Best Affirms Ratings of PXRE
A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings of “a” of the reinsurance subsidiaries of the PXRE Group Ltd. (PXRE) (Bermuda). PXRE’s reinsurance subsidiaries are comprised of PXRE Reinsurance Company (Hartford, Conn.) and PXRE Reinsurance Ltd. (Bermuda).
Additionally, A.M. Best has affirmed the financial strength rating of A (Excellent) and has assigned an issuer credit rating of “a” to PXRE Group (Bermuda). A.M. Best has also affirmed the issuer credit rating of “bbb” of PXRE and the group’s existing debt ratings. All ratings have a stable outlook.
These ratings reflect PXRE’s strong risk-adjusted capital position and its favorable operating results in recent years. Since refocusing its business strategy in 2001 to concentrate on its core competencies in property catastrophe reinsurance, the company has demonstrated that it can sustain and grow its capital through its improved underwriting performance, consistent investment returns and successful capital raising initiatives.
In 2004, despite incurring $117 million in after tax losses from the Florida hurricanes and the Asian earthquake/tsunami, PXRE still generated $22.8 million in net income and produced a combined ratio slightly below 100%.
Additionally, the company raised $98 million in capital in the fourth quarter through the issuance of common stock. Shareholders’ equity has grown to $714.6 million at March 31, 2005, and the company’s total capital base of $882 million is supportive of the premium growth experienced over the last three years by PXRE, along with the corresponding increase in risk exposure.
On March 31, 2005, PXRE mandatorily converted 62% of the outstanding convertible voting preferred shares into common shares and will pay cash dividends on the remaining preferred shares going forward, rather than add additional preferred shares, simplifying the capital structure and eliminating the dilutive effect of the preferred shares.
Partially offsetting these strengths is the onset of softening in the pricing for property covers, which could dampen expected returns. Furthermore, as a global property catastrophe reinsurer, PXRE is exposed to high impact, low frequency losses associated with catastrophic events on a worldwide basis.
Despite these concerns, A.M. Best expects PXRE to continue to manage its capital base very conservatively within acceptable ranges to support its current ratings and to continue to execute its business strategy in accordance with expectations.