Ratings agency A.M. Best showed confidence in PartnerRe Ltd. (PRE) as it avowed the credibility of the company and upgraded the outlook to ‘stable’ from ‘negative.’
Accordingly, the ratings agency asserted the debt ratings and issuer credit rating (ICR) of “a-” for PartnerRe, who also affirmed the financial strength rating (FSR) of “A+” and ICR of “aa-” for Partner Reinsurance Co. Ltd.Meanwhile, A.M. Best raised the FSR of “A” from “A-” and ICR of “a+” from “a-” of PartnerRe America Insurance Co.
The improved outlook reflects PartnerRe’s strong capital position and relatively stable results throughout 2012. In Apr last year, A.M. Best had assigned a negative outlook to PartnerRe and its subsidiaries, thereby downgrading it from the stable outlook. The ratings agency was wary of the severity of catastrophe (CAT) losses, which had heavily battered the company’s financials in 2011.
Nevertheless, lower CAT losses improved the technical results and return on equity in 2012 and so far in 2013. Moreover, a prudent reinsurance strategy, strong risk profile and diverse business mix across its operational regions are yielding results. These factors also supported the favorable development of reserves, thereby positioning the company higher than the peer group.
However, A.M. Best continues to remain wary of the successful integration of the Asian operations of Paris Re Ltd., which was acquired by PartnerRe in 2009. As a result, FSR of Paris Re was downgraded to “B++” from “A-,” while its ICR was demoted to “bbb+” from “a-.” The ratings agency has also pulled out this business from its assessment list.
We believe that the Presidio acquisition complements PartnerRe’s growth strategy through diversification. Overall, the company enjoys above-averageliquidity and a low-risk balance sheet, which isreflected in its consistent and efficient capital deployment.
While PartnerRe carries a Zacks Rank #2 (Buy), other strong performers in the insurance sector include Axis Capital Holders Ltd. (AXS), Platinum Underwriters Holdings Ltd. (PTP) and Montpelier Re (MRH). All these stocks carry a Zacks Rank #1 (Strong Buy).
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