S&P Sees No Rating Change for PartnerRe after Channel Re Write Down

Standard & Poor’s Ratings Services indicated that its ratings on PartnerRe Ltd., currently ‘A’ with a stable outlook, and related subsidiaries, will not be affected following the group’s announcement that it expects a non-operating charge of $74 million in the fourth quarter of 2007. S&P explained that the charge resulted from the write down in the value of PartnerRe’s stake in Channel Re to $0 (See related article).

S&P noted that the “decision to write down its investment in Channel Re follows discussions with the company, in which PartnerRe expects that the most recent announcement by MBIA, that it will record a mark-to-market charge of $3.3 billion in the fourth quarter of 2007, will lead to mark-to-market write-downs at Channel Re in excess of its GAAP shareholders’ equity.”

S&P described the charge as “reasonable vis-à-vis PartnerRe’s overall size and earnings power, thus no rating action is expected on PartnerRe or related subsidiaries due to this write-down.”

The rating agency added that it “does not expect PartnerRe to incur any further material losses related to residential subprime mortgage investments in its investment portfolio,” and expects PartnerRe “to report very strong operating performance for the full 2007 year.” Through the first nine months of the year, PartnerRe continued to meet S&P’s earnings expectations with a strong non-life combined ratio of 81 percent and net income of $ 537 million.

“The ratings on PartnerRe and related subsidiaries are based on the group’s very strong competitive position, disciplined underwriting, excellent ERM, strong operating performance, and improved capital adequacy in 2006 and 2007,” said S&P. “Partially offsetting these positive factors are potential underwriting volatility because of low retrocessional use; historically lower-than-peer-group capital adequacy; and risks associated with further diversification into alternative risk transfer businesses and, to a lesser extent, certain areas within life reinsurance.”

Source: Standard & Poor’s – www.standardandpoors.com