PartnerRe drops to net investment loss, but non-life underwriting improves
PartnerRe, based in Bermuda, reported improved non-life underwriting for the first quarter of 2022, although unrealized losses due to rising interest rates resulted in a net loss of $539 million.
The net loss reported by PartnerRe represents a deterioration from the $66 million loss reported in the first quarter of 2021.
The reinsurer attributes the larger loss to realized and unrealized net investment losses of a substantial $818 million on fixed maturities and short-term investments, primarily due to higher risk-free rates in the world.
“The industry continues to be impacted by interest rate increases,” said Jacques Bonneau, the company’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 retaining most of our fixed-term investments to maturity mean that changes in interest rates do not immediately put our capital at risk.
While the company’s assets suffered during the quarter, the underwriting side of the business delivered strong results, particularly in P&C and Specialties.
Overall, non-life net premiums increased 17%, driven by 24% growth in non-life due to favorable premium adjustments from previous underwriting years and also growth in the current subscription year.
For the first quarter of 2022, the non-life technical result was a profit of $199 million, compared to a gain of $40 million in the first quarter of 2021. The combined ratio strengthened significantly, year-on-year. other, falling from 96.7% in the first quarter of 2021 to 84.7% in Q1 2022.
The company’s non-life underwriting result benefited from the lower impact of large losses, net of retrocession and reinstatement premiums, which amounted to $86 million in the first quarter of 2022 compared to $104 million at the end of the year. same period of the previous year.
Of the $86 million, 58% or $50 million is related to Russia’s invasion of Ukraine, with the remaining $36 million related to flooding in Australia. PartnerRe notes that these two events negatively impacted the property and specialty combined ratios by 3.5 points and 13.4 points respectively.
Within P&C, the combined ratio improved significantly from 97.7% in Q1 2021 to 81.3% in Q1 2022, driven by lower significant losses and favorable reserve developments from prior years .
In the carrier’s specialist business, the combined ratio improved from 94.8% in Q1 2021 to 91.7% in Q1 2022, thanks to the improvement in the loss ratio by year of attrition of ongoing occurrence resulting from strategic reductions in less profitable lines, as well as a lower level of adverse losses. the change in reserves from previous years, partially offset by an increase in significant losses.
Somewhat offsetting the strong non-life performance in the first quarter of the year, PartnerRe’s life and health business recorded a loss of $16 million for the first quarter of 2022, compared to a profit of $20 million a year. earlier.
PartnerRe explains that losses related to the COVID-19 pandemic totaled $9 million during the quarter, which represents an improvement from the $12 million recorded in the first quarter of 2021. Excluding the pandemic, the decline in technical income allocated is mainly due to losses on long-term protection business, the company said.
Across the Group and despite the heavy investment loss, operating profit increased from $42 million in the first quarter of 2021 to $174 million in the first quarter of 2022, driven by improved underwriting results for multi-risk and specialized insurance.
“Following a successful renewal on January 1 and benefiting from our disciplined focus on profitable growth, we delivered an improved underwriting result for the first quarter of 2022, which led to a strong improvement in operating profit,” said Bonnet.
“We have continued to develop our base of premiums where the rates are attractive, in particular in the damages 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 continued focus on underwriting profitability offers PartnerRe the stability that our customers, our financial partners and shareholders expect, despite a difficult macroeconomic and geopolitical context.