Why Is RenaissanceRe (RNR) Up 3.1% Since Last Earnings Report?

It has been about a month since the last earnings report for RenaissanceRe (RNR). Shares have added about 3.1% in that time frame, outperforming 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 Misses Q1 Earnings on High Costs

RenaissanceRe reported first-quarter 2022 operating earnings per share of $3.50, which missed the Zacks Consensus Estimate of $4.63. However, the bottom line increased from 9 cents per share a year ago.

Total operating revenues of $1,571.3 million increased from $1,236 million a year ago. However, the top line missed the consensus mark of $1,587 million.

It reported weaker-than-expected March-quarter results on increased expenses and lower gross premiums at the Property business affected the results. The ongoing Russia-Ukraine conflict can further erode its bottom line in the coming days. However, the negatives were partially offset by higher gross premiums at the Casualty and Specialty segment and a lower combined ratio reflects improving business.

Quarterly Operational Update

Gross premiums written increased to $2,943 million in the first quarter from $2,652.4 million a year ago, courtesy of increased premiums at the Casualty and Specialty segment. Net investment income rose to $83.7 million in the quarter under review from $79.8 million a year-ago.

Total expenses of RenaissanceRe increased to $1,310.6 million from the year-ago level of $1,211.9 million owing to higher operational, corporate and acquisition expenses, partially offset by lower net claims and claim expenses incurred.

In the reported quarter, RNR delivered an underwriting income of $200.3 million against the year-ago quarter's underwriting loss of $35.8 million. Combined ratio contracted 1,660 basis points (bps) year over year to 86.5% in the first quarter.

Quarterly Segment Update

Property Segment

Gross premiums written declined 16.9% year over year to $1,343.5 million due to a significant reduction in Upsilon RFO, lower impact assumed reinstatement premiums and a planned non-renewal of some deals.

The segment delivered an underwriting income of $184.8 million against the year-ago quarter’s loss of $41.8 million. Combined ratio contracted 3,680 bps year over year to 70.1%.

Casualty and Specialty Segment

Gross premiums written soared 54.4% year over year to $1,599.5 million in the quarter under review. The improvement can be attributed to a hike in professional liability, rate increases and growth in new and existing business written, general casualty and other specialty lines of business.

The segment’s underwriting income was $15.5 million compared with the year-ago quarter’s income of $6 million. Combined ratio contracted 70 bps year over year to 98.2%.

Financial Position (as of Mar 31, 2022)

RenaissanceRe exited the first quarter with cash and cash equivalents of $1,563.1 million, which decreased from the 2021-end level of $1,859 million. Total assets of $34.8 billion increased from $34 billion as of Dec 31, 2021.

RNR’s debt amounted to $1,168.9 million, which rose from $1,168.4 million at 2021 end.

Book value per share amounted to $121.44, which declined from $131.15 a year ago.

Annualized operating return on average common equity was 10.8% in the quarter under review.

Share Repurchase Update

In the first quarter, RenaissanceRe bought back shares worth $93.4 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -8.2% due to these changes.

VGM Scores

At this time, RenaissanceRe has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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, W.R. Berkley (WRB), a stock from the same industry, has gained 2.4%. The company reported its results for the quarter ended March 2022 more than a month ago.

W.R. Berkley reported revenues of $2.55 billion in the last reported quarter, representing a year-over-year change of +20.1%. EPS of $1.10 for the same period compares with $0.72 a year ago.

W.R. Berkley is expected to post earnings of $0.86 per share for the current quarter, representing a year-over-year change of +10.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for W.R. Berkley. Also, the stock has a VGM Score of C.

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