PartnerRe Looks Reasonable Here, Especially If Pricing Firms
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Tue, Sep. 9, 11:59 AM
- "Fierce competition, over-capacity and low returns continue to put pressure on the industry," says Moody's, reinforcing its negative outlook on the global reinsurer sector (first changed to negative in June).
- There are positive developments though, particularly a slowing in price declines. Moody's previously believed a 15-20% drop in cat prices next year a "distinct possibility," but says such a severe scenario has become less likely.
- One reason for the slowing price decline, says Moody's, is non-traditional competitors like insurance linked securities (ILS) are having a tough year and have less scope to cut pricing.
- Among the reinsurers: ACE, XL, PRE, RE, RNR, AHL, ENH. AXS, ACGL, RGA, MRH, UNM, OTCPK:SSREY, GLRE, TPRE.
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- Operating earnings of $176.9M or $3.36 per share vs. $202.1M or $3.39 per share a year ago. Gains on investment brings Q1 net income to $295.7M or $5.61 per share vs. $210.5M or $3.53 per share (after investment gains) one year ago.
- Tangible book value per share of $103.10 is up 4.7% from the end of 2013. Annualized operating ROE of 12.3%.
- CEO Costas Miranthis: "We are beginning to see the effect of our efforts to profitably diversify our portfolio into new lines such as health and mortgage business."
- Previously: PartnerRe Ltd. beats by $0.86
- Source: Press Release
- PRE flat AH
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- Following a 2013 in which the number of natural and man-made disasters fell by half, reinsurers could be hit with up to a 25% decline in premium revenue this year, according to broker Willis Re.
- Combining with the lack of catastrophes is a market in oversupply as pension funds and hedge funds (like GLRE and TPRE) rush into the business - a $50B increase in industry capital, says Willis CEO John Cavanagh.
- U.S. property casualty reinsurance faces the biggest hit - 10-25% - while European premiums could fall 10-15%.
- Hannover Re (HVRRY) last week said it expected premiums to fall this year, fueling concern about a price war with competitors like Swiss Re (SSREY) and Berkshire Hathaway (BRK.A, BRK.B).
- Among U.S. reinsurers: ACE, XL, PRE, RE, RNR.
Dec. 17, 2013, 12:02 PM
- "We believe the increasing competitiveness of the reinsurance business will weigh on the shares for the foreseeable future," says analyst Harry Fong, removing his Buy rating on PartnerRe (PRE -1%) and cutting the price target to $100 from $110.
- Acknowledging the stock - at a 7% discount to book value - appears cheap by traditional valuation metrics, Fong says the abundance of reinsurance capital is likely to remain until there is a significant loss event.
Dec. 10, 2013, 12:19 PM
- Following a hurricane season in which hurricanes were largely absent, property catastrophe reinsurance renewal prices are set to fall about 10% on Jan. 1, says SNL's Adam Cancryn, with prices for more U.S.-centric mid-year renewals likely to decline as much as 20%.
- This will mark year #2 of deep cuts to reinsurance pricing - with a flood of new competition adding to the lack a natural disasters. "Unless you see some sort of massive change, it's not obvious what would change this environment that we've entered," says Sanford's Josh Stirling, and some analysts predict it will take $100B in industry losses to halt Y/Y rate-reductions.
- For now, expect buybacks to continue, says Janney's Ryan Byrnes. "If you're a pure reinsurer, there's not much you can do with your capital right now, operationally."
- A few sector names: ACGL, AHL, ALTE, ENH, MRH, PRE, PTP, RE, VR
PRE vs. ETF Alternatives
PartnerRe Ltd through its wholly owned subsidiaries, provides reinsurance and certain specialty insurance lines. It also offers alternative risk products that include weather and credit protection to financial, industrial and service companies.
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