Investment gains boost PartnerRe as cat losses dent results

Net realised and unrealised gains on investments were the biggest influencing factor on PartnerRe's 2016 results, helping the reinsurer to a big increase in its profits as its book shrunk slightly.

The company’s profits attributable to common shareholders increased by more than 800 percent in 2016, reaching $387 million, a substantial rise from the $48 million it made in 2015.

The increase rise was primarily due to net realised and unrealised gains on investments of $26 million in 2016 compared to losses of $297 million in 2015.

However, in the fourth quarter alone, the company made a loss of $191 million compared to a profit of $162 million for the same period of 2015. It said this was because of net realised and unrealised losses on investments of $388 million in the fourth quarter of 2016, which were largely driven by significant increases in treasury yields, partially offset by narrowing of credit spreads.

This compares to a $24 million loss in the fourth quarter of 2015, primarily driven by increases in US risk-free interest rates, partially offset by the narrowing credit spreads and increases in worldwide equity markets.

Putting net realised and unrealised gains or losses aside, PartnerRe’s operating earnings for the full year 2016 were $289 million, compared to operating earnings of $658 million for 2015.

It said this was primarily due to a lower non-life technical result, higher transaction and severance costs and loss on redemption of senior notes. The lower non-life technical result was primarily driven by lower favourable prior year loss development, higher mid-sized loss activity and increased losses from catastrophes.

The company’s combined ratio deteriorated from 85.6 percent for full year 2015 to 93.6 percent for full year 2016.

The company blamed the quarterly loss and the weakening in its combined ratio on losses from Hurricane Matthew of $45 million in the fourth quarter of the year and lower favourable prior years' reserve development.

Its gross written premiums fell slightly to $5.35 in 2016 compared with $5.5 billion in 2015.

PartnerRe president and CEO Emmanuel Clarke said: "We delivered good operating results in the fourth quarter with an annualised adjusted operating return on equity of 9.8 percent. The non-life combined ratio of 89.6 percent, notwithstanding losses related to Hurricane Matthew, highlights our underwriting discipline while favourable prior year development continues to remain strong. In the current market conditions, we are undertaking the right underwriting actions to better serve our core clients while preserving our long-term capital strength."

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