PartnerRe Ltd. Reports Fourth Quarter and Full Year Earnings for 2002

PartnerRe President & Chief Executive Officer, Patrick Thiele, commented, "We had an excellent fourth quarter to finish 2002. Overall it was a good year, with calendar year ROE of 12.5%, and book value per share growth of 17%. Premium growth of 45% was driven by excellent pricing conditions in most of our markets."

For the three months ended December 31, 2002, operating earnings, which excludes net realized investment gains or losses and is calculated after payment of preferred dividends, was $77.0 million or $1.46 per share on a fully diluted basis. This compares to operating earnings of $17.2 million, or $0.33 per share for the fourth quarter of 2001. The fourth quarter of 2002 reflected a return to a more normalized level of profitability given current market conditions, while results in the fourth quarter of 2001 were impacted by a $47.3 million pre-tax loss ($0.60 per diluted share after tax) relating to the Company's exposure to Enron Corp., as well as unusually high frequency of larges losses in Europe.

Net income for the three months ended December 31, 2002 was $88.4 million, or $1.58 per share on a fully diluted basis. Net income includes a net after-tax realized gain on investments of $6.3 million or $0.12 per share. Net income for the fourth quarter of 2001, including a net after-tax realized gain on investments of $6.7 million, was $28.9 million or $0.46 per share.

Summary unaudited consolidated financial data for the period is set forth below.

Total revenues for the quarter were $824.2 million, including $748.7 million of net premiums earned, net investment income of $66.8 million, and net realized investment gains of $6.6 million. For the fourth quarter of 2001, revenues were $508.5 million, with $442.3 million of net premiums earned, net investment income of $58.6 million, and net realized investment gains of $6.0 million.

For the year ended December 31,2002, operating earnings were $187.0 million or $3.60 per share on a fully diluted basis. Net income for the year was $190.3 million, or $3.28 per share (After deduction of preferred dividends). Net income for the year includes net after-tax realized investment losses of $16.7 million. For the year ended December 31, 2001 operating loses were $222.4 million or $4.44 per share. Net losses for 2001 were $160.5 million or $3.60 per share after net realized investment gains of $14.1 million after tax and the positive cumulative effect of adopting FAS 133 of $27.8 million. Results for 2001 were impacted by a loss of $400 million, or $8.01 per diluted share after tax, as a result of the terrorist attack of September 11, 2001. The Company adopted FAS 142 and ceased amortizing goodwill on January 1, 2002. During 2001, the Company amortized goodwill in an amount of $26.0 millionor $0.44 per share.

Total revenues for the full year 2002 were $2.7 billion, comprised of $2.4 billion of net premiums earned, net investment income of $245.2 million, and net realized investment losses of $6.8 million. For 2001, revenues were $1.9 billion, with $1.6 billion of net premiums earned, net investment income of $239.6 million, and net realized investment gains of $20.2 million.

At December 31, 2002, total assets were $8.7 billion, total capitalization was $2.7 billion, and total shaeholders' equity was $2.1 billion. This compares to total assets of $7.2 billion, total capitalization of $2.4 billion, and total shareholders'equity of $1.7 billion for 2001. Book Value per common share was $34.02 on a fully diluted basis, compared to $29.05 per share on December 31, 2001.

Separately, the Company announced that the Board of directors declared a regular quarterly dividend of $0.29 per common share. The dividend will be payable on March 3, 2003, to common shareholders of record on February 21, 2003, with the stock trading ex-dividend commencing February 19,2003.

Results of Operations

"Premium growth in the fourth quarter of 2002 was significant," Mr. Thiele said,"representing a 65% increase over the fourth quarter 2001, and included an upward revision for premium estimates for the year, following the receipt of updated information from cedents during the January 1, 2003 renewal process. For the full year, net premiums written grew 45% to $2.7 billion, virtually doubling our premium volume since 2000.

"Fourth quarter results in the Non-Life segment were better than expected due to exceptional results in our specialty business, especially catastrophe, aviation, property and energy. Both the U.S. Property and Casualty and Non-U.S. Property and Casualty businesses performed in line with the results of the first nine months of the year. The current Life operation results are on plan, but were, however, negatively affected by a write-down of deferred acquisition costs (DAC) on an old treaty. For the year, our Non-Life segment achieved a 97.9% combined ratio."

Mr. Thiele continued, "Investment income for the quarter was favorably impacted by a $6 million adjustment on the income earned on funds withheld balances, reflecting the upward revision in premiums written for the year. For the full year, investment income grew modestly with strong positive cash flow offsetting declining interest rates."

Results by Segment

The Non-Life segment reported net premiums written of $630.4 million for the quarter, reflecting continued growth during fourth quarter renewals as well as upward revisions of premium estimates for the year, in light of information received from cedents during the January 1, 2003 renewal process. The combined ratio was 91.6% for the fourth quarter compared to 110.9% for the same period in 2001. For the full year, Non-Life net premiums written grew 47% to $2.5 billion. The full year 2002 combined ratio of 97.9% compares to the 2001 ratio of 130.2%, which was impacted by the terrorist attack of September 11, 2001.

The U.S. Property and Casualty business, which represents 24% of total annual premiums, reported net written premiums of $173.9 million, a 104% increase over the prior year's fourth quarter, with substantial growth in specialty casualty lines. The technical ratio for this segment was 101.3%, compared to 107.2% in the fourth quarter of 2001. For the full year 2002, net premiums written were $649.0 million, compared to $411.0 million in 2001, while the technical ratio was 101.1% for the year compared to 153.1% in 2001.

The Non-U.S. Property and Casualty business, which represents 23% of total annual premiums, reported net written premiums of $149.5 million for the fourth quarter of 2002, a 33% increase over the prior year, with strong growth in property lines. The technical ratio for this segment was 103.7% compared to 103.0% for the same period in 2001. For the full year 2002, net premiums written were $599.8 million compared to $479.7 million in 2001, while the technical ratio was 103.4% for the year compared to 110.8% in 2001.

The World wide specialty business, which represents 46% of total annual premiums, reported net written premiums of $307.0 million for the fourth quarter, a 44% increase over the prior year period. This segment's strong technical ratio of 68.0%, compared to 103.7% for the fourth quarter 2001, reflects favorable loss experience in both catastrophe and aviation. For the full year 2002, net premiums written were $1.2 billion compared to $802.4 million in 2001, while the technical ratio was 79.6^ for the year, compared to 116.1% in 2001.

The Life segment, which provides coverages in all markets except the U.S. and represents 7% of total annual premiums, reported net written premiums of $67.1 million for the quarter, as compared to $12.0 million for the fourth quarter 2001. The 2002 quarter reflects new products and treaties, particularly in Europe, while the fourth quarter of 2001 includes a negative adjustment for the retroactive restucturing of a large Latin American treaty from a pro-rata basis to an excess of loss basis. The technical result for the quarter was a loss of $21.1 million, compared to a gain of $3.6 million for the comparable period in 2001. The technical result reflects a $25 million write-down of deferred acquisition costs (DAC) related to liabilities that were retained in the sale of the U.S. life reinsurance business in 2000. For the full year 2002, net premiums written were $174.6 with a technical result for the year of a loss of $8.7 million, compared to 2001, where net written premiums were $132.0 million, with a year-end technical result of income of $6.5 million. Growth in 2002 was fueled by increase participations in existing programs as well as the creation of new product offerings.

Commentary and Outlook

"We entered 2003 and the January 1 renewal season in a position of strength," Mr. Thiele said. "Our underwriting teams around the world experienced a very busy and successful renewal season. We saw good growth in Europe. However, market dislocation was not as significant as we initially expected. In the U.S., the casualty lines drove the market upward, and renewals met or exceeded our expectations.

"On the whole, January renewals generated estimated premiums of $2.1 billion, up approximately 20% from higher-than-anticipated premiums on expiring 2002 policies. We found that, with few exceptions, those lines that were already well priced remained at excellent levels, while those that were not yet at optimum profitability showed upward pricing momentum."

Mr. Thiele concluded, "Based on what we have seen during the renewal season, in 2003 we expect to achieve a premium level of at least $3.3 billion and an operating ROE in excess of 17%, barring any unusual loss events. At this point we expect strong market conditions to continue into 2004."