RenaissanceRe Holdings Ltd. (RNR - Analyst Report) has announced the completion of an equity capital raise of $100 million by its consolidated venture - DaVinciRe Holdings Ltd. (“DaVinci”).
The capital will be raised from its new and existing investors and the raised capital will be utilized for supporting the ongoing underwriting activities of DaVinci Reinsurance Ltd., which is a subsidiary of DaVinci. DaVinci Reinsurance Ltd. principally writes property catastrophe reinsurance and certain classes of specialty reinsurance.
With the completion of this financing, RenaissanceRe has been able to show its access to risk exposure, its capital strength and the ability to access and deploy third party capital position to match reinsurance capacity as per the needs of the clients.
Recently in May, the rating agency A.M. Best Co. has affirmed the issuer credit ratings (ICR) and debt ratings of RenaissanceRe, while maintaining the financial strength rating (FSR) and ICR of Renaissance’s subsidiaries. The outlook for all the ratings remains stable.
In addition, A.M. Best has affirmed the ICR of “bbb” of DaVinci; and the FSR of A (Excellent) and ICR of “a” of DaVinci Reinsurance Ltd.
The ratings reflect RenaissanceRe’s strong financial performance, superior risk-based capitalization, and its solid management team. Further, the company’s outstanding risk management technique has helped it to maintain its rating.
Being the leader in the state-of-the-art property catastrophe modeling and risk optimization, RenaissanceRe has successfully attracted capital from other companies to form several successful joint ventures including DaVinci and Top Layer Reinsurance Ltd.
However, according to the rating agency, RenaissanceRe’s exposure to high severity losses associated with catastrophic events on a worldwide basis has impacted the company’s results negatively.
RenaissanceRe reported its first-quarter loss from continuing operations of $242.9 million or $4.59 per share, lower than the Zacks Consensus Estimate of a loss of $4.94. However, the company reported favorable earnings of $116.5 million or $1.91 per share in the year-ago quarter.
Overall, RenaissanceRe is well-positioned to fully support its rating level, and the company continues to have excess capacity that can be deployed, via dividends and stock buyback program. Though we expect limited upside potential for RenaissanceRe shares in the coming quarters as it faces increasing challenges in its investment portfolio, it continues to benefit from its underwriting discipline, capital strength and strong market reputation. Major competitors of the company are ACE Limited (ACE - Analyst Report) and XL Group, plc (XL - Analyst Report).