S&P Global Ratings has lowered the long-term issuer credit rating on Bermuda-based RenaissanceRe Holdings Ltd. (RNR) to “A-” from “A” and its long-term financial strength and issuer credit ratings on RNR’s core operating subsidiaries to “A+” from “AA-“.
The outlook on all RNR entities is stable, which reflects S&P’s expectation that RNR will maintain a strong competitive position and capitalization.
While the company has a strong market position and saw some rate strengthening after 2017’s natural catastrophes, it will continue to face negative pressures from ongoing structural changes within its property-casualty business, said the ratings agency, explaining its rating action.
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RNR’s build-out of casualty/specialty lines and the group’s ability to manage third-party capital have helped push against these adverse trends, but their diversification benefits will take longer “to ramp-up and season,” S&P added. “Therefore, we don’t expect the company’s market position in this segment, growth and profitability to fully offset the pressures emanating from RNR’s property-catastrophe business.”
For full year 2017, RNR reported a combined ratio of 139 percent including corporate expenses (compared with 75 percent for the prior year), which reflected underwriting losses in both its property and casualty/specialty segments.
Given the company’s risk profile and exposure, such underwriting losses were expected after last year’s large catastrophe events, said S&P, but they are in line with its risk tolerance.
“We expect the company to maintain its strong competitive position anchored by its leading position in the property-catastrophe business, supported by a growing casualty/specialty business,” the ratings agency continued.
“Furthermore, we expect RNR to maintain extremely strong capitalization over the outlook period, generate robust, albeit volatile, earnings, and sustain very strong ERM. We expect the normalized combined ratio to be in the range of 78 percent-84 percent and mid-single-digit premium growth for 2018-2019.”
S&P does not anticipate lowering the ratings over the next two years but it would do so if:
- The company suffers significant property-catastrophe losses that hurt capital adequacy or its relationships with third-party capital providers, or underperforms its peers;
- It suffers sustained deterioration in operating performance, including because of any setbacks in its casualty business; or
- Its ERM weakens relative to its risk profile.
Source: S&P Global Ratings