RenaissanceRe's High-Quality Model Serving It (And Investors) Well

Hard times tell you a lot about companies, and the combination of a very soft pricing market and recent catastrophe losses have highlighted a lot of what is good about RenaissanceRe (NYSE:RNR). While the shares have certainly lagged the S&P 500 over the past year, and lagged rival/peer Arch Capital (NASDAQ:ACGL), RenRe hasn't done poorly relative to other insurers like Everest Re (NYSE:RE), Aspen (NYSE:AHL), or Validus (NYSE:VR). Throughout this tough period, RenRe's underwriting standards, strong balance sheet, and business flexibility have served the company well, despite some erosion in underwriting profitability.

RenRe is trading at a premium relative to long-term valuation norms. Some of that can be attributed to what I believe is a legitimate and well-earned quality premium, but I do have some worries that investors have been too eager to factor in the benefits of harder insurance markets. While I do still see some upside for shareholders from here, I'd be cautious about establishing a big new position at these levels.

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RenaissanceRe's High-Quality Model Serving It (And Investors) Well

Seeking Alpha: Is Renaissance Re Still A Safe Haven Among Reinsurance Companies?

I believe there are many standards by which RenaissanceRe Holdings (NYSE:RNR) (or "RenRe") can be called an excellent, if not one of the best, reinsurance companies in the business. Since its founding in 1993, RenRe has generated some of the best returns on equity within the space (a 20%-plus ROE since inception) due to very sophisticated risk analytics and modeling. RenRe has also been one of the pioneers in managed cat vehicles, an alternative capital option that generates significant returns on capital for the company.

The problem is that the property catastrophe market has too much capital today and pricing is getting undisciplined, with underwriters like RenRe and Validus (NYSE:VR) looking for double-digit declines in premiums. Although RenRe has been growing its specialty reinsurance and Lloyds businesses, it's going to be difficult to withstand the pressures in a business that makes up close to 70% of premiums. Although RenRe's shares are still a little undervalued relative to my long-term ROE assumptions, I see better overall opportunities in life insurance.

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Is Renaissance Re Still A Safe Haven Among Reinsurance Companies?

Investopedia: Berkshire Hathaway Makes An Unusual Bid For Transatlantic

These are strange days in the economy and the financial markets, so perhaps it is fitting that the Transatlantic Holdings (NYSE:TRH) merger saga just got a little stranger. After all, it was odd enough that Transatlantic was the subject of competing bids that both undervalued this rare U.S.-domiciled reinsurance company. Now, Berkshire Hathaway (NYSE:BRK.A) is stepping in with a proposal when the company normally has preferred to act much more subtly in its acquisitions.


The Latest Bid
Berkshire Hathaway, famously led by Warren Buffett, does not traditionally do hostile deals nor engage in public auctions. Typically Buffett's deal terms are "here's our deal, we expect a quick response and discretion". In this case, however, Berkshire's bid for Transatlantic does not seem to be the normal sort of arrangement where the deal is signed, sealed and delivered before the public even gets wind of it.


To read the full piece, please click below:
http://stocks.investopedia.com/stock-analysis/2011/Berkshire-Hathaway-Makes-An-Unusual-Bid-For-Transatlantic-TRH-BRK.A-AWH-VR-AIG-AON-MMC0809.aspx