Deutsche Bank (DB) raised its price target on RenaissanceRe Holdings Ltd. (NYSE:RNR) to $65 from $62, while maintaining its "Sell" rating on the stock.
Joshua Shanker, an analyst at DB, said investors - as they become more risk-tolerant in a bullish market - will begin to focus on valuation of RenRe as a function of earnings power rather than top line growth. He believes RenRe - a best in class property-cat underwriter - is poised to achieve 10-15% ROE with an annual standard deviation of 15-20%.
"We believe that the stock looks expensive, considering this return profile," Shanker wrote in a note to clients.
The pre-eminent risk at RenaissanceRe is a weather-related loss, particularly in Florida. A low year of catastrophes represents upside to our earnings and ostensibly the stock price, said Shanker.
On Tuesday, the stock fell 0.9% to trade at $72.30.