A.M. Best also has placed the ICR of "bbb" and the indicative ratings for securities available under shelf registration of "bb+" on preferred stock, "bbb" on senior unsecured debt and "bbb-" on subordinated debt of IPCRe under review with negative implications. The ratings of Max's lead operating company, Max Bermuda Ltd (Hamilton, Bermuda), its operating subsidiaries and all debt ratings of Max are unchanged by the transaction.
The under review status of IPCRe reflects the fact that IPCRe and Max combined would be largely influenced by Max from a multitude of perspectives, including premium volume, liabilities, operating platforms and information technology systems. IPCRe's property catastrophe business would make up a moderate amount of the newly combined diversified specialty (re)insurance company, but its property business would be a sizeable piece of the property reinsurance segment. In the intermediate term, property catastrophe exposures of the combined company would have to be aggregated and analyzed for correlations. In addition, part of management's time and effort would need to be spent on integrating office space, information technology systems and corporate cultures.
The immediate advantages to the combined organization would be size and scale coupled with a strong risk-adjusted capital base. There are additional benefits to both organizations individually, which makes this a sensible transaction; however, unlocking the value and driving the sustainable edge will only be realized over the longer term.
The transaction itself is stock for stock and is not contingent upon raising public or private capital. The deal is not expected to close until some time in third quarter 2009, subject to regulatory approvals. IPCRe and its subsidiaries' ratings will remain under review until the transaction has closed and A.M. Best has completed its evaluation of the merged entity.
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The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at Best's Credit Rating Methodology.
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