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PartnerRe Estimates 2Q CAT Loss

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Property-casualty and life reinsurer – PartnerRe Ltd. projected about $95–120 million in pre-tax catastrophe (CAT) losses from the floods in Europe and Canada, which occurred last month. This will be recorded in the second quarter results of 2013, which is scheduled to release after the closing bell on Jul 29, 2013.

Accordingly, PartnerRe expects pre-tax CAT loss of about $50–60 million from the European floods. However, this estimate is adjusted for retrocession and reinstatement premiums.

Other insurers and reinsurers such as Munich Re AG and Swiss Re Ltd. have estimated the total insured industry loss from the floods in Central and Eastern Europe to be within around $4 billion. While Munich Re is yet to estimate its own loss, Swiss Re and Allianz SE have nailed their respective CAT loss projections at approximately $300 million and $460 million.

Meanwhile, the initial loss estimate from the recent floods in Canada is pegged between $45 million and $60 million for PartnerRe. Preliminary insured industry loss estimates are pegged at about $1.0 billion. However, according to Aon Benfield’s monthly global catastrophe recap, economic losses should surge to about $3.8 billion. The total global economic loss from the floods in June 2013 across Europe, Canada and India are expected to amount to about $27 billion.

We believe such volatility in the magnitude of catastrophic losses besides reducing financial flexibility and reserves of the company also weakens the underwriting capacity, thereby deterring the desired upside in earnings. Yet, improved pricing and PartnerRe’s recent attempt to diversify its business through the Presidio acquisition should provide some buoyancy.

As a result, the Zacks Consensus Estimate for the second quarter is currently pegged at $1.76 per share, down 20.2% year over year. Over the last 30 days, 3 of the 10 analyst firms lowered their estimates, while only 1 revised upward. Even the earnings in 2013 are expected to decline by more than 11% over 2012 to $9.25 per share. Apart from PartnerRe, American Safety Insurance Holdings Inc. , MetLife Inc. (MET - Free Report) and Cigna Corp. (CI - Free Report) carry a Zacks Rank #2 (Buy).

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