A month has gone by since the last earnings report for RenaissanceRe (RNR - Free Report) . Shares have added about 3.1% in that time frame, underperforming 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 Earnings Lag Estimates, Plunge Y/Y
RenaissanceRe delivered third-quarter 2019 operating earnings per share of 29 cents per share, missing the Zacks Consensus Estimate by 54% due to catastrophe loss, high expenses and underwriting loss. Moreover, the bottom line declined by 44.2% year over year.
Quarterly Operational Update
RenaissanceRe’s third-quarter operating revenues of $1 billion soared nearly 67% year over year on the back of improved net premiums earned plus net realized and unrealized gains on investment.
Gross premiums written surged 37.6% year over year to $861.1 million owing to higher premiums at the Property as well as the Casualty and Specialty segments.
Net investment income of $113.8 million rose 41.1% year over year.
RenaissanceRe’s total expenses were $939.5 million, having escalated 62.1% year over year, primarily due to higher Net claims and claim expenses incurred, acquisition expenses, operational expenses and corporate expenses.
Underwriting loss of $3.4 million was narrower than the year-earlier quarterly loss of $29 million. The company’s underwriting results were negatively impacted by third-quarter catastrophe events.
Combined ratio was 100.4% in the third quarter compared with the year-ago quarter’s 105.5%.
Quarterly Segment Update
Gross premiums written were $314.4 million, up 4.3% year over year in the third quarter.
Underwriting loss of $7.7 million was reported in the third quarter, narrower than the year-ago loss of $43.9 million. Combined ratio of 101.7% contracted 1330 basis points (bps) year over year.
Casualty and Specialty Segment
Gross premiums written were $546.7 million, up 68.6% from the prior-year quarter. This upside is driven by the buyouts in connection with TMR Group Entities and growth in the current and new business opportunities within a few classes of business.
The segment’s underwriting income of $4.5 million plunged 69.8% year over year.
Combined ratio of 99% expanded 520 basis points year over year.
As of Sep 30, 2019, total assets of RenaissanceRe were $25.6 billion, up 37.3% from the level at 2018 end.
The company had total debt of $1.4 billion as of Sep 30, 2019, up nearly 39.6% from the level at 2018 end.
Cash and cash equivalents were $871.2 million, down 21.4% from the figure at 2018 end.
Book value per share of $120.07 rose 15.3% from the number at 2018 end.
Annualized Return on equity for the quarter under review was 2.8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -85.83% due to these changes.
At this time, RenaissanceRe has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, RenaissanceRe has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.