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PartnerRe Ltd. (PRE - Analyst Report) completed the acquisition of Presidio Reinsurance Group. The acquisition was announced in mid December last year.

Formed in 1994, California-based Presidio Reinsurance Group is a leading U.S. specialty accident and health reinsurer and insurer. Presidio currently generates $250 million in accident and health premiums.

Presidio Reinsurance’s business primarily consists of a Managing General Agency (MGA) and a reinsurance carrier. PartnerRe has agreed to pay $72 million for the MGA and the book value of the reinsurance carrier.

We believe that the deal is apt for PartnerRe and will likely complement its core growth strategy through diversification. Presidio Reinsurance’s strong market presence and proficient management personnel should boost PartnerRe’s business model, while exposing its product portfolio to another specialty risk category that was least accessible to the company until now.

Further, expansion into newer markets and enhancing product lines will also boost its competitive leverage against competitors like XL Group Plc (XL - Analyst Report) and W.R. Berkley Corp. (WRB - Analyst Report).

The Zacks Consensus Estimate for 2012 is currently pegged at $8.50 per share, up 189.5% year over year, while for 2013 it is $7.82 per share, down 8% year over year.

PartnerRe, in each of the first three quarters of 2012, reported solid earnings and surpassed the Zacks Consensus Estimate with an average beat of 44.1%. However, the picture might alter to accommodate the loss arising from Hurricane Sandy. It expects to incur pre-tax loss of about $200–$240 million. The Zacks Consensus Estimate for the fourth quarter is a loss of 43 cents, much narrower than the loss incurred in the year-ago quarter.

PartnerRe currently carries a Zacks #2 Rank (Buy) rating. Given the optimism over the recent acquisition, we expect analysts to raise their estimates, providing an upward pressure on its Zacks Rank. There was no earnings momentum over the past 7 days.

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