RenaissanceRe Reports Q2 2023 Net Income Available to Common Shareholders of $191.0 Million; Operating Income Available to Common Shareholders of $407.4 Million

• 13.5% annualized return on average common equity and 28.8% annualized operating return on average common equity.
• Third consecutive quarter with annualized operating return on average common equity exceeding 28%, driven by continued positive momentum across the three drivers of profit.
• Strong performance across both segments; Property combined ratio of 63.0% and Casualty and Specialty combined ratio of 93.2%; overall combined ratio of 80.3%.
• Property catastrophe net premiums written grew by $273.4 million or 54.9%, driven by significant rate increases.
• Fee income of $56.7 million; 65.5% growth compared to Q2 2022.
• Net investment income of $292.7 million; 173.0% growth compared to Q2 2022.
• Announced agreement to acquire Validus Re from American International Group, Inc. in $2.985 billion transaction.
• Raised approximately $2.09 billion in net proceeds through the issuance of 7.245 million common shares at $192.00 per share and $750.0 million principal amount of 5.750% Senior Notes due 2033, in accordance with our financing plan for the Validus Acquisition.

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

• Gross premiums written increased by $184.3 million, or 15.1%, driven by:
  • $198.5 million increase in the catastrophe class of business, primarily due to rate improvements on deals written in the second quarter of 2023 which were partially offset by a reduction of premiums written in Upsilon of $110.0 million. In addition, the growth in the catastrophe class of business included an increase in gross reinstatement premiums written of $29.4 million.
  • $14.2 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 increased by $256.7 million, or 28.9%, with an increase of $273.4 million, or 54.9% in the catastrophe class of business, driven by rate improvements and lower ceded premiums written.

• Net claims and claim expense ratio - current accident year increased 8.1 percentage points, primarily as a result of the impact from the 2023 Large Loss Events, which contributed 11.5 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 in the 2017 through 2020 accident years, driven by better than expected loss emergence.

• Underwriting expense ratio decreased 4.2 percentage points, largely driven by improved operating leverage from the increase in net premiums earned from the catastrophe class of business.

• Gross premiums written were relatively flat, reflecting proactive cycle management, as growth in the other specialty class of business was largely offset by a decrease in the professional liability class of business.

• Net premiums written increased 7.7% as a result of decreases in ceded premiums written.

• Net claims and claim expense ratio - current accident year decreased by 1.8 percentage points compared to the second quarter of 2022 due to lower current accident year attritional losses.

• Management fee income increased $12.7 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 previously deferred management fees in DaVinci related to the weather-related large losses experienced in the prior years.

• Performance fee income increased $9.7 million, driven by current year underwriting results.

• Net investment income increased $185.5 million, primarily driven by higher interest rates, higher yielding assets in the fixed maturity and short term portfolios as a result of our reinvestment of the portfolio during the rising interest rate environment throughout 2022 and 2023, as well as increased catastrophe bond yields.

• Net realized and unrealized gains on investments increased $431.3 million, principally driven by:
  • Net realized and unrealized losses on fixed maturity investments trading of $214.0 million, compared to net realized and unrealized losses of $437.0 million in the second quarter of 2022, driven by interest rate increases, which were generally lower in the second quarter of 2023 compared to the interest rate increases in the second quarter of 2022.
  • Equity investments contributed net realized and unrealized gains of $1.9 million, compared to net realized and unrealized losses of $91.5 million in the second quarter of 2022. Both the current and comparative quarter equity investment results were in line with wider equity market movements; and
  • Catastrophe bonds contributed net realized and unrealized gains of $38.2 million compared to net realized and unrealized losses of $24.7 million in the second quarter of 2022. Both the current and comparative quarter reflected changes in risk spreads in the wider catastrophe bond market.

• Total investments were $25.5 billion at June 30, 2023 (December 31, 2022 - $22.2 billion). 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 6.1% and 2.4 years (December 31, 2022 - 5.7% and 2.5 years, respectively).

• Net income attributable to redeemable noncontrolling interests of $174.9 million was primarily driven by:
  • Strong underwriting results for DaVinci and Vermeer;
  • Strong net investment income driven by higher interest rates and yields 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.

• Raised third-party capital of $350.5 million in the second quarter of 2023, including $170.5 million in Medici and $150.0 million in a newly formed segregated account focused on investing in insurance-linked securities (ILS), primarily catastrophe bonds.

• Redemptions of third-party capital of $313.0 million during the second quarter of 2023, of which $285.6 million was from Upsilon Diversified Fund, as a result of the release of collateral associated with prior years’ contracts.

• Corporate expenses increased by $11.0 million, primarily driven by expenses associated with the Validus Acquisition.

• Income tax expense of $5.9 million compared to a benefit of $30.5 million in the second quarter of 2022. The increase in income tax expense was driven by lower investment losses and increased operating income in the Company’s taxable jurisdictions, primarily from the Company’s U.S. operations compared to the second quarter of 2022.

• On May 22, 2023, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with American International Group, Inc. (together with its affiliates and subsidiaries, “AIG”) pursuant to which, upon the terms and subject to the conditions thereof, the Company agreed to purchase certain direct and indirect subsidiaries of AIG, including Validus Holdings, Ltd., Validus Specialty, LLC, and Validus Reinsurance, Ltd. (the acquisitions under the Stock Purchase Agreement, together with the other transactions contemplated thereby, the “Validus Acquisition”). The Validus Acquisition, which is currently expected to close during the fourth quarter of 2023, is subject to customary closing conditions, including, among others, receipt of required regulatory approvals.

• On May 26, 2023, the Company completed an offering of 7,245,000 of our common shares at the public offering price of $192.00 per share. The Company received net proceeds of approximately $1,352.0 million from the offering of common shares after deducting the underwriting discounts and estimated offering expenses payable.

• On June 5, 2023, the Company completed an offering of $750.0 million aggregate principal amount of the Company’s 5.750% Senior Notes due 2033. The Company received net proceeds of approximately $741.0 million from the offering of senior notes after deducting the underwriting discounts and estimated offering expenses payable.

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 Wednesday, July 26, 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, 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 risk that the Validus Acquisition may not be completed within the expected timeframe or at all; the risk that regulatory agencies in certain jurisdictions may impose onerous conditions following the Validus Acquisition; difficulties in integrating the acquired business; 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; the Company’s ability to manage the growth of the acquired business’ operations successfully following 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; risks from The Company’s increased debt obligations as a result of the Validus Acquisition; the Company’s dilutive impact on the Company’s shareholders from the issuance of common shares to AIG in connection with the Validus Acquisition; 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 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 our 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.