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Why Retaining RenaissanceRe (RNR) is a Prudent Move Now

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·4 min read
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RenaissanceRe Holdings Ltd. RNR is well poised to advance on the back of an improving risk profile and a growing Casualty and Specialty unit. Management’s efforts to boost shareholder value and third-party management services bode well.

RenaissanceRe — with a market cap of $6.8 billion — primarily provides property-catastrophe reinsurance to insurers and reinsurers globally. Headquartered in Pembroke, Bermuda, RenaissanceRe also provides certain specialty reinsurance coverage on accident, health, aviation, and satellite concerns, and others in various parts of the United States.

Courtesy of solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on to at the moment.

Rising Estimates

The Zacks Consensus Estimate for RenaissanceRe’s 2022 earnings is pegged at $17.48 per share, indicating a massive year-over-year rise from $1.72. The company beat earnings estimates twice in the last four quarters and missed the same on the other two occasions.

RenaissanceRe Holdings Ltd. Price and EPS Surprise

RenaissanceRe Holdings Ltd. Price and EPS Surprise
RenaissanceRe Holdings Ltd. Price and EPS Surprise

RenaissanceRe Holdings Ltd. price-eps-surprise | RenaissanceRe Holdings Ltd. Quote

The consensus estimate for 2022 revenues stands at $6.6 billion, suggesting a 19.8% year-over-year rise.

Growth Drivers

Management’s trust in RNR’s capital position and cash-generating abilities is noteworthy. This is reflected in its efforts to boost shareholder value. Last month, RNR hiked its quarterly dividend by 2.8% to 37 cents per share, marking the 27th straight year of dividend hikes. Its dividend demonstrated a nine-year CAGR of 3.2%. Further, it boosted the share repurchase program to a total of $500 million. Last year, the insurer bought back 6.6 million shares worth $1 billion.

Coming to balance sheet strength, RNR’s total debt represents 15% of capital, lower than the industry average of 18.4%. While debt amounted to $1.1 billion at fourth quarter-end, cash and cash equivalents were $1.9 billion, which increased 7% from the 2020-end level. Also, RenaissanceRe generated $1.2 billion in free cash flows last year, reflecting a healthy financial position.

RenaissanceRe’s strong presence in the Casualty & Specialty space is a prominent indicator of a stable future full of growth opportunities. The hike in professional liability, rate increases, and growth in new and existing business written are pushing its premiums in Casualty & Specialty. Gross premiums written soared 48% year over year to $928.3 million for the fourth quarter. Rate improvements in new and current businesses are also buoying the Property segment.

While RenaissanceRe’s strategic acquisitions are expanding the business and resulting in high inorganic growth, it is getting rid of low-return high-risk businesses. Moves like divesting the U.S based weather and weather-related energy risk management unit to guard itself against the associated uncertainties will enable the company to focus and grow its core operating business.

Key Concerns

There are a few factors that are impeding the growth of the stock lately.

Increasing costs are eating into its profits. For 2020 and 2021, total operating costs escalated 29.1% from the prior-year respective figures. Also, it remains exposed to high severity loss associated with catastrophic events on a worldwide basis, which has been affecting its underwriting results. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.

Some Better-Ranked Players

Some better-ranked players in the Insurance - Property and Casualty space include Arch Capital Group Ltd. ACGL, Berkshire Hathaway Inc. (BRK.B), and Palomar Holdings, Inc. PLMR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Based in Pembroke, Bermuda, Arch Capital has maintained a robust capital position over the years, reflecting financial flexibility. Arch Capital’s bottom line for 2022 is expected to jump 26% year over year to $4.51 per share. ACGL has witnessed three upward estimate revisions in the past 60 days and no movement in the opposite direction.

Headquartered in Omaha, NE, Berkshire Hathaway recently inked a deal to acquire property and casualty reinsurance company Alleghany Corporation for $11.6 billion to bolster its position in the insurance business. Berkshire Hathaway’s 2022 earnings per share are expected to rise 6.1% year over year to $12.86. BRK.B beat earnings estimates thrice in the last four quarters and missed once, with an average surprise of 11.9%.

Premiums of Palomar Holdings — headquartered in La Jolla, CA — should benefit from a solid product portfolio, geographic expansion and rate increases. The full-year 2022 bottom line of Palomar Holdings is expected to rise 43.4% year over year to $2.94 per share. In the past 60 days, it has witnessed two upward estimate revisions and no downward movement. PLMR beat earnings estimates thrice in the last four quarters and missed once.


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