RenaissanceRe's Q2 Earnings Disappoint
RenaissanceRe Holdings Ltd. (RNR) reported second-quarter 2013 operating earnings per share of $2.17, lagging the Zacks Consensus Estimate of $2.41. The results, however, surpassed $2.14 per share earned in the year-ago quarter.
Operating earnings for the quarter came in at $96.4 million compared with $111.5 million in the year-ago quarter.
Including net realized and unrealized gains on investments of $69.5 million or $1.57 per share in the reported quarter, net income was $26.8 million or 60 cents per share compared with $142.3 million or $2.75 per share in the prior-year quarter. The year-ago quarter included net realized and unrealized loss on investments of $28.1 million or 55 cents per share, investments-related derivative net realized and unrealized gains included in operating income prior to 2013 of $2.9 million or 6 cents per share and net other-than-temporary impairments of $0.21 million.
RenaissanceRe posted total revenue of $253 million, down 18.5% year over year from $310 million in the second quarter of 2012. Total revenue also lagged the Zacks Consensus Estimate of $296 million.
In addition, gross premiums increased 5.4% year over year to $703.2 million, primarily due to higher premiums in RenaissanceRe's specialty unit and the Lloyd's segment, partially offset by lower premiums in the catastrophe unit. Meanwhile, underwriting income declined to $113.3 million from $127.9 million in the year-ago quarter. In the reported quarter, combined ratio also deteriorated to 61.2% from 47.7% in the second quarter of 2012.
RenaissanceRe reported total investment losses (sum of net investment income, net realized and unrealized gains or losses on investments and net other-than-temporary impairments) of $43.5 million in the quarter under review, against total investment income of $44.8 million in the year-ago quarter. The decline was primarily attributable to lower returns in the fixed maturity investment portfolio.
Moreover, total expenses of RenaissanceRe surged 61.8% to $204.4 million from $126.3 million in the prior-year quarter.
Segment Results
Reinsurance segment reported gross premiums written of $635.4 million, up 3% from the prior-year quarter. Underwriting income came in at $116.9 million compared with $128.4 million in the second quarter of 2012, while combined ratio deteriorated to 53.2% from 40.1%, primarily due to higher current year net claims and claims expenses, lower favorable development in prior accident years net claims and claim expenses, partly offset by higher net premiums earned.
Lloyd’s segment’s gross premium written came in at $68.8 million, escalating 36.7% from the year-ago quarter due to organic growth. Underwriting loss widened to $4.2 million from $0.9 million in the year-ago quarter. Combined ratio deteriorated to 108.4% from 103% in the prior-year quarter.
Financial Position
RenaissanceRe exited the reported quarter with total assets of $8.5 billion, up from $7.9 billion as of Dec 31, 2012. Long-term debt totaled $250.4 million, down from $351.8 million at the end of 2012.
Meanwhile, cash and cash equivalents stood at $285.6 million, down from $325.4 million as of Dec 31, 2012. Shareholder equity totaled $3.57 billion compared with $3.51 billion at the end of 2012.
As of Jun 30, 2013, RenaissanceRe’s annualized return on average common equity (:ROCE) was 3.4%, declining from 17.5% in the second quarter of 2012.
Stock Update
During the reported quarter, RenaissanceRe repurchased 0.128 million equity shares at an average price of $83.32, totaling $10.7 million.
Zacks Rank
Currently, RenaissanceRe carries a Zacks Rank #3 (Hold). Other property & casualty insurers worth considering are ProAssurance Corporation (PRA), Hilltop Holdings Inc. (HTH) and State Auto Financial Corp. (STFC). All these companies carry a Zacks Rank #1 (Strong Buy).
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