RenaissanceRe Reports Q3 2023 Net Income Available to Common Shareholders of $194.0 Million; Operating Income Available to Common Shareholders of $422.3 Million

• Completed acquisition of Validus Re from American International Group, Inc. on November 1, 2023, accelerating the Company’s strategy.

• Annualized return on average common equity of 11.5% and an annualized operating return on average common equity of 25.0%, which includes a dilutive effect of nearly 5 percentage points from the capital raised in Q2 2023 to fund the Validus Acquisition.

• Overall combined ratio of 78.0%.

• Fee income of $64.6 million; up 150.9% from Q3 2022.

• Net investment income of $329.1 million; up 108.6% from Q3 2022.

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

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

• Gross premiums written decreased by $289.3 million, or 36.1%, driven by:

– $230.5 million decrease in the catastrophe class of business, driven by a $236.5 million reduction in gross reinstatement premiums from lower weather-related large losses in the third quarter of 2023.

– $58.8 million decrease in the other property class of business, primarily due to the non-renewal of certain catastrophe exposed quota share programs that did not meet the Company’s return hurdles.

• Net premiums written decreased by $251.6 million, or 36.1%, driven by a $208.3 million reduction in net reinstatement premiums from lower weather-related large losses in the third quarter of 2023.

• Net claims and claim expense ratio - current accident year improved by 120.2 percentage points due to a lower impact from the 2023 Large Loss Events in the third quarter of 2023 than the weather-related large losses in the third quarter of 2022. The 2023 Large Loss Events contributed 14.5 percentage points to the current accident year net claims and claim expense ratio.

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

• Underwriting expense ratio increased 3.5 percentage points, primarily due to the reduction in net reinstatement premiums in the third quarter of 2023 as compared to the third quarter of 2022.

• Combined Ratio improved by 132.8 percentage points, primarily due to a lower level of current accident year net losses combined with higher prior accident year net favorable development.

Underwriting Results - Casualty and Specialty Segment: Combined ratio of 97.0% and underwriting income of $29.8 million

• Gross premiums written decreased by $312.9 million, or 22.0%, driven by:

– a $226.7 million decrease in the credit class of business, principally due to significant premium growth in the third quarter of 2022 associated with opportunistic deals written in the mortgage book of business, which do not renew annually and earn over several years.

– the impact of positive adjustments to premium estimates in the third quarter of 2022 for business underwritten in prior years. Additionally, premium growth in the other specialty class of business as compared to the third quarter of 2022 was offset by a decrease in the casualty classes of business, reflecting proactive cycle management.

• Net premiums written decreased 13.2%, consistent with the changes in gross premiums written, and partially offset by an overall reduction in our retrocessional purchases.

• Net claims and claim expense ratio - current accident year increased by 2.2 percentage points compared to the third quarter of 2022. Event losses on catastrophe exposed lines within Specialty classes of business contributed approximately 3.0 percentage points to the current accident year net claims and claim expense ratio in the third quarter of 2023.

• 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, primarily from other specialty lines of business.

• Underwriting expense ratio decreased 0.3 percentage points, which consisted of a 1.3 percentage point decrease in the net acquisition expense ratio, largely offset by a 1.0 percentage point increase in the operating expense ratio.

Fee Income: $64.6 million of fee income, up 150.9% from Q3 2022; increase in both management and performance fees

• Management fee income increased $19.5 million, reflecting increased capital managed at DaVinciRe Holdings Ltd. (“DaVinci”), Vermeer Reinsurance Ltd. (“Vermeer”) and RenaissanceRe Medici Fund Ltd. (“Medici”), as well as 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 third quarter of 2022, as a result of the weather-related large losses.

• Performance fee income increased $19.3 million, driven by improved current year underwriting results, primarily in DaVinci.

Investment Results: Total investment result improved $584.7 million; net investment income growth of 108.6%

• Net investment income increased $171.3 million, primarily driven by a combination of higher average invested assets and higher yielding assets in the fixed maturity and short term portfolios.

• Net realized and unrealized gains on investments increased $413.4 million, principally driven by:

– Net realized and unrealized losses on fixed maturity investments trading of $279.3 million, compared to net realized and unrealized losses of $424.2 million in the third quarter of 2022, primarily driven by interest rate increases in each period, with generally lower increases in the current period.

– Net realized and unrealized gains on investment-related derivatives of $30.6 million, compared to net realized and unrealized losses of $55.6 million in the third quarter of 2022. Current quarter gains were driven by short interest rate future positions benefiting from interest rate increases, while long interest rate and equity futures were negatively impacted by U.S. treasury rate increases and equity market declines in the third quarter of 2022.

– Net realized and unrealized gains on catastrophe bonds of $32.5 million, compared to net realized and unrealized losses of $127.0 million in the third quarter of 2022. These catastrophe bonds are primarily held in Medici, the majority of which is owned by third party investors. Both the current and comparative quarter reflected changes in risk spreads in the wider catastrophe bond market.

• Total investments grew to $26.0 billion at September 30, 2023, from $22.2 billion at December 31, 2022, primarily driven by the approximately $2.1 billion raised in the second quarter of 2023 in accordance with the Company’s financing plan for the Validus Acquisition (as defined below). 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 6.3% and 2.1 years (December 31, 2022 - 5.7% and 2.5 years, respectively).

• Net income attributable to redeemable noncontrolling interests of $213.7 million 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 catastrophe bonds recorded during the quarter in Medici, as discussed above.

• Raised third-party capital of $16.3 million in the third quarter of 2023 in Medici.

• Redemptions of third-party capital of $368.7 million during the third quarter of 2023, including the return of $175.0 million of excess capital from Vermeer, and $122.3 million from Upsilon Diversified Fund, as a result of the release of collateral associated with prior years’ contracts.

• Corporate expenses increased by $6.8 million, primarily driven by expenses incurred in support of integration planning activities associated with the Validus Acquisition.

• Income tax expense of $9.3 million compared to $2.8 million in the third quarter of 2022. The increase in income tax expense was primarily driven by increased operating income, partially offset by investment losses, in the Company’s taxable jurisdictions compared to the third quarter of 2022.

• On November 1, 2023, the Company completed its acquisition of certain direct and indirect subsidiaries of American International Group, Inc., including Validus Holdings, Ltd., Validus Specialty, LLC, and Validus Reinsurance, Ltd. (the acquisitions, together with the other transactions contemplated by the Stock Purchase Agreement, the “Validus Acquisition”).

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” and “tangible book value per common share plus accumulated dividends.” 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 Thursday, November 2, 2023 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 well-structured risks with efficient sources of 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; difficulties in integrating the acquired business from the Validus Acquisition; risk that the due diligence process that the Company undertook in connection with the Validus Acquisition may not have revealed all facts that may be relevant in connection with the Validus Acquisition; that historical financial statements of Validus Reinsurance Ltd. are not representative of the future financial position, future results of operations or future cash flows of Validus Reinsurance Ltd. following the Validus Acquisition; 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 highly competitive nature of the Company’s industry and its reliance on a small number of brokers; collection on claimed retrocessional coverage, and new retrocessional reinsurance being available on acceptable terms or at all; the historically cyclical nature of the (re)insurance industries; the Company’s ability to attract and retain key executives and employees; the Company’s ability to successfully implement its business strategies and initiatives; 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 ability to effectively manage 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; 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 and recession or the perception that recession may occur; the effect 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 possible future tax reform legislation and regulations in the jurisdictions in which the Company operates; 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 funds; the Company’s ability to comply with applicable sanctions and foreign corrupt practices laws; the Company’s dependence on the ability of its operating subsidiaries to declare and pay dividends; 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.