RenaissanceRe Reports Operating Income of $28.7 Million for the Fourth Quarter of 2008 or $0.47 Per Common Share; Net Loss of $55.2 Million or $0.91 Loss Per Common Share
Annual Operating Income of $193.0 Million for 2008 or $3.04 Per Common Share; Annual Net Loss of $13.3 Million or $0.21 Loss Per Common Share
PEMBROKE, Bermuda--(BUSINESS WIRE)-- RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported $28.7 million in fourth quarter operating income available to common shareholders, or $0.47 per diluted common share, compared to $186.2 million, or $2.64 per diluted common share, in the fourth quarter of 2007. Operating income excludes net realized losses on investments of $83.9 million and net realized gains on investments of $7.2 million in the fourth quarters of 2008 and 2007, respectively, and, in the fourth quarter of 2007, $131.2 million of net unrealized losses on credit derivatives issued by ChannelRe Holdings Ltd. ("ChannelRe"). Net loss attributable to common shareholders was $55.2 million, or a loss of $0.91 per diluted common share in the fourth quarter of 2008, compared to net income available to common shareholders of $62.2 million, or $0.88 per diluted common share for the same quarter of 2007.
Neill A. Currie, CEO, commented: "Our results reflect the impact of a tumultuous investment environment, as negative total returns in our investment portfolio for the quarter overshadowed very strong operating results. These strong results include over $200.0 million of underwriting profits and a 36% combined ratio, driven in part by a low level of insured catastrophe losses and favorable reserve development. We generated $193.0 million of operating income and a 7.4% operating return on equity for the year."
Mr. Currie added: "The results of our January 1 renewals reflect an improving pricing environment. With our well-capitalized balance sheet, strong ratings at all of our operating subsidiaries and continued investments in our people, infrastructure and product offerings, we are well positioned to execute on the opportunities we see in 2009 and beyond."
FOURTH QUARTER 2008 HIGHLIGHTS
Underwriting Results
Gross premiums written for the fourth quarter of 2008 were $161.6 million, a $39.4 million increase from the fourth quarter of 2007, driven by increases in both of the Company's segments as described in more detail below. The Company generated $205.7 million of underwriting income and had a combined ratio of 36.1% in the fourth quarter of 2008, compared to $177.3 million of underwriting income and a combined ratio of 47.3% in the fourth quarter of 2007. The Company experienced $104.2 million of favorable development on prior year reserves in the fourth quarter of 2008, compared to $106.8 million in the fourth quarter of 2007.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment increased $26.7 million to $53.4 million in the fourth quarter of 2008, compared to $26.7 million in the fourth quarter of 2007. The increase is due to a $35.4 million increase in gross premiums written in the Company's catastrophe reinsurance unit, and was partially offset by an $8.7 million decrease in gross premiums written in the Company's specialty reinsurance unit. The increase in gross premiums written in the Company's catastrophe reinsurance unit is due to several factors including new business, the timing of the inception of the renewal of an existing program, and the lack of significant negative premium adjustments in the fourth quarter of 2008, compared to $20.2 million of negative premium adjustments recorded in the fourth quarter of 2007. The decrease in gross premiums written in the Company's specialty reinsurance unit in the fourth quarter of 2008, compared to the fourth quarter of 2007, was principally due to a reduction in the Company's participation on a personal lines property quota share reinsurance contract.
The Reinsurance segment generated $205.8 million of underwriting income and had a combined ratio of negative 2.8% in the fourth quarter of 2008, compared to $164.7 million of underwriting income and a combined ratio of 29.7% in the fourth quarter of 2007. The increase in underwriting income in the fourth quarter of 2008 was driven by a comparably low level of insured catastrophes and partially offset by a decrease in net premiums earned of $34.2 million. The Company's Reinsurance segment experienced $96.3 million of favorable development on prior year reserves in the fourth quarter of 2008 which includes $83.7 million related to the Company's catastrophe reinsurance unit, principally attributable to a reduction in ultimate net losses associated with hurricanes Katrina, Rita and Wilma which occurred in 2005, and $12.5 million related to the Company's specialty reinsurance unit, principally attributable to lower than expected claims emergence. The net positive impact on the Company's fourth quarter of 2008 results associated with the reduction in the ultimate net losses for the 2005 hurricanes was $45.9 million. Net positive impact includes the sum of estimates of net claims and claim expenses incurred, earned reinstatement premiums assumed and ceded, profit commissions and minority interest.
Individual Risk Segment
Gross premiums written for the Company's Individual Risk segment increased $14.6 million, or 15.6%, to $108.0 million in the fourth quarter of 2008, compared to $93.4 million in the fourth quarter of 2007, with the increase driven by a $23.6 million increase in the multi-peril crop insurance line of business and offset by modest decreases in the commercial multi-line, commercial property and personal lines property businesses. The increase in the multi-peril crop insurance line of business was primarily due to higher commodity prices on a comparative basis for the insured winter crops and an increase in insured acres. Due principally to growth in the Company's Individual Risk segment's net premiums written for the year, net premiums earned increased $19.9 million to $121.8 million in the fourth quarter of 2008, compared to $101.9 million in the fourth quarter of 2007.
The Individual Risk segment incurred a $0.1 million underwriting loss which resulted in a 100.1% combined ratio in the fourth quarter of 2008, compared to $12.5 million of underwriting income and an 87.7% combined ratio in the fourth quarter of 2007. The reduction in underwriting income and increase in the combined ratio were driven in part by lower commodity prices during the multi-peril crop insurance policy settlement period in the fourth quarter of 2008 which led to an increase in the loss ratio and higher net claims and claim expenses for this line of business compared to the fourth quarter of 2007. In addition, the multi-peril crop insurance line of business now comprises a larger proportion of the Individual Risk segment's gross premiums written than in 2007. Offsetting the increase in the multi-peril crop insurance loss ratio was a decrease in the acquisition ratio associated with this line of business. Certain components of underwriting expenses that were incurred in the fourth quarter of 2007 are no longer reflected due to the Company's acquisition of substantially all of the assets of Agro National, the agency that produces this business, in the second quarter of 2008.
The Individual Risk segment experienced $7.9 million of favorable development on prior year reserves in the fourth quarter of 2008 compared to $8.1 million of favorable development in the fourth quarter of 2007. The favorable development on prior year reserves was principally due to revised reported loss development patterns for several of the Company's liability lines of business that were enhanced to reflect the Company's actual experience to date with these lines. The favorable development is principally attributable to the 2004 through 2007 accident years.
Investments
Returns on the Company's investment portfolio were down significantly in the fourth quarter of 2008 compared to the fourth quarter of 2007. The lower returns were principally due to widening credit spreads as a result of the turmoil in the financial markets which resulted in realized and unrealized losses within the Company's fixed maturity investments available for sale combined with lower returns within the Company's other investments. The Company's total investment result, which includes the sum of net investment loss, net realized losses on investments and the net change in unrealized holding gains on fixed maturity investments available for sale, was negative $104.2 million in the fourth quarter of 2008, a $204.7 million decrease from positive $100.5 million in the fourth quarter of 2007.
Net investment loss was $82.7 million in the fourth quarter of 2008 compared to net investment income of $80.7 million in the fourth quarter of 2007, a decrease of $163.4 million. The decrease was principally driven by a $20.7 million decrease in net investment income from the Company's short term investments, principally reflecting lower short term interest rates, a $62.7 million decrease from hedge fund and private equity investments and an $84.7 million decrease from the Company's other investments, principally senior secured bank loan funds and non-U.S. fixed income funds. 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 loss. The results from the Company's other investments described above include net unrealized losses of $155.4 million in the fourth quarter of 2008, compared to $3.8 million of net unrealized losses in the fourth quarter of 2007.
Net realized losses on investments were $83.9 million in the fourth quarter of 2008 compared to net realized gains on investments of $7.2 million in the fourth quarter of 2007, a decrease of $91.1 million. The decrease was driven by a $58.7 million increase in other than temporary impairments which totaled $66.3 million in the fourth quarter of 2008 compared to $7.5 million in the fourth quarter of 2007, principally due to a widening of credit spreads. Included in other than temporary impairment charges are credit-related charges of $0.6 million and $nil for the fourth quarters of 2008 and 2007, respectively. The Company had essentially no fixed maturity investments available for sale in an unrealized loss position at December 31, 2008.
Other Items
-- The Company's cash outflows from operations were $10.4 million for the
fourth quarter of 2008, compared to cash inflows of $166.9 million for
the fourth quarter of 2007.
FULL YEAR 2008 HIGHLIGHTS
For the year ended December 31, 2008, the Company generated operating income available to common shareholders of $193.0 million, compared to $735.5 million in 2007. Operating income excludes net realized losses on investments of $206.3 million and net realized gains on investments of $1.3 million for 2008 and 2007, respectively, and net unrealized losses on credit derivatives issued by ChannelRe of $167.2 million in 2007. Operating income per diluted common share was $3.04 in 2008, compared to $10.24 in 2007. Net loss attributable to common shareholders was $13.3 million or a loss of $0.21 per diluted common share in 2008, compared to net income available to common shareholders of $569.6 million or $7.93 per diluted common share in 2007.
The Company generated an operating return on average common equity of 7.4% for 2008, compared to 27.0% for 2007. The Company generated a return on average common equity of negative 0.5% for 2008, compared to 20.9% for 2007. The Company's book value per common share decreased 5.6% in 2008, compared to a 19.3% increase in 2007.
The Company's 2008 operating results were negatively impacted by $276.2 million of net negative impact related to hurricanes Gustav and Ike. The net negative impact related to hurricanes Gustav and Ike described above includes the sum of net claims and claim expenses incurred, reinstatement premiums earned, lost profit commissions and minority interest. The Company's 2008 operating results were also negatively impacted by its investments results. The Company's net investment income totaled $24.2 million in 2008, a $378.2 million decrease from $402.5 million in 2007. In addition, the Company's total investment result, which includes the sum of net investment income, net realized losses on investments and the net change in unrealized holding gains on fixed maturity investments available for sale, was negative $152.7 million in 2008, a $575.9 million decrease from positive $423.3 million in 2007. The 5.6% decrease in the Company's book value per share in 2008 was principally driven by the Company's share repurchases during the year.
Underwriting Results
Gross premiums written for 2008 were $1,736.0 million, a decrease of $73.6 million, or 4.1%, from 2007. As described in more detail below, the decrease was driven by the then softening market conditions and selective underwriting where the Company chose to reduce its gross premiums written for certain classes of business. The Company's Reinsurance segment gross premiums written decreased $136.0 million, or 10.5%, to $1,154.4 million in 2008, compared to $1,290.4 million in 2007. The Company's Individual Risk segment gross premiums written increased $30.7 million, or 5.5%, to $587.3 million in 2008 from $556.6 million in 2007. As described in more detail below, the Company generated $290.6 million of underwriting income and had a combined ratio of 79.0% in 2008, compared to $579.7 million of underwriting income and a 59.3% combined ratio in 2007. The $289.1 million reduction in underwriting income in 2008 was principally due to hurricanes Gustav and Ike which resulted in $419.1 million of underwriting losses and increased the Company's combined ratio by 32.3 percentage points in 2008. The net negative impact from hurricanes Gustav and Ike was $276.2 million. Following is supplemental financial data regarding the underwriting impact by segment on the Company's 2008 results due to hurricanes Gustav and Ike:
Twelve months ended December 31, 2008
(in millions of United States dollars) Reinsurance Individual Risk Total
Net claims and claim expenses incurred $ (432.6 ) $ (35.4 ) $ (468.0 )
Net reinstatement premiums earned 58.4 (4.8 ) 53.6
Lost profit commissions (4.7 ) - (4.7 )
Net impact on underwriting result (378.9 ) (40.2 ) (419.1 )
Minority interest - DaVinciRe 142.9 - 142.9
Net negative impact $ (236.0 ) $ (40.2 ) $ (276.2 )
Impact on combined ratio 46.6 % 8.4 % 32.3 %
The Company experienced $234.8 million of favorable development on prior year reserves in 2008, compared to $233.2 million of favorable development in 2007, as discussed in more detail below.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment decreased $136.0 million, or 10.5%, to $1,154.4 million in 2008, compared to $1,290.4 million in 2007. For the year ended December 31, 2008, the Company's managed catastrophe premiums and specialty premiums totaled $1,044.3 million and $159.8 million, respectively, compared to $1,032.6 million and $287.3 million, respectively, in 2007. The $11.7 million, or 1.1%, increase in managed catastrophe premiums was principally due to $58.4 million of reinstatement premium written as a result of hurricanes Gustav and Ike and offset by a decrease in gross premiums written due to the then softening market conditions which resulted in lower premium rates and a reduction in business that met the Company's underwriting standards. The $127.5 million, or 44.4%, decrease in specialty premiums was principally driven by one new large transaction in 2007 that renewed in 2008 at a lower participation rate and on a smaller premium base than in 2007, resulting in a $66.4 million decrease in gross premiums written from this contract, combined with the then softening market conditions experienced in 2008, compared to 2007, which generally impacted all lines of business. The Reinsurance segment's gross premiums written continue to be comprised of a relatively small number of large transactions which can result in significant increases or decreases in gross premiums written from one period to the next.
The Reinsurance segment generated $281.6 million of underwriting income and had a combined ratio of 69.0% in 2008, compared to $528.7 million of underwriting income and a 44.8% combined ratio in 2007. The decrease in underwriting income in 2008 was principally driven by a $199.8 million increase in net claims and claims expenses, primarily due to losses associated with hurricanes Gustav and Ike, combined with a $47.9 million decrease in net premiums earned due to the decrease in gross premiums written noted above. Hurricanes Gustav and Ike resulted in $378.9 million in underwriting losses and increased the Reinsurance segment's combined ratio by 46.6 percentage points. The Reinsurance segment experienced $188.1 million of favorable development on prior year reserves in 2008, compared to $194.4 million of favorable development in 2007. The favorable development in 2008 included $131.6 million attributable to the Company's catastrophe reinsurance unit and was principally driven by a reduction of ultimate net losses from the 2005 accident year. The specialty reinsurance unit experienced $56.5 million of favorable development in 2008 which was principally due to lower than expected claims emergence.
Individual Risk Segment
Gross premiums written for the Company's Individual Risk segment increased $30.7 million, or 5.5%, to $587.3 million in 2008, compared to $556.6 million in 2007. The increase in gross premiums written for the Individual Risk segment is primarily due to a $93.8 million increase in the multi-peril crop line of business due principally to higher commodity prices and an increase in insured acres, and partially offset by reductions in the commercial property and commercial multi-line businesses where management maintained underwriting discipline in the then softening U.S. property and casualty market.
The Individual Risk segment generated $9.0 million of underwriting income and a 98.1% combined ratio in 2008, compared to $51.0 million of underwriting income and an 89.1% combined ratio in 2007. The $42.1 million decrease in underwriting income and 9.0 percentage point increase in the combined ratio was principally driven by hurricanes Gustav and Ike which resulted in $40.2 million of underwriting losses and added 8.4 percentage points to the Individual Risk segment's 2008 combined ratio. The Individual Risk segment's multi-peril crop insurance line of business generated an underwriting profit in 2008 and the returns for the year met the Company's long-term expectations. The Individual Risk segment experienced $46.7 million of favorable development in 2008 compared to $38.8 million in 2007. The increase in favorable development is primarily related to lower than expected claims emergence during 2008.
Investments
Returns on the Company's investment portfolio were down significantly in 2008 compared to 2007. The lower returns were principally due to widening credit spreads as a result of the turmoil in the financial markets which resulted in realized and unrealized losses within the Company's fixed maturity investments available for sale combined with lower returns within the Company's other investments. The Company's total investment result, which includes the sum of net investment income, net realized losses on investments and the net change in unrealized holding gains on fixed maturity investments available for sale, was negative $152.7 million in 2008, a $575.9 million decrease from $423.3 million in 2007.
Net investment income was $24.2 million in 2008 compared to $402.5 million in 2007, a decrease of $378.2 million. The decrease was principally driven by a $70.0 million decrease in net investment income from the Company's short term investments, due to lower short term interest rates and lower average short term investment balances, a $189.8 million decrease from hedge fund and private equity investments and a $135.3 million decrease in the Company's other investments, principally senior secured bank loan funds and non-U.S. fixed income funds. 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. The results from the Company's other investments described above include net unrealized losses of $259.4 million in 2008, compared to net unrealized gains of $47.3 million in 2007.
Net realized losses on investments were $206.3 million in 2008 compared to net realized gains on investments of $1.3 million in 2007, a decrease of $207.6 million. The decrease was driven by a $191.5 million increase in other than temporary impairments which totaled $217.0 million in 2008 compared to $25.5 million in 2007, principally due to a widening of credit spreads. Included in other than temporary impairment charges are credit-related charges of $8.3 million and $nil for 2008 and 2007, respectively. The Company had essentially no fixed maturity investments available for sale in an unrealized loss position at December 31, 2008.
Other Items
-- During 2008, the Company repurchased approximately 8.1 million common
shares in open market transactions at an aggregate cost of $428.4
million and at an average share price of $53.11.
-- The Company's cash flows from operations were $544.0 million in 2008,
compared to $793.2 million in 2007.
This press release includes certain non-GAAP financial measures including "operating income," "operating income per common share - diluted," "operating return on average common equity - annualized" and "managed catastrophe 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, February 12, 2009 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 and certain joint ventures and other investments managed by the Company's subsidiary RenaissanceRe Ventures Ltd., and (2) Individual Risk, which includes primary insurance and quota share reinsurance.
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, 2007 and its quarterly reports on Form 10-Q for the quarters ending March 31, 2008, June 30, 2008 and September 30, 2008.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Statements of Operations
For the three and twelve months ended December 31, 2008 and 2007
(in thousands of United States Dollars, except per share amounts)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31, December 31, 2008 December 31, 2007
2008 2007
Revenues
Gross premiums $ 161,609 $ 122,227 $ 1,736,028 $ 1,809,637
written
Net premiums $ 142,074 $ 105,303 $ 1,353,620 $ 1,435,335
written
Decrease
(increase) in 179,921 230,937 33,204 (10,966 )
unearned
premiums
Net premiums 321,995 336,240 1,386,824 1,424,369
earned
Net investment (82,724 ) 80,714 24,231 402,463
(loss) income
Net foreign
exchange (5,553 ) 4,598 2,600 3,968
(losses) gains
Equity in
earnings 148 (124,999 ) 13,603 (128,609 )
(losses) of
other ventures
Other income 6 (20,221 ) 10,252 (37,930 )
(loss)
Net realized
(losses) gains (83,873 ) 7,182 (206,314 ) 1,293
on investments
Total revenues 149,999 283,514 1,231,196 1,665,554
Expenses
Net claims and
claim expenses 28,769 62,728 760,489 479,274
incurred
Acquisition 59,281 67,973 213,553 254,930
expenses
Operational 28,262 28,287 122,165 110,464
expenses
Corporate 6,705 9,771 25,635 28,860
expenses
Interest 6,513 7,226 24,633 33,626
expense
Total expenses 129,530 175,985 1,146,475 907,154
Income before
minority 20,469 107,529 84,721 758,400
interest and
taxes
Minority
interest - (65,454 ) (54,070 ) (55,133 ) (164,396 )
DaVinciRe
(Loss) income (44,985 ) 53,459 29,588 594,004
before taxes
Income tax
benefit 368 19,320 (568 ) 18,432
(expense)
Net (loss) (44,617 ) 72,779 29,020 612,436
income
Dividends on
preference (10,575 ) (10,575 ) (42,300 ) (42,861 )
shares
Net (loss)
income
(attributable) $ (55,192 ) $ 62,204 $ (13,280 ) $ 569,575
available to
common
shareholders
Operating
income
available to
common $ 0.47 $ 2.64 $ 3.04 $ 10.24
shareholders
per Common
Share -
diluted (1)
Net (loss)
income
(attributable)
available to $ (0.91 ) $ 0.90 $ (0.21 ) $ 8.08
common
shareholders
per Common
Share - basic
Net (loss)
income
(attributable)
available to
common $ (0.91 ) $ 0.88 $ (0.21 ) $ 7.93
shareholders
per Common
Share -
diluted (2)
Average shares
outstanding - 60,732 68,966 62,531 70,520
basic
Average shares
outstanding - 61,269 70,413 63,411 71,825
diluted
Net claims and
claim expense 8.9 % 18.7 % 54.8 % 33.6 %
ratio
Expense ratio 27.2 % 28.6 % 24.2 % 25.7 %
Combined ratio 36.1 % 47.3 % 79.0 % 59.3 %
Operating
return on
average common 4.8 % 26.1 % 7.4 % 27.0 %
equity -
annualized (1)
(1) See Comments on Regulation G for a reconciliation of non-GAAP financial
measures.
(2) In accordance with FAS 128, earnings per share calculations use average
common shares outstanding - basic, when in a net loss position.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Balance Sheets
(in thousands of United States Dollars, except per share amounts)
At
December 31, 2008 December 31, 2007
(Unaudited) (Audited)
Assets
Fixed maturity investments available for $ 2,996,885 $ 3,914,363
sale, at fair value
Short term investments, at fair value 2,172,343 1,821,549
Other investments, at fair value 773,475 807,864
Investments in other ventures, under 99,879 90,572
equity method
Total investments 6,042,582 6,634,348
Cash and cash equivalents 274,692 330,226
Premiums receivable 565,630 475,075
Ceded reinsurance balances 88,019 107,916
Losses recoverable 299,534 183,275
Accrued investment income 26,614 39,084
Deferred acquisition costs 81,904 104,212
Receivable for investments sold 236,485 144,037
Other secured assets 76,424 90,488
Other assets 217,986 171,457
Goodwill and other intangibles 74,181 6,237
Total assets $ 7,984,051 $ 8,286,355
Liabilities, Minority Interest and
Shareholders' Equity
Liabilities
Reserve for claims and claim expenses $ 2,160,612 $ 2,028,496
Reserve for unearned premiums 510,235 563,336
Debt 450,000 451,951
Reinsurance balances payable 315,401 275,430
Payable for investments purchased 378,111 422,974
Other secured liabilities 77,420 88,920
Other liabilities 290,998 162,294
Total liabilities 4,182,777 3,993,401
Minority interest - DaVinciRe 768,531 815,451
Shareholders' Equity
Preference shares 650,000 650,000
Common shares 61,503 68,920
Additional paid-in capital 0 107,867
Accumulated other comprehensive income 75,387 44,719
Retained earnings 2,245,853 2,605,997
Total shareholders' equity 3,032,743 3,477,503
Total liabilities, minority interest and $ 7,984,051 $ 8,286,355
shareholders' equity
Book value per common share $ 38.74 $ 41.03
Common shares outstanding 61,503 68,920
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Segment Information
(in thousands of United States Dollars) (Unaudited)
Three months ended December 31, 2008
Reinsurance Individual Eliminations Other Total
Risk (1)
Gross
premiums $ 53,407 $ 107,958 $ 244 $ - $ 161,609
written
Net premiums $ 46,557 $ 95,517 - $ 142,074
written
Net premiums $ 200,188 $ 121,807 - $ 321,995
earned
Net claims
and claim (49,857 ) 78,626 - 28,769
expenses
incurred
Acquisition 26,942 32,339 - 59,281
expenses
Operational 17,300 10,962 - 28,262
expenses
Underwriting
income $ 205,803 $ (120 ) - 205,683
(loss)
Net
investment (82,724 ) (82,724 )
loss
Equity in
earnings of 148 148
other
ventures
Other income 6 6
Interest and
preference (17,088 ) (17,088 )
share
dividends
Minority
interest - (65,454 ) (65,454 )
DaVinciRe
Other items, (11,890 ) (11,890 )
net
Net realized
losses on (83,873 ) (83,873 )
investments
Net loss
attributable $ (260,875 ) $ (55,192 )
to common
shareholders
Net claims
and claim
expenses
incurred - $ 46,398 $ 86,546 $ 132,944
current
accident
year
Net claims
and claim
expenses
incurred - (96,255 ) (7,920 ) (104,175 )
prior
accident
years
Net claims
and claim
expenses $ (49,857 ) $ 78,626 $ 28,769
incurred -
total
Net claims
and claim
expense
ratio - 23.2 % 71.1 % 41.3 %
current
accident
year
Net claims
and claim
expense
ratio - (48.1 %) (6.6 %) (32.4 %)
prior
accident
years
Net claims
and claim
expense (24.9 %) 64.5 % 8.9 %
ratio -
calendar
year
Underwriting
expense 22.1 % 35.6 % 27.2 %
ratio
Combined (2.8 %) 100.1 % 36.1 %
ratio
(1) Represents gross premiums ceded from the Individual Risk segment to the
Reinsurance segment.
Three months ended December 31, 2007
Reinsurance Individual Eliminations Other Total
Risk (1)
Gross
premiums $ 26,693 $ 93,353 $ 2,181 $ - $ 122,227
written
Net premiums $ 28,807 $ 76,496 - $ 105,303
written
Net premiums $ 234,375 $ 101,865 - $ 336,240
earned
Net claims
and claim 19,128 43,600 - 62,728
expenses
incurred
Acquisition 33,504 34,469 - 67,973
expenses
Operational 17,026 11,261 - 28,287
expenses
Underwriting $ 164,717 $ 12,535 - 177,252
income
Net
investment 80,714 80,714
income
Equity in
losses of (124,999 ) (124,999 )
other
ventures
Other loss (20,221 ) (20,221 )
Interest and
preference (17,801 ) (17,801 )
share
dividends
Minority
interest - (54,070 ) (54,070 )
DaVinciRe
Other items, 14,147 14,147
net
Net realized
gains on 7,182 7,182
investments
Net income
available to $ (115,048 ) $ 62,204
common
shareholders
Net claims
and claim
expenses
incurred - $ 117,777 $ 51,722 $ 169,499
current
accident
year
Net claims
and claim
expenses
incurred - (98,649 ) (8,122 ) (106,771 )
prior
accident
years
Net claims
and claim
expenses $ 19,128 $ 43,600 $ 62,728
incurred -
total
Net claims
and claim
expense
ratio - 50.3 % 50.8 % 50.4 %
current
accident
year
Net claims
and claim
expense
ratio - (42.1 %) (8.0 %) (31.7 %)
prior
accident
years
Net claims
and claim
expense 8.2 % 42.8 % 18.7 %
ratio -
calendar
year
Underwriting
expense 21.5 % 44.9 % 28.6 %
ratio
Combined 29.7 % 87.7 % 47.3 %
ratio
(1) Represents gross premiums ceded from the Individual Risk segment to the
Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Segment Information (cont'd.)
(in thousands of United States Dollars) (Unaudited)
Twelve months ended December 31, 2008
Reinsurance Individual Eliminations Other Total
Risk (1)
Gross
premiums $ 1,154,391 $ 587,309 $ (5,672 ) $ - $ 1,736,028
written
Net premiums $ 871,893 $ 481,727 - $ 1,353,620
written
Net premiums $ 909,759 $ 477,065 - $ 1,386,824
earned
Net claims
and claim 440,900 319,589 - 760,489
expenses
incurred
Acquisition 105,437 108,116 - 213,553
expenses
Operational 81,797 40,368 - 122,165
expenses
Underwriting $ 281,625 $ 8,992 - 290,617
income
Net
investment 24,231 24,231
income
Equity in
earnings of 13,603 13,603
other
ventures
Other income 10,252 10,252
Interest and
preference (66,933 ) (66,933 )
share
dividends
Minority
interest - (55,133 ) (55,133 )
DaVinciRe
Other items, (23,603 ) (23,603 )
net
Net realized
losses on (206,314 ) (206,314 )
investments
Net loss
attributable $ (303,897 ) $ (13,280 )
to common
shareholders
Net claims
and claim
expenses
incurred - $ 629,022 $ 366,294 $ 995,316
current
accident
year
Net claims
and claim
expenses
incurred - (188,122 ) (46,705 ) (234,827 )
prior
accident
years
Net claims
and claim
expenses $ 440,900 $ 319,589 $ 760,489
incurred -
total
Net claims
and claim
expense
ratio - 69.1 % 76.8 % 71.8 %
current
accident
year
Net claims
and claim
expense
ratio - (20.6 %) (9.8 %) (17.0 %)
prior
accident
years
Net claims
and claim
expense 48.5 % 67.0 % 54.8 %
ratio -
calendar
year
Underwriting
expense 20.5 % 31.1 % 24.2 %
ratio
Combined 69.0 % 98.1 % 79.0 %
ratio
(1) Represents gross premiums ceded from the Individual Risk segment to the
Reinsurance segment.
Twelve months ended December 31, 2007
Reinsurance Individual Eliminations Other Total
Risk (1)
Gross
premiums $ 1,290,420 $ 556,594 $ (37,377 ) $ - $ 1,809,637
written
Net premiums $ 1,024,493 $ 410,842 - $ 1,435,335
written
Net premiums $ 957,661 $ 466,708 - $ 1,424,369
earned
Net claims
and claim 241,118 238,156 - 479,274
expenses
incurred
Acquisition 119,915 135,015 - 254,930
expenses
Operational 67,969 42,495 - 110,464
expenses
Underwriting $ 528,659 $ 51,042 - 579,701
income
Net
investment 402,463 402,463
income
Equity in
losses of (128,609 ) (128,609 )
other
ventures
Other loss (37,930 ) (37,930 )
Interest and
preference (76,487 ) (76,487 )
share
dividends
Minority
interest - (164,396 ) (164,396 )
DaVinciRe
Other items, (6,460 ) (6,460 )
net
Net realized
gains on 1,293 1,293
investments
Net income
available to $ (10,126 ) $ 569,575
common
shareholders
Net claims
and claim
expenses
incurred - $ 435,495 $ 276,929 $ 712,424
current
accident
year
Net claims
and claim
expenses
incurred - (194,377 ) (38,773 ) (233,150 )
prior
accident
years
Net claims
and claim
expenses $ 241,118 $ 238,156 $ 479,274
incurred -
total
Net claims
and claim
expense
ratio - 45.5 % 59.3 % 50.0 %
current
accident
year
Net claims
and claim
expense
ratio - (20.3 %) (8.3 %) (16.4 %)
prior
accident
years
Net claims
and claim
expense 25.2 % 51.0 % 33.6 %
ratio -
calendar
year
Underwriting
expense 19.6 % 38.1 % 25.7 %
ratio
Combined 44.8 % 89.1 % 59.3 %
ratio
(1) Represents gross premiums ceded from the Individual Risk segment to the
Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Gross Premiums Written Analysis
(in thousands of United States Dollars)
(Unaudited)
Three months ended Twelve months ended
Reinsurance Segment December December 31, December 31, December 31, 2007
31, 2008 2007 2008
Renaissance $ 19,487 $ (2,224 ) $ 633,611 $ 662,987
catastrophe premiums
Renaissance 26,875 37,498 153,701 277,882
specialty premiums
Total Renaissance 46,362 35,274 787,312 940,869
premiums
DaVinci catastrophe 5,070 (8,591 ) 361,010 340,117
premiums
DaVinci specialty 1,975 10 6,069 9,434
premiums
Total DaVinci 7,045 (8,581 ) 367,079 349,551
premiums
Total Reinsurance $ 53,407 $ 26,693 $ 1,154,391 $ 1,290,420
premiums
Total specialty $ 28,850 $ 37,508 $ 159,770 $ 287,316
premiums
Total catastrophe $ 24,557 $ (10,815 ) $ 994,621 $ 1,003,104
premiums
Catastrophe premiums
written on behalf of - 2,711 55,370 66,436
our joint venture,
Top Layer Re (1)
Catastrophe premiums
assumed from the 244 2,590 (5,672 ) (36,968 )
Individual Risk
segment
Total managed
catastrophe premiums $ 24,801 $ (5,514 ) $ 1,044,319 $ 1,032,572
(2)
Managed premiums
assumed for - 883 (2,306 ) (59,418 )
fully-collateralized
joint ventures
Total managed
catastrophe
premiums, net of $ 24,801 $ (4,631 ) $ 1,042,013 $ 973,154
fully-collateralized
joint ventures (2)
(1) Top Layer Re is accounted for under the equity method of accounting.
(2) See Comments on Regulation G for a reconciliation of non-GAAP financial
measures.
Three months ended Twelve months ended
Individual Risk December December 31, December 31, December 31, 2007
Segment 31, 2008 2007 2008
Multi-peril crop $ 52,229 $ 28,616 $ 272,559 $ 178,728
Commercial property 18,055 20,559 134,601 164,438
Commercial 27,131 31,840 119,987 162,422
multi-line
Personal lines 10,543 12,338 60,162 51,006
property
Total Individual $ 107,958 $ 93,353 $ 587,309 $ 556,594
Risk premiums
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Total Investment Result
(in thousands of United States Dollars)
(Unaudited)
Three months ended Twelve months ended
December 31, 2008 December 31, December 31, 2008 December 31,
2007 2007
Fixed
maturity
investments $ 53,290 $ 44,339 $ 201,220 $ 176,785
available
for sale
Short term 7,313 28,057 48,437 118,483
investments
Other
investments
Hedge funds
and private (55,364 ) 7,343 (101,779 ) 87,985
equity
investments
Other (84,983 ) (257 ) (117,867 ) 17,469
Cash and
cash 1,552 3,520 7,452 11,026
equivalents
(78,192 ) 83,002 37,463 411,748
Investment (4,532 ) (2,288 ) (13,232 ) (9,285 )
expenses
Net
investment (82,724 ) 80,714 24,231 402,463
(loss)
income
Gross
realized 40,749 17,985 99,634 35,923
gains
Gross
realized (58,371 ) (3,282 ) (88,934 ) (9,117 )
losses
Other than
temporary (66,251 ) (7,521 ) (217,014 ) (25,513 )
impairments
Net
realized
(losses) (83,873 ) 7,182 (206,314 ) 1,293
gains on
investments
Net change
in
unrealized
holding
gains on 62,363 12,612 29,433 19,502
fixed
maturity
investments
available
for sale
Total
investment $ (104,234 ) $ 100,508 $ (152,650 ) $ 423,258
result
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Investment Portfolio - Yield to Maturity and Credit Rating
(in thousands of United States Dollars)
(Unaudited)
Credit Rating (1)
% of Total
Non-
At December 31, Amortized Fair Managed Yield to
2008 AAA AA A BBB Investment Not Rated
Cost Value Investment Maturity
Grade
Portfolio
Short term $ 2,172,343 $ 2,172,343 36.6 % 0.3 % $ 2,071,671 $ 39,397 $ 59,059 $ 1,022 $ 1,194 $ -
investments
100.0 % 95.4 % 1.8 % 2.7 % 0.0 % 0.1 % 0.0 %
Fixed maturity
investments
available for
sale
U.S. treasuries
and agencies
U.S. treasuries 462,489 467,480 7.9 % 1.5 % 467,480 - - - - -
Agency debt
Fannie Mae & 370,519 385,229 6.4 % 1.9 % 385,229 - - - - -
Freddie Mac
Other agencies 61,008 63,292 1.1 % 1.9 % 63,292 - - - - -
Total agency 431,527 448,521 7.5 % 1.9 % 448,521 - - - - -
debt
Total U.S.
treasuries and 894,016 916,001 15.4 % 1.7 % 916,001 - - - - -
agencies
Non U.S. 53,592 57,058 1.0 % 5.9 % 27,483 8,520 226 11,022 9,807 -
government
Corporate 719,234 747,210 12.6 % 5.1 % 305,546 138,885 200,092 54,362 48,325 -
Mortgage-backed
securities
Residential
mortgage-backed
securities
Agency 731,679 756,902 12.7 % 4.0 % 756,902 - - - - -
securities
Non-agency 70,629 70,916 1.2 % 11.9 % 70,374 - - 542 - -
securities
Non-agency
securities - 27,475 27,756 0.5 % 15.6 % 27,152 - - 197 407 -
Alt A
Non-agency
securities - - - 0.0 % 0.0 % - - - - - -
Sub-prime
Total
residential 829,783 855,574 14.4 % 5.0 % 854,428 - - 739 407 -
mortgage-backed
securities
Commercial
mortgage-backed 254,373 255,020 4.3 % 10.5 % 255,020 - - - - -
securities
Total
mortgage-backed 1,084,156 1,110,594 18.7 % 6.3 % 1,109,448 - - 739 407 -
securities
Asset-backed
securities
Auto 95,798 95,812 1.6 % 8.5 % 95,812 - - - - -
Credit cards 12,053 12,056 0.2 % 6.5 % 12,056 - - - - -
Other - 7,638 7,639 0.1 % 5.3 % 7,639 - - - - -
Stranded cost
Other 50,504 50,515 0.8 % 8.2 % 50,515 - - - - -
Total
asset-backed 165,993 166,022 2.7 % 8.1 % 166,022 - - - - -
securities
Total
securitized 1,250,149 1,276,616 21.4 % 6.2 % 1,275,470 - - 739 407 -
assets
Total fixed
maturity
investments 2,916,991 2,996,885 50.4 % 4.7 % 2,524,500 147,405 200,318 66,123 58,539 -
available for
sale
100.0 % 84.2 % 4.9 % 6.7 % 2.2 % 2.0 % 0.0 %
Other
investments
Private equity 258,901 4.3 % - - - - - 258,901
partnerships
Senior secured 215,870 3.6 % - - - - 215,870 -
bank loan funds
Hedge funds 105,838 1.8 % - - - - - 105,838
Catastrophe 93,085 1.6 % - 23,430 - - 68,356 1,299
bonds
Non-U.S. fixed 81,719 1.4 % - - - 59,343 22,376 -
income funds
Miscellaneous
other 18,062 0.3 % - - - 8,880 - 9,182
investments
Total other 773,475 13.0 % - 23,430 - 68,223 306,602 375,220
investments
Total managed
investment $ 5,942,703 100.0 % $ 4,596,171 $ 210,232 $ 259,377 $ 135,368 $ 366,335 $ 375,220
portfolio
100.0 % 77.3 % 3.5 % 4.4 % 2.3 % 6.2 % 6.3 %
(1) The credit ratings included in this table are those assigned by Standard & Poor's Corporation. The Company has grouped short term investments
with an A-1+ and A-1 short-term issue credit rating as AAA, short term investments with A-2 short-term issue credit rating as AA and short term
investments with an A-3 short-term issue credit rating as A.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Investment Portfolio
(in thousands of United States Dollars)
(Unaudited)
At December 31, 2008 At September 30, 2008 Change
% of Total % of Total
Fair Managed Fair Managed
$ %
Value Investment Value Investment
Portfolio Portfolio
Short term $ 2,172,343 36.6 % $ 1,438,201 24.0 % $ 734,142 51.0 %
investments
Fixed maturity
investments
available for
sale
U.S. treasuries
and agencies
U.S. treasuries 467,480 7.9 % 690,265 11.5 % (222,785 ) (32.3 %)
Agency debt
Fannie Mae & 385,229 6.4 % 390,796 6.5 % (5,567 ) (1.4 %)
Freddie Mac
Other agencies 63,292 1.1 % 28,256 0.5 % 35,036 124.0 %
Total agency 448,521 7.5 % 419,052 7.0 % 29,469 7.0 %
debt
Total U.S.
treasuries and 916,001 15.4 % 1,109,317 18.5 % (193,316 ) (17.4 %)
agencies
Non U.S. 57,058 1.0 % 83,556 1.4 % (26,498 ) (31.7 %)
government
Corporate 747,210 12.6 % 740,013 12.4 % 7,197 1.0 %
Mortgage-backed
securities
Residential
mortgage-backed
securities
Agency 756,902 12.7 % 708,269 11.8 % 48,633 6.9 %
securities
Non-agency 70,916 1.2 % 160,289 2.7 % (89,373 ) (55.8 %)
securities
Non-agency
securities - 27,756 0.5 % 60,189 1.0 % (32,433 ) (53.9 %)
Alt A
Non-agency
securities - - 0.0 % - 0.0 % - 0.0 %
Sub-prime
Total
residential 855,574 14.4 % 928,747 15.5 % (73,173 ) (7.9 %)
mortgage-backed
securities
Commercial
mortgage-backed 255,020 4.3 % 435,000 7.3 % (179,980 ) (41.4 %)
securities
Total
mortgage-backed 1,110,594 18.7 % 1,363,747 22.8 % (253,153 ) (18.6 %)
securities
Asset-backed
securities
Auto 95,812 1.6 % 132,185 2.2 % (36,373 ) (27.5 %)
Credit cards 12,056 0.2 % 96,226 1.6 % (84,170 ) (87.5 %)
Other - 7,639 0.1 % 44,841 0.7 % (37,202 ) (83.0 %)
Stranded cost
Other 50,515 0.8 % 75,409 1.3 % (24,894 ) (33.0 %)
Total
asset-backed 166,022 2.7 % 348,661 5.8 % (182,639 ) (52.4 %)
securities
Total
securitized 1,276,616 21.4 % 1,712,408 28.6 % (435,792 ) (25.4 %)
assets
Total fixed
maturity
investments 2,996,885 50.4 % 3,645,294 60.9 % (648,409 ) (17.8 %)
available for
sale
Other
investments
Private equity 258,901 4.3 % 297,167 5.0 % (38,266 ) (12.9 %)
partnerships
Senior secured 215,870 3.6 % 272,752 4.6 % (56,882 ) (20.9 %)
bank loan funds
Hedge funds 105,838 1.8 % 115,345 1.9 % (9,507 ) (8.2 %)
Catastrophe 93,085 1.6 % 83,434 1.4 % 9,651 11.6 %
bonds
Non-U.S. fixed 81,719 1.4 % 104,196 1.7 % (22,477 ) (21.6 %)
income funds
Miscellaneous
other 18,062 0.3 % 29,434 0.5 % (11,372 ) (38.6 %)
investments
Total other 773,475 13.0 % 902,328 15.1 % (128,853 ) (14.3 %)
investments
Total managed
investment $ 5,942,703 100.0 % $ 5,985,823 100.0 % $ (43,120 ) (0.7 %)
portfolio
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Fixed Maturity Investments Available for Sale - Securitized Assets
(in thousands of United States Dollars)
(Unaudited)
% of Total Managed Investment Portfolio
Vintage
% of Total
2003 % of Total
At December 31, Managed & Average
2008 Fair Value 2008 2007 2006 2005 2004 Securitized
Investment Prior Duration
Assets
Portfolio
Total managed
investment $ 5,942,703 100.0 %
portfolio
Mortgage-backed
securities
Residential
mortgage-backed
securities
Agency 756,902 12.7 % 8.5 % 2.0 % 0.7 % 0.7 % 0.5 % 0.3 % 59.2 % 2.5
securities
Non-agency 70,916 1.2 % 0.0 % 0.0 % 0.2 % 0.5 % 0.2 % 0.2 % 5.6 % 0.8
securities
Non-agency
securities - 27,756 0.5 % 0.0 % 0.0 % 0.0 % 0.2 % 0.2 % 0.1 % 2.2 % 0.3
Alt A
Non-agency
securities - - 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % -
Sub-prime
Total
non-agency 98,672 1.7 % 0.0 % 0.0 % 0.2 % 0.7 % 0.4 % 0.3 % 7.8 % 0.6
securities
Total
residential 855,574 14.4 % 8.5 % 2.0 % 0.9 % 1.4 % 0.9 % 0.6 % 67.0 % 2.3
mortgage-backed
securities
Commercial
mortgage-backed 255,020 4.3 % 0.1 % 0.3 % 0.5 % 1.1 % 0.5 % 1.8 % 20.0 % 2.0
securities
Total
mortgage-backed 1,110,594 18.7 % 8.6 % 2.3 % 1.4 % 2.5 % 1.4 % 2.4 % 87.0 % 2.2
securities
Asset-backed
securities
Auto 95,812 1.6 % 0.1 % 0.0 % 0.9 % 0.6 % 0.0 % 0.0 % 7.5 % 0.8
Credit cards 12,056 0.2 % 0.0 % 0.0 % 0.1 % 0.1 % 0.0 % 0.0 % 0.9 % 0.6
Other - 7,639 0.1 % 0.0 % 0.0 % 0.0 % 0.1 % 0.0 % 0.0 % 0.6 % 1.7
Stranded cost
Other 50,515 0.8 % 0.6 % 0.0 % 0.0 % 0.2 % 0.1 % 0.1 % 4.0 % 0.3
Total
asset-backed 166,022 2.7 % 0.7 % 0.0 % 1.0 % 1.0 % 0.1 % 0.1 % 13.0 % 0.7
securities
Total
securitized $ 1,276,616 21.4 % 9.3 % 2.3 % 2.4 % 3.5 % 1.5 % 2.5 % 100.0 % 2.0
assets
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Investment Portfolio - Fixed Maturity Investments
Available for Sale - Corporate
(in thousands of United States Dollars)
(Unaudited)
At December 31, 2008
Non-Investment
Sector Total AAA AA A BBB
Grade
Financials $ 546,493 $ 301,366 $ 117,367 $ 107,720 $ 9,775 $ 10,265
Industrial,
utilities and 68,675 2,644 3,546 31,316 16,897 14,272
energy
Consumer 67,566 1,536 17,972 25,247 9,290 13,521
Communications 56,943 - - 32,586 16,330 8,027
and technology
Basic 7,533 - - 3,223 2,070 2,240
materials
Total
corporate
fixed maturity $ 747,210 $ 305,546 $ 138,885 $ 200,092 $ 54,362 $ 48,325
investments
available for
sale
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Investment Portfolio
Short Term Investments and Fixed Maturity Investments Available for Sale
- Top 10 Corporate Issuers by Fair Value
(in thousands of United States Dollars)
(Unaudited)
At December 31, 2008
Fixed maturity
Short term investments
Issuer Total
investments available
for sale
General Electric Company $ 134,576 $ - $ 134,576
JPMorgan Chase & Co. 66,200 35,952 30,248
Sovereign Bank 51,491 - 51,491
Wells Fargo & Company 44,965 - 44,965
U.S. Bancorp 28,829 7,998 20,831
New York Community Bancorp, Inc. 25,770 - 25,770
PNC Financial Services 21,292 12,897 8,395
Regions Financial Corporation 20,331 - 20,331
SunTrust Banks Inc. 19,016 - 19,016
Bank of America Corporation 18,059 - 18,059
Total $ 430,529 $ 56,847 $ 373,682
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" 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" as used herein differs from "net income available to common shareholders," which the Company believes is the most directly comparable GAAP measure, by the exclusion of net realized gains and losses on investments and net unrealized gains and losses on credit derivatives issued by entities included in investments in other ventures, under equity method. In the presentation below, the only adjustments in respect of unrealized gains and losses reflect unrealized mark-to-market losses on credit derivatives and other credit-related products issued by ChannelRe, a financial guarantee reinsurer whose investment is accounted for by the Company under the equity method. The Company believes that the prevailing convention among financial guaranty insurers, reinsurers and other market participants, such as ChannelRe, is to exclude from operating income such unrealized gains and losses attributable to credit derivatives and other credit-related products. The Company's management believes that "operating income" 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 investment portfolio and credit derivatives issued by entities included in investments in other ventures, under equity method, which are not considered by management to be relevant indicators of business operations. The Company also uses "operating income" to calculate "operating income per common share - diluted" and "operating return on average common equity - annualized". The following is a reconciliation of: 1) net (loss) income (attributable) available to common shareholders to operating income available to common shareholders; 2) net (loss) income (attributable) available to common shareholders per common share - diluted to operating income available to 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 Twelve months ended
(in thousands
of United
States December 31, December 31, December 31, 2008 December 31, 2007
dollars, 2008 2007
except for per
share amounts)
Net (loss)
income
(attributable) $ (55,192 ) $ 62,204 $ (13,280 ) $ 569,575
available to
common
shareholders
Adjustment for
net realized 83,873 (7,182 ) 206,314 (1,293 )
losses (gains)
on investments
Adjustment for
net unrealized
losses on
credit
derivatives
issued by
entities - 131,201 - 167,171
included in
investments in
other
ventures,
under equity
method
Operating
income
available to $ 28,681 $ 186,223 $ 193,034 $ 735,453
common
shareholders
Net (loss)
income
(attributable)
available to
common (0.91 ) 0.88 (0.21 ) 7.93
shareholders
per common
share -
diluted (1)
Adjustment for
net realized 1.38 (0.10 ) 3.25 (0.02 )
losses (gains)
on investments
Adjustment for
net unrealized
losses on
credit
derivatives
issued by
entities - 1.86 - 2.33
included in
investments in
other
ventures,
under equity
method
Operating
income
available to
common $ 0.47 $ 2.64 $ 3.04 $ 10.24
shareholders
per common
share -
diluted
Return on
average common (9.2 %) 8.7 % (0.5 %) 20.9 %
equity -
annualized
Adjustment for
net realized 14.0 % (1.0 %) 7.9 % (0.1 %)
losses (gains)
on investments
Adjustment for
net unrealized
losses on
credit
derivatives
issued by
entities - 18.4 % - 6.2 %
included in
investments in
other
ventures,
under equity
method
Operating
return on
average common 4.8 % 26.1 % 7.4 % 27.0 %
equity -
annualized
(1) In accordance with FAS 128, earnings per share calculations use average
common shares outstanding - basic, when in a net loss position.
The Company has also included in this Press Release "managed catastrophe premiums" and "managed catastrophe premiums, net of fully-collateralized joint ventures." "Managed catastrophe premiums" is defined as gross catastrophe premiums written by Renaissance Reinsurance and its related joint ventures. "Managed catastrophe premiums" differ from total catastrophe 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 Reinsurance Ltd. ("Top Layer Re"), which is accounted for under the equity method of accounting. "Managed catastrophe premiums, net of fully-collateralized joint ventures" differ from total catastrophe premiums, which the Company believes is the most directly comparable GAAP measure, due to: 1) 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; and 2) the deduction of catastrophe premiums that are written by the Company and ceded directly to the Company's fully-collateralized joint ventures which include Starbound Reinsurance Ltd., Starbound Reinsurance II Ltd. and Timicuan Reinsurance Ltd. The Company's management believes "managed catastrophe premiums" is useful to investors and other interested parties because it provides a measure of total catastrophe reinsurance premiums assumed by the Company through its consolidated subsidiaries and related joint ventures. The Company believes "managed catastrophe premiums, net of fully-collateralized joint ventures" is also a useful measure to investors and other interested parties because it provides a measure of total catastrophe reinsurance premiums assumed by the Company through its consolidated subsidiaries and related joint ventures, net of catastrophe premiums written directly on behalf of the Company's fully-collateralized joint ventures.
Source: RenaissanceRe Holdings Ltd.
Released February 11, 2009