S&P Affirms PartnerRe and Subs ‘A’, ‘AA-‘ Ratings

October 20, 2004

Standard & Poor’s Ratings Services announced that it has affirmed its “A” counterparty credit rating on Bermuda-based PartnerRe Ltd. (PRE) and its “AA-” counterparty credit and financial strength ratings on its subsidiaries: Partner Reinsurance Co. Ltd., Partner Re SA, and Partner Reinsurance Co. of U.S. The outlook on all the ratings is stable.

“The ratings are based on PRE’s very strong operating results, strong competitive position and well-diversified franchise, conservative balance sheet, and strong capital adequacy,” said S&P. “Partially offsetting these positive factors are the group’s potential volatility in underwriting performance because of low retrocessional usage as well as its developing U.S. and European franchises.”

S&P said it expects PRE’s combined ratio for full-year 2004 to be between 94 and 95 percent, “reflecting about 2-3 percentage points of hurricane-related catastrophe losses. Premium volume is expected to be flat to down for the rest of 2004 and into 2005 because of changing market conditions and PRE’s commitment to maintaining strict underwriting standards. Capital adequacy is expected to strengthen, reflecting the expectation of strong earnings and flat or declining premiums for the year. Investment quality as well as cash flows should remain very strong through the remainder of 2004 and into 2005.”

The following is a summary of the “Major Rating Factors” considered by S&P:
— Very strong operating performance. In the last two years, PRE has outperformed many of its peers, with the group reporting a consolidated GAAP combined ratio of 100.3 percent and an ROR of 9.1 percent.
— Strong competitive position. PRE ranked 10th among global reinsurance groups in 2003, with $3.6 billion in net reinsurance premiums written. This is an increase in market share from a ranking of 13th in 2001 and reflects the group’s ability to take advantage of considerable market dislocation within the global reinsurance industry over the last three years.
— Conservative balance sheet. PRE has maintained a clean balance sheet, with low levels of noninvestment-grade fixed assets, few higher-risk investments, and low financial leverage.
— Strong capital adequacy. PRE’s capital adequacy ratio remained in the strong range at year-end 2003 and is expected to strengthen within this range over the next two years. Further supporting the capital adequacy position are the group’s relatively modest exposure to U.S. liabilities prior to 2001 as well as its conservative reserving strategy.
— Potential volatility in underwriting performance. As a gross line catastrophe writer with limited retrocessional purchases, PRE remains subject to large catastrophe losses even though property catastrophe premiums constituted only 12 percent of net premiums for the six months ended June 30, 2004.
— Developing U.S. and European franchises. As part of its effort to diversify its operations beyond its property catastrophe roots, PRE expanded into the U.S. and European regions through a few acquisitions in the late 1990s. PRE’s U.S. operations are considered core by management and had markedly improved operating performance in 2002 and in 2003, with U.S. property/casualty combined ratios of 101.1 percent in 2002 and 101.9 percent in 2003, down from 153.1 percent in 2001 (reflecting the exposure to World Trade Center-related losses). The operating performance of the European business has also improved. However, the track record of improved operating profitability in these regions is still relatively recent.

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