A.M. Best Affirms Ratings of Subsidiaries of RenaissanceRe, Downgrades Issuer Credit and Debt Ratings; Removes All Ratings From Under Review.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Renaissance Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Ltd. (RenRe Ltd.) and the financial strength ratings of A (Excellent) of the subsidiaries of Glencoe Group Holdings Ltd. (Glencoe). These companies are operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. of the holding company, RenaissanceRe Holdings Ltd. (RenaissanceRe) (NYSE NYSE See: New York Stock Exchange : RNR RNR Rock 'N Roll RNR Royal Naval Reserve RNR Ribonucleotide Reductase RNR Receive Not Ready (ITU-T; ISDN) RNR Research News Reporter RNR Rest and Relaxation RNR Registry of Nursing Research RNR Rest and Recreation ) (all of Bermuda). Concurrently, A.M. Best has downgraded the issuer credit rating (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) of RenaissanceRe to "a-" from "a" as well as all existing debt ratings. All ratings have been removed from under review and assigned a stable outlook. These ratings reflect RenaissanceRe's excellent capitalization, seasoned management team and--despite taking over $550 million in losses from the 2004 Florida windstorms--a historical track record of exceptional underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. performance and superior risk management techniques. In the 10 years preceding 2004, RenaissanceRe generated returns on equity at the 20% range and greater. In 2004, due to the Florida hurricanes The List of Florida hurricanes encompasses 470 tropical or subtropical cyclones that affected the state of Florida. More storms hit Florida than any other U.S. state, and since 1851 only eighteen hurricane seasons passed without a storm impacting the state. , RenaissanceRe's net income was only $133 million and its return on equity for the year was limited to only 5%. RenaissanceRe's shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. reported at December 2004 is $2.7 billion, and it has total capital resources in excess of $3 billion. An offsetting factor to RenaissanceRe's strengths is the rapid growth being experienced through its Specialty Reinsurance segment being underwritten through RenRe Ltd. and its Individual Risk segment being written through the Glencoe insurance companies. Furthermore, a significant amount of Glencoe's business is underwritten outside of RenaissanceRe through program managers. These segments include lines of business outside of RenaissanceRe's core property catastrophe reinsurance expertise and comprise nearly two thirds of the net written premiums underwritten by RenaissanceRe's operating companies operating company A business that engages in transactions with outsiders. in 2004, including a significant amount of casualty lines. Additionally, management has indicated that at least for the near term, it will reduce property catastrophe reinsurance writings due to the currently unfavorable market conditions. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. of the issuer credit and debt ratings primarily reflects concerns over RenaissanceRe's expansion outside of its core property catastrophe business into casualty lines of business as well as there being an increase in operating and financial leverage in 2004 and from 2003 levels. Nonetheless, RenaissanceRe continues to maintain a significant amount of capital to support its insurance operations as well as various business and investment opportunities. As a result of the hurricanes in 2004, RenaissanceRe contributed over $275 million to RenRe Ltd. and the Glencoe companies, which are part of A.M. Best's rationale in affirming the operating companies' financial strength ratings. While financial leverage has been elevated due to the hurricane losses and the issuance of $250 million of perpetual preferred securities in March 2004, RenaissanceRe continues to manage its outstanding debt and preferred issues within A.M. Best's expectations to a level no greater than 35% of total capital. A.M. Best also anticipates that RenaissanceRe will achieve a fixed charge coverage in the upper single-digit range or higher, which it historically has achieved but did not in 2004 due to the hurricanes. RenaissanceRe's ratings had been placed under review pending its completion of an internal review of its accounting for certain reinsurance transactions. This review delayed the filing of RenaissanceRe's audited financial statements. The review has been completed, and its 2004 financial statements have been filed without any material restatements for prior years or adjustments to RenaissanceRe's balance sheet. For a complete list of RenaissanceRe Holdings Ltd.'s financial strength, issuer credit and debt ratings, please visit http://www.ambest.com/press/050204renre.pdf. For Best's Debt Ratings, all other Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. |
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