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.
“The ratings reflect PartnerRe’s excellent business profile, strong risk-adjusted capitalization and 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. Despite an active natural catastrophe year of loss events including Hurricanes Ike and Gustav, PartnerRe reported a solid nine-month combined ratio of 91.4 percent.”
However, Best continued, “widening credit spreads and the write-down of investments, such as holdings in Lehman Brothers, led to realized and unrealized losses of $595 million through nine months 2008 results. Additionally, PartnerRe’s investment losses as well as common share repurchases led to a decline in shareholders’ equity of 5.5 percent through nine months 2008 results.
“Nonetheless, 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.”
Best indicated, however, that “PartnerRe’s moderately above average risk profile and the financial leverage of PartnerRe Ltd., which is at the upper end of the acceptable range for its rating,” should be taken into account as offsetting factors.
Best also observed that “as an assumer of risk, PartnerRe’s earnings and capitalization are subject to large shock losses including natural catastrophes. 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 said it “believes that PartnerRe’s long standing strategy of cycle management through diversification should allow it to successfully manage through the current underwriting cycle.”
The rating agency also plans to “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.
“At September 30, 2008, PartnerRe Ltd. maintained unadjusted total debt, preferred and hybrid securities to total capital of approximately 28 percent prior to the partial equity credit provided under A.M. Best’s debt rating criteria. A.M. Best expects that PartnerRe Ltd. will maintain its current level of financial leverage while maintaining a fixed charge coverage in the mid to upper single-digit range.
For a complete listing of PartnerRe Group’s and PartnerRe Ltd.’s FSRs, ICRs and debt ratings, go to: www.ambest.com/press/012005partnerre.pdf.
Source: A.M. Best – www.ambest.com
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