PartnerRe Ltd. (PRE) is a leading global reinsurer. The company provides reinsurance for catastrophe, automobile, agricultural, credit and surety, marine, space and aviation, miscellaneous casualty and life/health risks.
Headquartered in Bermuda, PRE has offices in 17 global locations and serves more than 2000 clients in more than 150 countries.
Solid Third Quarter Results
PRE reported its Q3 results on October 28, 2013. Third-quarter 2013 operating earnings were $311.2 million or of $5.70 on a per share basis, handily beating the Zacks Consensus Estimate of $2.32 per share. Per PRE, this was their highest ever reported operating EPS. The results that benefitted from favorable reserve development were also ahead of the year-ago EPS of $3.90.
Net premiums written for the quarter were up 21% to $1.3 billion. The increase was reported across almost all segments. Improved premiums were partially offset by higher investment losses and higher expenses.
A low level of large loss activity and strong core performance resulted in a 74.9% combined ratio and a 22.6% operating return on equity.
PRE ended the third quarter with the highest diluted tangible book value per share in their history at $94.86. Dividend-adjusted quarterly growth was an impressive 7.2%.
Returning Cash to Shareholders
PRE has been consistently increasing its dividends every year since its inception in 1993. Earlier this year they announced the annual dividend at $2.56 per share, up from $2.48 per share, earlier.
Additionally they repurchased 6.7 million shares year-to-date, which was 11% of their shares outstanding at the start of this year. Through share repurchases and dividends, the company
has returned over $700 million to shareholders during the first 3 quarters of 2013.
Top Ranked Industry
Improving economic picture is positive for all insurers as their business volume is highly correlated to the health of the economy. Insurance companies also benefit from rising interest rates as they are able to earn higher returns on their investment portfolio.
At the same time, the value of long duration bonds in insurers’ portfolio go down as rates go up; however since these companies have very long-term investment horizons, they can hold investments till maturity and no losses are actually realized.
Further insurance rates have been going up of late and the cycle is expected to continue for the next few years.
Insurance industry looks well poised to outperform in the coming months from the Zacks industry rank (10 out of 265) perspective too.
Positive Earnings Estimates Revisions
As a result of continued solid performance, the Zacks Consensus Estimate for Q4 has increased to $2.52 per share, from $2.19 per share, 60 days ago. The Zacks Consensus Estimate for 2014 has also surged to $9.98 per share from $8.70 per share.
PRE has delivered positive earnings surprises in all four of last four quarters—with an average quarterly surprise of 163.57%.
The Bottom Line
PRE is a Zacks Rank#1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of “Outperform”. Further Zacks Industry rank of 10 out of 265 greatly increases the likelihood of short-to-mid term outperformance.
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