RenaissanceRe Expands Buyback – Analyst Blog

In an attempt to return value to its investors, on Tuesday, the board of RenaissanceRe Holdings Ltd. (RNR) approved the expansion of its stock repurchase program to a total current authorization of approximately $500 million. This authorization includes the remainder amounts available from prior authorizations, whereby repurchases will be based on internal capital requirement and market conditions. However, there is no expiration date for this repurchase program.

 

Prior to this in May 2008, RenaissanceRe had authorized a $500.0 million share repurchase program. Under this plan, the company bought back its common shares worth $51.0 million in 2009. As of Dec 31, 2009, $331.4 million remained available for repurchase, which are included in the new stock buyback plan.

 

Though there are some early signs of economic recovery, the pace of improvement is expected to be slow. As a result, it could still be difficult for the insurance companies to raise capital. However, in March 2010, RenaissanceRe initiated an underwritten public offering worth $250 million aggregate principal amount of 5.750% senior notes due 2020. We do not anticipate any additional capital requirement in the near term due to its strong capital position.

 

RenaissanceRe has been returning capital to its shareholders through share repurchases. The operating subsidiaries of the company also remained well capitalized. With its strong capital position, the company should be able to take advantage of the increased demand for reinsurance.

 

 

Over the last 30 days, four of 10 analysts covering RenaissanceRe have lowered their estimates for the second quarter of 2010, while three upward revisions were witnessed. Currently, the Zacks Consensus Estimate for the second quarter is operating earnings of $2.22 per share, which would be down by 45.2% from the year-ago quarter.

 

The fewer number of upward estimate revisions for the second 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 all four positive surprises. The average remained positive at 69.9%. This implies that RenaissanceRe has surpassed the Zacks Consensus Estimate by 69.9% over that period.

 

The upside potential for the estimate in the second quarter, essentially a proxy for future earnings surprises, currently stands at 2.3%.

 

 

Concurrently, the board of RenaissanceRe also declared its quarterly dividend of 25 cents per share. The dividend will be paid on Jun 30, 2010, to shareholders of record as on Jun 15, 2010.