Fitch Affirms PartnerRe’s Ratings

October 26, 2005

Fitch Ratings announced that it has affirmed the “AA” Insurer Financial Strength rating of Partner Reinsurance Company. Fitch also affirmed the various ratings of Partner Reinsurance’s parent company PartnerRe Ltd. (PartnerRe) including the “A'” ratings assigned to its cumulative redeemable preferred securities and the trust preferred securities of PartnerRe Capital Trust I. The outlook is stable.

“The rating action follows an announcement by PartnerRe that it had raised $550 million in additional capital through a combination of $400 million in a private debt transaction along with an additional $150 million in ordinary shares,” Fitch said. “PartnerRe also entered into a $400 million equity forward contract. The equity forward transaction contains a mandatory feature that allows PartnerRe to issue ordinary shares at a minimum price at any time over the next three years.”

The rating agency noted: “The transaction replaces a significant portion of the capital lost as the result of Hurricanes Katrina and Rita and the European flood, which resulted in losses to PartnerRe of approximately $510 million, $35 million, and $65 million, respectively. These losses contributed to PartnerRe’s third-quarter net loss of $289 million. The additional capital positions PartnerRe to increase its written premiums if insurance market conditions harden as a result of the storms.”

Fitch said it “views the equity forward sale positively and has assigned significant ‘equity credit’ to the issue for purposes of calculating PartnerRe’s financial leverage. As a result, PartnerRe’s financial leverage increased only modestly and remains within Fitch’s guidelines for the current rating. However, this positive is offset by a modest decline in coverage due to interest and fees on the issue. Although pro forma coverage is slightly below Fitch’s standard, Fitch expects coverage to improve in 2006 due to anticipated hard market conditions.

“Fitch’s rating also reflects PartnerRe’s conservative investment strategy, reserve strength, low level of reinsurance recoverables and low reliance on retrocessional reinsurance. Additionally, Fitch believes PartnerRe has relatively lower exposure to legacy issues such as asbestos. However, Fitch’s rating also considers PartnerRe’s relatively higher exposure to low-frequency but high-severity events — an exposure highlighted by recent hurricane losses.”

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