AM Best revises PartnerRe ratings

18-06-2018

AM Best has revised the outlooks to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and the long-term issuer credit ratings (long-term ICR) of “a+” for most of the operating subsidiaries of PartnerRe, collectively referred to as PartnerRe.

At the same time, AM Best has upgraded the long-term ICR to “a+” from “a” and affirmed the FSR of A (Excellent) of PartnerRe Life Reinsurance Company of Canada (Toronto, Canada) and PartnerRe Life Reinsurance Company of America (Little Rock, AR).

The outlook of the FSR has been revised to positive from stable, while the outlook of the long-term ICR remains positive. AM Best also has revised the outlooks to positive from stable and affirmed the long-term ICR of “bbb+” of PartnerRe and its existing long-term issue credit ratings (long-term IR). PartnerRe is domiciled in Hamilton, Bermuda.

The ratings reflect PartnerRe’s balance sheet strength, which AM Best categories as strongest, as well as its adequate operating performance, very favourable business profile and marginal enterprise risk management (ERM).

The rating agency said that while PartnerRe’s ERM is categorised currently as marginal, AM Best’s improving view of the group’s ERM function is the primary driver behind the group’s positive outlook. This is due to, in part, PartnerRe’s strong non-life underwriting performance during 2017, where the industry experienced a significant level of catastrophic activity. Despite the catastrophic activity, PartnerRe was able to produce a small non-life underwriting profit, while the vast majority of peers had underwriting losses of varying degrees. AM Best attributes this to prudent risk selection and retrocession usage, which has kept PartnerRe’s net probable maximum loss at manageable levels but still allowing the group to provide meaningful market capacity.

PartnerRe’s balance sheet strength and risk-adjusted capitalisation are considered to be at the strongest level. The group’s quality of capital is considered in line with peers but has a superior history of favourable prior year reserve development. Under EXOR ownership, AM Best believes that PartnerRe’s financial flexibility remains more than sufficient, as it still has access to the capital markets on a stand-alone basis, as well as potentially through EXOR, which is a publicly traded company in Italy.

The group maintains a highly diversified book of reinsurance business across non-life and life lines of business, as well as a balanced geographic spread of risk. AM Best believes that PartnerRe’s current focus to build out life and health operations could provide additional diversification to help navigate challenging market conditions while enhancing earnings stability over the medium to long term.

PartnerRe’s overall earnings in recent years have been impacted by several non-operating activities and has seen net investment income trend lower over the current five-year period. However, PartnerRe’s overall underwriting results have proven to be consistently stable and profitable.

Factors that could lead to a rating upgrade are continued consistently favourable operating profitability and maintaining excellent risk-adjusted capital levels through various market conditions. Factors that could lead to a negative outlook or a rating downgrade include unfavourable operating results, outsized insurance or investment losses, or a significant decline in risk-adjusted capital to a level that no longer supports the current ratings.

AM Best has revised the outlooks to positive from stable and affirmed the FSR of A (Excellent) and the long-term ICRs of “a+” of the operating subsidiaries of PartnerRe: Partner Reinsurance Company; Partner Reinsurance Company of the US; PartnerRe Ireland Insurance Designated Activity Company; Partner Reinsurance Europe and PartnerRe America Insurance Company.

PartnerRe, AM Best, ratings, outooks, revisions, subsidiaries

Bermuda Re