PartnerRe Ltd. (PRE)

PRE 
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PartnerRe (PRE)

Q2 2011 Earnings Call

August 02, 2011 10:00 am ET

Executives

Costas Miranthis - Chief Executive Officer, President, Director, Member of Risk & Finance Committee, Member of Executive Committee and Chief Executive Officer of Partner Reinsurance Europe Limited

Robin Sidders - Director, IR

William Babcock - Chief Financial Officer, Executive Vice President and Member of Executive Committee

Analysts

Jay Gelb - Barclays Capital

Dan Farrell - Sterne Agee & Leach Inc.

Gregory Locraft - Morgan Stanley

Ron Bobman - Capital Returns

Cliff Gallant - Keefe, Bruyette, & Woods, Inc.

Brian Meredith - UBS Investment Bank

Matthew Heimermann - JP Morgan Chase & Co

Doug Mewhirter - RBC Capital Markets, LLC

Joshua Shanker - Deutsche Bank AG

Presentation

Operator

[Operator Instructions] If you haven't received a copy of the press release, it is posted on the company's website at www.partnerre.com, or you can call (212) 687-8080 and one will be faxed to you right away. I'll now hand over the conference to Ms. Robin Sidders, Director of Investor Relations at PartnerRe, who will begin the call.

Robin Sidders

Good morning, and welcome to PartnerRe's Second Quarter and Half-Year 2011 Results Conference Call and Webcast. As a reminder, our second quarter financial supplement can be found on our website at www.partnerre.com in the Investor Relations section by clicking on Supplementary Financial Data on the Financial Reports page.

On today's call are Costas Miranthis, President and CEO of PartnerRe; and Bill Babcock, Executive Vice President and CFO of PartnerRe. Costas will start with an overview of the quarter and then hand the call over to Bill, who will provide more details on the results. Costas will come back at the end of the call to provide additional commentary on the market, and we'll open the call up for question-and-answer session. I'll begin with the Safe Harbor statement.

Forward-looking statements contained in this call are based on the company's assumptions and expectations concerning future events and financial performance of the company and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. PartnerRe's forward-looking statements could be affected by numerous foreseeable and unforeseeable events and developments, such as exposure to catastrophe or other large property and casualty losses, adequacy of reserves, risks associated with implementing business strategies, levels and pricing of new and renewal business achieved, credit, interest, currency and other risks associated with the company's investment portfolio, changes in accounting policies and other factors identified in the company's filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking information contained herein, listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company disclaims any obligation to publicly update or revise any forward-looking information or statements. In addition, during the call, management will refer to some non-GAAP measures when talking about the company's performance. You can find a reconciliation of these measures to GAAP measures in the company's financial supplement. With that, I'll hand the call over to Costas.

Costas Miranthis

Thank you, Robin and welcome, everybody to our second quarter results. Once again, the main influence of the quarter was the level of catastrophe activity. We did not have events of the same magnitude as we saw in the first quarter, but the frequency of events caused significant losses during the quarter. As I'm sure you're all aware unusual tornado activity in the U.S., particularly during April and May, cost industry losses estimated to be well in excess of $15 billion. Consistent with our industry position in the U.S. market, we have net losses of around $89 million arising from these events. But it was also an active loss quarter outside the U.S. with wildfires in Canada and major aftershock on June 13 in Christchurch, New Zealand, and several other locally important losses impacting some of our low-layer covers in aggregate contract. We also saw net development of loss estimates relating to first quarter events, driven principally by a revision of our estimates with the New Zealand earthquake following at [ph] late in the quarter from some seasons to revise their own estimates of alternate loss. These revisions were significantly in excess of their earlier indications. While disappointing, we recognize the specific issues of the claim settlement process, which is complicated due to lack of access to red zone areas and potential uncertainty regarding the extent of coverage offered by the state pool. In addition, the June aftershock, which had a very similar footprint to the February event, and therefore, impacted to a large extent already damaged properties will make apportionment of losses to events more difficult. While clearly the catastrophe activity was above our expectations for the quarter, the remainder of our portfolio continue to perform in line or above our expectations. Losses reported during the quarter remained significantly below expectations, and we saw no evidence of an uptick in lost trends during the quarter. We continue to price and reserve for significant loss trends of longer tail lines but also continue to be surprised by how benign loss experience has been. A lot of reserves in aggregate continue to develop favorably, helped by losses developing below expectations. I will come back in the end and provide some more information on the June and July renewal environment. But before I pass on to Bill, I would like to comment on the overall catastrophe limits we deploy.

It is now about a year since we've brought the underwriting teams of PartnerRe and PARIS RE together. During this period, we have worked to further ensure a smooth and transparent position for a client to ensure that the total limits deployed in any single zone within a maximum risk appetite and finally, to optimize the shape of the portfolio by adjusting the exposures in particular persons and specific players. As a result of these actions, our deployed limits are approximately 20% lower than last year in top [ph] zones with greater reductions in some of the smaller zones. We continuously seek to optimize the distribution of the CAT exposures in our portfolio, and our risk appetite will be driven by the price relative to risk in each zone, with always within a disciplined risk management framework. With that, I'll pass it to Bill and I'll comment back at the end of the call to talk about the renewal.

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