PartnerRe Ltd.'s (PRE) 3Q08 operating earnings of $121.3 million or $2.27 per diluted share were substantially ahead of consensus estimate.

We remain positive on PRE due to its excellent underwriting abilities, strong
capitalization, solid ratings and reputation in the market, which will enable it to take advantage of the stronger demand being witnessed currently, though we suspect that additional losses in the investment portfolio and the current negative sentiment for the financials as a whole may somewhat weigh on the share price.

Based on 3Q08 results, we are moderating our FY08 and FY09 estimates to $10.44 per share and $9.95 per share, respectively. At the current price, the shares of PRE trade at 0.98x its 3Q08 book value of $65.38 per share, almost at the bottom of its 10-year range, substantially below the peak of 1.73x and at a 6% premium to the peer group median.

Our six-month price target of $70.00 per share reflects a slightly expanded multiple of approximately 1.04x to our estimated book value at March 31, 2009 of $67.30 per share. It also equates to approximately 6.7x our earnings estimate for FY08. Combined with the annual dividend of $1.84 per share, this target price implies a return of about 11.1% over the period. We are maintaining our Buy recommendation on the shares.

Kalyan Nandy contributed to the report.