PartnerRe pact attracts rating agency attention
The $9-billion pending sale of Bermuda-based PartnerRe Ltd has attracted the attention of rating agencies, with both Moody’s Investor Services and AM Best making statements affirming existing ratings.
Moody's affirmed their A1 insurance financial strength (IFS) ratings of PartnerRe and Partner Reinsurance Company of the US and the debt and preferred stock ratings of PartnerRe Ltd (PartnerRe, senior shelf (P)A3 stable) and its debt-financing subsidiaries, noting that the outlooks are stable.
Meanwhile, AM Best said that the financial strength rating (FSR) of A+ (Superior) and the long-term issuer credit rating of aa- (Superior) for the members of PartnerRe Ltd. (Bermuda) also remain unchanged.
And the FSR of A (Excellent) and the long-term issuer credit rating (long-term ICR) of a+ (Excellent) of Covéa Coopérations (Covéa Coop) (France) remain unchanged.
Exor NV and Covéa signed a memorandum of understanding related to a proposed all-cash transaction.
As the two sides progress towards a definitive agreement, AM Best will continue to evaluate the potential credit profile impact to each organisation, and respond to any material planned or executed changes.
For Moody’s, the rating affirmation reflects an expectation that the change in ownership to Covéa will not have any meaningful impact on PartnerRe's business strategy and credit profile and that the current management team and other key employees will remain in place.
PartnerRe, the agency said, will benefit from being part of a larger insurance organisation with substantial capital resources that could be used to alleviate capital strain in the event of large catastrophe losses or to help to finance profitable growth opportunities.
Key considerations for PartnerRe's ratings, going forward, include the successful retention of client and broker support after the acquisition; changes, if any, to the firm's risk appetite; its prospective capital adequacy and financial leverage; as well as implicit and explicit support provided by Covéa.
PartnerRe's ratings reflect the group's strong market position in speciality reinsurance lines, its broad international presence and operational platform as well as its diversified book of business across a broad range of exposure classes, including life and health reinsurance.
Other strengths include its strong capitalisation, good core profitability and high-quality investment portfolio.
Tempering these strengths are the potential for earnings volatility arising from PartnerRe's meaningful property catastrophe reinsurance exposures and from claims inflation in its casualty reinsurance lines.