RenaissanceRe's Inorganic Growth Strong, Cat Loss a Drag
We issued an updated research report on RenaissanceRe Holdings Ltd. RNR on Sep 24, 2015.
The company is a leading provider of reinsurance and insurance coverage. Its strength lies in the inorganic growth initiatives and capital deployments. RenaissanceRe has resorted to inorganic measures such as divestitures and acquisitions to boost its core operations. The acquisition of reinsurer Platinum Underwriters in Mar 2015 has been helping the insurer to strengthen its U.S. Specialty and Casualty reinsurance platform, thereby complementing its risk management framework. To boost its underwriting platforms in Bermuda, London, the U.S. and Asia, the company sold its U.S.-based weather and weather-related energy risk management unit, RenRe Energy Advisors Ltd. (“REAL”).
RenaissanceRe has also sought to expand by forming additional capacities in various parts of the nation and joint ventures with significant names in the industry. Strong operating capabilities, along with improved market conditions, have led to improvement in gross premiums written over the years. Additionally, setting up of some large financial lines in mortgage insurance raises optimism for the future.
The company’s strong financial position allows it to deploy capital efficiently which aids bottom line growth. It has returned more than $2.2 billion of capital since 2010 via share buyback and dividends. RenaissanceRe also scores strongly with the credit ratings agencies.
However, offsetting the positives, RenaissanceRe’s significant exposure to catastrophe losses has been hampering profits. Combined ratio has also been deteriorating and managed catastrophe premiums have been decreasing. The soft market conditions are expected to persist and hence, decrease managed catastrophe premiums by 7% in 2015. Moreover, the catastrophe reinsurance market being highly unpredictable, any significant change in the catastrophe loss activity can foster noteworthy alterations in pricing, policy terms as well as demand for products.
Additionally, the company’s investment portfolio remains weak and low interest rates indicate the possibility of poor investment results in the upcoming quarters.
RenaissanceRe currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the property and casualty insurance space are Cincinnati Financial Corp. CINF, Hallmark Financial Services Inc. HALL and Selective Insurance Group Inc. SIGI.
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CINCINNATI FINL (CINF): Free Stock Analysis Report
RENAISSANCERE (RNR): Free Stock Analysis Report
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SELECT INS GRP (SIGI): Free Stock Analysis Report
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