Saturday, May 23, 2015

Seeking Alpha: RenaissanceRe Changes With The Times

Insurance companies like ACE (NYSE:ACE), Arch Capital (NASDAQ:ACGL), and W.R. Berkley (NYSE:WRB) are successful in no small part because they are structured in a way that management can smoothly reallocate capital across business lines as rates and projected returns dictate. That wasn't historically as much of an option for RenaissanceRe (NYSE:RNR), though, as this very well-run property catastrophe reinsurer didn't have the same level of diversification across its operations.

Having closed the deal on Platinum Underwriters, it's a new era for RenRe. Management can, and is planning to, allocate significantly more capital toward casualty and specialty reinsurance, sidestepping some of the rate pressure in prop-cat. While this move should decrease the volatility of the business over the long term, it will likely also temper some of the advantages of what had been arguably the best prop-cat reinsurer out there. Long-term ROEs are likely to be lower with the new business mix, but RenRe looks like a stronger company for the deal. The one hitch is valuation - as I have complained on several occasions lately, there aren't that many bargains in the insurance space, and while RenRe does seem undervalued, it isn't a compelling bargain.

Follow this link for the full article:
RenaissanceRe Changes With The Times

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