Bermudian reinsurance firm RenaissanceRe (RenRe) is rumoured to be under pressure from its investor, TimesSquare Capital Management LLC, to start a sale process, according to the Wall Street Journal (WSJ).
TimesSquare, an asset manager that currently owns a 1.9% stake in RenRe, reportedly believes that the company’s shares are undervalued but could be worth a considerable premium if sold to the right buyer.
The investor thus plans to urge RenRe, which is one of the last remaining stand-alone reinsurers, to begin the sales process as early as possible.
TimesSquare voiced its concerns privately to RenRe last month, but could reiterate them in a public letter today, sources familiar with the matter told the WSJ.
Analysts at KBW said that RenRe could likely be sold for a value that would exceed the 1.62x and 1.77x price-to-book and price-to-tangible book multiples that AIG valued Validus at in its acquisition earlier this year.
However, they added that “Aspen’s recent sales process may negatively impact reinsurance multiples that could reduce RNR’s near-term potential takeout multiple in a forced sale process.
“We reiterate our Market Perform rating and $143 price target,” KBW stated.
If TimesSquare’s push is successful, it would mark the firm’s first public instance of taking a known activist role in an investment, Bloomberg noted.
TimesSquare manages more than $19 billion in assets and has been invested in RenaissanceRe since 2008, but has historically refrained from activist investing, the publication stated.
Although RenRe has not yet commented on the rumours, Chief Executive Kevin O’Donnell said in a July earnings call that he was optimistic about the company’s future as stand-alone reinsurer despite the “pessimism permeating today’s market.” RenRe currently has a market value of around $5.3 billion.