On Thursday, rating agency A.M. Best Co. affirmed the issuer credit rating (ICR) of “a-” and all debt ratings of RenaissanceRe Holdings Ltd. (RNR), reflecting the company’s superior risk-based capitalization level and historically excellent underwriting track record.
The rating agency has also affirmed the financial strength rating (FSR) and ICR of “A+” (Superior) and “aa-“, respectively, of RenaissanceRe’s subsidiaries Renaissance Reinsurance Ltd. (RenRe) and Renaissance Reinsurance of Europe.
Additionally, the agency has affirmed the FSR of “A” (Excellent) and ICRs of “a” for both RenRe Insurance and DaVinci Reinsurance Ltd. The outlook for all ratings remains stable.
RenaissanceRe’s reinsurance segment has successfully grown in multi-peril crop, commercial multi-line and commercial property lines of business and is supported through reinsurance agreements provided by RenRe.
Estimate Revision Trend
Over the last 30 days, 4 of the 11 analysts covering RenaissanceRe have lowered estimates for the first quarter of 2010, while only 2 upward revisions were witnessed. Currently, the Zacks Consensus Estimate for the first quarter is operating earnings of $2.07 per share, which would be up 36.2% from the year-ago quarter.
The higher number of downward estimate revisions for the first quarter indicates a likelihood of downward pressure on the performance of the stock in the near term.
With respect to earnings surprises, the stock has been steady over the last four quarters, with three positive surprises. The average remained positive at 29.9%. This implies that RenaissanceRe has surpassed the Zacks Consensus Estimate by 29.9% over that period.
Earnings Recap
RenaissanceRe’s fourth-quarter operating earnings of $2.82 per share were substantially ahead of the Zacks Consensus Estimate of $2.47. This also compares favorably with operating earnings of 47 cents in the year-ago quarter.
The better-than-expected results were primarily aided by substantially higher revenues and lower expenses. Also, a relatively low level of insured catastrophe losses, favorable development on prior year reserves and solid investment results were among the positives.
We anticipate a limited upside potential for RenaissanceRe shares in the coming quarters as the company faces increasing challenges in its investment portfolio. However, the company will continue to benefit from its underwriting discipline, capital strength and stable ratings.

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