Yesterday, property-casualty (P&C) and life reinsurer PartnerRe Ltd. (PRE), announced that it has increased its quarterly dividend by a modest magnitude of 10% to 55 cents from the prior 50 cents. The newly raised dividend will be paid on December 1, 2010, to the company’s common shareholders on record as of November 19, 2010. The ex-dividend date is November 17, 2010.
This latest quarterly dividend increases the annual dividend per share to $2.20 from $2.00, also marking the second consecutive dividend hike in 2010. Prior to this, in February 2010, PartnerRe had raised its annual dividend by 6% to $2.00 per share from $1.88 per share. Accordingly, the quarterly dividend has been raised to 50 cents per share from 47 cents per share.
Since its inception in 1993, PartnerRe has increased its annual dividend eighteen times. The company continues to return additional value to its shareholders through stock buybacks and dividend payments. PartnerRe’s annual dividend payout increased 41% in 2009 over 2008, representing 11% compounded growth in the common dividend.
The recent dividend hike also reflects PartnerRe’s conservative investment strategy, reserve strength, low level of reinsurance recoverable and little reliance on retrocession reinsurance. These factors have also driven the growth of book value per share of the company.
Besides, a low level of debt obligations renders the company’s balance sheet risk-free while also enhancing its operating leverage. Despite the soft market conditions, PartnerRe’s above-average risk appetite and apparent underwriting discipline can help it maintain a modest ROE at the target rate of 13% in the long term.
Overall, our near term outlook on PartnerRe’s remains cautious on the back of concerns regarding the successful Paris Re integration and catastrophic losses, weak P&C market cycle and low underwriting profitability. In the long run, however, a stable rating outlook, improved pricing and market stability can help in mitigating the cyclical declines.
PartnerRe is expected to release its earnings results for the third quarter 2010 after the market closes on November 3, 2010.
PARTNERRE LTD (PRE): Free Stock Analysis Report
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