NEW YORK - Moody's Investors Service has assigned an A3 ("Good") insurance financial strength rating to Montpelier Reinsurance Ltd. (Montpelier Re), a Bermuda-based property catastrophe and specialty property reinsurance company.

Montpelier Re is the main operating subsidiary of Montpelier Re Holdings Ltd. a Bermuda-based, publicly-traded holding company. The rating outlook is stable.

Montpelier was founded by White Mountains Insurance Group, Ltd. and Benfield Holdings Limited and commenced operations in December 2001 with approximately $1 billion of capital.

In October 2002, the holding company completed an initial public offering, raising net proceeds of approximately $201 million, and began trading on the New York Stock Exchange. According to Moody's, Montpelier Re's A3 insurance financial strength rating is based on consideration of its meaningful capital base, modest operating and financial leverage profile and efficient operations.

Montpelier Re's conservative operating leverage profile is enhanced by the company's solid risk management framework. Moody's notes that, as a newly-formed company, Montpelier Re's balance sheet is unencumbered by historical loss exposures, and that Montpelier Re's invested assets are of high credit quality and liquidity.

In Moody's opinion these strengths are tempered by the inherent volatility of property catastrophe and property risk excess of loss reinsurance business, by the company's brief operating history and by Moody's concerns about key-man risk, given the company's modestly sized underwriting staff.

Moody's remarked that Montpelier Re prices and manages its reinsurance exposures using a proprietary computer-based underwriting model, incorporating output from several third-party vendor models.

That is, Montpelier Re's exposure management approach is probability-based. As of March 31, 2003, Montpelier Re Holdings Ltd. reported GAAP shareholders' equity of $1.36 billion. First quarter 2003 net income was approximately $104 million on total revenue of $202 million and a combined ratio of 52.8 percent. For 2002 the company reported net income of $152 million on total revenue of $379 million and a combined ratio of 67.4 percent.