A month has gone by since the last earnings report for RenaissanceRe (RNR). Shares have lost about 9.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RenaissanceRe due for a breakout? 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’s Q2 Earnings Beat on Solid Investment Income
RenaissanceRe reported second-quarter 2023 operating income of $8.79 per share, which beat the Zacks Consensus Estimate by 16%. The bottom line increased 59.5% year over year.
Total operating revenues increased 33.3% year over year to $2,081.8 million in the second quarter. The top line outpaced the consensus mark by 5.6%.
Strong underwriting results, improved net investment income, higher Capital Partners fees and solid contributions from segments provided an impetus to its quarterly performance. An elevated expense level might have acted as a partial offset to its second-quarter results.
Quarterly Operational Update
Gross premiums written of $2,651.6 million increased 7.6% year over year in the second quarter. The metric outpaced our estimate by 1.1%.
Net premiums earned improved 22.6% year over year to $1,785.3 million. The figure surpassed our estimate by 9.7%
The net investment income of RenaissanceRe amounted to $292.7 million, which increased more than 1.5 times 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 26.5% year over year to $1,472.5 million due to increased acquisition and operational expenses.
RNR reported an underwriting income of $351 million, which increased 10.9% year over year. The combined ratio deteriorated 200 points (bps) year over year to 80.3% in the second quarter.
Book value per share came in at $129.98 as of Jun 30, 2023, which increased 14.3% year over year. Annualized operating return on average common equity of 28.8% improved 1,040 bps year over year.
The segment’s gross premiums written amounted to $1,402.6 million, which improved 15.1% year over year in the second quarter due to an increase in catastrophe class of business. Net premiums earned improved 21.7% year over year to $758.7 million, higher than our estimate of $689.3 million.
Underwriting income of $281 million improved 6.3% year over year. The combined ratio deteriorated 540 bps year over year to 63%.
Casualty and Specialty Segment
Gross premiums written of $1,249 million improved 0.2% year over year in the quarter under review. The metric was supported by growing other specialty class of business. Net premiums earned increased 23.3% year over year to $1,027 million.
The segment recorded an underwriting income of $70 million, which increased 34.8% year over year. The combined ratio of 93.2% improved 60 bps year over year.
Financial Position (as of Jun 30, 2023)
RenaissanceRe exited the second quarter with cash and cash equivalents of $943.9 million, which decreased 26.5% from 2022-end. Total assets of $41,399.9 million increased 13.1% from 2022-end.
Debt amounted to $1,882 million, which increased 60.7% from December 2022-end.
Total shareholders’ equity of $7,402.8 million rose 39% from the 2022-end level.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 88.85% due to these changes.
At this time, RenaissanceRe has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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.
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 belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Progressive (PGR), has gained 3.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Progressive reported revenues of $15.23 billion in the last reported quarter, representing a year-over-year change of +19.9%. EPS of $0.50 for the same period compares with $0.95 a year ago.
Progressive is expected to post earnings of $1.55 per share for the current quarter, representing a year-over-year change of +216.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +15.6%.
Progressive has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report