RenRe shareholder calls for possible sale of company

02-10-2018

Institutional asset management firm TimesSquare Capital Management, which has a large stake in RenaissanceRe, has written to RenRe’s board of directors to urge for an immediate review of strategic alternatives, including an exploration of a potential sale of the company.

The letter, dated Sept. 7, 2018, states that: “Over the period of our ownership, we have witnessed a structural transformation of RenRe’s core property catastrophe reinsurance business, driven by the growing participation of alternative capital. In our view, this has had an adverse impact on the long-term risk-adjusted returns achievable in this business. Importantly, the degree of pricing response following large loss events over the past decade has been dampened relative to history and the duration of pricing gains has been ephemeral.

“During the Company’s July 25, 2018 earnings conference call, CEO Kevin O’Donnell pointed to the “increasingly differentiated market position” that RenRe enjoys as a standalone reinsurer. We appreciate that core clients prefer to transact with reinsurance partners with whom they are not in direct competition and agree that this should foster an advantageous position for the Company in accessing superior business.

“That said, the benefit of this premier positioning has not resulted in investors ascribing an improved valuation for the Company, even as acquisitions of peer companies have been generally consummated at escalating valuation multiples over the past two years.”

The letter concludes: “Further, as the industry environment evolves, we have diminished conviction that RenRe’s share price will appropriately reflect intrinsic value. In our view, however, there is a way for RenRe to better realize its intrinsic value: through a review of strategic alternatives, including a possible sale of the Company.

“We believe there are a number of potential acquirers that would covet RenRe’s dominant and unique position in third party capital management, as well as the Company’s proven track record of superior underwriting, risk management and tangible book value per share growth. Our opinion is that an active competitive sale process for the Company should be launched, which would likely yield a significant control premium over the current share price.

“To this end, we are requesting that the Board immediately commences a review of strategic alternatives, including an exploration of the sale of the Company, in order to maximize value for shareholders.”

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