Zacks Investment Research downgraded shares of RenaissanceRe Holdings Ltd. (RNR) from OUTPERFORM to NEUTRAL on August 21, 2012, with a target price of $81.00.
We are downgrading our recommendation on RenaissanceRe to Neutral based on its declining investment income coupled with high competition and weather-related risks in the catastrophe insurance and reinsurance segments. However, the company's second quarter earnings surpassed the Zacks Consensus Estimate owing to higher underwriting income arising from lack of catastrophic events in the quarter. While premiums exhibited growth, expenses declined, thereby boosting the bottom line. Moreover, improved financial leverage, cash balance and ROCE boosted its financial position. The formation of the Timicuan joint venture also increased the company's reinsurance capacity, contributing to premium growth. Overall, strategic divestitures, efficient capital deployment via share repurchase and regular dividend hikes and stable ratings should enhance operating leverage in the long run.
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