PartnerRe Ltd.'s (PRE) second-quarter 2014 operating earnings per share of $2.60 missed the Zacks Consensus Estimate of $2.78 by 6.5%. This followed the company's earnings streak in the past four quarters with an average beat of 47.1%. Higher expenses and lower catastrophe losses primarily led to the estimate miss.
However, the reported figure was higher than 90 cents a share in the year-ago quarter. The upsurge was led by higher premiums, investment income as well as net realized and unrealized investment gains, partially offset by higher loss, acquisition and policy benefit expenses. Underwriting results improved from the comparable year-ago numbers. Subsequently, operating net income surged over 161% year over year to $133.5 million.
Operating earnings were calculated after the payment of preferred dividends. These also excluded after-tax net realized and unrealized investment gains of $2.41 per share, net foreign exchange loss of 6 cents per share and interest income from equity investments of 7 cents per share.
Including these items, GAAP net income of PartnerRe amounted to $288.6 million or $5.02 per share against a loss of $187.5 million or $3.37 per share in the year-ago quarter.
Quarter in Detail
Total revenue escalated 59.8% to $1.66 billion from $1.04 billion in the year-ago quarter. The figure also exceeded the Zacks Consensus Estimate of $1.51 billion.
This included net premiums earned worth $1.35 billion (up 12% year over year), net investment income of $116.9 million (up 4.4%), pre-tax net realized and unrealized investment gains of $165.7 million against a loss of $299.2 million in the year-ago quarter, and other income of $9.3 million, up from $3.9 million in the year-ago period. Meanwhile, net premiums written climbed 8.4% year over year to $1.42 billion.
Moreover, technical ratio improved due to lower expenses and premiums growth in North America and Global Specialty non-life segments. However, premiums declined within non-U.S. P&C and catastrophe segments. The technical result for the reported quarter was $166 million, increasing 66% from the year-ago quarter.
Total expenses climbed 2.1% year over year to $1.31 billion. Subsequently, underwriting profits spiked to $68 million from a loss of $41 million in the year-ago quarter.
Non-life combined ratio also improved to 91.5% from 97.8% in the year-ago period. This includes 15.4 basis points or $161 million related to net favorable development on prior accident years experienced in all but catastrophe segment.
Financial Update
As of Jun 30, 2014, PartnerRe's total assets were $23.45 billion, up from $23.04 billion at 2013-end. Total investments, cash and funds held and directly managed stood at $17.5 billion, slightly up from $17.4 billion at 2013-end. As of Jun 30, 2014, total capital was $7.7 billion (up from $7.5 billion at 2013-end) and total shareholder equity was $6.96 billion, up from $6.77 billion at 2013-end.
PartnerRe's net non-life loss and loss expense reserves were down 2% from the 2013-end level at $10.3 billion. The company's book value per common share improved 8.9% to $118.6 at Jun 2014-end, from $109.26 at 2013-end.
Annualized operating ROE jumped to 9.5% in the reported quarter from 3.6% at the end of the prior-year quarter, while annualized net income ROE stood at 18.4%, significantly higher than 13.4% in the prior-year quarter.
Share Repurchase Update
PartnerRe bought back about 1.3 million shares for $133 million during the second quarter. An additional 0.15 million shares have been repurchased for $16 million so far in the ongoing third-quarter (until Jul 28, 2014), leaving about 1.7 million shares available for repurchase under the current authorization.
On Sep 12, 2013, the company's 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.
Dividend Update
On Jul 29, 2014, the board of PartnerRe announced its regular quarterly dividend of 67 cents per share, payable on Aug 29, 2014, to shareholders of record as on Aug 18.
On May 30, 2014, PartnerRe paid regular quarterly dividend of 67 cents per share to shareholders of record as on May 19.
In Jan 2014, the regular quarterly dividend was hiked by 5% to 67 cents per share from the prior 64 cents, and is now shelling out $2.68 per share annually. This hike marked the 21st consecutive year of dividend increase since the company's commencement of paying dividends.
Others
Currently, PartnerRe carries a Zacks Rank #3 (Hold). Investors interested in the same sector could consider stockslike Mercury General Corporation (MCY), AmTrust Financial Services Inc. (AFSI) and Endurance Specialty Holdings Ltd. (ENH), all of whichsport a Zacks Rank #1 (Strong Buy).
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