Bermuda-based Ariel Holdings' operating units have had their ratings affirmed by AM Best.

Ariel Reinsurance Company Ltd.'s financial strength rating remains at A- and its issuer credit rating at "a-". The same writings apply to Ariel's 2007 acquisition Valiant Insurance Company, which is based in Delaware. The outlook on all ratings is stable.

The ratings affirmation reflects Ariel's supportive level of risk-adjusted capitalisation, acceptable operating performance since inception and continued development of the group's operating platforms and business profile, Best said.

Ariel was founded in 2005 by its current chief executive officer Don Kramer.

The New Jersey-based rating agency added that Ariel's overall performance fell short of expectations during 2008 driven by investment write-downs and catastrophe losses. Furthermore, actual premium volume was lower than anticipated resulting in a higher expense ratio as compared to its peers. However, overall performance remained in line with its peer group since inception. The outlook reflects the favourable rate environment expected in Ariel's primary line of business, property cat reinsurance, which is partially offset by the recent softening in the casualty lines of business and the potential for continued volatility of investment returns.

Best said Valiant Specialty was formed in the fourth quarter of 2008 as the surplus lines carrier of the Valiant Insurance Group, complementing Valiant's operations as an admitted carrier targeting the same general lines of business. These include management liability, professional liability, primary and excess umbrella and marine and energy.

Valiant Specialty was originally capitalised with approximately $16 million in policyholders' surplus with the intention of an additional capital contribution of approximately $5 million during 2009 to adhere to capital requirements for excess and surplus lines writers in certain states.

Best added that Ariel's business profile had evolved through its acquisition of London-based Atrium Underwriting Plc and Valiant in 2007 and the formation of Valiant Specialty in 2008.

"While these initiatives have improved the business profile of Ariel, they have also contributed to an expense structure for Ariel that is on the higher end of the peer group during 2008," Best said.

"Based on management's business plan, AM Best expects the expense ratio to improve going forward as these new operating platforms mature and become contributors to the net income of Ariel."