RenaissanceRe Holdings Ltd. (RNR - Free Report) is poised well for growth on the back of rising premiums, declining costs and solid inorganic growth.
Estimates for the company have been revised upward over the past 30 days, reflecting brokers’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2019 and 2020 earnings move north 2.6% and 2.7%, respectively.
The company also retained investors' favorable sentiments by maintaining its positive surprise trend in three of the last four quarters, the average beat being 155.1%. This reflects the company’s operational excellence.
Its return on equity — a profitability measure — is 9.2%, better than the industry average of 7.2%. This represents the company’s efficiency in utilizing its shareholders’ funds.
Now let’s quickly glance through the factors that make RenaissanceRe stock an investors’ favorite.
RenaissanceRe has been witnessing a positive trend in gross premiums written, which has doubled over a span of five years, driven by higher premiums at both its Casualty and Specialty plus Property segments. This upside is visible from its four-year CAGR (2014 to 2018) of 20.88%, primarily led by strong segmental results. Consistent growth in premiums is likely to drive the top-line further for RenaissanceRe.
Moreover, the company has been undertaking divestitures to streamline its operations by getting rid of low-return high-risk businesses. To this end, it sold off its U.S.-based weather and weather-related energy risk management unit to save itself from the uncertainties associated with that business. Meanwhile, the company is also acquiring and expanding operations, which provide scope for growth.
Last month, the company bought Tokio Millennium Re for a value of $1.5 billion to increase its scale and boost its portfolio. We expect such strategic initiatives to facilitate the company’s focus on its core operating business and further its growth.
RenaissanceRe has also been witnessing a solid free cash flow over the last few years. This is also evident from its 2015-2018 CAGR of 42.2% for cash flow from operations. It has been deploying excess capital in business over the past several quarters. Earlier this month, the company again raised its cash dividend by 15%.
The company has been actively working on reducing its total expenses, which improved by an impressive 25.5% in 2018. It has constantly concentrated on lowering the costs through operational efficiency, which is visible in the results.
The Zacks Consensus Estimate for current-year earnings per share is pegged at $11.36, mirroring a year-over-year improvement of 23.9% on 20.9% higher revenues of $2.7 billion.
For 2020, the Zacks Consensus Estimate for earnings stands at $13.24 on $2.8 billion revenues, translating to respective 16.5% and 8.5% year-over-year growth.
Shares of this Zacks Rank #2 (Buy) company have gained 3.5% in the past year, outperforming its industry’s growth of 2.6%.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty segment are The Progressive Corporation (PGR - Free Report) , Arch Capital Group Ltd. (ACGL - Free Report) and Argo Group International Holdings, Ltd. (ARGO - Free Report) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Progressive Corporation offers personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. It exceeded estimates in three of the last four quarters, the average earnings surprise being 6.23%.
Arch Capital provides property, casualty and mortgage insurance and reinsurance products worldwide. It came up with a positive surprise of 14.72%.
Argo Group underwrites specialty insurance and reinsurance products in the property and casualty markets. It delivered a beat of 225.09% in the trailing four quarters.
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