RenaissanceRe: A "Preferred" Play

02/08/2017 7:00 am EST


Jack Adamo

Editor, Jack Adamo's Insiders Plus

RenaissanceRe Holdings (RNR) is a global provider of reinsurance, as well as various types of insurance and related services. The company was founded in 1993 and is headquartered in Bermuda, notes Jack Adamo, editor of Insiders Plus.

The company operates through three segments: Catastrophe Reinsurance, Specialty Reinsurance, and Lloyd's segments (Lloyd's of London).

Within these segments are covered property claims, automobile liability, catastrophe exposed workers' compensation, cyber liability, directors and officers liability, environmental liability, medical malpractice, and professional indemnity among many others types.

RenaissanceRe Holdings Ltd. 5.375% Series E Preference Shares (RNR-E) are selling at a 6.7% discount to their redemption price, giving them a current yield of 5.74% and an annualized total return of 9.94% if they are redeemed in June of 2018, when they are eligible to be redeemed by the company.

Of course, the prospect of higher interest rates is putting pressure on preferreds, but many are still selling above redemption price, whether the redemption date be sooner than RenaissanceRe's or later.

The dividends are not cumulative, but again, that isn't hurting many of its peers. Moreover, the company is rock solid financially. The rating agencies gave all of RenaissanceRe's paper ratings of A, AA, AA- and A+, etc.

Then I wondered if the company was just having a bad year. Look at the 20-year weekly chart of the common stock, and you tell me.

(Chart courtesy of

I should add that rising interest rates are good for insurance companies. They don't have to buy risky securities to get a good return on investments. RenaissanceRe's financial position should only get stronger.

So, as the nuns used to tell us in Catholic school, "It's a mystery." My best guess is that the shares are discounted simply because they aren't well known or followed.

The trading volume is pretty low, but not to the extent where you can't buy it if you show some patience. In any case, let's not look a gift horse too far in the mouth. Let's grab the reins.

Disclosure: I've owned this stock for nearly three years. I didn't recommend it earlier because I thought there would be liquidity issues. We've seen recently that this has generally not been the case.

Buy RenaissanceRe Holdings Series E Preferred up to $24. The shares are thinly traded, so be patient and try to get it close to its current price of $23.42. We are adding the issue to our High Income Portfolio.

Please note that there is no standard set of stock symbols for preferred stocks. Your broker might list it as RNR-E, RNR-PE, RNRprE or something similar.

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