This problem started I believe after the 1.9.1 version, the HTML formatting (line breaks for instance) is lost in the user's Signature. For example, I have configured my sign the following way:

but then it displays all in one line like so:

I believe this also happens in private messages, but because it happens in the signature as well, which is part of the forum core, I don't believe it's related to the private messages addon exclusively.

Regards.