Yahoo Finance Here's Why You Should Hold RenaissanceRe (RNR) Stock for Now
RenaissanceRe Holdings Ltd. RNR is well-poised for growth due to its strong financial foundation, strategic acquisitions, and partnerships. Moreover, rising premiums earned due to improving underwriting results will contribute to its momentum. The positive effects of a high-interest-rate environment continue to be a significant driver.
Headquartered in Pembroke, Bermuda, RNR offers insurance and reinsurance products in the domestic as well as international markets. It was founded in 1993 and currently has a market cap of $11.8 billion. Now, let’s take a look at its recent price performance to gauge investor sentiment toward the stock.
Price Performance
Over the past six months, RenaissanceRe shares have gained 15.5%, surpassing the industry's 14.3% increase and the S&P 500 Index's 14.8% growth. Notably, its forward 12-month price-to-earnings ratio of 6.2X is significantly lower than the industry average of 26.7X, indicating that the stock is more affordable.
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In this analysis, we'll explore the growth drivers and estimates and highlight the key factors investors should monitor. Let’s delve deeper.
The Zacks Consensus Estimate for RenaissanceRe’s current-year earnings is pegged at $37.18 per share, which has witnessed six upward estimate revisions in the past 60 days against none in the opposite direction. RNR beat on earnings in all the last four quarters, the average surprise being 27.9%.
The consensus estimate for RenaissanceRe’s current-year revenues stands at $11.5 billion, indicating 31.5% year-over-year growth. We expect its Property and Casualty & Specialty businesses to play a significant role in top-line growth. Our model suggests that net premiums earned from the Property segment will jump nearly 24% year over year in 2024. Similarly, net premiums earned from the Casualty & Specialty unit are expected to witness more than 34% growth.
RNR anticipates a significant 28% year-over-year increase in its net investment income for 2024, driven by enhanced yields from its fixed maturity and short-term portfolios amid a high-interest-rate environment. This strategic focus is poised to boost profitability despite prevailing economic conditions.
Additionally, RNR's focus on its rigorous underwriting standards is expected to reinforce its bottom-line strength. The company anticipates growth in its Specialty business while strategically reducing exposure to sectors like Professional liability. Concurrently, efforts to minimize exposure to unpredictable segments, such as D&O insurance, align with ongoing adjustments to optimize risk management strategies in response to evolving market dynamics.
The company’s efforts on integration following the Validus acquisition is a major tailwind. It is expected to deliver significant synergies while keeping the process seamless for its customers. This will play a vital role in the renewals and retentions of its portfolio. Retention of legacy lines and Validus acquisition are further expected to support the company’s segmental performance. With enhanced capabilities, RenaissanceRe is now well-situated to benefit from the growing demand for reinsurance.
RenaissanceRe's strong trailing 12-month return on invested capital stands at 11.9%, surpassing the industry average of 5.9%. This underscores the company's capacity to generate substantial returns in comparison to industry standards, demonstrating its efficiency in capital investment.
Its total debt to capital of 16.1% is lower than the industry level of 17.8%. It exited the first quarter of 2024 with cash and cash equivalents of $1.6 billion, while debt amounted to $1.9 billion (which decreased from $2 billion at 2023-end). The company’s ability to generate free cash flow is commendable. Over the trailing 12-month period, the metric jumped 13%.
A Risk
However, there is a factor that investors should keep a careful eye on.
RNR’s rising operational expenses will keep its margins under pressure. The metric surged 37.1% year over year in the first quarter of 2024. We expect it to further increase by almost 37% this year. Nevertheless, we believe that its systematic and strategic plan of action will drive growth and improve profitability further in the long term.
Zacks Rank and Key Picks
RenaissanceRe currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Finance space are Ambac Financial Group, Inc. AMBC, Brown & Brown, Inc. BRO, and Root, Inc. ROOT. Each stock presently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ambac Financial’s current-year earnings is pegged at $1.45 per share, which witnessed one upward estimate revision in the past 60 days against no movement in the opposite direction. It beat earnings estimates in all the past four quarters, with an average surprise of 893.5%.
The Zacks Consensus Estimate for Brown & Brown’s current-year earnings is pegged at $3.61 per share, which indicates 28.5% year-over-year growth. It has witnessed two upward estimate revisions against none in the opposite direction during the past 60 days. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.9%.
The consensus mark for ROOT’s current-year earnings indicates a 53% year-over-year improvement. It beat earnings estimates in all the past four quarters, with an average surprise of 34.1%. Furthermore, the consensus estimate for Root’s 2024 revenues suggests 125.3% year-over-year growth.
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RenaissanceRe Holdings Ltd. (RNR) : Free Stock Analysis Report
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