examination report of the partnerre america … · on december 7, 2009, partnerre ltd. completed...

EXAMINATION REPORT

OF THE

PARTNERRE AMERICA INSURANCE COMPANY

AS OF

DECEMBER 31, 2015

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TABLE OF CONTENTS SALUTATION ............................................................................................................................... 1

SCOPE OF EXAMINATION......................................................................................................... 2

SUMMARY OF SIGNIFICANT FINDINGS ................................................................................ 3

COMPANY HISTORY .................................................................................................................. 3

COMMON CAPITAL STOCK ........................................................................................................ 4

GROSS PAID IN AND CONTRIBUTED SURPLUS ........................................................................... 4

DIVIDENDS TO STOCKHOLDERS ................................................................................................ 4

MANAGEMENT AND CONTROL .............................................................................................. 4

DIRECTORS ............................................................................................................................... 5

OFFICERS .................................................................................................................................. 5

COMMITTEES ............................................................................................................................ 5

CORPORATE RECORDS .............................................................................................................. 6

HOLDING COMPANY SYSTEM ................................................................................................... 6

ARTICLES OF INCORPORATION AND BYLAWS ........................................................................... 8

AFFILIATED AGREEMENTS ........................................................................................................ 8

TERRITORY AND PLAN OF OPERATION ............................................................................. 10

REINSURANCE........................................................................................................................... 11

FINANCIAL STATEMENTS ...................................................................................................... 12

STATEMENT OF ASSETS AND LIABILITIES ............................................................................... 13

STATEMENT OF INCOME .......................................................................................................... 15

RECONCILIATION OF CAPITAL AND SURPLUS .......................................................................... 16

COMMENTS ON FINANCIAL STATEMENT ITEMS ............................................................. 16

SUBSEQUENT EVENTS ............................................................................................................ 17

SUMMARY OF RECOMMENDATIONS .................................................................................. 17

CONCLUSION ............................................................................................................................. 17

SALUTATION

May 24, 2017

Honorable Trinidad Navarro Insurance Commissioner Delaware Department of Insurance 841 Silver Lake Boulevard Dover, Delaware 19904 Commissioner:

In compliance with instructions and pursuant to statutory provisions contained in Certificate

of Authority No. 16-031, dated July 26, 2016, an examination has been made of the affairs, financial

condition and management of the

PARTNERRE AMERICA INSURANCE COMPANY

hereinafter referred to as (“Company or PRAIC”), incorporated under the laws of the State of

Delaware as a stock company with its home office located at 1209 Orange Street, Wilmington,

Delaware. The examination was conducted at the main administrative office of the Company

located at One Greenwich Plaza, Greenwich, Connecticut.

The examination report thereon is respectfully submitted.

PartnerRe America Insurance Company

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SCOPE OF EXAMINATION

In coordination with the New York Department of Financial Services (NYDFS), we have

performed our examination of PartnerRe America Insurance Company, a multi-state insurer. The

last examination covered the period from January 1, 2009 through December 31, 2013. This

examination covers the period of January 1, 2014 through December 31, 2015.

We conducted our examination in accordance with the NAIC Financial Condition Examiners

Handbook (NAIC Handbook). The NAIC Handbook requires that we plan and perform the

examination to evaluate the financial condition, assess corporate governance, identify current and

prospective risks of the company and evaluate system controls and procedures used to mitigate those

risks. An examination also includes identifying and evaluating significant risks that could cause an

insurer’s surplus to be materially misstated both currently and prospectively.

All accounts and activities of the company were considered in accordance with the risk-

focused examination process. This may include assessing significant estimates made by

management and evaluating management’s compliance with Statutory Accounting Principles. The

examination does not attest to the fair presentation of the financial statements included herein. If,

during the course of the examination an adjustment is identified, the impact of such adjustment will

be documented separately following the Company’s financial statements.

This examination report includes significant findings of fact, pursuant to the General

Corporation Law of the State of Delaware as required by 18 Del. C. §321, along with general

information about the insurer and its financial condition. There may be other items identified during

the examination that, due to their nature (e.g., subjective conclusions, proprietary information, etc.),

are not included within the examination report but separately communicated to other regulators

and/or the Company.


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During the course of this examination, consideration was given to work performed by the

Company’s external auditing firm, Deloitte & Touche LLP (D&T). Certain auditor work papers

have been incorporated into the work papers of the examination.

SUMMARY OF SIGNIFICANT FINDINGS

There were no significant findings or material adjustments to the Company’s financial

statements that warranted disclosure in this examination report.

COMPANY HISTORY

On December 31, 2008, the Company was a wholly owned subsidiary of Paris Re S.A.,

which was owned by Paris Re Holdings Ltd. On December 7, 2009, PartnerRe Ltd. completed the

acquisition of 100% of the outstanding common shares of Paris Re Holdings Ltd. (Switzerland).

Paris Re Holdings Ltd. was merged with and into a wholly owned subsidiary of PartnerRe Ltd. The

Company was acquired from Paris Re S.A. by PartnerRe Holdings S.A., on November 30, 2010. On

December 1, 2012, the Company’s name was changed from PARIS RE America Insurance

Company to PartnerRe America Insurance Company. On December 17, 2012, the Board of

Directors voted, after obtaining all U.S. regulatory approvals, to change the Company’s parent

company from PartnerRe Holdings SA to PartnerRe U.S. Corporation. As such, PartnerRe Holdings

SA distributed 100% of PartnerRe America Insurance Company to PartnerRe Holdings Europe

Limited and in turn PartnerRe Holdings Europe Limited contributed 100% of PartnerRe America

Insurance Company to PartnerRe U.S. Corporation (Parent). As a result, PartnerRe U.S.

Corporation holds 100% of PartnerRe America Insurance Company, effective December 17, 2012.

In December 2012, the Parent acquired Presidio Reinsurance Group, a specialty accident and health


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reinsurance and insurance Managing General Underwriter whose employees are now employed by

the Company and now referred to as PartnerRe Health.

Common Capital Stock

The Certificate of Incorporation provides that the Company has 55,000 shares of common

stock authorized, of which 50,000 shares are issued and outstanding, at $60 par value per share. The

capital represented by the 50,000 shares of common stock issued and outstanding is $3,000,000.

As of December 31, 2015, all outstanding shares of the Company’s common stock were

owned by the Parent, PartnerRe U.S. Corporation.

Gross Paid In and Contributed Surplus

During the period under examination, gross paid-in and contributed surplus decreased by

$170,254.

Dividends to Stockholders

During the period under examination, the Company paid ordinary dividends $13,000,000 to

stockholders.

MANAGEMENT AND CONTROL

Pursuant to the general Corporation Laws of the State of Delaware, as implemented by the

Company’s Certificate of Incorporation and bylaws, the property and business of the Company is

managed by the Board. The bylaws provide that the number of directors that constitute the whole

Board should not be less than three members or more than nine members. Each director is elected

for a term of one year and until such director’s successor is elected and qualified.

The Board, by vote of a majority of the whole Board, may designate one or more

committees.


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Directors

At December 31, 2015, the members of the Board of Directors together with their principal

business affiliations were as follows:

Name Position Daniel Rupert Bolgar President, PartnerRe America Insurance Company Dennis Earl Heinzig Chairman and Chief Executive Officer, PartnerRe America Insurance Company Laurie Ann Desmet Executive Vice President and Chief Operations Officer,

PartnerRe Ltd. Marvin Pestcoe Chief Executive Officer, Life and Health, PartnerRe Ltd. Thomas Lester Forsyth Senior Vice President, General Counsel & Corporate

Secretary of PRAIC, Executive Vice President, General Counsel & Corporate Secretary of Partner Reinsurance Company of the U.S. & PartnerRe Insurance Company of New York

Theodore Cuyler Walker President and Chief Executive Officer, PartnerRe Insurance Company of New York Partner Reinsurance Company of the U.S.

Officers

The bylaws state that the officers of the corporation shall consist of a President, a Secretary, a

Treasurer, and may, at the discretion of the Board of Directors, include one or more Executive Vice

Presidents and a Chief Executive Officer. The following persons were elected as officers and were

serving in that capacity at December 31, 2015:

Name Principal Position Daniel Rupert Bolgar President Dennis Earl Heinzig Chairman and Chief Executive Officer Thomas Lester Forsyth Senior Vice President, General Counsel & Corporate

Secretary Marta Juliana Shevchik Senior Vice President, Chief Financial Officer and

Treasurer Committees

In 2011, the Company formed a Subsidiary Audit Committee of the Board of Directors

which is comprised of members of senior management. The Company’s ultimate controlling parent,


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PartnerRe Ltd. (PRE Ltd.), is a Sarbanes-Oxley Act compliant corporation with an independent

Audit Committee. Pursuant to the NAIC’s Model Audit Rule, PartnerRe Ltd.’s Audit Committee

has agreed to act as the independent Audit Committee for PartnerRe America Insurance Company.

Corporate Records

The recorded minutes of the sole shareholder and Board of Directors were reviewed for the

period under examination. The recorded minutes of the Board adequately documented its meetings

and approval of Company transactions and events, including the authorization of investments as

required by 18 Del. C. §1304 “Authorization; record of investments”.

Holding Company System

The Company is a member of an insurance holding company system as defined under

Chapter 50, “Insurance Holding Companies” of the Delaware Insurance Code. The Company is a

wholly owned subsidiary of PartnerRe U.S. Corporation, a wholly owned subsidiary of PartnerRe

Holdings Europe Limited (PRHEL). PRHEL is incorporated in Ireland. PRHEL is a wholly owned

subsidiary of PartnerRe Ltd. (PRE Ltd.). PRE Ltd. is incorporated in Bermuda. The following is an

abbreviated organizational chart at December 31, 2015:


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PartnerRe Asset

Management Corporation

(DE)

PartnerRe Management

Limited (United

Kingdom)

Presidio Reinsurance Group, Inc. (DE)

Beaufort Investment

Management, Inc. (DE)

PartnerRe Insurance

Company of New York (NY)

PartnerRe Principal

Finance, Inc. (DE)

Presidio Reinsurance Corporation

(MT)

PartnerRe New Solutions,

Inc. (DE)

Presidio Excess

Insurance Services, Inc.

(CA)

PartnerRe Capital Markets Corporation

(DE)

PartnerRe Ltd. (Bermuda)

PartnerRe Holdings Europe Limited

(Ireland)

PartnerRe U. S. Corporation (DE)

Partner Reinsurance

Company of the U.S. (NY)

PartnerRe America

Insurance Company (DE)


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Articles of Incorporation and Bylaws

The Company did not amend its Articles of Incorporation or bylaws during the period under

examination.

Affiliated Agreements

The Company is party to agreements with affiliates, which were entered into prior to and

during the period covered by this examination and remain in effect as of December 31, 2015. These

agreements were disclosed to the Delaware Department of Insurance and approved as required by 18

Del. C. §5005(a)(2)d. These agreements are summarized below.

Capital Management Maintenance Agreement

Effective July 1, 2010, the Company entered into a Capital Management Maintenance

Agreement with PartnerRe Ltd., its ultimate parent. The agreement provides that PartnerRe Ltd. will

provide financial support based on certain financial thresholds. The aggregate amount of

contributions allowed during the life of the agreement is $200 million. No contributions have been

made related to this agreement since its inception.

Guarantee Agreement

Effective December 31, 2013, the Company entered into a guarantee with Partner

Reinsurance Ltd. whereby Partner Reinsurance Ltd. guarantees to the Company all present and

future obligations of each reinsurer when such reinsurer is unable to meet any or all its obligations to

pay the Company pursuant to the terms of the applicable reinsurance agreement.

Master Service Agreement

Effective January 1, 2012, the Company entered into an agreement with affiliates PartnerRe

Miami, Inc. (PRM) and PRCT. Under the terms of this agreement, PRM can provide claims,

reinsurance accounting, finance and accounting, legal and corporate compliance, reserving, office


9

management, executive and corporate human resources and information technology services to the

Company. PRCT can provide finance and accounting, legal and corporate compliance, and office

management to the Company.

Service Agreement

Effective June 1, 2013, the Company entered into a Service Agreement with affiliate Presidio

Excess Insurance Services, Inc. (PXS). Under the terms of this agreement, the Company provides

actuarial, cash management and treasury, claims and cost management, finance and external

communication, financial controlling, general accounting and reporting, information technology,

organization, security and internal communication, tax, compliance and legal, technical accounting,

technical support for underwriting and underwriting services to PXS.

Advisement and Investment Management Agreement

Effective January 1, 2012, the Company entered into an Advisement and Investment

Management Agreement with PartnerRe Asset Management Corporation (PRAM). Under the terms

of this agreement, the Company appointed PRAM to act as its investment manager providing

investment management and investment advice and recommendation, with respect to certain assets

with the Company’s investment portfolios.

Service Agreement

Effective January 1, 2014, the Company entered into an agreement to provide Accident &

Health (A&H) reinsurance product services to PRUS.

Service Agreement

Effective September 1, 2014, the Company entered into an agreement with PRUS and

various affiliates whereby PRUS will provide office space, administrative services such as claims,

underwriting, accounting, legal services and various resources.


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Service Agreement

Effective November 8, 2014, the Company entered into an agreement with PartnerRe

Management, Ltd. in which PartnerRe Management, Ltd. agreed to provide PRAIC administrative

services and other resources related to accident and health reinsurance contracts.

Tax Allocation Agreement

The Company became a party to an existing Tax Allocation agreement effective December 3,

2012 that includes PartnerRe U.S. Corporation, PartnerRe Insurance Company of New York,

PRAM, PartnerRe New Solutions, Inc., PartnerRe Principal Finance Inc., PartnerRe Capital Markets

Corp., PartnerRe Finance I Inc. and PartnerRe Finance II Inc. Effective March 11, 2013, Presidio

Reinsurance Group Inc., PXS and Presidio Reinsurance Corporation were also added to the

agreement. Under the terms of the agreement, PartnerRe U.S. Corporation computes the federal tax

liability and the liability for each member of the group. The federal income tax provision is

computed on a separate return basis and provides that the members of the consolidated group receive

reimbursement for any foreign tax credits, investment credits, losses of any loss carry over generated

by it, to the extent actually used in the consolidated return and not used by the group in computing

its separate return liability.

TERRITORY AND PLAN OF OPERATION

At December 31, 2015, the Company was licensed to write business in 49 states and the

District of Columbia. The Company was licensed as an accredited reinsurer in New Hampshire. As

previously mentioned, the Parent acquired Presidio Reinsurance Group, (referred to as PartnerRe

Health), a specialty accident and health reinsurance and insurance writer and managing general

underwriter whose employees are now employed by the Company, with offices in California,


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Kansas, Pennsylvania and Minnesota. The PartnerRe Health business is excess of loss insurance and

reinsurance offered to entities bearing medical risk; e.g. Health Maintenance Organizations,

Employer and Health Plans, and Provider Organizations located primarily throughout the United

States. The business written is predominately excess of loss policies, but also includes proportional

medical reinsurance offered to insurance companies, captive insurance companies and risk retention

groups. This business is now the primary business for the Company. Effective January 1, 2013,

certain accident and health reinsurance treaties and insurance policies which had formerly been

written by Presidio Excess Insurance Services (PXS) on behalf of unrelated insurance carriers began

renewing on the Company’s paper. As such, the Company’s direct and assumed premiums increased

in 2014. Regarding the other business of the Company (outside of PartnerRe Health), most treaties

and insurance policies, with effective dates on or after July 1, 2010, were renewed by an affiliate,

Partner Reinsurance Europe SE. A small portion of treaties/policies were written by the Company

outside of the health business between this date and the end of 2015 in the following segments:

Automobile (“Private passenger auto liability” and “Auto physical damage”) Space (“Other Liability”) Facultative (“International”)

REINSURANCE

The affiliated ceded agreements were disclosed to the Delaware Department of Insurance and

approved as required by 18 Del. C. §5005(a) (2) e. The ceded and assumed reinsurance is

summarized as follows:

Assumed

The reinsurance assumed is the excess of loss reinsurance products offered to Health

Maintenance Organizations and Health Plans throughout the United States and medical reinsurance,


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which is a reinsurance product offered to insurance companies, captive insurance companies and risk

retention groups.

Ceded

Effective January 1, 2013, the Company entered into a Loss Portfolio Transfer (LPT)

reinsurance contract with PRUS. Under the agreement, the Company transferred 100% of its

reinsurance liabilities recorded at December 31, 2012. The consideration paid was equal to the

amount of the net statutory reserves (loss, allocated losses and unearned premiums) for

approximately $35 million. There was no surplus gain from this transaction with the affiliate and as

such it was accounted for as prospective reinsurance.

Effective January 1, 2015, the Company renewed its Quota Share Retrocession Agreement

with its affiliate, Partner Reinsurance Company of the U.S. (PRUS). The agreement provides that

PRUS will accept a 90% quota share participation in the Company’s new and renewal business in

excess of reinsurance ceded externally for underwriting year 2015. The agreement covers all lines of

business. At year-end 2015, premiums in the amount of $58,169,913 were ceded to external

reinsurers and premiums in the amount of $289,963,911 were ceded to PRUS. Net premiums

retained were $32,226,911.

FINANCIAL STATEMENTS

The following statements show the assets, liabilities, surplus and other funds of the

Company, as determined by this examination, as of December 31, 2015:

Statement of Assets and Liabilities Statement of Income Reconciliation of Capital and Surplus


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Statement of Assets and Liabilities December 31, 2015

Nonadmitted Net Admitted Assets Assets Assets

Bonds $ 188,446,737 $ - $ 188,446,737 Cash and Short-Term 72,396,801 - 72,396,801 Receivable for securities 4,125 - 4,125 Investment Income Due and Accrued

659,694 - 659,694

Uncollected Premiums and Agents' Balances in

Course of Collection 66,714,889 449,791 66,265,098 Deferred Premiums 349,663 - 349,663

Amounts Recoverable from Reinsurers

45,013,366 - 45,013,366

Funds held or deposited with reinsured companies

1,667,589 - 1,667,589

Current Federal and Foreign Income Tax

43,589 - 43,589

Net deferred asset 890,277 583,073 307,204 Electronic data processing equipment and software 51,280 - 51,280 Furniture and equipment including health care delivery assets 548,565 548,565 0 Aggregate write-ins for other than invested assets 660,879 37,155 623,724

Total Assets $ 377,447,454 $ 1,618,584 $ 375,828,870


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Losses 20,767,121$

Reinsurance payable on paid losses and loss adjustment expenses (4,069) Loss adjustment expenses 2,243,353

Commissions payable 993,472 Other expenses 4,562,052 Taxes, licenses and fees 1,031,110 Unearned premiums 47,971 Advance premium 31,251 Ceded reinsurance premiums payable 127,568,366 Funds held by company under reinsurance treaties 40,812,609 Remittances and items not allocated 14,760,457 Provision for reinsurance 567,226 Payable to parent, subsidiaries and affiliates 2,201,052 Payable for securities 31,892,921 Aggregate write-ins for liabilities 359 Total liabilities 247,475,251$

Common capital stock 3,000,000 Gross paid in and contributed surplus 53,699,486 Unassigned funds 71,654,133

Surplus as regards policyholders 128,353,619$

Total liabilities, surplus and other funds 375,828,870$


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Statement of Income December 31, 2015

UNDERWRITING INCOMEPremiums earned 32,193,336$

DEDUCTIONS Losses incurred 21,841,212$ Loss adjustment expenses incurred 7,221,810 Other underwriting expenses incurred (1,950,437)

Total Underwriting Deductions 27,112,585$

Net Underwriting Gain or (Loss) 5,080,751$

INVESTMENT INCOMENet investment income earned 3,090,550$ Net realized capital gains (losses) less capital gains tax 252,533

Net Investment Gain or (Loss) 3,343,083$

OTHER INCOMENet gain (loss) from agents' balances charged off 84,358$ Aggregate write-ins for miscellaneous income 112,925 Total other income 197,283$

Net income after dividends to policyholders and before federal income taxes 8,621,117$ Federal and foreign income taxes incurred 3,023,388

Net Income (Loss) 5,597,729$


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Reconciliation of Capital and Surplus December 31, 2013 to December 31, 2015

Net income 13,821,372$

(245,641) Change in net unrealized foreign exchange capital gain 9,461

93,852 (699,444) 22,774

(170,254) (13,000,000)

Capital and Surplus, December 31, 2015 128,353,619$

Dividends to stockholders

Change in net unrealized capital gains (losses)

Change in net deferred income tax Change in non-admitted assets Change in provision for reinsuranceChange in accounting principles Surplus paid in

COMMENTS ON FINANCIAL STATEMENT ITEMS

Losses and Loss Adjustment Expenses

As the lead state, the NYDFS conducted an independent review of the gross and net loss and

loss adjustment expense reserves for PRAIC in conjunction with their review of PRUS and PRNY as

of December 31, 2015. The Delaware Department of Insurance retained the services of INS

Consultants, Inc. (INS) to perform a limited review of the work performed by NYDFS in support of

the financial condition examination of PRAIC. As a result of INS’ review, INS concluded that the

independent actuaries’ report provides reasonable analysis and conclusions with regard to the

reserves held by PRAIC. INS also concluded that the gross and net loss and LAE reserves as of

December 31, 2015 for PRAIC are reasonably stated.


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SUBSEQUENT EVENTS

Effective March 18, 2016, the Company was acquired by Exor N.V. (F/K/A EXOR S.p.A)

and its controlling persons (“EXOR Group”). EXOR is publicly-traded in Italy, is majority-held by

the Agnelli family, and is ultimately controlled by Mr. John Elkann.

SUMMARY OF RECOMMENDATIONS

There are no recommendations that warrant disclosure in this report.

CONCLUSION The assistance of the Delaware Insurance Department’s consulting actuarial firm, INS

Consultants, Inc. and consulting IT firm, INS Services, Inc. is acknowledged. In addition, the

assistance and cooperation of the Company’s outside audit firm, D&T LLP and the Company’s

management and staff were appreciated and are acknowledged.

Respectfully submitted,

_____________________________________ Lu Ann D. Therrell, CFE Examiner In-Charge Delaware Department of Insurance

_____________________________________ James D. Call, CFE Supervisor In-Charge Delaware Department of Insurance

examination report of the partnerre america … · on december 7, 2009, partnerre ltd. completed...

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