We have retained our Neutral recommendation on
RenaissanceRe Holdings Ltd.
) as the negatives such as declining investment income, high
competition and weather-related risks in the catastrophe
insurance and reinsurance business are expected to weigh on the
positives of the company.
RenaissanceRe has witnessed a positive trend in gross premiums
over 2011 and 2012. The company witnessed an 8.2% year-over-year
improvement in gross premiums in 2012, spurred by higher
risk-adjusted pricing in the catastrophe unit during the Jan 2012
renewals and premium growth in the catastrophe, special and
Lloyd's segments along with the additional premium from the new
reinsurance subsidiary Timicuan Reinsurance III Limited.
Further, RenaissanceRe has been deploying its excess capital
to enhance shareholders' wealth over the past several quarters.
The company not only pays regular dividends to shareholders, but
also hikes it by 1 cent per share annually.
However, these positives are offset by some negatives. Natural
catastrophes have been impacting the profits of this Zacks Rank
#2 (Buy) company since 2008. The occurrence of Hurricane Sandy in
Oct 2012 led to a decline in underwriting income to $4.3 million
in the fourth quarter of 2012 from $127.1 million in the year-ago
Further, RenaissanceRe faces substantial competition in the
catastrophe insurance and reinsurance segments that limits its
market share, particularly in the emerging markets.
RenaissanceRe is expected to report its first quarter 2013
financial results after the closing bell on May 1. The Zacks
Consensus Estimate for the company's first-quarter earnings
stands at $2.58, down 13.57% over the year-ago quarter.
Other Stock to Consider
Other stocks in the property and casualty insurance sector
that are worth a look are
Arch Capital Group Ltd.
Aspen Insurance Holdings Ltd.
AXIS Capital Holdings Ltd
). All these are Zacks Rank #1 (Strong Buy) companies.
ARCH CAP GP LTD (ACGL): Free Stock Analysis
ASPEN INS HLDGS (AHL): Free Stock Analysis
AXIS CAP HLDGS (AXS): Free Stock Analysis
RENAISSANCERE (RNR): Free Stock Analysis
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