It has been about a month since the last earnings report for RenaissanceRe (
RNR Quick Quote RNR - Free Report) . Shares have added about 8.7% in that time frame, outperforming 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 drivers.
RenaissanceRe’s Q3 Loss Wider Than Expected, Revenues Up Y/Y RenaissanceRe reported third-quarter 2021 operating loss per share of $8.98, wider than the Zacks Consensus Estimate of a loss of $7.75. The bottom line compared unfavorably with the prior-year quarter’s loss of $2.64 per share. The company’s results were hurt by escalating costs and severe catastrophic events stemming from Hurricane Ida and floods across Northwestern Europe. However, the results were partly offset by improved gross premiums written resulting from sound performances of the company’s Property, and Casualty and Specialty segments. Quarterly Operational Update
Total revenues of $1.5 billion advanced 15.9% year over year on the back of higher net premiums earned, partly offset by reduced net investment income.
Gross premiums written surged 55.2% year over year to $1.8 billion in the third quarter, courtesy of increased premiums at the Property, and Casualty and Specialty segments. Meanwhile, net investment income declined 6.3% year over year to $78.3 million in the quarter under review. Total expenses of RenaissanceRe escalated 74.3% year over year to $2.2 billion due to a steep rise in net claims and claim expenses incurred coupled with higher acquisition expenses and operational costs. In the quarter under review, the company incurred an underwriting loss of $678.8 million, which came in wider than the prior-year quarter’s loss of $206.1 million. Combined ratio deteriorated 2,450 basis points (bps) year over year to 145.1% in the third quarter. Quarterly Segment Update Property Segment
Gross premiums written surged 80.9% year over year to $773.7 million on the back of an uptick in reinstatement premiums linked with third-quarter weather-related losses and rate increases leading to growth of other property class of business.
The segment incurred an underwriting loss of $681.9 million, wider than the year-ago quarter’s loss of $206.6 million. The metric took a hit from substantial weather-related losses incurred in the third quarter. Combined ratio deteriorated 4,350 bps year over year to 183.5%. Casualty and Specialty Segment
Gross premiums written rose 39.9% year over year to $1 billion in the quarter under review. The improvement can be attributed to rate increases and growth in new and existing business written leading to sound performance of the professional liability, general casualty and other specialty lines of business.
The segment’s underwriting income increased nearly six-fold year over year to $3.1 million in the third quarter. Combined ratio improved 30 bps year over year to 99.6%. Financial Position (as of Sep 30, 2021)
The company exited the third quarter with cash and cash equivalents of $1.4 billion, which fell 17.1% from 2020-end level.
Total assets of $33.5 billion increased 8.8% from the figure as of Dec 31, 2020. The company’s debt amounted to $1.1 billion, which inched up 0.1% from the level at 2020 end. Book value per share amounted to $128.91, which declined 4.6% year over year. Annualized operating return on average common equity was a negative 26.1% in the quarter under review. Share Repurchase Update
In the third quarter, the company bought back shares worth $223.8 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 12.89% due to these changes.
Currently, RenaissanceRe has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, RenaissanceRe has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.