PartnerRe Ltd. Reports First Quarter 2019 Results

May 15, 2019

  • Net income available to common shareholder of $497 million, resulting in common shareholder’s book value growth of 7.9% (9.3% dividend adjusted) compared to December 31, 2018
  • Non-life combined ratio of 97.7%, driven by P&C combined ratio of 87.7% benefiting from solid performances in the property catastrophe book and in Europe, and Specialty combined ratio of 116.0% impacted by mid-size loss activity and adverse prior year reserve development
  • Life and Health profitability, including underwriting result and allocated net investment income, of $30 million, driven by a 17% growth in net premiums earned and 30% growth in technical result compared to Q1 2018, partially offset by an increase in other expenses to support future business growth
  • Total investment return of $600 million, or 3.6%, driven by $163 million in net realized and unrealized gains on equities and $280 million net realized and unrealized gains on fixed maturities and short-term investments

 

PEMBROKE, Bermuda, May 15, 2019 –PartnerRe Ltd. (“the Company”) today reported a net income available to common shareholder of $497 million for the quarter which included net unrealized investments gains of $257 million on fixed maturities and short-term investments, primarily due to decreases in world-wide risk-free rates and credit spreads, and $25 million net foreign exchange losses. This compared to net loss of $120 million for the first quarter of 2018, which included net unrealized investment losses of $222 million on fixed maturities and short-term investments, primarily driven by increases in risk-free rates, and $13 million net foreign exchange losses. The majority of the Company’s investments, including all fixed maturities, such as government bonds and investment grade corporate debt, are accounted for at fair value with changes in the fair value recorded in the Consolidated Statements of Operations.

Commenting on results, PartnerRe President and Chief Executive Officer Emmanuel Clarke said, “In the first quarter of 2019, we delivered strong results in our P&C and Life and Health segments, and in our Investments portfolio, while reporting an underwriting loss in our Specialty segment, driven by a combination of mid-sized losses and negative reserve development, and where we are undertaking portfolio actions to improve future underwriting performance.”

Mr. Clarke also added: “Positive momentum continued in our April 1 Non-life renewals with business production up double-digits on the back of continued improvements in the overall pricing environment, further solidifying the Company’s improved underwriting performance outlook for the remainder of the year.”

Highlights for the first quarter of 2019 compared to the first quarter of 2018 are included below.

Effective July 1, 2018 the executive management responsibility and reporting for U.S. health business was reallocated from the Life and Health segment to the P&C segment as part of an internal organizational change. As a result, the financial results for U.S. health business are reflected in the P&C segment for 2019 and the related 2018 comparatives have been reclassified from the Life and Health to the P&C segment to conform to current presentation.

Non-Life:

  • Non-life net premiums written for the quarter were up 24% compared to the first quarter of 2018, driven by a 30% increase in the P&C segment, and a 13% increase in the Specialty segment.
  • The Non-life underwriting result was a profit of $24 million (combined ratio of 97.7%) for the quarter compared to $44 million (combined ratio of 95.2%) for the first quarter of 2018. The Non-life combined ratio continued to benefit from net favorable prior years’ reserve development of $11 million (1.1 points) for the quarter, compared to $34 million (3.7 points) for the first quarter of 2018, with favorable development in the P&C segment in the quarter offset by negative development in the Specialty segment.
  • P&C combined ratio was 87.7% for the quarter compared to 100.2% for the first quarter of 2018, driven by an improvement in the current accident year technical ratio and higher prior year favorable reserve development. The P&C combined ratio for the first quarter of 2019 included $49 million (7.3 points) of favorable prior year reserve development, including the 2018 catastrophic events where an increase in Jebi losses was offset by retro recoveries, compared to $11 million (1.9 points) favorable prior year reserve development in the first quarter of 2018.
  • Specialty combined ratio was 116.0% for the quarter due to $38 million (10.4 points) of adverse prior year reserve development, primarily related to the Lloyd’s net quota share portfolio, and a loss of $27 million (7.3 points) in the aviation book for the current accident year. This compares with a combined ratio of 86.9% for the first quarter of 2018, which included no mid-sized losses and favorable prior year reserve development of $23 million (6.8 points).

Life and Health:

  • Net premiums written wereup18% in the quarter compared to the first quarter of 2018, primarily driven by organic growth in life business.
  • Allocated underwriting result was a gain of $30 million for the quarter compared to $29 million for the first quarter of 2018, driven by 17% growth in net premium earned and 30% growth in technical result (technical ratio down 0.8 points), partially offset by a $4 million other expense increase to support future business growth.

Investments:

  • Net investment return for the quarter was $600 million, or 3.6%, and included net investment income of $110 million, net realized and unrealized investment gains of $469 million and interest in earnings of equity method investments of $21 million. This compares to a negative total net investment return of $102 million, or (0.6%), for the first quarter of 2018, which included net realized and unrealized investment losses of $222 million, partially offset by net investment income of $103 million, and interest in earnings of equity method investments of $17 million.
  • Net investment income of $110 million for the quarter was up $7 million, or 7%, compared to the same period in 2018, driven primarily by the impact of actions on the fixed maturities and short-term investments portfolios undertaken in the fourth quarter of 2018 aimed at improving yield.
  • Net realized and unrealized investment gains of $469 million for the quarter were driven by $280 million net realized and unrealized investment gains on fixed maturities and short-term investments, due to decreases in world-wide risk free rates and credit spreads, and $189 million net realized and unrealized investment gains on equities, investments in real estate and other invested assets, primarily due to gains in public equity funds managed by EXOR. This compared to net realized and unrealized investment losses of $222 million for the first quarter of 2018, which included $232 million net realized and unrealized investment losses on fixed maturities and short-term investments, primarily driven by an increase in risk-free rates coupled with a widening of credit spreads in U.S. and Europe, and $10 million net realized and unrealized investment gains on equities, investments in real estate and other invested assets.
  • The interest in earnings of equity method investments of $21 million in the first quarter of 2019 was primarily driven by an appreciation on real estate investments and certain private equity funds. This compared to gains of $17 million in the first quarter of 2018.
  • As at March 31, 2019, reinvestment rates were 3.0% compared to the Company’s fixed income investment portfolio yield of 3.1% for the first quarter of 2019.

Other Income Statement Items:

  • Other expenses of $89 million (expense ratio of 6.4%) in the first quarter of 2019 was up $2 million, or 3%, compared to $87 million (expense ratio of 7.2%) for the same period of 2018.
  • Net foreign exchange losses were $25 million in the first quarter of 2019, primarily due to the depreciation of the U.S. dollar against the British pound and Canadian dollar (these losses were offset by gains in change in currency translation adjustment during the quarter). This compared to losses of $13 million in the first quarter of 2018, primarily driven by hedging costs.
  • Interest expense of $11 million and preferred dividends of $12 million in the first quarter of 2019 were comparable to the first quarter of 2018.
  • Income tax expense was $45 million on pre-tax income of $554 million in the first quarter of 2019 compared to a benefit of $15 million on pre-tax losses of $123 million for the same period of 2018. These amounts were primarily driven by the geographical distribution of pre-tax profits and losses.

Balance Sheet, Capitalization, and Cash Flows:

  • Total investments and cash and cash equivalents were $16.8 billion at March 31, 2019, up 3.1% compared to December 31, 2018.
  • Cash and cash equivalents, fixed maturities, and short-term investments, which are government issued or investment grade fixed income securities, were $13.7 billion at March 31, 2019, representing 82% of the cash and cash equivalents and total investments.
  • The average credit rating and expected average duration of the fixed income portfolio at March 31, 2019 was A and 4.0 years, respectively, while the average duration of the Company’s liabilities was 4.7 years.
  • Dividends declared and paid to common shareholders for the quarter were $80 million compared to $48 million for the first quarter of 2018.
  • Total capital was $8.4 billion at March 31, 2019, up 5.6% compared to December 31, 2018, primarily due to the net income for 2019 and favorable foreign currency translation adjustment, partially offset by dividends on preferred and common shares.
  • Common shareholder’s equity (or book value) of $6.3 billion and tangible book value of $5.7 billion at March 31, 2019 increased 7.9% and 8.8%, respectively, compared to December 31, 2018, primarily due to the net income available to common shareholder for the quarter and the foreign currency translation adjustment, partially offset by dividends on common shares. Book value at March 31, 2019, excluding dividends on common shares for the quarter, was up 9.3% compared to December 31, 2018.
  • Cash provided by operating activities, which include cash flows related to net investment income and underwriting operations, was $92 million in the quarter compared to $36 million of cash used in operating activities in the first quarter of 2018. The increase for the quarter over the first quarter of 2018 was primarily driven by an increase in cash flow from underwriting operations.

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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, 2018, total revenues were $5.6 billion. At March 31, 2019, total assets were $24.0 billion, total capital was $8.4 billion and total shareholders’ equity was $7.0 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

Please refer to the “Financial Information – Annual Reports” section of the Company’s website for a copy of the Company’s Annual Report on Form 20-F at: www.partnerre.com/financial-information/annual-reports/

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 for recent catastrophic losses 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.

 

Contacts:PartnerRe Ltd.
(441) 292-0888
Media Contact: Celia Powell
Investor Contact: Ryan Lipschutz

 

 

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