NEW YORK--(BUSINESS WIRE)--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’Donnell
President and Chief Executive Officer
RenaissanceRe
Holdings Ltd.
Renaissance House
12 Crow Lane
Pembroke HM19
Bermuda
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 | ||||
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Senior Founding Partner |
Partner and Director |
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and Portfolio Manager |
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September 7, 2018
RenaissanceRe Holdings Ltd.
Renaissance House
12 Crow Lane
Pembroke
HM19
Bermuda
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 |
Announced |
Date |
Deal |
Deal Price |
Deal Price to |
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| 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 | |||||||||
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Source: Company reports & filings, SNL, FactSet |
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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 |
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and Portfolio Manager |
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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.