A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings of “aa-” of the Bermuda-based PartnerRe Group and its members. Best also affirmed the ICR of “a-” and debt ratings of PartnerRe’s parent, PartnerRe Ltd. The outlook for all of the ratings is stable.
However, Best indicated that “these rating affirmations do not affect the ratings of Partner Re’s recently acquired PARIS RE subsidiaries, as these are currently separately rated.”
The ratings reflect PartnerRe’s “excellent business profile, superior risk-adjusted capitalization and very strong enterprise risk management practices,” said Best. PartnerRe is a global provider of multi-line reinsurance, and its competitive position “benefits from diversification on both a geographic and product lines basis.
“Its recent acquisition of PARIS RE has further augmented PartnerRe’s geographic scope and operating scale. With a combined capitalization in excess of $8.0 billion as of March 31, 2010, the group now ranks among the top five global reinsurance organizations.”
Best did indicated that are some “integration, operational and treaty overlapping risks associated with this transaction; however, given the relative size of PARIS RE, these risks are manageable and are diminishing over time.”
Best pointed out that, although PartnerRe is exposed to natural and manmade catastrophes worldwide, which can result in “earnings volatility,” the Company’s “five-year average underwriting combined ratio of 91.4 percent compares relatively favorably to its peer group. This reflects the group’s well diversified risk portfolio and consistently disciplined underwriting posture.
“PartnerRe maintains a conservative investment portfolio, with greater than 95 percent of fixed income holdings rated investment grade or better, which together with strong operating cash flows, increases the positive effect of net investment income on earnings.
As an offsetting factor, Best cited PartnerRe’s “moderately above average risk profile,” noting that as an assumer of risk, PartnerRe’s earnings and capitalization are “subject to large shock losses including natural catastrophes.”
Best then explained that in order to mitigate overall exposure to large losses, PartnerRe “manages catastrophe exposure on a zonal aggregate basis and limits its exposure as a percentage of total capital within identified zones. Furthermore, as part of its strong enterprise risk management process, PartnerRe continually assesses its overall risk position, including loss reserve risk, investment risk and credit risk, and runs various scenarios to highlight any potential correlation exposure.”
Best added that it believes PartnerRe’s “long standing strategy of cycle management through diversification should allow it to successfully manage through the current underwriting cycle. Moreover, A.M. Best will monitor the growth in the company’s life and capital market segments as these product offerings differ from PartnerRe’s traditional property/casualty reinsurance operations and are expected to be areas of growth for the company.”
For a complete listing of PartnerRe Group and PartnerRe Ltd.’s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/061716partnerre.pdf.
Source: A.M. Best