PartnerRe Updates on Second Quarter and Half Year 2015 Results

PartnerRe reported a net loss of $103.1 million, or $2.16 per share for the second quarter of 2015.

In its release on July 27, the Company noted that this includes net after-tax realized and unrealized losses on investments of $217.2 million, or $4.55 per share. Net income for the second quarter of 2014 was $257.7 million, or $5.02 per share, including net after-tax realized and unrealized gains on investments of $123.7 million, or $2.41 per share. The Company reported operating earnings of $112.5 million, or $2.35 per share, for the second quarter of 2015. This compares to operating earnings of $133.5 million, or $2.60 per share, for the second quarter of 2014.

Net income for the first six months of 2015 was $128.6 million, or $2.64 per share. This includes net after-tax realized and unrealized losses on investments of $116.9 million, or $2.39 per share. 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. Operating earnings for the first six months of 2015 were $263.0 million, or $5.39 per share. This compares to operating earnings of $310.4 million, or $5.97 per share, for the first six months of 2014.

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, the loss on redemption of preferred shares and certain net after-tax withholding tax on inter- company dividends (included in other expenses), 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 Interim Chief Executive Officer David Zwiener said, "We continued to see challenging market conditions during the second quarter, both in terms of persistent competitive reinsurance pressures and difficult financial markets. Nevertheless, we posted strong technical results in the quarter, which when combined with our first quarter performance, resulted in an operating ROE of 8.5 percent. As you saw from our press release earlier this month, our tangible book value per share was impacted by increases in longer term risk-free rates both in the U.S. and Europe, resulting in a significant mark-to-market loss on our investment portfolio. For the year to date, however, our tangible book value is up 1 percent."

Zwiener added, "As we look ahead to the important fall renewal season, we are encouraged by the success of the current June/July renewals, which accounts for approximately 10 percent of our Non- Life treaty business. Despite continued competitive pressures, we saw some initial signs that markets are beginning to stabilize, and we wrote a number of profitable new treaties. This speaks to our strong market presence, the quality of our client relationships, and underscores the strength of the PartnerRe franchise."

Highlights for the second quarter and first six months of 2015 compared to the same periods in 2014 include:

Results of operations:

-For the second quarter, net premiums written of $1.3 billion were down 7 percent. On a constant foreign exchange basis, net premiums written were flat with a decrease reported in the Catastrophe Non-life sub-segment, which was almost entirely offset by increases in the Life and Health segment and, to a lesser extent, the North America and Global (Non-U.S.) P&C Non-life sub-segments. For the first six months of 2015, net premiums written of $3.0 billion were down 6 percent. On a constant foreign exchange basis, net premiums written were flat with increases reported in the Life and Health segment and, to a lesser extent, the Global (Non-U.S.) P&C Non-life sub-segment, which were almost entirely offset by decreases in the Catastrophe and North America Non-life sub- segments.

-For the second quarter, net premiums earned of $1.3 billion were down 2 percent. On a constant foreign exchange basis, net premiums earned were up 5 percent primarily due to the North America Non- life sub-segment and the Life and Health segment. These increases were partially offset by a decrease in the Catastrophe Non-life sub- segment. For the first six months of 2015, net premiums earned of $2.6 billion were down 2 percent. On a constant foreign exchange basis, net premiums earned were up 4 percent, primarily due to the Life and Health segment and the Global Specialty Non-life sub- segment.

-For the second quarter, the Non-life combined ratio was 90.3 percent. The combined ratio benefited from favorable prior year development of 17.1 points (or $173 million). All Non-life sub- segments experienced net favorable development from prior accident years during the second quarter of 2015. For the first six months of 2015, the Non-life combined ratio was 86.7 percent. The combined ratio benefited from favorable prior year development of 20.4 points (or $398 million). All Non-life sub-segments experienced net favorable development on prior accident years during the first six months of 2015.

-For the second quarter and first six months, other expenses of $130 million and $254 million, respectively, include $9 million and $40 million, respectively, of costs related to the amalgamation with Axis Capital, pre-tax, or $0.19 and $0.82, respectively, per diluted share, pre-tax. In addition, other expenses for the second quarter and first six months include $25 million, pre-tax, of costs related to the negotiated earn-out consideration paid to the former shareholders of Presidio Reinsurance Group or $0.53 and $0.52, respectively, per diluted share, pre-tax.

-For the second quarter, net investment income of $120 million was down 8 percent. On a constant foreign exchange basis, net investment income was down by 3 percent primarily driven by lower reinvestment rates. For the first six months of 2015, net investment income of $225 million was down 9 percent. On a constant foreign exchange basis, net investment income was down by 5 percent primarily reflecting lower reinvestment rates.

-For the second quarter and first six months, pre-tax net realized and unrealized investment losses were $256 million and $140 million, respectively, primarily reflecting increases in longer- term U.S. and European risk-free rates.

-For the second quarter, the effective tax rate on operating earnings and non-operating losses was 16.4 percent and 15.3 percent, respectively. For the first six months of 2015, the effective tax rate on operating earnings and non-operating losses was 16.9 percent and (4.7) percent, respectively.

Balance sheet and capitalization:

-Total investments, cash and funds held - directly managed were $16.8 billion at June 30, down 2 percent compared to December 31, 2014, primarily reflecting the impacts of foreign exchange and increases in longer-term U.S. and European risk-free rates.

-Net Non-life loss and loss expense reserves were $9.3 billion at June 30, down 2 percent compared to December 31, 2014, primarily reflecting the impacts of foreign exchange.

-Net policy benefits for life and annuity contracts were $2.1 billion at June 30, up 1 percent compared to December 31, 2014, primarily due to the growth of the business, which was partially offset by the impacts of foreign exchange.

-Total capital was $7.9 billion at June 30, flat compared to December 31, 2014, as a result of net income for the first six months being almost entirely offset by common and preferred dividend payments and share repurchases.

-Total shareholders' equity attributable to PartnerRe was $7.1 billion at June 30, flat compared to December 31, 2014, due to the same factors described above for total capital.

-Book value per common share was $127.24 at June 30, up 0.8 percent compared to $126.21 at December 31, 2014. Tangible book value per common share was $115.90 at June 30, up 1.0 percent compared to $114.76 at December 31, 2014. The increases were primarily driven by net income, which was partially offset by common and preferred dividend payments.

Segment and sub-segment highlights for the second quarter and first six months of 2015 compared to the same period in 2014 include:

Non-life:

-For the second quarter, the Non-life segment's net premiums written were down 9 percent. On a constant foreign exchange basis, net premiums written were down 3 percent with the decrease reported in the Catastrophe sub-segment, which was partially offset by modest increases in the North America and Global (Non-U.S. P&C) sub- segments. For the first six months of 2015, the Non-life segment's net premiums written were down 8 percent. On a constant foreign exchange basis, net premiums written were down 3 percent with the decrease reported in the Catastrophe and North America sub-segments and was partially offset by a modest increase in the Global (Non- U.S. P&C) sub-segment.

-For the second quarter, the North America sub-segment's net premiums written were up 2 percent. On a constant foreign exchange basis, net premiums written were up 3 percent with the increase driven by new business and timing differences primarily in the agriculture and casualty lines of business, partially offset by cancellations in the casualty and structured property lines of business and higher premiums retroceded to the Company's third- party capital vehicle, Lorenz Re. This sub-segment reported a technical ratio of 93.5 percent, which included 10.1 points (or $44 million) of net favorable prior year loss development. For the first six months of 2015, the North America sub-segment's net premiums written were down 5 percent, primarily due to cancellations, non- renewals and participation decreases across various lines of business, and higher premiums retroceded to Lorenz Re. These decreases were partially offset by contributions from new business written in prior periods primarily in the casualty, agriculture and property lines of business. This sub-segment reported a technical ratio of 86.8 percent, which included 16.3 points (or $126 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 7 percent. On a constant foreign exchange basis, net premiums written were up 6 percent primarily due to new business written across all lines of business, which was partially offset by downward prior year premium adjustments in the property and motor lines of business and cancellations in the motor line of business. This sub-segment reported a technical ratio of 99.1 percent, which included 6.4 points (or $10 million) of net favorable prior year loss development. For the first six months of 2015, the Global (Non-U.S.) P&C sub-segment's net premiums written were down 8 percent. On a constant foreign exchange basis, net premiums written were up 2 percent primarily due to the same factors describing the second quarter. This sub-segment reported a technical ratio of 98.8 percent, which included 8.5 points (or $28 million) of net favorable prior year loss development.

-For the second quarter, the Global Specialty sub-segment's net premiums written were down 8 percent. On a constant foreign exchange basis, net premiums written were flat which reflects new business written across multiple lines of business in prior periods, which was partially offset by downward prior year premium adjustments and cancellations in various lines of business. This sub-segment reported a technical ratio of 80.2 percent, which included 29.4 points (or $110 million) of net favorable prior year loss development. For the first six months of 2015, the Global Specialty sub-segment's net premiums written were down 7 percent. On a constant foreign exchange basis, net premiums written were flat which reflects new business written across multiple lines of business in prior periods and lower premiums ceded under the Company's retrocessional program, which were partially offset by downward prior year premium adjustments, reduced participations and cancellations in various lines of business. This sub-segment reported a technical ratio of 76.2 percent, which included 29.7 points (or $220 million) of net favorable prior year loss development.

-For the second quarter, the Catastrophe sub-segment's net premiums written were down 48 percent. On a constant foreign exchange basis, net premiums written were down by 44 percent primarily due to higher premiums ceded under the Company's retrocessional program to Lorenz Re, cancellations, non-renewals and timing differences. This sub-segment reported a favorable technical ratio of (13.3 percent), which included 21.4 points (or $9 million) of net favorable prior year loss development. For the first six months of 2015, the Catastrophe sub-segment's net premiums written were down 21 percent. On a constant foreign exchange basis, net premiums written were down 16 percent primarily due to the same factors describing the second quarter. This sub-segment reported a technical ratio of 17.5 percent, which included 23.1 points (or $24 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 1 percent. On a constant foreign exchange basis, net premiums written were up 10 percent with the increase primarily driven by an increase in our participation on a significant longevity treaty and new short-term business written in the mortality line. For the first six months of 2015, the Life and Health segment's net premiums written were up 6 percent. On a constant foreign exchange basis, net premiums written were up 14 percent primarily driven by PartnerRe Health's accident and health line of business and the increased participation on a significant longevity treaty as described in the second quarter above.

-For the second quarter, the Life and Health segment's allocated underwriting result, which includes allocated investment income and other expenses, increased to $26 million compared to $18 million in the same period of 2014. This increase was primarily due to a higher level of favorable prior year loss development from the Company's short-term mortality and accident and health lines of business. For the first six months of 2015, the Life and Health segment's allocated underwriting result, which includes allocated investment income and other expenses, increased to $51 million compared to $32 million in the same period of 2014 primarily due to the same factors describing the second quarter.

Corporate and Other:

-For the second quarter, investment activities contributed losses of $144 million to pre-tax net loss, excluding investment income allocated to the Life and Health segment. Of this amount, income of $104 million was included in pre-tax operating earnings and a loss of $248 million related to net realized and unrealized losses on investments and earnings from equity method investee companies was included in pre-tax non-operating losses. For the first six months of 2015, investment activities contributed income of $63 million to pre-tax net income, excluding investment income allocated to the Life and Health segment. Of this amount, income of $198 million was included in pre-tax operating earnings and losses of $135 million related to net realized and unrealized losses on investments and earnings from equity method investee companies was included in pre- tax non-operating losses.

Separately, the Board of Directors declared a quarterly dividend of $0.70 per common share. The dividend will be payable on September 1, to common shareholders of record on August 7.

More information:

www.partnerre.com

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