On Jun 1, 2015, we issued an updated research report on PartnerRe Ltd. PRE.
PartnerRe has been undertaking initiatives that should strengthen its business portfolio and boost financials, going ahead. The company’s stock-swap merger deal with AXIS Capital Holdings Limited AXS, inked in Jan 2015 (slated to close in the third quarter of 2015) is expected to generate cost synergies and be accretive to earnings and return on equity. This amalgamation is projected to become one of the top-five global reinsurers in terms of premiums, thereby adding to PartenerRe’s competitive edge.
Moreover, PartnerRe enjoys a diversified business model, both geographically and across its reinsurance portfolio, which protects it from significant loss in sales. The company has expanded its horizon through strategic acquisitions that complement its core long-term growth goals.
The strategic alliances in France and Morocco will further drive growth in 2015 and beyond. Additionally, the company is focusing on underwriting, actuarial and financial areas that are critical to maintaining an independent view of risk.
Despite soft market conditions, PartnerRe’s apparent underwriting discipline has helped its total adjusted capital exceed the applicable risk-based capital levels. Strong liquidity has enabled PartnerRe to consistently enhance shareholders’ worth through stock buy backs and dividend payments.
However, increased expenditures on account of loss expenses and benefit payments on life policies raise caution. PartnerRe needs to adopt strong cost management strategies to avoid any significant pressure on its margins.
Moreover, increased competition, weak renewals and adverse reserve developments add to the woes.
In Apr 2015, the company reported first-quarter 2015 earnings that beat the Zacks Consensus Estimate by 22.6%. The company has delivered positive earnings surprises in three of the last four quarter with an average beat of 17.7%. However, earnings decreased year over year due to continued pressure across all reinsurance lines of business.
PartnerRe currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the property and casualty insurance space are Endurance Specialty Holdings Ltd. ENH and Markel Corp. MKL. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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