PREVIEW-Low catastrophe losses to boost reinsurers' profits

* PartnerRe, Everest Re expected to report strong Q3

* Low catastrophe losses to boost earnings

* When: PartnerRe reports on Oct. 26

Everest Re on Oct. 28

By Abhinav Sharma

BANGALORE, Oct 26 (Reuters) - Large U.S. reinsurers Everest Re Group Ltd (RE.N) and PartnerRe Ltd (PRE.N) are expected to report strong third-quarter profits, driven primarily by lower catastrophe losses.

"The continued recovery of the financial markets and only modest catastrophe losses year-to-date have put the industry in a position of excess capital again," analyst Brian Meredith of UBS Investment Research wrote in a note.

Other than lower catastrophe losses, higher income from derivative contracts will help Everest Re's profits, while excess loss reserves will contribute to PartnerRe's results.

Reinsurers provide backup coverage for property casualty carriers in the event of huge claims, such as hurricanes and other catastrophes.

Wells Fargo Securities, which expects about $20 million in gain for Everest Re from derivative contracts, said higher income reflects an increase in the fair value of these contracts, due in part to the 15 percent rise in S&P 500 .SPX in the third quarter.

Net premiums earned will see a growth of about 6 percent year-over-year for Everest Re, while analysts' see continued pressure on PartnerRe's premiums.

"Premium growth will become more difficult as we enter 2010," analyst Bill Yankus of Fox-Pitt Kelton said.

Everest Re will see a modest growth in premium, principally coming from property insurance, said analyst Meredith, who estimates third-quarter earnings of $3.77 a share for the company.

Flat to slightly lower pricing and 3 percent to 5 percent dip in exposures has led to pressure on premium growth for PartnerRe, analyst Jay Gelb of Barclays Capital wrote in a note.

Gelb has a third-quarter operating earnings outlook of $3.52 a share for PartnerRe.

According to Thomson Reuters I/B/E/S, analysts on average expect PartnerRe to earn $3.20 a share and Everest Re to earn $3.37 a share for the quarter.

However, net investment income for both the reinsurers could decline due to lower investment yields.

In July, PartnerRe posted lower operating earnings, hurt by a 14 percent fall in premiums.

Shares of Everest Re closed at $89.11, while those of PartnerRe closed at $78.56 Friday on the New York Stock Exchange. (Reporting by Abhinav Sharma in Bangalore; Editing by Anil D'Silva)