The Motley Fool: A Long-Proven Winner Is Being Underestimated

Strong sector performance has led to a lack of quality insurance companies trading at any meaningful discount to fair value. Property catastrophe reinsurance maven RenaissanceRe (NYSE: RNR  ) , or RenRe, looks like a bit of an exception. Of course, exceptions elicit the question, "What's different here?" In the case of RenRe, it looks like investors are concerned about the acknowledged weakness in catastrophe premiums next year, as well as the possibility that the favorable reserve development well has started running dry.

Next year will almost certainly be a down year for catastrophe reinsurance premiums, but I think investors may be acting a little hastily in assuming that RenRe's growth in specialty and Lloyd's can't cushion the blow. Moreover, I think RenRe, along with Arch Capital (NASDAQ: ACGL  ) and Axis Capital (NYSE: AXS  ) , is in on the very highest level in terms of management quality and underwriting skill. Perhaps it's smarter to wait for the insurance sector as a whole to pull back, but RenRe's relative underperformance makes it more interesting to me these days.

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A Long-Proven Winner Is Being Underestimated

Investopedia: Flagstone A Multi-Year Rebuilding Story

Insurance is a mixed bag these days. Rates seem to be firming up, but many reinsurance companies have had to absorb losses tied to several disasters. Unfortunately, underwriting discipline has apparently become a problem at Flagstone Reinsurance (NYSE:FSR), and investors are looking at a multi-year rebuilding story with this insurer.

Fourth Quarter Results More of the Same, Only More so  
Flagstone ended the year on pretty weak footing. Gross written premiums dropped 3%, while net written premiums fell 18%. To a certain extent, this was not very surprising - not only have many reinsurers seen iffy premium growth, but Flagstone has been actively looking to cut its risk exposure.

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Investopedia: Can Arch Capital Keep Pulling Rabbits Out Of Its Hat?

Years of superior performance have established quite a reputation for the management of Arch Capital (Nasdaq:ACGL). In good times and bad, this seems to be one of the best-run Bermuda-based insurance companies. The question investors have to ask, though, is whether there is enough leeway in the present valuation to really make this one of the best-performing stocks out there over the coming year or two.

Fourth Quarter Results  
Arch Capital reported that gross written premiums rose more than 5% for the fourth quarter, with particular strength (up 17%) in reinsurance. Net written premium growth was a little stronger, coming in at nearly 6%, while net investment income was down 11%.

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