RenaissanceRe Boosts Buyback Plan - Analyst Blog

In an attempt to return value to its investors, 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 $375.1 million available under earlier authorizations, whereby repurchases will be done from the open market based on RenaissanceRe’s ongoing cash and capital requirement, natural calamities and other market conditions. However, there is no expiration date for this repurchase program.
 
Concurrently, RenaissanceRe’s board declared a quarterly dividend of 25 cents per share, payable on September 30, 2010 to shareholders of record on September 15, 2010. RenaissanceRe also rewarded its stockholders with a dividend of 25 cents per share during the second quarter of 2010.
 
During that quarter, RenaissanceRe actively managed its capital and generated superior returns for its shareholders by repurchasing 3.7 million shares in open market transactions for an aggregate cost of $207.6 million and at an average share price of $56.10.
 
RenaissanceRe’s dividend and share repurchase program have been an integral part of its continuing capital management program. Other than enhancing shareholder value, it also provides earnings accretion. We believe that RenaissanceRe does not require any additional capital requirement in the near term due to its strong capital position. The operating subsidiaries of the company also remain well capitalized. With its capital position, RenaissanceRe should be able to take advantage of the increased demand for reinsurance.
 
However, we 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.
 
Estimate Trend Revision
 
Over the last 30 days, four of the 10 analysts covering RenaissanceRe have lowered estimates for the third quarter of 2010, with only 1 upward revision.
 
The fewer number of upward estimate revisions for the third quarter indicates a likelihood of downward pressure on the performance of the stock in the near term.
 
For 2010, seven of the 13 analysts covering the stock raised their estimates over that period, with no downward revisions. Similarly, for 2011, three of the 13 analysts covering the stock raised their estimates, with no downward revisions.
 
Currently, the Zacks Consensus Estimate for the third quarter is $1.30 per share. However, the full year Zacks Consensus Estimate for 2010 is $7.83 and for 2011 is $8.20.
 
With respect to earnings surprises, the stock has been steady with positive surprises over the last four quarters. The average remained positive at 54.6%. This implies that RenaissanceRe has surpassed the Zacks Consensus Estimate by 54.6% over that period.