On Apr 22, we upgraded our recommendation on
) to Outperform based on its improved risk profile, underwriting
capabilities and the latest acquisition of Presidio
Why the Upgrade?
Estimates for this global life and property-casualty insurer
and reinsurer witnessed significant corrections after the company
reported its fourth-quarter 2012 results on Feb 6. The company's
fourth-quarter earnings per share of $1.55 significantly
surpassed the Zacks Consensus Estimate of a loss of 42 cents and
the year-ago loss of $2.06. Total revenue of $1.31 billion
outpaced the Zacks Consensus Estimate of $1.29 billion although
it declined 7.2% from the prior-year quarter.
However, total expenses plunged 17.4% year over year to $1.18
billion, while combined ratio recovered to 95.3% from 121.7% in
the year-ago period. Consequently, operating return on equity
(ROE) of 12.3% in 2012 outpaced the (10.1%) in 2011. Overall,
PartnerRe delivered positive earnings surprises in all of the
last 4 quarters with an average beat of 150.3%.
Following the release of the fourth-quarter results, the Zacks
Consensus Estimate for 2013 increased 3.9% to $8.56 per share in
the last 60 days. Moreover, the Zacks Consensus Estimate for 2014
edged up 0.8% to $7.99 per share in the last 60 days. With the
Zacks Consensus Estimates for both 2013 and 2014 exhibiting
strong upward pressure in the near term, PartnerRe now has a
Zacks Rank #1 (Strong Buy).
What is the cause for the strong positive bias on the company?
Despite incurring catastrophe losses due to Hurricane Sandy, the
company posted strong fourth-quarter results. Moreover,
PartnerRe's acquisition of Presidio Reinsurance is likely to
drive growth based on its strong market presence, thus
complementing its strategy of growth through acquisitions.
Additionally, PartnerRe enjoys above-average liquidity and a
low-risk balance sheet, which is reflected in its consistent and
efficient capital deployment and dividend increment. In the long
run, a stable ratings outlook, improved pricing and market
stability will help it generate higher underwriting profitability
and investment returns.
Other Insurers That Warrant a Look
Apart from PartnerRe, other stocks in the insurance sector
that are outperforming include
Montpelier Re Ltd.
EMC Insurance Group Inc.
Hilltop Holdings Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
EMC INSURANCE (EMCI): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis
PARTNERRE LTD (PRE): Free Stock Analysis
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