A.M. Best has thrown some cold water on RenaissanceRe Holdings Ltd.’s $1.9 billion stock and cash bid for fellow Bermuda reinsurer Platinum Underwriters Holdings Ltd.

The insurance rating entity placed RenaissanceRe (RenRe) and all its subsidiaries under review “with negative implications” due to the M&A announcement.

A.M. Best, in taking action, acknowledged that the deal “would give RenaissanceRe additional scale and help broaden its product offering.” It warned, however, that the transaction reflects “a significant commitment on the part of RenaissanceRe to continue its move into the casualty business, which is outside of the organization’s core competency of property catastrophe reinsurance.”

That means that A.M. Best’s financial strength rating of A+, or superior, and issuer credit ratings of aa- for RenRe and Renaissance Reinsurance of Europe are at risk, as well as solid to stellar ratings of its various subsidiaries.

RenRe also now has a number of A.M. Best debt ratings under review with negative implications.

A.M. Best said it would remove the “under review” status once the deal closed and it can complete its analysis. Negative ratings actions could follow if A.M. Best finds RenRe’s acquisition leaves it with weakened risk-adjusted capitalization levels, or below-normal operating results. A.M. Best said it will also strike if the M&A deal affects RenRe’s ability to keep key personnel, or if any of the deal details aren’t known at this time to the rating entity.

On the other hand, positive results in all of those areas could give RenRe a number of rating affirmations, A.M. Best said.

RenRe CEO Kevin O’Donnell has presented the M&A deal with Platinum as something that will create a $4 billion company with a bigger footprint in the U.S. casualty and specialty reinsurance markets.

Not stopping there, A.M. Best has Platinum Underwriters’ ratings and those of its subsidiaries under review “with developing implications.” As well, Top Layer Reinsurance faces a similar review process. As A.M. Best noted, it is co-owned by RenRe and State Farm.

Source: A.M. Best