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RenaissanceRe (RNR) Up 7% on Q4 Earnings Beat, Revenues Up Y/Y

Shares of RenaissanceRe Holdings Ltd. RNR have jumped 7.1% since it reported better-than-expected fourth-quarter 2022 earnings on Jan 31. The strong results stemmed from solid underwriting results, robust growth in net investment income and sound management fees.

RNR reported fourth-quarter operating income of $7.33 per share, which outpaced the Zacks Consensus Estimate by 11.4%. The bottom line soared 55.6% year over year.

Total operating revenues of $1,843 million advanced 29.1% year over year. The top line beat the consensus mark by 1.4% and our estimate of $1,618.6 million.

RenaissanceRe Holdings Ltd. Price, Consensus and EPS Surprise

RenaissanceRe Holdings Ltd. Price, Consensus and EPS Surprise
RenaissanceRe Holdings Ltd. Price, Consensus and EPS Surprise

RenaissanceRe Holdings Ltd. price-consensus-eps-surprise-chart | RenaissanceRe Holdings Ltd. Quote

Quarterly Operational Update

Gross premiums written of RenaissanceRe improved 20.7% year over year to $1,585.3 million in the quarter under review.

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Net premiums earned of $1,624.2 million climbed 21.1% year over year and came higher than the Zacks Consensus Estimate of $1,600 million and our estimate of $1,505.8 million.

RNR’s net investment income increased nearly three-fold year over year to $211.2 million in the fourth quarter, which outpaced the consensus mark of $144 million and our estimate of $108.1 million. The substantial rise in the metric came on the back of an improving interest rate scenario coupled with higher returns from fixed maturity trading and short-term investment portfolios as well as catastrophe bonds.

Total expenses of $1,331.8 million escalated 22.5% year over year in the quarter under review due to higher net claims and claim expenses incurred as well as acquisition and operational expenses. Yet, the reported figure was lower than our estimate of $1,417.5 million.

RenaissanceRe reported an underwriting income of $316.3 million, which rose 14.3% year over year. However, the combined ratio of 80.5% deteriorated 110 points (bps) year over year in the fourth quarter.

Book value per share came in at $104.65 as of Dec 31, 2022, which fell 20.8% year over year. Annualized operating return on average common equity improved 1,520 bps year over year to 29.6% in the quarter under review.

Segment Update

Property Segment

Gross premiums written amounted to $372.1 million, which slipped 3.3% year over year due to reduced reinstatement premiums. Net premiums earned of $688.2 million rose 9.9% year over year in the fourth quarter, which outpaced the consensus mark of $555 million and our estimate of $555.5 million.

The segment recorded an underwriting income of $257.2 million, up 15.3% year over year. The combined ratio improved 180 bps year over year to 62.6%.

Casualty and Specialty Segment

Gross premiums written advanced 30.7% year over year to $1,213.2 million in the quarter under review due to continued rate increases and new business generation. Net premiums earned amounted to $935.9 million, which climbed 30.9% year over year but came lower than the consensus mark of $981 million and our estimate of $950.4 million.

The segment’s underwriting income of $59.1 million improved 10.3% year over year. The combined ratio of 93.7% deteriorated 120 bps year over year.

Financial Position (as of Dec 31, 2022)

RenaissanceRe exited the fourth quarter with cash and cash equivalents of $1,194.3 million, which increased 35.8% from the 2021-end level. Total assets of $36,552.9 million increased 7.6% from the figure in 2021 end.

Debt amounted to $1,170.4 million, up 0.2% from the figure as of Dec 31, 2022.

Total shareholders’ equity of $5,325.3 million dropped 19.6% from the 2021-end level.

Capital Deployment Update

RenaissanceRe did not buy back shares in the fourth quarter. It had $500 million in its share buyback program as of Dec 31, 2022.

Full-Year Update

The operating income of RNR in 2022 came in at $7.30 per share, which increased more than four-fold from the 2021 figure. Net premiums earned by the Property segment rose 6.2% year over year, while the same for the Casualty and Specialty segment climbed 37.8% year over year.

Consolidated combined ratio improved 440 bps year over year to 97.7% in 2022.

Zacks Rank

RenaissanceRe currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performances of Other P&C Insurers

Of the property and casualty (P&C) insurance industry players that have reported fourth-quarter results so far, RLI Corp. RLI, The Progressive Corporation PGR and AXIS Capital Holdings Limited AXS beat the respective Zacks Consensus Estimate for earnings.

RLI reported fourth-quarter 2022 operating earnings of $1.53 per share, beating the Zacks Consensus Estimate by 41.7%. The bottom line improved 26.4% from the prior-year quarter. Operating revenues for the reported quarter of RLI were $329.5 million, up 19.4% year over year, driven by 16.7% higher net premiums earned and 59% higher net investment income. The top line beat the Zacks Consensus Estimate by 0.4%.

Progressive’s fourth-quarter 2022 earnings per share of $1.50 beat the Zacks Consensus Estimate of $1.49. The bottom line improved 42.9% year over year. Net premiums written of PGR were $12.5 billion in the quarter, up 16% from $10.7 billion a year ago.  The combined ratio — the percentage of premiums paid out as claims and expenses — improved 80 basis points (bps) from the prior-year quarter’s level to 93.9.

AXIS Capital posted fourth-quarter 2022 operating income of $1.95 per share, which beat the Zacks Consensus Estimate by about 14.7%. The bottom line dropped 8.5% year over year. AXS’s operating revenues of $1.5 billion increased 8.6% year over year on higher net premiums earned and net investment income. The top line beat the consensus estimate as well as our estimate of $1.4 billion. Net investment income decreased 14.8% year over year to $147.1 million.

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The Progressive Corporation (PGR) : Free Stock Analysis Report

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