PartnerRe's Earnings Beat Ests, Soar Y/Y

Zacks

PartnerRe Ltd.’s (PRE) fourth-quarter 2013 operating earnings per share of $2.91 beat the Zacks Consensus Estimate by a penny. However, results outpaced the year-ago quarter number of $1.55 a share, primarily on lower share count.

Improved premiums and higher net realized and unrealized investment gains were partially offset by lower investment income and higher expenses, while underwriting results improved from the comparable year-ago figure. Subsequently, operating net income surged 64.5% year over year to $157.4 million.

Operating earnings were calculated after payment of preferred dividends. Earnings also excluded after-tax net realized and unrealized investment gains of $1.70 per share, net foreign exchange gains of 7 cents per share and interest income from equity investments of 8 cents per share.

Including these items, GAAP net income of PartnerRe amounted to $265.6 million or $4.76 per share against $104.6 million or $1.56 per share in the year-ago quarter.

Total revenue escalated 24.8% to $1.64 billion from $1.31 billion in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $1.44 billion.

This included net premiums earned worth $1.42 billion (up 21.7% year over year), net investment income of $114.4 million (down 15.7%), pre-tax net realized and unrealized investment gains of $99.4 million against a mere $5.1 million in the year-ago quarter, and other income of $3.4 million, down from $3.8 million in the year-ago period. Meanwhile, net premiums written increased 28.9% year over year to $1.19 billion.

During the reported quarter, total expenses jumped 14.9% year over year to $1.36 billion. Nevertheless, underwriting profits escalated to $96 million from $13 million in the year-ago period.

Non-life combined ratio also improved to 88% from 95.3% in the year-ago period. This includes 14.9 basis points or $173 million related to net favourable development on prior accident years across all non-life segments except the catastrophe segment.

Moreover, technical ratio improved across most non-life and life segments. The technical result for the reported quarter was $224 million, growing 83.6% over the year-ago quarter.

Highlights of Full-Year 2013

PartnerRe reported operating earnings per share of $12.79 in 2013, missing the Zacks Consensus Estimate of $12.90 but outpacing $10.43 recorded in 2012. Operating net income increased 8.7% year over year to $721.7 million. GAAP net income for PartnerRe stood at $641.2 million or $10.58 per share in 2013 compared with $1.16 billion or $16.87 per share in 2012.

Total revenue slipped 0.4% year over year to $5.54 billion in 2013, also lagging the Zacks Consensus Estimate of $5.97 billion. Total expense increased 14.1% to $4.83 billion. Operating expense included $58 million of restructuring expenses. Nonetheless, non-life combined ratio improved to 85.3% from 87.8% in 2012.

Financial Update

As of Dec 31, 2013, PartnerRe’s total assets were $23.04 billion, up from $22.98 billion at 2012-end. Total investments, cash and funds held and directly managed stood at $17.4 billion, down 3% from $18 billion at 2012-end. As of Dec 31, 2013, total capital was $7.5 billion (down from $7.7 billion at 2012-end) and total shareholder equity was $6.77 billion, down from $6.93 billion at 2012-end.

PartnerRe's net non-life loss and loss expense reserves were in line with 2012-end level at $10.4 billion. The company’s book value per common share improved 8.4% to $109.3 in 2013, compared with $100.84 at the end of 2012.

Annualized operating ROE soared to 11.5% in the reported quarter from 7.3% at the end of the prior-year quarter, while annualized net income ROE stood at 18.9%, significantly higher than 7.4% in the prior-year quarter.

Annualized operating ROE improved to 12.7% at 2013-end from 12.3% at the end of the prior quarter. However, annualized net income ROE stood at 10.5%, lower than ROE of 19.9% in 2012.

Share Repurchase Update

On Sep 12, 2013, the board approved and brought into effect a stock repurchase authorization of up to 6.0 million shares. This replaced the previous authorization of 6.0 million shares that was approved in Mar 2013.

Accordingly, the company bought back about 1.1 million shares for $101 million during the fourth quarter. An additional 0.62 million shares have been repurchased for $61 million so far in the ongoing first quarter (until Feb 3, 2014), leaving about 4.3 million shares available for repurchase under the current authorization.

Dividend Update

On Jan 29, 2014, the board of PartnerRe approved a 5% hike in its regular quarterly dividend payout to 67 cents per share from the prior 64 cent and is now shelling out $2.68 per share annually.

The current hike marks the 21st consecutive year of dividend increasesince the company’s commencement. The raised quarterly dividend will be paid on Feb 28, 2014 to shareholders of record as on Feb 18, 2014.

On Nov 29, 2013, PartnerRe paid a regular quarterly dividend of 64 cents per share to shareholders of record as on Nov 18, 2013.

Others

While PartnerRe carries a Zacks Rank #3 (Hold), some better-ranked insurers include White Mountains Insurance Group Ltd. (WTM), RLI Corp. (RLI) and Endurance Specialty Holdings Ltd. (ENH). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on RLI
Read the Full Research Report on PRE
Read the Full Research Report on ENH
Read the Full Research Report on WTM


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