Is RenaissanceRe Holdings (RNR) A Smart Long-Term Investment?

·3 min read

Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, published its “Longleaf Partners Small-Cap Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Longleaf Partners Small-Cap Fund added 1.91% in the fourth quarter, roughly in line with the Russell 2000's 2.14% return. For the year, the Fund returned 11.18%, falling short of the Russell 2000, which returned 14.82%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Longleaf Partners Small-Cap Fund Commentary, in its Q4 2021 investor letter, mentioned RenaissanceRe Holdings Ltd. (NYSE: RNR) and discussed its stance on the firm. RenaissanceRe Holdings Ltd. is a Pembroke Parish-based insurance company with a $7.6 billion market capitalization. RNR delivered a -2.07% return since the beginning of the year, while its 12-month returns are up by 7.14%. The stock closed at $165.82 per share on January 21, 2022.

Here is what Longleaf Partners Small-Cap Fund Commentary has to say about RenaissanceRe Holdings Ltd. in its Q4 2021 investor letter:

"RenaissanceRe (11%, 0.54%; 22%, 0.99%) the Bermuda-domiciled reinsurance company and a new position in 2021, was a top contributor in the fourth quarter. We know the reinsurance industry well, having invested in the sector for multiple decades, and we were thrilled to have the opportunity to invest in the business at a discount. RenRe has a reputation as a leading Catastrophe risk reinsurance underwriter - although the business mix has diversified over time into third party capital management, casualty and other property risk. RenRe traded below 10x earnings power and around 1x tangible book value in the third quarter as catastrophe headlines punished the entire industry, giving us the opportunity to invest. Management also took advantage of the temporary price discount by buying back 10% of outstanding shares, while the CEO, CFO and several other senior executives invested over $4 million buying shares personally. The share price appreciated in the fourth quarter as the company announced an excess capital buffer of $1 billion, even after third quarter catastrophe hits, and likely continued share repurchases. RenRe is a leader in insurance risk modeling and portfolio construction, and best in class data gathering and analytics are in the company DNA. In the face of significant volatility and disruption for the industry in the form of technology innovation, capital access innovation and climate change risks, RenRe's competitive advantages in pricing risk and in putting together a sound global portfolio of risk should be well placed to add excess return."

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Our calculations show that RenaissanceRe Holdings Ltd. (NYSE: RNR) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. RNR was in 31 hedge fund portfolios at the end of the third quarter of 2021, compared to 31 funds in the previous quarter. RenaissanceRe Holdings Ltd. (NYSE: RNR) delivered a 10.71% return in the past 3 months.

In November 2021, we also shared another hedge fund’s views on RNR in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.