The operating subsidiaries of Max Capital Group Ltd. have seen their financial strength rating (FSR) of A- (excellent) and issuer credit ratings (ICR) of "a-" placed under review with positive implications by AM Best Co following the recent announcement of its intent to merge with Harbor Point Ltd.

The rating actions apply to Max Bermuda Ltd, its affiliated operating subsidiaries, the ICR of "bbb-" and all debt ratings of Max.

The under review status reflects the potential benefits to Max for broadening its management depth, adding strong underwriting teams, improved diversification, increased capacity and greater scale of operations.

The new company, which is to be named Alterra Capital Holdings Ltd., will have little overlap in terms of lines of business, making it a complementary transaction, said Best. The ratings agency added that it was anticipated that the risk-adjusted capital of the combined organisation would be strong after considering the proposed post closing extraordinary dividend of approximately $300 million.

The ratings will remain under review until the transaction has closed and Best has completed its evaluation of the merged entity.

Best has also commented that the FSR of A (excellent) and ICR of "a" of Harbor Point Re Ltd., Harbor Point Reinsurance US Inc. and the ICR of "bbb" of their parent holding company, Harbor Point Ltd. were unaffected by the definitive agreement reached to merge with Max.

The ratings agency said that the merger would enhance the capacity and distribution capability of Harbor Point's products due to the complementary nature of Max's existing operating platforms. The combined organisation will benefit from operating synergies, limited overlap in lines of business and improved diversification.

Offsetting factors relate to the execution risk of integrating these two diverse organisations. However, these risks are somewhat mitigated by Harbor Point's strong management team, which has historically demonstrated solid enterprise risk management fundamentals, the ratings agency said.