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.
PartnerRe's forward-looking statements could be affected by numerous
foreseeable and unforeseeable events and developments such as exposure
to catastrophe, or other large property and casualty losses, credit,
interest, currency and other risks associated with the Company's
investment portfolio, adequacy of reserves, levels and pricing of new
and renewal business achieved, changes in accounting policies, risks
associated with implementing business strategies, and other factors
identified in the Company's reports filed or furnished with the
Securities and Exchange Commission. In light of the significant
uncertainties inherent in the forward-looking information contained
herein, readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the dates on which
they are made. The Company disclaims any obligation to publicly update
or revise any forward-looking information or statements.

The Company's estimate of losses for hurricanes Harvey, Irma and
Maria is based on a preliminary analysis of the Company's exposures, the
current assumption of total insured industry losses and preliminary
information received from certain cedants to date. There
is material uncertainty associated with the Company's loss estimates
given the nature, magnitude and recency of these loss events and the
limited claims information received to date. The ultimate loss therefore
may differ materially from the current preliminary estimate.

 

PartnerRe Ltd.
Consolidated Statements of
Operations and Comprehensive (Loss) Income
(1)
(Expressed
in thousands of U.S. dollars)
(Unaudited)

 
    For the three months ended   For the nine months ended

September 30,
2017

 

September 30,
2016

September 30,
2017

 

September 30,
2016

Revenues
Gross premiums written $ 1,389,951   $ 1,244,311   $ 4,352,308   $ 4,254,247  
Net premiums written $ 1,249,818 $ 1,131,260 $ 3,899,699 $ 3,886,375
Decrease (increase) in unearned premiums 145,052   178,319   (235,126 ) (180,833 )
Net premiums earned 1,394,870 1,309,579 3,664,573 3,705,542
Net investment income 97,594 101,773 298,975 305,943
Net realized and unrealized investment gains 61,248 55,548 213,506 414,682
Other income 3,593   3,266   11,029   11,572  
Total revenues 1,557,305   1,470,166   4,188,083   4,437,739  
Expenses
Losses and loss expenses 1,183,109 772,960 2,756,674 2,470,083
Acquisition costs 297,466 298,653 809,766 865,161
Other expenses (2) 90,179 91,257 270,020 367,439
Interest expense 10,547 12,251 31,920 36,766
Amortization of intangible assets 6,286 6,588 18,312 19,764
Net foreign exchange losses (gains) 40,919   8,362   107,049   (29,378 )
Total expenses 1,628,506   1,190,071   3,993,741   3,729,835  
(Loss) income before taxes and interest in earnings of equity
method investments
(71,201 ) 280,095 194,342 707,904
Income tax expense 10,162 29,027 33,123 92,368
Interest in earnings of equity method investments 9,025   3,396   19,014   5,468  
Net (loss) income (72,338 ) 254,464 180,233 621,004
Preferred dividends 11,604   14,184   34,812   42,551  
Net (loss) income available to common shareholder $ (83,942 ) $ 240,280   $ 145,421   $ 578,453  
Comprehensive (loss) income $ (44,436 ) $ 234,980   $ 180,577   $ 599,728  
 

(1)

 

On March 18, 2016, Exor N.V. acquired 100% of the Company's
common shares. As such, per share data is no longer meaningful and
has been excluded. PartnerRe common shares are no longer traded on
the NYSE.

 

(2)

Other expenses for the three months ended September 30, 2017
include $8 million of reorganization related costs. Other expenses
for the nine months ended September 30, 2017 include $24 million
of reorganization related costs and transaction costs related to
the Aurigen acquisition. Other expenses for the three months ended
September 30, 2016 include $13 million of reorganization related
severance costs and costs related to certain executive changes.
Other expenses for the nine months ended September 30, 2016
include $106 million of transaction costs and accelerated
stock-based compensation expense related to the closing of the
acquisition by Exor as well as reorganization related severance
costs.

 
 

PartnerRe Ltd.
Consolidated Balance Sheets
(Expressed
in thousands of U.S. dollars, except parenthetical share data)
(Unaudited)

 
    September 30, 2017   December 31, 2016
Assets
Investments:
Fixed maturities, at fair value $ 13,569,214 $ 13,432,501
Short-term investments, at fair value 57,218 21,697
Equities, at fair value 609,878 38,626
Other invested assets 1,163,615   1,075,637  
Total investments 15,399,925 14,568,461
Funds held – directly managed 527,733 511,324
Cash and cash equivalents 1,163,813 1,773,328
Accrued investment income 121,850 112,580
Reinsurance balances receivable 3,148,145 2,492,069
Reinsurance recoverable on paid and unpaid losses 884,690 331,704
Funds held by reinsured companies 789,758 685,069
Deferred acquisition costs 691,505 597,239
Deposit assets 83,536 74,273
Net tax assets 112,775 194,170
Goodwill 456,380 456,380
Intangible assets 166,569 107,092
Other assets and receivables 41,051   35,105  
Total assets $ 23,587,730   $ 21,938,794  
Liabilities
Non-life reserves $ 10,023,605 $ 8,985,434
Life and health reserves 2,375,838 1,984,096
Unearned premiums 2,043,819 1,623,796
Other reinsurance balances payable 354,735 281,973
Deposit liabilities 18,944 15,026
Net tax liabilities 186,360 166,113
Accounts payable, accrued expenses and other 332,574 849,572
Debt related to senior notes 1,372,188 1,273,883
Debt related to capital efficient notes 70,989   70,989  
Total liabilities 16,779,052   15,250,882  
Shareholders' Equity
Common shares (par value $0.00000001; issued: 100,000,000 shares)
Preferred shares (par value $1.00; issued and outstanding:
28,169,062 shares; aggregate liquidation value: $704,227)
28,169 28,169
Additional paid-in capital 2,396,530 2,396,530
Accumulated other comprehensive loss (74,226 ) (74,569 )
Retained earnings 4,458,205   4,337,782  
Total shareholders' equity 6,808,678   6,687,912  
Total liabilities and shareholders' equity $ 23,587,730   $ 21,938,794  
 
 

PartnerRe Ltd.
Condensed Consolidated Statements of
Cash Flows

(Expressed in millions of U.S. dollars)
(Unaudited)

 
    For the three months ended   For the nine months ended
September 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
Net cash provided by operating activities $ 113 $ 197 $ 241 $ 316
Net cash used in investing activities(1)(2) (77 ) (811 ) (630 ) (240 )
Net cash (used in) provided by financing activities(3)(4) (12 ) 723 (267 ) 444
Effect of foreign exchange rate changes on cash 22   13   47   (18 )
Increase (decrease) in cash and cash equivalents 46 122 (609 ) 502
Cash and cash equivalents - beginning of period 1,118   1,957   1,773   1,577  
Cash and cash equivalents - end of period $ 1,164   $ 2,079   $ 1,164   $ 2,079  
 

(1)

 

Net cash used in investing activities in the nine months ended
September 30, 2017 reflects cash used to fund the Aurigen
acquisition and investments in public equity funds.

 

(2)

Net cash used in investing activities in the three months ended
September 30, 2016 primarily represented proceeds from issuance of
Euro debt that was 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. In addition to the
investments in short-term fixed maturities, net cash used in
investing activities in the nine months ended September 30, 2016
includes cash generated through redemption of investments in order
to fund the payment of the special dividend upon closing of the
merger with Exor N.V. (Special Dividend) in the first quarter of
2016.

 

(3)

Net cash used in financing activities in the nine months ended
September 30, 2017 reflects a redemption of debt by Aurigen.

 

(4)

Net cash provided by financing activities in the three months
ended September 30, 2016 includes proceeds from issuance of Euro
750 million senior debt in September 2016. In addition to the
proceeds, the net cash provided by financing activities in the
nine months ended September 30, 2016 includes the payment of the
Special Dividend and the settlement of certain share-based awards
upon closing of the merger with Exor N.V. in the first quarter of
2016.

 
 

PartnerRe Ltd.
Consolidated Statements of
Comprehensive (Loss) Income

(Expressed in thousands of
U.S. dollars)
(Unaudited)

 
    For the three months ended   For the nine months ended
September 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
Net (loss) income $ (72,338 ) $ 254,464 $ 180,233 $ 621,004
Change in currency translation adjustment 27,479 (18,946 ) 2,337 (20,820 )
Change in net unrealized gains or losses on investments, net of tax (76 ) (210 ) (228 ) (620 )
Change in unfunded pension obligation, net of tax 499   (328 ) (1,765 ) 164  
Comprehensive (loss) income $ (44,436 ) $ 234,980   $ 180,577   $ 599,728  
 

 

PartnerRe Ltd.
Segment Information
(Expressed
in millions of U.S. dollars, except percentages)
(Unaudited)

 
  For the three months ended September 30, 2017
 

P&C
segment

 

Specialty
segment

 

Total
Non-life

 

Life
and Health
segment

 

Corporate
and Other

  Total
Gross premiums written $ 550 $ 489 $ 1,039 $ 351 $ $ 1,390
Net premiums written $ 461 $ 457 $ 918 $ 332 $ $ 1,250
Decrease in unearned premiums 132   6   138   7     145  
Net premiums earned $ 593 $ 463 $ 1,056 $ 339 $ $ 1,395
Losses and loss expenses (647 ) (221 ) (868 ) (315 ) (1,183 )
Acquisition costs (140 ) (124 ) (264 ) (34 )   (298 )
Technical result $ (194 ) $ 118 $ (76 ) $ (10 ) $ $ (86 )
Other (loss) income

(1 ) (1 ) 3 2 4
Other expenses (19 ) (8 ) (27 ) (19 ) (44 ) (90 )
Underwriting result $ (213 ) $ 109 $ (104 ) $ (26 ) n/a $ (172 )
Net investment income 16   82   98  
Allocated underwriting result (1) $ (10 ) n/a n/a
Net realized and unrealized investment gains 61 61
Interest expense (11 ) (11 )
Amortization of intangible assets (6 ) (6 )
Net foreign exchange losses (41 ) (41 )
Income tax expense (10 ) (10 )
Interest in earnings of equity method investments 9 9  
Net loss n/a $ (72 )
Loss ratio (2) 109.1 % 47.8 % 82.2 %
Acquisition ratio (3) 23.6   26.7   25.0  
Technical ratio (4) 132.7 % 74.5 % 107.2 %
Other expense ratio (5) 3.1   1.8   2.6  
Combined ratio (6) 135.8 % 76.3 % 109.8 %
 
For the three months ended September 30, 2016

P&C
segment

Specialty
segment

Total
Non-life

Life
and Health
segment

Corporate
and Other

Total
Gross premiums written $ 497 $ 466 $ 963 $ 281 $ $ 1,244
Net premiums written $ 439 $ 421 $ 860 $ 271 $ $ 1,131
Decrease in unearned premiums 141   35   176   2     178  
Net premiums earned $ 580 $ 456 $ 1,036 $ 273 $ $ 1,309
Losses and loss expenses (264 ) (279 ) (543 ) (230 ) (773 )
Acquisition costs (140 ) (124 ) (264 ) (34 )   (298 )
Technical result $ 176 $ 53 $ 229 $ 9 $ $ 238
Other income 2 1 3
Other expenses (31 ) (19 ) (50 ) (15 ) (26 ) (91 )
Underwriting result $ 145 $ 34 $ 179 $ (4 ) n/a $ 150
Net investment income 15   87   102  
Allocated underwriting result (1) $ 11 n/a n/a
Net realized and unrealized investment gains 56 56
Interest expense (12 ) (12 )
Amortization of intangible assets (7 ) (7 )
Net foreign exchange losses (9 ) (9 )
Income tax expense (29 ) (29 )
Interest in earnings of equity method investments 3 3  
Net income n/a $ 254  
Loss ratio (2) 45.5 % 61.2 % 52.4 %
Acquisition ratio (3) 24.2   27.2   25.5  
Technical ratio (4) 69.7 % 88.4 % 77.9 %
Other expense ratio (5) 5.3   4.2   4.8  
Combined ratio (6) 75.0 % 92.6 % 82.7 %

(1)

 

Allocated underwriting result is defined as net premiums
earned, other income or loss and allocated net investment income
less losses and loss expenses on life and health contracts,
acquisition costs and other expenses.

 

(2)

Loss ratio is obtained by dividing losses and loss expenses by
net premiums earned.

 

(3)

Acquisition ratio is obtained by dividing acquisition costs by
net premiums earned.

 

(4)

Technical ratio is defined as the sum of the loss ratio and the
acquisition ratio.

 

(5)

Other expense ratio is obtained by dividing other expenses by
net premiums earned.

 

(6)

Combined ratio is defined as the sum of the technical ratio and
the other expense ratio.

 
 

PartnerRe Ltd.
Segment Information
(Expressed
in millions of U.S. dollars, except percentages)
(Unaudited)

 
    For the nine months ended September 30, 2017

P&C
segment

 

Specialty
segment

 

Total
Non-life

 

Life
and Health
segment

 

Corporate
and Other

  Total
Gross premiums written $ 1,894 $ 1,441 $ 3,335 $ 1,017 $ $ 4,352
Net premiums written $ 1,630 $ 1,294 $ 2,924 $ 976 $ $ 3,900
Increase in unearned premiums (177 ) (53 ) (230 ) (5 )   (235 )
Net premiums earned $ 1,453 $ 1,241 $ 2,694 $ 971 $ $ 3,665
Losses and loss expenses (1,216 ) (657 ) (1,873 ) (884 ) (2,757 )
Acquisition costs (359 ) (346 ) (705 ) (105 )   (810 )
Technical result $ (122 ) $ 238 $ 116 $ (18 ) $ $ 98
Other income 1 (1 ) 10 1 11
Other expenses (58 ) (26 ) (84 ) (49 ) (137 ) (270 )
Underwriting result $ (179 ) $ 211 $ 32 $ (57 ) n/a $ (161 )
Net investment income 44   255   299  
Allocated underwriting result $ (13 ) n/a n/a
Net realized and unrealized investment gains 213 213
Interest expense (32 ) (32 )
Amortization of intangible assets (18 ) (18 )
Net foreign exchange losses (107 ) (107 )
Income tax expense (33 ) (33 )
Interest in earnings of equity method investments 19 19  
Net income n/a $ 180  
Loss ratio 83.7 % 52.9 % 69.5 %
Acquisition ratio 24.7   27.9   26.2  
Technical ratio 108.4 % 80.8 % 95.7 %
Other expense ratio 4.0   2.1   3.1  
Combined ratio 112.4 % 82.9 % 98.8 %
 
For the nine months ended September 30, 2016

P&C
segment

Specialty
segment

Total
Non-life

Life
and Health
segment

Corporate
and Other

Total
Gross premiums written $ 1,872 $ 1,512 $ 3,384 $ 870 $ $ 4,254
Net premiums written $ 1,667 $ 1,387 $ 3,054 $ 832 $ $ 3,886
Increase in unearned premiums (120 ) (54 ) (174 ) (6 )   (180 )
Net premiums earned $ 1,547 $ 1,333 $ 2,880 $ 826 $ $ 3,706
Losses and loss expenses (933 ) (859 ) (1,792 ) (678 ) (2,470 )
Acquisition costs (399 ) (367 ) (766 ) (99 )   (865 )
Technical result $ 215 $ 107 $ 322 $ 49 $ $ 371
Other income 3 (1 ) 2 7 2 11
Other expenses (108 ) (67 ) (175 ) (49 ) (143 ) (367 )
Underwriting result $ 110 $ 39 $ 149 $ 7 n/a $ 15
Net investment income 42   264   306  
Allocated underwriting result $ 49 n/a n/a
Net realized and unrealized investment gains 415 415
Interest expense (37 ) (37 )
Amortization of intangible assets (20 ) (20 )
Net foreign exchange gains 29 29
Income tax expense (92 ) (92 )
Interest in earnings of equity method investments 5 5  
Net income n/a $ 621  
Loss ratio 60.3 % 64.5 % 62.2 %
Acquisition ratio 25.8   27.5   26.6  
Technical ratio 86.1 % 92.0 % 88.8 %
Other expense ratio 7.0   5.0   6.1  
Combined ratio 93.1 % 97.0 % 94.9 %
 
 

PartnerRe Ltd.
Investment Portfolio
(Expressed
in millions of U.S. dollars)
(Unaudited)

 
    September 30, 2017   December 31, 2016
Investments:    
Fixed maturities
U.S. government $ 2,357 15 % $ 3,489 24 %
U.S. government sponsored enterprises 21 52
U.S. states, territories and municipalities 691 5 685 5
Non-U.S. sovereign government, supranational and government related 1,738 11 1,136 8
Corporate bonds 6,374 41 5,705 39
Mortgage/asset-backed securities 2,388   16   2,365   16  
Total fixed maturities 13,569 88 13,432 92
Short-term investments 57 22
Equities 610 4 39
Other invested assets 1,164   8   1,076   8  
Total investments $ 15,400   100 % $ 14,569   100 %
Cash and cash equivalents 1,164 1,773
Total investments and cash and cash equivalents 16,564 16,342
Maturity distribution:
One year or less $ 293 2 % $ 264 2 %
More than one year through five years 4,711 35 5,381 40
More than five years through ten years 3,985 29 3,703 27
More than ten years 2,249   16   1,741   13  
Subtotal 11,238 82 11,089 82
Mortgage/asset-backed securities 2,388   18   2,365   18  
Total fixed maturities and short-term investments $ 13,626   100 % $ 13,454   100 %
Credit quality by market value (Total
investments excluding Other invested assets):
AAA 8 % 6 %
AA 45 52
A 18 15
BBB 26 24
Below Investment Grade/Unrated 3   3  
100 % 100 %
Expected average duration (1) 4.8 Yrs 4.9 Yrs
Average yield to maturity at market (1) 2.5 % 2.7 %
Average credit quality A A

(1)

 

Includes funds holding fixed income securities that are
classified with equities on the Consolidated Balance Sheets and
futures used for the purpose of managing duration.

 
 

PartnerRe Ltd.
Distribution of Corporate Bonds
(Expressed
in thousands of U.S. dollars)
(Unaudited)

 
September 30, 2017
    Fair Value  

Percentage to
Total Fair Value of
Corporate
Bonds

 

Percentage to
Invested Assets
and cash

 

Largest single issuer
as a percentage of
Invested
Assets

and cash

   
Distribution by sector - Corporate bonds
Consumer noncyclical $ 1,376,266 21.6 % 8.3 % 0.9 %
Finance 1,209,591 19.0 7.3 0.9
Industrials 645,002 10.1 3.9 0.4
Energy 560,568 8.8 3.4 0.5
Consumer cyclical 503,133 7.9 3.0 0.4
Communications 467,609 7.3 2.8 0.7
Insurance 392,023 6.1 2.4 0.4
Utilities 322,070 5.1 1.9 0.2
Real estate investment trusts 304,315 4.8 1.8 0.3
Basic materials 244,718 3.8 1.5 0.4
Technology 243,363 3.8 1.5 0.4
Catastrophe bonds 67,502 1.1 0.4
Longevity and mortality bonds 25,618 0.4 0.2 0.2
Government guaranteed corporate debt 12,001   0.2   0.1   0.1
Total Corporate bonds $ 6,373,779   100.0 % 38.5 %
Finance sector - Corporate bonds
Banks $ 676,905 10.6 % 4.1 %
Investment banking and brokerage 351,086 5.5 2.1
Financial services 85,779 1.4 0.5
Commercial and consumer finance 44,111 0.7 0.3
Other 51,710   0.8   0.3  
Total finance sector - Corporate bonds $ 1,209,591   19.0 % 7.3 %
AAA AA A BBB

Non-Investment
Grade/Unrated

Total
Credit quality of finance sector - Corporate bonds
Banks $ 20,242 $ 21,031 $ 346,720 $ 288,912 $ $ 676,905
Investment banking and brokerage 58,360 291,478 1,248 351,086
Financial services 27,680 24,776 33,323 85,779
Commercial and consumer finance 33,708 10,403 44,111
Other   6,422   25,114   20,174     51,710  
Total finance sector - Corporate bonds $ 20,242   $ 55,133   $ 488,678   $ 644,290   $ 1,248   $ 1,209,591  
% of total 2 % 5 % 40 % 53 % % 100 %

Concentration of investment risk

The top 10 Corporate bond issuers account for 18.3% of the Company's
total corporate bonds. The single largest issuer accounts for 2.3% of
the Company's total Corporate bonds.

 

PartnerRe Ltd.
Analysis of Non-Life Reserves
(Expressed
in thousands of U.S. dollars)
(Unaudited)

 
    As at and for the three months ended   As at and for the nine months ended
September 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
Reconciliation of beginning and ending Non-life reserves:
Gross liability at beginning of period $ 9,196,466 $ 9,457,499 $ 8,985,434 $ 9,064,711
Reinsurance recoverable at beginning of period (327,428 ) (262,411 ) (266,742 ) (189,234 )
Net liability at beginning of period 8,869,038 9,195,088 8,718,692 8,875,477
Net incurred losses related to:
Current year 1,055,103 716,426 2,255,999 2,296,956
Prior years (187,026 ) (173,254 ) (383,212 ) (505,073 )
868,077 543,172 1,872,787 1,791,883
Change in reserve agreement (1) 2,191 (20,553 ) 9,685 7,671
Net losses paid (541,063 ) (465,912 ) (1,677,360 ) (1,428,870 )
Effects of foreign exchange rate changes 101,126   24,526   375,565   30,160  
Net liability at end of period 9,299,369 9,276,321 9,299,369 9,276,321
Reinsurance recoverable at end of period 724,236   290,151   724,236   290,151  
Gross liability at end of period $ 10,023,605   $ 9,566,472   $ 10,023,605   $ 9,566,472  
 
Breakdown of gross liability at end of period:
Case reserves $ 4,119,683 $ 4,016,213 $ 4,119,683 $ 4,016,213
Additional case reserves 163,752 176,248 163,752 176,248
Incurred but not reported reserves 5,740,170   5,374,011   5,740,170   5,374,011  
Gross liability at end of period $ 10,023,605   $ 9,566,472   $ 10,023,605   $ 9,566,472  
Gross liability at end of period by Non-life segment:
P&C 7,137,387 6,428,472 7,137,387 6,428,472
Specialty 2,886,218   3,138,000   2,886,218   3,138,000  
Gross liability at end of period $ 10,023,605   $ 9,566,472   $ 10,023,605   $ 9,566,472  
Unrecognized time value of Non-life reserves (2) $ 508,457 $ 316,168 $ 508,457 $ 316,168
Non-life paid loss ratio data:
Non-life paid losses to incurred losses ratio 62.3 % 85.8 % 89.6 % 79.7 %
Non-life paid losses to net premiums earned ratio 51.3 % 45.0 % 62.3 % 49.6 %
 

(1)

 

The change in the reserve agreement is due to adverse
(favorable) development on Paris Re 's reserves which are
guaranteed by Axa under the reserve agreement.

 

(2)

The unrecognized time value of non-life reserves represents the
difference between the recorded gross/net liability for non-life
reserves and the amount of gross/net liability for non-life
reserves that would be recorded if the underlying non-life
reserves were discounted. The unrecognized time value, or
discount, in the non-life reserves is calculated by applying
appropriate risk-free rates by currency and duration to the
underlying non-life reserves.

 

PartnerRe Ltd.

Life Value In Force

The Company calculates Value in Force (VIF) for its Life portfolio,
which represents the value of the Life portfolio that is not recognized
in the Consolidated Balance Sheets prepared under generally accepted
accounting principles in the United States (U.S. GAAP). Accordingly,
there is no corresponding measure that is prepared in accordance with
U.S. GAAP. Management believes that this is useful information for
investors, analysts, rating agencies and others. The Life VIF
calculation includes the business written in the Company's Life and
Health segment, except for the PartnerRe Health business.

The Company's Life VIF calculation uses market consistent techniques,
but primarily differs from a full Market Consistent Embedded Value
(MCEV) calculation, as defined in the European Insurance CFO Forum MCEV
principles, due to: (i) different methodologies used; and ii) the Life
VIF is only a component of MCEV and, specifically, the tangible assets
backing the liabilities are not considered in the Company's calculation.

The Company's Life VIF, which is calculated on a going concern basis, is
the sum of:

  • present value of future profits - which is defined as the net present
    value of shareholders' projected after-tax cash flows from the
    in-force business on a best-estimate assumption basis. The discount
    rates used reflect currency-specific market yields on zero coupon
    government bonds at given durations and are applied to projected
    deterministic cash flows and to calculate risk-free investment
    returns. The best-estimate is defined as median biometric assumptions
    and does not include any provision for adverse deviation. The Company
    attributes no value to future new business or renewals of short-term
    business. Allocated inflated-adjusted expenses are projected on a best
    estimate basis;
  • cost of non-hedgeable risks - which is defined as the cost of holding
    capital for non-hedgeable financial and non-hedgeable non-financial
    risks, such as a mortality deviation from shocks or changes in trends.
    The non-hedgeable risk capital has been determined using an internal
    economic capital model calibrated to a 99.6% Value at Risk (VaR)
    corresponding to a 1 in 250 year event;
  • frictional costs - which is defined as the cost of double taxation or
    investment management charges on assets backing required capital;
  • time value of options and guarantees (TVOG) - which is defined as the
    difference between the market value and the intrinsic value of the
    option calculated using stochastic techniques. The TVOG is significant
    to the guaranteed minimum death benefit (GMDB) portfolio where the
    Company covers death claims on savings plans, where the sum reinsured
    is the difference between the invested premium amount and the current
    fund value; and
  • cost of non-economic excess encumbered capital - which is defined as
    the cost of any encumbered capital in excess of economic capital
    required by local regulations.

Actuarial non-economic assumptions, such as current and future
mortality, are based on the most recent experience available, combined
with internal and industry benchmarks, including trend expectation where
appropriate.

The Life VIF is sensitive to changes in assumptions. In particular, the
Life VIF is sensitive to changes in yield curves that are used for
discounting, changes in equity market value assumptions and implied
volatilities.

The Company performs a detailed Life VIF calculation on an annual basis
and performs a roll-forward approach on an interim quarterly basis.

 

PartnerRe Ltd.
Analysis of Life and Health Reserves
(Expressed
in thousands of U.S. dollars)
(Unaudited)

 
    As at and for the three months ended   As at and for the nine months ended
September 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
Reconciliation of beginning and ending Life and health reserves:
Gross liability at beginning of period $ 2,271,323 $ 2,046,248 $ 1,984,096 $ 2,051,935
Reinsurance recoverable at beginning of period (35,041 ) (35,269 ) (31,372 ) (42,773 )
Net liability at beginning of period 2,236,282 2,010,979 1,952,724 2,009,162
Liability acquired related to the acquisition of Aurigen 67,916
Net incurred losses related to:
Current year 302,954 227,201 856,064 693,384
Prior years 12,078   2,587   27,823   (15,184 )
315,032 229,788 883,887 678,200
Net losses paid (263,584 ) (215,432 ) (735,988 ) (622,318 )
Effects of foreign exchange rate changes 50,699   (3,824 ) 169,890   (43,533 )
Net liability at end of period 2,338,429 2,021,511 2,338,429 2,021,511
Reinsurance recoverable at end of period 37,409   29,459   37,409   29,459  
Gross liability at end of period $ 2,375,838   $ 2,050,970   $ 2,375,838   $ 2,050,970  
Life value in force $ 295,200 $ 140,400 $ 295,200 $ 140,400
 

PartnerRe Ltd.
Natural Catastrophe Probable Maximum
Losses (PMLs)

(Expressed in millions of U.S. dollars)
(Unaudited)

 

Single occurrence estimated net PML exposure

 
    July 1, 2017   April 1, 2017   January 1, 2017
Zone Peril

1-in-250
year PML

 

1-in-500
year PML
(Earthquake
perils
only)

1-in-250
year PML

 

1-in-500
year PML
(Earthquake
perils
only)

1-in-250
year PML

 

1-in-500
year PML
(Earthquake
perils
only)

U.S. Southeast Hurricane $ 556 $ 557 $ 631
U.S. Northeast Hurricane 573 567 616
U.S. Gulf Coast Hurricane 586 557 583
Caribbean Hurricane 175 184 196
Europe Windstorm 403 394 404
Japan Typhoon 209 204 198
California Earthquake 512 $ 640 480 $ 633 488 $ 665
British Columbia Earthquake 143 306 159 312 166 307
Japan Earthquake 330 368 316 350 309 352
Australia Earthquake 152 222 150 211 148 184
New Zealand Earthquake 140 201 137 200 131 171
 

The PML estimates are pre-tax and net of retrocession and
reinstatement premiums. The peril zones in this disclosure are major
peril zones for the industry. The Company has exposures in other peril
zones that can potentially generate losses greater than the PML
estimates in this disclosure.

For more information regarding cautionary language related to the
Natural Catastrophe PML disclosure and the forward-looking statements,
as well as uncertainties and limitations associated with certain
assumptions and the methodology used, refer to the Company's natural
catastrophe PML information and definitions (see Risk Management—Natural
Catastrophe PML in Item 3 of the Company's Annual Report on Form 20-F
for the year ended December 31, 2016).

 

PartnerRe Ltd.
Reconciliation of GAAP and non-GAAP
measures

(in thousands of U.S. dollars)
(Unaudited)

 
    For the three months ended   For the nine months ended
September 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
 
Beginning of period common shareholder's equity $ 6,160,491 $ 6,169,310 $ 5,983,685 $ 6,046,751
End of period common shareholder's equity 6,104,451   6,299,886   6,104,451   6,299,886  
Average common shareholder's equity(1) $ 6,132,471   $ 6,234,598   $ 6,044,068   $ 6,173,318  
 
Annualized return on average common shareholders' equity
calculated with net income available to common shareholder

(2)
(5.5 )% 15.4 % 3.2 % 12.5 %
Less:
Annualized net realized and unrealized investment gains, net of tax,
on average common shareholder's equity(1)
4.2 3.6 4.4 7.9
Annualized net foreign exchange (losses) gains, net of tax, on
average common shareholder's equity(1)
(2.6 ) (0.3 ) (2.1 ) 0.9
Annualized net interest in earnings of equity method investments,
net of tax, on average common shareholder's equity(1)
0.3   0.2   0.3   0.2  
Annualized operating return on average common shareholder's equity(1) (7.4 )% 11.9 % 0.6 % 3.5 %
 
Net (loss) income $ (72,338 ) $ 254,464 $ 180,233 $ 621,004
Less: Dividends to preferred shareholders 11,604   14,184   34,812   42,551  
Net (loss) income available to common shareholder (83,942 ) 240,280 145,421 578,453
 
Less:
Net realized and unrealized investment gains, net of tax 63,802 56,370 199,064 366,625
Net foreign exchange (losses) gains, net of tax (40,023 ) (4,458 ) (95,001 ) 40,854
Interest in earnings of equity method investments, net of tax 5,775   3,384   14,358   7,376  
Operating (losses) earnings available to common shareholder $ (113,496 ) $ 184,984   $ 27,000   $ 163,598  
 

(1)

 

Average common shareholder's equity is calculated by using the
sum of the beginning of period and end of period common
shareholder's equity divided by two.

 

(2)

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

 
 

PartnerRe Ltd.
Reconciliation of GAAP and non-GAAP
measures

(in thousands of U.S. dollars)
(Unaudited)

 
    For the three months ended   For the nine months ended
September 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
Annualized return on average common shareholder's equity(1)
calculated with net (loss) income available to common shareholder
(5.5 )% 15.4 % 3.2 % 12.5 %
Add:
Transaction and severance related costs(2), net of tax 0.4   0.8   0.4   2.0  
Annualized return on average common shareholder's equity(1)
calculated with net (loss) income available to common shareholder,
adjusted by transaction and severance costs
(5.1 )% 16.2 % 3.6 % 14.5 %
 
Net (loss) income available to common shareholder(3) $ (83,942 ) $ 240,280 $ 145,421 $ 578,453
Add:
Transaction and severance related costs(2), net of tax 5,986   11,578   19,205   93,257  
Net (loss) income available to common shareholder(3),
adjusted by transaction and severance costs
$ (77,956 ) $ 251,858   $ 164,626   $ 671,710  
 
Annualized operating return on average common shareholder's equity(1) (7.4 )% 11.9 % 0.6 % 3.5 %
Add:
Transaction and severance related costs(2), net of tax 0.4   0.7   0.4   2.0  
Annualized operating return on average common shareholder's equity(1),
adjusted by transaction and severance costs
(7.0 )% 12.6 % 1.0 % 5.5 %
 
Operating (losses) earnings available to common shareholder $ (113,496 ) $ 184,984 $ 27,000 $ 163,598
Add:
Transaction and severance related costs(2), net of tax 5,986   11,578   19,205   93,257  
Operating (losses) earnings available to common shareholder,
adjusted by transaction
and severance costs
$ (107,510 ) $ 196,562   $ 46,205   $ 256,855  
 

(1)

 

Average common shareholder's equity is calculated by using the
sum of the beginning of period and end of period common
shareholder's equity divided by two.

 

(2)

The adjustment of $6 million ($8 million pre-tax) for the three
months ended September 30, 2017 primarily represented
reorganization related costs. The adjustment of $19 million ($24
million pre-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 ($13 million pre-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 ($106 million pre-tax) for the nine months ended September
30, 2016 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.

 

(3)

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

 
 

PartnerRe Ltd.
Reconciliation of GAAP and non-GAAP
measures

(in thousands of U.S. dollars)
(Unaudited)

 
    September 30, 2017   December 31, 2016
Tangible book value:
Total shareholders' equity $ 6,808,678 $ 6,687,912
Less:
Preferred shares, aggregate liquidation value 704,227   704,227
Common shareholder's equity 6,104,451 5,983,685
Less:
Goodwill (1) 456,380 456,380
Intangible assets, net of tax (1) 131,461   73,022
Tangible book value $ 5,516,610   $ 5,454,283
 
Capital Structure:
Senior notes $ 1,372,188 $ 1,273,883
Capital efficient notes (2) 63,384 63,384
Preferred shares, aggregate liquidation value 704,227 704,227
Common shareholder's equity 6,104,451   5,983,685
Total Capital $ 8,244,250   $ 8,025,179
 

(1)

 

The increase in intangible assets, net of tax, relates to the
recognition of the fair value of business acquired (VOBA) and
certain insurance licenses upon the acquisition of Aurigen, net of
amortization expense, in the three months ended June 30, 2017.
There was no related increase in goodwill as a bargain purchase
gain of less than $1 million was recorded in other income in the
Consolidated Statement of Operations.

 

(2)

Non-consolidated debt issued externally related to CENts of
$63m does not appear in the debt line of the Consolidated Balance
Sheet as the finance entity that issued the debt (PartnerRe
Finance II Inc.)does not meet the U.S. GAAP criteria for
consolidation. The Consolidated Balance Sheets as of September 30,
2017 and December 31, 2016 include the related intercompany notes
of $71m issued by PartnerRe U.S. Corporation to PartnerRe Finance
II Inc.

 

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