As a result of more than $1 billion in catastrophe losses in the first three months of the year, Bermuda reinsurer PartnerRe announced on Monday a first-quarter net loss of $807 million.
Earthquakes in New Zealand and Japan in addition to flooding and storms in Australia were the main driver of catastrophe losses of $1.07 billion.
For Costas Miranthis, who succeeded Patrick Thiele as chief executive officer at the start of this year, the quarter proved to be a baptism of fire.
PartnerRe recorded an operating loss of $735.6 million, or $10.82 per share on a fully diluted basis, for the first quarter, considerably more severe than the $8.45 expected by a panel of analysts polled by Bloomberg.
On Sunday, the company had revised its estimate of losses from the Japanese earthquake and tsunami up to $730 million from its preliminary estimate of $500 million.
PartnerRe's shareholders' equity plunged by $1 billion during the quarter, to $6.2 billion at March 31. Book value per common share also fell to $82.50 compared to $93.77 at December 31, 2010.
Mr. Miranthis said: “During the first quarter, we witnessed an exceptional frequency of catastrophic events in international markets. As PartnerRe underwrites a globally diversified portfolio, the losses in Japan, New Zealand and Australia together led to catastrophe losses significantly in excess of our quarterly expectations.
“Despite heavy losses in the current quarter, we continue to believe in the value of geographic diversification of our catastrophe portfolio as a means of optimising our long-term risk — adjusted returns. The strength of our balance sheet has enabled us to absorb these losses and maintain a strong capital position.”
Mr. Miranthis seems the beginnings of price strengthening in the reinsurance market as a result of the huge catastrophe losses suffered by the industry.
“The frequency of recent events, as well as recent revisions in modelling tools, are leading many of our clients to reevaluate their view of risk,” Mr Miranthis said. “While the pricing reaction in loss affected areas is predictable, the broader reevaluation of catastrophe risk is beginning to change the pricing dynamics in all property catastrophe markets.
“While clearly we are at an early stage in this process, the initial indications we've received are encouraging. For longer tail lines, we do not have the same pricing momentum, but we have seen a bottoming out in rate levels and encouraging signs that opportunities will arise as economies begin their recovery.”
PartnerRe's combined ratio - which reflects the portion of premium dollars spent on claims and expenses - was 193.7 percent and included 115.8 points related to catastrophes. The company reported 16.1 points, or $142 million, of net favourable loss development on prior accident years.
Net premiums written were down 18 percent to $1.5 billion, primarily related to the Company's decision to cancel and non-renew business in order to reposition its portfolios following the integration of Paris Re, and also reflects a continued competitive pricing environment in most lines. Foreign exchange decreased net premiums written by two percent.