PartnerRe(99.72% 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 2019 prepared in accordance with US GAAP.

 Year
$ million20192018
Net premiums written6,9095,803
Non-life combined ratio(a)100.3%101.9%
Life and Health allocated underwriting result(b)7386
Net investment return7.7%0.1%
Other expenses370306
Net (loss) income attributable to PartnerRe common shareholders(c)890(132)
Net Income ROE(d)14.4%(2.2)%
(a) PartnerRe 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) PartnerRe 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 for 2019 increased to $6.9 billion compared to $5.8 billion in 2018. Non-life net premiums written were up 18% for the full year 2019 compared to 2018, driven by a 21% increase in the P&C segment and a 14% increase in the Specialty segment. 

The Non-life combined ratio was 100.3% for the full year 2019 compared to 101.9% for 2018. The improvement in combined ratio was driven by the P&C segment with a combined ratio of 98.7% for the full year 2019 compared to 108.7% for the same period of 2018, reflecting an improvement in the current accident year attritional loss ratio and a decrease in losses related to large catastrophic events. Catastrophic losses of $258 million, net of retrocession and reinstatement premiums, related to Typhoons Hagibis and Faxai and Hurricane Dorian contributed 8.4 points on the P&C combined ratio for the full year 2019, compared to 15.1 points in 2018 related to Typhoons Jebi and Trami, Hurricanes Florence and Michael, and California wildfires. This was offset by the Specialty segment, which recorded a combined ratio of 103.0% for the full year 2019 compared to 91.9% for the same period of 2018, driven by net adverse prior years' reserve development and a large loss on Ethiopian Airlines and Boeing of $42 million, net of retrocession and reinstatement premiums (2.1 points on the Specialty combined ratio). 

The Life and Health allocated underwriting result was a profit of $73 million in 2019 compared to a profit of $86 million in 2018. The decrease was primarily driven by adverse experience in PartnerRe's short term life business, higher expenses to support growth in the business and higher annual incentive bonus payment to employees. 

Net investment return for 2019 was $1,352 million, or 7.7%, which included net investment income of $449 million, net realized and unrealized investment gains of $887 million and interest in earnings of equity method investments of $16 million. This compares to a net investment return of $37 million, or 0.1%, for the full year 2018, which included net investment income of $416 million and interest in earnings of equity method investments of $11 million, offset by net realized and unrealized investment losses of $390 million. 

Net realized and unrealized investment gains of $887 million for the full year 2019 included net realized and unrealized investment gains of $434 million on fixed maturities and short-term investments, primarily due to decreases in world-wide risk-free rates and credit spreads, and $453 million of net realized and unrealized investment gains on equities, investments in real estate and other invested assets, primarily due to gains in public equity funds.

Included within the net realized and unrealized investment gains of $434 million on fixed maturities and short-term investments was $244 million of net realized gains, primarily due to PartnerRe's decisions to rebalance certain portfolios, particularly in lower rated investment grade credit, and to reallocate the proceeds to other investment classes, particularly highly rated governments and mortgage backed securities, and to alternative credit. For the full year 2018, net realized and unrealized investment losses of $390 million included net realized and unrealized investment losses of $376 million on fixed maturities and short-term investments, driven by increases in U.S. risk free rates and the widening of U.S. and European investment grade corporate spreads, and $14 million of net realized and unrealized investment losses on equities, investments in real estate and other invested assets. 

Other Income Statement items 

Other income was $15 million for the full year 2019 compared to $50 million for 2018. During the fourth quarter of 2018 PartnerRe recognized a gain on commutation of $29 million due to the reserve and reinsurance agreement with Colisée Re being commuted with the associated guaranteed reserves and funds held and directly managed assets released. 

Other expenses of $370 million (expense ratio of 5.7%) for the full year 2019 increased by $64 million when compared to 2018 ($306 million - expense ratio of 5.5%). The increase was primarily driven by (i) higher annual incentive and long-term incentive payout for employees of $39 million compared to prior year due to the strong growth in book value reported by PartnerRe in 2019 and (ii) an increase in Life and Health expenses compared to prior year to support the organic growth of the business.

 Net foreign exchange losses were $87 million for the full year 2019, driven by the depreciation of the U.S. dollar against certain major currencies and the cost of hedging compared to gains of $119 million for 2018, driven by the appreciation of the U.S. dollar against certain major currencies, partially offset by hedging costs. 

Interest expense of $40 million for the full year 2019 compared to $43 million for 2018. During the second quarter of 2019, PartnerRe issued $500 million 3.70% Senior Notes due 2029 and used the proceeds to early redeem the $500 million 5.50% Senior Notes due 2020 in the third quarter of 2019. These transactions resulted in the lower interest expense in 2019. Loss on redemption of debt was $15 million for the full year 2019, related to the redemption of PartnerRe's 5.50% Senior Notes due 2020 at a make-whole redemption price. 

Preferred dividends of $46 million paid in 2019 were comparable to 2018. 

Income tax expense was $53 million on pre-tax income of $989 million in 2019 compared to an income tax benefit of $9 million on pre-tax losses of $95 million in 2018. These amounts were primarily driven by the geographical distribution of pre-tax profits and losses. 

Balance sheet and capitalization

Total investments and cash and cash equivalents were $17.8 billion at 31 December 2019, up 9.4% compared to 31 December 2018. The increase to 31 December 2019 was primarily driven by the $1,352 million net investment return for the full year 2019 and the increase in payables for securities purchased to $169 million as at 31 December 2019 from $80 million as at 31 December 2018. 

Cash and cash equivalents, fixed maturities and short-term investments, which are government issued or investment grade fixed income securities, were $12.8 billion at 31 December 2019, representing 72% of the total investments and cash and cash equivalents. 

The average credit rating of the fixed income portfolio increased to AA as of 31 December 2019 compared to A at 31 December 2018. The improvement in the average credit quality of the fixed income portfolio was due to actions taken during 2019 to reduce exposure to lower rated investment grade credit and reinvest certain proceeds in highly rated governments and mortgage backed securities. The expected average duration of the public fixed income portfolio at 31 December 2019 was 2.7 years, while the average duration of PartnerRe’s liabilities was 4.3 years.

There were no dividends declared and paid to common shareholders in the fourth quarter of 2019 and fourth quarter of 2018. Dividends declared and paid to common shareholders were $200 million for the full year 2019, compared to $48 million for the full year 2018.

Total capital was $8.7 billion at 31 December 2019, up 9.2% compared to 31 December 2018, primarily due to net income for the full year 2019, partially offset by dividends on preferred and common shares. PartnerRe issued $500 million 3.70% Senior Notes due 2029 during the second quarter of 2019 and used the proceeds to early redeem the $500 million 5.50% Senior Notes due 2020 in the third quarter of 2019.

Common shareholder's equity (or book value) of $6.6 billion and tangible book value of $6.0 billion at 31 December 2019 increased by 13.0% and 14.6% respectively, compared to 31 December 2018, primarily due to net income available to common shareholders for the full year 2019, partially offset by dividends on common shares. Book value, excluding dividends on common shares for 2019, was up 16.4% compared to 31 December 2018. 

Dividends Paid to EXOR

During 2019, PartnerRe declared and paid to Exor Nederland N.V. common share dividends of $200 million compared to $48 million for the full year 2018. 

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 income ($890 million) and the IFRS net income ($894 million) are immaterial and related only to the economic effects of the application of the acquisition method by EXOR to account for the acquisition. 

2020 Outlook

PartnerRe believes that overall, reinsurance will broadly remain a cyclical market, albeit of less amplitude, primarily as a result of excess capital, and that the cycles will become more specific and local, with less global amplitude. The outlooks for 2020 for each of PartnerRe's segments are summarized as follows: 

2020 P&C Segment Outlook

During the 1 January 2020 renewals, PartnerRe focused on portfolio optimization and improving profit margins and observed improving pricing trends in most of the North American business. The European business continued to see flat to low single digit rate decreases in all lines except casualty where pricing increases were observed.

As a result of the persisting competition and excess capacity in the industry, it is not possible to forecast if improving pricing conditions will continue in the future. 

2020 Specialty Segment Outlook

During the 1 January 2020 renewals, PartnerRe focused on portfolio optimization and improving profit margins and generally observed improved pricing in most lines of business within the Specialty segment (engineering, aviation, energy, marine, and property).

As a result of the persisting competition and excess capacity in the industry, it is not possible to forecast if improving pricing conditions will continue in the future. 

2020 Life and Health Outlook

The 1 January 2020 renewal for Life business is not considered significant, as only a limited portion of the premium associated with the Life portfolio is short-term business.

Management expects moderate continued growth in PartnerRe’s Life portfolio in 2020 assuming constant foreign exchange rates, mainly due to growth in Asia, Canada, Europe and the United States. Pricing conditions are not expected to materially differ from 2019.

Commercial Register No.64236277 Legal notes | Credits