Bermuda-based PartnerRe has reported an improvement in non-life underwriting for the first-quarter of 2022, although unrealised losses on the back of increases in interest rates has resulted in a net loss of $539 million.
The net loss reported by PartnerRe represents a deterioration from the $66 million loss announced in Q1 2021.
The reinsurer attributes the steeper loss to net realised and unrealised investment losses of a huge $818 million on fixed maturities and short-term investments, driven mainly by increases in worldwide risk-free rates.
“The industry continues to be impacted by increases in interest rates,” said Jacques Bonneau, the firm’s President and Chief Executive Officer (CEO). “While mark-to-market investment losses on fixed maturities, which we include in net income, were the sole driver of our net loss for the quarter, management’s approach of holding most of our fixed maturity investments to their maturity means that changes in interest rates do not immediately put our capital at risk.”
While the firm’s assets suffered in the quarter, the underwriting side of the business produced a solid result, notably in both P&C and specialty.
All in all, non-life net premiums increased by 17%, driven by 24% growth within P&C on the back of favourable premium adjustments from prior underwriting years and also growth in the current underwriting year.
For Q1 2022, the non-life underwriting result was a profit of $199 million, compared with a gain of $40 million in Q1 2021. The combined ratio strengthened significantly, year-on-year, from 96.7% in Q1 2021 to 84.7% in Q1 2022.
Benefiting the company’s non-life underwriting result was the lesser impact from large losses, net of retrocession and reinstatement premiums, which amounted to $86 million in Q1 2022 versus $104 million in the prior year period.
Of the $86 million, 58% or $50 million relate to Russia’s invasion of Ukraine, with the remaining $36 million related to the Australian floods. PartnerRe notes that these two events adversely impacted the P&C and specialty combined ratios by 3.5 points and 13.4 points, respectively.
Within P&C, the combined ratio has improved dramatically from 97.7% in Q1 2021 to 81.3% in Q1 2022, driven by lower large losses and favourable prior years’ reserve development.
In the carrier’s specialty operation, the combined ratio improved from 94.8% in Q1 2021 to 91.7% in Q1 2022, driven by improvements in the current accident year attritional loss ratio resulting from strategic reductions in less profitable lines, and also a lower level of unfavorable prior years’ reserve development, partially offset by a rise in large losses.
Somewhat offsetting the robust non-life performance in the opening quarter of the year, PartnerRe’s life and health business has reported a loss of $16 million for Q1 2022, compared with profit of $20 million a year earlier.
PartnerRe explains that losses related to the COVID-19 pandemic totalled $9 million in the quarter, which is an improvement on the $12 million seen in Q1 2021. Excluding the pandemic, the decrease in allocated underwriting result was primarily driven by losses on the long-term protection business, says the firm.
Across the Group and despite the heavy investment loss, operating income increased from $42 million in Q1 2021 to $174 million in Q1 2022, driven by the improved underwriting results for P&C and specialty.
“On the back of a successful January 1st renewal and benefiting from our disciplined focus on profitable growth, we had an improved underwriting result for the first quarter of 2022, which led to the strong improvement in operating income,” said Bonneau.
“We continued to grow our premium base where rates are attractive, particularly in casualty and professional lines. With an annualized operating return on equity of 9.9% and an improvement in our non-life combined ratio of 12 points year-over-year, it is clear that our continuous focus on underwriting profitability provides PartnerRe the stability that our clients, capital partners and shareholder expect, despite a challenging macroeconomic and geopolitical backdrop.”
