Best Affirms PartnerRe ‘A+’ Rating & Debt Ratings

A.M. Best Co. announced that it has affirmed the financial strength rating of “A+” (Superior) of the Bermuda-based PartnerRe Group and its affiliated companies.

Best also said it has assigned debt ratings of “a-” senior debt, “bbb+” subordinated debt and “bbb” preferred stock to the shelf registration of PartnerRe Ltd. and PartnerRe Finance II Inc. and the existing debt of PartnerRe Ltd. and PartnerRe Capital Trust I.

The rating agency also said it has assigned the debt rating of “bbb+” to the preferred securities of PartnerRe Capital Trust II and III’s shelf registration. The outlook for all the ratings is stable.

“The rating reflects PartnerRe’s prominent position as a leading global multi-line reinsurance organization offering diversified products and international market capabilities,” said Best. “PartnerRe has achieved solid consolidated operating returns through its client-oriented strategy, specialized underwriting expertise, diverse risk portfolio and conservative reserving practices.”

Best also noted that “PartnerRe’s operating subsidiaries have access to capital support, in addition to reinsurance protection from Partner Reinsurance Company Ltd. (Bermuda). Reinsurance protection is provided through individual calendar year stop loss treaties. Each treaty covers all in-force, new and renewal business under contracts written by PartnerRe’s operating subsidiaries.

“PartnerRe’s superior capitalization and prominent market position enables the company to access the capital markets. Debt offerings previously issued by PartnerRe have been used to support growth in the operating subsidiaries. The current shelf filing will allow PartnerRe to periodically sell debt securities, trust preferreds, preferred and common shares, which will be used for working capital, capital expenditures, acquisitions or other general corporate purposes.”

Best said it anticipated that “any issuance under the shelf filings will be used judiciously to support additional growth and to maintain financial flexibility. PartnerRe’s debt-to-adjusted-capital is expected to remain in the mid-20 percent range with fixed charge coverage sustained in the high single digit range.”

As partially offsetting factors Best noted PartnerRe’s “exposure to adverse loss development principally, for U.S. casualty lines of business written from 1997 to 2001. Although relatively small in relation to PartnerRe’s consolidated loss reserve position, the adverse development in U.S. casualty lines required reserve strengthening charges of approximately $90 million in 2002 and 2003, respectively.” Best indicated that it expects “additional adverse loss development for these lines of business and has included appropriate charges in both PartnerRe’s consolidated and PartnerRe U.S.’ risk-based capital models. Furthermore, PartnerRe’s earnings are susceptible to catastrophe exposure, which combined with the group’s modest use of retrocessional agreements, subjects PartnerRe to a higher degree of year-over-year earnings variability.”

Topics Mergers & Acquisitions Reinsurance