Best Affirms PartnerRe Ratings; Removes From Under Review

October 28, 2005

A.M. Best Co. joined S&P and Fitch (See IJ Website Oct. 26 and 27) in affirming the financial strength rating (FSR) of “A+” (Superior) and issuer credit rating (ICR) of “aa-” of the reinsurance subsidiaries of Bermuda’s PartnerRe Group. Best also affirmed the ICR of “a-” of PartnerRe Ltd. and all of the group’s existing debt ratings. The bulletin notes that “all ratings have been removed from under review and maintain a stable outlook.”

Best also affirmed the ratings of PartnerRe S.A., the Group’s French operating subsidiary (See following article).

“The ratings reflect PartnerRe’s excellent business profile, enhanced risk-adjusted capitalization, highly experienced management team and very strong risk management capability,” said Best. “Despite taking almost $600 million in catastrophe-related losses in the third quarter of 2005, the company’s historical track record of generating solid underwriting returns continues to compare favorably relative to its peer group of global reinsurance companies.” Best also indicated that it “believes that the company is well positioned to take full advantage of the extended favorable market conditions that are expected to prevail in the reinsurance sector for those classes of business most affected by the series of worldwide catastrophe losses that have occurred over the past two years.

“Following the group’s recent capital raising of $550 million and with consideration of prospective earnings, PartnerRe’s risk-adjusted capital remains supportive of the group’s risk profile at its current rating level. However, PartnerRe remains exposed to significant earnings volatility inherent to the reinsurance business, as was demonstrated by the recent hurricanes in the U.S. Golf coast.”

Best’ said its analysis had considered “PartnerRe’s recently announced private equity forward sale agreement, which obligates the company to issue and a counterparty to purchase $400 million in common shares within the next three years. The company also announced the issuance of $150 million of common stock together with a $400 million private loan agreement that increases its debt and preferred issues to approximately 35 percent of total capital prior to the partial equity credit provided under A.M. Best’s debt rating criteria.” Best said it “expects that the company will maintain or improve its financial leverage while maintaining a fixed charge coverage in the mid to upper single digit range.”

The rating agency also noted that it “will continue to actively monitor PartnerRe for the remainder of 2005 and throughout 2006 to ensure that the company maintains its risk-adjusted capital position and financial leverage ratios at levels commensurate with A.M. Best’s expectations.”

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