PartnerRe

PartnerRe(100% interest in common shareholder’s equity and 99.76% of voting rights; through Exor Nederland N.V.)

 

 

 

Data presented and commented below are derived from PartnerRe’s consolidated financial information for the six months ended 30 June 2021 and 2020, and for the year ended 31 December 2020 prepared in accordance with US GAAP.

  I Half
$ million 2021 2020
Net premiums written 3,843
3,269
Non-life combined ratio(a) 92.4%
112.6%
Life and Health allocated underwriting result(b) 43
23
Net investment return 1.5%
0.7%
Other expenses 184
169
Net (loss) income attributable to PartnerRe common shareholders(c) 248 (204)
Net Income ROE(d) 7.2% (6.4)%
(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.

Net premiums written for the first half 2021 increased to $3.8 billion compared to $3.3 billion in the first half 2020. Non-life net premiums written of $3,025 million were up 20% for the half year 2021 compared to the same period of 2020. This was driven by favorable premium adjustments from prior underwriting years, compared to the prior year which included adverse premium exposure adjustments related to the economic downturn.
The Non-life underwriting profit was $190 million (combined ratio of 92.4%) for the half year 2021. This compares to a Non-life underwriting loss of $306 million (combined ratio of 112.6%) for the half year 2020. 

The P&C segment reported a combined ratio of 95.5% for the half year 2021, compared to 103.5% for the half year 2020. The half year 2021 included catastrophic losses of $92 million (5.6 points) for Winter Storm Uri, net of retrocession and reinstatement premiums. The prior year included COVID-19 related losses, net of retrocession and reinstatement premiums, of $159 million for the half year 2020 (10.7 points). Excluding the impacts of COVID-19 and large catastrophic losses, there was an improvement in the current accident year loss ratio and prior year development for the half year 2021, compared to the same period of 2020. The improvement in the current accident year loss ratio was driven primarily by business mix changes and rate improvements. 

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 Specialty segment reported a combined ratio of 86.9% for the half year 2021, compared to 127.5% for the half year 2020. The half year 2021 included catastrophic losses of $28 million (3.2 points) for Winter Storm Uri, net of retrocession and reinstatement premiums. The prior year included COVID-19 related losses, net of retrocession and reinstatement premiums, of $164 million (17.9 points) for the half year 2020. Excluding the impacts of COVID-19, the improvement in the combined ratio was driven by changes in prior years' reserve development, favorable business mix changes and rate improvements. Prior years' reserve development contributed to a decrease of 15.2 points on the combined ratio compared to half year 2020. 

Life and Health net premiums written of $818 million were up 10% for the half year 2021, compared to the same period of 2020, reflecting growth in long-term life business. 

The underwriting result, including allocated net investment income, was $43 million for half year 2021, compared to a profit of $23 million for the half year 2020. This included COVID-19 losses on protection products of $26 million for half year 2021, compared to $15 million for the half year 2020. The allocated underwriting result for the half year reflected improvements in short-term business and positive results in longevity business compared to the same period of 2020. The half year 2021 result also benefited from improvements in the guaranteed minimum death benefits (GMDB) line of business performance as a result of equity market increases in 2021, partially offset by a higher level of COVID-19 losses on protection products and the impact of a lower level of gains related to recaptures of business compared to half year 2020. 

Net investment return for the half year 2021 was $302 million, or 1.5%, which included net investment income of $182 million, net realized and unrealized investment gains of $80 million, and interest in earnings of equity method investments of $40 million. This compares to a net investment return of $124 million, or 0.7%, for the half year 2020 which included net investment income of $175 million and interest in earnings of equity method investments of $2 million, partially offset by net realized and unrealized investment losses of $53 million. 

Net investment income of $182 million was up $7 million, or 4%, for the half year 2021 compared to the same period of 2020, primarily due to the impact of higher reinvestment rates, driven by the significant widening in worldwide risk-free rates and the impact of portfolio re-allocations to U.S. bank loans, U.S. investment grade credit and Asia high yield credit; partially offset by the significant decrease in reinvestment rates experienced in Q1 2020 and the decision in Q1 2020 to sell higher yielding U.S. bank loan investments. 

Net realized and unrealized investment gains of $80 million for the half year 2021 (2020: $53 million loss) included: 

  •  Net realized and unrealized investment losses of $255 million (2020: $211 million gain) on fixed maturities and short-term investments, which were primarily unrealized, were driven by a significant increase in worldwide risk-free rates. 
  •  Net realized and unrealized investment gains on equities of $228 million (2020: $137 million loss), which were also primarily unrealized, were driven by increases in worldwide equity markets that benefited public equity funds.
  • Net realized and unrealized investment gains of $107 million (2020: $127 million loss) on other invested assets were driven by realized and unrealized investment gains on private equity investments.

Other Income Statement items

Net foreign exchange losses were $59 million for the half year 2021, driven primarily by U.S. dollar depreciation against the Canadian dollar and appreciation against the Euro, and the cost of hedging, while net foreign exchange gains were $95 million for the second half of 2020 were driven by the appreciation of the U.S. dollar against the British pound and Canadian dollar, partially offset by the cost of hedging.

Interest expense was $28 million for the half year 2021, compared to $16 million for the same period of 2020. The increase was driven by the issuance of $500 million 4.50% Fixed-Rate Reset Junior Subordinated Notes due 2050 during the third quarter of 2020.

Preferred dividends of $18 million for the half year 2021, compared to $23 million for the same period of 2020. In May 2021, PartnerRe fully redeemed its Series G, H and I preferred shares for a liquidation value of $637 million. PartnerRe also incurred a loss on redemption of $21 million, related to the preferred share issuance costs that were included in Additional paid-in-capital at issuance, and upon redemption were expensed, with no net impact to Common shareholder's equity.

Income tax expense was $23 million on pre-tax income of $310 million for the half year 2021 compared to a benefit of $28 million on pre-tax losses of $209 million for the same period of 2020.

Balance sheet and capitalization

Total investments and cash and cash equivalents were $19.9 billion at 30 June 2021, down 1.1% compared to 31 December 2020. The decrease was primarily driven by the redemption of Series G, H and I Preferred Shares at an aggregate liquidation value of $637 million and premium paid for a loss portfolio transfer and adverse development cover described below. This was partially offset by the issuance of $8 million 4.875% Fixed Rate Non-Cumulative Redeemable Perpetual Preferred Shares (the Series J Preferred Shares) at a liquidation value per share of $25 for total gross proceeds of $200 million, a $302 million net investment return for the first six months of 2021 and other operating cash flows.

Cash provided by operating activities was $431 million for the half year 2021, compared to $479 million for half year 2020. The decrease was primarily driven by cash flows from underwriting operations, including the impact of premium paid for the loss portfolio transfer and adverse development cover agreement entered into during the second quarter of 2021 related to prior underwriting years on PartnerRe's U.S. casualty and auto business. This resulted in a cash transfer for the premium at inception of the agreement, and a related increase in Reinsurance recoverables of $321 million at 30 June 2021.

Cash and cash equivalents, fixed maturities, and short-term investments, which are government issued or investment grade fixed income securities, were $14.1 billion at 30 June 2021, representing 71% of the total investments and cash and cash equivalents.

The average credit rating of the fixed income portfolio was AA at 30 June 2021. The expected average duration of the public fixed income portfolio at 30 June 2021 was 3.9 years, while the average duration of PartnerRe’s liabilities was 4.2 years.

Common shareholder's equity (or book value) of $7.0 billion and tangible book value of $6.5 billion at 30 June 2021 increased by 4.9% and 5.4%, respectively, compared to 31 December 2020, due to the comprehensive income for the half year 2021, partially offset by preferred dividends and issuance costs incurred for the Series J preferred shares in the first half of 2021.

Total capital was $9.2 billion at 30 June 2021, down 1.4% compared to 31 December 2020, primarily due to the redemption of Series G, H and I preferred shares and a decrease in the U.S dollar value of PartnerRe's Euro denominated debt, as the U.S dollar strengthened against the Euro during the first six months of 2021. This was partially offset by issuance of the Series J Preferred Shares and the increase in common shareholder's equity.

Dividend paid to Exor

In July 2021, PartnerRe declared and paid to EXOR Nederland N.V common share dividends of $107 million, compared to $50 million for 2020.

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 ($248 million) and the IFRS net income ($273 million) are immaterial and related only to the economic effects of the application of the acquisition method by Exor to account for the acquisition.

2021 Outlook

PartnerRe's financial results have been positively impacted by prior portfolio actions which earned in during the first half year 2021. The Non-life segments have showed strong performance as a result of improvements in the current accident year loss ratio from business mix changes and overall favorable pricing conditions across most lines of business, as well as comparative improvements in prior years' reserve development as older underwriting years run off. In addition, the Life and Health segment continues to contribute to book value and provides diversification effects.

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.

Commercial Register No.64236277 Note legali | Credits