TimesSquare Issues Letter to RenaissanceRe Board of Directors
October 02 2018 - 8:42AM
Business Wire
Calls for Immediate Review of Strategic Alternatives
TimesSquare Capital Management, LLC, an institutional asset
management firm with a significant stake in RenaissanceRe Holdings
Ltd. (NYSE:RNR) (the “Company”), today announced that it has
delivered the following letter to the Company's Board of
Directors.
October 2, 2018
Kevin O’DonnellPresident and Chief Executive
OfficerRenaissanceRe Holdings Ltd.Renaissance House12 Crow
LanePembroke HM19Bermuda
Dear Kevin:
We trust that you and the Board have given serious consideration
to the perspectives raised in our letter that was sent on September
7, 2018. We have decided to publicly release this earlier letter in
order to outline our views for shareholders and to ensure that our
thoughts on maximizing shareholder value are as explicit as
possible. We remain steadfast in our belief that an immediate
review of strategic alternatives, including an exploration of a
potential sale of the Company, is imperative.
As always, we appreciate your willingness to engage in dialogue
with us and look forward to the efforts of the Board and management
to further evaluate pathways to unlock value for the benefit of
shareholders.
Sincerely,
Ian Anthony Rosenthal Seth Bienstock
Senior Founding Partner
Partner and Director
and Portfolio Manager
September 7, 2018
RenaissanceRe Holdings Ltd.Renaissance House12 Crow LanePembroke
HM19Bermuda
Dear Members of the Board of Directors (the “Board”):
As you are aware, TimesSquare Capital Management, LLC (“we” or
“TimesSquare”), an institutional asset management firm, has on
behalf of its investment advisory clients, held discretion over
common shares of RenaissanceRe Holdings Ltd. (“RenRe” or the
“Company”) since 2008.
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, as evidenced by the table below:
Target
Acquiror
AnnouncedConsideration
DateAnnounced
DealPremium as %
ofUnaffectedSharePrice
Deal Priceto Target’sBook
Value
Deal Price
toTarget’sTangibleBook Value
XL Group Ltd. AXA SA $15.3B Mar-18 54.3% 1.51x 1.96x Validus
Holdings, Ltd. American International Group, Inc. $5.6B Jan-18
45.5% 1.57x 1.77x Allied World Assurance Company Holdings Fairfax
Financial Holdings Limited $4.9B Dec-16 18.0% 1.34x 1.56x Ironshore
Inc. Liberty Mutual Insurance Co. $3.0B Dec-16 – – 1.45x Endurance
Specialty Holdings Ltd. SOMPO Holdings, Inc. $6.3B
Oct-16 43.2% 1.36x 1.53x
Comparable
Transaction Average 40.2% 1.45x 1.65x
RNR Valuation as of 9/7/2018 – 1.20x
1.28x
Source: Company reports & filings,
SNL, FactSet
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.
Sincerely,
Ian Anthony Rosenthal Seth Bienstock
Senior Founding Partner
Partner and Director
and Portfolio Manager
About TimesSquare Capital Management, LLC
TimesSquare Capital Management, LLC is a fundamental
research-oriented growth equity investment management firm
specializing in Small Cap and Mid Cap growth equity strategies
across the world. TimesSquare employs a time-tested team approach
to growth investing that has been in place since the mid 1980s.
The investment philosophy is predicated on fundamental research
skills with a particular emphasis on the assessment of management
quality and an in-depth understanding of business models.
TimesSquare believes that this process enables its teams to build
diversified portfolios of growth stocks that are designed to
generate positive risk-adjusted returns relative to portfolio
benchmarks. As of August 31, 2018, TimesSquare managed over $19
billion in assets.
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version on businesswire.com: https://www.businesswire.com/news/home/20181002005582/en/
TimesSquare Capital Management, LLCDavid M.
Cielusniakdavid.cielusniak@tscmllc.com
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