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




The data presented and commented below are derived from PartnerRe’s consolidated financial information for the first half ended June 30, 2017 prepared in accordance with US GAAP.

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(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 $2.6 billion were down 4% for the first half of 2017 compared to $2.8 billion in the same period of 2016 primarily driven by foreign exchange and continued underwriting discipline across most lines of the Non-life business resulting in cancellations and non-renewals. In addition, premiums ceded under retrocessional contracts, primarily in the property and catastrophe lines of business, were higher in 2017 compared to 2016. These decreases in net premiums written were partially offset by increases in Life and Health premiums written.

The Non-life combined ratio was 91.7% for the first half of 2017, a decrease of 10.0 points compared to 101.7% in the same period of 2016, reflecting lower catastrophe and large losses and a lower level of reported mid-sized and attritional loss activity, partially offset by a lower level of favorable development from prior accident years. Favorable development of 12.0 points (or $196 million) in the first half of 2017 compared to 18.0  points (or $332 million) reported in the first half of 2016, with most lines of business experiencing net favorable development from prior accident years as actual reported losses were below expectations.

The Life and Health allocated underwriting result was a loss of $5 million in for the first half of 2017 compared to a gain of $36 million in the same period of 2016, primarily as a result of high frequency of mid-sized losses in the health line of business.

Other expenses decreased to $180 million in the first half of 2017 compared to $276 million in the same period of 2016. Other expenses in the first half of 2017 include $16 million, compared to $92 million in the same period of 2016, of transaction and severance related costs.

Operating earnings for the first six months of 2017 were $140 million compared to operating loss of $21 million for the same period of 2016.  The increase in the operating earnings was primarily driven by a higher Non-life technical result and a reduction in other expenses, partially offset by a deterioration in the Life and Health technical result. The higher Non-life technical result was primarily driven by lower catastrophe and large losses and a lower level of reported mid-sized and attritional loss activity, partially offset by a lower level of favorable development from prior accident years.

Net investment income was $201 million in the first half of 2017 compared to $204 million in the same period of 2016. On a constant foreign exchange basis, net investment income was down 3%, mainly reflecting the impact of the investment portfolio de-risking, partially offset by lower investment expenses.

The effective tax rate on pre-tax operating earnings and net income were 7.1% and 8.3%, respectively, for the first half of 2017. The effective tax rate was driven by the geographical split of pretax income and losses.

Net income available to common shareholders for the first six months of 2017 was $229 million compared to $338 million in the same period of 2016. Net income available to common shareholders is reduced for dividends to preferred shareholders and includes net realized and unrealized gains on investments of $152 million compared to $359 million in the same period of 2016.

Some details related to the balance sheet are as follows:

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Total investments, cash and cash equivalents and funds held – directly managed were $16.9 billion at June 30, 2017, up by 0.3% compared to December 31, 2016.

Total capital of $8.3 billion at June 30, 2017 increased by 3% compared to December 31, 2016 primarily due to the net income in the first half of 2017.

Debt decrease by $72 million, or 5%, primarily due to the impact of foreign exchange on the Company’s Euro debt.

At June 30, 2017, common shareholders’ equity (or book value) and tangible book value were $6.2 billion and $5.6 billion respectively, an increase of 3.0% and 2.1% respectively, compared to December 31, 2016, primarily due to the net income for the first half of 2017. During the first half of 2017, PartnerRe paid dividends of $25 million to EXOR.

On June 30, 2017, the Company submitted its first required Financial Condition Report (FCR) for the year ended December 31, 2016 to the Company’s Group regulator, the Bermuda Monetary Authority.  The FCR includes, among other disclosures, the Group’s required and available statutory capital.  The Company uses the standard Bermuda Solvency Capital Requirement (BSCR) model to assess the Enhanced Capital Requirement (ECR), the required statutory capital and surplus. In the FCR, the Company reported an ECR of $2,484 million, Available Statutory Economic Capital and Surplus of $8,252 million, and a BSCR ratio of 332% as at December 31, 2016. Effective January 1, 2016, Bermuda was deemed Solvency II equivalent under the European Union’s (EU) Solvency II initiative.

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

The difference between the US GAAP net income ($229 million) and the IFRS net income ($230 million) only reflects the economic effects of the application of the acquisition method by EXOR to account for the acquisition.

Significant events in the second quarter of 2017 and subsequent events

On April 3, 2017, PartnerRe completed the acquisition of 100% of the outstanding ordinary shares of Aurigen Capital Limited, a North American life reinsurance company. The consideration paid was CAD $370 million or US$278 million and the fair value of net assets acquired was $277 million, including intangible assets of $78 million. The results of Aurigen Capital Limited were included in the results of PartnerRe from the acquisition date of April 3, 2017.

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, credit spreads, and capital markets in general, 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