RenaissanceRe Reports Net Income Available to RenaissanceRe Common Shareholders of $204.8 Million for the Third Quarter of 2010 or $3.70 Per Diluted Common Share
Operating Income of $90.9 Million for the Third Quarter of 2010 or $1.59 Per Diluted Common Share
PEMBROKE, Bermuda--(BUSINESS WIRE)-- RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported net income available to common shareholders of $204.8 million or $3.70 per diluted common share in the third quarter of 2010, compared to net income available to common shareholders of $258.6 million or $4.12 per diluted common share for the third quarter of 2009. Operating income available to common shareholders was $90.9 million or $1.59 per diluted common share in the third quarter of 2010, compared to operating income available to common shareholders of $242.2 million or $3.85 per diluted common share for the third quarter of 2009. Operating income excludes net realized and unrealized gains on fixed maturity investments of $98.0 million and a $15.8 million gain on the sale of the Company's ownership interest in ChannelRe in the third quarter of 2010, compared to net realized gains on fixed maturity investments of $16.8 million and net other-than-temporary impairments of $0.3 million in the third quarter of 2009.
The Company reported an annualized return on average common equity of 25.4% and an annualized operating return on average common equity of 11.3% in the third quarter of 2010, compared to 35.5% and 33.3%, respectively, in the third quarter of 2009. Book value per common share increased $3.61 to $60.57 at September 30, 2010, a 6.3% increase in the third quarter of 2010, compared to an 11.4% increase in the third quarter of 2009.
Neill A. Currie, CEO, commented: "In the third quarter we generated an annualized operating return on average common equity in excess of 11% and grew our book value per share by over 6%, with solid underwriting profits and strong total returns in our investment portfolio contributing to our book value growth. Our results reflect, among other things, a quiet season for land-falling U.S. hurricanes, offset in part by $73.6 million of net negative impact from the New Zealand earthquake."
Mr. Currie added: "Despite a quiet season for land-falling U.S. hurricanes, the New Zealand and Chilean earthquakes this year serve as a reminder that there is significant catastrophe risk around the globe, and that our clients value mitigating this risk. As one of the largest writers of catastrophe reinsurance risk in the world, we seek to build a diversified portfolio of risks that assists our clients in managing their catastrophe risk while also generating solid returns for our shareholders over the long term. As we approach the January 1st renewal season, we will continue to maintain our underwriting discipline, focusing on expected profit rather than premium volume."
THIRD QUARTER 2010 RESULTS
Net Impact of the New Zealand Earthquake
The Company recorded $73.6 million of net negative impact from the New Zealand earthquake in the third quarter of 2010. Net negative impact includes the sum of estimates of net claims and claim expenses incurred, earned reinstatement premiums assumed and ceded, lost profit commissions, equity in net claims and claim expenses of Top Layer Reinsurance Ltd. ("Top Layer Re") and redeemable noncontrolling interest. The Company's estimate of losses from the New Zealand earthquake are based on initial industry insured loss estimates, market share analysis, the application of the Company's modeling techniques, and a review of the Company's in-force contracts. Given the preliminary nature of the information available, the magnitude and recent occurrence of the event, the expected duration of the claims development period, and other factors and uncertainties inherent in loss estimation, meaningful uncertainty remains regarding losses from this event and the Company's actual ultimate net losses from this event will vary from these estimates, perhaps materially. Changes in these estimates will be recorded in the period in which they occur.
See the supplemental financial data below for additional information detailing the net negative impact from this event on the Company's Reinsurance segment results and consolidated financial statements.
New Zealand Earthquake
Three months ended Catastrophe Lloyd's Reinsurance Consolidated
September 30, 2010
(in thousands of United
States dollars)
Net claims and claim $ (77,770 ) $ (1,302 ) $ (79,072 ) $ (79,072 )
expenses incurred
Net reinstatement premiums 5,524 - 5,524 5,524
earned
Lost profit commissions (6,633 ) - (6,633 ) (6,633 )
Net impact on underwriting $ (78,879 ) $ (1,302 ) $ (80,181 ) (80,181 )
result
Equity in net claims and
claim expenses of Top
Layer Re (12,051 )
Redeemable noncontrolling 18,642
interest - DaVinciRe
Net negative impact $ (73,590 )
Impact on combined ratio 47.4 % 9.3 % 38.5 % 26.9 %
Underwriting Results
Gross premiums written for the third quarter of 2010 decreased $75.7 million, or 37.4%, to $126.7 million, compared to $202.4 million for the third quarter of 2009. As described in more detail below, the decrease in gross premiums written was due to decreases in the Company's Insurance segment premiums of $67.6 million, or 81.1%, and in its Reinsurance segment premiums of $13.1 million, or 9.9%. The Company generated $84.6 million of underwriting income and had a combined ratio of 72.6% in the third quarter of 2010, compared to $167.7 million of underwriting income and a 43.3% combined ratio in the third quarter of 2009. Included in the Company's underwriting income for the third quarter of 2010 was $37.0 million of favorable development on prior year reserves, compared to $70.4 million of favorable development on prior year reserves in the third quarter of 2009.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment decreased $13.1 million, or 9.9%, to $119.3 million in the third quarter of 2010, compared to $132.5 million in the third quarter of 2009. The Company's managed catastrophe premiums decreased $13.6 million, or 14.5%, to $79.9 million in the third quarter of 2010, compared to $93.5 million in the third quarter of 2009. The Company's reduction in managed catastrophe premiums principally reflected the deterioration of attractive market conditions on a risk-adjusted basis in the Company's core markets and the non-renewal of a large contract, partially offset by $5.5 million of reinstatement premiums written and earned in the third quarter of 2010 as a direct result of the net claims and claim expenses incurred from the New Zealand earthquake. Excluding the impact of $5.5 million of reinstatement premiums written and earned in the third quarter of 2010, the Company's managed catastrophe gross premiums written declined $19.1 million, or 20.5%. The Company's managed specialty reinsurance premiums increased $6.0 million, or 23.7%, to $31.2 million in the third quarter of 2010, compared to $25.2 million in the third quarter of 2009. In general, the third quarter is not an active period for the inception or renewal of catastrophe exposed reinsurance policies. The increase in the Company's managed specialty reinsurance premiums was primarily due to the inclusion of $8.9 million of specialty premiums written in the Company's Lloyd's unit during the third quarter of 2010. The Company's Lloyd's unit generated $10.3 million of managed gross premiums written in the third quarter of 2010.
Through the first nine months of 2010, the Company's managed catastrophe premiums are down 12.8%, compared to the first nine months of 2009, after excluding $35.2 million of reinstatement gross premiums written in the first nine months of 2010 as a result of the Chilean earthquake, European windstorm Xynthia and the New Zealand earthquake. The Company's managed specialty premiums are up 35.9% through the first nine months of 2010, compared to the first nine months of 2009 and the Company's Lloyd's unit generated $37.3 million of managed premiums written in the first nine months of 2010. The Company's Reinsurance segment premiums are prone to significant volatility due to the timing of contract inception and also due to the business being characterized by a relatively small number of relatively large transactions.
The Company's Reinsurance segment generated $77.2 million of underwriting income and had a combined ratio of 64.8% in the third quarter of 2010, compared to $167.0 million and 17.4%, respectively, in the third quarter of 2009. The $89.9 million decrease in underwriting income was principally due to a $67.3 million increase in current accident year losses, a $28.8 million decrease in favorable development on prior years reserves and a $10.6 million increase in underwriting expenses, partially offset by a $16.8 million increase in net premiums earned in the third quarter of 2010, compared to the third quarter of 2009. The increase in current accident year losses was primarily due to $79.1 million of net claims and claim expenses related to the New Zealand earthquake, which added 38.5 percentage points to the Reinsurance segment's combined ratio, as detailed in the table above.
The Reinsurance segment experienced $33.9 million of favorable development on prior years reserves in the third quarter of 2010 which includes $16.0 million in the Company's catastrophe unit and $17.9 million in the Company's specialty unit. The favorable development in the Company's catastrophe unit was due to decreases in estimated ultimate losses on certain specific events, including $7.4 million related to the 2004 and 2005 hurricanes, and $8.6 million due to better than expected claims emergence associated with a large number of relatively small catastrophes. The Company's specialty unit favorable development on prior years reserves of $17.9 million was driven by the application of the Company's formulaic actuarial reserving methodology for this business with the reductions being due to actual reported loss activity coming in better than expected.
Insurance Segment
Gross premiums written for the Company's Insurance segment decreased $67.6 million, or 81.1%, to $15.7 million in the third quarter of 2010, compared to $83.3 million in the third quarter of 2009, due to decreases in all lines of business. Crop insurance gross premiums written decreased $37.4 million, to negative $16.1 million in the third quarter of 2010, compared to $21.3 million in the third quarter of 2009, principally due to the receipt of updated acreage reports for the 2010 crop year. Gross premiums written in the Company's commercial multi-line, commercial property and personal lines property lines of business decreased $11.9 million, $12.7 million and $5.6 million, respectively, due to softening market conditions and the Company's decision to reduce its participation in certain programs. Gross premiums written in the Company's Insurance segment can fluctuate significantly between quarters and between years based on several factors, including, without limitation, the timing of the inception or cessation of new program managers and quota share reinsurance contracts, including whether or not the Company has portfolio transfers in, or portfolio transfers out, of quota share reinsurance contracts of in-force books of business.
The Insurance segment generated $7.5 million of underwriting income and had a combined ratio of 91.7% in the third quarter of 2010, compared to $0.7 million of underwriting income and a combined ratio of 99.3% in the third quarter of 2009. The increase in underwriting income was primarily due to a $9.0 million decrease in net claims and claim expenses and a $2.9 million decrease in acquisition expenses, partially offset by a $3.4 million decrease in net premiums earned and a $1.7 million increase in operational expenses. The decrease in net claims and claim expenses in the Insurance segment for the third quarter of 2010, compared to the third quarter of 2009, was principally due to reduced losses related to crop hail, a specific product line within the overall crop insurance line of business, which experienced losses from multiple hail storms in highly insured areas during the third quarter of 2009 which did not recur in the third quarter of 2010. The decrease in acquisition expenses in the third quarter of 2010, compared to the third quarter of 2009, was primarily related to ceding commissions on the crop insurance line of business as the Company determined to cede a portion of this business in respect of the 2010 crop year. The Company's Insurance segment experienced $3.1 million of favorable development on prior years reserves in the third quarter of 2010, compared to $7.8 million of favorable development on prior years reserves in the third quarter of 2009.
Investments
Returns on the Company's investment portfolio decreased in the third quarter of 2010, compared to the third quarter of 2009, primarily due to lower total returns in certain of the Company's non-investment grade allocations, which the Company includes in other investments, as well as lower returns in its hedge fund and private equity investments during the third quarter of 2010, compared to the third quarter of 2009. The Company's total investment result, which includes the sum of net investment income, net realized and unrealized gains on fixed maturity investments and net other-than-temporary impairments was $155.5 million in the third quarter of 2010, compared to $198.0 million in the third quarter of 2009. Although the decline in interest rates resulted in strong total returns in the third quarter of 2010 on the Company's fixed maturity portfolio, the average yield on the fixed maturity and short term investment portfolio has declined to 1.7% at September 30, 2010, which the Company currently expects will result in lower net investment income in future periods based on the Company's current portfolio.
Net investment income was $60.9 million in the third quarter of 2010, compared to $106.8 million in the third quarter of 2009. The $45.9 million decrease in net investment income was principally driven by a $28.8 million decrease from the Company's other investments, primarily driven by lower returns for the Company's investments in senior secured bank loan funds due to a more moderate tightening of credit spreads during the third quarter 2010, compared to the third quarter of 2009. In addition, net investment income from the Company's hedge fund and private equity investments decreased $8.0 million due to lower total returns and net investment income from the Company's fixed maturity investments decreased $9.3 million due to lower yields during the third quarter of 2010, compared to the third quarter of 2009. The Company's hedge fund, private equity and other investments are accounted for at fair value with the change in fair value recorded in net investment income which included net unrealized gains of $15.3 million in the third quarter of 2010, compared to $19.2 million in the third quarter of 2009.
Net realized and unrealized gains on fixed maturity investments were $94.6 million in the third quarter of 2010, compared to net realized and unrealized gains on fixed maturity investments of $91.1 million in the third quarter of 2009, an improvement of $3.5 million. During the fourth quarter of 2009, the Company started designating, upon acquisition, certain fixed maturity investments as trading, rather than available for sale, and as a result, $63.1 million of net unrealized gains on these securities are recorded in net realized and unrealized gains on fixed maturity investments in the Company's consolidated statements of operations in the third quarter of 2010 rather than in accumulated other comprehensive income in shareholders' equity.
Other Items
-- As previously reported, the Company sold its entire ownership interest
in ChannelRe Holdings Ltd. ("ChannelRe"), a financial guaranty
reinsurance company, for $15.8 million in July 2010. The Company
recorded a $15.8 million gain, included in other income, in its third
quarter 2010 financial results as a result of the sale. The Company no
longer has an ownership interest in ChannelRe and has no contractual
obligations to provide capital or other financial support to ChannelRe.
-- The Company's equity in (losses) earnings of other ventures decreased
$11.1 million, to a loss of $6.7 million in the third quarter of 2010,
compared to earnings of $4.3 million in the third quarter of 2009,
primarily due to the Company's equity in losses of Top Layer Re of $8.7
million during the third quarter of 2010, as a result of Top Layer Re
experiencing net claims and claim expenses related to the New Zealand
earthquake.
This Press Release includes certain non-GAAP financial measures including "operating income available to RenaissanceRe common shareholders", "operating income available to RenaissanceRe common shareholders per common share - diluted", "operating return on average common equity - annualized", "managed catastrophe premiums", "managed specialty premiums" and "managed Lloyd's unit premiums". 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 "Investor Information - 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.
RenaissanceRe Holdings Ltd. will host a conference call on Thursday, October 28, 2010 at 9:30 a.m. (ET) to discuss this release. Live broadcast of the conference call will be available through the "Investor Information - Company Webcasts" section of RenaissanceRe's website at www.renre.com.
RenaissanceRe Holdings Ltd. is a global provider of reinsurance and insurance. The Company's business consists of two segments: (1) Reinsurance, which includes catastrophe reinsurance, specialty reinsurance, its Lloyd's operations and certain joint ventures and other investments managed by the Company's subsidiary RenaissanceRe Ventures Ltd., and (2) Insurance, which principally includes primary insurance. Effective January 1, 2010, the Company renamed its Individual Risk segment, Insurance.
Cautionary Statement under "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995: Statements made in this earnings release contain information about the Company's future business prospects. These statements may be considered "forward-looking." These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. For further information regarding cautionary statements and factors affecting future results, please refer to RenaissanceRe Holdings Ltd.'s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2009 and its quarterly reports on Form 10-Q.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Statements of Operations
(in thousands of United States Dollars, except per share amounts)
(Unaudited)
Three months ended Nine months ended
September September 30, September 30, September 30,
30, 2009 2010 2009
2010
Revenues
Gross premiums $ 126,679 $ 202,413 $ 1,531,650 $ 1,655,886
written
Net premiums written $ 103,094 $ 75,098 $ 1,071,639 $ 1,153,304
Decrease (increase) 206,295 220,915 (157,602 ) (175,726 )
in unearned premiums
Net premiums earned 309,389 296,013 914,037 977,578
Net investment 60,934 106,815 155,722 263,234
income
Net foreign exchange (529 ) 1,556 (12,480 ) (12,761 )
(losses) gains
Equity in (losses)
earnings of other (6,740 ) 4,331 (1,424 ) 11,499
ventures
Other income (loss) 27,255 13,424 18,430 (5,027 )
Net realized and
unrealized gains on 98,011 16,794 217,715 57,809
fixed maturity
investments
Total
other-than-temporary - (1,408 ) (831 ) (25,719 )
impairments
Portion recognized
in other - 1,062 2 4,518
comprehensive
income, before taxes
Net
other-than-temporary - (346 ) (829 ) (21,201 )
impairments
Total revenues 488,320 438,587 1,291,171 1,271,131
Expenses
Net claims and claim 125,626 38,567 252,350 191,587
expenses incurred
Acquisition expenses 49,977 44,203 134,596 141,302
Operational expenses 49,148 45,498 164,075 132,120
Corporate expenses 5,704 (4,319 ) 16,087 8,608
Interest expense 6,164 3,748 15,526 12,084
Total expenses 236,619 127,697 582,634 485,701
Income before taxes 251,701 310,890 708,537 785,430
Income tax benefit 1,148 (3,993 ) 3,215 (3,793 )
(expense)
Net income 252,849 306,897 711,752 781,637
Net income
attributable to
redeemable (37,524 ) (37,694 ) (99,989 ) (122,821 )
noncontrolling
interest - DaVinciRe
Net income
attributable to 215,325 269,203 611,763 658,816
RenaissanceRe
Dividends on (10,575 ) (10,575 ) (31,725 ) (31,725 )
preference shares
Net income available
to RenaissanceRe $ 204,750 $ 258,628 $ 580,038 $ 627,091
common shareholders
Operating income
available to
RenaissanceRe
common shareholders
per common share - $ 1.59 $ 3.85 $ 5.91 $ 9.43
diluted (1)
Net income available
to RenaissanceRe
common
shareholders per $ 3.73 $ 4.15 $ 10.13 $ 10.09
common share - basic
Net income available
to RenaissanceRe
common
shareholders per
common share - $ 3.70 $ 4.12 $ 10.04 $ 10.03
diluted
Average shares 53,467 60,898 55,804 60,832
outstanding - basic
Average shares 53,965 61,367 56,299 61,226
outstanding - diluted
Net claims and claim 40.6 % 13.0 % 27.6 % 19.6 %
expense ratio
Underwriting expense 32.0 % 30.3 % 32.7 % 28.0 %
ratio
Combined ratio 72.6 % 43.3 % 60.3 % 47.6 %
Operating return on
average common equity 11.3 % 33.3 % 14.5 % 29.5 %
- annualized (1)
(1) See Comments on Regulation G for a reconciliation of non-GAAP financial
measures.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Balance Sheets
(in thousands of United States Dollars, except per share amounts)
At
September 30, December 31,
2010 2009
(Unaudited) (Audited)
Assets
Fixed maturity investments available for sale, at $ 330,056 $ 3,559,197
fair value
Fixed maturity investments trading, at fair value 4,490,081 736,595
Total fixed maturity investments, at fair value 4,820,137 4,295,792
Short term investments, at fair value 884,787 1,002,306
Other investments, at fair value 792,377 858,026
Investments in other ventures, under equity method 79,976 97,287
Total investments 6,577,277 6,253,411
Cash and cash equivalents 351,775 260,716
Premiums receivable 763,549 589,827
Prepaid reinsurance premiums 178,272 91,852
Reinsurance recoverable 200,919 194,241
Accrued investment income 38,811 31,928
Deferred acquisition costs 80,306 61,870
Receivable for investments sold 158,465 7,431
Other secured assets 17,765 27,730
Other assets 200,320 205,347
Goodwill and other intangibles 72,965 76,688
Total assets $ 8,640,424 $ 7,801,041
Liabilities, Redeemable Noncontrolling Interest and Shareholders'
Equity
Liabilities
Reserve for claims and claim expenses $ 1,706,339 $ 1,702,006
Unearned premiums 690,671 446,649
Debt 549,132 300,000
Reinsurance balances payable 364,491 381,548
Payable for investments purchased 304,604 59,236
Other secured liabilities 17,500 27,500
Other liabilities 292,774 256,669
Total liabilities 3,925,511 3,173,608
Redeemable noncontrolling interest - DaVinciRe 741,103 786,647
Shareholders' Equity
Preference shares 650,000 650,000
Common shares 54,875 61,745
Additional paid-in capital 5,840 -
Accumulated other comprehensive income 23,774 41,438
Retained earnings 3,239,321 3,087,603
Total shareholders' equity 3,973,810 3,840,786
Total liabilities, redeemable noncontrolling $ 8,640,424 $ 7,801,041
interest and shareholders' equity
Book value per common share $ 60.57 $ 51.68
Common shares outstanding 54,875 61,745
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Segment Information
(in thousands of United States Dollars) (Unaudited)
Three months ended September 30, 2010
Reinsurance Insurance Eliminations Other Total
(1)
Gross premiums $ 119,339 $ 15,728 $ (8,388 ) $ - $ 126,679
written
Net premiums written $ 92,450 $ 10,644 - $ 103,094
Net premiums earned $ 219,036 $ 90,353 - $ 309,389
Net claims and claim 80,167 45,459 - 125,626
expenses incurred
Acquisition expenses 25,815 24,162 - 49,977
Operational expenses 35,883 13,265 - 49,148
Underwriting income $ 77,171 $ 7,467 - 84,638
Net investment 60,934 60,934
income
Equity in losses of (6,740 ) (6,740 )
other ventures
Other income 27,255 27,255
Interest and
preference share (16,739 ) (16,739 )
dividends
Redeemable
noncontrolling (37,524 ) (37,524 )
interest - DaVinciRe
Other items, net (5,085 ) (5,085 )
Net realized and
unrealized gains on 98,011 98,011
fixed maturity
investments
Net income available
to RenaissanceRe $ 120,112 $ 204,750
common shareholders
Net claims and claim
expenses incurred - $ 114,046 $ 48,582 $ 162,628
current accident
year
Net claims and claim
expenses incurred - (33,879 ) (3,123 ) (37,002 )
prior accident years
Net claims and claim
expenses incurred - $ 80,167 $ 45,459 $ 125,626
total
Net claims and claim
expense ratio - 52.1 % 53.8 % 52.6 %
current accident
year
Net claims and claim
expense ratio - (15.5 %) (3.5 %) (12.0 %)
prior accident years
Net claims and claim
expense ratio - 36.6 % 50.3 % 40.6 %
calendar year
Underwriting expense 28.2 % 41.4 % 32.0 %
ratio
Combined ratio 64.8 % 91.7 % 72.6 %
(1) Represents gross premiums ceded from the Insurance segment to the Reinsurance segment.
Three months ended September 30, 2009
Reinsurance Insurance Eliminations Other Total
(1)
Gross premiums $ 132,487 $ 83,349 $ (13,423 ) $ - $ 202,413
written
Net premiums written $ 43,202 $ 31,896 - $ 75,098
Net premiums earned $ 202,260 $ 93,753 - $ 296,013
Net claims and claim (15,914 ) 54,481 - 38,567
expenses incurred
Acquisition expenses 17,164 27,039 - 44,203
Operational expenses 33,961 11,537 - 45,498
Underwriting income $ 167,049 $ 696 - 167,745
Net investment 106,815 106,815
income
Equity in earnings 4,331 4,331
of other ventures
Other income 13,424 13,424
Interest and
preference share (14,323 ) (14,323 )
dividends
Redeemable
noncontrolling (37,694 ) (37,694 )
interest - DaVinciRe
Other items, net 1,882 1,882
Net realized gains 16,794 16,794
on investments
Net
other-than-temporary (346 ) (346 )
impairments
Net income available
to RenaissanceRe $ 90,883 $ 258,628
common shareholders
Net claims and claim
expenses incurred - $ 46,755 $ 62,256 $ 109,011
current accident
year
Net claims and claim
expenses incurred - (62,669 ) (7,775 ) (70,444 )
prior accident years
Net claims and claim
expenses incurred - $ (15,914 ) $ 54,481 $ 38,567
total
Net claims and claim
expense ratio - 23.1 % 66.4 % 36.8 %
current accident
year
Net claims and claim
expense ratio - (31.0 %) (8.3 %) (23.8 %)
prior accident years
Net claims and claim
expense ratio - (7.9 %) 58.1 % 13.0 %
calendar year
Underwriting expense 25.3 % 41.2 % 30.3 %
ratio
Combined ratio 17.4 % 99.3 % 43.3 %
(1) Represents gross premiums ceded from the Insurance segment to the Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Segment Information (cont'd.)
(in thousands of United States Dollars) (Unaudited)
Nine months ended September 30, 2010
Reinsurance Insurance Eliminations Other Total
(1)
Gross premiums $ 1,163,089 $ 398,832 $ (30,271 ) $ - $ 1,531,650
written
Net premiums written $ 846,089 $ 225,550 - $ 1,071,639
Net premiums earned $ 683,929 $ 230,108 - $ 914,037
Net claims and claim 159,121 93,229 - 252,350
expenses incurred
Acquisition expenses 70,746 63,850 - 134,596
Operational expenses 110,856 53,219 - 164,075
Underwriting income $ 343,206 $ 19,810 - 363,016
Net investment 155,722 155,722
income
Equity in losses of (1,424 ) (1,424 )
other ventures
Other income 18,430 18,430
Interest and
preference share (47,251 ) (47,251 )
dividends
Redeemable
noncontrolling (99,989 ) (99,989 )
interest - DaVinciRe
Other items, net (25,352 ) (25,352 )
Net realized and
unrealized gains on 217,715 217,715
fixed maturity
investments
Net
other-than-temporary (829 ) (829 )
impairments
Net income available
to RenaissanceRe $ 217,022 $ 580,038
common shareholders
Net claims and claim
expenses incurred - $ 379,605 $ 157,861 $ 537,466
current accident
year
Net claims and claim
expenses incurred - (220,484 ) (64,632 ) (285,116 )
prior accident years
Net claims and claim
expenses incurred - $ 159,121 $ 93,229 $ 252,350
total
Net claims and claim
expense ratio - 55.5 % 68.6 % 58.8 %
current accident
year
Net claims and claim
expense ratio - (32.2 %) (28.1 %) (31.2 %)
prior accident years
Net claims and claim
expense ratio - 23.3 % 40.5 % 27.6 %
calendar year
Underwriting expense 26.5 % 50.9 % 32.7 %
ratio
Combined ratio 49.8 % 91.4 % 60.3 %
(1) Represents gross premiums ceded from the Insurance segment to the Reinsurance segment.
Nine months ended September 30, 2009
Reinsurance Insurance Eliminations Other Total
(1)
Gross premiums $ 1,221,035 $ 447,229 $ (12,378 ) $ - $ 1,655,886
written
Net premiums written $ 852,970 $ 300,334 - $ 1,153,304
Net premiums earned $ 656,143 $ 321,435 - $ 977,578
Net claims and claim (40,132 ) 231,719 - 191,587
expenses incurred
Acquisition expenses 57,321 83,981 - 141,302
Operational expenses 98,265 33,855 - 132,120
Underwriting income $ 540,689 $ (28,120 ) - 512,569
(loss)
Net investment 263,234 263,234
income
Equity in earnings 11,499 11,499
of other ventures
Other loss (5,027 ) (5,027 )
Interest and
preference share (43,809 ) (43,809 )
dividends
Redeemable
noncontrolling (122,821 ) (122,821 )
interest - DaVinciRe
Other items, net (25,162 ) (25,162 )
Net realized gains 57,809 57,809
on investments
Net
other-than-temporary (21,201 ) (21,201 )
impairments
Net income available
to RenaissanceRe $ 114,522 $ 627,091
common shareholders
Net claims and claim
expenses incurred - $ 143,636 $ 217,350 $ 360,986
current accident
year
Net claims and claim
expenses incurred - (183,768 ) 14,369 (169,399 )
prior accident years
Net claims and claim
expenses incurred - $ (40,132 ) $ 231,719 $ 191,587
total
Net claims and claim
expense ratio - 21.9 % 67.6 % 36.9 %
current accident
year
Net claims and claim
expense ratio - (28.0 %) 4.5 % (17.3 %)
prior accident years
Net claims and claim
expense ratio - (6.1 %) 72.1 % 19.6 %
calendar year
Underwriting expense 23.7 % 36.6 % 28.0 %
ratio
Combined ratio 17.6 % 108.7 % 47.6 %
(1) Represents gross premiums ceded from the Insurance segment to the Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Gross Premiums Written and Managed Premiums
(in thousands of United States Dollars)
(Unaudited)
Three months ended Nine months ended
Reinsurance Segment September 30, September 30, September 30, September 30,
2010 2009 2010 2009
Renaissance
catastrophe $ 62,434 $ 78,232 $ 633,353 $ 724,131
premiums
Renaissance 21,363 25,249 101,201 90,852
specialty premiums
Total Renaissance 83,797 103,481 734,554 814,983
premiums
DaVinci catastrophe 25,844 29,076 368,587 403,595
premiums
DaVinci specialty 936 (70 ) 2,538 2,457
premiums
Total DaVinci 26,780 29,006 371,125 406,052
premiums
Lloyd's catastrophe 1,422 - 14,415 -
premiums
Lloyd's specialty 8,851 - 23,082 -
premiums
Lloyd's Insurance (1,511 ) - 20,130 -
premiums
Total Lloyd's unit 8,762 - 57,627 -
premiums
Catastrophe unit
premiums ceded to - - (217 ) -
the Lloyd's unit
Total Lloyd's unit
premiums, net of 8,762 - 57,410 -
inter-unit
cessions
Total Reinsurance $ 119,339 $ 132,487 $ 1,163,089 $ 1,221,035
segment premiums
Three months ended Nine months ended
Insurance Segment September 30, September 30, September 30, September 30,
2010 2009 2010 2009
Crop $ (16,116 ) $ 21,296 $ 264,853 $ 264,442
Commercial 19,142 31,066 76,857 81,155
multi-line
Commercial property 2,808 15,514 36,617 64,001
Personal lines 9,894 15,473 20,505 37,631
property
Total Insurance $ 15,728 $ 83,349 $ 398,832 $ 447,229
segment premiums
Three months ended Nine months ended
Managed Premiums September 30, September 30, September 30, September 30,
(1) 2010 2009 2010 2009
Total catastrophe $ 88,278 $ 107,308 $ 1,001,940 $ 1,127,726
unit premiums
Catastrophe
premiums written
on behalf of our 60 (434 ) 45,039 49,542
joint venture, Top
Layer Re (2)
Catastrophe
premiums written 1,422 - 14,415 -
in the Lloyd's
unit
Catastrophe
premiums assumed (9,899 ) (13,423 ) (10,141 ) (12,378 )
from the Insurance
segment
Total managed
catastrophe $ 79,861 $ 93,451 $ 1,051,253 $ 1,164,890
premiums (1)
Total specialty $ 22,299 $ 25,179 $ 103,739 $ 93,309
unit premiums
Specialty premiums
written in the 8,851 - 23,082 -
Lloyd's unit
Total managed
specialty premiums $ 31,150 $ 25,179 $ 126,821 $ 93,309
(1)
Total Lloyd's unit $ 8,762 $ - $ 57,627 $ -
premiums
Catastrophe unit
premiums ceded to - - (217 ) -
the Lloyd's unit
Insurance segment
premiums ceded to 1,511 - (20,130 ) -
the Lloyd's unit
Total managed
Lloyd's unit $ 10,273 $ - $ 37,280 $ -
premiums (1)
(1) See Comments on Regulation G for a reconciliation of non-GAAP financial
measures.
(2) Top Layer Re is accounted for under the equity method of accounting.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Total Investment Result
(in thousands of United States Dollars)
(Unaudited)
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2010 2009 2010 2009
Fixed maturity $ 34,838 $ 44,127 $ 91,223 $ 123,261
investments
Short term 2,469 2,285 7,211 8,097
investments
Other investments
Hedge funds and
private equity 7,491 15,510 33,215 8,096
investments
Other 18,979 47,748 32,013 131,309
Cash and cash 73 102 204 632
equivalents
63,850 109,772 163,866 271,395
Investment expenses (2,916 ) (2,957 ) (8,144 ) (8,161 )
Net investment 60,934 106,815 155,722 263,234
income
Gross realized gains 35,615 26,734 113,560 91,370
Gross realized (748 ) (9,940 ) (11,880 ) (33,561 )
losses
Net realized gains
on fixed maturity 34,867 16,794 101,680 57,809
investments
Net unrealized gains
on fixed maturity 63,144 - 116,035 -
investments trading
Net realized and
unrealized gains on 98,011 16,794 217,715 57,809
fixed maturity
investments
Total
other-than-temporary - (1,408 ) (831 ) (25,719 )
impairments
Portion recognized
in other - 1,062 2 4,518
comprehensive
income, before taxes
Net
other-than-temporary - (346 ) (829 ) (21,201 )
impairments
Net unrealized
(losses) gains on
fixed maturity (3,453 ) 74,697 (21,508 ) 12,124
investments
available for sale
FAS 115-2 cumulative
effect adjustment - - - 76,615
(1)
Net change in
unrealized holding
gains on fixed (3,453 ) 74,697 (21,508 ) 88,739
maturity investments
available for sale
Total investment $ 155,492 $ 197,960 $ 351,100 $ 388,581
result
(1) Cumulative effect adjustment to opening retained earnings as of April 1,
2009, related to the recognition and presentation of other-than-temporary
impairments, as required by FASB ASC Topic Investments - Debt and Equity
Securities.
Comments on Regulation G
In addition to the GAAP financial measures set forth in this Press Release, the Company has included certain non-GAAP financial measures in this Press Release within the meaning of Regulation G. The Company has provided these financial measurements in previous investor communications and the Company's management believes that these measurements are important to investors and other interested persons, and that investors and such other persons benefit from having a consistent basis for comparison between quarters and for the comparison with other companies within the industry. These measures may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on these non-GAAP measures in assessing the Company's overall financial performance.
The Company uses "operating income available to RenaissanceRe common shareholders" as a measure to evaluate the underlying fundamentals of its operations and believes it to be a useful measure of its corporate performance. "Operating income available to RenaissanceRe common shareholders" as used herein differs from "net income available to RenaissanceRe common shareholders," which the Company believes is the most directly comparable GAAP measure, by the exclusion of net realized and unrealized gains and losses on fixed maturity investments, net other-than-temporary impairments and in the third quarter of 2010, the gain on the sale of the Company's ownership interest in ChannelRe. The Company's management believes that "operating income available to RenaissanceRe common shareholders" is useful to investors because it more accurately measures and predicts the Company's results of operations by removing the variability arising from fluctuations in the Company's fixed maturity investment portfolio and the gain associated with the sale of the Company's ownership interest in ChannelRe. The Company also uses "operating income available to RenaissanceRe common shareholders" to calculate "operating income available to RenaissanceRe common shareholders per common share - diluted" and "operating return on average common equity - annualized". The following is a reconciliation of: 1) net income available to RenaissanceRe common shareholders to operating income available to RenaissanceRe common shareholders; 2) net income available to RenaissanceRe common shareholders per common share - diluted to operating income available to RenaissanceRe common shareholders per common share - diluted; and 3) return on average common equity - annualized to operating return on average common equity - annualized:
Three months ended Nine months ended
(in thousands of
United States September September September 30, September 30,
Dollars, except for 30, 2010 30, 2009 2010 2009
per share amounts)
Net income available
to RenaissanceRe $ 204,750 $ 258,628 $ 580,038 $ 627,091
common shareholders
Adjustment for net
realized and
unrealized gains on (98,011 ) (16,794 ) (217,715 ) (57,809 )
fixed maturity
investments
Adjustment for net
other-than-temporary - 346 829 21,201
impairments
Adjustment for gain (15,835 ) - (15,835 ) -
on sale of ChannelRe
Operating income
available to $ 90,904 $ 242,180 $ 347,317 $ 590,483
RenaissanceRe common
shareholders
Net income available
to RenaissanceRe
common shareholders $ 3.70 $ 4.12 $ 10.04 $ 10.03
per common share -
diluted
Adjustment for net
realized and
unrealized gains on (1.82 ) (0.27 ) (3.87 ) (0.94 )
fixed maturity
investments
Adjustment for net
other-than-temporary - - 0.02 0.34
impairments
Adjustment for gain (0.29 ) - (0.28 ) -
on sale of ChannelRe
Operating income
available to
RenaissanceRe common $ 1.59 $ 3.85 $ 5.91 $ 9.43
shareholders per
common share -
diluted
Return on average
common equity - 25.4 % 35.5 % 24.2 % 31.3 %
annualized
Adjustment for net
realized and
unrealized gains on (12.1 %) (2.2 %) (9.1 %) (2.8 %)
fixed maturity
investments
Adjustment for net
other-than-temporary - - - 1.0 %
impairments
Adjustment for gain (2.0 %) - (0.6 %) -
on sale of ChannelRe
Operating return on
average common equity 11.3 % 33.3 % 14.5 % 29.5 %
- annualized
The Company has also included in this Press Release "managed catastrophe premiums", "managed specialty premiums" and "managed Lloyd's unit premiums". "Managed catastrophe premiums" is defined as gross catastrophe premiums written by Renaissance Reinsurance and its related joint ventures, excluding catastrophe premiums assumed from the Company's Insurance segment. "Managed catastrophe premiums" differ from total catastrophe unit premiums, which the Company believes is the most directly comparable GAAP measure, due to the inclusion of catastrophe premiums written on behalf of the Company's joint venture Top Layer Re, which is accounted for under the equity method of accounting, the inclusion of catastrophe premiums written on behalf of the Company's Lloyd's unit, and the exclusion of catastrophe premiums assumed from the Company's Insurance segment. "Managed specialty premiums" is defined as gross specialty premiums written by Renaissance Reinsurance, DaVinci and the Company's Lloyd's unit. "Managed specialty premiums" differ from total specialty unit premiums, which the Company believes is the most directly comparable GAAP measure, due to the inclusion of specialty premiums written on behalf of the Company's Lloyd's unit. "Managed Lloyd's unit premiums" is defined as gross premiums written by the Company Lloyd's unit, excluding premiums assumed from the Company's catastrophe unit and excluding premiums assumed from the Company's Insurance segment. "Managed Lloyd's unit premiums" differ from total Lloyd's unit premiums, which the Company believes is the most directly comparable GAAP measure, due to the exclusion of premiums assumed from the Company's catastrophe unit, and the exclusion of premiums assumed from the Company's Insurance segment. The Company's management believes "managed catastrophe premiums", "managed specialty premiums" and "managed Lloyd's unit premiums" are useful to investors and other interested parties because they provide a measure of total catastrophe, specialty and Lloyd's premiums, as applicable, assumed by the Company through its consolidated subsidiaries and related joint ventures.
Source: RenaissanceRe Holdings Ltd.
Released October 27, 2010