A.M. Best Comments That Ratings Are Unchanged For Alterra Capital Holdings Ltd. And Its Operating Subsidiaries

A.M. Best Co. has commented that the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Alterra Bermuda Limited (Alterra Bermuda) and its affiliated operating companies are unchanged based on the proposed transaction between Alterra Capital Holdings Ltd. (Alterra) [NASDAQ: ALTE] and Markel Corporation (Virginia) [NYSE: MKL] . Concurrently, A.M. Best has commented that the ICR of “bbb” of Alterra is unchanged as well and the debt ratings of Alterra, Alterra USA Holdings Limited, Alterra Finance, LLC (both domiciled in Delaware) and Alterra Capital Trust I. The outlook for all ratings is stable. The above named companies are domiciled in Bermuda, unless otherwise specified. (See below for a detailed listing of the companies and ratings.)

The ratings reflect the organization’s historical solid financial performance and strong risk-adjusted capitalization. Post-merger, Alterra will be part of a larger organization with more scale and reach while remaining a specialty underwriter. Risk-adjusted capitalization is expected to remain strong. The closing is expected to take place in the second quarter of 2013, subject to regulatory approval and customary closing conditions.

Rating factors that could lead to a downgrading of Alterra’s ratings or a 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 an unsuccessful execution of the transaction, which could damage the Alterra franchise. Alternatively, factors that could lead to an upgrading of the ratings include continued favorable operating profitability coupled with maintenance of strong risk-adjusted capital levels and/or additional support from the new parent organization.

The FSR of A (Excellent) and ICRs of “a” are unchanged 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 are unchanged:

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 are unchanged:

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. 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.

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