Recently, property-casualty and life reinsurer -
) - announced the pre-tax catastrophe (CAT) loss projections of
about $200-240 million from the Hurricane Sandy, which hit the
north-east coast of the US lately. This will be recorded in the
fourth quarter results of 2012.
The total insured industry loss from the Superstorm Sandy is
estimated to be over $25 billion. Other insurers and reinsurers
American International Group Inc.
The Travelers Companies
RenaissanceRe Holdings Ltd.
Everest Re Group Ltd.
) have estimated CAT losses of $1.08 billion, $1.3 billion, $1.14
billion, $130 million and $220 million, respectively.
Over the past few years, catastrophe losses have not only
amplified the claims payments of the insurers but also nibbled
into the earnings of the companies, thereby distorting the
operational dynamics for quite some time, post the
weather-related events. It also causes the erosion of free
capital, which could otherwise be utilized for growth purposes or
to enhance shareholder value.
PartnerRe incurred a net operating loss of about $504 million
or $7.43 per share in the first nine months of 2011 primarily due
to escalated CAT losses owing to the Thailand floods and the
Tsunami in Japan. However, lower CAT losses in the same period
this year resulted in an operating net income of $568 million or
$8.84 a share.
Nonetheless, losses from the Hurricane Sandy have reversed the
positive trend that the company experienced in the first three
quarters of 2012. 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 all the
Last month, PartnerRe reported its third-quarter 2012
operating earnings per share of $3.90. This significantly
exceeded the Zacks Consensus Estimate of $2.06 and the year-ago
earnings of $2.41.
PartnerRe'sresults benefited from the improved underwriting
and technical results coupled with a significant reduction in the
catastrophe and total expenses, which improved the combined ratio
and also drove the bottom line, return on equity (ROE) and book
value. The top line grew due to the 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
However, as per the Zacks Consensus Estimate, net loss is
pegged at 49 cents per share for the fourth quarter of 2012 and
is expected to decline about 76% year over year, primarily driven
by an increase in CAT losses from Hurricane Sandy. Nonetheless,
earnings are expected to escalate by about 189% over the prior
year in 2012 to $8.47 a share. Six out of the 16 analyst firms
have lowered their earnings estimates in the last 7 days, while
one upward revision was witnessed. Currently, PartnerRe carries a
Zacks #3 Rank, implying a Hold rating in the short-term.
AMER INTL GRP (AIG): Free Stock Analysis
ALLSTATE CORP (ALL): Free Stock Analysis
PARTNERRE LTD (PRE): Free Stock Analysis
EVEREST RE LTD (RE): Free Stock Analysis
RENAISSANCERE (RNR): Free Stock Analysis
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