Summary unaudited consolidated financial data for the period is set out below.
| U.S.$ thousands (except per share amounts and ratios) | Three months ended September 30 | Nine months ended September 30 |
| | 2008 | 2007 | 2008 | 2007 |
| Net Premiums Written | $869,194 | $873,474 | $3,237,027 | $3,042,733 |
| Net Premiums Earned | $1,078,459 | $1,056,395 | $2,943,752 | $2,787,713 |
| Non-life Combined Ratio | 95.5% | 74.2% | 91.4% | 80.9% |
| Net (Loss) Income | $(151,719) | $262,921 | $(48,723) | $537,209 |
| Net (Loss) Income per share (a) | $(3.01) | $4.44 | $(1.38) | $8.83 |
| Operating Earnings (a) | $121,331 | $274,198 | $415,373 | $565,073 |
| Operating Earnings per share (a) | $2.27 | $4.78 | $7.70 | $9.76 |
| (a) | Net income/(loss) per share is defined as net income/(loss) available to common shareholders divided by the weighted average number of fully diluted shares outstanding for the period. Net income/(loss) available to common shareholders is defined as net income/(loss) less preferred dividends. Operating earnings/(loss) is defined as net income/(loss) available to common shareholders excluding after-tax net realized and unrealized gains/losses on investments and after-tax interest in earnings/losses of equity investments. Operating earnings/(loss) per share is defined as operating earnings/(loss) divided by the weighted average number of fully diluted shares outstanding for the period. As the effect of dilutive securities would have been anti-dilutive in the three months and nine months ended September 30, 2008, the fully diluted per share figures for these periods were compiled using the basic weighted average number of common shares outstanding. |
Net premiums written for the third quarter of 2008 were $869.2 million, compared to $873.5 million in the third quarter of 2007. Total revenues for the third quarter 2008 were $896.6 million, compared to $1.2 billion in the third quarter of 2007, and included $1.1 billion of net premiums earned, which were up 2% over the third quarter of 2007; net investment income of $146.1 million – an increase of 8% over the third quarter of 2007; and pre-tax net realized and unrealized investment losses of $324.2 million as compared to pre-tax net realized investment losses of $3.1 million for the third quarter of 2007.
For the first nine months of 2008, net premiums written were $3.2 billion, up 6% over the first nine months of 2007. The net loss was $48.7 million or $1.38 per share for the nine months ended September 30, 2008. Net loss for the period includes net after-tax realized and unrealized losses on investments of $491.3 million or $9.10 per share. Operating earnings were $415.4 million, or $7.70 per share. Net income for the first nine months of 2007 was
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$537.2 million or $8.83 per share including net after-tax realized losses of $37.3 million, or $0.65 per share. Operating earnings for the same period in 2007 were $565.1 million or $9.76 per share. Total revenues for the first nine months of 2008 were $2.8 billion, including $2.9 billion of net premiums earned, net investment income of $428.6 million, and pre-tax net realized and unrealized investment losses of $595.3 million. Total revenues for the same period in 2007 were $3.1 billion, including $2.8 billion of net premiums earned, net investment income of $385.5 million, and pre-tax net realized investment losses of $56.0 million.
During the third quarter of 2008, the Company repurchased 1.0 million common shares at a total cost of approximately $70.2 million. To date this year, the Company has repurchased 1,532,460 common shares at a total cost of approximately $110.0 million. The Company has approximately 5 million common shares remaining under its current repurchase authorization.
During the third quarter of 2008, the Company announced the start of the valuation period for its maturing forward sale agreement. As of September 30, 2008, 252,474 common shares were sold for total proceeds of $16.9 million.
Separately, the Company announced today that its Board of Directors declared a quarterly dividend of $0.46 per common share. The dividend will be payable on December 1, 2008, to common shareholders of record on November 21, 2008, with the stock trading ex-dividend commencing November 19, 2008.
Results by Segment
Hurricanes Ike and Gustav impacted the technical results of all Non-Life sub-segments and the Capital Markets Group during the quarter. In total, the third quarter 2008 results contain approximately $198 million pre-tax operating losses, net of reinstatement premiums, related to Hurricanes Ike and Gustav.
The Non-Life segment reported net premiums written of $723 million for the third quarter, flat with the same period in 2007. The combined ratio was 95.5% for the third quarter of 2008 compared to 74.2% for the same period in 2007, with the deterioration primarily reflecting the impact of Hurricanes Ike and Gustav. The Non-Life technical result was $97 million for the third quarter of 2008 compared to $287 million for the prior year period. For the first nine months in 2008, Non-Life net premiums written were $2.8 billion, up 6% from the same period in 2007. The nine month 2008 technical result was $388 million, compared
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to $608 million for the same period in 2007. The combined ratio for the nine month period in 2008 was 91.4% compared to 80.9% for the first nine months of 2007.
The U.S. business, which represented 30% of total net premiums written for the quarter, reported net premiums written of $264 million for the third quarter of 2008, compared with $279 million for last year’s third quarter. Net premiums earned were $276 million in the third quarter of 2008, flat with the same period in 2007. The technical ratio for this sub-segment was 101.1% for the 2008 third quarter, including 8.6 points relating to Hurricanes Ike and Gustav, compared to 81.9% in the third quarter of 2007. The technical result for the third quarter 2008 was a loss of $3 million, compared to income of $49 million for the same period in 2007. For the first nine months of 2008, net premiums written were $841 million, up 5% from the first nine months of 2007. The nine month 2008 technical ratio was 97.6%, compared to 84.9% for the comparable period in 2007. The technical result for the nine months was $19 million compared to $111 million for the same period in 2007.
The Global (Non-U.S.) P&C business, which represented 16% of total net premiums written for the quarter, reported net premiums written of $137 million for the third quarter of 2008, compared to $151 million for the same period in 2007. Net premiums earned during the quarter were $195 million, up 1% from the third quarter 2007. The technical ratio for this sub-segment was 74.5% for the third quarter of 2008 compared to 94.5% for the same period in 2007, reflecting both low large loss activity and lower than expected reported losses, leading to favorable reserve development in the current quarter. The technical result for the third quarter 2008 was $50 million, compared to $11 million for the same period in 2007. For the first nine months of 2008, net premiums written were up 5% to $642 million. The nine month technical ratio was 82.3%, compared to 96.0% in the comparable period 2007. The technical result for the nine months was $103 million compared to $22 million in the comparable period 2007.
The Global (Non-U.S.) Specialty business, which represented 32% of total net premiums written for the quarter, reported net premiums written of $274 million for the third quarter of 2008, up 10% from the third quarter of 2007. Net premiums earned were up 6% to $290 million for the quarter, compared to the same period in 2007. This sub-segment’s technical ratio for the quarter was 88.6%, including 9.1 points relating to Hurricanes Ike and Gustav, net of reinstatement premiums, compared to 68.2% for the third quarter of 2007. The technical result for the third quarter 2008 was $33 million, compared to $87 million for the same period in 2007. For the nine-month period, net premiums written were up 11% to $898 million. The nine-month technical ratio was 86.8%, compared to 68.8% in 2007. The technical result for the nine months was $103 million in 2008 compared to $237 million for the comparable period in 2007.
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The Catastrophe business, which represented approximately 6% of total net premiums written for the quarter, reported net premiums written of $48 million for the third quarter of 2008, compared to $50 million for the prior year period. Net premiums earned were $159 million for the third quarter, compared to $170 million in the same period in 2007. The total loss in the third quarter 2008 relating to Hurricanes Ike and Gustav was $131.6 million, net of reinstatement premiums, or 93.8% of net premiums earned. This sub-segment’s technical ratio for the third quarter 2008 was 89.5%, reflecting the significant impact of the hurricanes, compared with 17.9% for the third quarter 2007. The technical result for the third quarter 2008 was $17 million, compared to $140 million for the same period in 2007. For the nine-month period, net premiums written were flat with the first nine months of 2007 at $391 million. The nine-month technical ratio was 45.7%, compared to 27.8% in 2007. The technical result for the nine months was $163 million in 2008 compared to $238 million in the comparable period in 2007.
The Life segment, which represented 16% of total net premiums written for the quarter, reported net premiums written of $141 million for the third quarter, flat with the third quarter of 2007. The allocated underwriting result was $9 million, compared to $nil in the third quarter of 2007. For the first nine months of 2008, net premiums written increased 5% to $448 million, with an allocated underwriting result of $21 million, up from $11 million for the first nine months of 2007.
The Company’s capital markets and investment activities are reported under the heading of “Corporate and Other”. Within Corporate and Other, capital markets and investment activities contributed $119 million to pre-tax operating income in the third quarter and $368 million to pre-tax operating income in the first nine months of 2008. Separately, following the adoption of FAS 159, with changes in the unrealized market values of invested assets recorded in net income, capital markets and investment activities contributed pre-tax non-operating losses of $324 million and $595 million in the third quarter and first nine months of 2008, respectively.
Balance Sheet Items
At September 30, 2008, total assets were $16.3 billion as compared to $16.0 billion at December 31, 2007. Over the trailing 12 month period, total investments and cash were flat at $11.5 billion. Gross Non-Life loss and loss expense reserves increased 5% year over year to $7.5 billion at September 30, 2008. During the third quarter of 2008, the Company’s estimate of Non-Life reserves for prior accident years developed favorably by $103 million. The overall third quarter prior year reserve development in the Non-Life segment includes
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net favorable development in all sub-segments, with $16 million in the U.S. sub-segment, $41 million in the Global (Non-U.S.) P&C sub-segment, $21 million in the Global (Non-U.S.) Specialty sub-segment, and $25 million in the Catastrophe sub-segment. In the third quarter of 2007, Non-Life reserves for prior years developed favorably by $89 million. Policy benefits for life and annuity contracts decreased by 6% year over year to $1.5 billion at September 30, 2008. During the third quarter of 2008, the Company’s estimate of Life reserves for prior years developed adversely by $5 million, compared to adverse development of $9 million in the third quarter of 2007.
At September 30, 2008, total capital was $5.0 billion, and total shareholders’ equity was $4.1 billion. This compares to total capital of $5.2 billion, and total shareholders’ equity of $4.3 billion at December 31, 2007. Book value per common share at September 30, 2008 was $65.38 on a fully diluted basis compared to $67.96 per diluted share at December 31, 2007.
For additional information, the Company has posted a third quarter 2008 financial supplement on its website www.partnerre.com in the Investor Relations section on the Financial Reports page under Supplementary Financial Data.
Commentary and Outlook
Mr. Thiele said, “2008 has been an extraordinary year on many levels.We are currently in the midst of one of the most severe financial crises since the Great Depression. Despite this, PartnerRe posted an operating return on beginning equity of 15% for the first nine months of the year. We are optimistic that we will finish the full year 2008 with an operating ROE in excess of our long-term target of 13%, barring unusual large losses.”
“Looking forward we expect that demand for reinsurance will increase as insurers look to their reinsurers for capital relief and volatility management,” Mr. Thiele said. “We also believe that their preference will be to work with only the highest quality reinsurers such as PartnerRe. PartnerRe has the risk appetite and the financial strength and stability to respond to an improving marketplace and provide the consistent capacity that our clients expect from us.”
The Company uses operating earnings, diluted operating earnings per share and annualized operating return on beginning common shareholders’ equity to measure performance, as these measures focus on the underlying fundamentals of our operations without the impact of net realized and unrealized gains/losses on investments, net of tax, nor the interest in earnings/losses of equity
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investments, net of tax, where the Company does not control the investee companies’ activities. 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, senior notes and capital efficient notes, to manage the capital structure of the Company.
PartnerRe Ltd. 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, multiline and other lines, life/annuity and health, and alternative risk products. For the year ended December 31, 2007, total revenues were $4.2 billion. At September 30, 2008, total assets were $16.3 billion, total capital was $5.0 billion and total shareholders’ equity was $4.1 billion.
PartnerRe on the Internet: www.partnerre.com
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) 687-808 |
| | Investor Contact: Robin Sidders | Drew Brown/Jane Simmons |
| | Media Contact: Celia Powell | |
