A.M. Best Affirms Ratings of Odyssey Re Holdings Corp. and Its Subsidiaries

A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Odyssey Reinsurance Group (Odyssey Re) (Wilmington, DE) and its members. Additionally, A.M. Best has affirmed the ICR of "bbb" and debt ratings of Odyssey Re Holdings Corp. (Odyssey Re Holdings) (Wilmington, DE). The outlook for all ratings is stable. (See below for a detailed list of the companies and ratings.)

The ratings reflect Odyssey Re's excellent risk-adjusted capitalization, strong financial performance in recent years and sound business position. Odyssey Re is a global underwriter of reinsurance and specialty primary insurance products and ranks among the top 15 global reinsurance groups in terms of premium volume. Odyssey Re's competitive position benefits from its diversified market presence with regard to business mix and geographic reach. These positive attributes are further supported by Odyssey Re's diversified geographic client base, combined with its large line capacity, broad product capability and an opportunistic business strategy.

An astute investment management philosophy emphasizing a total return strategy has augmented the group's earnings to the extent that on a total return basis the group has outperformed its reinsurance peers.

The ratings also recognize Odyssey Re's strong liquidity and the benefit derived from the access to its ultimate parent company, Fairfax Financial Holdings Limited (Fairfax) (Ontario, Canada), and Fairfax's access to public markets.

Somewhat offsetting these strengths are the challenging underwriting and investment environments and the group's historical reliance on both realized and unrealized capital gains to bolster its overall financial performance. A.M. Best views this source of earnings as more variable and less predictable than earnings sourced from underwriting.

Odyssey Re maintains a manageable exposure to natural catastrophes as measured by its 1-in-250-year probable maximum loss estimates relative to statutory surplus. In A.M. Best's opinion, Odyssey Re has made significant progress in building a holistic enterprise risk management framework.

The ratings apply to Odyssey Reinsurance Company (Connecticut), Hudson Insurance Company (Delaware), Hudson Specialty Insurance Company (New York) and Newline Insurance Company Limited (United Kingdom).

Positive rating actions could occur if the company maintains consistently strong underwriting performance and long-term profitability. Negative rating actions could occur if Odyssey Re experiences outsized catastrophe or investment losses relative to its peer group or if capital erosion due to operating performance exceeds A.M. Best's expectations.

The FSR of A (Excellent) and ICRs of "a" have been affirmed for Odyssey Reinsurance Group and its following members:

• Odyssey Reinsurance Company
• Hudson Insurance Company
• Hudson Specialty Insurance Company
• Newline Insurance Company Limited

The following debt ratings have been affirmed:

Odyssey Re Holdings Corp.—
-- "bbb" on $225 million 7.65% senior unsecured notes, due 2013
-- "bbb" on $125 million 6.875% senior unsecured notes, due 2015

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Understanding Universal BCAR"; "Catastrophe Analysis in A.M. Best Ratings"; "A.M. Best's Rating & the Treatment of Debt"; and "Rating Members of Insurance Groups." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

Contacts:

A.M. Best Co.
Gale Guerra, 908-439-2200, ext. 5069
Senior Financial Analyst
[e-mail]
or
Peter Dickey, 908-439-2200, ext. 5053
Assistant Vice President
[e-mail]
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
[e-mail]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[e-mail]