and counterparty credit ratings on Partner Reinsurance Co. and SAFR PartnerRe (PartnerRe). But the outlook is negative.

At the same time, S&P's has affirmed its single-`A'-plus financial strength and counterparty credit ratings on Partner Reinsurance Co of the US, a wholly-owned subsidiary of SAFR PartnerRe. Here the outlook is positive based on its strategic importance to the group.

S&P also affirmed its single-`A'-minus rating on the preferred shares of Partner Re Ltd., the ultimate holding company, reflecting non-standard notching, due to its low financial leverage and strong fixed charge coverages.

The ratings and outlooks reflect an enhanced business position, a strong commitment to the specialty reinsurance market, very strong capitalisation and disciplined underwriting, partially offset by declining operating margins and the potential impact from the implementation of its acquisition strategy.

PartnerRe outlook `negative' Partner Reinsurance Co. Ltd. is one of the leading Bermuda-based property catastrophe writers.

Equally, the group is among the world's leading providers of agriculture, aviation, and credit and surety reinsurance capacity.

PartnerRe's combined capital adequacy is very strong, at 157 percent, as measured by S&P's 1998 property /casualty capital model. Earnings have been historically very strong, S&P said, based on a five-year average return on revenue and return on equity of 60.2 percent and 16.6 percent, respectively.

However, continued competition in all lines, including the property catastrophe market, will challenge the consolidated group's ability to maintain its very strong profitability prospectively, S&P said.