Sluggish Rates And Book Value Growth Limit Renaissance Re's Appeal

I wasn’t overly excited about the prospects for the shares of Renaissance Re (RNR) (“RenRe”) back in the fall of 2017, as I was concerned that renewal rate increases would disappoint even after a bad catastrophe year and that RenRe would be facing a combination of weak book value and ROE performance. RenRe shares have indeed underperformed since then, falling almost 10% since that last article (though outperforming Arch Capital (ACGL) and Lancashire Holdings (OTCPK:LCSHF) (another reinsurance/specialty insurance company with meaningful property exposure)) and slightly more over the past year.

Weak rates have indeed remained the story, and with that weak momentum in book value growth (actual contraction for three straight quarters) and barely double-digit near-term ROE prospects. While RenRe remains a great reinsurance company, with upside in the casualty/specialty business and its third-party capital management vehicles, it’s likely going to take a little longer to unlock that value and investors have to contend with the risk that over-capitalized markets will be the “new normal” for a longer time, keeping a lid on RenRe’s rate growth prospects and returns.

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Sluggish Rates And Book Value Growth Limit Renaissance Re's Appeal