Market Overview

PartnerRe Ltd. Reports Third Quarter and Nine Month 2017 Results

Share:
  • Third Quarter Net Loss of $84 million, driven by $437 million after-tax
    loss related to the hurricanes Harvey, Irma and Maria
  • Non-life combined ratio of 109.8%, driven by a 135.8% combined
    ratio in the P&C segment and a 76.3% combined ratio in the Specialty
    segment
  • Book Value or common shareholder's equity of $6.1 billion, a 0.9%
    decrease compared to June 30, 2017 and a 2.0% increase compared to
    December 31, 2016

PartnerRe Ltd. ("the Company") today reported a net loss available to
common shareholder of $84 million for the third quarter of 2017 compared
to net income of $240 million for the same period of 2016. Net income or
loss available to common shareholder includes net realized and
unrealized investment gains of $61 million in the third quarter of 2017
compared to $56 million in the same period of 2016. Operating losses
were $113 million for the third quarter of 2017 compared to operating
gains of $185 million for the same period of 2016.

Net income available to common shareholder for the first nine months of
2017 was $145 million compared to $578 million in the same period of
2016. Net income available to common shareholder includes net realized
and unrealized investment gains of $214 million compared to $415 million
in the same period of 2016. Operating earnings for the first nine months
of 2017 were $27 million compared to $164 million for the same period of
2016.

Operating earnings is a non-GAAP financial measure which excludes
certain net after-tax realized and unrealized investment gains and
losses, net after-tax foreign exchange gains and losses and certain net
after-tax interest in results of equity method investments, and is
calculated after dividends to preferred shareholders.

Operating (losses) earnings and net (loss) income available to common
shareholder, and the associated annualized ROEs, for the third quarters
and the first nine months of 2017 and 2016 include various non-recurring
transaction and reorganization related costs, which impact period over
period comparability as follows (in US$ millions, except for
percentages):

         

Non-GAAP measures adjusted for transaction and
reorganization related costs, net of tax
(1):

Q3 2017 Q3 2016 YTD 2017 YTD 2016
Operating (losses) earnings $ (107 ) $ 197 $ 46 $ 257
Annualized Operating ROE (7.0 )% 12.6 % 1.0 % 5.5 %
Net (loss) income available to common shareholder(2) $ (78 ) $ 252 $ 164 $ 672
Annualized net (loss) income available to common shareholder ROE (5.1 )% 16.2 % 3.6 % 14.5 %
 

______________

(1)

 

The adjustment of $6 million, after-tax, for the three months
ended September 30, 2017 primarily represented reorganization
related costs. The adjustment of $19 million, after-tax, for the
nine months ended September 30, 2017, primarily represented
reorganization related costs and transaction costs related to the
Aurigen acquisition. The adjustment of $12 million, after-tax, for
the three months ended September 30, 2016 represented
reorganization related severance costs and costs related to
certain executive changes. The adjustment of $93 million,
after-tax, for the nine months ended September 30, 2016 primarily
represented transaction costs and accelerated stock-based
compensation expense related to the closing of the acquisition by
Exor as well as reorganization related severance costs.

 

(2)

Net (loss) income available to common shareholder is calculated
after preferred dividends.

 

Commenting on results, PartnerRe President and Chief Executive Officer
Emmanuel Clarke said, "The third quarter of 2017 was a very active
period of severe catastrophe events, with a series of hurricanes
impacting the Caribbean and the U.S. and two earthquakes in Mexico. Our
first thoughts go to the victims of these catastrophes. PartnerRe is
paying losses promptly and continue to provide coverage to our clients,
demonstrating the value of our reinsurance product, which ultimately
contributes to fund reconstruction efforts in devastated regions."

Mr. Clarke also added: "Despite the impact of these losses on the
catastrophe exposed lines in our portfolio, PartnerRe book value
declined by only 0.9% during the quarter, thanks to discipline in
deploying capital in Catastrophe exposed classes, solid performance in
our Specialty portfolio, an improvement in our P&C non-CAT accident year
technical ratio compared to the third quarter of 2016 and good
investments performance. These results highlight our underwriting
discipline and the quality and diversification of our underwriting
portfolio. We are approaching the January 1 renewals season with a
strong capital position which will allow us to benefit from improving
pricing conditions in the market."

Highlights for the third quarter of 2017 compared to the same period of
2016 include the following:

Non-Life:

  • Non-life net premiums written were up 7% compared to the same period
    of 2016, primarily as a result of new business written and
    reinstatement premiums, partially offset by cancellations and
    non-renewals. Excluding reinstatement premiums, net premiums written
    increased by 2%.
  • The Non-life combined ratio of 109.8% was driven by large catastrophic
    losses related to the hurricanes Harvey, Irma and Maria of $472
    million, pre-tax, net of retrocession and reinstatement premiums, or
    44.7 points on the combined ratio. The Non-life combined ratio in the
    third quarter of 2016 was 82.7% and did not include any large
    catastrophic losses. Excluding large catastrophic losses, the Non-life
    combined ratio in the third quarter of 2017 was 17.6 percentage points
    lower than the combined ratio in the third quarter of 2016, with the
    improvement mainly driven by an improved current accident year
    technical ratio, higher contributions from net prior years' reserve
    development and a lower expense ratio.
  • The Non-life combined ratio continued to benefit from net favorable
    prior years' reserve development of $187 million (17.7 points), with
    both the P&C and Specialty segments experiencing net favorable
    development from prior accident years. The combined ratio for the
    third quarter of 2016 included favorable prior year development of
    $173 million (16.7 points).

Life and Health:

  • Net premiums written were up 22% in the third quarter of 2017 compared
    to the same period of 2016, primarily driven by the inclusion of the
    Aurigen life premiums and growth in health business.
  • Allocated underwriting result, which includes allocated investment
    income and other expenses, was a loss of $10 million in the third
    quarter of 2017 compared to a gain of $11 million in the same period
    of 2016. This decrease primarily reflects lower profitability in the
    health line of business.

Investments:

  • Total net investment return in the third quarter of 2017 of $168
    million, or 1.0% in percentage terms, includes net realized and
    unrealized investment gains of $61 million, net investment income of
    $98 million and interest in earnings of equity method investments
    of $9 million. This compares to a total net investment return of $161
    million, or 0.9%, for the third quarter of 2016.
  • The total net investment return in the third quarter of 2017 was
    primarily generated by net investment income from fixed income
    securities and mark-to-market gains in public equity and third party
    private equity funds. A further compression of U.S. investment grade
    corporate and mortgage-backed securities spreads also contributed to a
    positive mark-to-market result, partially offset by an increase in
    risk-free rates in Canada.
  • Net investment income of $98 million was down $4 million, or 4%,
    compared to the third quarter of 2016, mainly due to the derisking of
    the investment portfolio in the fourth quarter of 2016.
  • Reinvestment rates are currently 2.7%, in line with our existing fixed
    income yield of 2.5%.

Other Income Statement Items:

  • Other expenses of $90 million in the third quarter of 2017 were
    comparable to $91 million for the same period of 2016 and included $9
    million of Aurigen expenses.
  • Interest expense of $11 million in the third quarter of 2017 was
    comparable to $12 million for the third quarter of 2016 due to the
    reduction from the redemption of $250 million of senior notes in the
    fourth quarter of 2016 being partially offset by the issuance of the
    €750 million senior debt (Euro debt) at a lower interest rate.
  • The preferred dividends of $12 million in the third quarter of 2017
    were down $3 million compared to the third quarter of 2016 as a result
    of the redemption of $150 million of Series D and E preferred shares
    during the fourth quarter of 2016.
  • Net foreign exchange losses in the third quarter of 2017 were $41
    million, mainly driven by the strengthening of certain currencies
    against the U.S. dollar and cost of hedging foreign exchange
    currencies.
  • Income tax expense of $10 million on a pre-tax loss of $62 million in
    the third quarter of 2017 (compared to $29 million on a pre-tax income
    of $283 million for the same period of 2016) was primarily driven by
    the geographical distribution of pre-tax profits and losses, with a
    significant portion of the large catastrophic losses recorded in
    jurisdictions with low or nil tax rates and profits recorded in tax
    jurisdictions with higher income tax rates.

Balance Sheet and Capitalization:

  • Total investments, cash and cash equivalents and funds held–directly
    managed were $17.1 billion at September 30, 2017, up 1.4% compared to
    December 31, 2016.
  • Cash and cash equivalents and fixed maturities, which are government
    issued or investment grade fixed income securities, were $14.4 billion
    at September 30, 2017, representing 87% of the cash and cash
    equivalents and total investments.
  • The average rating and the average duration of the fixed income
    portfolio at September 30, 2017 was A and 4.8 years, respectively,
    while the average duration of the Company's liabilities was 4.5 years.
  • There were no dividends declared on common shares during the third
    quarter of 2017. Dividends declared to common shareholder for the
    first nine months of 2017 were $25 million.
  • Total capital was $8.2 billion at September 30, 2017, up 2.7% compared
    to $8.0 billion at December 31, 2016, primarily due to net income of
    $180 million for the first nine months of 2017.
  • Common shareholder's equity (or book value) and tangible book value
    were $6.1 billion and $5.5 billion, respectively, at September 30,
    2017, up 2.0% and 1.1%, respectively, compared to December 31, 2016,
    primarily due to net income for the first nine months of 2017.

Cash Flows:

  • Cash provided by operating activities was $113 million in the third
    quarter of 2017 compared to $197 million in the third quarter of 2016.
    The positive cash flow was primarily driven by investment income.
  • Cash used in investing activities was $77 million in the third quarter
    of 2017 compared to $811 million in the same period in 2016. The cash
    used in the third quarter of 2017 was primarily due to net purchases
    of fixed maturity securities. The cash used in investing activities in
    the third quarter of 2016 reflects proceeds from issuance of Euro debt
    that were invested in short-term fixed maturities in advance of these
    funds being used to redeem preferred shares and senior notes in the
    fourth quarter of 2016.
  • Cash used in financing activities was $12 million in the third quarter
    of 2017 compared to cash provided by financing activities of $723
    million in the same period in 2016. The cash outflows in the third
    quarter of 2017 were driven by the dividends paid to preferred
    shareholders. The cash inflows in the third quarter of 2016 were due
    to cash proceeds on issuance of the Euro debt.

_______________________________________

PartnerRe Ltd. is a leading global reinsurer that helps insurance
companies reduce their earnings volatility, strengthen their capital and
grow their businesses through reinsurance solutions. Risks are
underwritten on a worldwide basis through the Company's three segments:
P&C, Specialty, and Life and Health. For the year ended December 31,
2016, total revenues were $5.4 billion. At September 30, 2017, total
assets were $23.6 billion, total capital was $8.2 billion and total
shareholders' equity was $6.8 billion. PartnerRe enjoys strong financial
strength ratings as follows: A.M. Best A / Moody's A1 / Standard &
Poor's A+.

PartnerRe on the Internet: www.partnerre.com

Forward-looking statements contained in this press release are based
on the Company's assumptions and expectations concerning future events
and financial performance and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to significant business, economic and competitive
risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements.
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