TEXT-Fitch affirms PartnerRe's ratings, outlook is stable

Wed Jan 9, 2013 9:40am EST

Jan 9 - Fitch Ratings today affirmed PartnerRe's existing ratings,
including the 'A+' Issuer Default Rating (IDR) of PartnerRe and the 'AA-'
Insurer Financial Strength (IFS) rating of Partner Reinsurance Company Ltd., the
company's principal (re)insurance operating subsidiary. The Rating Outlook is
Stable. A complete list of rating actions appears below.

The ratings affirmation reflects the company's continued strong competitive
position, solid balance sheet, and good long-term track record of earnings and
capital generation. The company's ratings also reflect Fitch's belief that the
company's risk management capabilities will enable it to maintain its strong and
liquid balance sheet during periods that experience heightened underwriting
losses and/or capital market volatility.

Partially offsetting these favorable factors is PartnerRe's relatively higher
exposure to low-frequency but high-severity events. This was most recently
illustrated by PartnerRe's pre-announced estimated pre-tax losses from
Superstorm Sandy of between $200 million-$240 million net of reinsurance
recoveries and reinstatement premiums that will impact the company's fourth
quarter 2012 (4Q'12) results. At roughly 3% of total GAAP equity, Fitch views
this loss as manageable and well within Fitch's expectations for PartnerRe's
share of industry losses which many industry observers expect to exceed $20
billion.

In 2011, PartnerRe's catastrophe losses (primarily from earthquakes in Japan and
New Zealand) totaled in excess of $1.7 billion. Fitch notes favorably that
during the first nine months of 2012, the company's $1 billion net income nearly
doubled the $520 million net loss reported by PartnerRe for the full year 2011.

This improvement was driven by solid underwriting results (non-life combined
ratio of 85.1%) as well as $488 million of pre-tax realized and unrealized
investment gains during the period. Fitch also notes that the company has
rebuilt its total GAAP equity to almost $7.1 billion, which approximates levels
reported at year end 2010.

Fitch anticipates that PartnerRe will report solid underwriting profits and
overall profitability for the full year 2012, despite the impact of
Sandy-related losses in 4Q'12.

Due to PartnerRe's high current rating category, Fitch views a near-term rating
upgrade as unlikely, in the absence of a material change in risk profile
resulting in significantly lower underwriting volatility observed over an
extended period.

Key ratings triggers that, if observed over the next 12-18 months, could result
in a downgrade include a sustained period of poor operating results, investment
writedowns or adverse loss reserve development of a magnitude that caused Fitch
to question the strength of PartnerRe's balance sheet, or if PartnerRe were to
report significantly worse underwriting results and overall profitability than
comparably rated peers.

Additional ratings triggers that could result in a downgrade when viewed on a
run-rate or multi-year rolling average basis include:

--Failure to report calendar-year combined ratios in the mid 90%'s or better;
--Operating-earnings-based interest and interest and preferred dividend coverage
ratios that fall below approximately 10x and 6x, respectively;
--Barring a significant shift in business mix toward less volatile lines, an
increase in net written premium to GAAP equity ratios to levels that exceed
1.0x.

Fitch has affirmed the following ratings with a Stable Outlook:

Partner Reinsurance Ltd. 
--IFS at 'AA-'.

PartnerRe Ltd. 
--IDR at 'A+';
--$290 million 6.75% series C cumulative redeemable perpetual preferred
securities at 'BBB+';
--$230 million 6.5% series D cumulative redeemable perpetual preferred
securities at 'BBB+';
--$374 million 7.25% series E cumulative redeemable perpetual preferred
securities at 'BBB+';
--$63 million junior subordinated notes due Dec. 1, 2066 at 'BBB+';
--$250 million 6.875% senior unsecured notes due June 1, 2018 at 'A';
--$500 million 5.5% senior unsecured notes due June 1, 2020 at 'A'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Oct. 18, 2012).

Applicable Criteria and Related Research:
Insurance Rating Methodology - Amended
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.