RenaissanceRe Holdings Ltd.
(
RNR
) reported second-quarter 2012 operating earnings per share of
$2.14, way behind the Zacks Consensus Estimate of $2.49. However,
the results reversed the operating loss of 21 cents per share in
the year-ago quarter.
Operating earnings for the quarter came in at $111.5 million
compared to operating loss of $10.2 million in the year-ago
quarter.
Including net realized and unrealized gains on investments of
$31 million or 61 cents, net income improved drastically to $142.3
million or $2.75 per share from a net loss of $24.8 million or 48
cents per share in the prior-year quarter.
The improved results were primarily aided by lower catastrophe
(CAT) losses in the reported quarter compared with the prior-year
quarter, which suffered huge CAT losses due to tornadoes in the
U.S. Favorable reserve development and higher investment income
also contributed to the earnings growth.
RenaissanceRe posted total revenue of $310.5 million, up 10.5%
year over year from $280.9 million in the second quarter of 2011.
However, total revenue lagged the Zacks Consensus Estimate of $317
million.
Alongside, gross premiums improved 4.0% year over year to $667.3
million, spurred by premium growth in the catastrophe, special and
Lloyd's segments along with the additional premium from the new
reinsurance subsidiary, Timicuan Reinsurance III Limited.
Meanwhile, underwriting income surged to $127.9 million from
$9.7 million in the year-ago quarter. The considerable improvement
was mainly due to tornadoes in the U.S. during 2011, which led to
high catastrophe losses in the prior-year quarter.
RenaissanceRe reported total investment income (sum of net
investment income, net realized and unrealized gains on investments
and net other-than-temporary impairments) of $44.8 million in the
quarter under review, against $66.5 million in the year-ago
quarter. The deterioration was primarily attributable to lower
returns on the private equity investment portfolio.
Moreover, total expenses of RenaissanceRe inched down 0.71% to
$126.3 million from $127.2 million in the prior-year quarter.
Additionally, income tax expense came in at $0.90 million compared
to income tax benefit of $1.77 million in the year-ago quarter.
Segment Results
Reinsurance
segment reported gross premiums of $617.0 million, up 1.6% from
$607.4 million in the prior-year quarter. Underwriting income came
in at $128.4 million compared with $12.9 million in the second
quarter of 2011, while the combined ratio improved to 40.1% from
93.5%.
Lloyd's
segment's gross premium came in at $50.3 million, expanding 47.4%
from $34.1 million in the year-ago quarter. Underwriting loss was
recorded at $0.9 million, against $3.3 million in the year-ago
quarter. Combined ratio plunged to 103.0% from 119.3% in the
prior-year quarter.
Insurance
segment's underwriting income was $0.39 million compared with $0.15
million in the year-ago quarter.
Financial Position
RenaissanceRe exited the reported quarter with total assets of
$8.96 billion, up from $7.74 billion as of December 31, 2011.
Long-term debt totaled $354.3 million, up from $353.6 million at
the end of 2011.
Meanwhile, cash and cash equivalents stood at $264.2 million, up
from $217.0 million as of December 31, 2011. Shareholders' equity
totaled $3.85 million compared with $3.61 billion at the end of
2011.
As of June 30, 2012, RenaissanceRe's annualized return on
average common equity (ROCE) was 17.5%, improving substantially
from 3.3% as of June 30, 2011.
Stock Repurchase Update
During the reported quarter, RenaissanceRe repurchased 1.2
million shares at an average price of $74.69, totaling $8.8
million. Further, from July 1 to July 30, the company repurchased
71,000 shares at an average price of $74.21, aggregating $5.3
million.
Our Take
RenaissanceRe's operating results for the reported quarter
improved significantly over the prior-year quarter, owing to higher
underwriting income arising from lack of any major catastrophic
events in the quarter. The company generally faces significant
challenges due to weather-related events as well as high
competitionin the catastrophe insurance and reinsurance
segments.
While premiums exhibited growth in the reported quarter,
expenses declined. This coupled with lower share count buoyed the
bottom line Moreover, the company's financial position strengthened
with improved financial leverage, higher cash balance and increased
ROCE.
Peer Performance
One of RenaissanceRe's competitors,
PartnerRe Ltd.
(
PRE
) reported second-quarter 2012 operating earnings per share of
$2.20, significantly exceeding the Zacks Consensus Estimate of
$2.02 and the year-ago earnings of 98 cents. As a result, operating
net income soared to $142.0 million from $67.2 million in the
prior-year quarter.
Another peer,
XL Group plc
(
XL
), will report its second-quarter 2012 financial results on August
7, 2012, after the market closes.
Currently, RenaissanceRe carries a Zacks #3 Rank, which
translates into a short-term Hold rating. However, we maintain our
long-term Outperform recommendation on the shares.
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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