PartnerRe Ltd. (PRE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
PartnerRe's third quarter earnings outpaced the Zacks Consensus Estimate but lagged the year-ago quarter figure. While higher premiums, lower catastrophe losses and favorable reserve drove results, higher expenses and lower investment results deteriorated the combined ratio, underwriting results and ROE. However, an appreciated asset base, capital as well as above-average liquidity and efficient capital deployment, also reflected strong balance sheet and improved book value. Uncertainty from catastrophes, weakening P&C cycle, credit spreads, stiff competition and challenging interest rate environment are other laggards. Long run though, diversified-risk model, stable ratings, improved pricing and market stability will likely help mitigate the cyclical declines, justifying our Outperform recommendation.

Overview:

Founded in 1993 and based in Pembroke, Bermuda, PartnerRe Ltd. through its subsidiaries commenced as a pure property reinsurer but has become a dynamic and diversified property-casualty (P&C) and life reinsurer over the years, covering catastrophe, automobile, agricultural, credit and surety, marine, space and aviation, miscellaneous casualty and life/health risks. The company was formed by raising nearly $1 billion in an IPO following Hurricane Andrew and the concurrent difficulties faced by Lloyds of London, which generated ample opportunities to capitalize on the untapped catastrophe reinsurance market.

Since 1997, the company has been a leading international reinsurance company that writes multi-line reinsurance on a pro rata as well as excess of loss basis and offers both treaty (reinsurance of an entire class of risk) and facultative (reinsurance on individual policy-by-policy basis) contracts, in about 150 countries across the globe. PartnerRe operates in Asia, Europe and South America and in the U.S. through its subsidiaries Partner Reinsurance Co. Ltd, PartnerRe SA and Partner Reinsurance Co. of the U.S. As of Dec 31, 2012, the company had 1,112 employees.

Over the years, PartnerRe has grown through acquisitions and alliances. Following an agreement and a 6% share purchase of Paris Re in Jul 2009, the company purchased another 57% of the shares in Paris Re along with certain outstanding warrants in Oct 2009. This was followed by two additional share purchases of approximately 6% each, bringing the total stake of the company in Paris Re to 89%. Again, in Dec 2009, PartnerRe acquired another 10% of Paris Re. Additionally, in Dec 2012, PartnerRe acquired California-based Presidio Reinsurance Group, a leading U.S. specialty accident and health reinsurance and insurance writer, for $72 million and tangible book value. This was renamed as PartnerRe Health.


The company has three primary revenue segments that generate net written premiums (NWP):

Non-life accounted for 82% of total NWP in 2013 This includes:

North America Property and Casualty 30% of total NWP

Global (Non-U.S.) Property and Casualty 15%

Global (Non-U.S.) Specialty 29%

Catastrophe 8%

Life accounted for 18% of total NWP in 2013 This includes:

Annuity

Health

Life

Corporate and Other negligible NWP This includes:

Insurance Linked Securities

Principal Finance

Strategic Investments

Geographically, Europe contributed 40% and North America contributed 39% to gross written premiums in 2013. The balance came from Asia, Australia and New Zealand (11%) and Latin America, Caribbean Islands and Africa (10%).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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