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RenaissanceRe's (RNR) Q4 Earnings Beat Estimates, Down Y/Y

Zacks Equity Research

RenaissanceRe Holdings Ltd. RNR delivered fourth-quarter 2018 operating earnings per share of 2 cents, comparing favorably with the Zacks Consensus Estimate of operating loss of $1.93 per share. The result was backed by superior underwriting, higher revenues and application of gross-to-net strategy. However, the bottom line declined substantially by 98% year over year.

The quarter under review witnessed many catastrophic events.

Quarterly Operational Update

RenaissanceRe’s fourth-quarter operating revenues of $633 million surpassed the Zacks Consensus Estimate by 16%. The top line also improved 27.4% year over year, driven by higher net premiums earned.

RenaissanceRe Holdings Ltd. Price, Consensus and EPS Surprise

RenaissanceRe Holdings Ltd. Price, Consensus and EPS Surprise | RenaissanceRe Holdings Ltd. Quote

Gross premiums written surged 34.3% year over year to $547 million owing to higher premiums in the Property as well as the Casualty and Specialty segments.

Net investment income came in at $53 million, down 27.4% year over year due to losses on private equity and catastrophe bond investments. However, this downside was partially offset by higher returns on its fixed maturity and short-term investment portfolios.

RenaissanceRe’s total expenses were $680.8 million, up 52% year over year, primarily on higher net claims and claim expenses, acquisition expenses and operational expenses.

Underwriting loss of $82.3 million was wider than the year-ago quarter’s loss of $10.4 million.

Combined ratio was 114.3% for the fourth quarter compared with the year-ago quarter’s tally of 102.5%.

Quarterly Segment Update

Property Segment

Gross premiums written were $199.9 million up 110.1% % year over year, led by higher premiums written in catastrophe class of business.

Underwriting loss of $35 million due to Hurricane Michael, California Wildfires and changes in the 2018 Aggregate losses was wider than the year-ago quarter’s underwriting loss of $22.7 million. Combined ratio of 110.6% is flat with the year-ago quarter’s metric.

Casualty and Specialty Segment

Gross premiums written were $347.8 million, up 11.3% from the prior-year quarter. This upside is driven by continued and selective growth from new business opportunities within a few classes of business.

The company incurred underwriting loss of $47.4 million against the year-ago quarter’s income of $11.5 million.

Combined ratio of 119.3% expanded 2480 basis points year over year.

Financial Position  

As of Dec 31, 2018, total assets of RenaissanceRe were $18.7 billion, up 23% from 2017-end level.

The company had total debt of $991 million as of Dec 31 2018, up 0.1% from the level at 2017 end.

Cash and cash equivalents were $1107 million, down 18.7% from the tally at 2017 end.

Book value per share of $104.1 rose 4.4% year over year.

Return on equity for the quarter under review is 0.1%.

Full-Year Highlights

Revenues for the year dipped 1.4% to $2.1 billion. The company delivered net income of $4.91 per share versus the prior year's net loss of $6.15.

Zacks Rank

RenaissanceRe carries a Zacks Rank #3 (Hold).

Performance of Other Insurers

Of the insurance industry players that have reported fourth-quarter earnings so far, The Travelers Companies, Inc. TRV and RLI Corp.’s RLI earnings beat the respective Zacks Consensus Estimate while the metric of The Progressive Corporation PGR missed the same. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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