PartnerRe Approves New Buyback - Analyst Blog

The board of directors of  PartnerRe Ltd. (PRE) authorized the company to buy back up to 7 million of its common shares in an effort to bolster the value for shareholders. The new authorization replaces the previous authorization of 7 million common shares approved by the board in September 2010.

In early December, the company spent $99.5 million to buy back 1.2834 million of common stock. PartnerRe has bought back 13.9 million common shares till date in 2010. We note that buying back shares will help PartnerRe to reduce its outstanding share count, thereby increasing earnings per share and return on equity.

Another insurer, Aflac Inc. (AFL), had resumed its share repurchase program in August 2010 after being shelved in 2008.

PartnerRe has and continues to return additional value to its shareholders through share repurchase and dividend payments. In October 2010, the company increased its quarterly dividend by a sharp 10%. The increased dividend of 55 cents was paid on December 1, 2010, to the company's common shareholders of record as of November 19, 2010.

The hike marked the company's ninth dividend increase since its inception. The company's current dividend yield is 2.74% with 11% compounded growth in the common dividend.

The company reported third quarter operating earnings of $3.69 per share, substantially higher than the Zacks Consensus Estimate but way behind earnings of $4.77 per share in the year-ago quarter. During the third quarter of 2010, PartnerRe had bought back 1.1 million common shares for approximately $82.4 million.

The Zacks Consensus Estimate for fourth-quarter 2010 is $2.22 per share. For fiscal years 2010 and 2011, the Zacks Consensus Estimates are a respective $7.15 per share and $9.38 per share.

We maintain our “Neutral” recommendation on PartnerRe. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.

Based in Pembroke, Bermuda, PartnerRe Ltd. through its subsidiaries commenced as a pure property reinsurer but has become a dynamic and diversified property-casualty and life reinsurer over the years, covering catastrophe, automobile, agricultural, credit and surety, marine, space and aviation, miscellaneous casualty and life/health risks.

 
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