PartnerRe Ltd. Reports Second Quarter and Half Year 2007 Results
| § | Second Quarter Net Income per share of $1.66; Operating Earnings per share of $2.39 |
| § | Second Quarter Annualized Net Income ROE of 11.8%; Annualized Operating ROE of 17.0% |
| § | Half Year Net Income per share of $4.42; Operating Earnings per share of $5.11 |
| § | Half Year Annualized Net Income ROE of 15.7%; Annualized Operating ROE of 18.2% |
| § | Book Value of $58.96 per share, up 5% year-to-date, and 26% year over year |
PEMBROKE, Bermuda, July 23, 2007 -- PartnerRe Ltd. (NYSE:PRE) today reported net income of $105.0 million, or $1.66 per share on a fully diluted basis, for the second quarter of 2007. This net income includes net after-tax realized losses on investments of $42.8 million, or $0.73 per share. Net income for the second quarter of 2006, including net after-tax realized losses on investments of $47.0 million, or $0.81 per share, was $77.5 million, or $1.20 per share. Operating earnings for the second quarter of 2007 were $139.2 million, or $2.39 per share on a fully diluted basis. This compares to operating earnings of $115.9 million, or $2.01 per share, for the second quarter of 2006. Operating earnings exclude net after-tax realized investment gains and losses and are calculated after 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 the second quarter and half year 2007 results, PartnerRe President & Chief Executive Officer Patrick Thiele said, “PartnerRe had another strong quarter with an operating return on beginning shareholders’ equity of 17%. On a six-month basis, we achieved an 18% operating return on beginning shareholders’ equity. Despite the impact of rising interest rates, which had a negative effect on the market value of our bond portfolio, we grew GAAP book value per share by 1% during the quarter and 26% year over year to $58.96.”
Summary unaudited consolidated financial data for the period is set out below.
U.S.$ thousands (except per share amounts and ratios) | Three months ended June 30 | Six months ended June 30 |
| | 2007 | 2006 | 2007 | 2006 |
| Net Premiums Written | $898,686 | $815,893 | $2,169,258 | $2,160,497 |
| Net Premiums Earned | $889,277 | $858,963 | $1,731,318 | $1,691,784 |
| Non-life Combined Ratio | 85.7% | 90.3% | 85.6% | 89.1% |
| Net Income | $105,021 | $77,531 | $274,288 | $270,774 |
| Net Income per share (a) | $1.66 | $1.20 | $4.42 | $4.40 |
| Operating Earnings (a) | $139,165 | $115,932 | $297,114 | $249,676 |
| Operating Earnings per share (a) | $2.39 | $2.01 | $5.11 | $4.33 |
PartnerRe Ltd. Wellesley House, 5th Floor 90 Pitts Bay Road Pembroke, Bermuda HM 08 | Telephone +1 441 292 0888 Fax +1 441 292 6080 www.partnerre.com | |
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(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. Operating earnings is defined as net income available to common shareholders excluding after-tax net realized gains/losses on investments. Operating earnings per share is defined as operating earnings divided by the weighted average number of fully diluted shares outstanding for the period. |
Net premiums written for the second quarter of 2007 were $898.7 million, up 10% from $815.9 million in the second quarter of 2006, essentially driven by the Life segment and mix of business and timing issues in the Non-Life book. Total revenues for the second quarter 2007 were $957.6 million, up 4% from $921.1 million in the second quarter of 2006, and included $889.3 million of net premiums earned, which were up 4% over the second quarter of 2006; net investment income of $130.9 million - an increase of 21% over the second quarter of 2006; and pre-tax net realized investment losses of $53.6 million as compared to pre-tax net realized investment losses of $58.9 million for the second quarter of 2006.
For the first six months of 2007, net premiums written were $2.2 billion, essentially flat with the first six months of 2006. Net income was $274.3 million or $4.42 per share. Net income for the period includes net after-tax realized losses on investments of $40.1 million or $0.69 per share. Operating earnings were $297.1 million, or $5.11 per share. Net income for the first six months of 2006 was $270.8 million or $4.40 per share including net after-tax realized gains of $3.8 million, or $0.07 per share. Operating earnings for the same period in 2006 were $249.7 million or $4.33 per share. Total revenues for the first six months of 2007 were $1.9 billion, including $1.7 billion of net premiums earned, net investment income of $249.9 million, and net realized investment losses of $52.9 million. Total revenues for the same period in 2006 were $1.9 billion, including $1.7 billion of net premiums earned, net investment income of $208.3 million, and net realized investment losses of $3.8 million.
During the second quarter of 2007, the Company repurchased 585,800 common shares at a total cost of approximately $44.2 million. To date this year, the Company has repurchased 1,073,100 common shares at a total cost of $77.9 million. The Company has approximately 4.4 million common shares remaining under its current repurchase authorization.
Separately, the Company announced today that its Board of Directors declared a quarterly dividend of $0.43 per common share. The dividend will be payable on August 31, 2007, to common shareholders of record on August 21, 2007, with the stock trading ex-dividend commencing August 17, 2007.
PartnerRe Ltd. Wellesley House, 5th Floor 90 Pitts Bay Road Pembroke, Bermuda HM 08 | Telephone +1 441 292 0888 Fax +1 441 292 6080 www.partnerre.com | |
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Results by Segment
The Non-Life segment reported net premiums written of $755 million for the quarter, up 7% as compared to the same period in 2006. The increase in net premiums written was driven by growth in the Worldwide Specialty sub-segment. Both the U.S. P&C and Global (Non-U.S.) P&C sub-segment net premiums written were flat for the second quarter of 2007 when compared with the same period in 2006. The combined ratio was 85.7% for the second quarter of 2007 compared to 90.3% for the same period in 2006. The Non-Life technical result was $157 million for the second quarter of 2007 compared to $121 million for the prior year period. For the first six months, Non-Life net premiums written were $1.9 billion, down 1% from the same period in 2006. The six month technical result was $311 million, compared to $255 million for the same period in 2006. The combined ratio for the six month period was 85.6% compared to 89.1% in 2006.
The U.S. Property and Casualty business, which represented 19% of total net premiums written for the quarter, reported net premiums written of $170 million for the second quarter of 2007, flat with last year’s second quarter. Net premiums earned were down 8% to $187 million in the second quarter of 2007 when compared with the same period in 2006. The technical ratio for this sub-segment was 89.1% for the 2007 second quarter, compared to 106.3% in the second quarter of 2006. The technical result for the second quarter 2007 was a gain of $20 million, compared to a loss of $13 million for the same period in 2006. For the first six months of 2007, net premiums written were $429 million, down 8% from the first six months of 2006. The six-month technical ratio was 91.1%, compared to 102.0% in 2006. The technical result for the half-year was a gain of $34 million compared to a loss of $8 million in 2006.
The Global (Non-U.S.) Property and Casualty business, which represented 14% of total net premiums written for the quarter, reported net premiums written of $127 million for the second quarter of 2007, flat with the same period in 2006. Net premiums earned during the quarter were $173 million, down 5% from $181 million in the second quarter 2006. The technical ratio for this sub-segment was 101.2% for the second quarter of 2007 compared to 79.2% for the same period in 2006, reflecting a higher-than-usual frequency of mid-sized loss events. For the six months, net premiums written were down 6% to $459 million. The six-month technical ratio was 96.9%, compared to 90.7% in 2006. The technical result for the half-year was $11 million compared to $34 million in 2006.
The Worldwide Specialty business, which represented 51% of total net premiums written for the quarter, reported net premiums written of $458 million for the second quarter of 2007, up
PartnerRe Ltd. Wellesley House, 5th Floor 90 Pitts Bay Road Pembroke, Bermuda HM 08 | Telephone +1 441 292 0888 Fax +1 441 292 6080 www.partnerre.com | |
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12% from the second quarter of 2006. Net premiums earned were up 6% to $380 million for the quarter, compared to the same period in 2006. This sub-segment’s technical ratio was 63.3% for the second quarter of 2007 compared to 73.2% for the second quarter of 2006. For the six-month period, net premiums written were up 4% to $978 million. The six-month technical ratio was 62.7%, compared to 66.4% in 2006. The technical result for the half-year was $266 million in 2007 compared to $229 million in 2006.
The Life segment, which represented 15% of total net premiums written for the quarter, reported net premiums written of $136 million for the quarter, representing 32% growth over the second quarter of 2006. The allocated underwriting result was a gain of $4 million, compared to a loss of $1 million for the second quarter of 2006. For the six-month period, net premiums written increased 17% to $283 million, with an allocated underwriting result of $11 million, compared to $2 million for the comparable period in 2006.
The ART (Alternative Risk Transfer) segment comprises structured risk transfer, principal finance, weather related products, and strategic investments. The pre-tax contribution to net income, including the Company’s interest in the earnings of Channel Re, was a loss of $2 million for the second quarter of 2007, compared to a gain of $15 million in the second quarter of 2006, as results for the second quarter of 2007 were impacted by the write-down of certain transactions in the principal finance unit. For the first six months of 2007, the pre-tax contribution to net income was $4 million compared to $22 million for the same period in 2006.
Balance Sheet Items
During the second quarter of 2007, total investments and cash declined slightly to $10.9 billion due to the impact of rising interest rates, and increased 11% over a trailing 12 month period, due primarily to incremental cash flow. Gross Non-Life loss and loss expense reserves were $6.9 billion. During the second quarter, the Company’s estimate of Non-Life losses for prior accident years developed favorably by $107 million, which is reflected in the quarter’s operating results. The overall prior year reserve development in the Non-Life segment includes net favorable reserve development of $12 million in the U.S. P&C sub-segment, $20 million in the Global (Non-U.S.) P&C sub-segment, and $75 million in the Worldwide Specialty sub-segment. During the second quarter of 2006, the Company’s estimate of Non-Life losses for prior year reserves developed favorably by $62 million.
At June 30, 2007, total assets were $15.7 billion, total capital was $4.8 billion, and total shareholders’ equity was $3.9 billion. This compares to total assets of $14.9 billion, total capital of $4.7 billion and total shareholders’ equity of $3.8 billion at December 31, 2006.
PartnerRe Ltd. Wellesley House, 5th Floor 90 Pitts Bay Road Pembroke, Bermuda HM 08 | Telephone +1 441 292 0888 Fax +1 441 292 6080 www.partnerre.com | |
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Book value per common share at June 30, 2007 was $58.96 on a fully diluted basis, up 5% from $56.07 per share at December 31, 2006, and 26% from $46.62 per share at June 30, 2006.
Commentary and Outlook
“As expected, the non-life market is continuing its slow decline as cedants retain a greater portion of their business and competition at the reinsurance level intensifies,” Mr. Thiele said. “Despite this more competitive market environment, pricing declines are being broadly offset by continued favorable loss trends, and PartnerRe is benefiting from cedants’ movement to higher quality reinsurers, which is consistent with this stage of the reinsurance pricing cycle. Given that, we are more sanguine about the outlook for 2007 premiums than we were at the start of the year.”
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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 realized gains and losses from the sale of investments, which is driven by the timing of the disposition of investments and not by the Company’s operating performance. The Company uses technical ratio and technical result as measures of underwriting performance. The technical ratio is defined as the sum of the loss and acquisition ratios. These metrics exclude other operating expenses. The Company also uses combined ratio to measure results for the Non-Life segment. The combined ratio is the sum of the technical and other operating expense ratios. The Company uses total capital, which is defined as total shareholders’ equity, long-term debt and capital efficient notes, to manage the capital structure of the Company.
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PartnerRe is a leading global reinsurer, providing multi-line reinsurance to insurance companies. The Company through its wholly owned subsidiaries also offers alternative risk 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, other lines, life/annuity and health, and alternative risk products. For the year ended December 31, 2006, total revenues were $4.2 billion. At June 30, 2007, total assets were $15.7 billion, total capital was $4.8 billion and total shareholders’ equity was $3.9 billion.
PartnerRe on the Internet: www.partnerre.com
PartnerRe Ltd. Wellesley House, 5th Floor 90 Pitts Bay Road Pembroke, Bermuda HM 08 | Telephone +1 441 292 0888 Fax +1 441 292 6080 www.partnerre.com | |
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Forward-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 forward-looking information or statements.
Contacts: | | PartnerRe Ltd. | | Sard Verbinnen & Co. | |
| | | (441) 292-0888 | | (212) 687-8080 | |
| | | Investor Contact: Robin Sidders | | Drew Brown/Jane Simmons | |
| | | Media Contact: Celia Powell | | | |
PartnerRe Ltd. Wellesley House, 5th Floor 90 Pitts Bay Road Pembroke, Bermuda HM 08 | Telephone +1 441 292 0888 Fax +1 441 292 6080 www.partnerre.com | |
