We issued an updated research report on RenaissanceRe Holdings Ltd. RNR on Dec 21, 2015.
The company’s inorganic growth initiatives and capital deployments appear impressive. To boost inorganic growth, RenaissanceRe acquired reinsurer Platinum Underwriters in March 2015. This deal has been helping the insurer to strengthen its U.S. Specialty and Casualty reinsurance platform, thereby complementing its risk management framework. The company’s strong financial position allows it to deploy capital efficiently, which in turn aids bottom-line growth. This is evident from the increase in its share repurchase program in Nov 2015, which brought the total authorization to $500 million. RenaissanceRe also scores strongly with the credit ratings agencies.
To boost its underwriting platforms in Bermuda, London, the U.S. and Asia, the company sold its U.S.-based weather and weather-related energy risk management unit, RenRe Energy Advisors Ltd. (“REAL”). Additionally, the company’s strengthened its operations through partnerships. These initiatives, along with improved market conditions, have resulted in higher gross premiums written over the years. Also, setting up of some large financial lines in mortgage insurance raises optimism for the future.
Last month, the company reported third-quarter 2015 earnings that surpassed the Zacks Consensus Estimate and also improved year over year on higher premiums and favorable reserve development.
However, the company is exposed to catastrophe losses that offset the positives to some extent. Combined ratio has also been deteriorating and managed catastrophe premiums have been decreasing. The soft market conditions are expected to persist and hence, decrease managed catastrophe premiums in 2015. Moreover, the catastrophe reinsurance market being highly unpredictable, any significant change in the catastrophe loss activity can foster noteworthy alterations in pricing, policy terms as well as demand for products. Additionally, the insurer’s weak investment portfolio and low interest rates indicate the possibility of poor investment results in the upcoming quarters.
RenaissanceRe currently holds a Zacks Rank #2 (Buy). Other stocks from the property and casualty insurance space that warrant a look are Cincinnati Financial Corp. CINF, Hallmark Financial Services Inc. HALL and Selective Insurance Group Inc. SIGI. All three stocks sport a Zacks Rank #1 (Strong Buy).
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