RenaissanceRe Finance Inc. – a subsidiary of RenaissanceRe Holdings Ltd. RNR – has recently issued 3.700% senior notes worth $300 million, scheduled to mature in 2025. The notes are guaranteed by the parent company.
The proceeds from the issuance will be used to repay the $300 million term loan. This term loan was deployed to fund a part of the cash consideration in the acquisition of Platinum Underwriters Holdings, Ltd.
The latest debt issuance of RenaissanceRe will require it to pay interests worth $11.1 million annually. Owing to its solid operational performance the company generates enough funds to service the debt uninterruptedly.
RenaissanceRe’s interest expenses have been declining over the last two years. It declined year over year by 22.4% in 2013 and by 4.3% in 2014. However, the above-mentioned issuance will likely weigh on this metric to some extent, thereby limiting margin expansion.
The company’s balance sheet demonstrates that its debt burden has increased in 2014 compared to year-end 2013. Prior to the aforementioned issuance, its debt portfolio consisted of 5.75% senior notes worth $250 million, due to mature in 2020.
RenaissanceRe’s debt-to-capital ratio has also deteriorated 10 basis points to 6.1% at the end of 2014. The latest issuance, when added to its debt portfolio, is expected to increase the debt burden and affect the debt-to-capital ratio adversely, thereby weighing on the company’s balance sheet strength.
RenaissanceRe currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the property & casualty insurance space include Allied World Assurance Company Holdings, AG AWH, AmTrust Financial Services, Inc. AFSI and Fidelity National Financial, Inc. FNF. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment