Outlook

January 1, 2007, was a good renewal for us. Approximately 55% of our non-life book was up for renewal, and we were able to maintain our priced profitability at the cost of a moderate 4% reduction of in-force premiums, and a small increase in expected volatility.

However, we also saw some negative trends in the market that are expected to intensify through 2007. On the back of observed low loss trends, our clients are retaining more of their risk by raising attachment points and by dropping lower layers. This is taking significant amounts of premium from the reinsurance marketplace; a trend that will be further compounded by the recent acts of the Florida legislature.

The trend of decreasing prices is also intensifying. Lower demand coupled with greater supply of capacity – from both established companies and start-up vehicles – generally leads to lower prices. This is especially true in the current environment of low loss trends.

So while we started out 2007 well, we expect challenges in virtually all non-life markets as we move through the year. At PartnerRe, we take comfort from two facts. First, we enter this deteriorating market with the highest level of profitability and the strongest financial position in our history. Second, we have faced these challenges before, and we know how to function and succeed in adversity.

So no matter what major catastrophes are in store, no matter what new volatility drivers arise, we expect to be able to meet or exceed our long-term goals of 10% growth in book value and continual increases in our dividend.

Acknowledgements

As always, I’d like to thank all of our employees (they’re listed on pages 164 and 165) for their continued hard work and trust. In a challenging environment, they were calm and good humored and very effective. I’d especially like to acknowledge Mark Pabst and his huge contribution to making PartnerRe the Company it is today. We all miss him a great deal.

Thank you, also, to our shareholders, cedants and brokers, for your continued support. 2006 was an exceptional year for our industry, and it was the culmination of a successful five years for PartnerRe.

Patrick Thiele
President and Chief Executive Officer