AM Best has responded to the annouced reorganisation of the Argo Group by upgrading the financial strength rating of Peleus Reinsurance from "A-" to "A" and replicated that change for its issuer credit rating.

It said the outlook on both ratings for the Bermuda Class 4 reinsurer is stable.

Peleus is a wholly owned subsidiary of Argo Group International Holdings.

AM Best said: "The rating upgrades are based on the announced restructuring of the Argo Group organisational platform, the pro forma surplus for Peleus of approximately $1.3 billion and the benefits derived from the overall consolidated operating results and financial strength of Argo Group and its subsidiaries.

"The rating upgrades also consider Peleus' experienced management team, prudent business plan and the expectation that all existing liabilities assumed from its announced amalgamation (merger) with PXRE Reinsurance Limited."

The rating company said it expects to see the Bermuda-based PXRE operation "run off in an orderly fashion. An analysis of current and pro-forma cash flows indicates that sufficient capital exists to support existing financial obligations."

AM Best's financial strength rating of A (Excellent) and the issuer credit ratings of "a" are unchanged for the other Argo Group subsidiaries.