PartnerRe Ltd. Reports Fourth Quarter And Record Full Year Earnings For 2003

New accounting guidance, which became effective in the fourth quarter, required changes in the classification of certain income statement items. As a result, the Company reclassified certain items for prior quarters as if these changes were applied as of January 1, 2003. While these changes did not impact net income for the nine months to September 30, 2003 of $6.30 per share, they resulted in certain items being moved from "Realized Gains" to "Operating Income". Consequently, operating earnings for the first nine months of 2003 were $4.98 per share. Details of these reclassifications are set out in note form at the end of this press release under the heading "New Accounting Pronouncements".

For the year ended December 31, 2003, net income was $467.7 million, or $8.13 per share. This includes a net after-tax realized gain on investments of $80.0 million or $1.48 per share. Net income for the full year 2002, including a net after-tax realized loss on investments of $16.7 million or $0.32 per share, was $190.3 million or $3.28 per share. Operating earnings for the year ended December 31, 2003 were $358.3 million or $6.65 per share. This compares to operating earnings of $187.0 million, or $3.60 per share for the full year 2002.

Commenting on the 2003 results, PartnerRe President & Chief Executive Officer, Patrick Thiele, said, "We had another strong quarter to finish 2003, our tenth anniversary year, well ahead of plan. We had very strong premium growth, excellent underwriting profitability, and generated in excess of $1.1 billion of operating cash flow. We had a full year operating return on equity of 20%, affirming our leadership position as one of the world's most profitable reinsurers. We also grew book value by 25% to year-end shareholders' equity of $2.6 billion, again underscoring the financial strength and stability of our Company."

Net premiums written for the fourth quarter of 2003 were $772.5 million, an 11% increase over the comparable period in 2002. Total revenues increased 27% in the quarter to $1.1 billion, including $946.1 million of net premiums earned - an increase of 26%; net investment income of $73.2 million - an increase of 10%; and net realized investment gains of $19.0 million. For the fourth quarter of 2002, revenues were $824.2 million, with $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 year ended December 31, 2003, net premiums written were $3.6 billion, an increase of 35% from the prior year. Total revenues for 2003 were $3.9 billion, a 45% increase over the $2.7 billion in 2002.

At December 31, 2003, total assets were $10.9 billion, total capitalization was $3.2 billion, and total shareholders' equity was $2.6 billion. This compares to total assets of $8.5 billion, total capitalization of $2.7 billion, and total shareholders' equity of $2.1 billion at December 31, 2002. Book value per common share was $42.48 on a fully diluted basis, compared to $34.02 per share at December 31, 2002.

Dividends

Separately, the Company announced today that its Board of Directors has increased the annual common share dividend by 10% to $1.36 from $1.24. Today, the Board declared a quarterly dividend of $0.34 per share representing this increased level of dividend. The dividend will be payable on March 1, 2004, to common shareholders of record on February 20, 2004, with the stock trading ex-dividend commencing February 18, 2004.

"We understand that dividends are an important component of shareholder return," Mr. Thiele said. "We are pleased that PartnerRe has increased its common share dividend every year since its inception in 1993, generating a compound annual growth rate of 13%."

The Board has also declared a dividend of $0.421875 per share on the Company's 6.75% Series C Cumulative Preferred Shares for the period December 1, 2003 - February 29, 2004. The dividend will be payable on March 1, 2004, to shareholders of record on February 20, 2004.

Results of Operations

"2003 was a record year for PartnerRe by virtually all measures of growth and profitability," said Mr. Thiele. "Growth in net premiums written for the full year represented a 35% increase over 2002 to a record level of $3.6 billion. This result is well ahead of the 30% growth target we communicated in our plan for 2003, and demonstrates the strength of the PartnerRe franchise in accessing business which we believe will provide superior returns.

"Our Non-Life segment performed well with a combined ratio of 94.5% for the full year. The nature of our diversified book of business is such that there are variations in results across our operations. Our Worldwide Specialty operations posted an exceptional 73.5% technical ratio on $1.5 billion in net premiums earned for the year. Our U.S. Property and Casualty results were impacted by reserve strengthening of approximately $88 million for the year, of which approximately $51 million occurred in the fourth quarter, primarily relating to casualty business written in 1997 through 2000. Overall, our diversification strategy is working and we had a very good year as shown by our 20% consolidated operating ROE.

"We continued to grow our Life segment, taking advantage of opportunities in the European markets. Net premiums written were up 72% for the year. The Life business is a growing component of our business and we expect to see continued steady growth in this segment during 2004.

"Investment income increased 7% over last year, as the positive effects of $1.1 billion in cash flow and favorable foreign exchange outpaced the impact of lower reinvestment rates," said Mr. Thiele.

Results by Segment

The Non-Life segment reported net premiums written of $680.8 million for the fourth quarter, an increase of 8%. The Non-Life technical result decreased to $88.7 million compared to $97.2 million for the same period in the prior year. This includes a net increase in estimates for prior year losses of approximately $43 million, as increases in the U.S. P&C and Global P&C sub-segments were partially offset by reductions in estimates for Worldwide Specialty. The combined ratio was 96.3% for the fourth quarter compared to 91.6% for the same period in 2002. For the year ended December 31, 2003, Non-Life net premiums written were $3.3 billion, representing an increase of 33% over the prior year. The full year Non-Life technical result was $392.6 million compared to $197.1 million for 2002. The full year combined ratio was 94.5% for 2003, compared to 97.9% for 2002.

The U.S. Property and Casualty business, which represented approximately 26% of total net premiums written for the year, reported net premiums written of $181.7 million for the quarter, a 5% increase over the prior year's fourth quarter. Net premiums earned increased 9% during the quarter when compared to the same period in 2002. The technical result for the fourth quarter was a loss of $27.9 million compared to a loss of $2.5 million in the fourth quarter of 2002. The technical ratio for this segment was 112.8%, compared to 101.3% in the fourth quarter of 2002. Our fourth quarter results include an increase in reserves for prior years of approximately $51 million, primarily for U.S. casualty lines written in the years 1997-2000. For the full year 2003, net premiums written increased 42% to $919.4 million, with the strongest growth in specialty casualty lines. The full year technical ratio was 101.9% compared to 101.1% for 2002. The full year technical result was a loss of $15.9 million in 2003 compared to a loss of $7.0 million in 2002.

The Global (Non-U.S.) Property and Casualty business, which represented approximately 24% of total net premiums written for the year, reported net premiums written of $193.9 million for the fourth quarter of 2003, a 30% increase over the prior year. Net premiums earned during the quarter increased 53%. The technical result for the fourth quarter was a profit of $4.2 million compared to a loss of $5.6 million in 2002. The technical ratio for this segment was 98.2% compared to 103.7% for the same period in 2002. For the full year, net premiums written increased 42% to $849.2 million, with strong growth in all lines, but predominantly in property. The full year technical ratio was 99.3% as compared to 103.4% for 2002, while the full year technical result increased to $5.6 million in 2003 from a loss of $19.0 million in 2002.

The Worldwide Specialty business, which includes the catastrophe line, and represents approximately 42% of total net premiums written for the year, reported net premiums written of $305.2 million for the fourth quarter, a marginal decrease over the prior year period. Net premiums earned increased 23% during the quarter. The technical result for the quarter increased to $112.4 million in 2003 compared to $105.3 million in 2002. This unit's technical ratio was 72.3%, compared to 68.0% for the fourth quarter of 2002. For the full year, net premiums written increased 23% to $1.5 billion, with the strongest growth in credit and surety, energy, and specialty casualty. The full year technical ratio was 73.5% compared to 79.6% for 2002. The full year technical result grew to $402.9 million from $223.1 million in 2002.

The Life segment, which markets coverages primarily in Europe, Canada and Latin America, and represented approximately 8% of total net premiums written for the year, reported net premiums written of $91.7 million for the quarter, as compared to $67.1 million for the fourth quarter 2002, representing an increase of 37%. The allocated technical result for the quarter was a gain of $9.3 million, compared to a loss of $21.1 million for the comparable period in 2002. For the full year 2003, net premiums written increased 72% to $300.1 million, with an allocated technical result of $25.3 million, compared to a loss of $8.7 million for the full year 2002.

Commentary and Outlook

"PartnerRe followed a year of exception results with a good January 1 renewal season," Mr. Thiele said. "We saw strong growth in the U.S. and more moderate growth in Europe, despite increasing competition and a growing trend by insurers to retain a greater portion of their risk. January renewals, which are expected to generate estimated Non-Life premiums of $2.0 billion, were up 5% at constant exchange rates on expiring 2003 policies. Pricing remained strongest in casualty lines, with property pricing less so, while certain specialty lines, including cat, showed some weakness in pricing.

"Overall, we are satisfied with the expected level of profitability implicit in the 1/1/04 pricing and loss trends and look forward to another year of profitability above our long term target. We continue to remain comfortable with our plan for 2004 of operating earnings per share of a minimum of $6.90 barring any unusually large loss events, and growth in net written premium to $3.9 billion."

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New Accounting Pronouncements

During the fourth quarter of 2003, the Company began applying the guidance in FASB Interpretation No. 46 "Consolidation of Variable Interest Entities"("FIN 46"). As a result the Company has deconsolidated the Trust which issued the Company's Trust Preferred Stock and is now reflecting on its balance sheet the junior subordinated debt issued by the Company to the Trust. This new presentation had no impact on the Company's equity, capitalization, book value or results for all periods presented.

In response to the developing interpretations of SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" (SFAS 149) the Company has reclassified certain items relating to the foreign currency movements on the Company's insurance assets and liabilities and the related hedges the Company places on these amounts from the net realized gain/loss line to the net foreign exchange gain/loss line item on its income statement. In addition, the Company has reclassified the activity associated with its capital market transactions from the net investment income and net realized investment gain/loss lines to the other income line.

On October 1, 2003 the Company implemented the accounting guidance resulting from SFAS 133 Implementation Issue No. B36 "Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments." The adoption of this new guidance did not have a material impact on the results of operations or financial position of the Company.

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The Company uses operating earnings, diluted operating earnings per share and operating return on beginning equity to measure performance, as these measures focus on the underlying fundamentals of our operations without the influence of realized gains and losses from the sale of investments, which are driven by the timing of the disposition of investments and not by our operating performance. For planning purposes, the Company does not anticipate realized investment gains or losses. The Company also uses technical ratio and technical result as measures of underwriting performance. These metrics exclude overhead expenses. All references to per share amounts in this press release are on the basis of fully diluted shares.

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PartnerRe Ltd. is a leading global reinsurer, providing multi-line reinsurance to insurance companies. Risks reinsured include property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering/energy, marine, special risks, other lines, life/annuity and health. At year-end 2003, total revenues were $3.9 billion, total assets were $10.9 billion, total capitalization was $3.2 billion and total shareholders' equity was $2.6 billion. Our major reinsurance operations have ratings of AA- from Standard & Poor's, Aa3 from Moody's, A+ from A.M. Best, and AA from Fitch.

PartnerRe on the Internet: www.partnerre.com