PartnerRe lifts third-party capital assets to $1.1 billion

PartnerRe, the Bermuda headquartered, EXOR owned reinsurance company, has continued to add to its third-party capital under management in the last quarter, lifting the total to $1.1 billion.

The company reported a strong set of second-quarter results, featuring increased profits year-over-year, as well as strong growth in its property and casualty reinsurance business segment.

A quarter ago, the reinsurers CEO had said that third-party capital was feeling thee benefits from growing its third-party capital assets under management.

This quarter the CEO revealed that the haul has now reached $1.1 billion in size, while continuing to assist PartnerRe as it expands its reinsurance business.

The company has reported $314 million of net income for the second quarter of 2021, compared to $229 million for the same period of 2020.

For the first-half of 2021 net income rose to $248 million, significantly better than a loss of $204 million for the same period of 2020.

Overall net-premiums underwritten across the business rose by 29% to almost $1.8 billion for the second-quarter and PartnerRe noted that growth was strong in areas where reinsurance rates have been rising.

In non-life reinsurance, the premium growth was even more impressive, at 37% for the quarter, led by a 47% increase in the P&C segment.

This came alongside combined ratios of 88.6% in non-life for Q2 and 92.4% for the first-half, driving profits for the PartnerRe non-life reinsurance business.

It is the non-life side of the business that benefits from the use of the growing third-party capital haul at PartnerRe.

Even in P&C the combined ratios came out at 93.5% and 95.5% for the second quarter and half year 2021, despite the impacts of winter storm Uri in the first-quarter of the year.

Commenting on the quarter, PartnerRe President and Chief Executive Officer Jacques Bonneau said, “We delivered strong results in the second quarter with an annualized operating ROE of 8.8%, and I am pleased to see the positive impacts of our portfolio actions begin to show through our financial result. Our Non-life combined ratio of 88.6% includes improvements in the current accident year loss ratio from business mix changes and overall favorable pricing conditions across most lines of business, as well as improvements in prior years’ reserve development as older underwriting years run off. Our Life and Health segment also significantly improved its underwriting profit compared to the prior year.”

PartnerRe had grown its third-party capital assets under management earlier this year, lifting them above $1 billion around the January 2021 renewals.

PartnerRe had already been building out its third-party capital business over the last few years, moving into direct partnerships with large institutional investors, as well as building out its infrastructure to support ILS investment opportunities for third-parties.

PartnerRe formalised its third-party capital activities within a dedicated unit last year, with the hire of Andrew Hughes (formerly of Hiscox) as its CEO of Third Party Capital.

PartnerRe’s latest quota share sidecar arrangement was revealed in January this year, a collateralized retrocession and specialty reinsurance focused investment vehicle named Laplace-C, with backing secured from private equity investor Olympus Partners.

PartnerRe also has access to €750 million of capital that French insurance group Covéa injected into special purpose reinsurance vehicles under its management, although it’s not clear if this is included in the third-party assets under management the reinsurer has been disclosing.

Finally, PartnerRe had also grown its reinsurance investment partnerships, introducing a relationship with Dutch pension investor PGGM, the largest ILS investor in the market, through its Huygens structure.

All of which has resulted in the third-party capital pile at PartnerRe growing, which will have assisted the reinsurer in managing the impacts of the winter storms and catastrophe loss events experienced this year, while writing more business at renewals, given the risk-sharing nature of these investor relationships.

Bonneau stated, “Third party capital currently stands at $1.1b of assets under management and provided us the ability to increase underwriting capacity and line sizes.”

For a reinsurer like PartnerRe, third-party capital has in the past tended to come in one of two forms. That sourced for retrocession purposes and that sourced for supporting managed portfolios of risk.

The more sophisticated reinsurers have now learnt how to meld the two, to ensure its range of third-party capital structures are both buffering them against losses, while providing capital for growth.

PartnerRe is clearly having success in this way, with the third-party capital acting as a growth lever, while also adding protection to support business expansion.

Once again the gap between gross and net P&C premiums written has expanded year-on-year for PartnerRe, implying greater use of retrocessional sources of capital, or more risk sharing with third-party capital providers.

“These underwriting results, combined with good investment performance, helped produce solid profitability for the second quarter of 2021,” Bonneau explained.