PartnerRe(100.0% of common share capital through EXOR Nederland N.V.)




The data presented and commented below are derived from PartnerRe’s consolidated financial information for the year ended December 31, 2016 and December 31, 2015 prepared in accordance with US GAAP.

$ millionYearChange
 20162015Amount%
Net premiums written 4,954 5,230 (276) (5.3%)
Net premiums earned 4,970 5,269 (299) (5.7%)
Non-life combined ratio (a) 93.6% 85.6% n/a 8.0
Life and Health allocated underwriting result (b) 61 94 (33) 35.1%
Total investment return 2.4% 0.8% n/a 1.6
Operating earnings (c ) 289 658 (369) (56.1%)
Adjusted Operating earnings (d) 413 749 (336) (44.9%)
Operating ROE (e) 4.8% 10.8% n/a (6.0)
Adjusting Operating ROE (d) 6.9% 12.2% n/a (5.3)
Net income attributable to PartnerRe common shareholders (f) 387 48 339 n.m.
Adjusted Net income attributable to PartnerRe common shareholders (d) 517 453 64 14.1%
Net Income ROE (g) 6.4% 0.8% n/a 5.6
Adjusted Net income ROE (d) 8.6% 7.4% n/a 1.2
(a) The Company uses combined ratio to measure results for the Non-life P&C and Specialty segments. The combined ratio is the sum of the technical and other expense ratios; (b) The Company uses allocated underwriting result as a measure of underwriting performance for its Life and Health segment. This metric is defined as net premiums earned, other income or loss and allocated net investment income less life policy benefits, acquisition costs and other expenses; (c) Operating earnings is defined as net income/loss available to PartnerRe common shareholders excluding certain after-tax net realized and unrealized gains/losses on investments, after-tax net foreign exchange gains/losses, certain after-tax interest in earnings/losses of equity method investments and the non-recurring expenses included in other charges; (d) Excluding transaction and severance costs; (e) Operating ROE is calculated as operating earnings on average common shareholders’ equity; (f) Net income/loss attributable to PartnerRe common shareholders is defined as net income/loss attributable to PartnerRe less preferred dividends; (g) Net income ROE is calculated as net income return on average common shareholders’ equity.

Net premiums written of $5.0 billion were down 5% in 2016 compared to $5.2 billion in 2015. On a constant foreign exchange basis, net premiums written were down 2%, primarily driven by continued competitive pricing and market conditions across most lines of the Non-life business which resulted in PartnerRe cancelling and reducing participations. In addition premiums ceded under retrocessional contracts, primarily in the catastrophe and mortgage protection lines of business, were higher in 2016 compared to 2015. These decreases were partially offset by new business written across all lines. Net premiums written in the Life and Health business also decreased due to downward prior year premium adjustments, cancellations of certain non-profitable mortality business, a one-time increased participation in 2015 on a significant longevity treaty and continued competitive pressures in the health business.

The Non-life combined ratio was 93.6% in 2016, an increase of 8.0 points compared to 85.6% in 2015, reflecting lower favorable prior year loss development, higher mid-sized loss activity and increased losses from catastrophes. The most significant losses in 2016 were related to the Canadian wildfires ($69 million), hurricane Matthew ($45 million) and an energy loss ($42 million), all net of reinsurance and reinstatement premiums. The Non-life combined ratio continued to benefit from strong favorable prior year development of 17.6 points (or $677 million), compared to 20.5 points (or $831 million) reported in 2015, with most lines of business experiencing net favorable development from prior accident years as actual reported losses from cedants were below expectations.

The Life and Health allocated underwriting result decreased to $61 million in 2016 compared to $94 million in 2015, primarily as a result of reduced profitability in the health line of business.

Other expenses were $472 million in 2016 compared to $791 million in 2015. Other expenses for 2016 include $128 million of transaction and severance related costs, while other expenses for 2015 include $411 million related to a $315 amalgamation termination fee and reimbursement of expenses paid to AXIS Capital, a negotiated earn-out consideration paid to previous shareholders of a previously acquired company, and certain other transaction related costs. Excluding the transaction and severance related and the negotiated earn-out one-time costs, other expenses decreased by 9% to $344 million in 2016 compared to $380 million in 2015, due to the reorganization of PartnerRe's operations.

Operating earnings for 2016 were $289 million, compared to operating earnings of $658 million for 2015 primarily due to a lower Non-life technical result, higher transaction and severance costs and loss on redemption of senior notes. The lower Non-life technical result was primarily driven by lower favorable prior year loss development, higher mid-sized loss activity and increased losses from catastrophes.

Net investment income was $411 million, down 9% in 2016 compared to 2015. On a constant foreign exchange basis, net investment income was down 7%. The decrease mainly reflects the impact of the reduction in risk within the investment portfolio, the increased allocation to U.S. government fixed income securities, the change in asset mix with a lower amount of high yield fixed income securities and dividend yielding equity securities, and lower reinvestment rates. These decreases were partially offset by lower investment expenses following the reorganization of the Company's investment operations.

The effective tax rate on pre-tax operating earnings and pre-tax income were 10.3% and 5.5%, respectively, in 2016. The effective tax rate of 10.3% on pre-tax operating earnings was driven by the distribution of pre-tax operating earnings between the taxable and non-taxable jurisdictions.

Net income attributable to PartnerRe common shareholders for 2016 was $387 million compared to $48 million in 2015. The increase was due to net realized and unrealized gains on investments in 2016 of $26 million compared to losses of $297 million in 2015 and a $315 amalgamation termination fee and reimbursement of expenses paid to AXIS Capital in 2015, partially offset by a decrease in the technical result in 2016.

Some details related to the balance sheet are as follows:

   Change
$ million 12/31/2016 12/31/2015 amount %
Debt 1,337 813 524 64.5%
Preferred shares, aggregate liquidation value 704 854 (150) -17.6%
Common shareholders' equity 5,984 6,047 (63) 1.0%
Total capital 8,025 7,714 311 4.0%

Total capital of $8.0 billion at December 31, 2016 increased by 4% compared to December 31, 2015, primarily due to the issuance of €750 million senior debt in September 2016, and the net income for the year, partially offset by common dividends paid (including a special dividend paid to former shareholders upon the acquisition by EXOR) and the redemption of senior notes and preferred shares.

Common shareholders’ equity attributable to PartnerRe (or book value) and tangible book value were $6.0 billion and $5.5 billion, respectively, at December 31, 2016, an decrease of 1.0% and 0.8%, respectively, compared to December 31, 2015 due to common dividends paid (including dividends of $250 million paid to EXOR) and the impact of settling stock compensation awards upon the change of control being partially offset by net income for the year. 

Total investments, cash and cash equivalents and funds held – directly managed were $16.9 billion at December 31, 2016, up 2.4% compared to December 31, 2015. 

Reconciliation of reported US GAAP financial information to IFRS financial information used for line-by-line consolidation purposes:

The US GAAP net income ($387 million) reflects the results for the full year in 2016, whereas the IFRS net income ($186 million) only reflects the results for the period from the acquisition date (March 18, 2016) to December 31, 2016, as well as the economic effects of the application of the acquisition method by EXOR to account for the acquisition.

Significant evets in the fourth quarter of 2016 and subsequent events

On November 1, 2016, the Company used the proceeds from the September 2016 Euro bond issue to redeem its Series D 6.5% and Series E 7.25% preferred shares totaling $150 million and to early retire $250 million senior notes issued in 2008 at 6.875%, which were due in 2018. This resulted in a loss on redemption of preferred shares of $5 million and a loss of $22 million related to the redemption of the senior notes which represented a make whole provision, determined based on the present value of future interest foregone as a result of the early retirement.

Outlook

Excluding the impacts of any significant catastrophe and other large losses and/or increases in interest rates or credit spreads, PartnerRe expects to continue to generate positive underwriting and investing returns.

PartnerRe continues to experience competitive reinsurance market conditions and a challenging investment environment driven by low interest rates, despite recent increases in US treasury rates. Reinsurance market conditions reflect persistent pricing pressure in virtually all lines of business and continued erosion of terms and conditions. These negative trends are primarily driven by excess capital in the industry, particularly in catastrophe exposed lines of business and traditional property and casualty markets, as well as relatively low recent large loss activity and limited new growth opportunities in the industry. PartnerRe maintains a disciplined approach to underwriting by reducing exposure where the pricing, terms and conditions are no longer satisfying our requirements. Overall, PartnerRe expects continued market pressure.

PartnerRe, and its peers within the reinsurance industry, do not provide earnings guidance given its reinsurance results are largely exposed to low frequency and high severity risk events. Some of these risk events are seasonal, such that results for certain periods may include unusually low loss experience, while results for other periods may include modest or significant catastrophe losses. In addition, the PartnerRe’s investment results are exposed to changes in interest rates and credit spreads, which result from fluctuations in general economic and financial market conditions. As a result, PartnerRe’s profitability in any one period or year is not necessarily predictive or indicative of future profitability or performance.

 

 

Commercial Register No.64236277 Legal notes | Credits