Bermuda reinsurer PartnerRe Ltd. will continue to reinforce their position in European, Japanese and Canadian markets, president and CEO Herbert Haag said in his year end report to shareholders.

He forecast the reinsurer will become a leader in the emerging markets of central and eastern Europe, Southeast Asia, and in selected parts of Latin America.

The company does not expect the heavy competitive conditions in the industry to change significantly in the next two or three years, barring a series of catastrophic insured losses.

An overview of company operations points out that intense competition in reinsurance has led to a number of large reinsurers engaging in "a damaging battle for market share.'' Competitive industry forces, he said, increased for 1998 to levels not seen since the early 1980s.

PartnerRe's purchase last year of French reinsurer SAFR took the group's client base instantly from 200 to 1,000, providing an ideal platform for future growth, positioning the company to become a powerful force in the global reinsurance market.

The company reported losses and loss expenses at $207.3 million for the year to December 31, 1997 (1996: $23 million) and a loss ratio of 43.5 percent, much of it due to the inclusion of a partial year of SAFR's multi-line book of business.

The report said the loss ratio for that multi-line book is traditionally higher than the catastrophe business in years for which there are no significant catastrophe losses.

The loss ratio is expected to increase further this year as the global multi-line business is included for a full year.

The acquisition also meant that the recorded reserves for unpaid losses and loss expenses jumped from $59.9 million at the end of 1996 to $1.221 billion to December 31, 1997.

The company declared net income of $271.1 million for the year, return on average shareholders' equity of 16.6 percent, net premiums written of $427.8 million and total revenues of $615.7 million. The combined ratio was 67.7 percent.

Total assets grew for the year more than $2 billion to nearly $3.6 billion and total shareholders' equity grew by nearly $600 million to $1.978 billion.

Mr. Haag said, "In the United States, the largest reinsurance market in the world, SAFR's multi-line business is under-represented in relation to PartnerRe's catastrophe reinsurance business and the market potential.

PartnerRe to tap US market directly "Our strategic objective in the United States will be to seek sustained quality growth for our multi-line business, for which we want to lay a solid foundation in the coming year.'' The company will tap the market directly and through the use of reinsurance brokers.

Mr. Haag commented: "Our emphasis on regular dialogue and interaction with all our clients is no deterrent from a strong commitment to partnerships with like-minded brokers, particularly as it is the intermediary who has seen the consolidation of the reinsurance market chip away at its choice of friendly quality reinsurers.'' The group's new organisational structure that began at the beginning of this month will bring an increased risk threshold for SAFR, in line with that of PartnerRe.

Mr. Haag said, "In the area of non-proportional reinsurance, our group has skills which will set us apart from many of our competitors. This strength will prove invaluable during the transition phase from proportional reinsurance protection to excess of loss programmes, a trend which is gradually gaining momentum.

"The company shall continue to emphasise short-tail lines of business, providing transparency of the company's financial position for our shareholders and clients.'' The company is strengthening its research capabilities toward longer-term development of its catastrophe book of business, by recruiting an experienced professional in catastrophe modelling to join existing engineering, seismological and meteorological skills.

This year the reinsurer is adding actuarial and financial reinsurance skills through the integration of SAFR.

Summer floods affected the Czech Republic, Poland and the Eastern part of Germany, resulting in the firm's largest loss of the year, costing $13.5 million gross, or $7.7 million net of retrocession.

The SAFR acquisition nearly doubled the cash and invested asset base of PartnerRe to $2.8 billion, with the distribution heavily-weighted (92 percent) toward fixed income securities at the year's end.

This year the company is implementing a group asset allocation strategy designed to capitalise on the larger asset base and the more diversified nature of the firm's reinsurance obligations.