RenaissanceRe Holdings Ltd. RNR is currently trading at a discount compared to the industry average. The stock is currently trading at 1.34X, trailing 12-month tangible book value, which compares to 1.57X for the industry, indicating undervaluation. The company has a Value Score of B.

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In the past three months, RNR has delivered 5.9% growth, outperforming the industry’s 2.8% growth. The company’s price performance also outperformed its peers, such as First American Financial Corporation FAF and Reinsurance Group of America, Incorporated RGA, which gained 1.3% and lost 0.8%, respectively. However, it underperformed the S&P 500’s 8.5% rise.

RNR's 3-Month Price Performance

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Now, let’s take a look at the stock’s growth drivers.

RNR’s Growth Drivers

RenaissanceRe is actively pursuing growth through strategic acquisitions and business expansion. The recent acquisition of Validus Re and related businesses from AIG has significantly strengthened its global property and casualty reinsurance operations and enhanced profitability. The company also optimizes its portfolio by divesting non-core assets.

RNR’s strong cash position supports its growth initiatives and shareholder returns. Over the past 12 months, it generated $3.9 billion in net operating cash flow and repurchased $106.8 million in shares in the third quarter. 

Increasing premiums from its Property and Casualty & Specialty segments are expected to further drive performance. Strong underwriting results contribute to profit growth, evident in recent upward estimate revisions.

Estimate Revisions for RNR Stock

Reflecting the positive sentiment around RenaissanceRe, the Zacks Consensus Estimate for earnings per share has seen upward revisions. The consensus estimate for 2024 adjusted earnings for RNR is currently pegged at $41.94 per share, which indicates 11.7% year-over-year growth. The company beat earnings estimates in each of the past four quarters, with an average surprise of 28%. The consensus estimate for 2024 revenues suggests 36.6% year-over-year growth.

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Key Concerns for RNR

There are a few factors that investors should keep an eye on.

RenaissanceRe faces escalating expenses driven by higher net claims and claim expenses, acquisition costs, and operational expenses. We expect it to escalate by more than 44% on a year-over-year basis in 2024. The rising expenses pose a risk to the company’s profit margins.

The company’s long-term debt to capital of 43.9% is significantly higher than the industry average. Its debt load increased from $1.2 billion at the end of 2022 to $1.9 billion as of Sept. 30, 2024. This elevated debt level has led to a sharp rise in interest expenses, which grew 41.1% year over year in the first nine months of 2024.  

End Notes

RenaissanceRe shows strong growth potential, bolstered by strategic acquisitions like Validus Re, rising premiums, and robust underwriting results. Consistent earnings surprises and upward revisions in estimates highlight its resilience, supported by strong cash flow and share repurchases. However, escalating expenses, elevated debt levels, and rising interest costs pose challenges to profit margins. Current shareholders may consider holding on to their shares. However, potential investors may want to wait for a better entry point.

RNR stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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