Bermuda re/insurer Max Capital Group Ltd.'s operating units have received A- financial strength and counterparty credit ratings from Standard & Poor's Rating Services.

S&P also raised its counterparty credit rating on Max Capital Group Ltd. to 'BBB' from 'BBB-'. The outlook on both of the ratings is stable.

"The rating actions on Max Capital Group Ltd. and its operating insurance and reinsurance companies reflect their strong underwriting and operating performance, with a five-year average combined ratio of 93.3 percent and a standard deviation of 7.7 percent; strong competitive position as a diversified specialty insurance and reinsurance company; and strong enterprise risk management," explained credit analyst Damien Magarelli.

S&P also noted that Max Capital's new management team, in place for around three years, "has been focused on developing Max Capital into a specialty provider, and this strategy has significantly improved the company's operating platforms' breadth and brand name in the market."

However, S&P also indicated that Max Capital's "limited equity scale is a weakness because it limits the company's access to certain customer segments and markets."

Max's attempt to boost its capital base by merging with Bermuda reinsurer IPC Holdings Ltd. failed in June, when IPC shareholders voted against the deal. S&P described the company's operating performance as "strong and less volatile than that of some peers with a purposely lower catastrophe risk component. Changes in Max Capital's investment allocation have resulted in transforming the company from one that was known for its hedge fund allocation, to a company focused on specialty product offerings with a dramatically lower hedge fund allocation in line with some of its peers."

Earlier this week Fitch Ratings affirmed Max's financial strength rating at A, but retained a negative outlook for the company.

Fitch added that it expects Max to maintain its disciplined underwriting approach in the overall competitive market rate environment and return to overall profitability in 2009.

The negative outlook reflected the potential for further reductions in capital, particularly from additional significant losses in the volatile alternative investment portfolio, although exposure to this asset class is being further reduced and returns have been positive thus far in 2009, said Fitch.