On Nov 22, we upgraded our recommendation on
) to Outperform based on its improved risk profile, underwriting
capabilities and the latest acquisition of Presidio Reinsurance,
all of which are showing positive results.
Why the Upgrade?
Estimates for this global life and property-casualty insurer
and reinsurer witnessed significant corrections after the company
reported its third-quarter 2013 results on Oct 28. Both operating
earnings of $5.70 per share and total revenue of $1.56 billion
topped the Zacks Consensus Estimate of $2.32 a share and $1.43
billion, respectively, during the third quarter.
Earnings also remarkably exceeded the year-ago quarter number
of $3.90 a share by 46.2%, although total revenue dipped 4.1%
from the prior-year quarter.
Higher premiums and lower catastrophe losses boosted
underwriting and technical results, while also improving the
combined ratio, ROE and book value per share. Overall, PartnerRe
delivered positive earnings surprises in all the last 4 quarters
with an average beat of 163.6%.
Following the release of the third-quarter results, the Zacks
Consensus Estimate for 2013 surged 35.5% to $12.22 per share in
the last 30 days. Moreover, the Most Accurate Estimate for
PartnerRe's 2013 earnings stands at $12.56 a share, resulting in
Further, the Zacks Consensus Estimate for 2014 edged up 2
cents per share to $9.44 in the last 30 days. Meanwhile, no
downward revision in estimates was witnessed for both the years.
With the Zacks Consensus Estimate on both fronts exhibiting
strong upward pressure in the near term, PartnerRe now has a
Zacks Rank #1 (Strong Buy).
PartnerRe enjoys a diversified business model, further
strengthened by Presidio Reinsurance acquisition. Although
investment returns have remained challenged, meaningful changes
made in the company's catastrophic risk-profile have improved its
operating leverage. Moreover, PartnerRe's strong market presence
is driving the growth momentum, whereas stable equity returns in
2012 and so far in 2013 cast a favorable outlook for the upcoming
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 worth considering in the
insurance sector are
Montpelier Re Ltd.
HCI Group Inc.
CNA Financial Corp.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
CNA FINL CORP (CNA): Free Stock Analysis
HCI GROUP INC (HCI): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis
PARTNERRE LTD (PRE): Free Stock Analysis
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