Why Is RenaissanceRe (RNR) Down 5.3% Since Last Earnings Report?

A month has gone by since the last earnings report for RenaissanceRe (RNR). Shares have lost about 5.3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is RenaissanceRe due for a breakout? 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 Q4 Earnings Lag Estimates, Surge Y/Y

RenaissanceRe reported fourth-quarter 2019 operating earnings per share of 52 cents per share, missing the Zacks Consensus Estimate by 44%.

However, the bottom line improved significantly by 2500% year over year on the back of solid revenues.

Quarterly Operational Update

RenaissanceRe’s fourth-quarter operating revenues of $1 billion soared nearly 101.7% year over year on the back of improved net premiums written plus net investment income.

Gross premiums written surged 65.3% year over year to $905.4 million owing to higher premiums at the Property as well as the Casualty and Specialty segments.

Net investment income of $113 million jumped 113.8% year over year.

RenaissanceRe’s total expenses of $1068 million escalated 57% year over year, primarily due to higher Net claims and claim expenses incurred, acquisition expenses, operational expenses, interest expenses and corporate expenses.

Underwriting loss of $65.2 million was narrower than the year-earlier quarterly loss of $82.3 million.

Combined ratio was 106.7% in the fourth quarter compared with the year-ago quarter’s 114.3%.

Quarterly Segment Update

Property Segment

Gross premiums written were $245 million, up 22.6% year over year in the quarter.

Underwriting loss of $87.1 million was reported in the quarter under review, wider than the year-ago loss of $35 million. Combined ratio of 118.6% expanded 800 basis points (bps) year over year.

Casualty and Specialty Segment

Gross premiums written were $660.5 million, up 89.9% from the prior-year quarter. This upside is driven by growth in the current and new business opportunities written in current and previous periods across several business classes, and business bought in connection with the TMR buyout.

The segment’s underwriting income of $20.8 million came in against the segment’s underwriting loss of $47.4 million.

Combined ratio of 95.9% contracted 2340 basis points year over year.

Financial Position

As of Dec 31, 2019, total assets of RenaissanceRe were $26.3 billion, up 41% from the level at 2018 end.

The company had total debt of $1.4 billion as of Dec 31, 2019, up nearly 39.6% from the level at 2018 end.

Cash and cash equivalents were $1379 million, up 24.5% from the figure at 2018 end.

Book value per share of $120.53 rose 15.7% from the number at 2018 end.

Annualized return on equity for the quarter under review was 1.7%.

Business Update

In March 2019, the company closed the buyout of Tokio Millennium Re AG (now known as RenaissanceRe Europe AG), Tokio Millennium Re (UK) Limited (now known as RenaissanceRe (UK) Limited) and their subsidiaries.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, RenaissanceRe has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. It comes with little surprise RenaissanceRe has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.