Best Affirms Paris Re’s ‘A-‘ Ratings

June 17, 2009

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of French-based Paris Re and the other rated operating subsidiaries of PARIS RE Holdings Limited (Switzerland) (PRH), the ultimate parent company of the group. Best also affirmed the ICR of “bbb-” of PRH. The outlook on all ratings remains positive.

“The ratings of the operating subsidiaries of PRH’s reflect the group’s strong consolidated risk-adjusted capitalization, diversified business profile and experienced management team,” said Best.

The positive outlook reflects Best’s view that an upgrade could be considered at a stage when Best believes that the group’s disciplined underwriting strategy appears likely to result in sustained strong performance.

Best also said it “expects PRH’s consolidated risk-adjusted capitalization to continue to be supportive of the ratings in 2009, despite a dividend payout ratio of 100 percent of 2008 operational results and normal growth in claims reserves. The company’s consolidated risk-adjusted capitalization remained excellent in 2008, supported by the absence of a significant impact from the financial crisis (overall unrealized gain at the end of 2008 of $69.8 million). In January 2008, its entire equity portfolio was sold.”

Best is also anticipating that PRH’s underwriting results are likely to improve in 2009, “provided that catastrophe experience remains within expectations. Stability in future performance will be assisted by PRH’s risk reduction in facultative (mainly property and energy) business, marine, and credit and surety, although the latter may still be heavily hit by the economic environment in 2009.

In addition Best said it “believes that the company’s expense ratio should also improve due to a reduction of the charges related to the company’s stock option plan and an anticipated decrease in commissions. The company is also likely to continue to benefit from a strong investment yield in 2009 at approximately 3.5-3.8 percent, albeit reduced due to the recent drop in interest rates.”

In 2008 the combined ratio was “marginally worse” than Best had expected at 103 percent, compared to 91.3 percent in 2006, due to “relatively high claims frequency and losses from hurricane Ike and from credit and surety business.”

The bulletin described PRH as a “medium-sized international company with a well balanced portfolio. [IJ Ed Note: Paris Re was formed in 2006 by an international consortium of investors. It initially acquired the reinsurance portfolio of AXA Re. See IJ web site – – for further details].

“Although property treaties remain the largest line of business (43 percent of gross written premium [GWP] in 2008), the underwriting portfolio is well diversified between Europe and the U.S.,” Best continued. “The company is expected to write GWP of approximately $1.35 billion in 2009, slightly lower than in 2008 ($1.4 billion) following the reduction of exposure implemented for the 2009 underwriting year. The decline in premiums may be mitigated by an increase in US property catastrophe premiums following June and July 2009 renewals, if rates continue to rise in that segment.”

Best summarized its ratings on the group as follows:
The FSRs of A- (Excellent) and the ICRs of “a-“of the following subsidiaries of PARIS RE Holdings Limited) have been affirmed, and the outlook remains positive:
PARIS RE Switzerland A.G.
PARIS RE America Insurance Company
PARIS RE Asia Pacific Pte. Ltd.
CGRM (Compagnie Generale de Reassurance de Monte Carlo)

The ratings of PARIS RE Switzerland reflect its membership of the PARIS RE group. The affirmation of the ratings of PARIS RE America Insurance Company, PARIS RE Asia Pacific Pte. Ltd. and CGRM reflect guarantees from PARIS RE.

Source: A.M. Best –

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