Why Is RenaissanceRe (RNR) Up 0.1% Since Last Earnings Report?
A month has gone by since the last earnings report for RenaissanceRe (RNR). Shares have added about 0.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is RenaissanceRe due for a pullback? 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 drivers.
RenaissanceRe Q4 Earnings Beat on Solid Investment Income
RenaissanceRe Holdings reported fourth-quarter 2023 operating income of $11.77 per share, which beat the Zacks Consensus Estimate by 44.8%. The bottom line increased 60.6% year over year.
Total operating revenues increased 42.5% year over year to $2.6 billion in the fourth quarter. The top line outpaced the consensus mark by 19.6%.
Strong quarterly results were supported by improved underwriting, improved net investment income and solid contributions from the property segment, providing an impetus to its quarterly performance. An elevated expense level might have acted as a partial offset to its fourth-quarter results.
Quarterly Operational Update
Gross premiums written of $1.8 billion increased 13.7% year over year in the fourth quarter. The metric outpaced our estimate by 12.5%.
Net premiums earned improved 38.5% year over year to $2.2 billion. The figure surpassed our estimate by 35.2%.
The net investment income of RenaissanceRe amounted to $377 million, which increased 11.6% year over year in the quarter under review on the back of improved yields from its fixed maturity and short-term portfolios.
Total expenses increased 35.6% year over year to $1.8 billion due to increasedacquisition and operational expenses.
RNR reported an underwriting income of $541 million, which surged 71% year over year. The combined ratio improved 450 points (bps) year over year to 76% in the fourth quarter.
Book value per share came in at $165.2 as of Dec 31, 2023, which increased 57.9% year over year. Annualized operating return on average common equity of 33% improved 340 bps year over year.
Segmental Update
Property Segment
The segment’s gross premiums written amounted to $344.6 million, which declined 7.4% year over year in the fourth quarter due to a decline in other property partially offset by improved reinstatement premiums. However, net premiums earned improved 28.5% year over year to $884.3 million, higher than our estimate of $704.5 million.
Underwriting income of $503.6 million improved nearly one-fold year over year. The combined ratio improved 1950 bps year over year to 43.1%.
Casualty and Specialty Segment
Gross premiums written of $1.5 billion improved 20.1% year over year in the quarter under review. The metric was supported by growing other specialty class of business. Net premiums earned increased 45.9% year over year to $1.4 billion.
The segment recorded an underwriting income of $37.4 million, which deteriorated 36.8% year over year. The combined ratio of 97.3% declined 360 bps year over year.
Financial Position (as of Dec 31, 2023)
RenaissanceRe exited the fourth quarter with cash and cash equivalents of $1.9 billion from $1.2 billion at 2022-end. Total assets increased to $49 billion from $36.6 billion at 2022-end.
Debt amounted to $2 million, which increased from $1.2 billion at 2022-end.
Total shareholders’ equity of $9.5 billion rose from $5.3 billion in 2022-end.
Acquisition Update
The company completed the acquisition of Validus Re on Nov 1, 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, RenaissanceRe has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Outlook
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.
Performance of an Industry Player
RenaissanceRe is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Travelers (TRV), a stock from the same industry, has gained 4.3%. The company reported its results for the quarter ended December 2023 more than a month ago.
Travelers reported revenues of $10.94 billion in the last reported quarter, representing a year-over-year change of +13.6%. EPS of $7.01 for the same period compares with $3.40 a year ago.
For the current quarter, Travelers is expected to post earnings of $4.74 per share, indicating a change of +15.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Travelers. Also, the stock has a VGM Score of A.
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