Bermuda-based reinsurer PartnerRe Ltd. yesterday reported operating losses of $28.2 million for the third quarter 2002 as increases in insurance rates were offset by claims from Europe's summer floods.

The industry is suffering from a second year of unusual loss events; industry sources estimate that the European flooding may become one of the top five ever catastrophe losses in Europe with a total industry loss of $3.5 billion.

Despite showing an increase in underwriting revenue, the company estimated its exposure to the European flooding as $120 million and this wiped out any potential profit.

But PartnerRe president and chief executive officer Patrick Thiele predicted that reinsurance rates would continue to rise through 2003 and said the reinsurer was in a good position to capitalise on "significant turmoil" in some segments of the European insurance market. PartnerRe's shares closed down $4.00 to $48.50 on the New York Stock Exchange. For the three months ended September 30, 2002, operating losses, which exclude the company's investment results, were $28.2 million or 56 cents per share on a fully diluted basis compared to operating losses of $342.8 million, or $6.83 per share for the third quarter of 2001 when results were hit by a $400 million loss from the attacks of September 11.

After inclusion of investment results which were flat from the year before, the loss for the third quarter was $27.9 million, or $0.65 per share on a fully diluted basis.

The net loss includes an after-tax realised loss on investments of $4.7 million which the company said was due to tax expenses in the quarter. Net loss for the third quarter of 2001 was $338.5 million or $6.85 per share, including a net after-tax realised loss on investments of $0.7 million or two cents per share.

Total revenues for the quarter were $694.5 million, comprised of $631.9 million of net premiums earned, net investment income of $60.2 million, and net realised investment gains of $0.8 million.

"The company is experiencing strong growth in net written premiums, continuing the trend that started at the beginning of 2001," Mr. Thiele said. "Total net written premiums were up 45 percent for the quarter over the same period last year and 40% for the nine-month period. This was driven by both price increases and growth in treaties and participations.

"Growth is concentrated on those areas of business which we believe will produce superior returns, such as aviation, energy and engineering... Excluding the impact of the floods in 2002 and September 11 attacks in 2001, most of our specialty lines showed improving year over year profitability."

Mr. Thiele concluded: "We expect fourth quarter results to reflect a return to more normalised earnings patterns and, barring any major catastrophes, we expect to achieve full year operating earnings of between $3.55 and $3.65 per share, and a return on beginning shareholders' equity of at least 12 percent. We now believe our net written premium increases for the year will exceed 35 percent.

"Looking beyond 2002, we are optimistic about January 1 renewals in the US and European markets and our outlook for PartnerRe's position within that environment remains positive. We believe that our market presence, strong financial position, and our excellent underwriting skills position us to benefit from the opportunities available in the market.

"In 2003, we expect premiums will grow by at least 30 percent and that we will achieve a return on beginning shareholders' equity in excess of 17 percent, absent unusual loss events."