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Bermuda-based PartnerRe Ltd. reported a net loss of $33.6 million, or $0.76 per share, for the fourth quarter of 2005.
This net loss includes net after-tax realized gains on investments of $37.0 million or $0.66 per share. Net income for the fourth quarter of 2004, including net after-tax realized gains on investments of $16.1 million or $0.29 per share, was $143.7 million or $2.54 per share on a fully diluted basis. The operating loss for the fourth quarter of 2005 was $79.3 million or $1.42 per share. This compares to operating earnings of $120.8 million, or $2.25 per share on a fully diluted basis, for the fourth quarter of 2004. Operating earnings exclude net after-tax realized investment gains and losses and are calculated after payment of preferred dividends.
For the year ended Dec. 31, 2005, the net loss was $51.1 million or $1.56 per share. Net loss includes net after-tax realized gains on investments of $157.1 million or $2.86 per share. The operating loss was $242.6 million or $4.42 per share. Net income for the full year 2004 was $492.4 million or $8.71 per share on a fully diluted basis. Net income included net after-tax realized gains on investments of $78.1 million or $1.44 per share. Operating earnings for the full year 2004 were $392.8 million or $7.27 per share on a fully diluted basis.
Commenting on the full year results, PartnerRe President & Chief Executive Officer, Patrick Thiele, said, “2005 was an extraordinary year on many levels. It was the worst year in history for natural disasters with more than $80 billion in insured damage for the industry and approximately $900 million for PartnerRe. During 2004, which previously had been the record year for industry catastrophe losses, our five largest cat losses (four Atlantic hurricanes and the southeast Asian tsunami) aggregated $175 million, net of reinstatement premiums. Our current estimates, net of reinstatement premiums, for the five significant losses of 2005 are: Hurricane Katrina: $511 million, Hurricane Wilma: $174 million, Hurricane Rita: $88 million, Winter Storm Erwin: $61 million, and the European floods: $66 million. These events in total represent a very unusual frequency and severity, but not so unusual that they were outside of our modeled risk exposures nor our pricing.
“We believe that the results of 2005, while disappointing, are consistent with our role as a premier global reinsurer and with our longer-term risk/return model,” Thiele added. “We have grown our book value per share at an average annual rate of 11.3% over the last four years, despite a decline of 12.6% in 2005. In addition, we have returned significant capital to our shareholders through share repurchases and shareholder dividends. I am pleased to announce that we once again increased our annual common share dividend. This marks the twelfth consecutive year that we have increased our dividend.”
Net premiums written for the fourth quarter 2005 were $666.3 million, a decrease of 2% from the fourth quarter of 2004. Total revenues for the quarter of $1.1 billion increased marginally over the fourth quarter of 2004. Total revenues include $907.0 million of net premiums earned, net investment income of $94.1 million, and net realized investment gains of $57.9 million.
For the full year 2005, net premiums written were $3.6 billion, representing a 6% decline from 2004. Total revenues for the full year 2005 were $4.2 billion, including $3.6 billion of net premiums earned, net investment income of $364.5 million, and net realized investment gains of $206.9 million. Total revenues in 2004 were $4.2 billion.
Separately, the company saidt its Board of Directors has increased the annual common share dividend by 5 percent to $1.60 per share from $1.52 per share. Today, the Board declared a regular quarterly dividend of $0.40 per common share. The dividend will be payable on March 1, 2006, to common shareholders of record on Feb. 17, 2006, with the stock trading ex-dividend commencing Feb. 15, 2006.
The Non-Life segment reported net premiums written of $552 million for the fourth quarter of 2005, down 2% as compared to the prior year. The combined ratio was 119.9% for the fourth quarter compared to 94.5% for the same period in 2004. The Non-Life technical result was a loss of $115 million for the fourth quarter of 2005, primarily reflecting the impact of Hurricane Wilma. This compares to a gain of $93 million in the fourth quarter of 2004.
For the full year, Non-Life net premiums written were $3.2 billion, down 8% from the same period in 2004. The full year technical result was a loss of $316 million, compared to a gain of $384 million for the same period in 2004. The combined ratio for the full year was 115.9% compared to 94.3% in 2004.
Hurricane Wilma impacted the technical results of all of the Non-Life sub-segments and the ART segment. In total, the fourth quarter results contain approximately $174 million in estimated losses from Hurricane Wilma, down from the company’s initial estimate of between $190-$210 million, and total incremental charges of approximately $44 million for third quarter events. All estimates are pre-tax and after reinstatement premiums.
The U.S. Property and Casualty business, which represented approximately 25% of total net premiums written for the quarter, reported net premiums written of $170 million, down 5% over the prior year’s fourth quarter, resulting from prior underwriting year premium adjustments. Net premiums earned decreased 2% during the quarter when compared to the same period in 2004. The technical ratio for this sub-segment was 120.6%, compared to 97.9% in the fourth quarter of 2004, primarily reflecting the impact of Hurricane Wilma on Florida property covers.
For the full year 2005, net premiums written declined by 17% to $819 million. The full year technical ratio was 116.4% compared to 101.0% in 2004. The technical result for the full year was a loss of $136 million compared to a loss of $10 million in 2004.
The Global (Non-U.S.) Property and Casualty business, which represented approximately 17% of total net premiums written, reported net premiums written of $111 million for the fourth quarter of 2005 compared to $124 million for the same period in 2004. Net premiums earned during the quarter were $213 million, down 8% from $231 million in the prior year’s fourth quarter. The technical ratio for this sub-segment was 124.7% compared to 113.3% for the same period in 2004, reflecting the impact of Hurricane Wilma in Mexico.
For the full year, net premiums written were down 12% to $835 million. The full year technical ratio was 99.4% compared to 104.2% in 2004. The technical result for the full year was a gain of $6 million compared to a loss of $39 million in 2004.
The Worldwide Specialty business, which represented approximately 41% of total net premiums written for the quarter, reported net premiums written of $271 million for the fourth quarter, up 5% from the prior year period, reflecting the impact of reinstatement premiums and back-up covers related to the catastrophe losses, as well as significant new business in the energy and marine lines following hurricanes Katrina and Rita. Net premiums earned decreased 2% during the quarter. This sub-segment’s technical ratio was 105.5% compared to 68.1% for the fourth quarter of 2004.
For the full year, net premiums written were essentially flat at $1.5 billion. The full year technical ratio was 112.8% compared to 71.2% in 2004. The technical result for the full year was a loss of $186 million compared to a gain of $433 million in 2004.
The ART (Alternative Risk Transfer) segment comprises structured risk business, structured finance, weather related products, and the results of the company’s investment in Channel Re. The pre-tax contribution to net income, including the company’s interest in the earnings of Channel Re, was a gain of $1 million in the fourth quarter of 2005, in line with the $1 million gain in the fourth quarter of 2004. For the full year 2005, the pre-tax contribution to net income was a gain of $18 million compared to a gain of $2 million for the same period in 2004, primarily due to strong results in the weather and structured finance business lines as compared to the prior year.
Thiele added, “Following the exceptional events of 2005, PartnerRe was well-positioned for the January 1 renewal. We not only maintained or increased our participation in the majority of our renewed treaties, but we wrote $241 million of new business. The result is a high quality balanced book of business that has no overall increase in risk profile and that we expect will generate good profitability in 2006.
“Assuming a reasonable level of large losses, stable foreign exchange and interest rates in 2006, we continue to expect to achieve a mid-teens operating return on beginning shareholders’ equity and fully diluted book value per share growth in excess of 10% after dividends. This is in line with our long-term goal of delivering a 13% operating return on beginning shareholders’ equity over the cycle.”