PartnerRe sees continuing signs of higher retentions

PartnerRe Ltd. (NYSE: PRE) is reporting a slight decline of premium as of the Jan. 1, 2007 renewal season because insurers are continuing a trend of retaining more risk.
PartnerRe has indicated on its Web site that during the Jan.1, 2007 renewal season, it had written and bound approximately US$1.8 billion of estimated non-life premium.
“On a constant foreign exchange basis, that represents a 4% decline over total renewable expiring premium of US$1.9 billion,” the reinsurer reported on its Web site.
PartnerRe president and CEO Patrick Thiele said the numbers were a result of primary insurers retaining more risk. “Overall, we found the market to be orderly at January 1,” he said. “A significant amount of business — almost 10% of our renewable premium — left the reinsurance market as cedants continued to retain more risk.
“Despite this, competition at the reinsurance level was reasonable. Absent significant market loss events, we would expect competition in all lines to increase for the remainder of the year.”
The company noted renewable expiring premium of US$1.9 billion excludes policies remaining in process or which were extended for renewal later in 2007. Of this amount, approximately US$207 million, or 11%, was removed from the market as a result of cedants’ decisions to retain more of their business, or restructure quota share coverages to excess of loss treaties, which provide less premium.
PartnerRe said it declined to renew approximately US$125 million, or 6%, of expiring premiums “due to pricing or terms and conditions that did not meet the company’s objectives.”
New business totaled US$164 million, the company reported, with the worldwide specialty sub-segment having the greatest success.
Thiele said: “We are generally pleased with the January 1 renewals. While we wrote modestly lower levels of premium in the January 1, 2007 renewals, we were able to shift our capital to higher return, more capital intensive lines, and thus maintain a level of priced profitability that is generally consistent with 2006 renewals, and above our long term target. This shift to higher return lines was accompanied by a modest increase in portfolio volatility.”