A.M. Best Affirms Ratings Of PacRe Ltd.

April 26, 2013

A.M. Best Co. this week affirmed the financial strength rating of A- [Excellent] and issuer credit ratings of “a-” of Bermuda-based PaCRe Ltd. The outlook for both ratings is stable.

The ratings agency said, “The ratings of PaCRe are based on its excellent risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio [BCAR]; its experienced underwriting team, which is exclusively managed by AlphaCat Mangers Ltd. a business unit within Bermuda-based Validus Holdings, Ltd.

“Additionally, PaCRe’s ratings are based on the overall business plan of writing upper layer property catastrophe business combined with assets managed by the investment expertise of Paulson & Co Inc.

“Positive underwriting performance for PaCRe’s first year in business was offset by unrealized investment losses due to overall macro-economic volatility.

“Partially offsetting these positive rating factors are the start-up nature of PaCRe along with the greater investment risk that is associated with this investment strategy. In addition, PaCRe’s business plan will be challenged by established reinsurers as well as other alternative investment reinsurers entering the market and more capacity into an already overcapitalized reinsurance marketplace could pressure underwriting margins.

“Although A.M. Best is concern about the possibility of PaCRe being exposed to a simultaneous adverse asset and underwriting event, this concern is mitigated by its low underwriting leverage, strong capitalization, as well as the strength of Validus Holdings, Ltd.’s underwriting performance and Paulson & Co. Inc.’s 19-year successful investment track record. The assets of PaCRe will be managed by Paulson & Company, a New York-based, SEC-registered multi-strategy event arbitrage investment advisor.

“Key rating triggers that could result in positive rating actions would be PaCRe meeting and/or exceeding its business plan over the long term. Key rating triggers that could result in negative rating actions would be PaCRe not executing its business plan over the long term.”

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