RenaissanceRe Reports $1.6 Billion of Quarterly Net Income Available to Common Shareholders and $623.1 Million of Quarterly Operating Income Available to Common Shareholders in Q4 2023.

RenaissanceRe Reports $2.5 Billion of Annual Net Income Available to Common Shareholders and $1.8 Billion of Annual Operating Income Available to Common Shareholders in 2023.

Fourth Quarter 2023 Highlights

• Annualized return on average common equity of 83.5% and annualized operating return on average common equity of 33.0%.
• Combined ratio of 76.0% and adjusted combined ratio of 73.6%.
• Fee income of $70.8 million; up 133.2% from Q4 2022.
• Net investment income of $377.0 million; up 78.5% from Q4 2022.
• Mark-to-market gains of $585.9 million included in net income available to common shareholders.
• Income tax benefit of $554.2 million primarily related to the enactment of the Bermuda corporate income tax.

Full Year 2023 Highlights

• Return on average common equity of 40.5% and operating return on average common equity of 29.3%.
• 57.9% growth in book value per share and 47.6% growth in tangible book value per share plus change in accumulated dividends.
• Strong performance across Three Drivers of Profit; underwriting income of $1.6 billion, net investment income of $1.2 billion, and fee income of $236.8 million.
• Combined ratio of 77.9% and adjusted combined ratio of 77.1%.
• Raised $1.2 billion of third-party capital in the Capital Partners unit, with a further $494.8 million raised from third-party investors effective January 1, 2024.

PEMBROKE, Bermuda--(BUSINESS WIRE)-- RenaissanceRe Holdings Ltd. (NYSE: RNR) (“RenaissanceRe” or the “Company”) today announced its financial results for the fourth quarter and full year 2023.

Fourth Quarter 2023

Acquisition of Validus

On November 1, 2023, the Company completed its acquisition (the “Validus Acquisition”) of Validus Holdings, Ltd. (“Validus Holdings”), Validus Specialty, LLC (“Validus Specialty”) and the renewal rights, records and customer relationships of the assumed treaty reinsurance business of Talbot Underwriting Limited from subsidiaries of American International Group, Inc., Validus Holdings, Validus Specialty, and their respective subsidiaries collectively are referred to herein as “Validus.”

The operating activities of Validus from the acquisition date, November 1, 2023, through December 31, 2023 are included in the Company's consolidated statements of operations for the three months and year ended December 31, 2023. As such, the results of operations for the three months and year ended December 31, 2023 compared to the three months and year ended December 31, 2022, should be viewed in that context. In addition, the results of operations for three months and year ended December 31, 2023 may not be reflective of the ongoing business of the combined entities. At December 31, 2023, the Company’s consolidated balance sheet reflects the combined entities.

• Gross premiums written decreased by $27.5 million, or 7.4%, driven by:

– an $86.6 million decrease in other property. The decrease in other property was primarily due to the non-renewal of certain catastrophe exposed quota share programs that did not meet the Company’s return hurdles, partially offset by an increase related to Validus.

– a $59.1 million increase in catastrophe, driven by a $41.8 million increase in gross reinstatement premiums in the fourth quarter of 2023.

• Net premiums written decreased by $15.0 million, or 4.0%, driven by the reduction of gross premiums written discussed above, partially offset by an adjustment that reduced ceded premium written in the fourth quarter of 2023.

• Combined ratio improved by 19.5 percentage points, and adjusted combined ratio, which removes the impact of acquisition related purchase accounting adjustments, improved by 20.5 percentage points, each primarily due to a lower level of current accident year net losses.

• Net claims and claim expense ratio - current accident year improved by 22.6 percentage points due to a lower impact from the 2023 Large Loss Events in the fourth quarter of 2023 compared to the impact from the weather-related large losses in the fourth quarter of 2022.

• Net claims and claim expense ratio - prior accident years reflects net favorable development in the fourth quarter of 2023, primarily from weather-related large losses across the 2017 to 2022 accident years, driven by better than expected loss emergence.

• Underwriting expense ratio increased 1.4 percentage points, primarily due to:

– a 2.5 percentage point increase in the operating expense ratio, due in part to higher performance based compensation expense in the fourth quarter of 2023; partially offset by

– a 1.1 percentage point decrease in the acquisition expense ratio, driven by changes in the mix of business as a result of continued relative growth in catastrophe, which has a lower acquisition expense ratio than other property, partially offset by the increase in acquisition expenses from purchase accounting adjustments relating to the Validus acquisition.

Underwriting Results - Casualty and Specialty Segment: Combined ratio of 97.3% and Adjusted combined ratio of 94.3%; Underwriting income of $37.4 million

• Gross premiums written increased by $244.3 million, or 20.1%, driven by:

– premium growth in the other specialty line of business of $189.4 million and the general casualty line of business of $175.4 million, primarily from Validus; partially offset by

– a decrease of $109.3 million in the professional liability line of business, reflecting proactive cycle management.

• Net premiums written increased 26.4%, consistent with the drivers discussed in gross premiums written above, in addition to an overall reduction in our retrocessional purchases.

• Combined ratio increased by 3.6 percentage points, and adjusted combined ratio, which removes the impact of acquisition related purchase accounting adjustments, increased by 0.3 percentage points.

• Net claims and claim expense ratio - current accident year decreased by 1.9 percentage points. The current accident year net claims and claim expense ratio in the fourth quarter of 2022 was higher due to a large energy loss in the other specialty lines of business.

• Net claims and claim expense ratio - prior accident years reflects net favorable development driven by reported losses generally coming in lower than expected on attritional net claims and claim expenses from the other specialty and credit lines of business, partially offset by the impact of acquisition related purchase accounting adjustments.

• Underwriting expense ratio increased 3.1 percentage points, which consisted of:

– a 1.9 percentage point increase in the acquisition expense ratio primarily due to the impact of the purchase accounting adjustments relating to the Validus Acquisition; and

– a 1.2 percentage point increase in the operating expense ratio, mainly due to a higher performance-based compensation expense as compared to the fourth quarter of 2022.

Fee Income: $70.8 million of fee income, up 133.2% from Q4 2022; increase in both management and performance fees

• Management fee income increased $21.8 million, reflecting:

– growth in the Company’s joint ventures and managed funds, specifically DaVinciRe Holdings Ltd. (“DaVinci”), Fontana Holdings L.P. (“Fontana”), Vermeer Reinsurance Ltd. (“Vermeer”) and RenaissanceRe Medici Fund Ltd. (“Medici”).

– the recording of management fees in DaVinci that were previously deferred as a result of the weather-related large losses experienced in prior years, as compared to the deferral of management fees in the fourth quarter of 2022 due to weather-related large losses.

• Performance fee income increased $18.7 million, driven by improved current year underwriting results, primarily in DaVinci.

Investment Results: Total investment result improved $583.5 million; net investment income growth of 78.5%

• Net investment income increased $165.7 million, primarily driven by a combination of higher yielding assets in the fixed maturity and short term portfolios, and higher average invested assets partially resulting from the Validus Acquisition.

• Net realized and unrealized gains on investments increased $417.8 million, principally driven by:

– Net realized and unrealized gains on fixed maturity investments trading of $578.1 million, primarily driven by decreases in interest rates, compared to net realized and unrealized gains of $77.1 million in the fourth quarter of 2022 due to modest reductions in interest rates during the period;

– Net realized and unrealized gains on equity investments of $11.2 million, compared to net realized and unrealized gains of $59.6 million in the fourth quarter of 2022, following a reduction in the size of the equity investments portfolio during 2023; and

– Net realized and unrealized losses on investment-related derivatives of $46.0 million, compared to net realized and unrealized losses of $3.3 million in the fourth quarter of 2022. The current quarter losses were primarily driven by the negative impact of tightening credit spreads on credit default swaps that the Company uses to hedge credit risk.

• Total investments grew to $29.2 billion at December 31, 2023, from $22.2 billion at December 31, 2022, primarily driven by the integration of $4.9 billion of investments as part of the Validus Acquisition. Weighted average yield to maturity and duration on the Company’s investment portfolio (excluding investments that have no final maturity, yield to maturity or duration) was 5.8% and 2.6 years (2022 - 5.7% and 2.5 years, respectively).

• Net income attributable to redeemable noncontrolling interests of $403.0 million was primarily driven by:

– strong underwriting results in DaVinci and Vermeer;

– strong net investment income driven by higher interest rates and higher yielding assets within the investment portfolios of the Company’s joint ventures and managed funds; and

– net realized and unrealized gains on the investment portfolios of the Company’s joint ventures and managed funds, driven by decreases in interest rates, as described above.

• Raised third-party capital of $193.9 million in the fourth quarter of 2023, primarily in Medici, Fontana and Upsilon RFO Re Ltd. (“Upsilon RFO”).

• Returned third-party capital of $364.5 million during the fourth quarter of 2023, including the return of $300.3 million from RenaissanceRe Upsilon Diversified Fund, a segregated account of Upsilon Fund (“Upsilon Diversified Fund”), as a result of the release of collateral associated with prior underwriting years contracts.

• Corporate expenses increased by $62.7 million, primarily driven by expenses incurred in support of integration planning activities associated with the Validus Acquisition.

• On December 27, 2023, the Government of Bermuda enacted the Corporate Income Tax Act 2023, which will apply a 15% corporate income tax to certain Bermuda businesses in fiscal years beginning on or after January 1, 2025. The act includes a provision referred to as the economic transition adjustment, which is intended to provide a fair and equitable transition into the tax regime, and results in a deferred tax benefit for the Company. The act will also require the Company to reverse certain transaction related purchase accounting adjustments in determining its taxable income, which results in a deferred tax expense. Pursuant to this legislation, the Company recorded a $593.8 million net deferred tax asset in the fourth quarter of 2023, expected to be utilized predominantly over a 10-year period. The Company expects to incur and pay increased taxes in Bermuda beginning in 2025.

• Income tax benefit of $554.2 million compared to an expense of $5.4 million in the fourth quarter of 2022. The increase in income tax benefit was primarily driven by the net deferred tax benefit discussed above, partially offset by increased income tax expense in the Company’s other operating jurisdictions as a result of higher operating income and investment gains.

Net negative impact of the 2023 Large Loss Events

Net negative impact on underwriting result includes the sum of (1) net claims and claim expenses incurred, (2) assumed and ceded reinstatement premiums earned and (3) earned and lost profit commissions. Net negative impact on net income (loss) available (attributable) to RenaissanceRe common shareholders is the sum of (1) net negative impact on underwriting result and (2) redeemable noncontrolling interest, both before consideration of any related income tax benefit (expense).

The Company’s estimates of net negative impact are based on a review of the Company’s potential exposures, preliminary discussions with certain counterparties and actuarial modeling techniques. The Company’s actual net negative impact, both individually and in the aggregate, may vary from these estimates, perhaps materially. Changes in these estimates will be recorded in the period in which they occur.

Meaningful uncertainty remains regarding the estimates and the nature and extent of the losses from these catastrophe events, driven by the magnitude and recent nature of each event, the geographic areas impacted by the events, relatively limited claims data received to date, the contingent nature of business interruption and other exposures, potential uncertainties relating to reinsurance recoveries and other factors inherent in loss estimation, among other things.

Net negative impact on the consolidated financial statements

Net negative impact on the segment underwriting results and consolidated combined ratio

Underwriting Results - Property Segment: Combined ratio of 53.4%; 10.5 percentage points from the 2023 Large Loss Events.

• Gross premiums written decreased $171.8 million, or 4.6%, driven by:

– a decrease in other property of $241.4 million, or 14.6%, principally due to the non-renewal of certain catastrophe exposed quota share programs that did not meet the Company’s return hurdles; partially offset by

– an increase in catastrophe gross premiums written of $69.6 million, or 3.3%, driven by an increase of $552.8 million in gross premiums written as a result of rate improvements during the year, largely offset by a decrease of $268.4 million in gross premiums written due to the non-renewal of deals written in Upsilon RFO, and a decrease of $214.8 million in gross reinstatement premiums.

• Ceded premiums written were $595.1 million, a decrease of $291.5 million, or 32.9%. This decrease was primarily driven by:

– a reduction in ceded reinstatement premiums of $75.5 million, as well as a reduction of $237.4 million in premiums ceded to Upsilon RFO following a reduction in the size of Upsilon Diversified; partially offset by

– an increase in overall ceded premiums written due to higher levels of retrocessional purchases by the Company.

• Net premiums written increased $119.7 million, or 4.2%, driven by rate improvements on deals written in catastrophe as noted above, partially offset by a decrease in net reinstatement premiums of $160.2 million as well as a reduction in other property principally due to the non-renewal of certain catastrophe exposed quota share programs that did not meet the Company’s return hurdles.

• Combined Ratio improved by 47.2 percentage points, and adjusted combined ratio, which removes the impact of acquisition related purchase accounting adjustments, improved by 47.5 percentage points, each driven by higher net earned premium, lower current accident year losses, and higher prior year favorable development.

• Net claims and claim expense ratio - current accident year improved by 42.1 percentage points, primarily as a result of a lower impact from the 2023 Large Loss Events in 2023 compared to the impact from the weather-related large losses in 2022.

– 2023 Large Loss Events contributed 11.0 percentage points to the current accident year net claims and claim expense ratio, while weather-related large losses contributed 48.0 percentage points in 2022.

• Net claims and claim expense ratio - prior accident years reflected net favorable development in 2023 of 13.2%, primarily from weather-related large losses across the 2017 to 2022 accident years, driven by better than expected loss emergence, as well as favorable development on net attritional losses within other property.

• Underwriting expense ratio increased 0.7 percentage points, driven by a reduced benefit from net reinstatement premiums in 2023 as compared to 2022 due to the lower level of catastrophe losses and correspondingly lower reinstatement premiums.

Casualty and Specialty Segment: Net premiums written increased by 3.5%; Combined ratio of 95.2% and Adjusted combined ratio of 94.2%

• Gross premiums written decreased $179.3 million, or 3.3%, driven by:

– a $292.9 million decrease in the credit class of business, principally due to significant premium growth in 2022 associated with opportunistic deals written in the mortgage book of business, which do not renew annually and earn over several years; and

– a $516.2 million decrease in the professional liability line of business, reflecting proactive cycle management, partially offset by

– a $460.2 million increase in the other specialty class of business, and a $169.5 million increase in the general casualty class of business, which together were significantly impacted by Validus.

– Gross premiums written in 2022 was also impacted by significant positive adjustments to premium estimates for business underwritten in prior years.

• Net premiums written increased 3.5%, primarily driven by an overall reduction in our retrocessional purchases.

• Combined ratio decreased by 0.1 percentage point, and adjusted combined ratio, which removes the impact of acquisition related purchase accounting adjustments, decreased by 1.1 percentage points.

• Net claims and claim expense ratio - current accident year improved by 1.2 percentage points, primarily driven by a change in mix of business towards other specialty lines of business, which carry lower expected attritional loss ratios.

• Underwriting expense ratio increased 1.0 percentage point due to the impact of purchase accounting adjustments related to the Validus Acquisition.

Fee Income: $236.8 million of fee income; up 99.5% from 2022; increase in both management and performance fees

• Management fee income increased by $67.7 million, reflecting growth in the Company’s joint ventures and managed funds, specifically DaVinci, Fontana, Vermeer and Medici, as well as the recording of management fees in DaVinci in 2023 that were deferred in 2022 and 2021 as a result of the weather-related large losses experienced in prior years. The increase was partially offset by a decrease in fees associated with the decrease in capital managed at Upsilon.

• Performance fee income increased $50.4 million, driven by improved current year underwriting results, primarily in DaVinci.

Investment Results: Total investment result improved $2.9 billion; net investment income growth of 123.8%

• Net investment income increased $693.2 million, primarily driven by:

– a combination of higher yielding assets in the fixed maturity and short term portfolios; and

– higher average invested assets resulting from the equity and debt offerings in the second quarter of 2023, as well the Validus Acquisition in the fourth quarter of 2023.

• Net realized and unrealized gains on investments increased $2.2 billion, principally driven by:

– Net realized and unrealized gains on fixed maturity investments trading of $292.1 million in 2023 primarily due to modest interest rate movements through the year, compared to net realized and unrealized losses of $1.4 billion in 2022, primarily due to increasing yields on U.S. treasuries;

– Net realized and unrealized gains on equity investments of $45.8 million in 2023, which was primarily due to a combination of a reduced allocation to equity investments, and a higher equity market price environment, compared to net realized and unrealized losses of $123.8 million in 2022, which was the result of a generally lower equity market price environment; and

– Net realized and unrealized gains on catastrophe bonds of $101.9 million in 2023, compared to net realized and unrealized losses of $130.3 million in 2022. These catastrophe bonds are primarily held in Medici, the majority of which is owned by third party investors. Both years’ performance also reflected changes in risk spreads in the wider catastrophe bond market.

• Net loss attributable to redeemable noncontrolling interests of $1.1 billion was primarily driven by:

– strong underwriting results for DaVinci and Vermeer;

– strong net investment income driven by higher interest rates and higher yielding assets within the investment portfolios of the Company’s joint ventures and managed funds; and

– net realized and unrealized gains on the investment portfolios of the Company’s joint ventures and managed funds, driven by decreases in interest rates, as described above.

– net realized and unrealized gains on catastrophe bonds recorded during the year in Medici, as discussed above.

• Income tax benefit of $510.1 million, compared to $59.0 million in 2022. The increase in income tax benefit was primarily driven by the net deferred tax benefit resulting from the recognition of deferred tax assets, net of deferred tax liabilities, in connection with the enactment of the 15% Bermuda corporate income tax on December 27, 2023. This was partially offset by increased income tax expense in the Company’s other operating jurisdictions resulting from higher operating income and investment gains.

• Net foreign exchange losses of $41.5 million in 2023 compared to a loss of $56.9 million in 2022. The net foreign exchange losses for 2023 and 2022 were driven by losses attributable to third-party investors in Medici which are allocated through net income (loss) attributable to redeemable noncontrolling interest, and the impact of certain foreign exchange exposures related to our underwriting activities.

• Raised third party capital in 2023 of $1.2 billion through DaVinci ($377.2 million), Medici ($482.1 million), Fontana ($51.3 million), Upsilon ($111.4 million), and NOC1, a separately managed account ($159.9 million).

• Redemptions of third-party capital in 2023 of $1.3 billion, of which $842.8 million was from Upsilon as a result of the release of collateral associated with prior years’ contracts, and the remainder from DaVinci, Vermeer and Medici.

• Raised third party capital of $494.8 million, effective January 1, 2024, including $300.0 million in DaVinci and the remaining in Medici, Fontana and NOC1. Following these transactions, the Company’s ownership in DaVinci, Medici and Fontana was 24.2%, 11.3% and 26.5%, respectively.

Non-GAAP Financial Measures and Additional Financial Information

This Press Release includes certain financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”) including “operating income (loss) available (attributable) to RenaissanceRe common shareholders,” “operating income (loss) available (attributable) to RenaissanceRe common shareholders per common share - diluted,” “operating return on average common equity - annualized,” “tangible book value per common share,” “tangible book value per common share plus accumulated dividends” and “adjusted combined ratio.” A reconciliation of such measures to the most comparable GAAP figures in accordance with Regulation G is presented in the attached supplemental financial data.

Please refer to the “Investors - Financial Reports - Financial Supplements” section of the Company’s website at www.renre.com for a copy of the Financial Supplement which includes additional information on the Company’s financial performance.

Conference Call Information

RenaissanceRe will host a conference call on Wednesday, January 31, 2024 at 11:00 a.m. ET to discuss this release. Live broadcast of the conference call will be available through the “Investors - Webcasts & Presentations” section of the Company’s website at www.renre.com.

About RenaissanceRe

RenaissanceRe is a global provider of reinsurance and insurance that specializes in matching desirable risk with efficient capital. The Company provides property, casualty and specialty reinsurance and certain insurance solutions to customers, principally through intermediaries. Established in 1993, RenaissanceRe has offices in Bermuda, Australia, Canada, Ireland, Singapore, Switzerland, the United Kingdom and the United States.

Cautionary Statement Regarding Forward-Looking Statements

Any forward-looking statements made in this Press Release reflect RenaissanceRe’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company may also make forward-looking statements with respect to its business and industry, such as those relating to its strategy and management objectives, plans and expectations regarding its response and ability to adapt to changing economic conditions, market standing and product volumes, estimates of net negative impact and insured losses from loss events, and the Validus Acquisition and its impact on the Company’s business, among other things. These statements are subject to numerous factors that could cause actual results to differ materially from those addressed by such forward-looking statements, including the following: the Company’s exposure to natural and non-natural catastrophic events and circumstances and the variance it may cause in the Company’s financial results; the effect of climate change on the Company’s business, including the trend towards increasingly frequent and severe climate events; the effectiveness of the Company’s claims and claim expense reserving process; the effect of emerging claims and coverage issues; the performance of the Company’s investment portfolio and financial market volatility; the effects of inflation; the ability of the Company’s ceding companies and delegated authority counterparties to accurately assess the risks they underwrite; the Company’s ability to maintain its financial strength ratings; the Company’s reliance on a small number of brokers; the highly competitive nature of the Company’s industry; the historically cyclical nature of the (re)insurance industries; collection on claimed retrocessional coverage, and new retrocessional reinsurance being available on acceptable terms or at all; the Company’s ability to attract and retain key executives and employees; the Company’s ability to successfully implement its business strategies and initiatives; difficulties in integrating Validus; the Company’s exposure to credit loss from counterparties; the Company’s need to make many estimates and judgments in the preparation of its financial statements; the Company’s exposure to risks associated with its management of capital on behalf of investors in joint ventures or other entities it manages; changes to the accounting rules and regulatory systems applicable to the Company’s business, including changes in Bermuda and U.S. laws and regulations; the effect of current or future macroeconomic or geopolitical events or trends, including the ongoing conflicts between Russia and Ukraine, and Israel and Hamas; other political, regulatory or industry initiatives adversely impacting the Company; the Company’s ability to comply with covenants in its debt agreements; the effect of adverse economic factors, including changes in prevailing interest rates; the impact of cybersecurity risks, including technology breaches or failure; a contention by the U.S. Internal Revenue Service that any of the Company’s Bermuda subsidiaries are subject to taxation in the U.S.; the effects of new or possible future tax reform legislation and regulations in the jurisdictions in which the Company operates, including recent changes in Bermuda tax law; the Company’s ability to determine any impairments taken on its investments; the Company’s ability to raise capital on acceptable terms, including through debt instruments, the capital markets, and third party investments in the Company’s joint ventures and managed fund partners; the Company’s ability to comply with applicable sanctions and foreign corrupt practices laws; the Company’s dependence on capital distributions from its subsidiaries; and other factors affecting future results disclosed in RenaissanceRe’s filings with the SEC, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.