RenaissanceRe Beats on Q3 Earnings and Revs - Analyst Blog

By Zacks Equity Research,

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RenaissanceRe Holdings Ltd. ( RNR ) reported third-quarter 2013 operating earnings per share of $3.36, surpassing the Zacks Consensus Estimate of $2.32 by a wide margin. Results also improved from the year-ago period when the company posted earnings of $2.07 per share.

Growth in premiums coupled with lower catastrophes mainly led to the upside.

Including net realized and unrealized gains on investments in the reported quarter, net income was $179.7 million or $4.01 per share compared with $180.7 million or $3.62 per share in the prior-year quarter.

RenaissanceRe posted total revenues of $391.6 million, up 0.3% year over year. Total revenues also surpassed the Zacks Consensus Estimate of $333 million. The improvement was mainly driven by an increase in premiums and investment income.

Higher premiums in RenaissanceRe's specialty unit and the Lloyd's segment drove overall gross premiums written in the third quarter by 33.9% year over year to $182.6 million. Meanwhile, underwriting income improved to $151.4 million from $122.6 million in the year-ago quarter. In the reported quarter, combined ratio also improved to 48.6% from 53.3% in the third quarter of 2012.

RenaissanceRe reported total investment gains (sum of net investment income, net realized and unrealized gains or losses on investments and net other-than-temporary impairments) of $88.2 million in the reported quarter, against total investment gains of $122.8 million in the year-ago quarter. The decline was primarily attributable to credit spread tightening during the third quarter of 2012.

During the quarter, RenaissanceRe incurred an increase in total expenses on account of higher operational costs and corporate expenses. Total expenses increased 1.5% year over year to $151.9 million.

Segment Results

The Reinsurance segment reported gross premiums written of $142.7 million, up 32.6% from the prior-year quarter, reflecting higher quota share premiums in RenaissanceRe Specialty Risks Ltd. and growth in the catastrophe unit of RenaissanceRe. Underwriting income came in at $152.4 million compared with $134.2 million in the third quarter of 2012 while combined ratio improved to 38.4% from 41.8%. The improvement was driven by higher net premiums earned and low catastrophe losses during the quarter, partially offset by lower favorable development on prior year accident years net claims and claim expenses.

Lloyd's segment's gross premium written came in at $40 million, escalating 39.1% from the year-ago quarter due to organic growth. Growth in premiums led to the narrowing of underwriting loss to $2.5 million from $11.5 million in the year-ago quarter. As a result, combined ratio improved to 105.3% from 135.6% in the prior-year quarter.

Financial Position

RenaissanceRe exited the reported quarter with total assets of $8.4 billion, up from $7.9 billion as of Dec 31, 2012. Debt burden of the company totaled $249.4 million, down from $349.3 million at the end of 2012.

Meanwhile, cash and cash equivalents stood at $266.4 million, down from $304.1 million as of Dec 31, 2012. Shareholder equity totaled $3.7 billion compared with $3.5 billion at the end of 2012.

As of Sep 30, 2013, RenaissanceRe's annualized return on average common equity (ROCE) was 18.7%, declining from 22% in the third quarter of 2012. Although ROCE declined year over year, it improved 1530 basis points sequentially due to strong underwriting performance, lower catastrophes and solid investments.

Share Buybacks

During the reported quarter, RenaissanceRe repurchased 0.22 million shares for $18.9 million under its $500 million buyback authorization, approved in Feb 2013. Currently, the company is left with $470.4 million under this program.

Our Take

RenaissanceRe's third quarter results were impressive after a disappointing second quarter. Both earnings and revenues fared well, beating the Zacks Consensus Estimate and improving from the year-ago period.   

With the renewal season approaching, the company's flexible capital structure and platform expansions position RenaissanceRe to serve its clients better thereby gaining on retentions and membership renewals.

During the quarter, RenaissanceRe launched its U.S. based specialty reinsurance platform named RenaissanceRe Underwriting Managers U.S. LLC, which is in line with the company's consistent global reinsurance operation expansion objectives. Further, the divestiture of its U.S.-based weather and weather-related energy risk management unit, RenRe Energy Advisors Ltd. (REAL) in Oct 2013, also looks promising on account of enhancing its core operations that include property catastrophe reinsurance and insurance business written through Syndicate 1458. We expect all the above endeavors to fetch better revenues and help the company come up with better numbers going forward.


Montpelier Re Holdings Ltd. ( MRH ) reported third-quarter 2013 operating net income of $1.38 per share, beating the Zacks Consensus Estimate by 86%.

RLI Corporation ( RLI ) reported third-quarter 2013 operating earnings of $1.40 per share, surpassing the Zacks Consensus Estimate by 47% as well as the year-ago earnings by 37.2%.

The Travelers Companies Inc. ( TRV ) reported operating net earnings of $2.35 per share in the third quarter of 2013, beating the Zacks Consensus Estimate of $1.99 per share.

Zacks Rank

Currently, RenaissanceRe carries a Zacks Rank #2 (Buy). Both Montpelier and RLI carry a favorable Zacks Rank #1 (Strong Buy) while The Travelers shares the same Zacks Rank as RenaissanceRe.

MONTPELIER RE (MRH): Free Stock Analysis Report

RLI CORP (RLI): Free Stock Analysis Report

RENAISSANCERE (RNR): Free Stock Analysis Report

TRAVELERS COS (TRV): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: MRH , RLI , RNR , TRV

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