Fitch Ratings reiterated Issuer Default Rating ("IDR") at 'A' of
RenaissanceRe Holdings Ltd.
). Concurrently the rating agency also reiterated Insurer Financial
Strength ("IFS") rating at 'A+' of Renaissance Reinsurance Ltd.,
the company's subsidiary.
The outlook of the ratings is stable.
RenaissanceRe's rating affirmation came on the back of its
dominant position in the property catastrophe reinsurance market,
modest operating and financial leverage and solid liquidity. The
affirmations also account for property catastrophe market rate
environment, unstable underwriting performances and instability
from alternative investments.
The company attained the dominant position by virtue of its
ability to effectively write more catastrophe related risks.
Further, both gross and net premiums written in the first quarter
increased 9% over the prior-year quarter.
Fitch also noted that RenaissanceRe's unstable underwriting
profitability and returns on capital are to some extent offset by
low combined ratios and strong returns on capital.
RenaissanceRe posted net income of $201 million in the first
quarter of 2012, rebounding from the year-ago loss, mainly due to
lower catastrophe loss. Combined ratio thus improved sequentially
to 29.4% from 118.6% in the fourth of quarter 2011.
Nevertheless, Fitch stated that rating upgrade in the near term
is unlikely, given the company's earnings and capital instability.
However, they might consider a rating upgrade over the long term if
RenaissanceRe continues to deliver solid underwriting results,
solidifies market position in specialty reinsurance and Lloyd's
business and increases risk adjusted capital.
However, if profitability declines, premiums written to
shareholders' equity moves beyond 0.5x, equity-credit adjusted
financial leverage crosses the 25% mark, and catastrophe events
loss equals 25% or more of shareholders' equity, the ratings will
be subjected to downgrade.
We retain our Neutral recommendation on RenaissanceRe Holdings.
The quantitative Zacks #2 Rank (short term Buy rating) for the
company indicates slight boost on the stock over the near term.
Hamilton, Bermuda-based RenaissanceRe Holdings competes with
XL Group plc
ACE LIMITED (ACE): Free Stock Analysis Report
PARTNERRE LTD (PRE): Free Stock Analysis Report
RENAISSANCERE (RNR): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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