) second-quarter 2012 operating earnings per share of $2.20
significantly surpassed the Zacks Consensus Estimate of $2.02 and
the year-ago earnings of 98 cents. As a result, operating net
income soared to $142.0 million from $67.2 million in the
Operating earnings were calculated after payment of preferred
dividends. This also excluded after-tax net realized and unrealized
investment gains of 29 cents per share and net foreign exchange
losses of 2 cents per share, partially offset by interest loss of 1
cent per share from equity investments. The year-ago quarter had
recorded net adjustment loss of 71 cents per share.
Including these items, GAAP net income for PartnerRe stood at
$176.1 million or $2.50 per share against $124.2 million or $1.69
per share in the year-ago quarter.
Results benefited year over year from improved underwriting and
technical results coupled by a significant reduction in the total
expenses and combined ratio, which also drove the earnings, return
on equity (ROE) and book value. However, top line deteriorated due
to low net realized and unrealized investment gains, continued
decline in premiums earned due to cancellations and non-renewals in
the prior quarters, along with lower investment income driven by
low reinvestment and risk-free rates.
During the reported quarter, total expense plunged 9.5% year
over year to $1.06 billion. Non-life combined ratio also recovered
to 90.6% from 101.7% in the year-ago period. This reflects 12.9
points or $115 million related to net favourable loss development
on prior accident years.
Moreover, technical ratio improved for all the segments. The
technical result for the reported quarter was a positive of $152
million against $64 million in the year-ago quarter. These factors
supported the underwriting profits and bottom-line growth.
Meanwhile, PartnerRe's total revenue slipped 4.5% to $1.29
billion from $1.35 billion in the year-ago quarter, although it
exceeded the Zacks Consensus Estimate of $1.23 billion. This
included net premiums earned of $1.09 billion (down 1.5% year over
year), net investment income of $153.5 million (down 3.0% year over
year), pre-tax net realized and unrealized investment gains of
$38.1 million against $78.2 million in the year-ago quarter and
other income of $2.7 million, up from $1.6 million in the year-ago
However, net premiums written climbed 7.5% year over year to
$1.14 billion. Overall, premiums earned witnessed weak performance
across most business segments. Catastrophe, n non-U.S. global
speciality and life segments witnessed declines, partly offset by
slight growth in North America and non-U.S. global property and
casualty (P&C) segments.
As of June 30, 2012, PartnerRe's total assets were $23.07
billion, up from $22.86 billion at 2011-end. Total investments,
cash and funds held and directly managed stood at $17.8 billion,
down 1% from 2011. As of June 30, 2012, total capital was $7.5
billion (up from $7.3 billion at 2011-end) and total shareholders'
equity was $6.7 billion, up 4% from $6.5 billion at 2011-end.
However, PartnerRe's net non-life loss and loss expense reserves
reduced by 5% to $10.3 billion from 2011-end, primarily due to the
impact of catastrophic events during 2011. The company's book value
per common share increased to $91.88 when compared with $84.82 at
the end of 2011.
Annualized operating ROE soared to 10.4 % in the reported
quarter (down from a 13.0% at the end of prior quarter), while
annualized net income ROE stood at 11.8%, significantly down from a
24.7% in the prior quarter.
Share Repurchase Update
On November 21, 2011, the board of PartnerRe approved and
authorized the extension of its stock repurchase program up to 7.0
million shares, depending on the market conditions. Meanwhile,
about 3.7 million common shares were already available for
repurchase under its previous authorization.
Accordingly, the company bought back about 3.0 million shares
for $210 million during the reported quarter. Besides, an
additional 0.35 million shares have been repurchased for $26
million so far in the third quarter of 2012, until July 27, 2012,
leaving about 1.8 million shares available for repurchases under
the current authorization.
Concurrently, the board of PartneRe declared a regular dividend
of 62 cents payable on August 31, 2012, to the shareholders of
record as on August 20, 2012.
On June 1, 2012, PartneRe paid a regular dividend of 62 cents to
the shareholders of record as on May 21, 2012.
On February 2, 2012, PartnerRe had hiked its regular annual
dividend by 3% to $2.48 per share from $2.40 per share. This marked
the nineteenth consecutive year that the company has increased the
common share dividend since its inception in 1993.
So far in this quarter, most of PartnerRe's peer group have
booked profits due to the absence of catastrophe losses and lower
claims. Last week
Everest Re Group Ltd.
) reported second-quarter 2012 operating earnings of $4.25 per
share, substantially higher than the Zacks Consensus Estimate of
$3.83. Results surged 73% from $2.46 earned in the prior-year
quarter, primarily benefiting from lower claims expenses along with
a modest revenue increase.
MontpelierRe Holdings Ltd.
) reported second-quarter 2012 operating earnings of 74 cents per
share, surpassing the Zacks Consensus Estimate by 4 cents. Results
exhibited a massive improvement from 8 cents earned in the
Overall, we hold a cautious near-term outlook for PartnerRe on
the back of concerns regarding the product pricing and weak P&C
market cycle along with low premiums generation, credit spreads and
investment risk. Nevertheless, a stable outlook from rating
agencies backed by meaningful debt de-leveraging, conservative
reserving practices, overall operational synergies from strong
competitive position, disciplined expense management, above-average
liquidity, a low-risk balance sheet, effective capital deployment
and solid long-term operating profitability strengthens the
company's long-term growth profile.
In the long run, improved pricing and interest rates along with
market stability can help mitigate the cyclical declines. Hence we
maintain our Outperform stance on PartnerRe with a short-term Zacks
Rank #2 on the stock, which implies a Buy rating.
MONTPELIER RE (MRH): Free Stock Analysis Report
PARTNERRE LTD (PRE): Free Stock Analysis Report
EVEREST RE LTD (RE): Free Stock Analysis Report
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