RenaissanceRe (RNR)

Reinsurance provider RenaissanceRe (NYSE:RNR) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, but sales fell by 19.5% year on year to $3.2 billion. Its non-GAAP profit of $15.62 per share was 64.4% above analysts’ consensus estimates.

Company Overview

Born in Bermuda after the devastating Hurricane Andrew created a crisis in the catastrophe insurance market, RenaissanceRe (NYSE:RNR) provides property, casualty, and specialty reinsurance and insurance solutions to customers worldwide, primarily through intermediaries.

This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. The primary headwind remains the immense and concentrated exposure to large-scale catastrophe losses, as the growing impact of climate change challenges traditional risk models and creates significant earnings volatility. Additionally, they face the risk of adverse prior-year reserve development, where claims prove more costly than anticipated, while the eventual influx of new capital from alternative sources threatens to soften the market and compress future returns.

RenaissanceRe competes with other major reinsurance providers including Munich Re, Swiss Re, Hannover Re, and Everest Re (NYSE:RE). In the Lloyd's of London market, it faces competition from various syndicates, while in specialty lines it competes with players like Arch Capital Group (NASDAQ:ACGL) and Axis Capital (NYSE:AXS).

Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services. Over the last five years, RenaissanceRe grew its revenue at an incredible 20% compounded annual growth rate. Its growth surpassed the average insurance company and shows its offerings resonate with customers, a great starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. RenaissanceRe’s annualized revenue growth of 23.9% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, RenaissanceRe’s revenue fell by 19.5% year on year to $3.2 billion but beat Wall Street’s estimates by 9.7%.

Net premiums earned made up 88.8% of the company’s total revenue during the last five years, meaning RenaissanceRe barely relies on non-insurance activities to drive its overall growth.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

RenaissanceRe’s net premiums earned has grown at a 20.9% annualized rate over the last five years, much better than the broader insurance industry and in line with its total revenue.

When analyzing RenaissanceRe’s net premiums earned over the last two years, we can paint a similar picture as it recorded an annual growth rate of 21.4%. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. While these supplementary streams affect the bottom line, their contribution can fluctuate. Some firms have been more successful and consistent in investing their float over the long term, but sharp movements in the fixed income and equity markets can play a substantial role in short-term performance.

RenaissanceRe produced $2.43 billion of net premiums earned in Q3, down 5.8% year on year. But this was still enough to meet Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio is:

• The costs of underwriting (salaries, commissions, overhead) + what an insurer pays out in claims, all divided by net premiums earned

If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last two years, RenaissanceRe’s combined ratio has increased by 11.8 percentage points, going from 78.8% to 90.6%. Said differently, the company’s expenses have increased at a faster rate than revenue, which usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q3, RenaissanceRe’s combined ratio was 68.4%, beating analysts’ expectations by 1,262 basis points (100 basis points = 1 percentage point). This result was 16.4 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

RenaissanceRe’s EPS grew at an astounding 66.4% compounded annual growth rate over the last five years, higher than its 20% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its combined ratio didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For RenaissanceRe, its two-year annual EPS growth of 2.8% was lower than its five-year trend. This wasn’t great, but at least the company was successful in other measures of financial health.

In Q3, RenaissanceRe reported adjusted EPS of $15.62, up from $10.23 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects RenaissanceRe’s full-year EPS of $34.48 to shrink by 6.2%.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float–premiums collected but not yet paid out–are invested, creating an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

RenaissanceRe’s BVPS grew at an impressive 11.3% annual clip over the last five years. BVPS growth has also accelerated recently, growing by 31.5% annually over the last two years from $133.63 to $231.23 per share.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

RenaissanceRe currently has $2.23 billion of debt and $11.5 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.2×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.

Over the last five years, RenaissanceRe has averaged an ROE of 10%, uninspiring for a company operating in a sector where the average shakes out around 12.5%. We’re optimistic RenaissanceRe can turn the ship around given its success in other measures of financial health.

It was good to see RenaissanceRe beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. On the other hand, its net premiums earned slightly missed. Zooming out, we think this was still a solid print. The stock traded up 3.2% to $239 immediately after reporting.

Updated: December 4, 2025 at 11:36 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

There are some bright spots in RenaissanceRe’s fundamentals, but its business quality ultimately falls short. First off, its revenue growth was exceptional over the last five years. And while RenaissanceRe’s projected EPS for the next year is lacking, its net premiums earned growth was exceptional over the last five years.

RenaissanceRe’s P/B ratio based on the next 12 months is 1.1x. This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $288.79 on the company (compared to the current share price of $268.67).