Fitch Ratings announced today that it expects to assign an 'A+' rating to PartnerRe Ltd.'s (PartnerRe) planned issue of $400 million of 10-year senior unsecured notes. The Rating Outlook is Negative. Fitch's expectation is that proceeds of the offering will be used for general corporate purposes.
The expected ratings reflect PartnerRe's strong profitability, conservative investment strategy, and low reserve and reinsurance leverage. The ratings also consider PartnerRe's inherent exposure to potential earnings volatility from catastrophe-related losses.
Including the planned notes issuance on a pro forma basis, PartnerRe's financial leverage and interest coverage remain supportive of the company's ratings. On a pro forma basis Fitch estimates PartnerRe's equity-credit adjusted leverage excluding unrealized appreciation on the company's fixed income investments, at roughly 10% and the company's run-rate interest coverage ratios in the mid-to-high single digits.
Fitch notes that PartnerRe recently announced that its board of directors had approved a new share repurchase authorization for up to roughly $624 million (based on the current share price). The agency's expectation is that PartnerRe will manage potential share repurchases such that the company's equity-credit adjusted debt-to-capital ratios will remain supportive of the company's current debt ratings.
Fitch believes that PartnerRe's earnings and capital exposure to catastrophe-related losses was highlighted by the company's recently announced estimated losses from the Chilean earthquake and Winter Storm Xynthia. Fitch's does not view PartnerRe's estimated pre-tax losses from these two events of $260 million-$390 million, or 3%-5% of year-end capital, as a material weakening of the company's financial strength.
PartnerRe's Negative Rating Outlook reflects Fitch's uncertainty about the combined PartnerRe - Paris Re organization to generate returns and stability of returns commensurate with those expected at the company's current ratings levels. PartnerRe acquired Paris Re in October 2009.
If the combined entity demonstrates the ability to generate such returns over the next 6-12 months while retaining its risk adjusted capitalization, Fitch will likely affirm PartnerRe's existing ratings. Otherwise, Fitch believes that PartnerRe's ratings would likely be downgraded one notch.
Applicable Criteria available on Fitch's web site at 'www.fitchratings.com' include:
--'Insurance Rating Methodology' (Dec. 29, 2009);
--'Non-Life Insurance Rating Criteria' (March 2, 2007);
--Reinsurance Rating Criteria: Life and Non-Life (Global)' (March 2, 2007);
--Insurance Industry: Global Notching Methodology and Recovery Analysis (Dec. 29, 2009).
Additional information is available at www.fitchratings.com.
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Contacts:
Fitch Ratings
Gregory W. Dickerson, +1-212-908-0220 (New York)
Mark
E. Rouck, CPA, CFA, +1-312-368-2085 (Chicago)
Brian Bertsch,
+1-212-908-0549 (Media Relations, New York)
brian.bertsch@fitchratings.com
