RenaissanceRe Holdings Ltd. RNR is currently aided by improved premiums, strong segmental performances, buyouts and a strong financial position.
Zacks Rank & Price Rally
RenaissanceRe currently sports a Zacks Rank #1 (Strong Buy).
The stock has soared 40.8% in the past six months compared with the industry’s 11.6% growth. The Zacks Finance sector and the S&P 500 composite rallied 5.5% and 10.7% respectively, in the said time frame.
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Favorable Style Score
RNR carries an impressive Value Score of A. Value Score helps identify undervalued stocks. The back-tested results show that stocks with a Value Score of A or B in combination with a Zacks Rank of 1 or 2 (Buy) are the best investment bets.
Robust Growth Prospects
The Zacks Consensus Estimate for RenaissanceRe’s 2023 earnings is pegged at $23.26 per share, which indicates a more than three-fold increase from the year-ago reported figure. The same for revenues stands at $7.7 billion, implying 11% growth from the prior-year number.
The Zacks Consensus Estimate for 2024 earnings is pegged at $26.40 per share, suggesting 13.5% growth from the 2023 estimate. The same for revenues stands at $8.3 billion, which indicates a rise of 7.7% from the 2023 estimate.
Solid Return on Equity
RNR’s efficiency in utilizing shareholders’ funds can be substantiated by its return on equity of 7.4% as of Dec 31, 2022, 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.
Though an active catastrophe environment comes with its share of worries for Renaissance, 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.
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.
An improving interest rate scenario usually boosts the investment yields of insurers and the investment portfolio of RenaissanceRe comprising a significant proportion of fixed-income investments, is likely to reap benefits for continued Fed rate hikes.
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.
Renaissance boasts a solid financial standing, substantiated by a sufficient cash balance and solid cash-generating abilities. In 2022, RNR generated operating cash flows of $1,603.7 million, which grew nearly 30% year over year.
It remains active on the capital deployment front and rewards shareholders through share buybacks or dividend payments. RenaissanceRe 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 0.4%.
Other Stocks to Consider
Some other top-ranked stocks in the insurance space are Kinsale Capital Group, Inc. KNSL, Everest Re Group, Ltd. RE and Universal Insurance Holdings, Inc. UVE, each sporting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital’s earnings surpassed estimates in each of the trailing four quarters, the average being 13.83%. The Zacks Consensus Estimate for KNSL’s 2023 earnings suggests an improvement of 26.4%, while the same for revenues suggests growth of 32.2% from the corresponding year-ago reported figures. The consensus mark for KNSL’s 2023 earnings has moved 9.8% north in the past 60 days.
The bottom line of Everest Re beat estimates in each of the trailing four quarters, the average surprise being 18.41%. The Zacks Consensus Estimate for RE’s 2023 earnings suggests an improvement of 68.5%, while the same for revenues suggests growth of 12.8% from the corresponding year-ago reported figures. The consensus mark for RE’s 2023 earnings has moved 8.2% north in the past 60 days.
Universal Insurance’s earnings outpaced estimates in each of the last four quarters, the average surprise being 101.69%. The Zacks Consensus Estimate for UVE’s 2023 earnings is pegged at $1.65 per share. A loss of 41 cents per share was reported in the prior year. The same for revenues suggests growth of 9% from the year-ago reported figure. The consensus mark for UVE’s 2023 earnings has moved 10% north in the past 30 days.
Shares of Kinsale Capital, Everest Re and Universal Insurance have gained 16.2%, 34.9% and 90.5%, respectively, in the past six months.
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