Covea acquisition of PartnerRe would weaken its balance sheet – Moody’s

Covea’s potential acquisition of PartnerRe would weaken its balance sheet but it would not eliminate Covea's capital and leverage strengths relative to other Aa-rated peers, credit rating agency Moody’s has said.

The comments follow the confirmation on February 9, 2020 that Covea Cooperations (IFS Aa3 stable) had entered discussions with Exor regarding a possible acquisition of Exor's reinsurance business PartnerRe.

“Positively, the acquisition would enhance Covea’s business and geographic diversification,” said Moody’s. “Partner Re is the 12th largest global reinsurer with gross written premiums of $6.3 billion in 2018. While the company is predominantly focused on P&C reinsurance, it has a growing life reinsurance business, accounting for 21 percent of 2018 net premiums, which sets it apart from a number of the other single-A rated reinsurers. Partner Re would provide a strong platform for Covea to diversify its business and grow into reinsurance.

“Finally, to gauge the effect of an acquisition on Covea's credit profile, we would also consider integration and execution risks. In particular, we would assess Covea's ability to manage and control a sizeable reinsurance business, given the currently limited weight of reinsurance activities within the group.

“Nonetheless, since there is virtually no overlap between the business operations of Covea and PartnerRe, we would expect there to be a significant degree of continuity with respect to PartnerRe’s senior management and underwriting teams and its overall corporate strategy following a potential acquisition.”