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PartnerRe Falls on Cat Loss Estimate of Tianjin Explosion

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Shares of PartnerRe Ltd.PRE dipped 0.14% in the last trading session to close at $138.60 after the company provided catastrophe loss estimates related to the explosion in Tianjin, China in Aug 2015.

In the third quarter of 2015, the company expects to incur a pre-tax catastrophe loss in the range of $50 million to $70 million related to the above-mentioned event. The loss, net of retrocession and reinstatement premiums, is expected to affect the company's financials adversely. The loss will be recorded in the Global P&C, Specialty, Catastrophe, and North America sub-segments.

In the last reported quarter, PartnerRe's Catastrophe Non-life sub segment's performance was weak. As a result, the Catastrophe sub-segment's net premiums written plunged 48% year over year and the Non-life segment's overall net premiums written decreased 9%. However, overall combined ratio improved 120 basis points year over year to 90.3%. The improvement was attributable to favorable prior-year development.

PartnerRe is significantly exposed to catastrophe losses. The company recorded about $1.79 billion in pre-tax catastrophe losses in 2011, way higher than a loss of $437 million in 2010, no loss in 2009 and $305 million in 2008, leading to a loss of earnings and capital overall.

PartnerRe further incurred pre-tax catastrophe loss of $318 million in 2012, higher than the projection of about $200-240 million. Loss of another $142 million was incurred in 2013. Even technical results for the catastrophe segment declined 11.2% year over year in 2013 and deteriorated 1.1% in 2014. Going ahead, PartnerRe's lack of casualty underwriting experience, risk retention by clients and low-risk appetite for reinsurers may even result in negative surprises in the future.

The company is slated to release third-quarter 2015 results on Oct 26, after the closing bell. Our proven model shows that the company is likely to beat earnings because it has the right combination of two key components, namely a positive Earnings ESP and a favorable Zacks Rank. Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 10.11% for PartnerRe. The company holds a Zacks Rank #2 (Buy).

Other Stocks to Consider

Investors can also consider other property and casualty insurers like The Travelers Companies, Inc. TRV , White Mountains Insurance Group, Ltd. WTM and Arch Capital Group Ltd. ACGL . While The Travelers and White Mountains sport a Zacks Rank #1 (Strong Buy), Arch Capital holds the same Zacks Rank as PartnerRe.

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TRAVELERS COS (TRV): Free Stock Analysis Report

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WHITE MTN INS (WTM): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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