Yesterday, property-casualty and life reinsurer -
) - projected about $120 million in pre-tax catastrophe (
) losses from the Thailand floods, which occurred in October and
November last year. This will be recorded in the fourth quarter
results of 2011.
The total insured industry loss from Thailand floods is
estimated to be over $15 billion. Besides, the company's estimated
loss came in line with management's prior expectation of incurring
CAT loss related to these floods within 0.5-1.0% of the total
industry loss. In December 2011, another reinsurer
Everest Re Group Ltd.
) estimated to incur about $100-125 million in CAT loss arising
from these floods, during the fourth quarter of 2011.
Together with the Thailand floods, total CAT losses for the
fourth quarter of 2011 are now projected to be about $208 million.
This even includes an estimated $88 million from the impact of the
earthquakes that hit Japan in March last year.
Until the third quarter of 2011, PartnerRe had incurred a total
charge of about $730 million against the earthquake and tsunami in
Japan. The additional $88 million charge has been taken after
completing an intensive on-the-ground audit of the Japanese
exposure and claim processes.
As a result of these CAT losses, PartnerRe now expects post-tax
operating loss of $110-130 million for the fourth quarter of 2011
and $130-150 million or $1.95-2.25 per share for 2011.
So far PartnerRe has already recorded about $1.4 billion in
pre-tax CAT losses in the first nine months of 2011 itself, way
higher than $437 million in 2010, nil loss in 2009 and $305 million
in 2008. Along with the estimate for the fourth quarter, CAT losses
for 2011 are now expected to escalate to about $1.6 billion.
We believe such uncertainty and volatility in the magnitude of
catastrophic losses besides reducing financial flexibility and
reserves of the company also weakens the underwriting capacity,
thereby draining out all the earnings resources.
As a result, the Zacks Consensus Estimate for the fourth quarter
is currently pegged at 51 cents per share, down by a significant
67% year over year, although it excludes the estimated CAT loss.
Over the last 30 days, 5 of the 16 analyst firms lowered their
estimates, while no upward revisions were witnessed. However,
earnings in 2011are expected to decline over 208% over 2010 to a
loss of $6.94 per share, reflecting increased CAT losses. PartnerRe
is scheduled to release its results after the market closes on
February 6, 2012.
Overall, our near-term outlook on PartnerRe remains cautious on
the back of concerns regarding the successful Paris Re integration
and catastrophic losses, weak P&C market cycle and low
underwriting profitability. In the long run, however, a stable
rating outlook, improved pricing and market stability can help in
mitigating the cyclical declines. Hence, we maintain a Neutral
recommendation on the stock in the long run, in line with the Zacks
Rank #3, reflecting a short-term Hold recommendation.
PARTNERRE LTD (
): Free Stock Analysis Report
EVEREST RE LTD (
): Free Stock Analysis Report
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