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Rating Action:

Moody's affirms PartnerRe’s ratings (IFS at A1); assigns A3 rating to senior notes, outlook stable

12 June 2019

Rates $500 million of new senior notes, assigns shelf ratings

New York , June 12, 2019 – Moody's Investors Service ("Moody's") has affirmed the A1 insurance financial strength (IFS) ratings of Partner Reinsurance Company Ltd. and Partner Reinsurance Company of the US and the debt and preferred stock ratings of PartnerRe Ltd. (PartnerRe, preferred stock Baa2(hyb)) and its debt financing subsidiaries. In the same rating action, Moody's has assigned provisional ratings to PartnerRe's multi-seniority shelf registration statement that was filed on May 23, 2019, as well as an A3 rating to $500 million of 3.700% guaranteed senior unsecured notes to be issued by PartnerRe Finance B LLC. Partner Re intends to use net proceeds from the offering to redeem $500 million of outstanding debt issued by PartnerRe Finance B LLC. The outlook is stable.

The guaranteed senior unsecured notes to be issued by PartnerRe Finance B LLC mature in 2029 and are redeemable by the issuer after three years under certain conditions. The notes are fully and unconditionally guaranteed on a senior unsecured basis by PartnerRe.

RATINGS RATIONALE

According to Moody's, PartnerRe's ratings reflect the group's leadership position in specialty reinsurance lines, its broad international presence and operational platform as well as its diversified book of business across a broad range of exposure classes, including life and health (re)insurance. Other strengths include its strong capitalization, good core profitability and high quality investment portfolio. Tempering these strengths are the group's potential for earnings volatility arising from meaningful property catastrophe reinsurance exposures and the highly competitive operating environment in reinsurance market marked by an oversupply of capital from both traditional reinsurers and alternative capital providers.

Pro forma for the issuance and planned redemption of $500 million of outstanding debt, PartnerRe's adjusted financial leverage was approximately 22.2% at March 31, 2019, down from 23.5% at year-end 2018. For the first quarter of 2019, PartnerRe reported net income attributable to common shareholder of approximately $497 million compared to a net loss of $120 million in the prior year quarter, primarily reflecting $441 million of unrealized gains on the firm's investment portfolio. The combined ratio during the quarter was 97.7% which included modest adverse loss reserve development from 2018 catastrophes and a large loss within the firm's specialty segment. Going forward, we expect PartnerRe's profitability to benefit from stronger reinsurance pricing observed during recent renewals periods and improvements in primary insurance pricing which will benefit proportional reinsurance treaties.

PartnerRe is wholly-owned by EXOR N.V. (EXOR), an investment holding company with a net asset value of approximately $19.7 billion at year-end 2018. PartnerRe's status as a key subsidiary within the larger EXOR group is credit positive, as it improves the company's ability to withstand challenging reinsurance market conditions as a strategic subsidiary and long-term investment of a larger investment holding company group as opposed to operating as a stand-alone company. In addition, EXOR has committed to several creditor-friendly provisions, including a legally binding capital distribution limitation to less than 67% of GAAP net income through year-end 2020. This limit on capital distributions allows for the organic growth of equity capital at PartnerRe, which will provide an important capital cushion against the inherent volatility of PartnerRe's insured portfolio and likely lead to lower financial leverage metrics over time.

PartnerRe's (P)A3 senior shelf rating is two notches below the A1 insurance financial strength rating of the company's flagship operating subsidiary, Partner Reinsurance Company Ltd., reflecting the application of narrower notching for debt instruments issued by insurance groups domiciled in locations that benefit from enhanced group regulatory supervision, including Bermuda.

RATING DRIVERS

Given PartnerRe's current ratings, its business and financial profile and the competitive environment in the reinsurance sector, there is limited potential for upward rating movement. However, the following factors could positively influence the firm's credit profile: 1) a sustained reduction in the company's overall risk profile and volatility; 2) sustained better-than peer performance through the cycle; 3) a sustained reduction in adjusted financial leverage (e.g. below 15%), together with a strong capital position and an enhanced competitive position in the global reinsurance sector.

Conversely, the following factors could result in a downgrade of the ratings: 1) adjusted financial leverage above 25%; 2) a decline in shareholder's equity (including dividends) by more than 10% over a rolling twelve month period; 3) gross underwriting leverage above 3.0x (2.7x at YE2018); and 4) returns on capital in the mid-single digits across multiple years.

The following ratings have been affirmed:

PartnerRe Ltd. – preferred stock at Baa2(hyb);

Partner Reinsurance Company Ltd – insurance financial strength at A1;

Partner Reinsurance Company of the US – insurance financial strength at A1;

PartnerRe Finance II Inc.- guaranteed junior subordinated debt at Baa1(hyb);

PartnerRe Ireland Finance DAC – guaranteed senior unsecured debt at A3;

PartnerRe Finance B LLC – guaranteed senior unsecured debt at A3.

The following ratings have been assigned:

PartnerRe Ltd. - provisional senior unsecured shelf at (P)A3, provisional subordinated shelf at (P)Baa1, provisional preferred stock shelf at (P)Baa2, provisional preferred stock non-cumulative shelf at (P)Baa2;

PartnerRe Finance B LLC - provisional senior unsecured shelf at (P)A3, provisional subordinated shelf at (P)Baa1; guaranteed senior notes due 2029 at A3.

PartnerRe Finance C LLC - provisional senior unsecured shelf at (P)A3, provisional subordinated shelf at (P)Baa1.

Outlook actions:

The outlook for Partner Reinsurance Company Ltd., Partner Reinsurance Company of the US, PartnerRe Finance B LLC, PartnerRe Finance II Inc., PartnerRe Ireland Finance DAC and PartnerRe Ltd. is stable.

The outlook for PartnerRe Finance C LLC was assigned stable.

PartnerRe Ltd., based in Bermuda, is engaged through its subsidiaries in underwriting multi-line reinsurance on a worldwide basis. The company is a wholly-owned subsidiary of EXOR N.V., a leading investment holding company based in Italy. As of March 31, 2019, PartnerRe Ltd. had shareholder's equity of approximately $7.0 billion.

The principal methodology used in these ratings was Reinsurers published in May 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

James Eck
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Sarah Hibler
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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