PartnerRe

(100% interest in common shareholder’s equity and 99.73% of voting rights; through Exor Nederland N.V.)

 

 

 

Data presented and commented below are derived from PartnerRe’s consolidated financial information for the year ended 31 December 2020 prepared in accordance with US GAAP

 Year
$ million20202019
Net premiums written6,3016,909
Non-life combined ratio(a)106.0 %100.3%
Life and Health allocated underwriting result(b)7073
Net investment return4.6%7.7%
Other expenses356370
Net (loss) income attributable to PartnerRe common shareholders(c)206890
Net Income ROE(d)3.1 %14.4%
(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.

COVID-19

The COVID-19 pandemic and the related economic downturn is ongoing, and there continues to be significant uncertainty surrounding the full extent of the impact. PartnerRe incurred $397 million of pre-tax losses, net of retrocession and reinstatement premiums, as a direct result of COVID-19 and the related effects of the economic downturn during the full year 2020, with the majority of the losses classified as incurred but not reported (IBNR) reserves. This is inclusive of $31 million of COVID-19 related losses recorded during the fourth quarter, driven by $20 million of losses in Specialty financial risks lines as a result of the continued economic downturn and $11 million of losses in the Life and Health segment. The total COVID-19 related losses for 2020 reflect PartnerRe's estimates on claims incurred as of 31 December 2020 and include $160 million, $211 million, and $26 million of pre-tax losses, net of retrocession and reinstatement premiums, in its P&C, Specialty and Life and Health segments, respectively. These losses are attributable to business interruption and event cancellation related coverages, credit exposures in financial risks lines, and life and health business. Despite the recent market conditions, PartnerRe's solvency position has remained strong and total capital increased during the fourth quarter of 2020. PartnerRe also maintains ample liquidity, with cash and cash equivalents of $2.4 billion at the end of 2020.

Net premiums written for 2020 decreased to $6.3 billion compared to $6.9 billion in 2019. Non-life net premiums written were down 11% for the full year 2020 compared to the same period of 2019. The decrease for the full year 2020 reflects premium exposure adjustments resulting from the current economic downturn and PartnerRe's focus on portfolio optimization throughout 2020.

The Non-life underwriting loss was $304 million (combined ratio of 106.0%) for the full year 2020 compared to a $20 million loss (combined ratio of 100.3%) for 2019. The P&C segment reported a combined ratio of 102.2% for the full year 2020 compared to 98.7% for 2019, driven by COVID-19 related losses of $160 million (5.1 points), net of retrocession and reinstatement premiums. Catastrophic losses related to Hurricane Laura of $55 million, net of retrocession and reinstatement premiums, primarily impacted the P&C segment ($47 million or 1.5 points), compared to 8.4 points in the P&C segment for catastrophic losses related to Typhoons Hagibis and Faxai and Hurricane Dorian in 2019.

The P&C segment was also adversely impacted by an aggregation of mid-sized catastrophic and man-made losses during 2020. The 2.1 point favorable impact of net prior years' reserve development for the full year 2020 compared to 4.4 points for 2019. The Specialty segment recorded a combined ratio of 112.2% for the full year 2020 compared to 103.0% for 2019, driven by COVID-19 related losses of $211 million (11.2 points) and higher adverse prior years' reserve development of 7.2 points compared to 4.0 points for 2019. This was partially offset by an improvement in the current accident year attritional loss ratio, and a decrease in large losses, as 2019 included 2.1 points related to a large aviation loss.

The Life and Health allocated underwriting result was a profit of $70 million in 2020 compared to a profit of $73 million in 2019. The decrease was driven by $26 million of COVID-19 related losses, partially offset by the favorable impact of certain portfolio recaptures and favorable experience in PartnerRe's longevity business.

Net investment return for the full year 2020 was $839 million, or 4.6%, which included net investment income of $361 million, net realized and unrealized investment gains of $454 million, and interest in earnings of equity method investments of $24 million. This compares to a net investment return of $1,352 million, or 7.7%, for 2019, 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.

Net investment income was down $88 million, or 20%, for the full year 2020, compared to 2019, primarily due to the impact of lower reinvestment rates, driven by the significant decreases in worldwide risk-free rates in the first quarter of 2020.

Net realized and unrealized investment gains of $454 million for the full year 2020 included net realized and unrealized investment gains of $245 million on fixed maturities and short-term investments, $189 million of net realized and unrealized investment gains on equities and $20 million of net realized and unrealized gains on other invested assets and investments in real estate. Gains on fixed maturities and short-term investments were primarily unrealized and driven by decreases in worldwide risk free rates. Gains on equities were also primarily unrealized and were due to increases in worldwide equity markets. Gains on other invested assets were driven by gains on private equities. For 2019, net realized and unrealized investment gains of $887 million 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.

Other Income Statement items 

Other expenses of $356 million (expense ratio of 5.4%) for the full year 2020 were down $14 million compared to $370 million (expense ratio of 5.7%) for 2019. The decrease in other expenses was primarily due to lower annual incentive and long term incentive payout for employees compared to prior year, partially offset by an increase in consulting and professional fees for accounting standard implementation projects.

Net foreign exchange losses were $52 million for the full year 2020, driven by the depreciation of the U.S. dollar against all major currencies (primarily the Canadian dollar, British Pound and Swiss Franc) and the cost of hedging, compared to losses of $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.

Interest expense was $39 million for the full year 2020, compared to $40 million for 2019. 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, resulting in a reduction in interest expense for the full year 2020 compared to 2019. Loss on redemption of debt of $15 million for the full year 2019 related to the redemption of the 5.50% Senior Notes due 2020 at a make-whole redemption price.

Preferred dividends of $46 million for the full year 2020 were comparable to 2019. During the fourth quarter of 2020, PartnerRe fully redeemed its 5.875% Series F Preferred Shares at a redemption price of $68 million inclusive of accrued dividends, resulting in a loss on redemption of preferred shares of $2 million.

Income tax benefit was $13 million on pre-tax income of $241 million for the full year 2020 compared to an expense of $53 million on pre-tax income of $989 million in 2019. 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 $20.1 billion at 31 December 2020, up 12.8% compared to 31 December 2019. The increase was primarily driven by the $839 million net investment return for the full year 2020, the issuance of $500 million 4.50% Fixed-Rate Reset Junior Subordinated Notes due 2050 during the third quarter of 2020, a $124 million increase in net payables for securities purchased and other positive underwriting cash flows.

Cash and cash equivalents, fixed maturities, and short-term investments, which are government issued or investment grade fixed income securities, were $14.9 billion at 31 December 2020, representing 74% of total investments and cash and cash equivalents.

The average credit rating of the fixed income portfolio was AA at 31 December 2020. The expected average duration of the public fixed income portfolio at 31 December 2020 was 2.3 years, while the average duration of PartnerRe’s liabilities was 4.3 years.

Dividends declared and paid to common shareholders were $50 million for the full year 2020, compared to $200 million for the full year 2019.

Total capital was $9.3 billion at 31 December 2020, up 7.3% compared to 31 December 2019, primarily due to the issuance of the Junior Subordinated Notes during the third quarter of 2020 and the increase in common shareholder's equity for the full year 2020, partially offset by the redemption of the Series F preferred shares.

Common shareholder's equity (or book value) of $6.7 billion and tangible book value of $6.1 billion at 31 December 2020 increased by 1.9% and 2.3%, respectively, compared to 31 December 2019, primarily due to net income available to common shareholder for the full year 2020, partially offset by dividends on common shares. Book value, excluding dividends on common shares for 2020, was up 2.6% compared to 31 December 2019.

Dividends Paid to EXOR

During 2020, PartnerRe declared and paid to Exor Nederland N.V. common share dividends of $50 million compared to $200 million for full year 2019.

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 ($206 million) and the IFRS net income ($202 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 capital inflows and outflows, and that the cycles will become more specific and local, with less global amplitude. The outlooks for 2021 for each of PartnerRe's segments are summarized as follows:

2021 P&C Segment Outlook

During the 1 January 2021 renewals, PartnerRe observed improving pricing trends in most lines of business. The market improvements were driven by primary rate increases in U.S. Casualty, Property Catastrophe rates (particularly in North America) and the assumed retrocession market. Due to capital capacity entering and leaving the industry, it is not possible to forecast how long the current pricing conditions will stay.

2021 Specialty Segment Outlook

During the 1 January 2021 renewals, PartnerRe generally observed improved pricing in most lines of business within the Specialty segment (particularly in the engineering, aviation, energy, marine and property lines of business). Due to capital capacity entering and leaving the industry, it is not possible to forecast how long the current pricing conditions will stay.

2021 Life and Health Outlook

The 1 January 2021 renewal for life business is not significant, as only a limited portion of the premiums written associated with the life portfolio is short-term business. While COVID-19 did result in a slowing of reinsurance bidding activity in 2020 in certain regions such as North America, PartnerRe expects a return to normal levels in 2021. Management expects moderate growth in PartnerRe’s life portfolio in 2021 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 2020.

Commercial Register No.64236277 Legal notes | Credits