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RenRe investor TimesSquare calls for sales process

October 02, 2018

RenaissanceRe investor TimesSquare Capital Management is urging the Bermudian carrier to commence an “immediate” strategic review of the company, including the consideration of a potential sale.

On 2 October, TimesSquare – an institutional asset management firm and long-term shareholder in RenRe - publicly released a letter sent to RenRe’s board of directors on 7 September 2018, arguing that the carrier should look to capitalise on the current wave of M&A activity across the (re)insurance industry.

“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,” TimesSquare said the in the letter.

“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,” it added.

The firm pointed to a number of M&A deals in the last two years that have seen peer companies acquired at “escalating valuation multiples”, including Axa’s $15.3bn takeover of XL Group and Validus’ $5.6bn sale to AIG.

TimesSquare, which has held shares in the Bermudian carrier since 2008, said during the decade of its ownership it had “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,” the letter went on.

“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,” the asset manager said.

However, in its response to TimesSquare’s letter on 2 October, RenRe vowed to continue its strategic plan.

“We have considered fully TimesSquare’s views and have shared them with our oard. Our Board understands, and is committed to, its fiduciary duties to act in the best interests of all shareholders,” the statement said.

“Our Board and management team continuously focus on enhancing shareholder value through execution of the Company’s strategic plan. We will maintain an open and active dialogue with all of our shareholders as we continue to work to enhance shareholder value”, it continued.

The carrier said that it “welcomes open and constructive communications with all shareholders and values their input”, adding that “members of our senior management team have held numerous meetings with TimesSquare over the past few years”.

“In particular, both our chairman of the Board and our chief executive officer have separately met with TimesSquare in recent months,” the firm noted.

This campaign follows recent pressure from activist investor CIAM on Scor’s management team after the French reinsurer rejected a EUR8.2bn takeover offer from Covéa last month.