A.M. Best has announced a readjustment of PartnerRe’s rating outlook from stable to positive, placing the Financial Strength Rating (FSR) at A and the Long-Term Issuer Credit Ratings (Long-Term ICR) at A+ for the majority of the firm’s subsidiaries.
Additionally, Best has increased the PartnerRe American and Canadian Life Reinsurance Companies’ Long-Term ICR from A to A+ and affirmed an FSR of A.
Best points to an improving view of PartnerRe’s enterprise risk management (ERM) – currently categorised as marginal – as the major driving factor behind the positive outlook.
This is partly due to a profitable non-life underwriting performance in 2017 despite the impact of major hurricanes and catastrophe losses, that Best attributes to prudent risk selection and retrocession usage, keeping PartnerRe’s net probable maximum loss at manageable levels while allowing the group to provide meaningful market capacity.
Despite PartnerRe’s quality capital remaining in-line with peers, its superior history of favourable prior year reserve development means the group’s balance sheet strength and risk-adjusted capitalisation are considered by Best to be at the strongest level.
Best also highlights the considerable financial flexibility provided by PartnerRe’s holding company EXOR N.V, as the group still has access to the capital markets on a stand-alone basis as well as potentially through EXOR N.V, which is a publicly traded company in Italy.
PartnerRe’s recent overall earnings have been impacted by several non-operating activities and has seen net investment income trend lower over the current five-year period. However, according to Best, PartnerRe’s overall underwriting results have proven to be consistently stable and profitable.
With a highly diversified book of reinsurance business across non-life and life lines of business, as well as a balanced geographic spread of risk, 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.
