) announced its intention to purchase Presidio Reinsurance Group
- California-based leading U.S. specialty accident and health
reinsurer and insurer. The deal is expected to culminate by the
first quarter of 2013, subject to the fulfillment of regulatory
Presidio Reinsurance's business primarily consists of a
Managing General Agency (MGA) and a reinsurance carrier,
generating $250 million in accident and health premiums through
its 18-year history of underwriting profitability. It is a
leading health maintenance organization (HMO) reinsurance writer
and offers stop-loss insurance, medical treaty reinsurance,
accident insurance and reinsurance in the U.S.
PartnerRe has agreed to pay $72 million for the MGA and the
book value of the reinsurance carrier, which will be evaluated
during the closure of the deal. Moreover, the company has
accepted to augment the value of the business, if it exceeds
certain profitability targets over time.
We believe that the deal is a good-fit for PartnerRe and
complement its core growth strategy through diversification.
Presidio Reinsurance's strong market presence and proficient
management personnel should boost PartnerRe's business model,
while also exposing its product portfolio to another specialty
risk category that was least accessible to the company until now.
Additionally, expansion into newer markets and product lines will
also enhance its competitive leverage against arch-rivals such as
XL Group Plc
W.R. Berkley Corp.
Last month, PartnerRe reported its third quarter operating
earnings per share of $3.90. This significantly exceeded the
Zacks Consensus Estimate of $2.06 and the year-ago earnings of
PartnerRe's results benefited 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. The top line also improved
due to enhanced net realized and unrealized investment gains.
However, continued decline in premiums earned along with lower
investment income, driven by low reinvestment and risk-free
rates, partly offset the improvements.
Moreover, for the fourth quarter of 2012, loss is pegged at 4
cents per share by the Zacks Consensus Estimate, and is expected
to decline about 98% year over year, primarily driven by increase
catastrophe losses from Hurricane Sandy. Nevertheless, earnings
are expected to escalate by about 192% over the prior year in
2012 to $8.76 a share. Currently, PartnerRe holds a Zacks #3
Rank, implying a Hold rating in the short-term.
PARTNERRE LTD (PRE): Free Stock Analysis
BERKLEY (WR) CP (WRB): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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