PARTNER RE

(99.66% of voting rights; 100% interest in common shareholder’s equity through EXOR Nederland N.V.)

 

 

Data presented and commented below are derived from PartnerRe’s consolidated financial information for the year ended 31 December 2018 prepared in accordance with US GAAP.

  Year  
$ million 2018 2017 Change
Net premiums written 5,803 5,120 683
Non-life combined ratio (a) (e) 101.9% 102.3%  
Life and Health allocated underwriting result (b) (e) 86 68 18
Net investment return 0.1% 4.2%  
Other expenses 306 348 (42)
Net (loss) income attributable to PartnerRe common shareholders (c) (132) 218 (350)
Net Income ROE (d) (2.2)% 3.6%  
(a) The Company uses a 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) Net income/loss attributable to PartnerRe common shareholders is defined as net income/loss attributable to PartnerRe less preferred dividends. (d) Net income ROE is calculated as net income return on average common shareholders’ equity. (e) Effective 1 July 2018 the executive management responsibility and reporting for U.S. Health business was reallocated from the Life and Health segment to the P&C segment as part of an internal organizational change, comparatives have been updated accordingly.

Underwriting result

Net premiums written for the full year 2018 increased to $5.8 billion compared to $5.1 billion in 2017. The increase was primarily due to an increase in Non-Life net premiums written, driven by a 15% increase in the Property and Casualty (P&C) segment and 5% increase in the Specialty segment, as well as a 25% increase in the Life & Health segment. The increase in Life & Health was primarily driven by organic growth and the inclusion of the Aurigen Capital Ltd (Aurigen) life premiums for a full year in 2018 compared to three quarters in 2017, following the acquisition on 2 April 2017.

The Non-life combined ratio of 101.9% for the full year 2018 (102.3% in 2017) was driven by Catastrophic losses of $386 million related to Typhoons Jebi and Trami, Hurricanes Florence and Michael, and California wildfires. These events contributed 9.0 points on the combined ratio in 2018, compared to 14.1 points on the combined ratio in 2017 from losses related to Hurricanes Harvey, Irma and Maria (HIM), and California wildfires of $569 million, net of retrocession and reinstatement premiums.

The Non-life underwriting loss also reflects improvement in attritional losses on the current accident year compared to 2017 and $29 million of other income related to a gain on a commutation transaction of a reserve and reinsurance agreement with Colisee Re during the fourth quarter of 2018. The Non-life combined ratio continued to benefit from net favorable prior year development of $249 million (5.8 points) in 2018 compared to $448 million (11.1 points) for 2017, with both the P&C and Specialty segments experiencing net favorable development.

The Life and Health allocated underwriting result was a gain of $86 million for the full year 2018 compared to a gain of $68 million in 2017, driven by increased profitability and organic growth, including in the acquired Aurigen operation, partially offset by $7 million higher expenses to support the Company’s plan to grow the business.

Net investment return for 2018 was $37 million, or 0.1%, which included net investment income of $416 million and interest in earnings of equity method investments of $11 million, partially offset by net realized and unrealized investment losses of $390 million. This compares to a net investment return of $720 million, or 4.2%, for 2017, which included net investment income of $402 million, net realized and unrealized investment gains of $232 million, and interest in earnings of equity method investments of $86 million.

Investments

Net realized and unrealized investment losses of $390 million for the full year 2018 were driven by increases in U.S. risk-free rates and the widening of U.S. and European investment grade corporate spreads. This compares to net realized and unrealized investment gains of $232 million for 2017 which were driven by compression in corporate bond spreads and strong performance in public and private equities, partially offset by the impact of increases in U.S. risk-free rates.

As of 31 December 2018, reinvestment rates were 3.2% compared to the Company’s fixed income investment portfolio yield of 2.9% for the fourth quarter of 2018.

Other Income Statement items

Other expenses of $306 million (expense ratio of 5.5%) for the full year 2018 were down $42 million, or 12%, compared to $348 million (expense ratio of 6.9%) for 2017. These decreases were primarily due to lower recurring personnel costs driven by a decrease in full-time equivalent employees as a result of efficiency actions undertaken by the Company, in addition to lower reorganization costs, consulting and facilities costs, partially offset by higher expenses primarily in the Life and Health segment to support the Company's plans to grow the business. The full year 2017 also included $4 million of transaction costs related to the acquisition of Aurigen.

Review of Net income (loss)

Net loss attributable to common shareholder was $132 million for 2018 which was driven by losses related to Typhoons Jebi and Trami, Hurricanes Florence and Michael, and California wildfires of $386 million and net realized and unrealized investment losses on fixed maturities and short-term investments of $376 million, partially offset by net foreign exchange gains of $119 million. This compared to net income of $218 million for 2017, which included losses related to Hurricanes Harvey, Irma and Maria and California wildfires of $569 million, net realized and unrealized investment gains on fixed maturities and short-term investments of $153 million and net foreign exchange losses of $108 million.

Balance sheet and capitalization

$ million 12.31.2018 12.31.2017 Change
Debt 1,412 1,448 (36)
Preferred shares, aggregate liquidation value 704 704 0
Common shareholders’ equity 5,812 6,041 (229)
Total Capital 7,929 8,193 (264)

Total capital of $7.9 billion at 31 December 2018, down 3.2% compared to 31 December 2017, primarily due to the net loss for 2018, dividends on preferred and common shares, the impact of the foreign currency translation adjustment and a decrease in Euro debt from foreign exchange movements.

Debt decreased by $36 million primarily due to the impact of foreign exchange on the Company’s Euro denominated debt.

Common shareholder's equity (or book value) of $5.8 billion and tangible book value of $5.2 billion at 31 December 2018 both decreased by 3.8% compared to 31 December 2017, primarily due to the net loss for 2018, dividends on common shares and the foreign currency translation adjustment. Book value, excluding dividends on common shares for 2018, was $5.9 billion at 31 December 2018, down 3.0% compared to 31 December 2017. Dividends declared and paid by PartnerRe to EXOR Nederland N.V. were $48 million for the full year 2018.

Total investments and cash and cash equivalents were $16.3 billion at 31 December 2018, down 1.6% compared to 31 December 2017. The funds held–directly managed account of $0.4 billion and related guaranteed reserves of $0.4 billion as of 31 December 2017 were settled upon commutation of the related business in the fourth quarter of 2018.

Cash and cash equivalents and fixed maturities and short-term investments, which are government issued or investment grade fixed income securities, were $13.5 billion at 31 December 2018, representing 83% of the cash and cash equivalents and total investments.

The average credit rating and expected average duration of the fixed income portfolio at 31 December 2018 was A and 3.9 years, respectively, while the average duration of the Company’s liabilities was 4.8 years.

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

The differences between the US GAAP net loss ($132 million) and the IFRS net loss ($124 million) are immaterial and related only to the economic effects of the application of the acquisition method by EXOR to account for the acquisition.

2019 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, and some of 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, 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