RenaissanceRe Holdings Ltd. (RNR) has consummated the sale of its U.S. property and casualty business to an Australian insurer – QBE Holdings, Inc. for about $275 million, which was announced in November, 2010.
RenaissanceRe’s U.S. property and casualty business was underwritten through managing general agents, and its crop insurance business through Agro National Inc.
With the completion of this transaction, RenaissanceRe is now positioned well to concentrate more on its U.S. insurance market through our Lloyd’s syndicate, RenaissanceRe Syndicate 1458, on a non-admitted basis.
On the other hand, the acquisition has raised QBE’s earnings per share in the first year and helped it in expanding its operations in the market by further enhancing its product diversification and distribution.
Likewise in July 2010, RenaissanceRe sold its entire ownership interest in ChannelRe Holdings Ltd., a financial guaranty reinsurance company, for $15.8 million.
RenaissanceRe exited its U.S. property and casualty operations as it was the right time to sell its relatively small scale operation in a scenario, which favors consolidation in U.S. insurance lines.
RenaissanceRe will continue to participate in the U.S. excess and surplus lines insurance market through its Lloyd’s platform and Glencoe Insurance Ltd. and managing its portfolio of businesses to generate superior returns over time.
Besides, the company has a strong capital position and recently announced a dividend increment by a penny to 26 cents, which will be paid on March 31, 2011 to shareholders of record as on March 15, 2011. Simultaneously, RenaissanceRe expanded its stock repurchase program to deploy its excess capital to enhance shareholders’ wealth.
The board of RenaissanceRe approved the expansion of its stock buyback authorization to $500 million, without an expiration date. The shares will be repurchased from time to time, from the open market, depending on the external and internal factors.
However, we still expect limited upside potential for RenaissanceRe shares in the coming quarters as it faces increasing challenges in its investment portfolio, though it continues to benefit from its underwriting discipline, capital strength and strong market reputation.
RenaissanceRe reported impressive fourth-quarter results with income from continuing operations of $189.1 million or $3.47 per share, exceeding the Zacks Consensus Estimate of $2.05 and from the income of $177.7 million or earnings of $2.82 per share in the year-ago quarter.
Its peer, American International Group Inc. (AIG) reported a lower fourth quarter operating loss of $2.21 billion or $16.20 per share, compared with the Zacks Consensus Estimate of a loss of $16.98. But the loss exceeded that of $1.34 billion or $9.88 in the year-ago period.
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