PartnerRe’s Q3 Earnings Impacted by EXOR Acquisition, ‘Difficult’ Market

October 27, 2015

As EXOR’s acquisition of Bermuda-based PartnerRe proceeds, it will be taking over a somewhat diminished company, as PartnerRe reported a net loss of $243.3 million, or $5.08 per share for the third quarter of 2015. This includes, however, the “amalgamation termination fee and reimbursement of expenses paid to Axis Capital of $315.0 million, or $6.58 per share, and net after-tax realized and unrealized losses on investments of $121.8 million, or $2.54 per share.”

In the same period of 2014 PartnerRe posted net income of $182.2 million, or $3.60 per share, including net after-tax realized and unrealized losses on investments of $35.4 million, or $0.70 per share. The Company reported operating earnings of $211.6 million, or $4.42 per share, for the third quarter of 2015. This compares to operating earnings of $226.7 million, or $4.47 per share, for the third quarter of 2014.

The net loss for the first nine months of 2015 was $114.7 million, or $2.40 per share. This reflects the “amalgamation termination fee and reimbursement of expenses paid to Axis Capital,. As well as net after-tax realized and unrealized losses on investments of $238.7 million, or $5.00 per share.

Net income for the first nine months of 2014 was $735.5 million, or $14.26 per share. This includes net after-tax realized and unrealized gains on investments of $204.1 million, or $3.95 per share. Operating earnings for the first nine months of 2015 were $474.6 million, or $9.95 per share. This compares to operating earnings of $537.1 million, or $10.42 per share, for the first nine months of 2014.

PartnerRe’s interim CEO David Zwiener commented: “Our results this quarter reflect a number of factors, most notably the amalgamation termination fee paid to Axis Capital, and continued difficult financial and investment markets, both of which had a negative impact on our book value.

“Despite the noise, and the impact of the Chinese Tianjin loss in August, our underlying results remain strong. All in, we posted a 1.4 point improvement in our Non-life combined ratio to 82.8 percent when compared to the third quarter of 2014. Our Life and Health portfolios also remain strong. Overall for the third quarter, we recorded an operating ROE of 14 percent, which on the back of our solid performance for the first half of 2015, resulted in an operating ROE of 10.5 percent for the year to date.”

PartnerRe’s President Emmanuel Clarke, who was selected by EXOR, added: “As we look ahead to the important January renewal season, which accounts for more than 60 percent of our Non-life treaty premium, reinsurance markets remain competitive across the board. In addition, M&A activity is continuing to be a distraction for some market participants. At PartnerRe, however, we continue to distinguish ourselves with our clients as a stable and focused partner with long-term financial flexibility, and a proven track record of reliability.”

For EXOR the 2015 results are simply the result of the market and the bruising merger fight with AXIS Capital. At a press conference at the Reinsurance Rendezvous John Elkann, the leader of Italy’s billionaire Agnelli family, who heads EXOR, said: “This investment, this initiative, we’ve taken on for the generations.” He added that as the last 20 years had seen the development of PartnerRe, but that the “next 20 years will be, no doubt, as great if not better.”

Elkann reinforced Clarke’s announce ambition of placing PartnerRe among the “Big Four,” which he said is measured by the “strength of balance sheet,” and the “strength of the balance sheet is measured by the shareholders’ equity within the business. We made a very damn good commitment that we will have a very different way of distributing earnings. We will make sure that most of the units are retained, within the business, to help the business be stronger.”

Source: PartnerRe and EXOR

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