PartnerRe Ltd. Reports Q2 2014 Results (Excerpt)

PEMBROKE, Bermuda – 30 July, 2014 - PartnerRe Ltd. (Ticker: PRE.BH) reported net income of $257.7 million, or $5.02 per share for the second quarter of 2014. This includes net after-tax realized and unrealized gains on investments of $123.7 million, or $2.41 per share. The net loss for the second quarter of 2013 was $190.4 million, or $3.37 per share, including net after-tax realized and unrealized losses on investments of $230.0 million, or $4.07 per share. The Company reported operating earnings of $133.5 million, or $2.60 per share, for the second quarter of 2014. This compares to operating earnings of $51.1 million, or $0.90 per share, for the second quarter of 2013.

·         Second Quarter Operating Earnings per share of $2.60; Net Income per share of $5.02

·         Second Quarter Annualized Operating ROE of 9.5%; Annualized Net Income ROE of 18.4%

·         Half Year Operating Earnings per share of $5.97; Net Income per share of $10.64

·         Half Year Annualized Operating ROE of 10.9%; Annualized Net Income ROE of 19.5%

·         Book Value of $118.96 per share, up 4.2% for the quarter and up 8.9% year-to-date

·         Tangible Book Value of $107.80 per share, up 4.6% for the quarter and up 9.5% year-to-date

Net income for the first six months of 2014 was $553.3 million, or $10.64 per share. This includes net after-tax realized and unrealized gains on investments of $239.6 million, or $4.61 per share. Net income for the first six months of 2013 was $20.2 million, or $0.34 per share, including net after-tax realized and unrealized losses on investments of $217.7 million, or $3.72 per share. Operating earnings for the first six months of 2014 were $310.4 million, or $5.97 per share. This compares to operating earnings of $253.1 million, or $4.32 per share, for the first six months of 2013.

Operating earnings or loss excludes certain net after-tax realized and unrealized investment gains and losses, net after-tax foreign exchange gains and losses, certain net after-tax interest in results of equity method investments and the loss on redemption of preferred shares, and is calculated after the payment of preferred dividends. All references to per share amounts in the text of this press release are on a fully diluted basis.

Commenting on results, PartnerRe President & Chief Executive Officer Costas Miranthis said, “We had a good second quarter, on the back of the strong results we posted in the first quarter. Our seasonal earnings pattern for catastrophe premium resulted in lower cat premiums earned during the second quarter. In addition, we experienced a higher than average number of mid-sized individual non-catastrophe losses, an area where we expect some quarterly volatility. We are pleased however that the underlying loss ratio on attritional losses continues to be healthy. We also had very strong investment performance during the quarter. All together, this culminated in us growing our dividend-adjusted tangible book value per share by 10.8% for the first six months of 2014.”

Mr. Miranthis added, “Market conditions remain very competitive and excess reinsurance capacity is putting pressure on premium rates as well as on terms and conditions. While this is a difficult market, I am confident that our experienced teams coupled with the strength of our franchise will enable us to tackle the challenges ahead.”

Highlights for the second quarter and first six months of 2014 compared to the same periods in 2013 include:

Results of operations:

For the second quarter, net premiums written of $1.4 billion were up 8%, or 7% on a constant foreign exchange basis. The increase was driven by the Life and Health segment and the North America and Global Specialty Non-life sub-segments. The increase was primarily driven by PartnerRe Health’s accident and health business in the Life and Health segment and new business written at the January 1 renewals across multiple lines of business in the North America and Global Specialty Non-life sub-segments. These increases were partially offset by decreases in the Catastrophe and Global (Non-U.S.) P&C Non-life sub-segments. For the first six months of 2014, net premiums written of $3.2 billion were up 7% primarily due to the same factors describing the second quarter.

For the second quarter, net premiums earned of $1.4 billion were up 12%, or 11% on a constant foreign exchange basis. The increase was primarily driven by PartnerRe Health’s business in the Life and Health segment and the earning of new business written in 2013 and 2014 in the North America and Global Specialty Non-life sub-segments. For the first six months of 2014, net premiums earned of $2.6 billion were up 11%, or 10% on a constant foreign exchange basis, primarily due to the same factors describing the second quarter.

For the second quarter, the Non-life combined ratio was 91.5%. The combined ratio benefited from favorable prior year development of 15.4 points (or $161 million). Except for the Catastrophe sub-segment, all other Non-life sub-segments experienced net favorable development on prior accident years during the second quarter. For the first six months of 2014, the Non-life combined ratio was 87.8%. The combined ratio benefited from favorable prior year development of 16.0 points (or $325 million). All Non-life sub-segments experienced net favorable development on prior accident years during the first six months of 2014.

For the second quarter, net investment income of $130 million was up 4%, or 3% on a constant foreign exchange basis, primarily driven by the impact of a rise in the U.S. Consumer Price Index on our Treasury Inflation Protected Securities portfolio and certain other one-time favorable adjustments, partially offset by lower reinvestment rates. For the first six months of 2014, net investment income of $247 million was down 1% primarily reflecting lower reinvestment rates, partially offset by various factors.

For the second quarter and first six months of 2014, pre-tax net realized and unrealized investment gains were $166 million and $308 million, respectively, primarily reflecting decreases in longer-term risk-free interest rates, narrowing credit spreads, and improvements in worldwide equity markets.

For the second quarter, the effective tax rate on operating earnings and non-operating earnings was 16% and 28%, respectively. For the first six months of 2014, the effective tax rate on operating earnings and non-operating earnings was 15% and 24%, respectively.

Balance sheet and capitalization:

·         Total investments, cash and funds held – directly managed were $17.5 billion at June 30, 2014, comparable to December 31, 2013.

·         Net Non-life loss and loss expense reserves were $10.2 billion at June 30, 2014, down 2% compared to December 31, 2013.

·         Net policy benefits for life and annuity contracts were $2.1 billion at June 30, 2014, up 7% compared to December 31, 2013.

·         Total capital was $7.7 billion at June 30, 2014, up 3% compared to December 31, 2013 primarily driven by net income for the first six months of 2014, which was partially offset by share repurchases and common and preferred dividend payments.

The Company repurchased approximately 1.3 million common shares at a total cost of approximately $133 million during the second quarter of 2014. The average repurchase price of $105.12 per share represents an 8% discount to the diluted book value per share at March 31, 2014. Since July 1, 2014, the Company has repurchased 150 thousand common shares at a total cost of approximately $16 million. As of July 28, 2014, approximately 1.7 million common shares remained under the current repurchase authorization.

Total shareholders’ equity attributable to PartnerRe was $6.9 billion at June 30, 2014, up 3% compared to December 31, 2013. The increase was driven by the same factors described above for total capital.

Book value per common share was $118.96 at June 30, 2014, a record high for PartnerRe, up 8.9% compared to $109.26 at December 31, 2013. Tangible book value per common share was $107.80 at June 30, 2014, up 9.5% compared to $98.49 at December 31, 2013. The increases were primarily driven by net income and the accretive impact of share repurchases, which was partially offset by common and preferred dividend payments.

Segment and sub-segment highlights for the second quarter and first six months of 2014 compared to the same periods in 2013 include:

Non-life:

For the second quarter, the Non-life segment’s net premiums written were up 3%. The increase was reported in the North America and Global Specialty sub-segments and was partially offset by decreases in the Global (Non-U.S.) P&C and Catastrophe sub-segments. For the first six months of 2014, the Non-life segment’s net premiums written were up 4% due to the same factors describing the second quarter.

For the second quarter, the North America sub-segment’s net premiums written were up 9% primarily driven by new business written in the agriculture, multi-line and credit/surety lines of business at the January 1, 2014 renewals. The increases were partially offset by cancellations and renewal decreases in the property line of business. This sub-segment reported a technical ratio of 87.6%, which included 17.3 points (or $68 million) of net favorable prior year loss development. For the first six months of 2014, the North America sub-segment’s net premiums written were up 14% primarily due to the same factors describing the second quarter and due to the restructuring of a significant treaty in the agriculture line of business. This sub-segment reported a technical ratio of 90.2%, which included 12.0 points (or $92 million) of net favorable prior year loss development.

For the second quarter, the Global (Non-U.S.) P&C sub-segment’s net premiums written were down 6%, or 7% on a constant foreign exchange basis, primarily due to downward prior year premium adjustments in the motor line of business and cancellations in the property line of business. These decreases were partially offset by new business written in the motor line of business. This sub-segment reported a technical ratio of 82.5%, which included 16.2 points (or $30 million) of net favorable prior year loss development. For the first six months of 2014, the Global (Non-U.S.) P&C sub-segment’s net premiums written were down 3%, or 4% on a constant foreign exchange basis, primarily driven by cancellations due to pricing, increased retentions, and share decreases in the property line of business. This sub-segment reported a technical ratio of 82.5%, which included 21.0 points (or $77 million) of net favorable prior year loss development.

For the second quarter, the Global Specialty sub-segment’s net premiums written were up 6%, or 4% on a constant foreign exchange basis, primarily due to new business written in prior periods in the specialty casualty, multi-line and agriculture lines of business. These increases were partially offset by lower premium adjustments in the engineering line of business and cancellations in the marine line of business. This sub-segment reported a technical ratio of 90.7%, which included 17.1 points (or $69 million) of net favorable prior year loss development and 4.5 points (or $18 million) of net adverse prior quarter development. For the first six months of 2014, the Global Specialty sub-segment’s net premiums written were up 7%, or 6% on a constant foreign exchange basis, primarily due to the same factors describing the second quarter. This sub-segment reported a technical ratio of 85.3%, which included 16.9 points (or $128 million) of net favorable prior year loss development.

For the second quarter, the Catastrophe sub-segment’s net premiums written were down 9%, or 8% on a constant foreign exchange basis, primarily due to the impact of reinstatement premiums related to the European and Canadian floods in the second quarter of 2013. New business written during the second quarter was offset by cancellations, non-renewals and the restructuring of certain treaties. This sub-segment reported a technical ratio of 46.4%, which included 10.2 points (or $6 million) of net adverse prior year loss development. For the first six months of 2014, the Catastrophe sub-segment’s net premiums written were down 13%, or 12% on a constant foreign exchange basis, primarily due to the same factors describing the second quarter. This sub-segment reported a technical ratio of 10.5%, which included 20.2 points (or $28 million) of net favorable prior year loss development.

Life and Health:

For the second quarter, the Life and Health segment’s net premiums written were up 34%, or 29% on a constant foreign exchange basis. The increase was primarily driven by PartnerRe Health’s accident and health line of business and, to a lesser extent, the mortality and longevity lines of business. For the first six months of 2014, the Life and Health segment’s net premiums written were up 23%, or 20% on a constant foreign exchange basis, primarily due to the same factors describing the second quarter.

For the second quarter, the Life and Health segment’s allocated underwriting result, which includes allocated investment income and operating expenses, decreased to $18 million compared to $19 million in the same period of 2013 primarily due to a lower level of net favorable prior year loss development, which was partially offset by increased profitability from the PartnerRe Health business. For the first six months of 2014, the Life and Health segment’s allocated underwriting result, which includes allocated investment income and operating expenses, decreased to $32 million compared to $35 million in the same period of 2013 primarily due to the same factors describing the second quarter.

Corporate and Other:

For the second quarter, investment and capital markets activities contributed income of $290 million to pre-tax net income, excluding investment income allocated to the Life and Health segment. Of this amount, income of $119 million was included in pre-tax operating earnings and income of $171 million related to net realized and unrealized gains on investments and earnings from equity method investee companies was included in pre-tax non-operating earnings. For the first six months of 2014, investment and capital markets activities contributed income of $538 million to pre-tax net income, excluding investment income allocated to the Life and Health segment. Of this amount, income of $219 million was included in pre-tax operating earnings and income of $319 million related to net realized and unrealized gains on investments and earnings from equity method investee companies was included in pre-tax non-operating earnings.

Separately, as announced by the Company earlier, the Board of Directors declared a quarterly dividend of $0.67 per common share. The dividend will be payable on August 29, 2014 to common shareholders of record on August 18, 2014.

The Company has posted its second quarter 2014 financial supplement on its website www.partnerre.com  in the Investor Relations section, along with the full text of this release, on the Financial Reports page under Supplementary Financial Data, which includes a reconciliation of GAAP and non-GAAP measures.

PartnerRe Ltd. is a leading global reinsurer, providing multi-line reinsurance to insurance companies. The Company, through its wholly owned subsidiaries, also offers capital markets products that include weather and credit protection to financial, industrial and service companies. Risks reinsured include property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering, energy, marine, specialty property, specialty casualty, multiline and other lines in its Non-life operations, mortality, longevity and accident and health in its Life and Health operations, and alternative risk products. For the year ended December 31, 2013, total revenues were $5.5 billion. At June 30, 2014, total assets were $23.4 billion, total capital was $7.7 billion and total shareholders’ equity attributable to PartnerRe was $6.9 billion.

PartnerRe on the Internet: www.partnerre.com  

PartnerRe Ltd. Contacts:

Investor: Robin Sidders

or

Media: Celia Powell

441-292-0888

or

Sard Verbinnen & Co

Drew Brown/Daniel Goldstein

212-687-8080