Shares of PartnerRe Ltd. (PRE) scaled a new 52-week high at $111.11 on Aug 29, riding on a steady growth momentum following solid year-over-year performance in second-quarter 2014. Notably, this multi-line insurer and reinsurer’s shares rose about 12.2% since the beginning of 2014.
Friday’s closing price represents a strong one-year return of about 28.2%, against 22.7% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 320.9K.
Earnings Review
This Zacks Rank #3 (Hold) stock has delivered positive earnings surprises in three of the last four quarters with an impressive average beat of 44.9%.
On Jul 28, PartnerRe reported second quarter operating earnings per share (EPS) of $2.60 that notably missed the Zacks Consensus Estimate of $2.78 by 6.5%. Higher-than-expected expenses primarily led to the estimate miss.
However, the reported figure outpaced the year-ago quarter EPS of 90 cents. The year-over-year upsurge was led by higher premiums, investment income as well as net realized and unrealized investment gains, all of which led to top-line growth of 59.8%.
The positives were partially offset by rise in loss as well as acquisition and policy benefit expenses. Underwriting results and combined ratio also improved from the comparable year-ago numbers, resulting in higher return on equity (ROE) and book value per share.
Rationale
PartnerRe’s focus on prudent enterprise risk management initiatives are showing results, as reflected in its improved core insurance sales in the past quarters despite catastrophe exposures. These initiatives to hedge market risks are also helping the company to counter the challenges from low interest rates, thereby boosting investment returns and ROE. The upcoming quarters are also likely to benefit from PartnerRe’s disciplined underwriting, improved pricing and healthy renewals.
Going ahead, the company’s diversified business portfolio, robust capital position and its pursuit of new lines of lucrative businesses will continue to accelerate margins and cash flows. These factors support efficient capital deployment as well as instill confidence in investors and ratings agencies.
Moreover, the long-term growth rate for PartnerRe is pegged at 9.5%, higher than the peer group’s average of 8.5%.
Stocks to Consider
Investors interested in insurance stocks could consider AmTrust Financial Services Inc. (AFSI), Global Indemnity plc (GBLI) and Mercury General Corp. (MCY). All these stocks sport a Zacks Rank #1 (Strong Buy).
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