However you look at it – 2009 was an exceptional year. While the capital markets lurched from crisis to stability to making a strong recovery in the second half of the year, the reinsurance market continued along a more stable trajectory as low loss trends made 2009 a relatively profitable year for re/insurers. Now, in 2010 we find ourselves in a state of “profitable stagnation” – a state of inertia where the industry is reasonably profitable but where there are few opportunities for growth.

The January 1 renewals confirmed that, despite sluggish exposure growth, there was a need for significant risk transfer by cedants, a demand that was easily met by reinsurer capacity. Muted loss trends continue to pressure pricing while low interest rates help set a floor to competition. Without some sort of catalytic event – a major Cat event, a spike in inflation or a re-emergence of casualty losses, we are likely to remain in this state throughout 2010.

With no dramatic recovery in sight, this no-growth environment will undoubtedly be the biggest challenge facing re/insurers until the next phase of the cycle emerges. To maintain profitability, re/insurers have a limited number of options to choose from – cutting expenses, capital management or acquisitions.

We chose the third option. Our acquisition of PARIS RE provides us with another $2 billion of capital and $1.4 billion in premium, increases our expertise and adds to the diversification of our Company. It also moves us into a new “class” of reinsurer that has significant capacity, strength and stability but is still small enough to be agile and responsive to the market.

Whether 2010 brings a big event or a continuation of the current environment, we believe that PartnerRe has the strength and security to continue to meet your risk transfer needs without sacrificing the consistency and continuity you have come to expect of us.