Moody's has lowered the credit ratings of Montpelier Re (senior debt to Baa3 from Baa2), and its insurance financial strength rating to Baa1 from A3. The outlook is stable.
Moody's said the downgrade reflects Montpelier Re's substantial losses recorded from recent hurricanes, which represent 66% of shareholders' equity as of 30 June 2005 and over two years worth of net income.
According to Moody's, these losses were outside rating expectations and raise concerns about the company's risk management.
The stable outlook reflects Moody's view that the company will re-evaluate its risk tolerance and reduce its underwriting exposures commensurate with its reduced capital levels.
Moody's said it expects that the company's financial leverage will remain below 20% and that the company will take appropriate capital management actions should estimated losses from the hurricanes be revised upward or losses from additional storms be incurred.
