Credit ratings agency AM Best upgrades reinsurer PartnerRe on strength of balance sheet

Global credit ratings agency AM Best has upgraded PartnerRe and its operating subsidiaries to the financial strength rating (FSR) A+ (Superior) from A (Excellent), while the group’s long-term issuer credit ratings (LTICR) has improved to “aa-” from “a+”.

AM Best revised the outlook of the Credit Ratings (ratings) to stable from positive for the reinsurer, which is domiciled in Hamilton, Bermuda.

The agency said the decision to upgrade the firm “reflect PartnerRe’s balance sheet strength, which AM Best categories as strongest, as well as its adequate operating performance, very favorable business profile and appropriate enterprise risk management (ERM)”.

It said the revision is also due to the reinsurer’s successful demonstration of its ERM functions and framework over the past several years and, in particular, PartnerRe’s underwriting performance in 2017 and 2018 was well within expectations during a period when the industry experienced a significant level of catastrophe loss activity”.

AM Best highlighted the firm’s “prudent risk selection and retrocession usage”, which it said had kept PartnerRe’s net probable maximum losses at manageable levels, while allowing the group to provide meaningful market capacity. Additionally, PartnerRe has built its life book of business in a selective and measured manner that is reflective of the group’s risk culture.

“AM Best considers PartnerRe’s balance sheet strength and risk-adjusted capitalization to be at the strongest level. The group’s quality of capital is considered in line with peers but has a superior history of favorable prior-year reserve development,” the agency said.

Under EXOR NV ownership, the agency said it believed PartnerRe’s financial flexibility remains more than sufficient because it has retained access to the capital markets on a stand-alone basis, as well as potentially through EXOR NV, which is a publicly traded investment company in Italy.

It added: “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 of life and health operations could provide additional diversification to help navigate challenging market conditions while enhancing earning stability over the medium to long term.

“PartnerRe’s operating performance is unpinned by stable and profitable underwriting results and complimented by net investment income. Net investment income has generally trended lower over the past five years, although it did experience a slight uptick in 2018. Overall earnings in 2018 were impacted adversely by realized and unrealized losses. The unrealized portion was offset largely by unrealized gains in the first quarter of 2019.”

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