PartnerRe Ltd.’s (PRE - Analyst Report) fourth-quarter 2012 operating earnings per share of $1.55 significantly surpassed the Zacks Consensus Estimate of a loss of 42 cents and the year-ago loss of $2.06. As a result, operating net income soared to $95.7 million from a loss of $137.7 million in the prior-year quarter.
Operating earnings were calculated after payment of preferred dividends. This also excluded after-tax net realized and unrealized investment loss of 12 cents per share, which was offset by net foreign exchange gains of 12 cents per share and interest income of 1 cent per share from equity investments.
The year-ago quarter had recorded after-tax net realized and unrealized investment gains of 85 cents per share, net foreign exchange gains of 75 cents per share and interest expense from equity investments of 3 cents per share.
Including these items, GAAP net income for PartnerRe stood at $104.6 million or $1.56 per share against a loss of $22.4 million or 49 cents per share in the year-ago quarter.
PartnerRe’s total revenue declined 7.2% to $1.31 billion from $1.41 billion in the year-ago quarter. However, total revenue surpassed the Zacks Consensus Estimate of $1.29 billion.
This included net premiums earned of $1.17 billion (down 1.1% year over year), net investment income of $135.7 million (down 12.7% year over year), pre-tax net realized and unrealized investment gains of $5.1 million against $74.6 million in the year-ago quarter and other income of $3.8 million, up from $3.1 million in the year-ago period. However, net premiums written increased 4.6% year over year to $920.3 million.
During the reported quarter, total expense plunged 17.4% year over year to $1.18 billion. Non-life combined ratio also recovered to 95.3% from 121.7% in the year-ago period. This reflects 23.7 points or $225 million related to catastrophe losses due to Hurricane Sandy, while 16.7 points or $161 million are related to net favourable loss development on prior accident years.
Moreover, the technical ratio improved across segments. The technical result for the reported quarter was a positive of $122 million against a negative result of $127 million in the year-ago quarter.
Highlights of Full-Year 2012
PartnerRe reported operating earnings per share of $10.43 in 2012, beating the Zacks Consensus Estimate of $8.51 and a loss of $9.50 in 2011. Operating net income increased to $663.8 million versus a loss of $641.6 million in 2011. GAAP net income for PartnerRe stood at $1.16 billion or $16.87 per share in 2012 compared with net loss of $537.0 million or $8.40 per share in 2011.
Total revenue improved 3.9% to $5.56 billion in 2012, also exceeding the Zacks Consensus Estimate of $5.12 billion. Total expense plunged 27.0% year over year to $4.23 billion. Non-life combined ratio also improved to 87.8% from 125.4% in 2011.
As of Dec 31, 2012, PartnerRe’s total assets were $22.98 billion, up from $22.86 billion at 2011-end. Total investments, cash and funds held and directly managed stood at $18.0 billion, up 1% from 2011-end. As of Dec 31, 2012, total capital was $7.7 billion (up from $7.3 billion at 2011-end) and total shareholders' equity was $6.93 billion, up from $6.47 billion at 2011-end.
However, PartnerRe's net non-life loss and loss expense reserves reduced by 5% to $10.4 billion from 2011-end, primarily due to the impact of catastrophic events during 2011. The company’s book value per common share increased 19% to $100.84, compared with $84.82 at the end of 2011.
Annualized operating ROE soared to 7.3% in the reported quarter (down from 18.4% at the end of the prior quarter), while annualized net income ROE stood at 7.4%, significantly lower than 35.5% in the prior quarter.
In 2012, annualized operating ROE stood at 12.3% (down from a negative 10.1% at the end of 2011), while annualized net income ROE stood at 19.9%, significantly increasing from a negative 9.0% in 2011.
Share Repurchase Update
In the third quarter of 2012, the board approved a stock repurchase authorization of up to 6.0 million shares.
Accordingly, the company bought back about 2.7 million shares for $218 million during the reported quarter. Moreover, an additional 0.4 million shares have been repurchased for $37 million so far in the first quarter of 2013, until Feb 5, 2013, leaving about 2.7 million shares available for repurchases under the current authorization.
On Feb 4, 2013, the board of PartneRe hiked its regular dividend by 3% to 64 cents per share from the prior payout of 62 cents. The hiked dividend is payable on Mar 1, 2013, to the shareholders of record as on Feb 19, 2013.
On Nov 30, 2012, PartneRe paid a regular dividend of 62 cents to the shareholders of record as on Nov 19, 2012.
PartnerRe carries a Zacks Rank #3 (Hold). Other strong performers in the insurance sector include The Travelers Cos. Inc. (TRV - Analyst Report), First American Financial Corp. (FAF - Snapshot Report) and RLI Corp. (RLI - Analyst Report), all of which carry a Zacks Rank #1 (Strong Buy).