It is business as usual at PartnerRe in spite of having to report a Katrina-impacted bottom line net loss of $288.7 million, the Bermuda-based company's chief executive suggested during a conference call this morning.
Patrick Thiele, the company's CEO, said that PartnerRe's Katrina losses, estimated at $510 million, represents roughly 2 percent of his company's estimate of industry reinsurance losses–"consistent with our share of global reinsurance market capital."
He said that PartnerRe believes total industry losses from Katrina–including commercial flood, offshore energy and casualty, as well as property–will fall in the $45 to $48 million range, with 55 to 60 percent of that falling to reinsurers.
Reflecting on his firm's $60 billion total industry estimate for all catastrophic events in the third quarter, he said: "For PartnerRe, these events, and particularly Katrina, are not a surprise for us, and will not change the way we manage our risks. We set our risk and pricing guidelines in anticipation of events of this size.
"We have reached a size and a level of diversification that allows us to withstand an extensive and unprecedented year of losses, and still maintain our GAAP capital on a year over year basis," he said, noting that the capital position is above last year's at Sept. 30. "We have adequate capital to respond quickly and decisively to an improving market."
Looking ahead to 2006, Mr. Thiele said, "We do see significant opportunity to grow premium without taking on huge incremental risk," predicting, for example, that U.S. windstorm prices would rise 20 to 45 percent and that catastrophe prices elsewhere would show double-digit increases.
He also foresees triple-digit price increases in offshore energy, and stable prices in casualty and automobile books after declines in 2004 and 2005.
"We expect to participate fully in an improving market," he said, noting, however, that PartnerRe is not likely to materially increase its exposure to U.S. windstorm risk or casualty business.
"We expect no change in our risk capacity or our risk appetite in the upcoming renewal season," he said.
During the call, analysts questioned PartnerRe executives about whether the company, like others, would seek to raise capital in response to rating agencies' increased desire to see more capital for the industry generally.
Chief Financial Officer Albert Benchimol responded that the possibility is being evaluated but won't be rushed into. While the company will consider rating agency trends that seem to be raising the capital bar, as well as renewal opportunities, he said he is also encouraged by the increased willingness of rating agency analysts to understand insurers' risk management models and incorporate them into ratings.
"We're not in a bad place. There's no panic around here. We don't feel like we need to rush into anything," he said, noting that internal capital and risk models continue to show strong capital adequacy for the company to support its risks.
On a per share basis, PartnerRe's $288.7 million net loss for the third quarter was $5.48 per share. In third-quarter 2004, the company reported net income of $83.2 million, or $1.46 per share.
Net premiums written for the third-quarter 2005 were $770.8 million, a decrease of 4 percent from the third-quarter 2004.
As of Sept. 30, total shareholders' equity was $3.1 billion.
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