RenaissanceRe’s Preferred Shares Get Ratings, Outlook Stable

Credit rating giant Moody's Investors Service assigned a Baa2 (hyb) rating to $ 250 million of Series F Preference Shares, to be issued by RenaissanceRe Holdings Ltd. RNR. The proceeds from this offering would be deployed for general corporate purposes. The outlook remains stable.

The Series F Preference Shares are non-cumulative, perpetual as well as redeemable by RenaissanceRe Holdings under a few conditions after a span of around five years.

Ratings Representation

The company’s ratings vouch for its premier market position in property catastrophe reinsurance and sturdy capitalization. It also reflects its use of joint ventures and other capital vehicles that build loyalty with brokers and clients, providing an additional source of capital for the company. However, these strengths are partially offset by the earnings volatility, stemming from RenaissanceRe's significant property catastrophe reinsurance exposures and the highly competitive operating environment, marked by a capital oversupply and an alternative capital resource supplied by pension funds and other institutional investors.

The property catastrophe reinsurance of the company is continuing to boost its liquidity and capital consumption.

The Baa2 (hyb) rating on the company’s preference shares shows that the junior, ranking to all indebtedness, is positioned two notches below the senior debt rating, based on the agency’s standard notching practices.

Factors Impacting the Ratings

Given the company’s current rating and position, there is limited scope for its upward rating movement.  Factors probably leading to its ratings downgrade include deterioration in leadership position in property catastrophe reinsurance, declining core profitability with returns on capital below the high single-digit percentage range, an above 20% adjusted financial leverage for a longer period and a decrease in total shareholders’ equity by more than 10% over a 12-month period because of underwriting loss and/or share repurchase and dividends.

Shares of this Zacks Rank #3 (Hold) company have inched up 0.86% in the past six months against the industry’s slip of 0.70%.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are Alleghany Corporation Y, HCI Group, Inc. HCI and Axis Capital Holdings Limited AXS, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany offers property and casualty reinsurance and insurance products in the United States and internationally. It managed to pull off an average four-quarter positive surprise of 17.61%.

HCI engages in the property and casualty insurance business in Florida. The company came up with an average four-quarter positive earnings surprise of 1.57%.

AXIS and its subsidiaries offer specialty insurance and reinsurance products worldwide. The company delivered a positive surprise in two of the last four quarters with an average beat of 5.11%.

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RenaissanceRe Holdings Ltd. (RNR): Free Stock Analysis Report
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