A month has gone by since the last earnings report for RenaissanceRe Holdings Ltd. (RNR - Free Report) . Shares have added about 6.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 fourth-quarter 2016 operating earnings per share of $2.29 surpassed the Zacks Consensus Estimate of $1.42 by 61.3%. However, the bottom line dipped 4.9% year over year due to lower revenues.
For 2016, the company reported operating earnings per share of $8.03, down 35% year over year.
RenaissanceRe’s fourth-quarter operating revenues of $404.4 million dropped 2.8% year over year due to lower net premiums earned and other income.
For 2016, operating revenues were nearly $1.6 billion, up 2% from the prior year. A 19% increase in net investment income primarily drove the upside.
Quarterly Operational Update:
Gross premiums written of $323.1 million decreased 3.9% year over year due to a 7.4% drop in the premiums of Casualty and Specialty segment.
Net investment income of $47.3 million in the fourth quarter grew 3% from the prior-year quarter. The recent hike in interest rates is expected to have supported this improvement.
RenaissanceRe witnessed an 11% year-over-year increase in total expenses to $270.4 million. This was mainly due to higher net claims and claim expenses and acquisition expenses. However, the company has exercised better control on operating expenses as evidenced by the 22% year-over-year decline in costs.
The company generated underwriting income decreased 25.7% year over year to $103.9 million. The combined ratio of 70.5% in the fourth quarter increased 920 basis points from the last-year quarter. The deterioration in underwriting income and combined ratio stemmed from the increase in net claims and claim expenses, and underwriting expenses.
Net negative impact of Hurricane Matthew on the company’s fourth-quarter underwriting results amounted to a loss of $0.05 million.
Quarterly Segment Update:
Property Segment: Gross premiums written were $52.4 million, up 19.4% year over year. Underwriting income dipped 4.1% year over year to $100.5 million.
Casualty and Specialty Segment: Gross premiums written were $270.6 million, down 7.4% from the prior-year quarter. Underwriting income of $3 million compared favorably with an underwriting loss of $6.9 million in the prior-year quarter.
As of Dec 31, 2016, total asset of RenaissanceRe was $12.3 billion, up 6.9% year over year.
The company had total debt of $948.7 million as of Dec 31, 2016, reflecting nearly 1.2% decrease from $960.5 at year-end 2015.
At the end of 2016, cash and cash equivalents were $421 million, down 16.8% from Dec 31, 2015.
As of Dec 31, 2016, shareholders’ equity totaled $4.9 billion, up 2.1% from year-end 2015.
RenaissanceRe reported annualized operating return on average common equity of 8% in the fourth quarter as against 10.7% in the last-year quarter. The metric was down 270 bps year over year.
For 2016, the company reported return on average common equity of 11.0% and operating return on average common equity of 7.8% compared with a respective 9.8% and 11.4% in 2015.
In 2016, RenaissanceRe repurchased approximately 2.7 million common shares at an aggregate cost of $309.4 million and at an average share price of $112.87.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been five downward revisions for the current quarter.
At this time, RenaissanceRe's stock has a poor Growth Score of 'F', a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.