RenaissanceRe Holdings Ltd. (RNR) reported third-quarter 2014 operating earnings per share of $2.49 that missed the Zacks Consensus Estimate by 5.1%. The figure also marked a decline from the year-ago quarter earnings of $3.36 per share. The underperformance stems from both a revenue declined and an increase in expenses.
Including net realized and unrealized losses on investments in the reported quarter, net income of RenaissanceRe was $1.70 per share, down from $4.01 in the prior-year quarter.
RenaissanceRe posted total revenue of $266.5 million, down 32% year over year. The figure also missed the Zacks Consensus Estimate of $300 million. Lower premiums earned and decline in net investment income induced the downfall.
Moreover, underwriting income decreased 31% to $104.8 million due to a fall in net premiums earned. In the reported quarter, combined ratio also deteriorated 59.5% to 1,090 basis points.
RenaissanceRe reported total investment result (sum of net investment income, net realized and unrealized gains or losses on investments and change in net unrealized gains on fixed maturity investments available for sale) was ($6.5) million in the reported quarter against $88.2 million in the year-ago quarter.
During the quarter, RenaissanceRe witnessed an increase in total expenses on account of higher net claims and claim expenses incurred, and operational expenses. Total expenses escalated 6.9% year over year to $162.3 million.
Segment Update
Catastrophe Reinsurance: Gross premiums written were $68.3 million, comparing unfavorably with $82.5 million in the year-ago period. The decline mainly stemmed from the softening of market conditions.
Underwriting income came in at $104.1 million, down from $128.9 million in the third quarter of 2013 largely due to lower earned premiums. However, combined ratio improved to 23.9% from 30.1% in the year-ago period.
Specialty Reinsurance: Gross premiums written of $68.9 million, down 14.5% from the prior-year quarter, attributable to increases in certain casualty related lines of business.
Underwriting income came in at $5.7 million, significantly down from $23.5 million, while combined ratio deteriorated to 91.1% from 62.7% in the third quarter of 2013.
Lloyd’s: Gross premiums written were $63.9 million, up 59.8% from the year-ago quarter on organic growth of Syndicate 1458. Underwriting loss in the segment was $5.3 million, wider than the year-ago loss of $2.5 million. As a result, combined ratio deteriorated to 109.1% from 105.3% in the prior-year quarter.
Financial Position
As of Sep 30, 2014, total assets of RenaissanceRe were $8.4 billion, higher than $8.2 billion at year-end 2013. Debt burden of the company totaled $249.5 million as of Sep 30, 2014, reflecting a marginal rise from $249.4 million as of Dec 31, 2013.
Meanwhile, cash and cash equivalents stood at $300.5 million as of Sep 30, 2014, down from $408 million as of Dec 31, 2013. Shareholders’ equity totaled $3.7 billion, down from $3.9 billion at the end of 2013.
At the end of the third quarter of 2014, RenaissanceRe’s annualized operating return on average common equity (ROCE) was 11.7%, representing a decrease from 18.7% in the year-ago period.
Share Buybacks
During the reported quarter, RenaissanceRe repurchased 1.6 million shares for $164 million. Subsequent to the third quarter through Nov 3, it also spent another $35.7 million to buy back 0.4 million shares.
Performance of Other Insurers
The bottom line at RLI Corporation (RLI), The Travelers Companies Inc. (TRV) and ACE Limited (ACE) has outperformed each of their Zacks Consensus Estimate in the third quarter.
Zacks Rank
RenaissanceRe carries a Zacks Rank #2 (Buy).
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