We issued an updated research report on
RenaissanceRe Holdings Ltd.
on Mar 30, 2015.
Last month, the company reported fourth-quarter 2014 earnings that
surpassed the Zacks Consensus Estimate but declined year over year
on lower revenues and increased expenses. While lower premiums
earned and decline in net investment income pulled down revenues,
higher acquisition and corporate costs led to the year-over-year
increase in expenses.
RenaissanceRe has been undertaking prudent inorganic growth
strategies to enhance its operations. Toward this end, the company
acquired Platinum Underwriters Holdings, Ltd. earlier this month.
The deal is expected to enhance book value, improve earnings per
share and boost the long-term value of the business for its
stakeholders. Additionally, the company's principal joint ventures
position it well to enhance its underwriting capabilities and are
working with capital partners to improve cedings.
The company has also been witnessing a rise in gross premiums
written over some years. Although gross premiums written decreased
in 2014, the setting up of some large financial lines in mortgage
insurance raises optimism. Notably, both the Lloyd's segment and
specialty reinsurance segment performed well in 2014 recording an
increase in gross premiums written.
Moreover, RenaissanceRe deploys capital efficiently to enhance
shareholders' value. Toward this end, the company's' board of
directors approved an increase in its share repurchase program in
Nov 2014 and hiked its quarterly dividend in Feb 2015.
RenaissanceRe also scores strongly with the credit rating agencies.
The aforementioned positives are causing analysts to raise their
estimates. Over the last 30 days, the Zacks Consensus Estimate for
2015 moved up 1.5% to $8.70 per share. The Zacks Consensus Estimate
for 2016 also increased 1.2% to $9.32 per share over the same
However, natural catastrophes have been hampering RenaissanceRe's
profits since 2008. Subsequently, underwriting income and combined
ratio have been under pressure. Moreover, a continued softening of
market conditions has largely impacted premiums from managed
catastrophes. The unpredictable nature of such weather-related
events continues to raise caution for the upcoming quarters,
thereby posing operating risks.
Also, the investment portfolio of RenaissanceRe is exposed to the
weak credit and capital markets. Declining total returns on the
fixed maturity investment portfolio led to lower net investment
income. Concern regarding this metric persists as it remains
vulnerable to interest rate risk. Moreover, RenaissanceRe faces
substantial competition in the catastrophe insurance and
reinsurance segments that limits its market share, particularly in
the emerging markets.
RenaissanceRe currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the property and casualty space include
Allied World Assurance Company Holdings, AG
, Arch Capital Group Ltd.
and Heritage Insurance Holdings, Inc.
. All three stocks sport a Zacks Rank #1 (Strong Buy).
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