News Column

A.M. Best Affirms Ratings of PaCRe Ltd.

June 17, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Besthas affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of ďa-Ē of PaCRe, Ltd. (PaCRe) (Hamilton, Bermuda). The outlook for both ratings is stable.

The ratings reflect PaCReís excellent risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR), its experienced underwriting team, and independent management by AlphaCat Managers Ltd., a business unit within 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 & Company Inc. Positive underwriting performance for PaCRe's first two years in business were negatively impacted by unrealized investment losses as the result of macroeconomic factors.

Partially offsetting these positive rating factors is the start-up nature of PaCRe along with the greater investment risk that is associated with this type of 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 concerned about the possibility of PaCRe being exposed to a simultaneous adverse underwriting and asset 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 & Company Inc.'s 20-year successful investment track record. The assets of PaCRe are managed by Paulson & Company, a New York-based, SEC-registered, multi-strategy event arbitrage investment advisor.

Rating factors that could result in positive rating actions would be PaCRe meeting and/or exceeding its business plan over the long term.

Rating factors that could result in negative rating actions would be PaCRe not executing its business plan over the long term and/or if the company experiences outsized underwriting or investment losses.

The methodology used in determining these ratings is Bestís Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestís rating process and contains the different rating criteria employed in the rating process. Bestís Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.





A.M. Best Company, Inc.

Gale Guerra, 908-439-2200, ext. 5069

Senior Financial Analyst

gale.guerra@ambest.com

or

Steven Chirico, 908-439-2200, ext. 5087

Assistant Vice President

steven.chirico@ambest.com

or

Jim Peavy, 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com


Source: A.M. Best Company, Inc.


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