PartnerRe(100% of common share capital)




The data presented and commented below are derived from PartnerRe’s consolidated financial information for the first nine months ended September 30, 2016, prepared in accordance with US GAAP.

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(a) Excluding transaction and severance costs.

PartnerRe’s results for the first nine months of 2016 have also been impacted by a high level of catastrophe and weather-related loss activity, including the Fort McMurray wildfires (the largest catastrophe in Canadian history), the Taiwan and Japanese earthquakes, hail in Canada, floods in Germany and France and a typhoon in the Philippines, and an energy loss, for which PartnerRe reported combined losses of $165 million, pre-tax, after reinsurance and reinstatement premiums. Notwithstanding the high frequency of catastrophe, weather-related and energy loss activity, the reported losses of $165 million, pre-tax, represent only 2.6% of common shareholders’ equity and 1.9% of total capital at September 30, 2016.

The results for the first nine months of 2015 were impacted by losses of $60 million, pre-tax, after reinsurance and reinstatement premiums, related to the Tianjin explosion in China.

Net premiums written of $3.9 billion were down 7% in the first nine months of 2016 compared to $4.2 billion in the same period of 2015. On a constant foreign exchange basis, net premiums written were down 4%, primarily driven by continued competitive pricing and market conditions across almost all lines of the Non-life business which resulted in PartnerRe cancelling and reducing participations, as well as by higher premiums ceded under retrocessional contracts, primarily in the catastrophe line of business. These decreases were partially offset by new business written across all lines. In addition, net premiums written in the Life and Health business decreased due to downward prior year premium adjustments, cancellations of certain non-profitable mortality business, a one-time increased participation in the first nine months of 2015 on a significant longevity treaty and continued competitive pressures in the health business.

Other expenses were $367 million in the first nine months of 2016 compared to $670 million in the same period of 2015. Other expenses for 2016 include $106 million of transaction and severance related costs, while other expenses for 2015 included $387 million related to a termination fee under the amalgamation agreement with AXIS Capital, transaction related costs and a negotiated earn-out consideration. Excluding the transaction and severance related and the negotiated earn-out one-time costs, other expenses decreased by 8% to $261 million in the first nine months of 2016 compared to $283 million in the same period of 2015, due to the reorganization of PartnerRe's operations.

Net investment income was $306 million, down 11% in the first nine months of 2016 compared to the same period of 2015. On a constant foreign exchange basis, net investment income was down 9%. 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.

Total investment return in the first nine months of 2016 was 4.3%, for a total net contribution of $726 million, of which $622 million was generated by fixed income securities (government bonds and investment grade credit) and $104 million was generated by other securities (mainly principal finance and third party private equity funds).

The net contribution from fixed income securities, which includes net investment income, was driven by decreases in risk-free rates and compression in credit spreads.

The effective tax rates on pre-tax operating earnings and net income were 19.7% and 13.0%, respectively, in the first nine months of 2016. The effective tax rate of 19.7% on pre-tax operating earnings was driven by the distribution of pre-tax operating earnings between the taxable and non-taxable jurisdictions, as well as certain permanent adjustments.

Net income for the first nine months of 2016 is $578 million (net loss for the first nine months of 2015 was $115 million) and includes net after-tax realized and unrealized gains on investments of $367 million ($239 million in the first nine months of 2015).

Operating earnings for the first nine months of 2016 are $164 million, which compares to operating earnings of $475 million for the same period of 2015.

The Non-life combined ratio was 94.9% in the first nine months of 2016, an increase of 9.6 points compared to 85.3% in the same period of 2015. The increase in the Non-life combined ratio reflects a relatively high level of reported large and mid-sized loss activity and a lower level of favorable development from prior accident years. The most significant losses in the first nine months of 2016 were related to the Canadian wildfires (2.6 points or $75 million, net of reinsurance and reinstatement premiums) and an energy loss (1.5 points or $42 million, net of reinsurance and reinstatement premiums). The Non-life combined ratio continued to benefit from strong favorable prior year development of 17.5 points (or $505 million), although this was lower than the 21.1 points (or $644  million) reported in the same period of 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 amounts to $49 million in the first nine months of 2016 compared to $69 million in the same period of 2015, primarily as a result of the increasingly competitive U.S. health market.

Some details related to the balance sheet are as follows:

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Total capital of $8.8 billion at September 30, 2016 increased by 14% compared to December 31, 2015, primarily due to the issuance of €750 million senior debt in September 2016 and the net income for the first nine months of 2016, partially offset by common dividends paid.

Common shareholders’ equity attributable to PartnerRe (or book value) and tangible book value are $6.3 billion and $5.8 billion, respectively, at September 30, 2016, an increase of 4.2% and 4.8%, respectively, compared to December 31, 2015 due to the net income for the first nine months of 2016, partially offset by common dividends paid, including dividends of $90 million paid to EXOR.

Total investments, cash and cash equivalents and funds held - directly managed are $17.5 billion at September 30, 2016, up 6.5% compared to December 31, 2015.

Reconciliation with the IFRS data presented in the interim consolidated financial statements – shortened

The US GAAP net income ($578 million) reflects the results for the full nine-month period from January 1, to September 30, 2016) whereas the IFRS net income ($390 million) only reflects the results for the period from the acquisition date (March 18, 2016) to September 30, 2016, as well as the economic effects of the application of the acquisition method by EXOR to account for the acquisition.

Significant events in the third quarter of 2016 and subsequent events

Issuance of €750 million 10-year fixed rate 1.25% Notes

In September 2016, PartnerRe priced, through its indirectly wholly-owned subsidiary, PartnerRe Ireland Finance DAC, €750 million of 10-year fixed rate 1.25% Notes. The Notes, which are fully and unconditionally guaranteed by PartnerRe Ltd., have a maturity of September 15, 2026, and were listed on the main securities market of the Irish Stock Exchange. Approximately $422 million of the proceeds raised will be used to redeem PartnerRe's existing $250 million senior notes due 2018 and Series D and Series E cumulative preferred shares. PartnerRe is expected to achieve yearly pre-tax savings on interest payments and dividends of approximately $16 million, starting from financial year 2017.

Acquisition of Aurigen

On October 20, 2016 PartnerRe announced that it had entered into a definitive agreement to acquire 100% of the outstanding ordinary shares of Aurigen Capital Limited, a North American life reinsurance company for CAD 375 million (approximately $286 million). This acquisition enables PartnerRe to expand its life reinsurance footprint in Canada and the U.S. with virtually no overlap in market coverage.

The acquisition is subject to customary closing conditions including the receipt of required regulatory approvals and is expected to be completed by the first quarter of 2017.

Commercial Register No.64236277 Legal notes | Credits