RenaissanceRe Holdings Ltd. RNR is currently aided by improving premiums, fee income and investment income, sturdy segmental performances, buyouts and a strong financial position.
Zacks Rank & Price Performance
RenaissanceRe currently carries a Zacks Rank #3 (Hold).
The stock has soared 36.2% in the past year compared with the industry’s 18.2% growth.
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RenaissanceRe has a VGM Score of B. This style score helps identify stocks with the most attractive value, best growth and most promising momentum.
The Zacks Consensus Estimate for RenaissanceRe’s 2023 earnings is pegged at $25.47 per share, which indicates close to three-fold increase from the year-ago reported figure. The consensus estimate for revenues is pegged at $8.2 billion, implying 18.6% growth from the prior-year number.
The Zacks Consensus Estimate for 2024 earnings and revenues is pegged at $28.12 per share and $9.6 billion, suggesting 10.4% and 16.8% growth from the 2023 estimate.
The company beat earnings estimates in three of the last four quarters, missed once, the average surprise being 3.4%.
Solid Return on Equity
RNR’s efficiency in utilizing shareholders’ funds can be substantiated by its return on equity of 14.2% as of Jun 30, 2023, which remains higher than the industry’s average of 6.7%.
RenaissanceRe’s premiums continue to grow on the back of solid contributions from its Property as well as Casualty and Specialty segments. As premiums remain the most significant contributor to an insurer’s top line, rising premiums will definitely drive the revenues of an insurance company. RNR expects Casualty and Specialty’s net earned premiums to be around $1 billion each quarter for the remainder of 2023
Though an active catastrophe environment comes with its share of worries for RNR, such an environment usually accelerates the policy renewal rate to make uninterrupted claim payments and prompt insurers to implement rate hikes. Subsequently, continual rate increases keep premiums flowing as it did in the second quarter, wherein net written premiums grew 55% in the property catastrophe business.
Growing fee income derived from the capital management business of RenaissanceRe is also likely to boost the profit levels of the insurer. RNR actively pursues opportunities, ranging from the creation and management of its joint ventures and managed funds, carrying out structured reinsurance transactions to assume or cede risk or controlling certain strategic investments, to boost its fee income.
The company expects management fee to be $45 million per quarter for the remaining quarters of 2023. Performance fees are projected to be $15 million per quarter for 2023, absent any large losses.
An improving interest rate scenario usually enhances investment yields of insurers. The company estimates retained net investment income to be $220 million for the third quarter of 2023.
RNR keeps an eye to expand its capabilities through an inorganic growth route of acquisitions or business expansions. It resorts to selling off its underperforming businesses to intensify its focus on growing business units that fetches higher return. The company is expected to close its acquisition of Validus Re by fourth-quarter 2023. This move will benefit RNR as it gains large and diversified business in a favorable insurance market.
It boasts a solid financial standing, substantiated by a sufficient cash balance and solid cash-generating abilities. In the first half of 2023, RNR generated operating cash flows of $626.7 million, which grew 132.8% year over year.
It remains active on the capital deployment front and rewards shareholders through share buybacks or dividend payments. It has been resorting to uninterrupted dividend hikes for nearly three decades now. In February 2023, management implemented a 2.7% hike in the quarterly dividend. Its dividend yield of 0.8% remains higher than the industry’s figure of 0.3%.
Other Stocks to Consider
Some better-ranked stocks in the Property and Casualty insurance space are Arch Capital Group Ltd. ACGL, AXIS Capital Holdings Limited AXS and HCI Group, Inc. HCI, each sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital’s earnings surpassed estimates in each of the trailing four quarters, the average being 26.8%. The Zacks Consensus Estimate for ACGL’s 2023 earnings and revenues suggests improvements of 38.2% and 30.6% from the year-ago reported figures. The consensus mark for ACGL’s 2023 earnings has moved 6.8% north in the past 30 days.
The bottom line of AXIS Capital beat estimates in three of the trailing four quarters, missed once, the average surprise being 9.8%. The Zacks Consensus Estimate for AXS’s 2023 earnings and revenues implies rises of 44.8% and 7.9% from the year-ago numbers. The consensus mark for AXS’s 2023 earnings has moved 10.4% north in the past 30 days.
HCI Group’s earnings outpaced estimates in each of the last four quarters, the average surprise being 448.4%. The Zacks Consensus Estimate for HCI’s 2023 earnings and revenues indicates gains of 159.3% and 1.1% from the year-ago levels.
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