On Jun 29, we issued an updated research report on RenaissanceRe Holdings Ltd. RNR.
RenaissanceRe primarily provides property-catastrophe reinsurance. In its effort to expand in the challenging reinsurance market environment, the company is shifting its focus from property catastrophe reinsurance to casualty and specialty reinsurance business. The company is also making efforts to enhance its core operations by divesting businesses with high risk and low returns, and expanding operations.
The inorganic story also remains impressive with strategic acquisitions strengthening its U.S. Specialty and Casualty reinsurance platform, complementing the risk management framework, and enhancing product portfolio and broker relationships.
These have been driving improvement in gross premiums written at a seven-year CAGR of 8.9%.
Banking on its operational strength, the company boasts a solid capital position and indulges in effective capital deployment that in turn enhances shareholder value. The company has a track of increasing dividend by a cent each year (the hike in Feb 2015 marks the 21st straight annual increase) besides buying back shares. The approval to increase buyback to $500 million worth shares marks the second share buyback approval this year.
However, exposure to catastrophe losses remains a concern as these have been hampering the insurer’s profits over years. Also, the investment portfolio remains exposed to weak credit and capital markets. Moreover, pricing pressure due to the overflow of alternative capital and increased retentions of primary companies have been weighing on the catastrophe reinsurance business of RenaissanceRe.
With respect to the surprise trend, this Zacks Rank #3 (Hold) property and casualty insurer missed earnings in two of the last four quarters. Also, due to the absence of any near-term catalyst, the Zacks Consensus Estimate has been witnessing downward revision over the last 60 days.
RenaissanceRe is scheduled to report its second-quarter earnings results on Jul 27. The Zacks Consensus Estimate for the second quarter is currently pegged at $2.30. However, our proven model cannot conclusively state if the bottom line will beat the estimate because though a Zacks Rank #3 increases chances of an earnings beat, an Earnings ESP of -26.09% makes prediction difficult.
Stocks to Consider
Some better-ranked property and casualty insurers are Markel Corp. MKL, National General Holdings Corp NGHC and OneBeacon Insurance Group, Ltd OB. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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