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It has been about a month since the last earnings report for RenaissanceRe (RNR). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RenaissanceRe due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
RenaissanceRe's Q2 Earnings Beat Estimates, Fall Y/Y
RenaissanceRe delivered second-quarter 2020 operating earnings per share of $4.06, beating the Zacks Consensus Estimate by 51.5% on the back of solid revenues. However, the bottom line declined 15.1% year over year.
Quarterly Operational Update
Total revenues of $1.5 billion improved 25% year over year on higher gross premiums written.
Gross premiums written increased 15.2% year over year to $1.7 billion owing to higher premiums at the Property as well as the Casualty and Specialty segments.
Net investment income of $89.3 million declined 24.7% year over year.
RenaissanceRe’s total expenses of $816.7 million rose 4.7% year over year, primarily due to steep net claims and claim expenses and acquisition costs.
Underwriting income of $217.1 million grew 27.1% year over year, aided by higher contribution from the Property segment.
Combined ratio of 78.5% in the second quarter compared favorably with the year-ago quarter’s 81.3%.
Quarterly Segment Update
Gross premiums written were $1 billion, up 24.2% year over year in the second quarter.
Underwriting income of $200.6 million surged32.2% year over year, banking on a decrease in the underwriting expense ratio.
Combined ratio of 59.1% contracted 520 basis points (bps) year over year.
Casualty and Specialty Segment
Gross premiums written of $659.3 million were up 3.4% from the prior-year quarter. This upside is driven by growth in the current and new business opportunities within a few classes of business written in the present and previous periods.
The segment’s underwriting income of $16.5 million was down 13.2% year over year in the second quarter.
Combined ratio of 96.8% expanded 70 bps year over year.
The company issued 6,325,000 of its common shares in an underwritten public offering at a public offering price of $166.00 per share on Jun 5, 2020.
It also raised $75 million through the issuance of 451,807 of its common shares at a price of $166.00 per share to State Farm Mutual Automobile Insurance Company.
As of Jun 30, 2020, total assets of RenaissanceRe were $30.5 billion, up 15.8% from the level at 2019 end.
The company had total debt of $1.1 billion as of Jun 30, 2020, down 18% from the level at 2019 end.
Cash and cash equivalents were $1.2 billion, down 14% from the figure at 2019 end.
Book value per share of $134.27 increased 11.4% from the number at 2019 end.
Annualized operating return on equity for the quarter under review was 12.7%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 14.37% due to these changes.
Currently, RenaissanceRe has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, RenaissanceRe has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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