Best Rates Paris Re ‘A-‘; Downgrades Ratings of CGRM

June 22, 2007

A.M. Best Co. has assigned a financial strength rating (FSR) of “A-” (Excellent) and an issuer credit rating (ICR) of “a-” to PARIS RE S.A., the main operating company of the newly formed PARIS RE group. Best also assigned an ICR of “bbb-” to Swiss-based PARIS RE Holdings Limited, the ultimate parent company of PARIS RE.

In addition Best assigned an FSR of “A-” (Excellent) and an ICR of “a-” to PARIS RE Switzerland AG and PARIS RE Bermuda Limited, both subsidiaries of PARIS RE Holdings Limited.

However, Best announced that it has downgraded the FSR to “A-” (Excellent) from “A” (Excellent) and the ICR to “a-” from “a” of CGRM (Compagnie Generale de Reassurance de Monte Carlo), and affirmed the FSR of “A-” (Excellent) and assigned an ICR of “a-” to New York-based PARIS RE America Insurance Company (previously AXA Re America Insurance Company), both are also subsidiaries of PARIS RE. The outlook for all ratings is stable.

Standard & Poor’s Ratings Services recently assigned similar ratings to the Group (See IJ web site June 11).

PARIS RE was established by private equity funds to take over the reinsurance activity of AXA RE, with an initial capital of $1.65 billion. The investors include Trident III, L.P., a fund managed by Stone Point Capital LLC. Trident III was originally established as an investment vehicle by MMC Capital – a unit of Marsh, Inc. Other lead investors include Hellman & Friedman, Vestar Capital Partners, Crestview Capital Partners, ABN Amro and New Mountain Capital (See IJ web site June 7, 2006).

Best noted that as “part of the transaction, PARIS RE is 100 percent reinsuring the portfolio of AXA Re, which will continue to front the ceded risks until 30 September 2007. The transaction became retroactively effective as of 1 January 2006. Consequently, PARIS RE has already benefited from excellent earnings in 2006: $437 million, of which approximately $230 million is related to the insurance activity and remainder from the positive gain on acquisition (bad will).”

Best’s ratings on PARIS RE “reflect its strong initial capitalization and an experienced management team,” said the announcement. A “challenging market environment in which PARIS RE operates” is cited as an offsetting factor.

AXA and AXA RE, have “fully guaranteed” PARIS RE’s technical reserves prior to Dec. 31, 2005, the Company is therefore “benefiting from the investment income associated to assets backing guaranteed reserves until these reserves are fully run off,” Best noted.

Best expressed confidence in the senior management team led by Peter Gerhardt, and in PARIS RE’s “existing infrastructure operation including back office.”

However, Best said it “believes that PARIS RE will be challenged by increased competition and additional capacity from established and newly created companies. In addition, AXA Re’s historic operational performance was volatile. Given these factors, PARIS RE may find it difficult to achieve its business plans and earnings targets.”

Best also noted that its ratings of PARIS RE Switzerland AG and PARIS RE Bermuda Limited “also factor a rating enhancement for its strategic role within the PARIS RE group.” Best anticipates that PARIS RE Switzerland AG “will have put into place a level of capitalization in line with the rating by the end of third quarter 2007.”

Explaining the downgrade of CGRM’s ratings and the affirmation of PARIS RE America, Best said the “ratings reflect the change in ownership (previously AXA Re) but also factor into the rating an implicit support from the new parent company.”

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