PartnerRe reports non-life profit despite Q3 catastrophe impact

PartnerRe, the Bermuda headquartered reinsurance company that is currently EXOR owned, but subject of a sale to Covea Group, has managed to report a positive technical result across its non-life business despite significant losses from hurricane Ida and the European flooding.

We suspect that retrocessional reinsurance and also PartnerRe’s expanded third-party capital under management will have helped to moderate the impacts of the third-quarter catastrophe loss events for the company.

So it is likely that some investors backing PartnerRe’s quota share and other ILS style arrangements will have shared in the impacts of hurricane Ida and the European floods, while its retrocession partners will also have played their part in moderating the overall impact.

PartnerRe has reported $70 million of net income for the third-quarter, despite $297 million of large catastrophic losses.

The reinsurance firm estimated $188 million of losses, after retrocession, for hurricane Ida and another $60 million from the European floods.

The loss activity did drive the P&C reinsurance segment to an underwriting loss, with a combined ratio of 10.5.9%, but the specialty segment managed a 86.6% combined ratio, meaning that overall PartnerRe’s non-life business reported a combined ratio of 99.8%, despite the catastrophes.

Non-life premiums written continued to expand at the reinsurance firm, with a 14% increase reported for Q3 and 18% for the first nine-months of 2021.

However, the P&C reinsurance segment grew fastest, at 32% in Q3 and 27% for the nine-months, as PartnerRe continued to expand into the improved pricing environment and with the help of its expanded pool of third-party capital.

PartnerRe President and Chief Executive Officer Jacques Bonneau commented on the results, “Despite an active quarter for catastrophic activity, we delivered positive operating income during the third quarter of 2021, demonstrating the continued positive financial impacts of our portfolio optimization, especially on the current accident year attritional loss ratio.

“With a profitable underwriting result across all of our segments for the first nine months of 2021, and the strength of our capital and liquidity positions, we are well positioned for the renewal season.”

It’s interesting though, that having reported its third-party capital to have reached $1.1 billion as of the end of the first-half of 2021, the latest figure is “over $1 billion” which likely reflects some impacts from the major catastrophe events to this pool of capital.

“As we look forward to 2022, our strong capital base along with over $1 billion in third party capital assets under management leaves us poised to remain a valuable, responsive reinsurance partner,” Bonneau said.

That’s not surprising though, as the third-party capital is really there to assist PartnerRe in some of the more volatile or catastrophe prone areas of its book, so losses would be expected for some of the investors in those vehicles after a quarter of loss activity like Q3.

Sophisticated reinsurers, like PartnerRe, have increasingly learnt how to work with a range of third-party capital structures and investors, both to buffer themselves against losses, while also providing capital for growth and a source of fee income.

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

Once again, the gap between gross and net P&C premiums written has expanded year-on-year in PartnerRe’s latest reported results, implying greater use of retrocessional sources of reinsurance capital, or that more risk is being shared with its third-party capital providers.