Fitch Affirms Platinum Underwriters' Ratings; Outlook Remains Negative

Fitch Ratings has affirmed the ratings of Platinum Underwriters Holding Ltd. (PTP) and its subsidiaries. The Rating Outlook remains Negative. A full list of ratings is included at the end of this release.

The Negative Outlook reflects Fitch's observation that PTP's recent underwriting performance has exhibited significantly greater volatility than was expected for a (re)insurer in the company's current rating category. Moreover, significant upward development of Platinum's incurred loss estimates from the large catastrophe events of the first half of 2011 in its third and fourth quarter 2011 earnings release demonstrated challenges the company has faced in measuring and controlling exposure to recent large losses.

PTP reported a combined ratio of 88.2% in the first quarter of 2012 as the reinsurance industry as a whole endured substantially lower levels of catastrophe losses relative to the prior year. For the full year of 2011, PTP reported a 143% combined ratio due to $510 million of catastrophe losses, largely related to earthquakes in Japan and New Zealand, as well as severe weather and tornado damage in the U.S.

In recent quarters, PTP has taken steps to reduce their amount of gross catastrophe exposure, particularly in non-peak geographies, as the company reduced its total year-to-date net premiums written by 26.2% over the same period of 2011, with the largest reductions taking place in international catastrophe and U.S. crop business. Fitch will continue to monitor PTP's willingness and ability to expand their writings in 2012 if promising opportunities for writing future business become available to the company.

Fitch's ratings of PTP recognize that despite the company's unusually poor performance in 2011, the company maintains a longer-term history of strong underwriting results and profitability. PTP's ratings also reflect the company's solid capitalization, moderate financial and operating leverage, as well as it's high-quality and liquid investment portfolio.

Fitch views PTP's use of financial leverage as moderate and its historical operating earnings-based interest coverage as good. At March 31, 2012, the company's debt-to-capital ratio was 12.8% and from 2007 through 2011 the company's operating earnings-based interest coverage averaged a strong 9.0x.

Fitch views PTP's investment portfolio as high-quality with good liquidity characteristics. The company invests almost entirely in fixed income and cash and short-term investments, although at 5.1 years at March 31, 2012, the duration of the company's overall investment portfolio is somewhat higher than many of its peers, which could expose the company to significant unrealized investment losses if interest rates were to rise rapidly.

Key rating triggers that could result in a ratings downgrade include:

--Protracted declines in PTP's underwriting results that creates a 10 percentage point unfavorable margin between PTP and similarly rated companies over the next 12-18 months;

--Further material unfavorable development on 2011 catastrophe loss estimates;

--Material declines in capitalization that caused the company's shareholder's equity to fall below $1.5 billion, excluding the benefit of Platinum's net unrealized investment gain position.

Key rating triggers that could result in a Stable Outlook include:

--Stabilization of underwriting results and a return to underwriting profitability with volatility comparable to those of 'A' rated peers;

--Exhibiting future loss experience on catastrophes that is in line with similarly rated peers;

--Continued favorable to stable reserve development on prior losses.

Fitch has affirmed the following ratings with a Negative Outlook:

Platinum Underwriters Holdings, Ltd.

--Issuer Default Rating (IDR) at 'A-'.

Platinum Underwriters Finance, Inc.

--IDR 'A-';

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

Platinum Underwriters Bermuda Ltd.

--Insurer Financial Strength (IFS) at 'A'.

Platinum Underwriters Reinsurance, Inc.

--IFS at 'A'.

Additional information is available at 'www.fitchratings.com'. The ratings above were unsolicited and have been provided by Fitch as a service to investors. The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sept. 22, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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Contacts:

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