NEW YORK (Bloomberg) — Reinsurers are issuing corporate bonds at the fastest pace in almost five years as they authorise stock buybacks, taking on $1.34 billion in extra debt with borrowing costs at their lowest since 2004.

Endurance Specialty Holdings Ltd. became the latest Bermuda-based reinsurer to issue bonds when it sold $85 million of notes this week. Axis Capital Holdings Ltd. and PartnerRe Ltd. each placed $500 million of notes, and RenaissanceRe Holdings Ltd. sold $250 million on March 12. It's the first time since 2005 that four reinsurers sold debt in a two-week span, according to data compiled by Bloomberg.

Reinsurers, which sell back-up protection to insurance companies, are issuing some of the debt to fund share repurchases as the majority of their stocks trade below book value, a measure of assets minus liabilities. Borrowing costs for investment-grade companies have fallen to the lowest since April 2004, according to Bank of America Merrill Lynch's US Corporate Master index.

"If you're a company who can raise debt at 5, 6 percent, and your stock is trading below book value, there's an arbitrage there," said Paul Newsome, an analyst at Sandler O'Neill & Partners LP. "The market is essentially saying: 'We want you to put on debt, and we want you to get rid of your equity'."

PartnerRe's board of directors authorised the repurchase of as many as eight million shares last month, or about 10 percent of the outstanding stock. The company closed at $80.20 on Friday, at 0.93 of the company's book value per share.

"Given the current valuations in the financial markets, we do view share repurchases as well as debt issuance as viable and effective capital management strategies for PartnerRe," chief financial officer Albert Benchimol said on a February 11 conference call. "It's difficult for us to find a better investment opportunity than to repurchase some of our own shares."

Axis received board approval for a $500 million buyback in December that would pay for about 17 million shares based on the price when the programme was announced. AM Best, a credit rating company for insurers, said the firm may use proceeds of last week's sale on the buyback.

The Endurance offering reopened a sale from 2004. The company issued $250 million of the notes due 2034. In its original prospectus, Endurance said it may use the proceeds for general corporate purposes, including "repurchases of our shares and share equivalents".

"Normally, bondholders would say that issuing debt to repurchase stock is not a credit positive," said David Havens, managing director in credit trading at Nomura Securities International Inc. "At the same time, there is a significant amount of equity capital in the reinsurance industry, prices are relatively weak, and shareholders are leaning on the companies to deploy their capital as efficiently as possible."

About six percent of companies in the Standard & Poor's 500 are trading below their book value per share after the benchmark index rallied 26 percent last year, according to data compiled by Bloomberg. Fourteen of the world's 23 biggest publicly traded reinsurers are selling below book value.

The price for catastrophe reinsurance fell for the third time in four years when insurers renegotiated their annual contracts on January 1, according to Guy Carpenter & Co., a unit of brokerage Marsh & McLennan Cos. Prices typically fall when the economy declines, as companies have less to insure.

"There's not a great deal of opportunity for the reinsurance companies to deploy capital to sort of build or grow the business," Havens said.

The average absolute yield on investment-grade corporate debt fell to 4.48 percentage points on March 17, the lowest since April 12, 2004, according to Bank of America Merrill Lynch data. "The expectation is that interest rates will probably go up," said Michael Paisan, an analyst at Stifel Nicolaus & Co. "If you can lock in a lower interest rate today, the timing makes sense."

Munich Re, the world's biggest reinsurer, said this month it plans to repurchase as much as 1 billion euros ($1.33 billion) of its stock before its annual shareholder meeting on April 28.

Warren Buffett's Berkshire Hathaway Inc. is among the companies betting on a recovery in reinsurance stocks. Berkshire, where Buffett is chairman and chief executive officer, became Munich Re's biggest shareholder last month. Munich Re said in a statement yesterday that Berkshire's stake was about eight percent. Buffett's firm also holds three percent of Swiss Reinsurance Co., the world's second-largest reinsurer, data compiled by Bloomberg show.

RenaissanceRe won authorisation from its board to buy back up to $500 million in common shares in February. The company has repurchased 2.4 million shares this year, CFO Jeffrey Kelly said in a March 2 conference call.

"When we don't see an opportunity to deploy our capital in the business consistent with prior periods, we return it as soon as we can," Kelly said.

Reinsurers have proceeded with debt sales this month after an earthquake rattled Chile and a windstorm swept across Western Europe in February. Globally, insurers and reinsurer have announced losses of as much as $4.1 billion from the two events, of which the Bermuda market has roughly a half share. Moody's senior analyst James Eck wrote that reinsurers may need to take "a hard look" at repurchase plans with the 2010 Atlantic hurricane season still to come.

"We view the capital 'cushion' for significant share buybacks to have narrowed considerably as a result of these recent catastrophe events," Eck wrote in a report this month.