RenaissanceRe Holdings Ltd. (RNR - Free Report) has been in investor’s good books on the back of solid segmental contributions and balance sheet flexibility.
The Zacks Rank #2 (Buy) company carries a VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Its return-on-equity (ROE) reflects growth potential. The company’s trailing 12-month ROE of 8.5% compares favorably with the industry average of 6.4%, reflecting its efficiency in utilizing shareholders’ funds.
Now let’s see what has been working in favour of the company.
The company has been witnessing a positive trend in gross premiums written, which has doubled over a span of five years, driven by premium growth at both its Casualty and Specialty plus Property segments. This upside is evident from its five-year CAGR (2014 to 2019) of 25.4%, primarily led by strong segmental results. This consistent increase in premiums is likely to drive the company’s top line further.
RenaissanceRe has also taken certain initiatives to streamline operations by getting rid of its low-return high-risk businesses. Meanwhile, it is also buying units to expand business. In March 2019, it bought Tokio Millennium Re for a value of $1.5 billion to increase the scale and strengthen portfolio. We expect such strategic initiatives to enable the company to focus and grow its core operating business.
Its financial strength also impresses. Its free cash flow, which has been increasing over the last few years, reflects its solid capital position.
RenaissanceRe has been deploying excess capital in business over the past several quarters. It has been raising dividend since the past many years. In February 2019, the company again increased its payout by 3.1%. This is likely to instill investor confidence in the stock.
Its long-term growth rate is projected at 9%, above the industry's average of 8.5%.
For 2020, its earnings estimate is projected at $15.28, suggesting an improvement of 67.4% year over year on revenues of $4.5 billion, up 10.3% year over year.
Shares of RenaissanceRe have lost 8.5% in a year's time, compared with the industry’s decline of 22.2%. This looks better than the price performance of other companies in the same space, such as Axis Capital Holdings Limited (AXS - Free Report) , First American Financial Corporation (FAF - Free Report) and Everest Re Group, Ltd. (RE - Free Report) , which have lost 35.9%, 31.9%, 19.9%, respectively over the same timeframe. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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