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Why Investors Are Buying RenaissanceRe (RNR) Shares Now
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RenaissanceRe Holdings Ltd. (RNR - Free Report) is well-positioned for growth, capitalizing on a strong financial foundation, strategic acquisitions and partnerships. Additionally, increasing premiums earned and improving underwriting results will contribute to its momentum. The positive effects of a high-interest-rate environment continue to be a significant driver.
Headquartered in Pembroke, Bermuda, RNR offers insurance and reinsurance products in the domestic as well as international markets. It was founded in 1993 and currently has a market cap of $11.9 billion. Now, let’s take a look at its recent price performance to gauge investor sentiment toward the stock.
Price Performance
Over the past month, RenaissanceRe shares have gained 4.7%, surpassing the industry's 3.1% increase and the S&P 500 Index's 3.4% growth. Notably, its forward 12-month price-to-earnings ratio of 6.3X is significantly lower than the industry average of 27X, indicating that the stock is more affordable.
Image Source: Zacks Investment Research
Due to its solid prospects, this currently Zacks Rank #2 (Buy) stock presents an attractive investment opportunity for investors at the moment.
In this analysis, we'll explore the growth drivers and estimates and highlight the key factors investors should monitor. Let’s delve deeper.
The Zacks Consensus Estimate for RenaissanceRe’s current-year earnings is pegged at $36.42 per share, which has witnessed five upward estimate revisions in the past 30 days against none in the opposite direction. RNR beat on earnings in all the last four quarters, the average surprise being 27.9%.
The consensus estimate for RenaissanceRe’s current-year revenues stands at $11.4 billion, indicating 30.5% year-over-year growth. We expect its Property and Casualty & Specialty businesses to play a significant role in top-line growth. Our model suggests that net premiums earned from the Property segment will jump nearly 24% year over year in 2024. Similarly, net premiums earned from the Casualty & Specialty unit is expected to witness more than 34% growth.
Furthermore, improving yields from its fixed maturity and short-term portfolios amid a high interest rate environment is expected to enhance its net investment income. We expect the metric to jump almost 28% year over year in 2024.
The company’s efforts on integration following the Validus acquisition is a major tailwind. It is expected to deliver significant synergies while keeping the process seamless for its customers. This will play a vital role in the renewals and retentions of its portfolio. With enhanced capabilities, RenaissanceRe is now well-situated to benefit from the growing demand for reinsurance.
RNR's commitment to underwriting discipline is poised to further bolster its bottom line. We expect to see more growth in Specialty business in the coming days, whereas exposures in operations like Professional liability may decrease. It is expected to continue lowering exposure to uncertain lines such as D&O insurance. Underlying rates in this business are on a decline.
RenaissanceRe's strong trailing 12-month return on invested capital stands at 11.9%, surpassing the industry average of 5.9%. This underscores the company's capacity to generate substantial returns in comparison to industry standards, demonstrating its efficiency in capital investment.
Its total debt to capital of 16.1% is lower than the industry level of 18.4%. It exited the first quarter of 2024 with cash and cash equivalents of $1.6 billion, while debt amounted to $1.9 billion (which decreased from $2 billion at 2023-end). The company’s ability to generate free cash flow is commendable. Over the trailing 12-month period, the metric jumped 13%.
A Risk
However, there is a factor that investors should keep a careful eye on.
RNR’s rising operational expenses will keep its margins under pressure. The metric surged 35.6% year over year in 2023. We expect it to further increase by almost 37% this year. Also, our estimate for total expenses suggests 41% year-over-year growth. Nevertheless, we believe that its systematic and strategic plan of action will drive growth and improve profitability further in the long term.
The Zacks Consensus Estimate for Ambac Financial’s current-year earnings is pegged at $1.45 per share, which witnessed one upward estimate revision in the past month against no movement in the opposite direction. It beat earnings estimates in all the past four quarters, with an average surprise of 893.5%.
The Zacks Consensus Estimate for Brown & Brown’s current-year earnings is pegged at $3.51 per share, which indicates 24.9% year-over-year growth. It has witnessed five upward estimate revisions against none in the opposite direction during the past month. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.9%.
The consensus mark for ROOT’s current-year earnings indicates a 35.6% year-over-year improvement. It beat earnings estimates in all the past four quarters, with an average surprise of 34.1%. Furthermore, the consensus estimate for Root’s 2024 revenues suggests 125.3% year-over-year growth.
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Why Investors Are Buying RenaissanceRe (RNR) Shares Now
RenaissanceRe Holdings Ltd. (RNR - Free Report) is well-positioned for growth, capitalizing on a strong financial foundation, strategic acquisitions and partnerships. Additionally, increasing premiums earned and improving underwriting results will contribute to its momentum. The positive effects of a high-interest-rate environment continue to be a significant driver.
Headquartered in Pembroke, Bermuda, RNR offers insurance and reinsurance products in the domestic as well as international markets. It was founded in 1993 and currently has a market cap of $11.9 billion. Now, let’s take a look at its recent price performance to gauge investor sentiment toward the stock.
Price Performance
Over the past month, RenaissanceRe shares have gained 4.7%, surpassing the industry's 3.1% increase and the S&P 500 Index's 3.4% growth. Notably, its forward 12-month price-to-earnings ratio of 6.3X is significantly lower than the industry average of 27X, indicating that the stock is more affordable.
Image Source: Zacks Investment Research
Due to its solid prospects, this currently Zacks Rank #2 (Buy) stock presents an attractive investment opportunity for investors at the moment.
In this analysis, we'll explore the growth drivers and estimates and highlight the key factors investors should monitor. Let’s delve deeper.
The Zacks Consensus Estimate for RenaissanceRe’s current-year earnings is pegged at $36.42 per share, which has witnessed five upward estimate revisions in the past 30 days against none in the opposite direction. RNR beat on earnings in all the last four quarters, the average surprise being 27.9%.
The consensus estimate for RenaissanceRe’s current-year revenues stands at $11.4 billion, indicating 30.5% year-over-year growth. We expect its Property and Casualty & Specialty businesses to play a significant role in top-line growth. Our model suggests that net premiums earned from the Property segment will jump nearly 24% year over year in 2024. Similarly, net premiums earned from the Casualty & Specialty unit is expected to witness more than 34% growth.
Furthermore, improving yields from its fixed maturity and short-term portfolios amid a high interest rate environment is expected to enhance its net investment income. We expect the metric to jump almost 28% year over year in 2024.
The company’s efforts on integration following the Validus acquisition is a major tailwind. It is expected to deliver significant synergies while keeping the process seamless for its customers. This will play a vital role in the renewals and retentions of its portfolio. With enhanced capabilities, RenaissanceRe is now well-situated to benefit from the growing demand for reinsurance.
RNR's commitment to underwriting discipline is poised to further bolster its bottom line. We expect to see more growth in Specialty business in the coming days, whereas exposures in operations like Professional liability may decrease. It is expected to continue lowering exposure to uncertain lines such as D&O insurance. Underlying rates in this business are on a decline.
RenaissanceRe's strong trailing 12-month return on invested capital stands at 11.9%, surpassing the industry average of 5.9%. This underscores the company's capacity to generate substantial returns in comparison to industry standards, demonstrating its efficiency in capital investment.
Its total debt to capital of 16.1% is lower than the industry level of 18.4%. It exited the first quarter of 2024 with cash and cash equivalents of $1.6 billion, while debt amounted to $1.9 billion (which decreased from $2 billion at 2023-end). The company’s ability to generate free cash flow is commendable. Over the trailing 12-month period, the metric jumped 13%.
A Risk
However, there is a factor that investors should keep a careful eye on.
RNR’s rising operational expenses will keep its margins under pressure. The metric surged 35.6% year over year in 2023. We expect it to further increase by almost 37% this year. Also, our estimate for total expenses suggests 41% year-over-year growth. Nevertheless, we believe that its systematic and strategic plan of action will drive growth and improve profitability further in the long term.
Other Key Picks
Some other top-ranked stocks in the broader Finance space are Ambac Financial Group, Inc. (AMBC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Root, Inc. (ROOT - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ambac Financial’s current-year earnings is pegged at $1.45 per share, which witnessed one upward estimate revision in the past month against no movement in the opposite direction. It beat earnings estimates in all the past four quarters, with an average surprise of 893.5%.
The Zacks Consensus Estimate for Brown & Brown’s current-year earnings is pegged at $3.51 per share, which indicates 24.9% year-over-year growth. It has witnessed five upward estimate revisions against none in the opposite direction during the past month. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.9%.
The consensus mark for ROOT’s current-year earnings indicates a 35.6% year-over-year improvement. It beat earnings estimates in all the past four quarters, with an average surprise of 34.1%. Furthermore, the consensus estimate for Root’s 2024 revenues suggests 125.3% year-over-year growth.