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24 Oct 2006
Moody's Affirms PartnerRe's Ratings; Changes Outlook to Stable
New York, October 24, 2006 -- Moody's Investors Service has affirmed the Baa1 preferred stock rating
of PartnerRe Ltd. [NYSE: PRE] and the Aa3 insurance
financial strength ratings of its principal reinsurance subsidiaries.
Moody's has also revised the outlook on the company's ratings to stable
According to Moody's, the restoration of the stable outlook
is based primarily on PartnerRe's strong earnings performance and
the commensurate replenishment of capital during the first nine months
of 2006, which have led to a better alignment of the company's
financial and risk-adjusted parameters with key rating expectations.
PartnerRe's consolidated earnings and dividend capacity measures
relative to interest and preferred dividend expenses are very good.
Furthermore, the company's financial leverage has improved
and is expected to remain in the mid-20% range, consistent
with our expectations. The stable outlook also reflects Moody's
comfort with PartnerRe's risk management practices.
Moody's considers one of PartnerRe's distinguishing characteristics
to be its focused approach to risk analysis and exposure management,
a discipline that is essential to underwriting severity-intensive
lines of business. Key aspects of its underwriting risk management
framework -- which includes setting aggregate limit caps on catastrophe
exposures and net written premium caps on casualty-based business,
and applying computer-based statistical modeling to the pricing
and structuring of its contracts and to the management of its in-force
portfolio and capital -- have contributed to establish PartnerRe
as a leading international property-casualty reinsurer.
PartnerRe also distinguishes itself from many of its peers by its sparing
purchase of retrocessional protection. Moody's generally
views the company's gross-lines underwriting strategy as
being a credit positive, as it suggests that risk tolerances are
managed directly, rather than through counterparty transactions,
and as it provides an incentive for positive -- rather than negative
-- risk selection. That said, it does potentially expose
the company to a somewhat greater level of underwriting volatility relative
to peer companies. Moody's noted that following the costly
2005 storms, PartnerRe did not fundamentally alter its approach
to risk evaluation and selection, but rather focused on refining
its analysis of risk-adjusted capital adequacy in order to more
clearly define enterprise-wide risk tolerance across all major
disciplines, including underwriting, investments and reserving.
The rating affirmations reflect the group's sound fundamentals,
including its leadership in specialty reinsurance lines, as well
as its diversified book by both geography and line of business and its
strong presence and franchise in Europe. Beyond the portfolio diversification
benefits, the breadth of its business provides PartnerRe with the
ability to identify and adapt to changes rapidly in the marketplace.
Other strengths include its high quality investment portfolio and prudent
reserving philosophy. These strengths are tempered by the group's
significant gross lines risk retentions, which could lead to capital
pressures, by the inherent volatility of property-catastrophe
reinsurance, and by parent company leverage that remains toward
the high end of our expected range.
At the current rating level, Moody's expects that the company will
continue to maintain basket-adjusted debt (also adjusted for leases)
at or below 25% of total capitalization; that further exposure
growth will be adequately supported by the group's capital base;
that future capital raising activities will not add significant strain
to fixed charge coverage, and that shareholders' equity will
not decline by more than 10% over a twelve month period as a result
of operating losses.
Moody's most recent rating action on PartnerRe was on October 26,
2005, when the rating agency affirmed the company's ratings and
changed the outlook to negative.
The following ratings were affirmed with a stable outlook:
PartnerRe Ltd. - preferred stock at Baa1; prospective
senior unsecured debt at (P)A2; prospective subordinated debt at
(P)A3; prospective preferred stock at (P)Baa1;
PartnerRe Capital Trusts I -- capital securities at A3;
PartnerRe Capital Trusts II, III -- prospective rating
for capital securities at (P)A3;
PartnerRe Finance I, Inc. -- junior subordinated
securities at A3;
PartnerRe Finance II, Inc. -- prospective senior
debt at (P)A2, prospective subordinated debt at (P)A3;
Partner Reinsurance Company Ltd. -- insurance financial
strength at Aa3;
Partner Reinsurance Company of the US -- insurance financial
strength at Aa3;
PartnerRe SA -- insurance financial strength at Aa3.
PartnerRe Ltd., based in Bermuda, is engaged through
its subsidiaries in underwriting multi-line reinsurance on a worldwide
basis. For the first nine months of 2006, PartnerRe Ltd.
reported operating income of $454.7 million, and a
combined ratio of 86.2% (81.4% for the third
quarter) for the non-life segment. As of September 30,
2006, shareholders' equity was $3.5 billion.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to repay punctually senior policyholder claims
and obligations. For more information, visit our website
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
Financial Institutions Group
Moody's Investors Service
No Related Data.
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