Deutsche Bank Upgrades RenaissanceRe To Buy

In a report published Monday, Deutsche Bank analysts upgraded RenaissanceRe Holdings Ltd.

to Buy, while increasing the price target to $116. The analysts expect the company's buyback pace to pick up with the completion of the Platinum Underwriters acquisition. Apart from the potential resumption of share buyback, the increasing appetite among third-party entities to diversify exposure has led to the risk to the company's stock declining significantly. In addition, the analysts added that, "Risk of a negative ROE year (-13% in 2005 and -5% in 2011, as examples) has become increasingly remote, and our expectation is that RenRe can earn its cost of equity capital (89%) in a catastrophe "normal" year." Apart from earnings related cash flows, RenaissanceRe is also likely to benefit from the freeing up of Platinum Underwriters' "underutilized" balance sheet. Additional cash flow could be created via the management's strategy to structure the company's US entities in a way to offset the Platinum acquisition. "While the Platinum acquisition diminishes the franchise, we believe some of RenRe's brand equity as the premier property-cat underwriter remains," the analysts said. The shares are trading at a 5 percent premium at present and the stock has not traded below book value since 2H10.