S&P: Validus outlook positive

Standard & Poor's said it revised its outlook on Validus Holdings Ltd. to positive from stable and affirmed its BBB- counterparty credit rating on the holding company.

The outlook revision follows Validus' announcement that it entered into a definitive amalgamation agreement with IPC Holdings Ltd. S&P said the positive outlook reflects its view that the IPC transaction will significantly enhance Validus' competitive position, the combined company's significantly higher pro forma capital base and the agency's expectation that the merged group's capital adequacy will remain strong and that financial leverage will remain moderate.

Partially offsetting these positive factors is S&P's concern about Validus' aggressive appetite for acquisitions, with IPC's deal constituting the second major acquisition by Validus over the last two years.

The ratings on Validus are based on the group's good and expanding competitive position, strong capitalization, strong risk controls around exposure management, underwriting and modeling and very strong operating performance since inception, the agency said.

Partially offsetting these strengths are the potential integration risk related to the IPC transaction, the group's adequate strategic risk management practices, the possibility of significant earnings volatility because of its short-tail focus and catastrophe exposure and some remaining integration and execution risks associated with the acquisition of Talbot, S&P said.

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