PartnerRe

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

 

 

 

The data presented and commented below are derived from PartnerRe’s consolidated financial information for the first half ended 30 June 2018 prepared in accordance with US GAAP.

$ million 2018 2017 Change
Net premiums written 3,143 2,65 493
Non-life combined ratio (a) 94.3% 91.7% n/a
Life and Health allocated underwriting result (b) 50 (5) 55
Other expenses 164 180 (24)
Net investment return (0.4%) 2.1% n/a
Net income attributable to PartnerRe common shareholders (c) 5 229 (224)
Net Income ROE (d) 0.2% 7.6% n/a
(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) 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.

Net premiums written of $3.1 billion were up 19% for the first half of 2018 compared to $2.6 billion in the same period of 2017. The increase was driven by all segments and was primarily due to new business written in the P&C and Specialty segments as well as increases in the Life and Health segment. The Life business benefited from organic growth and a favorable foreign exchange impact as well as the inclusion of the Aurigen life premiums for two quarters in 2018 compared to only one quarter in 2017 (following the acquisition of Aurigen on 2 April 2017), while the Health business increased due to higher rates.

The Non-life combined ratio was 94.3% for the half year 2018 compared to 91.7% for the same period of 2017 primarily reflecting a lower prior years' reserve development and improved current accident year technical ratios. The net favorable prior year development was $70 million (3.7 points) for the half year 2018 compared to $196 million (12.0 points) for 2017. Both the P&C and Specialty segments experienced net favorable development in the first half of 2018 and 2017.

Allocated underwriting result in the Life and Health segment for the half year 2018 was a gain of $50 million compared to a loss of $5 million in 2017, driven by a $31 million improvement in Health and a $24 million improvement in Life business.

Other expenses decreased to $164 million in the first half of 2018 compared to $180 million in the same period of 2017, primarily due to lower personnel costs, lower facilities expenses and transaction and reorganization costs incurred in 2017.

Net investment return for the half year 2018 was negative $60 million, or 0.4%, and included net investment income of $208 million, net realized and unrealized investment losses of $296 million and interest in earnings of equity method investments of $28 million. This compares to a positive return of $363 million, or 2.1%, for the half year 2017, which included net investment income of $201 million, net realized and unrealized investment gains of $152 million and interest in earnings of equity method investments of $10 million. Net investment income of $208 million for the half year 2018 was up $7 million, or 3%, compared to the same period of 2017, mainly due to higher reinvestment rates and changes in the fixed income portfolio allocation. Net realized and unrealized investment losses of $296 million for the half year 2018 were primarily driven by lower fair value of fixed income securities due to an increase in risk-free rates in the U.S. coupled with a widening of credit spreads in the U.S. and Europe, compared to net realized and unrealized investment gains of $152 million for the half year 2017, which were primarily driven by higher fair value of fixed income securities due to a narrowing of investment grade corporate spreads. Financial assets (mainly alternative credit, public and private equity) and real estate reported a $57 million gain for the half year 2018, compared to a $49 million gain in the same period of 2017.

Net foreign exchange gains were $70 million in the first half of 2018 compared to losses of $66 million in the same period of 2017 and were driven by appreciation of the U.S. dollar during the course of 2018 (depreciation during the course of 2017) and hedging costs (mostly related to the U.S. dollar vs Euro hedging).

Interest expense was $22 million and preferred dividends were $23 million in half year 2018 and were comparable to the same period of 2017.

Income tax benefit was $6 million on pre-tax earnings of $22 million in the half year 2018 compared to $23 million tax expense on pre-tax earnings of $276 million in the same period of 2017.

Net income available to common shareholder for the first half of 2018 was $5 million, which includes net unrealized investment losses on fixed income securities of $312 million, compared to a net income available to common shareholders of $229 million for the half year 2017, which included net unrealized investment gains on fixed income securities of $137 million. The unrealized investment losses on fixed income securities in 2018 were driven by an increase in risk-free rates and credit spreads and the unrealized investment gains on fixed income securities in 2017 were driven by a narrowing of credit spreads. The majority of PartnerRe’s investments, including all standard fixed income investments such as government bonds and investment grade corporate debt, are accounted at fair value to profit (loss).

Some details related to the balance sheet are as follows:

$ million 6/30/2018 12/31/2017 Change
Debt 1,421 1,448 (27)
Preferred shares, aggregate liquidation value 704 704 0
Common shareholders’ equity 5,956 6,041 (85)
Total Capital 8,081 8,193 (112)

Total investments, funds held - directly managed and cash and cash equivalents were $16.6 billion at 30 June 2018, down 2.2% compared to 31 December 2017.

Total capital of $8.1 billion at 30 June 2018 decreased by 1.4% compared to 31 December 2017, primarily due to dividends on common and preferred shares and the impact of foreign currency translation adjustment for the first half of 2018.

Debt decreased by $27 million, or 2%, primarily due to the impact of foreign exchange on the Company’s Euro debt.

At 30 June 2018, common shareholder's equity (or book value) of $6.0 billion and tangible book value of $5.4 billion, were down 1.4% and 1.5%, respectively, compared to 31 December 2017 primarily due to dividends on common shares and the foreign currency translation adjustment. Book value at 30 June 2018, excluding dividends on common shares, was down 0.6% compared to 31 December 2017. During the first Half of 2018, PartnerRe paid dividends of $48 million to EXOR.

Cash and cash equivalents and fixed maturities, which are government issued or investment grade fixed income securities, were $13.6 billion at 30 June 2018, representing 84% of the cash and cash equivalents and total investments.

The average credit rating and expected average duration of the fixed income portfolio at 30 June 2018 was A and 4.9 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 difference between the US GAAP net income ($5 million) and the IFRS net income ($7 million) only reflects the economic effects of the application of the acquisition method by EXOR to account for the acquisition.

Significant events in the first-half of 2018 and subsequent events

Effective 1 September 2018, Brian Dowd succeeds John Elkann as Chairman of the Company’s Board of Directors. Mr. Elkann, who is Chairman and CEO of EXOR, remain on the Board.

Nikhil Srinivasan stepped down from the Board in order to assume the role of Chief Investment Officer, subject to customary governmental approvals. 

Finally, Mary Ann Brown joins the Board as an independent director.

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 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.

The data presented and commented above are derived from PartnerRe’s consolidated financial information for the first half ended 30 June 2018 prepared in accordance with US GAAP.

Commercial Register No.64236277 Legal notes | Credits