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RenaissanceRe Beats on Q4 Earnings, Expenses Shoot Up

RenaissanceRe Holdings Ltd.RNR reported fourth-quarter 2015 operating earnings per share of $3.07, beating the Zacks Consensus Estimate of $2.81. The bottom line, however, decreased from the year-ago quarter earnings of $3.62 per share.

The decline was attributed to a rise in total expense that outpaced revenue growth.

RenaissanceRe posted total revenue of $377.4 million, up 18.4% year over year. Higher premiums earned and an increase in net investment income mainly contributed to the upside. The top line, however, missed the Zacks Consensus Estimate of $406 million.

Underwriting income decreased 19.4% year over year to $139.9 million, owing primarily to an increase in net claims and claim expenses along with higher underwriting expenses.

For full 2015, earnings came in at $10.86 per share, down from $11.56 in 2014.

Gross premiums written of $336.1 million increased 153.1%, year over year.

RenaissanceRe reported total investment result of $2.8 million in the reported quarter against $56.1 million in the year-ago quarter. The decline stemmed from increased unrealized losses in fixed maturity investments, due to an upward shift of the yield curve as a consequence of an increase in interest rates. This was coupled with unrealized losses in the company's portfolio of equity investments and lower net investment income from private equity investments.

During the quarter, RenaissanceRe witnessed a mammoth increase of 148% year over year in total expenses to $243.1 million. This was mainly on account of higher net claims and claim expenses, acquisition costs, operational expenses, interest expenses and corporate expenses.

Segment Update

Catastrophe Reinsurance: Gross premiums written were $12.3 million, up 24.2% year over year. This was largely attributable to the underwriting of some new programs.

Underwriting income came in at $132.5 million, almost flat with $133 million in the year-ago quarter.

Specialty Reinsurance: Gross premiums written were $267.4 million, up a whopping 271.8% from the prior-year quarter. This was largely attributable to improvement across the segment's credit and casualty lines of business.

Underwriting income came in at $16.9 million, down from $26.9 million in the year-ago quarter.

Lloyd's: Gross premiums written were $56.4 million, up 11.4% from the year-ago quarter on organic growth at Syndicate 1458. Underwriting loss in the segment was $10.4 million against an underwriting gain of $8.3 million in the year-ago period. This deterioration was largely attributable to a decrease in favorable development on prior accident year net claims and claim expenses coupled with a decrease in net premiums earned. As a result, combined ratio deteriorated to 119.6% from 85.9% in the prior-year quarter.

Financial Position

As of Dec 31, 2015, total assets of RenaissanceRe were $11.6 billion, up from $8.2 billion as of Dec 31, 2014. The company had total debt burden of $966.1 million as of Dec 31, 2015, significantly higher than $249.5 million on Dec 31, 2014.

Cash and cash equivalents came in at $506.9 million as of Dec 31 2015, down from $525.6 million as of Dec 31, 2014. Shareholders' equity at RenaissanceRe totaled $4.7 billion at the end of the quarter, higher than $3.9 billion at the end of 2014.

RenaissanceRe's annualized operating return on average common equity or ROCE was 12.5% as of Dec 31, 2015. This represents a decline from 16.5% as of Dec 31, 2014.

Tangible book value per common share plus accumulated dividends increased 2.3% in the fourth quarter of 2015 compared with a 5.5% increase in the fourth quarter of 2014.

Share Buybacks

RenaissanceRe repurchased shares worth $48.4 million in the fourth quarter.

Zacks Rank

RenaissanceRe currently carries a Zacks Rank #3 (Hold).

Performance of Other Insurers

The bottom line at RLI Corporation RLI missed the Zacks Consensus Estimate, while Reinsurance Group of America Inc. RGA and The Travelers Companies, Inc. TRV outperformed their respective estimates in the fourth quarter.

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REINSURANCE GRP (RGA): Free Stock Analysis Report

RLI CORP (RLI): Free Stock Analysis Report

TRAVELERS COS (TRV): Free Stock Analysis Report

RENAISSANCERE (RNR): Free Stock Analysis Report

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


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

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