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It has been about a month since the last earnings report for RenaissanceRe (RNR). Shares have lost about 7.2% 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 Q1 Earnings Miss, Revenues Down Y/Y
RenaissanceRe reported first-quarter 2021 operating income per share of 9 cents, which missed the Zacks Consensus Estimate by 87.8%. Further, the bottom line declined more than eight-fold from the prior-year quarter.
The company’s results were hurt by escalating costs and reduced net investment income. Nevertheless, the downside was partly mitigated by higher gross written premiums written across the company’s Property as well as Casualty and Specialty segments.
Quarterly Operational Update
Total revenues plunged 3.8% year over year to $861.9 million in the first quarter attributable to higher gross premiums written.
Gross premiums written improved 30.9% year over year to $2.7 billion owing to uptick in premiums at the Property and, Casualty and Specialty segments.
In the quarter, net investment income declined 19.8% year over year to $79.8 million.
Total expenses of RenaissanceRe increased 37.7% year over year to $1.2 billion primarily due to steep rise in net claims and claim expenses incurred and higher acquisition costs.
In the quarter under review, underwriting loss came in at $35.8 million, which compared unfavorably with the prior-year quarter’s underwriting income of $64.1 million. Combined ratio deteriorated 1010 basis points (bps) to 103.1% in the first quarter.
Quarterly Segment Update
Gross premiums written climbed 32.5% year over year to $1.6 billion in the quarter under review, courtesy of rate increases and $90.1 million of reinstatement premiums stemming from Winter Storm Uri.
Underwriting loss of $41.8 million compared unfavorably with the prior-year quarter’s underwriting income of $147.2 million. This was mainly due to the net negative impact that Winter Storm Uri had on the segment’s underwriting results.
Combined ratio deteriorated 4180 bps year over year to of 106.9% in the first quarter.
Casualty and Specialty Segment
Gross premiums written advanced 28.6% year over year of $1 billion in the quarter attributable to rate increases and increase in new and existing casualty business written during the current and previous periods.
The segment’s underwriting income amounted to $6 million compared with the prior-year quarter’s underwriting loss of $83.2 million.
Combined ratio improved 1800 bps year over year to 98.9% in first quarter.
As of Mar 31, 2021, RenaissanceRe’s total assets totaled $32.2 billion, which improved 4.6% from 2020-end level.
At the end of the first quarter, cash and cash equivalents dropped 25.9% from the figure at 2020 end to $1.3 billion.
The company had debt of $1.1 billion as of Mar 31, 2021, which remained unchanged from the 2020-end level.
Book value per share came in at $131.15, which climbed 12% year over year.
Annualized operating return on average common equity came in at 0.3% in the quarter under review, down 230 bps year over year.
Share Repurchase Update
In the quarter, the company bought back shares worth $171.6 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 9.11% due to these changes.
At this time, RenaissanceRe has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, RenaissanceRe has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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