PRE results substantially ahead of estimates

On April 27, 2009, after market close, PartnerRe, Ltd. (PRE) reported its 1Q09 financial results. A conference call to discuss the results was held this morning.

Operating income (excluding net after-tax realized and unrealized investment gains/losses, net after-tax realized gain on the purchase of the Capital Efficient Notes [CENts], and net after-tax interest in results of equity investments) for 1Q09 was $155.7 million or $2.72 per diluted share, compared to $110.2 million or $1.98 per diluted share recorded in the prior-year quarter. 1Q09 operating income was substantially ahead of estimates. Better-than-expected results were mainly attributed to lower expenses and positive return on invested assets.

Net premiums written for 1Q09 were $1.3 billion, down 7.3% from $1.4 billion in the prior-year quarter. Total revenues for the quarter were $1.0 billion, down 4.8% from $1.1 billion in the prior-year quarter. Total revenues for the reported quarter included $866.4 million of net premiums earned, down 4.8% from $909.8 million in the prior-year quarter, and net investment income of $133.1 million, down 2.8% year-over-year.

Net premiums written for the Non-life segment for the quarter were $1.1 billion, down 7.2% from $1.2 billion in the prior-year quarter. The year-ago quarter reflected a high frequency of losses in both the Global (Non-U.S.) P&C and Global (Non-U.S.) Specialty sub-segments. The Non-life technical result was $147 million for 1Q09, compared to $116 million for the prior-year quarter.

The Life segment reported net premiums written of $160 million, down 5.9% from $170 million in the prior-year quarter. The allocated underwriting result was $5 million for the reported quarter, compared to $4 million in the prior-year quarter.

The Corporate & Other segment, which comprises capital markets and investment activities, contributed pre-tax operating income of $116 million during 1Q09. The technical result for the reported quarter was $1 million, compared to $2 million for the same period a year ago.

Concurrent to the earnings release, PRE declared a regular quarterly dividend of $0.47 per common share.

Based on better-than-expected results, we are increasing our FY09 and FY10 earnings estimates and maintaining our Buy recommendation on the shares.

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