Bermuda reinsurer Validus Re’s financial strength rating has been upgraded by AM Best Co to A (excellent) from A- (excellent).Additionally, AM Best has upgraded the issuer credit rating to “bbb” from “bbb-”and debt ratings of the parent company, Validus Holdings, Ltd. The outlook for all ratings has been revised to stable from positive.The announcement comes after the company eked out a $21 million profit in 2011, a year of massive catastrophe losses for the reinsurance industry.AM Best said the ratings reflect Validus Re’s solid risk-adjusted capitalisation, favourable operating performance since inception, experienced management team, excellent enterprise risk management programme and prudent operating strategies. Further supporting these ratings is the support of Validus Holdings, which provides financial flexibility as a publicly traded company on the New York Stock Exchange.Best said that partially offsetting these strengths is Validus Re’s susceptibility to low frequency, high severity events as a property catastrophe focused reinsurer. However, the company’s risk-adjusted capital remains at levels that have been stress tested to absorb significant catastrophe losses, thus, mitigating this concern.The stable outlook is reflective of AM Best’s expectation that the group will continue to produce favourable long-term operating results and maintain excellent risk-adjusted capitalisation, which is supportive of its current rating level.Since its formation in 2005, Validus Holdings has grown through organic growth and acquisitions. In July 2007, Validus Holdings acquired Talbot Holdings Ltd (Talbot), which enhanced the business profile of the group by diversifying the company’s revenues to include other lines of business, spreading risk exposures geographically and expanding its distribution channels. This acquisition has served to complement the organic growth of revenues while diversifying Validus Holdings’ exposure and enhancing its business profile.Validus Holdings has demonstrated its risk management capabilities and prudent risk selection as evidenced by its solid underwriting performance and overall operating results compared to its peers during a very difficult 2008 and 2011. This will increasingly become more challenging as the company grows and develops newer operating platforms and expands its business profile.