Partially offsetting these positive rating attributes is the current soft market in casualty classes of business, which represents a significant portion of Alterra’s risk portfolio, and a challenging investment climate that places increased pressure on underwriting profitability.

Rating factors that could lead to a downgrade or revision in the outlook to negative include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers, significant adverse loss reserve development, a material decline in risk-adjusted capital and/or the departure of one or more key employees. Alternatively, factors that could lead to an upgrade include continued favorable operating profitability coupled with maintenance of strong risk-adjusted capital levels.

The FSR of A (Excellent) and ICRs of “a” have been affirmed for Alterra Bermuda Limited and its following operating affiliates:
       

• Alterra Europe plc

• Alterra America Insurance Company

• Alterra Excess and Surplus Insurance Company

• Alterra Reinsurance USA Inc.
 
The following debt ratings have been affirmed:
 

Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)—
--“bbb” on $100 million 7.2% senior secured notes, due 2017
 

Alterra Finance, LLC (guaranteed by Alterra Capital Holdings Limited)—
--“bbb” on $350 million 6.25% senior unsecured notes, due 2020
 
The following indicative ratings under the current shelf registration have been affirmed:
 

Alterra Capital Holdings Limited
--“bbb” on senior unsecured debt
--“bbb-” on subordinated debt
--“bb+” on preferred stock
 

Alterra USA Holdings Limited (guaranteed by Alterra Capital Holdings Limited)—
--“bbb” on senior secured debt
--“bbb-” on subordinated debt
 

Alterra Capital Trust I (guaranteed by Alterra Capital Holdings Limited)—
--“bb+” on preferred securities

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Insurance Holding Company and Debt Ratings”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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