A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a” of Platinum Underwriters Bermuda, Ltd. (Platinum) (Bermuda) and its strategic affiliate, Platinum Underwriters Reinsurance, Inc. (Baltimore, MD). A.M. Best also has affirmed the ICR of “bbb” of Platinum Underwriters Holdings, Ltd. (Bermuda) [NYSE: PTP] and debt ratings of Platinum and Platinum Underwriters Finance, Inc . (Delaware). The outlook for all ratings is stable. (See below for a detailed list of the debt ratings.)
The ratings reflect the group’s excellent risk-adjusted capitalization, solid long-term track record, focused business strategy, which strictly emphasizes cycle management, and overall enterprise risk management capabilities. The ratings also consider the organization’s stable management team and low financial leverage.
In 2011, Platinum experienced significant catastrophe losses, which resulted in a sizeable net operating loss. However, when adjusted for capital management activities, the decline in shareholders’ equity was nominal, leaving Platinum with strong risk-adjusted capitalization to execute its strategy. Given the magnitude of industry losses, a slight erosion of capital at Platinum’s rating level is within A.M. Best’s expectations and is not outsized relative to peers. Platinum benefited from significant unrealized gains in 2011, which was a result of its “barbell” investment strategy. A.M. Best considered Platinum’s total enterprise risk management across the various spectrums of risk, its business strategy and the organization’s ability to generate strong prospective returns.
Somewhat offsetting these strengths are A.M. Best’s concerns that Platinum’s resolute cycle management strategy may someday hinder the company’s ability to access quality business. While it is still early to fully evaluate the impact of such a strategy, A.M. Best will continue to monitor the organization’s business profile and position in the marketplace with regard to significant rating considerations.Factors that could lead to a downgrading of Platinum’s ratings or a revision of the outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to expectations and peers, significant adverse loss reserve development and/or a material decline in risk-adjusted capital. Alternatively, factors that could lead to an upgrading of the company’s ratings include sustained, long-term favorable operating profitability, coupled with maintenance of strong risk-adjusted capital levels.