Best Upgrades DaVinci Re Credit Rating; Affirms RenRe’s ‘A+’ Ratings

May 22, 2012

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of Dublin, Ireland-based Renaissance Reinsurance Ltd. and Renaissance Reinsurance of Europe.

Best has also affirmed the ICR of “a-” and all debt ratings of RenaissanceRe Holdings Ltd. and the FSR of ‘A’ (Excellent) and ICR of “a” of Bermuda-based Glencoe Insurance Ltd. Best also affirmed the FSR of ‘A’ (Excellent) and upgraded the ICR to “a+” from “a” of DaVinci Reinsurance Ltd. and upgraded the ICR to “bbb+” from “bbb” of DaVinci Re Holdings Ltd.

The outlook for all of the ratings is stable.

The rating actions “reflect RenRe’s superior level of risk-based capitalization, the strength and depth of its management team and the company’s ability to deliver strong returns over the course of the cycle,” Best explained.

“In addition, the company is widely recognized as a leader in enterprise risk management. RenRe maintains its superior market reputation as a leader in state-of-the-art property catastrophe modeling and risk optimization, which has attracted capital from outside companies to form several successful joint ventures including DaVinci and Top Layer Reinsurance Ltd.”

Best said the upgrade of DaVinci Re’s ICR “reflects its solid operating performance over the last several years and maintenance of strong risk-adjusted capital. While 2011 was a challenging year for DaVinci as well as the rest of the reinsurance sector due to the numerous global catastrophes, losses were well within expectations. DaVinci’s profile is enhanced due to its affiliation with RenRe.”

As an offsetting factor Best cited “RenRe’s exposure to high severity losses associated with catastrophic events on a worldwide basis, as is the case with the 2011 catastrophes.” However, Best also noted that the “losses were within stated risk tolerances” and its expectations. RenRe and DaVinci were well-positioned going into the January 2012 renewals.

Best also, indicated that for the “rated operating companies above, factors that could lead to a revision of the outlook to positive or an upgrading of the ratings include continued, long-term favorable operating profitability relative to peers and maintenance of strong risk-adjusted capital levels.

“Factors that could cause a revision in the outlook to negative or a downgrading of the ratings include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to peers and/or A.M. Best’s expectations, a decline in the level of parental or organizational commitment, significant adverse loss reserve development and/or a material decline in risk adjusted capital.”

Best summarized the ratings affected by its actions as follows:
The following debt ratings have been affirmed:
RenaissanceRe Holdings Ltd.—
— “a-” on $100 million 5.875% senior unsecured notes, due 2013
— “bbb” on $250 million 6.08% Series C perpetual preferred stock
— “bbb” on $300 million 6.6% Series D perpetual preferred stock

RenaissanceRe North America Holdings Inc.—(guaranteed by
RenaissanceRe Holdings Ltd.)
— “a-” on $250 million 5.75% senior unsecured notes, due 2020

The following indicative shelf debt ratings have been affirmed:
RenaissanceRe Holdings Ltd.—
— “a-” on senior unsecured
— “bbb+” on subordinated
— “bbb” on preferred stock
RenaissanceRe Capital Trust II—
— “bbb” on trust preferred securities

Source: A.M. Best

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