) third-quarter 2012 operating earnings per share of $3.90
significantly surpassed the Zacks Consensus Estimate of $2.06 and
the year-ago earnings of $2.41. As a result, operating net income
soared to $244.4 million from $164.5 million in the prior-year
Operating earnings were calculated after payment of preferred
dividends. This also excluded after-tax net realized and
unrealized investment gains of $221.8 million or $3.55 per share
and net foreign exchange losses of 2 cents per share and interest
income of 6 cents per share from equity investments. The year-ago
quarter had recorded after-tax net realized and unrealized
investment gains of $6.2 million or 9 cents per share.
Including these items, GAAP net income for PartnerRe stood at
$486.7 million or $7.53 per share against $180.1 million or $2.43
per share in the year-ago quarter.
Results benefited year over year from improved underwriting
and technical results coupled with a significant reduction in the
total expenses and combined ratio, which also drove the earnings,
return on equity (ROE) and book value. Top line improved due to
enhanced net realized and unrealized investment gains, driven by
contracting credit spreads, better equity markets and reduced
risk-free rates. However, continued decline in premiums earned
and lower investment income offset some of the improvements.
PartnerRe's total revenue surged 9.4% to $1.63 billion from
$1.49 billion in the year-ago quarter. Total revenue also
exceeded the Zacks Consensus Estimate of $1.37 billion.
This included net premiums earned of $1.2 billion (down 4%
year over year), net investment income of $135 million (down 15%
year over year), pre-tax net realized and unrealized investment
gains of $257.4 million against $26.1 million in the year-ago
quarter and other income of $2.7 million, up from $1.4 million in
the year-ago period. However, net premiums written declined 3%
year over year to $1.0 billion.
During the reported quarter, total expense plunged 14% year
over year to $1.09 billion. Non-life combined ratio also
recovered to 80.7% from 93.1% in the year-ago period. This
reflects 18.2 points or $189 million related to net favourable
loss development on prior accident years.
Moreover, technical ratio improved for the Global (non-U.S.)
Specialty and Catastrophe segments, but deteriorated for the
North America and Global (non-U.S.) P&C segments. The
technical result for the reported quarter was a positive of $269
million against $150 million in the year-ago quarter.
As of September 30, 2012, PartnerRe's total assets were $23.64
billion, up from $22.86 billion at 2011-end. Total investments,
cash and funds held and directly managed stood at $18.4 billion,
up 3% from 2011-end. As of September 30, 2012, total capital was
$7.9 billion (up from $7.3 billion at 2011-end) and total
shareholders' equity was $7.1 billion, up 9% from $6.5 billion at
However, PartnerRe's net non-life loss and loss expense
reserves reduced by 4% to $10.5 billion from 2011-end, primarily
due to the impact of catastrophic events during 2011. The
company's book value per common share increased 17% to $99.54,
compared with $84.82 at the end of 2011.
Annualized operating ROE soared to 18.4% in the reported
quarter (from 10.4% at the end of the prior quarter), while
annualized net income ROE stood at 35.5%, significantly
increasing from 11.8% in the prior quarter.
Share Repurchase Update
In the reported quarter, the board of PartnerRe approved a
stock repurchase authorization of up to 6.0 million shares.
Accordingly, the company bought back about 1.3 million shares
for $93 million during the reported quarter. Moreover, an
additional 0.153 million shares have been repurchased for $12
million so far in the third quarter of 2012, until October 26,
2012, leaving about 5.7 million shares available for repurchases
under the current authorization.
Concurrently, the board of PartneRe declared a regular
dividend of 62 cents payable on November 30, 2012, to the
shareholders of record as on November 19, 2012.
On August 31, 2012, PartneRe paid a regular dividend of 62
cents to the shareholders of record as on August 20, 2012.
So far in this quarter, most of PartnerRe's peers have booked
profits due to the absence of catastrophe losses and lower
claims. Last week,
Everest Re Group Ltd.
) reported third-quarter 2012 operating earnings of $4.05 per
share, substantially higher than the Zacks Consensus Estimate of
$3.44. Results surged 50% from $2.70 earned in the prior-year
quarter, primarily benefiting from higher revenues along with
lower claims and expenses.
MontpelierRe Holdings Ltd.
) reported third-quarter 2012 operating earnings of 85 cents per
share, surpassing the Zacks Consensus Estimate of 65 cents.
Results exhibited a massive improvement from operating loss of 40
cents in the prior-year quarter.
Overall, we hold a cautious near-term outlook for PartnerRe on
the back of concerns regarding the rating downgrades, a weak
P&C market cycle, low premiums generation, currency
fluctuations, credit spreads and investment risk. Nevertheless,
above-average liquidity, a low-risk balance sheet and effective
capital deployment strengthens the company's long-term growth
In the long run, a stable ratings outlook, improved pricing
and market stability can help mitigate the cyclical declines.
Hence, we maintain our 'Neutral' stance on PartnerRe with a
short-term Zacks Rank #3 on the stock, which implies a Hold
MONTPELIER RE (MRH): Free Stock Analysis
PARTNERRE LTD (PRE): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
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