Deutsche Bank Downgrades RenaissanceRe Holdings (RNR) to Sell

Deutsche Bank downgraded RenaissanceRe Holdings (NYSE: RNR) from Hold to Sell with a price target of $96.00 (from $100.00). Analyst Joshua Shanker thinks the stock's premium valuation is at risk.

"Reinsurance pricing has been decidedly poor for two mid-year renewal cycles as well as one Jan. 1 renewal. We believe the contributors to this weak pricing cycle are more likely permanent than transitory. We believe RenRe's premium valuation could be at risk should future results disappoint and are reducing our rating to Sell," said Shanker.

"Reinsurers reported earnings misses virtually across the board, but most pronounced at RenRe. The Street correctly reduced its forward expectations for the company, dropping next twelve months earnings to $8.36 from $9.36. Even with this reduction, we believe earnings risk is to the downside, though our 2015 EPS forecast of $8.50 is only modestly below consensus," he added. "The poor pricing in property-catastrophe lines has been well-articulated, and RenRe, as the most well-known and levered participant to this product, has likely seen its stock sold and shorted on this thesis, but that trade hasn't yet been met with much success. What has changed for us, however, is valuation. Following the 2Q14 earnings revisions, RenRe now trades at 75% of the S&P 500's P/E multiple, the most richly it has ever traded relative to the market. Further, good prior-year results may be influencing investors to be too optimistic about the coming year's "normalized" earnings power."

For an analyst ratings summary and ratings history on RenaissanceRe Holdings click here. For more ratings news on RenaissanceRe Holdings click here.

Shares of RenaissanceRe Holdings closed at $101.73 yesterday.

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