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RenaissanceRe Stock Near 52-Week High: Time to Lock in Gains?

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Shares of RenaissanceRe Holdings Ltd. (RNR - Free Report) closed at $259.04 on Wednesday, near its 52-week high of $260.97, after having gained 14% in the past month. Shares outperformed the industry’s return of 12.7% and the S&P 500 Index’s rise of 5.4% in the said time frame. Improving underwriting performance and rising net investment income appear to have catalyzed this bullishness. 

RNR’s proximity to its 52-week high underscores investor confidence and market optimism about this insurance company’s prospects. It has the right ingredients for further price appreciation. Technical indicators for Regional Management show that the stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum.

RNR’s One-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. It generated $3.2 billion in net operating cash flow over the past 12 months, up 66.4%, and repurchased $108.5 million in shares in the second quarter. 

Increasing premiums from its Property and Casualty & Specialty segments are expected to further drive performance. Strong underwriting results are contributing 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 $39.01 per share, which indicates 3.9% year-over-year growth. The company beat earnings estimates in each of the past four quarters, with an average surprise of 27.4%. The consensus estimate for 2024 revenues suggests 32.3% year-over-year growth.

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RNR’s Favorable Valuation

Despite the recent growth in stock price, RNR is trading at a discount compared to the industry average. The stock is currently trading at 1.43X trailing 12-month tangible book value, which compares to 1.67X for the industry, indicating undervaluation. The company has a Value Score of B. Hence, it still remains an attractive option to retain in an investment portfolio.

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 more than 42% 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 44.9% is significantly higher than the industry average. Its debt load increased from $1.2 billion at the end of 2022 to $2 billion as of June 30, 2024. This elevated debt level has led to a sharp rise in interest expenses, which grew by 74.5% year-over-year in the first half of 2024.  

Final Verdict: Hold RNR Stock for Now

RenaissanceRe appears to have significant growth potential with growing premiums, expanding operations and a strong cash position. Current shareholders may consider holding on to their shares, as earnings estimate revisions are indicating more profits on the way and it has a favorable valuation. However, potential investors may want to keep an eye on its increasing expenses and debt level and wait for a better entry point.

RNR stock currently carries a Zacks Rank #3 (Hold).

Key Picks

Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. (JXN - Free Report) , WisdomTree, Inc. (WT - Free Report) and HIVE Digital Technologies Ltd. (HIVE - Free Report) . While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and HIVE Digital carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.

The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 67.6% year-over-year growth. During the past month, WT has witnessed two upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.

The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 63.6% year-over-year improvement. During the past month, HIVE has witnessed two upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues is pegged at $125.2 million, indicating a 9.4% increase from a year ago.

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