RenaissanceRe (RNR) Troubled By Cat Losses, Tough Market

On Aug 8, 2016, we issued an updated research report on RenaissanceRe Holdings Ltd. (NYSE:RNR)

In the second quarter of 2016, reported late last month the insurer posted operating earnings per share of $1.55 that missed the Zacks Consensus Estimate by 23% and also plunged 29% year over year. The lackluster results was due to a rise in total expense including claim expenses and underwriting expenses, which offset revenue growth. The Texas hailstorms and the Fort McMurray wildfire were primarily responsible for higher claim expenses.

RenaissanceRe remains exposed to high severity losses associated with catastrophic events worldwide. Natural catastrophes have been hampering the insurer’s profits since 2008. The underwriting results too suffered with declining underwriting income and deteriorating combined ratio. The second quarter was also no exception as the company incurred cat loss of $41 million from weather events in Texas and the Fort McMurray wildfires in Canada.

The company’s catastrophe reinsurance business remains exposed to tough market conditions. Given the pricing pressure due to the overflow of alternative capital and increased retentions of primary companies, the company’s profit margins remain pressured. The property catastrophe reinsurance segment is experiencing what appears to be a secular change. For managed catastrophe business, the company expects top-line deterioration of 10% in 2016.

However, divestment of businesses with high risk and low returns, strategic acquisitions to boost inorganic growth, addition of new product lines like specialty insurance, an increasing trend in gross premiums written are some of the major positives for the company. Also, RenaissanceRe’s continuous effort to expand operations across the globe through joint ventures and alliances has given it a greater exposure and renown. Effective capital deployment through share repurchases and dividend payment has helped the company create shareholders’ value over years.

Stocks to Consider

RenaissanceRe carries a zacks Rank # (Sell). Some better-ranked stocks from the same industry include Allied World Assurance Company Holdings, AG (NYSE:AWH) , Argo Group International Holdings, Ltd. (NASDAQ:AGII) and MS&AD Insurance Group Holdings, Inc. (OTC:MSADY) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).

RENAISSANCERE (RNR): Free Stock Analysis Report

ARGO GROUP INTL (AGII): Free Stock Analysis Report

ALLIED WORLD AS (AWH): Free Stock Analysis Report

MS&AD INSURANCE (MSADY): Free Stock Analysis Report

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