PartnerRe Ltd. Reports Second Quarter and Half Year 2021 Results

• Net income available to common shareholders of $314 million for the second quarter and $248 million for the half year
• Operating income of $151 million for the second quarter and $192 million for the half year, which provided an operating income return on equity of 8.8% and 5.6%, respectively
• Net premiums written were up 29% at $1,794 million for the quarter, with growth in lines of business that experienced strong rate increases, compared to the prior year premiums which were impacted by the COVID-19 economic downturn
• Non-life underwriting result of $150 million or 32.7 points of improvement on the combined ratio of 88.6% year-over-year, and Life and Health underwriting profit, including allocated net investment income, of $23 million for the second quarter
• In Q2 2021, the Company fully redeemed the Series G, H and I Preferred Shares at a redemption value of $637 million and finalized the refinancing of our balance sheet with a run-rate saving of $18 million per annum

PEMBROKE, Bermuda, July 26, 2021 – PartnerRe Ltd. (“the Company”) today reported net income available to common shareholder of $314 million for the second quarter of 2021, compared to income of $229 million for the same period of 2020. Net income available to common shareholder was $248 million for the half year 2021, compared to a loss of $204 million for the same period of 2020.

Operating income was $151 million for the second quarter of 2021, compared to an operating loss of $256 million for the same period of 2020. Operating income for the half year 2021 was $192 million compared to an operating loss of $226 million for the same period of 2020. Operating income for the second quarter and half year 2021 improved over the same periods of 2020 as a result of improvements in current accident year attritional loss ratios and lower levels of adverse prior year development, and also the effects that COVID-19 reserves had on the second quarter of 2020.

Operating income (loss) is a non-GAAP financial measure defined by the Company as net income or loss available to common shareholder and excludes after-tax net realized and unrealized investment gains and losses, foreign exchange gains and losses, interest in results of equity method investments, and loss on redemption of preferred shares. The Company calculates annualized operating ROE using Operating income (loss) for the period divided by the average common shareholder’s equity outstanding for the period. See “Non-GAAP Financial Measures – Regulation G” for a reconciliation of non-GAAP measures.

PartnerRe President and Chief Executive Officer Jacques Bonneau commented, “We delivered strong results in the second quarter with an annualized operating ROE of 8.8%, and I am pleased to see the positive impacts of our portfolio actions begin to show through our financial result. Our Non-life combined ratio of 88.6% includes 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 improvements in prior years’ reserve development as older underwriting years run off. Our Life and Health segment also significantly improved its underwriting profit compared to the prior year. Third party capital currently stands at $1.1b of assets under management and provided us the ability to increase underwriting capacity and line sizes. These underwriting results, combined with good investment performance, helped produce solid profitability for the second quarter of 2021.”

Highlights for the second quarter and half year 2021 compared to the same periods of 2020 are included below.

Non-Life:

• Non-life net premiums written were up 37% for the second quarter of 2021 and were up 20% for the half year 2021 compared to the same periods of 2020. The increase in the second quarter of 2021 was driven by a 47% increase in the P&C segment. The current year included 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 $150 million (combined ratio of 88.6%) for the second quarter of 2021 and $190 million (combined ratio of 92.4%) for the half year 2021. This compares to a Non-life underwriting loss of $260 million (combined ratio of 121.3%) and $306 million (combined ratio of 112.6%) for the second quarter and half year 2020, respectively.
• There were no significant changes to the Company’s total Non-life net loss estimate of $371 million established for the COVID-19 pandemic in 2020. For the second quarter and half year 2021, the Company’s P&C segment incurred an increase in COVID-19 related losses, related primarily to refinements of estimates for business interruption exposures as more information has been received from cedants. This was offset by a decrease in estimated losses for Specialty financial risk lines for credit related exposures.
• The P&C segment reported a combined ratio of 93.5% and 95.5% for the second quarter and half year 2021, respectively, compared to 113.5% and 103.5% for the second quarter and half year 2020, respectively. 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 second quarter and half year 2020 (22.0 points and 10.7 points, respectively). 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 second quarter and half year 2021, compared to the same periods of 2020. The improvement in the current accident year loss ratio was driven primarily by business mix changes and rate improvements.
• The Specialty segment reported a combined ratio of 79.5% and 86.9% for the second quarter and half year 2021, respectively, compared to 132.8% and 127.5% for the second quarter and half year 2020, respectively. 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 $146 million (29.8 points) and $164 million (17.9 points) for the second quarter and half year 2020, respectively. 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 17.1 points and 15.2 points on the combined ratio compared to the second quarter and half year 2020, respectively.

Life and Health:

• Net premiums written were up 8% for the second quarter and up 10% for the half year 2021, compared to the same periods of 2020, reflecting growth in long-term life business.
• The underwriting result, including allocated net investment income, was a profit of $23 million and $43 million in the second quarter and half year 2021, respectively, compared to a profit of $5 million and $23 million in the second quarter and half year 2020, respectively. This included COVID-19 losses on protection products of $14 million and $26 million for the second quarter and half year 2021, respectively, compared to $15 million for the second quarter and half year 2020. The allocated underwriting result for the quarter and half year reflected improvements in short-term business and positive results in longevity business compared to the same periods 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.

Investments:

• Net investment return in the second quarter of 2021 was $321 million, or 1.6% and included net investment income of $95 million, net realized and unrealized investment gains of $216 million, and interest in earnings of equity method investments of $10 million. This compares to a net investment return of $627 million, or 3.5%, for the second quarter of 2020, which included net investment income of $72 million, net realized and unrealized investment gains of $549 million after recovering the unrealized loss of $610 million in the first quarter of 2020 and interest in earnings of equity method investments of $6 million.
• 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 $95 million was up $23 million, or 31%, for the second quarter of 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. 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 reasons discussed for the quarter; 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 $216 million for the second quarter of 2021 (2020: $549 million gain) included:
• Net realized and unrealized investment gains of $84 million (2020: $238 million gain) on fixed maturities and short-term investments, which were primarily unrealized, were driven by the narrowing of U.S. and Canadian risk-free rates.
• Net realized and unrealized investment gains on equities of $76 million (2020: $225 million gain), which were primarily unrealized, were driven by increases in worldwide equity markets that benefited public equity funds.
• Net realized and unrealized investment gains of $57 million (2020: $86 million gain) on other invested assets, which were primarily unrealized, were driven by investment gains on private equity 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.
• Interest in earnings of equity method investments of $10 million and $40 million in the second quarter and half year 2021, respectively, primarily reflects realized and unrealized gains on UK and New York real estate funds. This compared to interest in earnings of equity method investments of $6 million and $2 million in the second quarter and half year 2020, respectively.
• As of June 30, 2021, reinvestment rates were 2.2% compared to the Company’s fixed income investment portfolio yield of 2.5% for the second quarter of 2021.

Other Income Statement Items:

• Other expense ratio of 5.4% and 5.5% for the second quarter and half year 2021, respectively, were comparable to the same periods of 2020, which had expense ratios of 5.2% and 5.4%, respectively.
• Net foreign exchange losses were $30 million for the second quarter of 2021 and $35 million for the second quarter of 2020, driven by the depreciation of the U.S. dollar against certain major currencies (primarily the Canadian dollar) and the cost of hedging. Net foreign exchange losses of $59 million for the half year 2021 were 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, 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 $14 million and $28 million for the second quarter and half year 2021, respectively, compared to $8 million and $16 million for the same periods 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 $7 million and $18 million for the second quarter and half year 2021, respectively, compared to $12 million and $23 million for the same periods of 2020. In May 2021, the Company fully redeemed its Series G, H and I preferred shares for a liquidation value of $637 million. The Company 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 $38 million on pre-tax income of $380 million in the second quarter of 2021 compared to an expense of $17 million on pre-tax income of $257 million for the same period of 2020. 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, Capitalization and Cash Flows:

• Total investments and cash and cash equivalents were $19.9 billion at June 30, 2021, down 1.1% compared to December 31, 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 $62 million and $431 million for the second quarter and half year 2021, respectively, compared to $242 million and $479 million for the second quarter and half year 2020, respectively. The decreases were 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 the Company’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 as at June 30, 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 June 30, 2021, representing 71% of the total investments and cash and cash equivalents.
• The average credit rating of the fixed income portfolio was AA as of June 30, 2021. The expected average duration of the public fixed income portfolio at June 30, 2021 was 3.9 years, while the average duration of the Company’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 June 30, 2021 increased by 4.9% and 5.4%, respectively, compared to December 31, 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 June 30, 2021, down 1.4% compared to December 31, 2020, primarily due to the redemption of Series G, H and I preferred shares and a decrease in the U.S dollar value of the Company’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.

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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, 2020, total revenues were $7.4 billion. At June 30, 2021, total assets were $28.3 billion, total capital was $9.2 billion and total shareholders’ equity was $7.2 billion. PartnerRe maintains strong financial strength ratings as follows: A.M. Best A+ / Moody’s A1 / Standard & Poor’s A+. 

Forward-looking statements contained in this press release, such as those related to company performance, including the impact of the ongoing COVID-19 pandemic (including the related impact on the U.S. and global economies), 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, pandemic 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 COVID-19 pandemic losses and recent catastrophic events, 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.