Fitch Affirms PartnerRe's Ratings; Outlook Stable

  Fitch Affirms PartnerRe's Ratings; Outlook Stable

Business Wire

NEW YORK -- April 22, 2014

Fitch Ratings has affirmed PartnerRe Ltd.'s (PartnerRe) ratings, including its
'A+' Issuer Default Rating (IDR) 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.

KEY RATING DRIVERS

The ratings affirmation reflects the company's continued strong competitive
position, solid balance sheet, moderate operating and financial leverage, 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. PartnerRe's ratings also
reflect Fitch's current Negative sector outlook on global reinsurance, as the
fundamentals of the reinsurance sector have deteriorated with declining
premium pricing and weakening of terms and conditions across a wide range of
lines.

PartnerRe posted sizable growth in written premiums in 2013 at levels greater
than the market and most peers. Total company net premiums written (NPW)
increased 18% in 2013, following significantly more modest growth of 1.9% in
2012. Due to this growth, PartnerRe's NPW to equity ratio increased to 0.80x
at Dec. 31, 2013 from 0.66x at Dec. 31, 2012.

Fitch recognizes that top line premium growth can prove beneficial in
advancing a company's market position and size/scale. However, Fitch also
cautions that rapid growth can create additional risks in underwriting quality
and pricing adequacy on new business, especially during a period of market
competitiveness.

Fitch's concerns about PartnerRe's comparatively rapid recent growth during at
a time when pricing is under pressure in many of the company's core business
lines is partially mitigated by the fact that a significant portion of
PartnerRe's recent top line gains emanated from businesses where pricing and
loss experience is largely uncorrelated with the company's traditional
property/casualty business.

Specifically, the two largest contributors to PartnerRe's net written premium
growth were agriculture business and life and health reinsurance. Excluding
these two lines, PartnerRe's net written premiums increased by 10.2% in 2013.
The company has decreased its property catastrophe premiums, where pricing is
currently under the greatest pressure, in each of the past two years.

Fitch expects PartnerRe to manage its growth prudently and does not anticipate
that the company will grow its premiums considerably greater than the market
and peers over a longer period of time.

PartnerRe's 2013 underwriting and operating profitability were strong,
characterized by an 85.3% combined ratio and 12.1% operating return on common
equity. Results in 2013 benefited from significantly lower catastrophe losses
versus the prior two years but this was partially offset by an $86 million
year over year reduction in net investment income, stemming from the
prevailing low interest rate environment.

PartnerRe's net income to common shareholders during 2013 totaled $597
million, which was suppressed by $526 million of unrealized investment losses
on fixed income investments during the period. Fitch notes that these
valuation declines were largely related to the increase in risk free interest
rates during the second quarter of 2013 and were similar to declines observed
across the insurance sector during this time period.

RATING SENSITIVITIES

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 could result in a downgrade include:

--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
0.9x;

--Net leverage (the sum of net premiums written and total liabilities, less
any ceded reserves and debt, divided by equity) exceeding 3.5x;

--Failure to report calendar-year combined ratios in the mid 90%'s or better;

--Operating-earnings-based interest and preferred dividend coverage ratios
that fall below approximately 8x;

--Investment write downs or adverse loss reserve development of a magnitude
that caused Fitch to question the strength of PartnerRe's balance sheet;

--If the company were to report significantly worse underwriting results and
overall profitability than comparably rated peers.

Fitch has affirmed the following ratings with a Stable Outlook:

Partner Reinsurance Company Ltd.

--IFS at 'AA-'.

PartnerRe Ltd.

--IDR at 'A+';

--$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+';

--$250 million 5.875% series F non 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' (Nov. 13, 2013);

--'Reinsurance (Global) Sector Credit Factors Special Report' (Aug. 14, 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Reinsurance (Global) Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715686

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827424

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Contact:

Fitch Ratings
Primary Analyst
Greg Dickerson
Director
+1-212-908-0220
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Brian Schneider, CPA, CPCU, ARe
Senior Director
+1-312-606-2321
or
Committee Chairperson
Andrew Davidson, CFA
Senior Director
+1-312-368-3144
or
Media Relations:
Brian Bertsch, +1-212-908-0549 (New York)
brian.bertsch@fitchratings.com
 
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