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RenaissanceRe (RNR) Up 0.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for RenaissanceRe (RNR - Free Report) . Shares have added about 0.4% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
RenaissanceRe Q2 Earnings Beat Mark on Strong Net Investment Income
RenaissanceRe reported second-quarter 2022 operating earnings per share (EPS) of $5.51, which beat the Zacks Consensus Estimate by 9.1% but fell short of our estimate of $5.82. The bottom line fell 2.3% year over year.
Total operating revenues climbed 22.8% year over year to $1,565 million. However, the top line missed the consensus mark by 2.4% and our estimate of $1,622.9 million.
Quarterly Operational Update
Gross premiums written of $2,464.6 million improved 17.7% year over year in the quarter under review. The figure was lower than our estimate of $2,614 million.
Net premiums earned surged 22.1% year over year to $1,456.4 million. The figure lagged the Zacks Consensus Estimate of $1,523 million and our estimate of $1,533 million.
Net investment income of $107.2 million advanced 32.5% year over year in the second quarter, courtesy of higher interest rates in the fixed maturity trading and short-term investment portfolios of RenaissanceRe coupled with increased average invested assets and returns in the catastrophe bond and equity trading investment portfolios. The figure outpaced the Zacks Consensus Estimate of $90 million and our estimate of $89 million.
Total expenses escalated 31.4% year over year to $1,164.2 million due to increased net claims and claim expenses incurred, operational costs and acquisition expenses. The figure was lower than our estimate of $1,227.9 million.
Underwriting income of RNR totaled $316.9 million, which declined 3.8% year over year in the quarter under review. The figure was lower than our estimate of $339 million.
The combined ratio of 78.3% deteriorated 590 basis points (bps) year over year in the second quarter. The figure was lower than the Zacks Consensus Estimate of 82% but came in higher than our estimate of 77.9%.
Quarterly Segment Update
Property Segment
Gross premiums written improved 2.9% year over year to $1,218.3 million in the second quarter, thanks to rate increases.
The segment’s underwriting income of $264.5 million tumbled 16.1% year over year. The figure lagged our estimate of $313.6 million. The combined ratio deteriorated 1,380 bps year over year to 57.6%, which came lower than the Zacks Consensus Estimate of 67% but higher than our estimate of 53.9%.
Casualty and Specialty Segment
Gross premiums written of the segment amounted to $1,246.3 million, which climbed 36.9% year over year in the quarter under review. The upside can be attributed to rate increases and growth in new and existing businesses within the current and previous periods.
The segment delivered an underwriting income of $51.9 million in the second quarter, which increased nearly four-fold year over year. The figure surpassed our estimate of $25.4 million.
The combined ratio of 93.8% improved 400 bps year over year, the metric being lower than the Zacks Consensus Estimate of 96% and our estimate of 97%.
Financial Position (as of Jun 30, 2022)
RenaissanceRe exited the second quarter with cash and cash equivalents of $1,398.1 million, which slumped 24.8% from the 2021-end level. Total assets of $35 billion increased 3.2% from the figure at the 2021 end.
Debt increased marginally from the 2021-end level to $1,169.4 million.
Total shareholders’ equity of $5,738.7 million fell 13.4% from the figure as of Dec 31, 2021.
Book value per share decreased 18.4% year over year to $113.69.
Annualized operating return on average common equity came in at 18.4% during the second quarter, up 160 bps year over year.
Capital Deployment Update
RenaissanceRe bought back shares worth $44.1 million in the second quarter.
2022 Outlook
RenaissanceRe anticipates net premiums earned of around $3.4 billion in its Casualty and Specialty segment this year, out of which roughly $1.7 billion is likely to be reported in the second half of the year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 24.1% due to these changes.
VGM Scores
At this time, RenaissanceRe has a poor Growth Score of F, however its Momentum Score is doing a lot 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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 is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Progressive (PGR - Free Report) , a stock from the same industry, has gained 10.5%. The company reported its results for the quarter ended June 2022 more than a month ago.
Progressive reported revenues of $12.7 billion in the last reported quarter, representing a year-over-year change of +11%. EPS of $0.95 for the same period compares with $1.51 a year ago.
For the current quarter, Progressive is expected to post earnings of $1.37 per share, indicating a change of +878.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +17.5% over the last 30 days.
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 B.
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RenaissanceRe (RNR) Up 0.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for RenaissanceRe (RNR - Free Report) . Shares have added about 0.4% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
RenaissanceRe Q2 Earnings Beat Mark on Strong Net Investment Income
RenaissanceRe reported second-quarter 2022 operating earnings per share (EPS) of $5.51, which beat the Zacks Consensus Estimate by 9.1% but fell short of our estimate of $5.82. The bottom line fell 2.3% year over year.
Total operating revenues climbed 22.8% year over year to $1,565 million. However, the top line missed the consensus mark by 2.4% and our estimate of $1,622.9 million.
Quarterly Operational Update
Gross premiums written of $2,464.6 million improved 17.7% year over year in the quarter under review. The figure was lower than our estimate of $2,614 million.
Net premiums earned surged 22.1% year over year to $1,456.4 million. The figure lagged the Zacks Consensus Estimate of $1,523 million and our estimate of $1,533 million.
Net investment income of $107.2 million advanced 32.5% year over year in the second quarter, courtesy of higher interest rates in the fixed maturity trading and short-term investment portfolios of RenaissanceRe coupled with increased average invested assets and returns in the catastrophe bond and equity trading investment portfolios. The figure outpaced the Zacks Consensus Estimate of $90 million and our estimate of $89 million.
Total expenses escalated 31.4% year over year to $1,164.2 million due to increased net claims and claim expenses incurred, operational costs and acquisition expenses. The figure was lower than our estimate of $1,227.9 million.
Underwriting income of RNR totaled $316.9 million, which declined 3.8% year over year in the quarter under review. The figure was lower than our estimate of $339 million.
The combined ratio of 78.3% deteriorated 590 basis points (bps) year over year in the second quarter. The figure was lower than the Zacks Consensus Estimate of 82% but came in higher than our estimate of 77.9%.
Quarterly Segment Update
Property Segment
Gross premiums written improved 2.9% year over year to $1,218.3 million in the second quarter, thanks to rate increases.
The segment’s underwriting income of $264.5 million tumbled 16.1% year over year. The figure lagged our estimate of $313.6 million. The combined ratio deteriorated 1,380 bps year over year to 57.6%, which came lower than the Zacks Consensus Estimate of 67% but higher than our estimate of 53.9%.
Casualty and Specialty Segment
Gross premiums written of the segment amounted to $1,246.3 million, which climbed 36.9% year over year in the quarter under review. The upside can be attributed to rate increases and growth in new and existing businesses within the current and previous periods.
The segment delivered an underwriting income of $51.9 million in the second quarter, which increased nearly four-fold year over year. The figure surpassed our estimate of $25.4 million.
The combined ratio of 93.8% improved 400 bps year over year, the metric being lower than the Zacks Consensus Estimate of 96% and our estimate of 97%.
Financial Position (as of Jun 30, 2022)
RenaissanceRe exited the second quarter with cash and cash equivalents of $1,398.1 million, which slumped 24.8% from the 2021-end level. Total assets of $35 billion increased 3.2% from the figure at the 2021 end.
Debt increased marginally from the 2021-end level to $1,169.4 million.
Total shareholders’ equity of $5,738.7 million fell 13.4% from the figure as of Dec 31, 2021.
Book value per share decreased 18.4% year over year to $113.69.
Annualized operating return on average common equity came in at 18.4% during the second quarter, up 160 bps year over year.
Capital Deployment Update
RenaissanceRe bought back shares worth $44.1 million in the second quarter.
2022 Outlook
RenaissanceRe anticipates net premiums earned of around $3.4 billion in its Casualty and Specialty segment this year, out of which roughly $1.7 billion is likely to be reported in the second half of the year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 24.1% due to these changes.
VGM Scores
At this time, RenaissanceRe has a poor Growth Score of F, however its Momentum Score is doing a lot 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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 is part of the Zacks Insurance - Property and Casualty industry. Over the past month, Progressive (PGR - Free Report) , a stock from the same industry, has gained 10.5%. The company reported its results for the quarter ended June 2022 more than a month ago.
Progressive reported revenues of $12.7 billion in the last reported quarter, representing a year-over-year change of +11%. EPS of $0.95 for the same period compares with $1.51 a year ago.
For the current quarter, Progressive is expected to post earnings of $1.37 per share, indicating a change of +878.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +17.5% over the last 30 days.
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 B.