PartnerRe President & Chief Executive Officer, Patrick Thiele, commented, "Our results this quarter were impacted by the flooding in Europe in August. While our loss estimate of $120 million is significant, it is consistent with our leadership position in the European reinsurance market.
"Overall, reinsurance market conditions continue to be excellent for PartnerRe. We are seeing significant turmoil in some segments of the global industry, particularly in Europe, and we believe we are well-positioned to take advantage of new opportunities in this marketplace."
For the three months ended September 30, 2002, operating losses, which exclude net realized investment gains or losses and are calculated after payment of preferred dividends, were $28.2 million or $0.56 per share on a fully diluted basis. These results reflect the impact of the European floods. This compares to operating losses of $342.8 million, or $6.83 per share for the third quarter of 2001. Results in the third quarter of 2001 were impacted by a $400 million loss from the attacks of September 11.
Net loss for the three months ended September 30, 2002 was $27.9 million, or $0.65 per share on a fully diluted basis. The net loss includes an after-tax realized loss on investments of $4.7 million or $0.09 per share. Net loss for the third quarter of 2001 was $338.5 million or $6.85 per share, including a net after-tax realized loss on investments of $0.7 million or $0.02 per share.
Total revenues for the quarter were $694.5 million, comprised of $631.9 million of net premiums earned, net investment income of $60.2 million, and net realized investment gains of $0.8 million. For the third quarter of 2001, revenues were $475.4 million, with $415.5 million of net premiums earned, net investment income of $60.3 million, and net realized investment losses of $0.4 million.
For the nine months ended September 30, 2002, operating earnings were $109.9 million or $2.13 per share on a fully diluted basis. Net premiums written were $2.0 billion, an increase of 40% from the prior year. Net income for the nine months was $101.9 million, or $1.68 per share. Net income for the period includes net (after-tax) realized losses of $23.0 million. Operating losses for the nine months ended September 30, 2001 were $239.7 million or $4.78 per share. Net loss for the first nine months of 2001 was $189.4 million or $4.08 per share after net (after-tax) realized gains of $7.5 million and the cumulative effect of adopting FAS 133 of $27.8 million.
At September 30, 2002, total assets were $8.2 billion, total capitalization was $2.5 billion, and total shareholders' equity was $1.9 billion. Book value per common share was $31.78 on a fully diluted basis, compared to $31.52 per share on June 30, 2002.
Separately, the Company announced that the Board of Directors declared a regular quarterly dividend of $0.29 per common share, payable on December 2, 2002, to shareholders of record on November 22, 2002. The stock will trade ex-dividend commencing November 20, 2002.
Results of Operations
"The Company is experiencing strong growth in net written premiums, continuing the trend that started at the beginning of 2001," Mr. Thiele said. "Total net written premiums were up 45% for the quarter over the same period last year and 40% for the nine-month period. This was driven by both price increases and growth in treaties and participations.
"Growth is concentrated on those areas of business which we believe will produce superior returns, such as aviation, energy and engineering."
Results by Segment
The U.S. Property and Casualty segment, which represents 22% of total premiums for the quarter, reported net written premiums of $125.0 million, a 44% increase over the prior year's third quarter, with substantial growth in motor and property lines. The technical ratio for this segment was 105.8%.
European floods impacted the technical ratios of the Non-U.S. Property and Casualty and the Worldwide Specialty segments.
The Non-U.S. Property and Casualty segment, which represents 25% of total premiums, reported net written premiums of $139.8 million, a 32% increase over the prior year, with strong growth in property lines. The technical ratio for this segment was 112.8%. European floods added 20.9 points to the loss ratio for this segment.
The Worldwide Specialty segment, which represents 48% of total premiums, reported net written premiums of $271.6 million, a 62% increase over the prior year period. The most significant growth was in the engineering/energy and aviation lines. This segment's technical ratio was 102.0%, with European floods adding 29.1 points to the loss ratio. Excluding the impact of the floods in 2002 and September 11 attacks in 2001, most of our specialty lines showed improving year over year profitability.
The Life segment, which provides coverages in all markets except the U.S. and represents 5% of total premiums, reported net written premiums of $33.7 million, a marginal increase from the prior period. New business development was offset by the shift in business mix to more excess of loss treaties from proportional treaties. The net technical result for this segment was $5.3 million for the quarter.
Commentary and Outlook
Mr. Thiele concluded, "We expect fourth quarter results to reflect a return to more normalized earnings patterns and, barring any major catastrophes, we expect to achieve full year operating earnings of between $3.55 and $3.65 per share, and a return on beginning shareholders' equity of at least 12%. We now believe our net written premium increases for the year will exceed 35%.
"Looking beyond 2002, we are optimistic about January 1 renewals in the U.S. and European markets and our outlook for PartnerRe's position within that environment remains positive. We believe that our market presence, strong financial position, and our excellent underwriting skills position us to benefit from the opportunities available in the market.
"In 2003, we expect premiums will grow by at least 30% and that we will achieve a return on beginning shareholders' equity in excess of 17%, absent unusual loss events."