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PartnerRe continues quest to be pure-play reinsurer

PartnerRe's transfer of its upstream energy insurance portfolio to Ark Syndicate Management continues a strategic refocus on reinsurance that the Bermuda-based company embarked upon after being acquired two years ago.

Agnelli family fund Exor completed its $6.9bn acquisition of PartnerRe in March 2016 after winning a bidding war with Axis Capital in August 2015.

Exor repeatedly made clear that it was attracted to PartnerRe because it offered a pure-play reinsurer, with its refusal to compete with its client base a core part of its competitive advantage.

As a result, PartnerRe has either shed assets that do not serve the reinsurance mission or has made acquisitions that do.

The upstream energy deal, announced on 8 March, is the most recent instance of the former, with PartnerRe's portfolio set to be transferred to Ark's Syndicate 3902.

The transfer applies to policies starting or written on or after 1 January and includes renewal rights for policies renewing after that. PartnerRe will participate in the portfolio as reinsurer to Syndicate 3902.

"The decision to transfer the portfolio aligns with our overall strategy to focus on reinsurance and reinsurance-like solutions that don't compete with our clients," said PartnerRe president and CEO Emmanuel Clarke.

PartnerRe in August agreed to sell PartnerRe Insurance Company of New York (PRNY) to Employers Group. While PRNY is essentially a shell entity, PartnerRe said the sale would advance its overall strategic recalibration "by streamlining its legal entities".

Six months earlier, on 31 March 2017, PartnerRe sold a team of underwriters and their book of US excess and surplus lines (E&S) and facultative property business to Everest Re.

PartnerRe seems to be making moves to fulfil the strategy every six or seven months. Before the transaction involving Everest Re, the company on 15 August 2016 discontinued PartnerRe Wholesale, the insurance unit that supported most of its MGA relationships.

The thinking at the time was that moving out of open market E&S in the US provided a further sign that PartnerRe does not view primary insurance as part of its strategy - although it may retain a number of MGA relationships where they write on E&S paper.

Meanwhile, when PartnerRe has seen an opportunity to add to its reinsurance scale, it has done so. On 3 April 2017, it acquired Aurigen Capital, a top-five life reinsurer in Canada based on recurring new reinsurance business.

Is the strategic refocus on reinsurance working?

PartnerRe fell to a $28mn operating loss for the fourth quarter that included a $120mn hit from California wildfires. By contrast, the reinsurer reported operating earnings of $125mn in the same period of 2016.

The company's non-life combined ratio picked up 12.1 points from the California wildfires as it deteriorated to an unprofitable 100.7 percent in the quarter from 89.6 percent in Q4 2016.

But Clarke sees bluer skies ahead, noting when announcing 2017 fourth quarter results that 2018 started "on a very positive note", with a strong 1 January renewal that included double-digit rate increases for North American property cat and improving profit margins in other specialty and P&C segments globally.

Honing its focus

PartnerRe has taken the following steps to refocus as a reinsurer:

  • 8 March 2018: Transfers upstream energy insurance portfolio to Ark Syndicate Management

  • 16 August 2017: Agrees to sell PartnerRe Insurance Company of New York to Employers Group

  • 3 April 2017: Completes acquisition of Aurigen Capital, a North American life reinsurer

  • 31 March 2017: Sells book of US excess and surplus lines and facultative property business to Everest Re

  • 15 August 2016: Discontinues insurance unit supporting most of its MGA relationships

  • 1 July 2016: Consolidates business units into three segments: P&C, specialty lines and life and health

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