S&P Affirms PartnerRe’s ‘AA-‘ Ratings and Stable Outlook

November 10, 2008

Standard & Poor’s Ratings Services has affirmed its ‘A’ counterparty credit rating on Bermuda-based reinsurance holding company Partner Re Ltd. and its ‘AA-‘ counterparty credit and financial strength ratings on the operating subsidiaries (collectively referred to as PartnerRe). The outlook on all of these companies remains stable.

“The affirmation follows our review of PartnerRe’s third-quarter 2008 operating results,” explained credit analyst Laline Carvalho. “We believe that the group’s underwriting results and capital adequacy remain strong.”

S&P noted that PartnerRe “reported a net loss of $152 million in the third quarter of 2008 compared with net income of $263 million for the same period in 2007. This follows a net loss of $26 million in the second quarter of 2008. These losses principally stemmed from unrealized losses in PartnerRe’s investment portfolio as a result of recent volatility in the capital markets. It also reflects PartnerRe’s decision to adopt FAS 159 in the beginning of 2008 and report realized and unrealized investment gains/losses on its fixed-income portfolio as part of net income.

“From an underwriting perspective, PartnerRe’s results remain solid, with the group reporting a nonlife combined ratio of 95.5 percent in the third quarter of 2008 and 91.4 percent through the first nine months of the year. This is despite incurring $203 million in pretax losses, net of reinstatement premiums, related to Hurricanes Ike and Gustav in the third quarter.

Carvalho added: “The ratings on PartnerRe are based on this group’s very strong competitive position, strong operating performance, excellent ERM, and improved capital adequacy in recent years. Offsetting these positive factors are the group’s potential underwriting volatility because of low retrocessional use and a historically lower-than-peer group capital adequacy ratio.”

S1P said it “expects PartnerRe’s full-year 2008 underwriting performance to remain strong, with the group expected to report a combined ratio of 90 percent-93 percent and an operating ROR of more than 13 percent. We expect that the group’s capital adequacy will remain supportive of the ratings in the strong to very strong range over the next two years. Financial leverage–as measured by total debt plus hybrids to total capital–will likely remain at less than 30 percent over the medium term.”

Source: Standard & Poor’s – www.standardandpoors.com

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