S&P Raises PARIS RE Ratings to ‘A+’

December 4, 2009

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on the core and guaranteed operating subsidiaries of the Swiss-based reinsurance group PARIS RE Group, including PARIS RE S.A. and PARIS RE Switzerland Ltd., to ‘A+’ from ‘A-‘.

S&P has also removed the ratings from CreditWatch with positive implications where they were placed July 6, 2009. The outlook is positive.

S&P said it had made the upgrade following the “acquisition and control by PartnerRe Ltd. (PRE; A/Negative/–) of more than 90 percent of the voting rights in PARIS RE. This level of control enables PRE to effect a merger of PARIS RE Holdings Ltd., the listed parent company of the group, into PartnerRe Holdings II Switzerland GmbH, a direct wholly owned subsidiary of PRE.

“Having obtained legal and Board level control of PARIS RE and following the completion of the legal merger, which we expect before year-end, we understand that beginning in 2010, and subject to regulatory approval, PRE is over time likely to integrate the rated PARIS RE entities into the existing core subsidiaries and/or branch operations of the PRE group.”

The rating agency also explained that it has raised the ratings on PARIS RE’s operating companies to “within one notch of the ratings on PRE’s core operating subsidiaries (AA-/Negative/–). This is because of PRE’s ownership stake and its intention to acquire the remaining shares in PARIS RE, management’s intent to directly align the interests of PARIS RE’s policyholders with those of PRE prospectively, and the strategic benefit that PARIS RE provides to its new owner by virtue of its complementary global reinsurance franchise. The one-notch differential is consistent with our group rating methodology.”

Credit analyst Mark Coleman added: “The ratings on PARIS RE are based on its track record of successful strategic execution, its strong competitive position, and strong financial profile.”

S&P further explained that “PARIS RE’s financial profile includes its strong capitalization, albeit weakened by the previously disclosed $310 million special cash dividend under the terms of the acquisition, strong asset quality, and limited exposure to reserving issues. PARIS RE has a short tailed liability profile and an adverse development guarantee provided by COLISSE RE (formerly AXA RE; not rated) with respect to the net reserves carried forward at Jan. 1, 2006.

“The ratings are constrained by PARIS RE’s earnings profile, which, although strong, is volatile due to catastrophe risk and has a higher relative exposure to credit and surety reinsurance than most of its sector peers amid a recessionary economic climate.”

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

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