Reinsurance News

Turbulent investment landscape pushes PartnerRe to $433mn Q1 loss

8th May 2020 - Author: Luke Gallin

Bermuda-based reinsurer PartnerRe has announced a net loss of $433 million for the first-quarter of 2020, as COVID-19-induced financial market volatility and fading equity markets significantly impacted the company’s investments in the period.

PartnerRePartnerRe’s Q1 2020 net loss compares with net income of $497 million a year earlier, and includes net realised and unrealised investment losses of $27 million on fixed maturities and short-term investments and $130 million of net foreign exchange gains.

In addition, PartnerRe notes that its first-quarter 2020 results also reflects a huge $610 million of unrealised investment losses driven by the economic impacts of widening credit spreads and declines in equity markets, as result of the ongoing COVID-19 pandemic.

Overall, PartnerRe has reported a net investment loss of $503 million, which included the significant level of realised and unrealised investment losses and also losses from equity method investments, partially offset by net investment income of $103 million. In comparison, PartnerRe recorded a net investment return of $600 million in the first-quarter of 2019. The company does add that from the end of the quarter, its investment portfolio has recovered significantly.

As well as the hit to its investments, COVID-19 also had a negative impact on the firm’s underwriting performance in the quarter, albeit to a lesser extent.

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In total, PartnerRe incurred losses of $18 million from two event cancellation claims associated with the current crisis in Q1 2020, which, combined with adverse prior year reserve development of $95 million, contributed to the deterioration of the Specialty segment’s combined ratio to 121.1%, versus 116% a year earlier.

Sticking with non-life operations, and PartnerRe has revealed that its P&C segment reported a combined ratio of 94.3% in Q1 2020 compared with 87.7% in Q1 2019. The company notes that in Q1 2020 its P&C combined ratio included $26 million of favourable prior year reserve development, compared to $49 million for the same period in 2019.

Despite P&C underwriting remaining in profitable territory during Q1 2020, the decline in PartnerRe’s Specialty segment more than offset this, and resulted in a non-life underwriting loss of $46 million and a combined ratio of 103.8%, compared with an underwriting gain of $24 million and a combined ratio of 97.7% a year earlier.

Premiums also declined in non-life for PartnerRe during the period, by 6% year-on-year, driven by a 7% decrease in P&C, partially offset by 1% growth in Specialty as the firm continued to focus on portfolio optimisation at the January 1st, 2020 renewals. Non-life net premiums earned increased by 14% when compared with the same period in 2019.

PartnerRe’s President and Chief Executive Officer (CEO), Emmanuel Clarke, commented: “The COVID-19 pandemic is a test for our industry and a reminder of the potential severity of systemic events, and the value of strong reinsurance partnerships. Our priorities in responding to the rapidly expanding COVID-19 pandemic through the first quarter have been the safety of our staff and the continuous, seamless servicing of all our business partners. I have been impressed by the speed and agility with which the PartnerRe organization worldwide has adapted to a full work from home mode, while maintaining highly responsive interaction with our business partners.

“In our first quarter, we delivered positive underwriting results in our P&C and Life & Health segments, which was offset by loss activity in our Specialty segment. I am confident that the actions we have taken throughout last year to improve our portfolio performance, combined with strong underlying rate increases in the loss affected classes, will start to show a positive impact. We continue to execute on our growth strategy for Life & Health to maintain a well-diversified and profitable book of business.

“With the strength of our balance sheet and our high quality investment portfolio, we have the resilience to weather this pandemic and changed economic cycle, and we are well-positioned for the hardening of reinsurance pricing.”

Turning to the reinsurer’s Life and Health operations, and net premiums in this segment of the business increased by 7% in Q1 2020 when compared with the previous year, while net premiums earned jumped 10%.

The allocated underwriting result was a profit of $18 million in Q1 2020, which is down on the $30 million profit posted a year earlier, primarily driven by a $23 million adverse impact in the guaranteed minimum death benefits (GMDB) line of business following declines in equity markets.

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