A.M. Best Upgrades Financial Strength Ratings of RenaissanceRe; Assigns Debt Rating

Business Wire, Jan 12, 2001

Business Editors & Insurance Writers

OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 12, 2001

A.M. Best Co. has upgraded the financial strength rating of Renaissance Reinsurance Ltd., Hamilton Bermuda, and its substantially reinsured subsidiary, Renaissance Reinsurance of Europe, to A (Superior) from A (Excellent) and affirmed the financial strength ratings of the other subsidiaries of RenaissanceRe Holdings Ltd. (NYSE - RNR).

The existing trust preferred securities issued by RenaissanceRe Capital Trust have been rated "bbb ".

The financial strength rating upgrade reflects Renaissance Re's consistently strong earnings trends, superior risk management capabilities, conservative balance sheet strategies, and recognized leadership position in the worldwide property catastrophe reinsurance market. These positive rating factors are derived from the company's experienced management team, highly disciplined underwriting focus, and strong risk evaluation capabilities, supported by a proprietary pricing and exposure management system. The company's extensive catastrophe management capabilities are demonstrated by its consistently superior results relative to its peers despite the high frequency and severity of catastrophic events in recent years.

These factors have provided strong growth to the consolidated group's equity base while at the same time enabling the parent to fund opportunistic share repurchases and service debt requirements. The parent has historically maintained a conservative level of financial leverage. Cash coverage of debt obligations has been consistently high, stemming from sustained profitability. A.M. Best expects the company to prudently manage its capitalization and maintain fixed charge coverage at superior levels.

Renaissance Re has leveraged its core capabilities to expand its franchise and diversify its earnings stream through the formation of strategic partnerships, namely OPCAT and TopLayer Re, with leading insurance organizations (Overseas Partners and State Farm, respectively). This has provided increased revenue opportunities while insulating the balance sheet from accumulating exposures and stabilizing its earnings base. Financial strength has been bolstered by the purchase of multi-year retrocessional covers, which will limit the impact of high frequency and severity of catastrophes and minimize earnings volatility. Renaissance Re's strong balance sheet is further supported by its conservative investment philosophy, and loss reserves that are well within the outside actuaries' acceptable range.

Offsetting these strengths are the competitive pricing pressures experienced in the property catastrophe reinsurance market, a condition that is expected to continue, although at a less intense level. The company's lack of product line diversification and emphasis on property catastrophe reinsurance exposures amplify this condition, presenting additional risk to surplus that could result from a severe industry event. Mitigating these risks are the company's globally diversified exposure base, which reduces operating risks as well as its strategic partnerships. Further, following two years of weak pricing environment and less attractive business selection, upward momentum in property catastrophe pricing as well as improved capacity through its strategic partnerships substantially increased Renaissance Re's managed premium base in 1999. A.M. Best believes the company is well positioned to sustain a superior level of financial performance relative to its peers and expects it to continue to generate solid operating returns due to its demonstrated risk management expertise and conservative underwriting criteria. The company's rating outlook is stable.

RenaissanceRe Holdings Ltd. is a Bermuda-based holding company which, through Renaissance Reinsurance Ltd., operates as a property catastrophe reinsurer on a worldwide basis. At September 30, 2000, the holding company reported assets of $1.7 billion and shareholders' equity of $664 million.

The financial strength ratings of the following companies have been upgraded to A (Superior) from A (Excellent):

-- Renaissance Reinsurance Ltd., Bermuda

-- Renaissance Reinsurance of Europe, Ireland

The A-financial strength rating of Glencoe Insurance Ltd. has been affirmed

The B financial strength rating of Nobel Insurance Company has been affirmed

The following existing debt rating has been assigned:

-- RenaissanceRe Capital Trust--

-- "bbb " rating on the 8.54% Guaranteed Preferred Trust

Securities, due 2027

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 www.ambest.com.