2 Reasons to Watch RNR and 1 to Stay Cautious

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RNR Cover Image

RenaissanceRe trades at $282.24 and has moved in lockstep with the market. Its shares have returned 7.1% over the last six months while the S&P 500 has gained 8%.

Is now a good time to buy RNR? Find out in our full research report, it’s free.

Why Does RenaissanceRe Spark Debate?

Born in Bermuda after the devastating Hurricane Andrew created a crisis in the catastrophe insurance market, RenaissanceRe (NYSE: RNR) provides property, casualty, and specialty reinsurance and insurance solutions to customers worldwide, primarily through intermediaries.

Two Things to Like:

1. Net Premiums Earned Skyrocket, Fueling Growth Opportunities

Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.

RenaissanceRe’s net premiums earned has grown at a 17.4% annualized rate over the last five years, much better than the broader insurance industry and in line with its total revenue.

RenaissanceRe Trailing 12-Month Net Premiums Earned

2. Outstanding Long-Term EPS Growth

Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.

RenaissanceRe’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.

RenaissanceRe Trailing 12-Month EPS (Non-GAAP)

One Reason to Be Careful:

Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect RenaissanceRe’s revenue to drop by 8.2%, a decrease from its 10.2% annualized growth for the past two years. This projection doesn’t excite us and suggests its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

Final Judgment

RenaissanceRe’s positive characteristics outweigh the negatives, but at $282.24 per share (or 1.1× forward P/B), is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

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