Fitch Assigns 'A' IFS Rating to Platinum; Rates Senior Notes 'BBB+'

2008-07-24 21:54:03 -

- Fitch Ratings has assigned an 'A' insurer financial strength (IFS) rating to Platinum Underwriters Holdings, Ltd.'s (PTP) subsidiaries, Platinum Underwriters Bermuda Ltd. (PTP Bermuda) and Platinum Underwriters Reinsurance, Inc. (PTP U.S.) . Additionally, Fitch has assigned a 'BBB+' rating to the 7.50% series B senior unsecured notes issued by an indirect subsidiary of PTP (and guaranteed by PTP) and a 'BBB' rating to PTP's series A mandatory convertible preferred shares. The Rating Outlooks are Stable (see full rating list below).

The ratings reflect PTP's solid profitability, earnings and cash flow benefits derived from the company's diverse book of business and the strong support the company's high-quality and liquid investment portfolio provides for its loss reserves.

The ratings also incorporate Fitch's belief that PTP's underwriting margins are likely to contract in the near-to-medium term as premium rates in the company's core lines continue to face cyclical pricing pressure. In addition, the ratings consider PTP's exposure to potential adverse reserve development from the company's casualty lines reserves and significant catastrophe exposure.

PTP's first-half 2008 earnings were strong as the company generated a 22.3% annualized net return on average common equity (ROAE) and a 73.7% combined ratio. Fitch views PTP's 2006 and 2007 underwriting profitability as generally consistent with that of the company's peers reflecting comparatively light catastrophe-related losses and favorable reserve development. Fitch's expectation is that underwriting margins industry-wide are likely to be pressured over the next 12-18 months and the agency expects PTP to be affected by this trend.

Fitch views Platinum's investment portfolio, which at June 30, 2008 was invested almost entirely in investment grade fixed-income and short-term instruments, as a high-quality portfolio with strong liquidity characteristics. Fitch also views the quality of Platinum's capital base as high, since the company has little exposure to reinsurance recoverables or to intangible assets.

At year-end 2007, 72% of PTP's loss reserves were for casualty-related business lines. Fitch generally views the duration of casualty line reserves as having relatively long durations and thus being more exposed to potential adverse development than shorter-duration property reserves. Fitch believes that PTP's reserves are reasonably conservative based on metrics such as paid-to-incurred ratios, the company's historical favorable development trends, and the declining growth rate of the company's reserves.

Fitch views PTP's use of financial leverage as moderate and its operating earnings-based interest coverage as good. At June 30, 2008 the company's equity-credit-adjusted ratio of debt plus preferred shares-to-total capital was 10%. Fitch classifies PTP's series A mandatory convertible preferred shares as Class E securities for purposes of assigning equity credit due to the securities' mandatory February 2009 conversion into common equity.

Operating earnings-based coverage has been strong averaging 10.4x from 2003 through 2007. Although earnings and coverage are materially exposed to catastrophe-related claims, PTP's annual interest requirements are modest at roughly $20 million and the company's operating subsidiaries have significant dividend capacity.

Fitch rates the following, with a Stable Outlook:

Platinum Underwriters Holdings, Ltd.

--Issuer Default Rating (IDR) 'A-';

--6.00% series A mandatory convertible preferred shares 'BBB'.

Platinum Underwriters Finance, Inc.

--IDR 'A-';

--7.50% series B senior unsecured notes 'BBB+'.

Platinum Underwriters Bermuda Ltd.

--IFS 'A'.

Platinum Underwriters Reinsurance, Inc.

--IFS 'A'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The ratings above have been initiated by Fitch as a service to investors. The issuer did not participate in the rating process other than through the medium of its public disclosure.

Fitch Ratings
Mark Rouck CPA, CFA, +1-312-368-2085 (Chicago)
Greg Dickerson, +1-212-908-0220 (New York)
Sandro Scenga, +1-212-908-0278
(Media Relations, New York)