PartnerRe Ltd.’s (PRE) first-quarter 2014 operating earnings per share of $3.36 remarkably outpaced the Zacks Consensus Estimate of $2.45. However, results lagged the year-ago quarter number of $3.39 a share.
Improved premiums and higher net realized and unrealized investment gains were partially offset by lower investment income and higher expenses, while underwriting results boosted from the comparable year-ago numbers. Subsequently, operating net income declined 12.5% year over year to $176.9 million.
Operating earnings were calculated after the payment of preferred dividends. Earnings also excluded after-tax net realized and unrealized investment gains of $2.20 per share, net foreign exchange loss of 2 cents per share and interest income from equity investments of 7 cents per share.
Including these items, GAAP net income of PartnerRe amounted to $309.8 million or $5.61 per share against $234.4 million or $3.53 per share in the year-ago quarter.
Total revenue escalated 16.6% to $1.51 billion from $1.30 billion in the year-ago quarter. The figure also exceeded the Zacks Consensus Estimate of $1.48 billion.
This included net premiums earned worth $1.25 billion (up 9.3% year over year), net investment income of $116.9 million (down 5.5%), pre-tax net realized and unrealized investment gains of $142.2 million against mere $22.9 million in the year-ago quarter, and other income of $0.4 million, down from $3.9 million in the year-ago period. Meanwhile, net premiums written climbed 6.2% year over year to $1.74 billion.
During the reported quarter, total expenses jumped 11.3% year over year to $1.14 billion. Subsequently, underwriting profits dipped 7.2% to $129 million.
Non-life combined ratio also deteriorated to 83.9% from 81.7% in the year-ago period. This includes 16.6 basis points or $164 million related to net favourable development on prior accident years.
Moreover, technical ratio deteriorated due to weakness in most non-life and life segments. The technical result for the reported quarter was $240 million, decreasing 4.4% over the year-ago quarter.
Financial Update
As of Mar 31, 2014, PartnerRe’s total assets were $23.52 billion, up from $23.04 billion at 2013-end. Total investments, cash and funds held and directly managed stood at $17.5 billion, slightly up from $17.4 billion at 2013-end. As of Dec 31, 2013, total capital was $7.6 billion (up from $7.5 billion at 2013-end) and total shareholder equity was $6.84 billion, up from $6.77 billion at 2013-end.
PartnerRe's net non-life loss and loss expense reserves were down 1% from the 2013-end level at $10.3 billion. The company’s book value per common share improved 4.4% to $114.1 at Mar 2014-end, compared with $109.3 at 2013-end.
Annualized operating ROE dipped to 12.3% in the reported quarter from 13.5% at the end of the prior-year quarter, while annualized net income ROE stood at 20.5%, significantly higher than 14% in the prior-year quarter.
Share Repurchase Update
On Sep 12, 2013, the board approved and brought into effect a stock repurchase authorization of up to 6.0 million shares. This replaced the previous authorization of 6.0 million shares that was approved in Mar 2013.
Accordingly, the company bought back about 1.8 million shares for $180 million during the first quarter. An additional 0.45 million shares have been repurchased for $46 million so far in the ongoing second-quarter (until Apr 28, 2014), leaving about 2.7 million shares available for repurchase under the current authorization.
Dividend Update
On Apr 28, 2014, the board of PartnerRe announced its regular quarterly dividend of 67 cents per share, payable on May 30, 2014, to shareholders of record as on May 19.
On Jan 29, 2014, the board of PartnerRe approved a 5% hike in its regular quarterly dividend payout to 67 cents per share from the prior 64 cents, and is now shelling out $2.68 per share annually.
The current hike marks the 21st consecutive year of dividend increasesince the company’s commencement. The raised quarterly dividend was paid on Feb 28, 2014 to shareholders of record as on Feb 18, 2014.
Others
While PartnerRe carries a Zacks Rank #2 (Buy), its top-ranked peers include Everest Re Group Ltd. (RE), Montpelier Re (MRH) and Aspen Insurance Holdings Ltd. (AHL). All these insurers sport a Zacks Rank #1 (Strong Buy).
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