RenaissanceRe Holdings Ltd. RNR recently announced that its wholly owned subsidiary, RenaissanceRe Finance Inc. agreed to sell Senior Notes worth $300 million, due 2027, at a rate of 3.45% through an underwritten public offering. The notes are guaranteed by the parent company, Renaissance Holdings, which expects to close the deal on or around Jun 29, 2017.
Renaissance Holdings expects to fund its general corporate expenses with net proceeds from this offering. The Senior Notes are likely to receive an “A3” rating from Moody’s Investors Service, a wing of Moody’s Corp MCO and “A” rating from S&P ratings a unit of S&P Global Inc. SPGI.
The company has always issued notes, bonds and debentures to fund its acquisition related expenses, borrowing costs and general and corporate related expenses. These efforts, along with the company’s other positives like health balance sheet, growing revenues and prudent inorganic growth encourage investors. Over last one year, the stock has gained 24% outpacing the Zacks categorized Property & Casualty Insurance industry’s rally of 19%.
RenaissanceRe Holdings has been witnessing continuous increase in total expenses since 2013 owing to rising level of acquisition expenses, operational expenses as well as corporate expenses. The company’s expenses witnessed year-over-year rise of 7.8%, 7.7% and 6.3% in 2016, 2015 and 2014, respectively. The trend continued in the first quarter of 2017 as well with a 9.3% rise
However, notes issuance impacts the company’s balance sheet as well as income statement. This increases its level of long-term debt and interest expenses. The company’s long-term debt has seen a volatile trend over last five years although in 2015 it soared almost 285% along with the debt equity ratio, which surged 1080 basis points. Nevertheless, the company has strong debt servicing capacity on the back of which both long-term debt and debt equity ratio reduced in 2016 and in the first quarter of 2017.
Zacks Rank and Stocks to Consider
RenaissanceRe Holdings currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors interested in the Property & Casualty insurance space can consider The Progressive Corp PGR which is a leading independent agency writer of private passenger auto coverage and the market share leader for the motorcycle products. The stock sports a Zacks Rank #1.
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