AXIS Capital Holdings Ltd., PartnerRe Ltd. and their pending $11 billion merger are back in Standard & Poor’s good graces, which has affirmed the ratings of both companies after essentially putting them on probation.

In January, Standard & Poor’s placed all of the ratings on both companies and their subsidiaries on CreditWatch with negative implications, due, in part, to anticipation of post-merger complications.

But S&P changed its tune on March 13, affirming its A+ financial strength and long-term counterparty credit ratings for AXIS and PartnerRe and their respective subsidiaries. They’ve also been removed from CreditWatch negative, and the outlook is stable for both. As well, S&P affirmed its A- long-term counterparty credit ratings for both companies.

Why the change?

“The affirmation reflects our opinion that this merger of equals will bring together two strong insurance and reinsurance franchises, which will benefit from increased scale and enhanced market presence,” Standard & Poor’s credit analyst Taoufik Gharib said in the updated evaluation.

He added that the all-stock transaction “will ultimately create a stronger global competitive position in the next two years,” with limited reinsurance business overlap and virtually no redundancy in the global specialty insurance business. There’s also virtually no duplication in the life, and accident and health business, he noted.

As well, Standard & Poor’s said it expects the combined company to continue at very strong levels of capitalization, “redundant at the ‘AA’ level after the deal closes and through 2017.”

Meanwhile, A.M. Best still has the financial -strength ratings of both companies and their subsidiaries under review, with negative implications, due, in part to the risk to ongoing operations for both companies as they integrate.

Source: Standard & Poor’s