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Analyst Blog

Riding on a steady growth momentum, the shares of PartnerRe Ltd. (PRE - Analyst Report) hit a new 52-week high at $107.93 on May 23. This multi-line insurer and reinsurer’s shares rose about 6.5% since the beginning of 2014.

The strong price appreciation of this Zacks Rank #2 (Buy) stock was driven by growth in the past quarters. PartnerRe has delivered positive earnings surprises in all of the last 4 quarters with an average beat of 47.1%. Disciplined underwriting, improved pricing and healthy renewals bode well for the coming quarters as well.

Yesterday’s closing price represents a strong one-year return of about 20.4%, against 15.2% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 447.2K.

Earnings Review

On Apr 28, PartnerRe reported first-quarter 2014 operating earnings per share of $3.36, which surpassed the Zacks Consensus Estimate by 40%. However, earnings were slightly lower than the year-ago quarter figure of $3.39 a share.

Results were boosted by improved premiums and rise in net realized and unrealized investment gains as well as underwriting results, all on a year-over-year basis. The positives were partially offset by lower investment income and higher expenses, which dragged the combined ratio and return on equity (ROE). However, improved book value per share and above-average liquidity remained impressive.

Rationale

Despite intense competition, currency risks and volatility in interest rates, which restrict investment returns, PartnerRe holds a low-risk balance sheet. This also paves the way forefficient capital deployment. In the long run, stable ratings, improved pricing and market stability could help mitigate the cyclical declines. These factors also indicate an optimistic growth outlook going forward.

Some better-ranked insurersthat warrant a look include AmTrust Financial Services Inc. (AFSI - Snapshot Report), HCI Group Inc. (HCI - Snapshot Report) and Aspen Insurance Holdings Ltd. (AHL - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).