A.M. Best Upgrades Issuer Credit Ratings Of Odyssey Re Holdings Corp.’s Subsidiaries

A.M. Best Co. has upgraded the issuer credit ratings (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of A (Excellent) of the Odyssey Reinsurance Group (Odyssey Re) members. Concurrently, A.M. Best has affirmed the ICR of “bbb” and the debt ratings of Odyssey Re Holdings Corp. (Odyssey Re Holdings) (Wilmington, DE). The outlook for these ratings is stable.

Additionally, A.M. Best has assigned an FSR of A (Excellent) and an ICR of “a+” to Hudson Excess Insurance Company (Wilmington, DE), the newest member of Odyssey Re. The outlook assigned to both ratings is stable. (See below for a detailed list of the companies and ratings.)

The ICR upgrades reflect Odyssey Re’s excellent risk-adjusted capitalization, strong financial performance and sound business position. Odyssey Re is a global underwriter of reinsurance and specialty primary insurance products and ranks among the top 15 global reinsurance groups in terms of premium volume. Odyssey Re's competitive position benefits from its worldwide market presence with regard to business mix and geographic reach. These positive attributes are further supported by Odyssey Re's diversified geographic client base, combined with its large line capacity, broad product capability and an opportunistic business strategy. Odyssey Re's investment management philosophy, which emphasizes a total return strategy, has augmented its earnings to the extent that on a total return basis it has outperformed its reinsurance peers over the past five-year period. The ratings also recognize Odyssey Re's strong liquidity and the benefits derived from access to its ultimate parent , Fairfax Financial Holdings Limited (Fairfax), and Fairfax's access to public markets.

Somewhat offsetting these strengths are the challenging underwriting and investment environments and Odyssey Re’s historical reliance on both realized and unrealized capital gains to bolster its overall financial performance. A.M. Best views this source of earnings as more variable and less predictable than earnings sourced from underwriting.

Odyssey Re maintains a manageable exposure to natural catastrophes as measured by its 1-in-250-year probable maximum loss estimates relative to statutory surplus. In A.M. Best's opinion, Odyssey Re has developed an excellent and holistic enterprise risk management framework.

Positive rating actions could occur if Odyssey Re maintains consistently strong underwriting performance and long-term profitability. Negative rating actions could occur if Odyssey Re experiences outsized catastrophe or investment losses relative to its peer group, or if capital erosion due to operating performance exceeds A.M. Best's expectations.

The ICRs have been upgraded to “a+” from “a” and the FSR of A (Excellent) has been affirmed for the following members of the Odyssey Reinsurance Group:
  • Odyssey Reinsurance Company
  • Hudson Insurance Company
  • Hudson Specialty Insurance Company
  • Newline Insurance Company Limited

The following debt ratings have been affirmed:

Odyssey Re Holdings Corp.—

-- “bbb” on $183 million 7.65% senior unsecured notes, due 2013

-- “bbb” on $125 million 6.875% senior unsecured notes, due 2015

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”; “Rating Members of Insurance Groups”; and “Rating New Company Formations.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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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