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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