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RenaissanceRe (RNR) Projects $90M Q4 Cat Loss From Wildfires

Zacks Equity Research

RenaissanceRe Holdings Ltd. RNR expects to incur catastrophe (cat) loss of $90 million, from the California wildfires.

In the fourth quarter, these losses will further weigh on the company’s bottom line.

RenaissanceRe incurred a loss of $9.63 per share for the first nine months of 2017 compared to earnings of $5.14 in prior-year period.

Unprecedented catastrophe led to net claims and claims expenses of $1.6 billion in the first nine months of 2017, significantly higher than $0.4 billion in the year ago period.

AIR Worldwide, a catastrophe modeling firm expects insured losses from wildfires to exceed $10 billion.

This specialty insurer has witnessed multiple weather-related losses in 2017. The results in the third quarter were severely hurt by hurricanes Harvey, Irma and Maria, the Mexico City Earthquake. These natural calamities are estimated to have caused damages of more than $100 billion and underwriting losses at many insurers and reinsurers.

So far this year, the stock has declined by 5.9%, underperforming the industry’s growth of 17%.  


Losses Estimates Provided by Other Players

The Allstate Corporation ALL has estimated pre-tax catastrophe loss of $516 million for October 2017 due to California wildfires.

Another insurance giant, American International Group AIG has projected $500 million loss from the same event.

Travelers Cos. Inc. TRV estimates pre-tax loss in the range of $525 million to $675 million and after-tax loss in the $340 million to $440 million band.

Bottom Line

On the face of it, catastrophe losses resulted in an increase in loss ratio, thereby hurting insurers’ underwriting margins. However, these losses act as catalysts in turning the industry's pricing cycle. The industry which has amassed a huge capital buffer and led to soft pricing (thanks to a benign cat loss environment in recent years) will likely see price surge in certain lines of business that have been mostly affected.

RenaissanceRe carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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