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PartnerRe Ltd. Reports Fourth Quarter and Record Full Year 2004 Results and Increase in Dividend
PEMBROKE, Bermuda, February 7, 2005 --
PartnerRe Ltd. (NYSE:PRE) today reported net income of $143.7 million, or $2.54 per share on a fully diluted basis, for the fourth quarter of 2004. This net income includes net after-tax realized gains on investments of $16.1 million or $0.29 per share. Net income for the fourth quarter of 2003, including net after-tax realized gains on investments of $9.3 million or $0.17 per share, was $104.5 million or $1.84 per share. Operating earnings for the fourth quarter of 2004 were $120.8 million or $2.25 per share on a fully diluted basis. Operating earnings exclude net after-tax realized investment gains and losses and are calculated after payment of preferred dividends. This compares to operating earnings of $90.3 million, or $1.67 per share, for the fourth quarter of 2003. All references to per share amounts are on a fully diluted basis.For the year ended December 31, 2004, net income was $492.4 million or $8.71 per share. Net income for the period includes a net after-tax realized gain on investments of $78.1 million or $1.44 per share. Operating earnings were $392.8 million, or $7.27 per share. Net income for the full year 2003 was $467.7 million or $8.13 per share including net after-tax realized gains of $80.0 million, or $1.48 per share. Operating earnings for the same period in 2003 were $358.3 million or $6.65 per share.
Commenting on the 2004 results, PartnerRe President & Chief Executive Officer Patrick Thiele said, "We had an excellent fourth quarter to close out 2004 with record results that are well ahead of our stated plan. Despite facing a challenging year in terms of the number of natural catastrophes and magnitude of losses associated with them, PartnerRe performed exceptionally well, achieving a full year operating return on equity of 17% and growing book value by 20% to year-end book value per share of $50.99. Our achievements in 2004 underscore the strength of the Company both financially and operationally."
Summary unaudited consolidated financial data for the period is set out below.
U.S.$ thousands (except per share amounts and ratios)
Three months ended December 31 Twelve months ended December 312004 2003 2004 2003
Net Premiums Written $682,998 $772,509 $3,852,672 $3,589,641
Net Premiums Earned $942,332 $946,148 $3,733,740 $3,503,442
Non-Life Combined Ratio 94.5% 95.1% 94.3% 93.2%
Net Income $143,669 $104,530 $492,353 $467,679
Net Income per share (a) $2.54 $1.84 $8.71 $8.13
Net Operating Earnings (a) $120,813 $90,286 $392,751 $358,319
Net Operating Earnings per share (a) $2.25 $1.67 $7.27 $6.65
(a) Net income per share is defined as net income available to common shareholders divided by the weighted average number of fully diluted shares outstanding for the period. Net income available to common shareholders is defined as net income less preferred dividends. Net operating earnings is net income available to common shareholders excluding after-tax net realized gains/losses on investments. Net operating earnings per share is defined as net operating earnings divided by the weighted average number of fully diluted shares outstanding for the period. Per share results are on a fully diluted basis.
Net premiums written for the fourth quarter 2004 were $683.0 million, a 12% decrease over the comparable period in 2003. Total revenues for the quarter were essentially flat with the fourth quarter of 2003 at $1.1 billion, including $942.3 million of net premiums earned; net investment income of $80.0 million - an increase of 9%; and net realized investment gains of $38.6 million.
For the year ended December 31, 2004, net premiums written were $3.9 billion, a 7% increase over the full year 2003. Total revenues for 2004 were $4.2 billion, including $3.7 billion of net premiums earned, net investment income of $298.0 million, and net realized investment gains of $117.3 million. Total revenues for 2003 were $3.9 billion.
At December 31, 2004, total assets were $12.5 billion, total capitalization was $3.8 billion, and total shareholders' equity was $3.4 billion. This compares to total assets of $10.9 billion, total capitalization of $3.2 billion and total shareholders' equity of $2.6 billion at December 31, 2003. Book value per common share at December 31, 2004 was $50.99 on a fully diluted basis, compared to $42.48 per share at December 31, 2003.
The Company is continuing its share repurchase program which was initiated during the second quarter of 2004. During 2004, the Company repurchased 2.9 million common shares, including 2 million common shares which were part of an accelerated share repurchase agreement executed on December 30, 2004. This partially offset the issuance of 3,478,400 common shares on December 31, 2004, following settlement of the stock purchase contracts associated with the 8% Premium Equity Participating Security (PEPS) Units, which were subsequently retired.
Separately, the Company announced today that its Board of Directors has increased the annual common share dividend by 12% to $1.52 per share from $1.36 per share. Today, the Board declared a regular quarterly dividend of $0.38 per common share, representing the increased level of dividend. The dividend will be payable on March 1, 2005, to common shareholders of record on February 18, 2005, with the stock trading ex-dividend commencing February 16, 2005.
Results of Operations
"Our results this year clearly demonstrate the excellent level of portfolio diversification that we have achieved," Mr. Thiele said. "While there were variations in results across operating units, overall we achieved excellent underwriting profitability with a Non-Life combined ratio of 94.3%.
"Our Worldwide Specialty operations posted an exceptional 71.2% technical ratio on $1.5 billion in net premiums earned for the year. These outstanding results helped to offset results in both our U.S. and Global Property & Casualty operations, which were impacted by reserve strengthening and the significant natural catastrophes of the third and fourth quarters. We continued to grow both our ART and Life segments, and they are increasingly important components of our overall diversification strategy.
"Our investment operations also added significant value during the year," said Mr. Thiele. "Investment income increased 14% partially driven by our excellent cash flow of $1.3 billion, and we generated over $117 million in realized capital gains."
Results by Segment
The Non-Life segment reported net premiums written of $561.8 million for the quarter, down 17% as compared to the same period in 2003. Timing differences in the recording of written premiums affect quarterly year-over-year comparisons, and therefore, the full year written premium growth rate is the more relevant measure. For the full year, Non-Life net premiums written were $3.4 billion, representing an increase of 5%. The combined ratio was 94.5% for the fourth quarter compared to 95.1% for the same period in 2003. The Non-Life technical result was $93.5 million in the fourth quarter of 2004 compared to $87.7 million for the prior year period. The results for this quarter include $26 million in estimated claims from the Indian Ocean tsunami, as well as $8 million of net reductions to prior year reserves. The full year technical result was $384.1 million, compared to $391.4 million for the same period in 2003. The combined ratio for the year was 94.3% compared to 93.2% in 2003.
The U.S. Property and Casualty business, which represented approximately 26% of total net premiums written for the year, reported net premiums written of $179.9 million, down 1% from the prior year's fourth quarter. Net premiums earned decreased 5% during the quarter when compared to the same period in 2003. The technical ratio for this sub-segment was 97.9% compared to 112.8% in the fourth quarter of 2003. For the full year of 2004, net premiums written increased 8% to $990.3 million. The full year technical ratio was 101.0% compared to 101.9% in 2003.
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 $123.8 million for the fourth quarter of 2004, compared to $193.9 million for the same period in 2003. Timing differences in the recording of premiums affect the quarterly comparison. For the full-year 2004, net premiums written increased 11% to $944.8 million. Net premiums earned during the quarter were $231.5 million, up 1% from $229.6 million in the fourth quarter 2003. The technical ratio for this sub-segment was 113.3% for the fourth quarter compared to 98.2% for the same period in 2003, primarily reflecting $23 million in net additions to prior year reserves, as increases in motor excess of loss reserves were partially offset by reductions in reserves for property business. The full year technical ratio was 104.2%, compared to 99.3% in 2003.
The Worldwide Specialty business, which represented approximately 39% of total net premiums written for the year, reported net premiums written of $258.1 million for the fourth quarter, down 14% from the fourth quarter of 2003. Net premiums earned were down 6% for the quarter, compared to the same period in 2003. This sub-segment's technical ratio was 68.1%, compared to 72.3% for the fourth quarter of 2003, reflecting the low level of catastrophe activity during the quarter, as well as net reserve reductions for prior years of approximately $33 million. For the full year, net premiums written were essentially flat with 2003 at $1.5 billion. The full year technical ratio was 71.2%, compared to 73.5% in 2003.
The Life segment, which markets coverages primarily in Europe, Canada and Latin America, and represented approximately 11% of total net premiums written for the year, reported net premiums written of $120.3 million for the quarter, realizing 31% growth over the fourth quarter of 2003. The allocated underwriting result was a loss of $1 million, compared to a gain of $3 million for the fourth quarter 2003, reflecting approximately $5 million in estimated claims from the Indian Ocean tsunami. For the full year, net premiums written increased 35% to $404.0 million, with an allocated underwriting loss of $4 million, compared to a gain of $6 million in 2003.
The ART (Alternative Risk Transfer) segment comprises finite reinsurance, structured finance, weather related products, and the results of the Company's investment in Channel Re. Premiums are not a representative measure of activity in ART, as reinsurance accounting does not apply for much of the business in this segment. The ART segment recognizes reinsurance revenues, gross margins, net spreads, or changes in the value of derivative instruments on its various transactions either on the "premium written", "premium earned", "investment income", or "other income" lines of the income statement, in accordance with the applicable accounting guidance. The underwriting result for this segment was a gain of $1 million for the fourth quarter of 2004, compared to a gain of $10 million in the fourth quarter of 2003. For the full year, the ART segment posted a gain of $3 million, compared to a gain of $11 million for 2003. Fourth quarter and full year 2004 results were adversely impacted by weather and catastrophe-related losses.
Commentary and Outlook
"Following an exceptional year in 2004, the January 2005 renewal season was mixed for PartnerRe in terms of pricing and potential future profitability," Mr. Thiele said. "While the U.S. was rationally competitive with pricing in most lines at reasonable profitability levels, European and international markets were somewhat more competitive than expected. Our financial strength and franchise allowed us to gain a fair amount of new business. However, many customers increased their retentions and we also reduced our participation in those instances where competitive pressures pushed prices and terms and conditions below our standards. As a result, we underwrote a diversified portfolio priced to achieve profitability above our long-term objective, but we expect total consolidated net written premiums to be flat to down 5% in 2005, barring unusual market conditions."
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The Company uses operating earnings, diluted operating earnings per share and operating return on beginning common shareholders' equity to measure performance, as these measures focus on the underlying fundamentals of our operations without the influence of reaized gains and losses from the sale of investments, which is 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 g ins 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 onthe basis of fully diluted shares. Certain reclassifications have been made to prior year consolidated financial statement amounts to conform to the current year presentation and the new segment presentation.
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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, and alternative risk transfer solutions. At December 31, 2004, total revenues were $4.2 billion, total assets were $12.5 billion, total capitalization was $3.8 billion and total shareholders' equity was $3.4 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.comForward-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, adequacy of reserves, risks associated with implementing business strategies, levels and pricing of new and renewal business achieved, credit, interest, currency and other risks associated with the Company's investment portfolio, changes in accounting policies, and other factors identified in the Company's filings 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 forwardlooking information or statements.
Contacts: PartnerRe Ltd. Citigate Sard Verbinnen
(441) 292-0888 (212) 687-8080
Investor Contact: Robin Sidders Jim Barron/Hallie Bozzi
Media Contact: Celia Powell