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Shares of RenaissanceRe Holdings Ltd. (RNR - Free Report) declined 8.1% since it reported third-quarter 2023 results on Nov 1. Investors might be concerned about a declining premium level, which remains the most significant contributor to an insurer’s top line. Premiums suffered a blow due to a reduction in net reinstatement premiums, resulting from lower weather-related losses in the quarter under review.
However, the downside from lower premiums in the third quarter was offset by strong underwriting results, a substantial decline in expense level and increased returns from the fixed maturity portfolio.
RNR reported third-quarter 2023 operating income of $8.33 per share, which outpaced the Zacks Consensus Estimate by 27.4%. A loss of $9.27 per share was reported in the prior-year quarter.
Total operating revenues of $2,064 million advanced 7.1% year over year in the quarter under review. The top line beat the consensus mark by 1.7%.
RenaissanceRe Holdings Ltd. Price, Consensus and EPS Surprise
Gross premiums written dropped 27.1% year over year to $1,618.4 million. RenaissanceRe’s net premiums earned of $1,755.9 million dipped 0.6% year over year in the third quarter but fell short of the Zacks Consensus Estimate of $1,780 million and our estimate of $1,790.7 million.
Net investment income more than doubled year over year to $329.1 million, which surpassed the consensus mark of $287 million and our estimate of $205.5 million. The metric gained from improved average invested assets and increased returns from its fixed maturity and short-term portfolios. Fee income increased nearly three-fold year over year to $64.6 million on the back of growth in management and performance fee incomes.
Total expenses of $1,410.2 million plunged 43% year over year in the quarter under review due to a significant decline in net claims and claim expenses incurred.
RNR reported an underwriting income of $385.8 million against the prior-year quarter’s underwriting loss of $683.1 million. The combined ratio of 78% improved 6,070 basis points (bps) year over year.
Book value per share surged 41.3% year over year to $133.63 in the third quarter. Annualized operating return on average common equity was 25% while the metric was recorded at a negative figure of 34.8% in the prior-year quarter.
Segmental Update
Property Segment
The segment reported gross premiums written of $511 million, which fell 36.1% year over year. Net premiums earned declined 9.5% year over year to $760.4 million, which missed the Zacks Consensus Estimate of $779 million and our estimate of $795 million. Lower net reinstatement premiums exerted a strain on the unit’s performance.
Underwriting income of $356 million came against the prior-year quarter’s underwriting loss of $722.6 million. Our estimate indicated the segment to incur an underwriting loss of $586 million in the third quarter. The combined ratio was 53.2%, which improved 13,280 bps year over year, attributable to a decline in current accident year net losses and increased prior accident year net favorable development.
Casualty and Specialty Segment
Gross premiums written of the unit fell 22% year over year to $1,107.4 million in the quarter under review, lower than our estimate of $1,511.8 million. Net premiums earned of $995.5 million rose 7.4% year over year but lagged the consensus mark of $1,015 million and our estimate of $995.7 million.
The segment recorded an underwriting income of $29.8 million, which decreased 24.6% year over year. The combined ratio deteriorated 130 bps year over year to 97% in the third quarter due to specialty losses.
Financial Position (as of Sep 30, 2023)
RenaissanceRe exited the third quarter with cash and cash equivalents of $1,195.9 million, which inched up 0.1% from figure at the 2022 end. Total assets of $40.8 billion grew 11.7% from the 2022-end level.
Debt amounted to $1,882.9 million, which soared 60.9% from the figure as of Dec 31, 2022.
Total shareholders’ equity of $7,588.6 climbed 42.5% from the 2022-end figure.
RNR generated net cash from operations of $1,399.1 million in the first nine months of 2023, which jumped 60.7% from the prior-year comparable period.
Capital Deployment Update
RenaissanceRe did not buy back shares in the third quarter. It paid out common dividends of $19.2 million in the quarter under review.
Business Update
RNR completed the acquisition of Validus Re, the treaty reinsurance business of American International Group, Inc. (AIG - Free Report) , on Nov 1, 2023.
Forward View
In the fourth quarter of 2023, Renaissance Re anticipates management and performance fees to stay in line, excluding any significant losses, with the third-quarter 2023 levels. Management forecasts retained net investment income of around $260 million in the fourth quarter.
Combined ratio in the Casualty and Specialty unit is forecasted to stay in the mid-90s range. Next year, corporate expenses are likely to stay lower than the fourth-quarter 2023 level.
Of the insurance industry players that have reported third-quarter results so far, Assurant, Inc. (AIZ - Free Report) and The Hartford Financial Services Group, Inc. (HIG - Free Report) beat the Zacks Consensus Estimate for earnings.
Assurant’s third-quarter 2023 net operating income of $4.29 per share beat the Zacks Consensus Estimate by 73%. The bottom line surged more than fourfold from the year-ago quarter. Total revenues increased 8.5% year over year to $2.8 billion. The top line beat the consensus estimate by 4.5%. Net investment income was up 50.2% year over year to $125.5 million. Revenues at the Global Housing unit increased 24.7% year over year to $584.8 million while its adjusted EBITDA, excluding reportable catastrophes, more than doubled year over year to $191.3 million. Revenues at the Global Lifestyle segment of AIZ increased 5.3% year over year to $2.2 billion.
Hartford Financial reported third-quarter 2023 adjusted operating earnings of $2.29 per share, which outpaced the Zacks Consensus Estimate by 17.4%. The bottom line rose 57.9% year over year. Operating revenues rose 10% year over year to $4,213 million in the quarter under review. The top line beat the consensus mark by a whisker. Net earned premiums of HIG amounted to $5,310 million, which improved 8.1% year over year in the third quarter. Net investment income rose 22.6% year over year to $597 million in the third quarter. It reported a pretax income of $813 million, which jumped 88.2% year over year. The Commercial Lines segment recorded revenues of $3,318 million in the third quarter, which rose 13.1% year over year. Core earnings rose 49.3% year over year to $542 million.
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RenaissanceRe (RNR) Shares Dip 8% Despite Q3 Earnings Beat
Shares of RenaissanceRe Holdings Ltd. (RNR - Free Report) declined 8.1% since it reported third-quarter 2023 results on Nov 1. Investors might be concerned about a declining premium level, which remains the most significant contributor to an insurer’s top line. Premiums suffered a blow due to a reduction in net reinstatement premiums, resulting from lower weather-related losses in the quarter under review.
However, the downside from lower premiums in the third quarter was offset by strong underwriting results, a substantial decline in expense level and increased returns from the fixed maturity portfolio.
RNR reported third-quarter 2023 operating income of $8.33 per share, which outpaced the Zacks Consensus Estimate by 27.4%. A loss of $9.27 per share was reported in the prior-year quarter.
Total operating revenues of $2,064 million advanced 7.1% year over year in the quarter under review. The top line beat the consensus mark by 1.7%.
RenaissanceRe Holdings Ltd. Price, Consensus and EPS Surprise
RenaissanceRe Holdings Ltd. price-consensus-eps-surprise-chart | RenaissanceRe Holdings Ltd. Quote
Quarterly Operational Update
Gross premiums written dropped 27.1% year over year to $1,618.4 million. RenaissanceRe’s net premiums earned of $1,755.9 million dipped 0.6% year over year in the third quarter but fell short of the Zacks Consensus Estimate of $1,780 million and our estimate of $1,790.7 million.
Net investment income more than doubled year over year to $329.1 million, which surpassed the consensus mark of $287 million and our estimate of $205.5 million. The metric gained from improved average invested assets and increased returns from its fixed maturity and short-term portfolios. Fee income increased nearly three-fold year over year to $64.6 million on the back of growth in management and performance fee incomes.
Total expenses of $1,410.2 million plunged 43% year over year in the quarter under review due to a significant decline in net claims and claim expenses incurred.
RNR reported an underwriting income of $385.8 million against the prior-year quarter’s underwriting loss of $683.1 million. The combined ratio of 78% improved 6,070 basis points (bps) year over year.
Book value per share surged 41.3% year over year to $133.63 in the third quarter. Annualized operating return on average common equity was 25% while the metric was recorded at a negative figure of 34.8% in the prior-year quarter.
Segmental Update
Property Segment
The segment reported gross premiums written of $511 million, which fell 36.1% year over year. Net premiums earned declined 9.5% year over year to $760.4 million, which missed the Zacks Consensus Estimate of $779 million and our estimate of $795 million. Lower net reinstatement premiums exerted a strain on the unit’s performance.
Underwriting income of $356 million came against the prior-year quarter’s underwriting loss of $722.6 million. Our estimate indicated the segment to incur an underwriting loss of $586 million in the third quarter. The combined ratio was 53.2%, which improved 13,280 bps year over year, attributable to a decline in current accident year net losses and increased prior accident year net favorable development.
Casualty and Specialty Segment
Gross premiums written of the unit fell 22% year over year to $1,107.4 million in the quarter under review, lower than our estimate of $1,511.8 million. Net premiums earned of $995.5 million rose 7.4% year over year but lagged the consensus mark of $1,015 million and our estimate of $995.7 million.
The segment recorded an underwriting income of $29.8 million, which decreased 24.6% year over year. The combined ratio deteriorated 130 bps year over year to 97% in the third quarter due to specialty losses.
Financial Position (as of Sep 30, 2023)
RenaissanceRe exited the third quarter with cash and cash equivalents of $1,195.9 million, which inched up 0.1% from figure at the 2022 end. Total assets of $40.8 billion grew 11.7% from the 2022-end level.
Debt amounted to $1,882.9 million, which soared 60.9% from the figure as of Dec 31, 2022.
Total shareholders’ equity of $7,588.6 climbed 42.5% from the 2022-end figure.
RNR generated net cash from operations of $1,399.1 million in the first nine months of 2023, which jumped 60.7% from the prior-year comparable period.
Capital Deployment Update
RenaissanceRe did not buy back shares in the third quarter. It paid out common dividends of $19.2 million in the quarter under review.
Business Update
RNR completed the acquisition of Validus Re, the treaty reinsurance business of American International Group, Inc. (AIG - Free Report) , on Nov 1, 2023.
Forward View
In the fourth quarter of 2023, Renaissance Re anticipates management and performance fees to stay in line, excluding any significant losses, with the third-quarter 2023 levels. Management forecasts retained net investment income of around $260 million in the fourth quarter.
Combined ratio in the Casualty and Specialty unit is forecasted to stay in the mid-90s range. Next year, corporate expenses are likely to stay lower than the fourth-quarter 2023 level.
Zacks Rank
RenaissanceRe presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Some Other Insurers
Of the insurance industry players that have reported third-quarter results so far, Assurant, Inc. (AIZ - Free Report) and The Hartford Financial Services Group, Inc. (HIG - Free Report) beat the Zacks Consensus Estimate for earnings.
Assurant’s third-quarter 2023 net operating income of $4.29 per share beat the Zacks Consensus Estimate by 73%. The bottom line surged more than fourfold from the year-ago quarter. Total revenues increased 8.5% year over year to $2.8 billion. The top line beat the consensus estimate by 4.5%. Net investment income was up 50.2% year over year to $125.5 million. Revenues at the Global Housing unit increased 24.7% year over year to $584.8 million while its adjusted EBITDA, excluding reportable catastrophes, more than doubled year over year to $191.3 million. Revenues at the Global Lifestyle segment of AIZ increased 5.3% year over year to $2.2 billion.
Hartford Financial reported third-quarter 2023 adjusted operating earnings of $2.29 per share, which outpaced the Zacks Consensus Estimate by 17.4%. The bottom line rose 57.9% year over year. Operating revenues rose 10% year over year to $4,213 million in the quarter under review. The top line beat the consensus mark by a whisker. Net earned premiums of HIG amounted to $5,310 million, which improved 8.1% year over year in the third quarter. Net investment income rose 22.6% year over year to $597 million in the third quarter. It reported a pretax income of $813 million, which jumped 88.2% year over year. The Commercial Lines segment recorded revenues of $3,318 million in the third quarter, which rose 13.1% year over year. Core earnings rose 49.3% year over year to $542 million.