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Analyst Blog

On Mar 15, 2013, shares of RenaissanceRe Holdings Ltd. (RNR - Free Report) hit a 52-week high of $91.10. After dismal performances in the last two quarters, the company had managed to post solid fourth-quarter 2012 results with an earnings surprise of 70.3%. This property & casualty insurer witnessed positive earnings surprises in 2 of 4 quarters of 2012, with an average beat of 14.6%.

On Feb 20, 2013, the board of directors of RenaissanceRe approved a 3.7% increase in the quarterly dividend to 28 cents per share from 27 cents paid earlier. This marks the 18th consecutive year of dividend increase. In addition, the board of directors approved an increase in RenaissanceRe's stock repurchase program, bringing the total current authorization to $500 million.

In addition, RenaissanceRe created a new special purpose insurance vehicle – Upsilon Reinsurance II Ltd., thereby increasing its reinsurance capacity to cater to the global retrocessional reinsurance market.

On Feb 6, RenaissanceRe reported fourth-quarter 2012 operating income of 65 cents per share, up 28 cents from the Zacks Consensus Estimate. Improved premiums aided the bottom line.

RenaissanceRe posted total revenue of $348.4 million, up 67% year over year from $208.5 million in the fourth quarter of 2011. Total revenue also surpassed the Zacks Consensus Estimate of $307 million.

Valuation for RenaissanceRe looks attractive. The shares are trading at a 17.7% discount to the peer group average on a forward price-to-earnings basis and at only 1.9% premium to the peer group on a price-to-book basis. Return on equity is 129.5% above the peer group average. The one-year return for the stock came in at 22.4%, much above S&P 500’s return of 11.2%.    

Over the long-term, the company faces headwinds such as declining investment income, high competition and weather-related risks in the catastrophe insurance and reinsurance business. Nevertheless, strategic divestitures, efficient capital deployment via repurchase and dividend hikes and continued focus to enhance its operation should help RenaissanceRe deliver solid numbers going forward. The long-term expected earnings growth rate for this stock is 9.5%.    

RenaissanceRe presently carries a Zacks Rank #3 (Hold). Property and casualty insurers like XL Group plc (XL - Free Report) , Cincinnati Financial Corp. (CINF - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) , among others, carry a favorable Zacks Rank #1 (Strong Buy).