Rating agency AM Best has given an optimistic view on the acquisition of reinsurance company PartnerRe by French mutual insurance group Covéa, saying the diversification is positive for Covéa, while PartnerRe will benefit from increased scale and capital strength.
Just last week, EXOR, the Agnelli family owned investment and holding company and Covéa signed a definitive agreement for the sale of reinsurer PartnerRe to Covéa for $9 billion.
AM Best has now placed Covéa’s ratings under review with positive implications, as it feels the acquisition of a dedicated global reinsurance arm is good for the mutuals business.
The rating agency said that it anticipated that the acquisition of PartnerRe will “lead to an improvement in Covéa’s business profile by significantly diversifying, both on a product and geographic basis, its offering.”
AM Best also commented on how the acquisition will affect PartnerRe, implying that it feels the deal will be beneficial for the company.
Importantly, the rating agency said it does not believe the sale will materially impact PartnerRe’s credit profile.
Even while PartnerRe is expected to “improve the diversification of the greater Covéa Coop,” AM Best also noted that “the stand-alone operations of PartnerRe are anticipated to remain generally consistent with prior years.”
Positively, the rating agency further explained that, “PartnerRe could benefit from the increased scale and capital strength that Covéa Coop provides in future years.”
As long as the terms of the $9 billion acquisition do not deviate materially and no other information changes the outlook, it seems possible Covéa could even see a rating upgrade, if the agencies believe the assumption of a global reinsurance business will make a significant difference to its diversification and reach.