Excess capacity and a drop in growth for property-casualty reinsurance didn’t stop RenaissanceRe RNR from having a very profitable first quarter. RenaissanceRe reported a 22.5% annualized return on equity driven by a 36.2% combined ratio, despite a market where a rise in CAT bonds and less ceded risk from primary insurers is cutting into demand. Of course, it didn’t hurt that the first quarter was devoid of any significant catastrophe events, but even so, RenaissanceRe outperformed all of its peers over the threemonth period. Unfortunately, management at the firm cautioned that the continued buildup in capacity and falling demand for reinsurance will likely keep a lid on premium growth. Therefore, it is extremely important that underwriting risk be kept in check, at which RenaissanceRe has excelled in the past. However, as much as we admire the ability of this premier reinsurer to avoid stretching for returns in difficult and uncertain markets, we still think the stock is overvalued. We recently raised our fair value estimate on the stock to $83 per share and we are sticking with it. We do not think even the best reinsurers like RenaissanceRe have a moat to establish a competitive advantage and it is likely that an overcapacity in reinsurance will eventually weigh on its income and profit growth.