25 June 2015Insurance

PartnerRe issues second attack on ‘misleading’ Exor ratings claims

PartnerRe has issued yet another statement purporting to correct what it calls misleading statements by Exor – this time relating to its potential ratings in the event of a sale to Exor and, specifically, the impact of such a transaction on its preferred shareholders.

This follows another statement just 24 hours before from PartnerRe, which had dismissed claims by Exor that the Italian investment company’s capital structure will have no impact on the ratings of PartnerRe, including the BBB rating of the preferred shares, in the event Exor acquires PartnerRe.

PartnerRe stressed that Standard and Poor’s (S&P) “has not taken a view nor has it made any public statements regarding the credit or financial strength ratings of PartnerRe in the event of an Exor acquisition”. It added that it felt Exor’s statements with regard to PartnerRe’s potential credit ratings are misleading.

In this new statement, which continues in the same vein, PartnerRe makes several additional points.

It notes again that S&P has not made any statement or affirmation regarding the ratings of PartnerRe’s preferred shares under Exor and also stresses that PartnerRe’s preferred shares are also rated by Moody’s, Fitch and AM Best.

It also says that it believes that under Exor ownership, it would be a wholly-owned subsidiary, unlike Exors’ current portfolio of partially-owned companies, none of which are insurance companies.

“Consistent with the methodology for evaluating insurance companies, rating agencies would examine Exor’s strategy and business plans for PartnerRe, including capital distributions,” it said in the statement.

“The rating agencies will also consider Exor’s financial flexibility in the context of its portfolio of capital intensive and marginally profitable businesses with limited free cash generation.”

It also argued that Exor’s leverage will increase substantially in the context of an acquisition of PartnerRe, a factor it said is cited by S&P in assigning a negative outlook to Exor’s rating. “This debt burden would be supported by Exor’s operating subsidiaries,” it said.

Finally, it also stressed that all four rating agencies have publicly stated that the merger with Axis Capital will result in a stronger and more diversified insurance and reinsurance business, better positioned to compete in evolving markets.

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