14. Dividend Restrictions and Statutory Requirements

The Company’s ability to pay common and preferred shareholders’ dividends and its corporate expenses is dependent mainly on cash dividends from PartnerRe Bermuda, PartnerRe Europe and PartnerRe U.S. (collectively, the reinsurance subsidiaries), which are the Company’s most significant subsidiaries. The payment of such dividends by the reinsurance subsidiaries to the Company is limited under Bermuda and Irish laws and certain statutes of various U.S. states in which PartnerRe U.S. is licensed to transact business. The restrictions are generally based on net income and/or certain levels of policyholders’ earned surplus as determined in accordance with the relevant statutory accounting practices. At December 31, 2015, there were no restrictions on the Company’s ability to pay common and preferred shareholders’ dividends from its retained earnings, except for the reinsurance subsidiaries’ dividend restrictions described below.

The reinsurance subsidiaries are required to file annual statements with insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis), maintain minimum levels of solvency and liquidity and comply with risk-based capital requirements and licensing rules. At December 31, 2015, the reinsurance subsidiaries’ solvency, liquidity and risk-based capital amounts were in excess of the minimum levels required. The typical adjustments to insurance statutory basis amounts to convert to U.S. GAAP include elimination of certain statutory reserves, deferral of certain acquisition costs, recognition of goodwill, intangible assets and deferred income taxes, valuation of bonds at fair value and presentation of ceded reinsurance balances gross of assumed balances.

PartnerRe Bermuda may declare dividends subject to it continuing to meet its minimum solvency and capital requirements, which are to hold statutory capital and surplus equal to or exceeding the Target Capital Level, which is equivalent to 120% of the Enhanced Capital Requirement (ECR). The ECR is calculated with reference to the Bermuda Solvency Capital Requirement model, which is a risk-based capital model. At December 31, 2015, the maximum dividend that PartnerRe Bermuda could pay without prior regulatory approval was approximately $991 million.

PartnerRe Europe may declare dividends subject to it continuing to meet its minimum solvency and capital requirements, which are to hold statutory capital and surplus equal to or exceeding the Required Solvency Margin (RSM). At December 31, 2015, the RSM is calculated with reference to Solvency I regulations. The maximum dividend is limited to “profits available for distribution”, which consist of accumulated realized profits less accumulated realized losses. At December 31, 2015, the maximum dividend that PartnerRe Europe could pay without prior regulatory approval was approximately $257 million. On January 1, 2016 Solvency II European Directive (Solvency II regulations) came into force. The Solvency II regulations relate to the solvency standards applicable to insurers and reinsurers and lays down, at the level of PartnerRe Europe, the minimum amounts of financial resources required in order to cover the risks to which it is exposed and the principles that should guide its overall risk management and reporting. In addition to the Solvency II regulations, some of the previous rules, known as Solvency I regulations, and some specific requirements set by the Central Bank of Ireland are retained for 2016.

PartnerRe U.S. may declare dividends subject to it continuing to meet its minimum solvency and capital requirements and is generally limited to paying dividends from earned surplus. The maximum dividend that can be declared and paid without prior approval is limited, together with all dividends declared and paid during the preceding twelve months, to the lesser of net investment income for the previous twelve months or 10% of its total statutory capital and surplus. At December 31, 2015, the maximum dividend that PartnerRe U.S. could pay without prior regulatory approval was $12 million. In addition, the Company anticipates that, for a period of two years from the date of consummation of the Merger Agreement, PartnerRe U.S. shall be required to seek approval of the New York State Department of Financial Services prior to paying any dividends.

The statutory financial statements and returns of the Company’s reinsurance subsidiaries at, and for the year ended, December 31, 2015 are due to be submitted to the relevant regulatory authorities later in 2016, with different filing dates in each jurisdiction. In certain jurisdictions, the statutory financial statements and returns are subject to the review and final approval of the relevant regulatory authorities.

The statutory net income of the Company’s reinsurance subsidiaries for the years ended December 31, 2015, 2014 and 2013 was as follows (in millions of U.S. dollars):



	2015		2014		2013
PartnerRe Bermuda	$	444	$	660	$	616
PartnerRe Europe	75		298		9
PartnerRe U.S.	219		236		123

The required and actual statutory capital and surplus of the Company’s reinsurance subsidiaries at December 31, 2015 and 2014 was as follows (in millions of U.S. dollars):



	PartnerRe Bermuda				PartnerRe Europe				PartnerRe U.S.
	2015		2014		2015		2014		2015		2014
Required statutory capital and surplus	$	2,041	$	1,984	$	805	$	867	$	701	$	764
Actual statutory capital and surplus	3,032		3,157		1,062		1,400		1,405		1,420

At December 31, 2015 and 2014, the Company has Swiss and French branches of PartnerRe Europe that are regulated by the Central Bank of Ireland, as prescribed by the EU Reinsurance Directive. At December 31, 2015, the Company also has a subsidiary in Asia that is regulated by MAS.

In addition to the required statutory capital and surplus requirements in the table above, the Company assesses its own solvency capital needs both at a Group and subsidiary level taking into account factors which may not be fully reflected in statutory requirements. The Company’s solvency capital requirements determined under these self assessments may impact the level of the dividends payable by its reinsurance subsidiaries.

Of the Company’s total net assets of $6.9 billion at December 31, 2015, the total amount of restricted net assets for the Company’s consolidated subsidiaries was $5.3 billion and primarily related to the statutory dividend restrictions described above.