Along with affirming the parent company’s ratings (See previous article), A.M. Best Co. announced that it has affirmed the financial strength rating of â€œA+â€ (Superior) and the issuer credit rating of “aa-” of French insurer PartnerRe S.A. Best noted that the â€œoutlook on both ratings remains stable, in line with the outlook of its ultimate parent company PartnerRe Ltd. (PRL).â€
The ratings reflect full enhancement derived from implicit support from the parent company and explicit support in the form of a stop-loss protection provided by Partner Reinsurance Company Ltd., â€œsaid Best. â€œOther factors include PartnerRe SA’s excellent stand-alone risk-adjusted capitalisation, improved operating performance and strong business profile.â€
Best said it â€œexpects PartnerRe SA’s risk-adjusted capitalisation to be supportive of the current rating, factoring reduction in risk due to the divestment of Partner Reinsurance Company of the US in 2004. The accident year stop-loss facility protects Partner Re SA’s net loss ratio by 15 basis points in excess of 85 percent, although A.M. Best does not expect this cover to be utilized in 2005.â€
The rating agency also indicated that in its opinion â€œPartnerRe SA’s non-life underwriting performance is likely to improve in 2005 with a modest reduction in the combined ratio from 109 percent at year-end 2004. A.M. Best expects the overall after-tax earnings to improve significantly in 2005, due mainly to anticipated strong investment returns–including realised investment gains–and a good profit contribution from the life segment, which offset the non-life underwriting losses expected in 2005 (EUR 59 million (USD 80.9 million) loss in 2004).â€ Best said it â€œis likely to review the level of enhancement given to the rating if PartnerRe SA’s operating performance falls below A.M. Best’s expectations beyond 2005.â€
Best also anticipates â€œa decline in gross written premiums of between 5 and 10 percent in PartnerRe SA’s life book in 2005 to EUR 210 million (USD 250 million). This is due mainly to the level of single premiums on the longevity account returning to normal levels in 2005, following the exceptional growth of 38 percent seen in 2004. However, as PartnerRe SA continues to concentrate on niche markets such as longevity products, A.M. Best will closely monitor its pricing and assumptions for this growing portfolio. Non-life premiums are expected to decrease by approximately 11 percent to EUR 500 million (USD 600 million) in 2005 as premium rates soften–especially in European property and motor–and competition increases across its core markets.â€
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