S&P Affirms PartnerRe ‘A’ Ratings

October 27, 2005

Standard & Poor’s Ratings Services announced that it has affirmed its “A” counterparty credit rating on Bermuda-based reinsurer PartnerRe Ltd. (PRE). S&P also affirmed its “AA-” counterparty credit and financial strength ratings on PRE’s operating reinsurance subsidiaries Partner Reinsurance Co. Ltd., PartnerRe S.A., and Partner Reinsurance Co. of U.S. and its ‘AA-‘ financial strength rating on Partner Re Ireland Insurance Co. (collectively, PartnerRe). The outlook on all of the ratings is stable.

“The affirmation follows PRE’s raising of $550 million in capital, consisting of $150 million in common equity and $400 million in a combined privately placed loan agreement and a forward sale agreement,” stated S&P credit analyst Laline Carvalho. “The loan and forward sale agreements are viewed as akin to a mandatory convertible security, and thus are eligible for hybrid credit under Standard & Poor’s criteria.”

S&P said: “On a pro forma basis, PRE’s year-end 2005 operating capital adequacy ratio is expected to be strong, including the $550 million capital raise and a 1-in-250 year aggregate probable maximum loss charge for property catastrophe exposure, in accordance with Standard & Poor’s recently announced criteria for this line of business. This estimate also factors expected moderate losses from Hurricane Wilma.

“The ratings on PRE are based on the group’s very strong operating performance through June 30, 2005, reasonable (albeit large) third-quarter 2005 catastrophe losses, very strong competitive position, strong capital adequacy, strong risk management, and conservative balance sheet.

“Offsetting these positives is the group’s potential underwriting volatility due to low retrocessional usage and developing U.S. and European franchises. PRE continued to meet Standard & Poor’s expectations through the first half of 2005, with a half-year nonlife combined ratio of 93.5 percent and consolidated ROR of 12 percent. In the third quarter of 2005, the group incurred about $610 million in pretax losses related to Hurricanes Katrina and Rita, as well as European floods.

“Although these losses are significant and led PRE to report an 11 percent decline in shareholders’ equity as of Sept. 30, 2005 (from June 30 levels), Standard & Poor’s believes the magnitude of these losses as currently estimated is reasonable within the context of PRE’s capital base and business mix.

“As of June 30, 2005, property and property-catastrophe lines constituted 17 percent and 11 percent, respectively, of the group’s total writings. PRE’s risk management capabilities are strong and reflected in the group’s strategy to cap its zonal exposures for all lines of business at a maximum of 25 percent of its capital base. Because PRE is a nominal user of retrocessional cover, this group is not expected to have any material reinsurance recoverable balances related to the third-quarter events and is not expected to be affected by the expected contraction of the retrocessional market in 2006.”

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