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Announcement:

Moody's affirms RenaissanceRe following announced sale of U.S. insurance operations

18 Nov 2010

$350 million of senior notes affirmed.

New York, November 18, 2010 -- Moody's Investors Service has affirmed the A3 senior debt rating of RenaissanceRe Holdings Ltd. (NYSE: RNR, "RenRe"), the A3 guaranteed senior debt rating of RenRe North America Holdings Inc. ("RRNAH") and the A1 insurance financial strength rating of Renaissance Reinsurance Ltd. ("RRL", Bermuda). Other ratings have also been affirmed (see complete list below). All ratings have a stable outlook.

This rating action follows today's announcement that RenRe has agreed to sell its U.S. insurance operations to QBE Holdings, Inc. The aggregate purchase price will be the U.S. GAAP book value of the subject entities at year end 2010, which is currently estimated by RenRe to be $275 million. Separately, RenRe announced yesterday that it plans to redeem all of its 7.30% Series B Preference Shares for an aggregate price of $100 million, plus accrued and unpaid dividends to December 20, 2010.

According to Moody's, the operations that are being sold represent roughly 30% of RenRe's consolidated premiums but a much smaller portion of RenRe's net income (number is not publicly disclosed). U.S. crop insurance accounts for about 60% of these operations.

"The sale of these insurance operations will allow RenRe to exit a subscale business that was less of a cultural fit, and with negligible impact to its balance sheet," said Kevin Lee, senior credit officer at Moody's. While these operations achieved respectable profitability, the expense base was high (c.50% expense ratio). Furthermore, recent changes to how the U.S. government provides reinsurance and expense reimbursements to crop insurers would likely have reduced future margins.

According to Moody's, RenRe's remaining businesses -- primarily property catastrophe reinsurance and specialty reinsurance -- are more consistent with its core competencies of high-touch underwriting, exposure-based rating and good data governance.

Moody's A3 rating on RRNAH's $250 million senior notes will not be impacted by the sale of its operations. These operations currently provide moderate dividend capacity and credit support to the notes. The rating is based predominantly on the guarantee provided by the ultimate parent company. RRNAH will have to obtain the consent of noteholders in order to complete the sale. Moody's does not include these notes as debt in its financial leverage calculations given the expectation that the proceeds will be used as revolving credit only in rare occasions, and that the proceeds will remain segregated and invested in assets with durations similar to that of the senior notes.

The A3 senior debt rating on RenRe is based on its reasonable consolidated debt leverage and our expectation of ample credit support and dividend capacity from the operating subsidiaries. The main sources of credit support are dividends from RRL and capital contributions from its other operating subsidiaries including its affiliate DaVinci Reinsurance Ltd.

The adjusted debt-to-capital ratio will go down modestly (to c.13% pro forma as of September 2010) as a result of the redemption of the Series B preference shares because Moody's treats 50% of the preferred shares as debt.

The A1 insurance financial strength rating (claims-paying ability) for RRL reflects its reputation as one of the market leaders in property catastrophe reinsurance, good capital adequacy, profitable track record, and strong risk management culture. Risk management has been a core competence of the company since its inception.

These strengths are tempered by the volatility of the catastrophe reinsurance business and a tendency to manage capital actively (i.e., share buybacks).

As part of the sale of the insurance operations, RenRe will reimburse QBE for up to $10 million for adverse reserve development during 2011 and conversely QBE will compensate RenRe for up to $10 million for favorable reserve development during 2011. The transaction is expected to close in the first half of 2011, subject to regulatory approvals and customary closing conditions.

For 9M 2010, RenRe reported consolidated gross premiums written of $1,531.7mn (vs. $1,655.9mn for 9M 2009), net income available to RenRe common shareholders of $580.0mn (vs. $627.1mn for 9M 2009) and total shareholders' equity at Sept 2010 of $3,973.8mn (vs. $ 3,840.8mn at Dec 2009 due to $411mn share repurchases and other factors).

The last rating action on RenRe occurred on March 12, 2010, when Moody's rated the senior notes of RRNAH.

The principal methodology used in rating RenRe and its affiliates was Moody's Global Rating Methodology for Reinsurers published in July 2008. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

The following ratings have been affirmed with a stable outlook:

RenaissanceRe Holdings Ltd. -- senior unsecured debt at A3; preference stock at Baa2;

RenRe North America Holdings Inc. -- guaranteed senior unsecured debt at A3;

Renaissance Reinsurance Ltd. -- insurance financial strength at A1.

New York
Kevin Lee
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Stanislas Rouyer
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's affirms RenaissanceRe following announced sale of U.S. insurance operations
No Related Data.
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