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Investment Loss Hurts PartnerRe Q2 Earnings

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PartnerRe Ltd.’s second-quarter 2013 operating earnings per share of 90 cents inched past the Zacks Consensus Estimate of 88 cents. However, results stood significantly lower than the year-ago number of $2.20 a share.

Higher investment losses led to lower top line, while higher expenses led to underwriting loss, overall deteriorating the bottom line. Subsequently, operating net income plunged 64% year over year to $51.1 million.

Operating earnings were calculated after payment of preferred dividends. This also excluded after-tax net realized and unrealized investment loss of $4.07 per share, net foreign exchange loss of 10 cents and loss on redemption of preferred shares of 10 cents.

Including these items, GAAP net loss for PartnerRe stood at $187.5 million or $3.37 per share against net income of $158 million or $2.50 per share in the year-ago quarter.

PartnerRe’s total revenue plummeted 19.2% to $1.04 billion from $1.29 billion in the year-ago quarter. It sizeably missed the Zacks Consensus Estimate of $1.33 billion as well.

This included net premiums earned of $1.21 billion (up 7.9% year over year), net investment income of $124.5 million (down 18.9 % year over year), pre-tax net realized and unrealized investment loss of $299.2 million against gain of $38.1 million in the year-ago quarter and other income of $3.9 million, up from $2.7 million in the year-ago period. Meanwhile, net premiums written increased 15.3% year over year to $1.31 billion.

During the reported quarter, total expense surged 21.5% year over year to $1.28 billion. Higher expenses also led to underwriting loss of $41 million versus income of $49 million in the year-ago quarter.

Non-life combined ratio also deteriorated to 97.8% from 90.6% in the year-ago period, attributable to higher expenses, policy benefits and acquisition costs. This also reflected 11.7 points or $112 million related to catastrophe losses from floods in Europe and Canada, offset by 13.0 points or $127 million related to net favourable development on prior accident years across all non-life segments.

Further, technical ratio depreciated across most non-life segments. The technical result for the reported quarter was positive $100 million, declining 34.2% from the year-ago quarter.

Financial Update

As of Jun 30, 2013, PartnerRe’s total assets were $22.57 billion, down from $22.98 billion at 2012-end. Total investments, cash and directly managed funds stood at $17.1 billion, down 5% from $18 billion at 2012-end. As of Jun 30, 2013, total capital was $7.2 billion (down 7% from 2012-end) and total shareholder equity was $6.42 billion, down from $6.93 billion at 2012-end.

However, PartnerRe's net non-life loss and loss expense reserves dipped 3% from 2012-end to $10.1 billion, primarily due to loss payments and strong dollar exchange rate. The company’s book value per common share reduced 1.2% to $99.65, compared with $100.84 at the end of 2012.

Annualized operating ROE plunged to 3.6% in the reported quarter from 13.5% at the end of the prior quarter, while annualized net loss ROE stood at 13.4%, significantly lower than net income ROE of 14% in the prior quarter.

Share Repurchase Update

On Mar 6, 2013, the 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 Aug 2012.

Accordingly, the company bought back about 3.7 million shares for $332 million during the reported quarter. An additional 0.325 million shares worth $29 million have been bought back so far in the third quarter of 2013, leaving about 1.1 million shares available for repurchases under the current authorization.

Dividend Update

Concurrently, the board of PartneRe declared a regular quarterly dividend of 64 cents per share, payable on Aug 30, 2013, to shareholders of record as on Aug 19, 2013.

On May 31, 2013, PartnerRe paid a regular quarterly dividend of 64 cents a share to shareholders of record as on May 20, 2013. In Feb 2013, the company had hiked its regular dividend by 3% to 64 cents per share from the prior payout of 62 cents.


While PartnerRe carries a Zacks Rank #3 (Hold), other strong performers in the insurance sector include State Auto Financial Corp. (STFC - Free Report) , Hilltop Holdings Inc. (HTH - Free Report) and ProAssurance Corp. (PRA - Free Report) . All these stocks carry a Zacks Rank #1 (Strong Buy).

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