Best Affirms PartnerRe (France) Ratings

December 26, 2006

A.M. Best Co. has affirmed the financial strength rating of ‘A+’ (Superior) and the issuer credit rating of “aa-“of France’s PartnerRe S.A. “The outlook on both ratings remains stable, in line with the outlook of its ultimate parent company, Partner Reinsurance Co Ltd. (PRL),” said Best.

The ratings also “reflect the full enhancement from the implicit support provided by PRL,” Best noted. “Other factors include PartnerRe S.A.’s strong business profile and stable stand-alone risk-adjusted capitalization An offsetting factor is PartnerRe S.A.’s deteriorating underwriting results in 2006.” As a result, Best indicated that it “could reduce the level of enhancement if underwriting results continue to remain weak.”

Best said it “expects PartnerRe S.A.’s risk-adjusted capitalization to remain stable, factoring the reserve strengthening for French motor third-party liability and declining premium income. The explicit support provided by PRL, through an accident year stop-loss protection (which protects PartnerRe S.A.’s net loss ratio by 20 points in excess of 85 percent), was not utilized during the past three years, nor does A.M. Best expect it to be utilized in 2006.”

However, as noted above, Best indicated that it “expects overall earnings to significantly decline in 2006 mainly due to non-life underwriting losses driven by softening premium rates and reserve strengthening for French motor. Best expects pre-tax earnings to be in the region of €15 million ($20 million) at year-end 2006, compared to €86 million ($112 million) achieved in 2005, factoring stable life earnings and a deterioration in the combined ratio by approximately 5 percentage points to 106 percent.”

On a positive note, Best said it “expects PartnerRe S.A.’s business position, especially in France, southern Europe, Benelux and Canada, to remain strong despite increasing competition.” However, the rating agency anticipates “a 10 percent decline (to approximately €450 million ($585 million)) in non-life gross premiums written in 2006 due to strict underwriting in a softening market, especially in property and motor, as well as higher net retention of clients.”

In the life sector, Best forecasts stable premium income (approximately €165 million ($215 million)) as PartnerRe S.A. benefits from sustainable business of mortality and longevity products.

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