Executives
Robin Sidders - Director, IR
Patrick Thiele - President and CEO
Analysts
Jay Gelb - Lehman Brothers
Vinay Misquith - Credit Suisse
Doug Mewhirter - Ferris, Baker Watts
Ron Bobman - Capital Research
Larry Greenberg - Langen McAlenney
Thomas Cholnoky - Goldman Sachs
PartnerRe Ltd. (PRE) Q1 FY08 Earnings Call April 29, 2008 10:00 AM ET
Operator
Before we begin the call, I would remind all participants that they are in a listen-only mode. [Operator Instructions] If you haven't received a copy of the press release, it is posted on the Company's website, www.partnerre.com, or you can call 212-687-8080 and one will be faxed to you right away. This call is being recorded. I will now hand the call over to Robin Sidders, Director of Investor Relations at PartnerRe, who will begin the call.
Robin Sidders - Director, Investor Relations
Good morning and welcome to PartnerRe's First Quarter 2008 Earnings Conference Call Webcast. You will notice a change in our press release format this quarter. We reduced the number of financial pages as we've moved to a quarterly financial supplement. If you haven't already accessed the supplement it can be found on our website at www.partnerre.com in the Investor Relations section by clicking on the supplementary financial data on the financial reports page.
On today's call are Patrick Thiele, President and CEO of PartnerRe; and Albert Benchimol, Executive Vice President and CFO of PartnerRe. Patrick will start with an overview of the first quarter and then hand over to Albert who'll provide more details on the results. Patrick will conclude with some additional commentary and then will open the call up as usual for a 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, 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 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 statement.
In addition, during the call management will refer to some non-GAAP measures when talking about the Company's performance, you could find a reconciliation of these measures to GAAP measures in the Company's financial supplement. With that I will hand the call over to Patrick.
Patrick Thiele - President and Chief Executive Officer
Thanks Robin and welcome everyone to PartnerRe's first quarter call. We had a very interesting quarter to start 2008. Overall results were good and consistent with the trends that have been in place for some time, that being increased retentions and reduced demand in the non-life marketplace, declining pricing and current underwriting year price profitability, significant volatility in the capital markets and continuing weakness in the U.S. dollar.
For PartnerRe we also saw some unusual developments. First U.S. agriculture market grew dramatically driven by rapidly increasing food prices which positively impacted our net written premium by $40 million plus in the first quarter. That combined with foreign exchange impacts and renewal of the MCR book meant that our net written premium grew by 11% and this in a softening cycle, when most of our reinsurance industry peers are reporting significant volume declines.
Second the market had significant large loss activity in the quarter, by our estimates something in excess of $8.5 billion. For us this loss activity was contained within our Global P&C, Global Specialty business unit. U.S. casualty losses including D&O losses continue to develop as expected and obviously the cat unit had an excellent quarter.
Third on the assets side, we held up very well in the tough quarter for the capital markets. Our diversification and conservative asset allocation allowed us to deliver positive total returns for our capital market exposures. Investment income continued to show strong growth because of our healthy cash flow. And finally as a consequence the reorganization of our European legal entities, we incurred a one time tax charge of $46 million in the quarter.
We now have what we believe will be a more effective an efficient tax structure, which we believe will result in a lower effective tax rate over the next 12 to 18 months, all else being equal. Despite all of these moving pieces the bottom-line is that we grew our fully diluted book value per share by 4.4% or almost $3 in the quarter and by 21% year-over-year, which is one of the best performances in the industry.
While some of the increase came as a result of weakening U.S. dollar, we believe the increase points to PartnerRe's strong strategic positioning and to our superior execution.
With that Albert?
C: Albert Benchimol: Executive Vice President and Chief Financial Officer:Thank you, Patrick, and good morning everyone. As Patrick just noted it was an active quarter on many fronts. Our results reflect, on the one hand, the expected lower profitability of business written at generally lower prices over the past few month and the larger number of large loss event around the globe. While they also display the favorable effect of continuing strength in reserves and prudent investment activity. Our non-life operations showed growth in both premiums written and earned, but much of that was due to the currency effect.
On a constant exchange rate basis, net premiums written would be up 4% while net premiums earned would be up 2%. This positive growth in light of a shrinking and increasingly competitive market, is attributable to our writing more agriculture business in the U.S. and the benefits of the renewal rights transaction we closed at Group Monceau last year. Otherwise premiums return would have been down year-over-year. Our loss ratios and technical results reflect the effect of lower pricing as well as a higher midsize losses that... higher than we had experience in the last few years, but also incorporate the beneficial impact of favorable development from prior years.
The U.S. segment showed the largest growth in premium, entirely on the strength of new agricultural business. Absent agriculture, net premiums written would have been down from 2.4%. In Ag we've underwritten contracts estimated to bring in $285 million of annual premium this year as compared to $124 million in 2007. This increases our exposure to commodity price risk for crop such as corn, wheat and Soybeans, in addition to draught and other typical agricultural risk. However, this is a well structured risk assumed within the Federal Crop Insurance Program. And we do this risk class to be less correlated with our traditional risks. It therefore enhances portfolio stability at a time when softening market conditions can reduce diversification in our portfolio.
Our U.S. technical results point towards our prudent view of the subprime D&O loss potential. We are both reserving the current year at higher levels and cautious about releasing reserves from prior years in specialty casualty. The global non-U.S. P&C sub-segment is operating in a most competitive environment. The premium growth rates are entirely due to FX.
Despite the benefits of the MCR renewal rights transaction, premiums would be flat year-over-year without the impact of FX. The technical ratio is up to 99.3 from 92.7 in last year's first quarter, exhibiting the effects of a substantial level of midsize losses as well as lower pricing and profitability in the softening market.
The Global Specialty segment is also competing in a tough environment. We were able to pursue opportunities including some relating to the MCR renewal rights transaction, and thus showed an increase in premiums written from those lines.
The price profitability is down across the board. Quarterly net premiums written increased by 17% from the prior year and net premiums earned were flat. FX contributed close to 7% to both net premiums written and earned.
The technical results are down meaningfully from the prior year. The products are more competitive pricing, lower prior year release... reserve releases and more midsize losses.
The Catastrophe market, on the heels of two outstanding loss-free years is increasingly competitive. Premiums written are down 7% year-over-year but would have been down 12% without the benefit of FX. However the estimates of large losses allows for another strong technical result of $68 million as compared to 55 million in last year's Kyrill-impacted quarter.
The largest events this quarter were windstorm Emma in Europe, the winter storm in China, the floods and storms in Australia, which together we estimate aggregated 3.6 billion. Our cat unit experienced less than $10 million in aggregate losses on those events. The strong technical result is also noteworthy in as much as it was achieved with $17 million less earned premium this quarter compared to the 2007 period. This decrease is due to, both, lower earned premium expected for the year, as well as modest changes in the timing of earned premiums. Gulf of Mexico and hurricane risk represent a larger proportional of our cat premium in 2008. And since we earned premiums with these risks substantially in the second half of the year, our cat premiums will be a bit more back-loaded in 2008 than they were in 2007.
Putting it all together, the strong contributions from the U.S. in catastrophe were offset by lower results in Global P&C and Global Specialty leading to a non-life combined ratio 92.3 for this first quarter as compared to 84.8 last year. For those of you who have performed the variance analysis, you have noted that our accident share loss ratio excluding reserve releases and announced cat losses increased by about 12 points from 65% last year to 77% this year. This 12 points difference can be explained by 5 point increase reflecting margin compression due to lower pricing, another 5 point due to the unusual frequency of midsize losses, and about 2 points due to the business mix, as we earned less premium in the low loss ratio cat business and more premium in the higher lost ratio casualty and long-tail business.
We believe the increases in loss ratio due to margin compression will stay with us until the market turns, while the mix effect should reduce over the year, as we earn out our cat premium. As for the impact of losses, it's the nature of our business that they are volatile and inherently unpredictable.
For the life segment, net premiums written of $170 million were up 15% from last year's first quarter with growth reported in all lines of business. FX contributed 10% to premium growth. Our life segment allocated underwriting results, which includes allocated investment income and operating expenses was $2 million for this quarter compared to $7 million for the prior year. The major driver of year-over-year difference is the GMDB line. In this year's first quarter, we booked $7 million increase to GMDB Reserves to reflect a decline in French equity market values. Given the trends we see in non-life we are hopeful that our life segment will provide growth and diversification opportunities even as our non-life segment faces increasing competitive pressures.
As part of our new segment classifications started in the fourth quarter of '07 our investment in capital markets activities are included in the corporate and other segments as are our corporate activities. The capital markets group delivered good operating results in a very difficult market, our asset allocation continue to service well, as we had reduced exposures to most of the underperforming risk classes. Our fixed income portfolio had positive results, reflecting our high asset quality, low credit exposures and continued avoidance of CDOs, CLOs and subprime residential mortgage securities.
We remain cautious on public equity markets. We had reduced equity exposures throughout 2007 and again in the beginning of 2008. These proved wise decisions in retrospect, as equities fell globally. We have $845 million of common stock, ETFs and index funds allocated among a core U.S. portfolio, an international portfolio and REITs. Separately, we also have $244 million of externally managed bank loan funds that are classified as equities. These two assets classes combined comprise the $1.1 billion listed as equities in our balance sheet.
A casual glance on our balance sheet may have missed the reduction in equities. That's because there were presented under both the equities line and the trading securities line at December of '07 but now they are combined on a single line of equities after the adoption of FAS 159.
Within private markets the execution of our ILS strategy is very promising, while we do not issue insurance-linked securities, we view them as an opportune way to shape our overall reinsurance risk portfolio. We also believe that we have a competitive advantage in the evaluation and management of an ILS portfolio and are trading these securities on our own accounts.
Of course any exposure assumed in the ILS portfolio is captured in our cat exposure limits. We have $68 million in strategic investments. Interest and earnings of equity investment were $1 million this quarter. This is less than the $3 million booked in the first quarter of '07 which included results from ChannelRe Holding which as you know has since been written down to zero.
In Principal Finance, we have approximately $320 million of exposures, the bulk of which are unfunded risks. Our major risk classes are esoteric asset-backed or structured debt securities. Although, we may also acquire distressed assets where we believe the price provide attractive risk return opportunities. The bulk of the volatility in returns for this asset class is expected to derive from changes in market spreads, which ultimately we expect should zero over time as the securities perform and payoff at maturity.
Occasionally, however, we will have volatility driven by impairment charges, but we would expect these to be significant fraction, a small fraction of earned premium interests over any extended period of time.
Overall, in the first quarter of 2008, the capital markets group contributed $148 million to pre-tax income, including allocated investment income of $124 million and net realized and unrealized gains of $25 million. This last $25 million of realized gains includes the impact of the adoption of FAS 157 and FAS 159 for substantially all of our invested assets with the expectation of investments held under the equity method of accounting and those carried at Investment Company accounting. This means that you will see in our income statement the full effect of all changes in the market value of substantially all of our invested assets. Whether up or down, whether realized or unrealized. While the adoption of FAS 157 and 159 will generally add volatility to net income, it will have no impact on book value as that metric already reflected the market value of assets and we will continue to exclude realized and unrealized gains from our calculation of operating income.
Given the adoption of FAS 159, the GAAP accounting entries for our investment activities provide a pretty good approximation of the total return of our investments in capital markets activity. For example for the first quarter of '08, if we add portfolio investment income, seasonal premium receive for assuming credit market risk. The FX impact as well as realized and unrealized changes in the market value of both public and private market exposures and we divide that by the average balance of our notional exposures during the period, we would get a total return approximating 3.1%.
Looking forward there are significant opportunities to acquire good quality assets at attractive levels. We would expect to assume more credit risk in our fixed income portfolio and increase the level of principle finance and other strategic investments in our private market portfolio. As we are today seeing risk return opportunities not available since the last credit crunch in 2002. After we add back the life investment income, our consolidated net investment income was $137 million for the quarter. This represents 15% increase over the first quarter of last year, primarily due to positive cash flows, higher corporate bond investment rates and a stronger euro versus the U.S. dollar.
Moving on to other items on our income statement. The increase in operating expenses is explained by higher compensation expense, including the accelerated expensing of equity grants for employees who are eligible for retirement as well as FX. We should take a little time to discuss the tax expense, as it included a number of unusual factor.
The total tax expense was $43 million for the quarter, comprised of a charge of $27 million against operating income and a charge of $16 million against net realized investment gains. The key drivers of the tax expense this quarter are the tax impact of our EU transaction and the impact of foreign exchange.
As Patrick noted at the beginning of the call, we had a non-recurring tax charge of $46 million in the quarter due to the internal transactions we consummated in relation our European reorganization on January 1st. This is in the middle of the $35 million to $55 million range we published in our 10-K. Of the $46 million, $40 million are considered operating and $6 million non-operating. Separately, excluding the impact of our EU transactions, we also enjoyed an operating tax benefit of $13 million this quarter. This was caused by FX-driven changes in local carrying values of inter-company balances. Since most of the inter-company balances are eliminated in consolidation, they do not have major impact on pre-tax income, but we will some times see a large tax expense or benefit depending on which direction the currencies move against the various local balance sheet. This causes some quarterly volatility in taxes, but it generally even out in the long run. We expect our normalized effective operating tax rates to be low... to be lower going forward due to a more efficient tax structure. Thus absent, large Cats and movement in foreign exchange, our effective tax rate for the full year of '08 will remain within our historical range of 10% to 15%, now was standing the unusual first quarter entries.
Putting it all together operating income was $110 or $1.98 per share. Net income was $129 million or $2.16 per share. The decline from the prior year is explained by lower pricing, a higher frequency of losses and higher tax charge. However comprehensive income, which substantially captures all items that affect book value, was $190 million.
Let's move on to the balance sheet which grew this quarter $17.3 billion due to the growth in asset values, cash flow and the traditional impact of the January 1 renewals. Total investment in cash stand at $12.2 billion compared $11.6 billion in December 31 of '07.
The growth in the quarter was due to new cash flow, reinvested portfolio income and increase in the market value of the fixed income securities and FX, partially offset by decreases in the market value of the equities. Our new financial supplement contains a fair amount of detail on our portfolio composition although the asset allocation at March 31st was generally similar to the allocation at December 31 of '07. There were small shifts in the portfolio, based on actions to reduce our equity holdings and to begin to increase our exposure to spread product. Our gradual increase in exposure to credit is evidence by a reduction of AAA rated securities from 65 to 66% of the portfolio.
However the overall credit quality of the fixed income portfolio remains at AA. Our gross Non-Life reserves are 17.6 billion at March 31st. Changes from the prior period reflect normal on going underwriting activities and claims payment. Prior year reserves were reduce by $117 million this quarter, of which 30 million was due to a downward revision of earned premiums from prior periods.
As usual the net favorable development in the quarter is the result of new information and not to any change in our reserving processes or philosophy. In the following interest rate environment in the first quarter, the time value on money in our Non-Life reserves which is discounted at the quarter end risk free rate, decreased by $69 million to 1.53 million. The inter-play between the impact of interest rates on our fixed income portfolio on the asset side and the Non-Life reserve provide stability to economic value of our company.
Total capital was up 2.9 % for the quarter and 11.8 % year-over-year. Book value per share as Patrick noted grew 4.4% in the quarter and 21.4% year-over-year and stood at $70.93 per diluted share at March 31, '08. During the quarter we repurchased a 1880,660 in the open market for approximately $15 million. We currently have about 4.3 million shares remaining under our current repurchase authorization. As some of you may know within capital structures we have two securities that will mature this year. Our range forward contract equity contract entered in the fall of 2005 will mature in October and our $220 million bank debt matures at year end. We will be considering alternatives to amend extend or refinance these reductions prior to their maturity.
And with that I will turn the call to Patrick.
Patrick Thiele - President and Chief Executive Officer
Thanks Albert and now the forward-looking part of the call. I usually talked about market condition at this point but there really isn't much new to say virtually all of our lines of business and geographies are becoming more competitive with prices declining. Most recent example was the April renewals in Japan, Korea and China where prices continue to erode and as a consequence our exposure risk to wind risk in Asia continues to decline. I really don't see any change in this competitive environment so for this year, nor for January first renewals next year.
This environment will continue be our reality for sometime forward. Instead of talking about the market conditions I want to say a few words about how we planned a deal with this environment over the nearer and near and intermediate term. These types of condition the company is distinguish themselves and plan the seeds of success for when the market trends upwards sometime in the future.
First risk management and diversification are even more critical than ever in softening markets. Ordinarily we worked to maintain as much our hard one diversification and re insurance as possible during these time. This means that we will continue write lower our OE business in diversifying lines which combined with more attractively priced business and catastrophe and casualty should produce the combination with price returns at or above our long terms targets in 2008.
And we will not improvise our underwriting standards as the terms and conditions. invested terms and conditions. You saw the initial results of the strategy in the first quarter, with the acquisition and renewal rights in the international reinsurance business of MCR which led to high single digit ROE but good diversifying business and this renewal velocity meant that we are able to hold our premium flattish in a declining market.
We believe we are making the right and rationale trade off between short and long-term profitability by this approach. We have maintained our position with our clients that will provide us with business that meets our long-term profitability targets over the complete cycle.
Second we will not cut back on exploring new lines of business or new geographies, we will continue to invest in opening up in new areas like China and Brazil and expanding our participation in the U.S. regional market and in the Ag market. This will inevitably have a cost attached to it in the short-term but will pay dividends for us in the longer term.
Third, we will likely utilize more of our capital in the capital markets, we built our internal capabilities to the point that I am very confident and our ability to assess and value opportunities here and I know the market is moving toward us as risk is repriced a number of asset class. Hopefully this will translate into rising investment returns.
And finally if we generate more capital than we need to maintaining and building our risk portfolio, we will use it to repurchase our shares assuming the stock price is at a reasonable premium to economic value and that the capital markets are healthy.
PartnerRe is not immune to market trends, we are experiencing falling levels of underwriting year profitability. But we think that if we are successful executing the task discussed and we think, we will be, we will have greater stability than many of our peers with no give up in relative profitability and we will be very well positioned to participate in any market upturn, whenever that occurs.
We continue to target a 10% growth rate in our economic and GAAP book value per share. We have exceeded that over the last five years, over the last three years and over the last two years and I expect to achieve again 2008 borrowing a large number of major loss events. And we will do that without increasing the overall risk profile of the company.
With that I will open the call up to questions. Operator we are ready for the first question.
Question And Answer
Operator
Thank you Sir. [Operator Instructions] And we'll hear first from Jay Gelb with Lehman Brothers.
Jay Gelb - Lehman Brothers
Thanks and good morning. First I was hoping to comment on your view of the shifts in the Florida range on its mark to between the changes perhaps coming down the line from the Florida Hurricane capacity fund is all citizen how much demand could accurate in the market and what is Partner's appetite for participating?
Unidentified Company Representative
We don't have much argument with the numbers are being thrown out there, I think most people you potentially $2 to $3 billion of increase the limits. It really was an issue for PartnerRe when they cut the moderate reinsurance but in the market place because of the socialization of the Florida Cap market. So we don't really expected to have a significant positive impact upon us if we do open the market up again. Florida only homeowner only business is not under very attractive line to us and I assume we would continue to be quite prudent in our under writing of that. I think the one wildcard in this one is in fact how much of that increased demand will be met by catastrophe bonds as suppose to be traditional excessive loss product there seems to be an appetite in the capital markets and some of hedge funds over Florida homeowner only risk.
Jay Gelb - Lehman Brothers
Okay, thank you. And then separately on the tax rate, I'll just to make sure I understand what's your outlook for the effective tax rate on operating basis for the remainder of 2008
Unidentified Company Representative
Well, always the effective tax rate in Q1 was 18, we are going to get back within our range, so I wouldn't be uncomfortable with a 10% rate for the rest of the year assuming of course nothing unusual in terms of catered distribution of earnings or FX.
Jay Gelb - Lehman Brothers
Okay and with that hope through for 2009 as well, would think?
Unidentified Company Representative
I think that's right I think that as we look forward, this new structure in Europe should give us a shift down in the range that we would utilize and at this point I don't know if we are going to tell you 7.5 to 12.5, 8 to 12, 6 to 13, but clearly we take on average, 3 to 4 point shift.
Jay Gelb - Lehman Brothers
Great. Okay, and then just a last one if I could, you mentioned on the agricultural business that is, increases your exposure to commodity risks, could you explain that, obviously I know, agriculture is, but explain how that works from insurance prospective?
Unidentified Company Representative
There are a number of different structures, but one of the product, is essentially a total yield returned product, you ensure the net value of the harvest so that you take the actual harvest volume and you multiply that by the price at its available at the end of the year and the volume is what it is and the price is the average daily value of the futures on November for December delivery. You set the prices and the estimates for that in March of the current year, and the reason it works that ways, that historically if you have a really bad yield in the harvest, the prices go up, so that tends to stabilize and like wise if you have a very strong yield in the harvest it has a negative impact on prices so this is a structure which initially was targeted to provide stability in the returns.
But obviously given where the commodity prices are now, there is a little bit more of commodity exposure, that said it these are generally well structured list because there is a substantial retention generally at the minimum of 20% before there is any claim on these programs and these programs are subsidized and backstopped by U.S federal government so the range of out comes in these lines of business is actually within a reasonable range, and as I said in my prepared remarks what's good about this is when we look all of the risk factors that we have in our portfolio, we certainly don't have lot of commodity price risk in there, we don't have that much Ag type risk, the Ag risks at the which are generally droughts do not curly with our catastrophe book, so net we think it actually enhances the diversification of the portfolio.
Unidentified Company Representative
Because it was significant shift in our portfolio, and you certainly saw that and the net written premium percentages and the supplement, we thought important that the shareholders understand that factor isn't the risk factor our over all portfolio and slight punch up, commodity prices on my screen nowadays.
Jay Gelb - Lehman Brothers
Fair enough thanks.
Operator
We are going to our next question from Matthew Heimer [ph] with JPMorgan.
Unidentified Analyst
Hi, good morning everyone, the instructor is always a couple of follow-ups though on one was the fifth 500 basis point increase that you are picking in your loss ratios just on year-on-year basis, you mentioned you didn't see any change in while you only saw good news with respect to new information versus all of given reserve, I guess if you could just is everything there just price at this point from your perspective?
Unidentified Company Representative
We don't think there is has been significant change in the underlying loss run, again it gets a little complicated because we're continually re-estimating our starting point over which we calculate the loss trend and that is actually in that number and that's why you saw in fact at the U.S. business unit had a relatively well contained increase in our loss ratio in the first quarter. But the bulk of it is price, if we are seeing a 3% or 4% loss trend in the industry which we are and prices are going down by 3% or 4% which is kind of a minimum expectation one would have to believe that the loss ratio is going to significantly increase, and the underlying loss ratio should significantly increase in 2008.
Unidentified Analyst
Okay. Can you just remind me how that contrast with how you initially picked the business last year...year-on-year '07, '06?
Unidentified Company Representative
Well just to give you a sense of it, if it were simply the pricing and we did not have favorable development. Our loss ratios will actually go up more this year. The reality is that the favorable trends where we readjusted the beginning assumption if you would, actually is factored as a reduction to the deterioration. So it could have been 7 points or more, if it weren't for the fact that we were factoring in the favorable loss trend.
Unidentified Company Representative
Yes, there is no question that the favorable trends from prior year this quarter are approximately what they were in our estimation last year. So the benefits of the prior year trends are equal year-over-year. The difference is that the deterioration in pricing has been accentuated in the first quarter of '08 versus the first quarter of '07.
Unidentified Analyst
Okay. That's helpful the other question I had was Patrick, I guess your commentary seems not that you are normally an outrageously bullish character with respect to your outlook, but it seems to be a little bit more conservative than maybe it was at year end and I guess on was there any think unusually you sound first quarter I think your comments was reflect a price on that a usual versus what we played other places but I guess you seeing the heavier make you more nervous?
Unidentified Company Representative
We made a comment of on a January 1st renewals and we publish our January 1st renewals and thought in fact the January 1, renewal was as we said were price reasonably well overall the portfolio with all those price to kind of mid teens early I think there has been some slight acceleration and price decline since then which probably leads me to be a little more realistic about the rest of the prospects for the year, again we environment that we can continue to find and actually build a portfolio that meets our return guidelines by after become a little more difficult.
Unidentified Analyst
Okay, that's helpful and then I guess the last comment was there's clearly been a lot of... seasonally size individually this class is globally and then radically was an issue and then quarter but I guess what your stands as the market that observing most of these losses because it fairly doesn't appear that its really hitting on everybody equally?
Unidentified Company Representative
No I don't think it will the both of these loses were property losses obviously but they won't show up in a lot of cap losses 50% to 60 % was stay with the insurance companies, but there is still probably release $4 to $4.5 billion which could get into reinsurance market place, it was very well spread across the world there is probably some more propounded in outside United States then inside the United States so you see a little bit more with the international property reinsurance and number of these line so lot of more energy related, engineering related to be frank they are running a lot of minds and platforms for and the in the real obviously given commodity prices so it's happening is as you run minds and plans full out they tend to break little bit more often and then two is the business interruption the losses tend to go up because of this size because of the commodity prices being up so high. Those type of losses tend to stay and as I said first in the insurance market place within properly get into the larger direct reinsurers about perhaps a little bit more than the traditional U.S reinsurance marketplace and probably ends up in little bit more.
Unidentified Analyst
Okay, just one follow up on your comment with respect to the energy and particularly if I recall correctly one of the big changes post the energy losses of '04 and '05 was because commodity prices were already rising at that point was a change in business interruption coverage.
Unidentified Company Representative
That was primarily true for rigs in the Gulf of Mexico.
Unidentified Analyst
Okay, has that help since then I guess was my question I was just trying to give?
Unidentified Company Representative
Yes.
Unidentified Analyst
Alright.
Unidentified Company Representative
Thank you.
Operator
We'll hear next from Vinay Misquith with Credit Suisse.
Vinay Misquith - Credit Suisse
Hi, good morning. On your top line growth in your U.S segment I see it that was equally or it has casualty and your property book if you could add some color on how you manage to grow that book business in Ag book?.
Unidentified Company Representative
I think it was primarily the Ag book. I think the net rate premium was up approximately $40 million in the U.S portfolio.
Vinay Misquith - Credit Suisse
Sure, but I am also looking at the casualty line and its I think $159 million this quarter versus $109 million last year so it seem well to grown that book of business. I just want to have that?
Unidentified Company Representative
Yes that was not that much actually we last year we had approximately 146 million all in versus $158 for casualties so that's not a huge number, likewise properties 46 to 51. I think it's a couple of things that are happening and effect just part of our first quarter review, we were [audio gap] get of interesting feedback from our college and as much as we think our positioning in U.S. market continues to improve. I think our ratings and market positions are such that in some cases where we've seen some programs shrink, we were able to hold our own either in terms of the line price of the dollar side. I do believe that the experience that we've anecdotally, with regards to the first quarter is that our position in the U.S. relative position in the U.S. continues to improve.
Unidentified Company Representative
It was some shift in the make up of that under writing little bit more excess in umbrella and we're certainly writing less the D&O.
Vinay Misquith - Credit Suisse
Sure and on the question of capital management this quarter we saw very low buybacks I am just curious why you didn't buy some more stock this quarter?
Unidentified Company Representative
I think the bottom-line is that capital a excessive capital markets strategy. I think it's depended on healthy and response of financial markets. You give back the stop because you expect that when you do needed to the market [audio gap] easily give it back to you. Frankly, we've our concerns about the... that the health and resilience of the capital markets and I think that right now I grab to hold on to the stock a little bit longer until I've confidence that the market will give it back to us at a reasonable price. Right now as you see anybody who needs capital tends to get dinged a very significant discount, and I think that our shareholders would not be well served if we bought back the stock now, only if God forbid something happens and we need more capital and we have to issue at a significant discount. So I would like to wait a little bit longer, get a better sense of the market are healthy and then start being becoming a little bit more comfortable with an active capital management strategy.
Vinay Misquith - Credit Suisse
Terrific. Your forward sell agreement I believe matures or in the last quarter of this year correct and I think you will be issuing about 6.7 million shares, so will you be able to buy back some stock then if you have to issue those fresh shares then?
C: Albert Benchimol: Yes we are now entering the world of... of a number of different permutations Vinay [ph]. We don't necessarily have to issue the shares and so, there are numbers of different options that we are looking at, if we were to extend if for example there would be no issuance, we would just be pushing back the maturity, we could arguably settle at net if we wanted... if we wanted to just come out at maturity, we could issue the shares and buy them back, there are lot of different options Viany [ph] and at this point of time the only thing that I can say is you can count on us to do, what we feel is best for the shareholders, but there are lot of opportunities and lot of that also depends frankly on what's available in the markets. The markets today are very tight, very difficult as we get closer to November, there may be different opportunities available to us.
Vinay Misquith - Credit Suisse
Fair enough thank you.
Operator
Next from Ferris, Baker Watts with Doug Mewhirter.
Doug Mewhirter - Ferris, Baker Watts
Good morning guys, most of my question have been answered, going back to your loss... your losses in the global P&C, how much did you record any appreciable losses from Emma in the quarter?
C: Albert Benchimol: Negligible.
Doug Mewhirter - Ferris, Baker Watts
Okay and with the larger amount of medium losses that you say, I am surprised that maybe at least in Europe, the rates aren't maybe solidifying or stabilizing just a bit, given I have seen some reports of your competitors also express relative surprise, what happened in the quarter, at least at the primary level or on the working layer level and so you think this isn't enough to at least maybe stem the run away decline of pricing in that area?
Patrick Thiele - President and Chief Executive Officer
Well this wasn't just a European phenomenon there were obviously Asian as well as Latin America losses in here. There is a bit... all these losses are spread pretty well from a geographic standpoint and also from a line standpoint. One would hope that at some point in time, they would have a positive impact upon people perception of risk and therefore the appropriate pricing for that but in Europe almost all of the business gets transacted January 1st and if you would expect to see a significant price hardening or at least a stabilization of the market you are going to have to wait until January 1st of 2009. And my concern on that would be is that, if the rest of year is loss free, in fact this will be forgotten by the time the renewals come through.
Doug Mewhirter - Ferris, Baker Watts
Okay. Thanks that's all my questions.
Operator
We will take our next question from Ron Bobman with Capital Research.
Ron Bobman - Capital Research
Thanks my question was asked and answered.
Operator
Thank you. We will now hear next from Larry Greenberg with Langen McAlenney.
Larry Greenberg - Langen McAlenney
Thanks and good morning. Just two quickies, Albert you mentioned that the Cat premium earned will be a little bit more backend loaded this year, are we just talking a couple of points or could it be more meaningful than that and then secondly can you just elaborate a little bit on the... the favorable development in the U.S. global line, excuse me the global non-Specialty area which had a big reserve release this quarter.
C: Albert Benchimol: Yes, the reserve release in P&C was a little bit higher than... had been higher than historically. Again if we look at this data, every quarter we look at the trends the actuaries take a look at the, at the risk period I cant say that anything other then just continuing to see the trends. The one thing probably is that there is probably been some settling of the motor business, which of course which would favor ongoing reserve releases but other then that Larry, its' just new data. With regards to the timing its really, its really 2, 3 point somewhere between 2 and 4 point, would be more last year, sorry, more in the second half of this year then last year. I think that's an important point on the excess of loss motor. I think for the last two or three years we've talked in a number of conference calls in fact that we found that line of business particularly under price then that loss trends were continuing to accelerate, specifically in French excess of loss motor and also in the UK. What we've seen here and the last six month to year is a moderation in that, we are beginning to see losses being reported at little bit less then we had expected, and therefore we don't have to continue to pump reserves into our older years. You recall that excess motor in Europe is the single longest line, duration line of business, that we write as company so the lack of pounding your head against the wall, I guess is a good sign.
Larry Greenberg - Langen McAlenney
So given the duration of those reserves, I mean this could be leverage change and thanks.
Unidentified Company Representative
Yes.
Larry Greenberg - Langen McAlenney
Okay. Thank very much.
Operator
[Operator Instructions] Next you will hear from Tom Cholnoky with Goldman Sachs.
Thomas Cholnoky - Goldman Sachs
Yes I just have two quick questions first Albert you were kind enough to tell us what the midsize impact to midsize losses where on an aggregate consolidated basis, can you give us some sense of how that might have been impacted the ratios of the individuals segments in this prices losses?
C: Albert Benchimol: Well the short answer is nothing in Cat in the U.S. With regards to global PC and to... I am afraid that I can't give you an exact number because depending on the various lines of business some of which were underwriting year '08 some of which was under writing year '07 and depending on how much of it was absorbed by actuaries and the attritional losses versus unusual, it's actually a little bit more complicated and than just saying X points. So if you don't mind I'd rather say that our actuaries view of the current quarter is the way it's presented and not break it out between attritional and the mid size loses.
Thomas Cholnoky - Goldman Sachs
Okay. And then I guess let me just follow up on your comment I guess without your lack of buying back stock in turbulent markets. I guess I am a little surprised I would've thought that turbulent markets are ones where the market is probably under valuing your shares and that would give you an opportunity to buyback and you know its not as though your capital strength at this point so need making a call on the equity markets that you thinks there is a lot more downside risk in here and that you and FX will be able to buyback shares at a significantly greater discount where they are trading today?
Patrick Thiele - President and Chief Executive Officer
I don't think we are doing that, I think what we are seeing is that we intend to buyback shares over time. But you have to give us a little bit of flexibility in the management of that share repurchase if in fact there is a whole series of criteria that we go through, when we push our share repurchase and decide the timing and amount of share repurchase at the moment as Albert said, we are a little concerned about the stability of the capital markets and going into a Catastrophe season, we think its probably wise to be a little more prudent, but we again, we have no desire to keep capital longer than we need it, because again if we can earn it at a good rate of return and why should we haven't. So I think its not a... its not either a call on the equity market and total and it certainly not a signaling that we are not going to be buying back stock. We will time or certainly repurchase shares, we are just trying to tell you, how we are thinking about it in the relatively short period of time that we have in front of us.
Thomas Cholnoky - Goldman Sachs
Yes I mean I guess if it doesn't add up a little bit, because you are not growing your Cat business as much so presumably you are 1 in 250 is relatively stable right now.
Patrick Thiele - President and Chief Executive Officer
That's not actually true.
Thomas Cholnoky - Goldman Sachs
Okay, can you remind us where you are then in your one to 250.
Patrick Thiele - President and Chief Executive Officer
We will have to get it, I mean but what happens is that pricing goes down, actually your 1 and 250 goes up.
Thomas Cholnoky - Goldman Sachs
Right, that's fair,
Patrick Thiele - President and Chief Executive Officer
so in fact we are as I said on the January 1st renewal update is that we held our capital approximately excuse me our capital at risk. How we think about risk, we think about our exposures and we think about our significant loss drivers, we held that about constant and now with the Ag increasing and with the desire to probably put a little more risk into some of the capital markets, in fact I think we are maintaining our overall risk portfolio and our over all risk appetite inside this company.
Thomas Cholnoky - Goldman Sachs
Okay, it's great, thank you.
Operator
And at this time we have no further questions coming in Mr. Thiele, I will hand over the conference back to you for any closing comments.
Patrick Thiele - President and Chief Executive Officer
Thanks, thanks again for your attention and thanks for the good question, I know this is going to be a fairly difficult quarter for you all to analyze but in fact I think that's going of all companies in the Insurance and Re-Insurance industry over the next year I mean that's a natural consequence of a softening market well I can say is I think that PartnerRe is well positioned to deal with this softening market we have the right people we have consistent method from pricing we have a balance sheet, we have the right system, I think we are well prepared for this kind of environment and my hope is that we are able to continue to deliver acceptable returns in the short term to avoid the big, is what usually the key aspect of being good re-insurer and in fact make sure that we're well set up for the upturn whenever that may occur some time in the future.
So with that I guess I will close the call, thank you again.
Operator
And that just conclude our conferencing thank you all for your participation. We hope you enjoy your rest of the day.
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