RenaissanceRe Reports Operating Income of $167.8 Million for the Third Quarter of 2007 or $2.33 Per Common Share
Net Income of $133.4 Million for the Third Quarter of 2007 or $1.85 Per Common Share
PEMBROKE, Bermuda--(BUSINESS WIRE)--
RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported $167.8 million in third quarter operating income available to common shareholders compared to $247.0 million in the third quarter of 2006. Operating income excludes net realized investment gains of $1.6 million and $4.2 million in the third quarters of 2007 and 2006, respectively, and net unrealized losses on credit derivatives issued by entities included in investments in other ventures, under equity method of $36.0 million in the third quarter of 2007. Operating income per diluted common share was $2.33 in the third quarter of 2007, compared to $3.42 in the third quarter of 2006. Net income available to common shareholders was $133.4 million or $1.85 per diluted common share in the quarter, compared to $251.1 million or $3.48 per diluted common share for the same quarter of 2006.
The Company's results for the third quarter of 2007 were impacted by a $36.0 million charge to reflect an anticipated third quarter loss at ChannelRe Holdings Ltd. ("ChannelRe"), an equity method investment, driven by unrealized mark-to-market losses in ChannelRe's portfolio of financial guaranty contracts accounted for as derivatives under generally accepted accounting principles ("GAAP")
Neill A. Currie, CEO, commented: "We generated solid underwriting profits and strong investment returns during the third quarter. Financial results were positively affected by the lack of hurricanes making landfall in the U.S., and were negatively impacted by unrealized mark-to-market losses in ChannelRe, flood losses in the U.K., and claims reported in various lines of our specialty reinsurance book."
Mr. Currie added: "Our focus is on growing book value per share over the long term. So far this year, book value per share has increased by 18% and we have generated an annualized operating return on equity in excess of 27%."
Mr. Currie concluded: "I'm very pleased with the quality of the portfolio of insurance and reinsurance business our team has constructed, which reflects our strong underwriting discipline. We look forward to continuing to serve our clients, brokers and joint venture partners during the upcoming renewal season."
THIRD QUARTER 2007 RESULTS
Underwriting Results
The Company's gross premiums written decreased $48.9 million to $208.8 million in the third quarter of 2007, compared to $257.8 million in the third quarter of 2006. As described in more detail below, the decrease in gross premiums written was driven by a $64.7 million decrease in gross premiums written in the Company's Individual Risk segment, partially offset by an $18.2 million increase in gross premiums written in the Company's Reinsurance segment. The Company generated $144.5 million of underwriting income and had a combined ratio of 60.6% in the third quarter of 2007, compared to $233.3 million of underwriting income and a combined ratio of 36.5% in the third quarter of 2006. The Company's underwriting results for the third quarter of 2007, as compared to the third quarter of 2006, were driven by a $103.9 million decrease in underwriting income in the Company's Reinsurance segment and a $15.2 million increase in underwriting income in the Company's Individual Risk segment. Net paid losses for the quarter were $114.3 million compared to $164.5 million in the third quarter of 2006.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment increased $18.2 million to $141.5 million in the third quarter of 2007, compared to $123.3 million in the third quarter of 2006. The comparative change in gross premiums written in the quarter relative to the third quarter of 2006 was impacted by the commutation in 2006 of several large reinsurance contracts which resulted in the return of $28.3 million of premium in the third quarter of 2006. Net premiums earned increased $6.2 million to $242.5 million in the third quarter of 2007, compared to $236.3 million in the third quarter of 2006.
The Reinsurance segment generated $126.8 million of underwriting income in the third quarter of 2007, compared to $230.7 million of underwriting income in the third quarter of 2006. The decrease in underwriting income is in part driven by the impact of the 2006 commutations described above which increased underwriting income by $34.2 million in the third quarter of 2006 and resulted in a $31.4 million net positive impact to the Company after considering minority interest. The Reinsurance segment experienced $83.1 million of current accident year net claims and claim expenses in the third quarter of 2007, compared to $17.1 million in the third quarter of 2006, an increase of $66.0 million. The Reinsurance segment's third quarter 2007 current accident year losses include $36.1 million of losses from the Company's catastrophe unit, principally driven by flood losses in the United Kingdom in July and hurricane Dean which made landfall in August, combined with $47.0 million of losses in the Company's specialty unit, principally driven by three relatively large reported losses in the quarter. In addition, the Reinsurance segment experienced $15.8 million of favorable loss reserve development in the third quarter of 2007, a $42.1 million decrease compared to the third quarter of 2006. Included in the favorable development in the third quarter of 2006 is a $44.4 million decrease in prior year reserves as a result of the commutations noted above. Overall, the Reinsurance segment generated a net claims and claim expense ratio of 27.8%, an underwriting expense ratio of 20.0% and a combined ratio of 47.8% in the third quarter of 2007, compared to a net claims and claim expense ratio, underwriting expense ratio and combined ratio of (17.2%), 19.6% and 2.4%, respectively, in the third quarter of 2006.
Individual Risk Segment
Gross premiums written for the Company's Individual Risk segment decreased $64.7 million to $101.5 million in the third quarter of 2007, compared to $166.2 million in the third quarter of 2006. The Individual Risk segment's commercial multi-line, commercial property and personal lines property lines of business all experienced a decrease in gross premiums written compared to the same period in 2006. The decrease in commercial multi-line gross premiums written was principally driven by the termination of one large program in 2006 and consequently the premium was not written in the third quarter of 2007. The decrease in the commercial property gross premiums written was due to the Company terminating one large commercial property quota share contract in the second quarter of 2007 combined with softening rates in the California earthquake commercial property market resulting in a decrease in business that met the Company's return hurdles. In addition, the decrease in personal lines property gross premiums written was principally due to the Company's decision last year to reduce its exposure to this market and redeploy its capacity within the property catastrophe excess of loss reinsurance market within the Company's Reinsurance segment where the Company found pricing and terms more attractive. Net premiums earned decreased $6.2 million to $124.5 million in the third quarter of 2007, compared to $130.8 million in the third quarter of 2006.
The Individual Risk segment generated $17.8 million of underwriting income in the third quarter of 2007, compared to $2.6 million of underwriting income in the third quarter of 2006. The increase in underwriting income in the third quarter of 2007 compared to the third quarter of 2006 was primarily due to a decrease in net claims and claim expenses incurred. The Individual Risk segment experienced $68.8 million of current accident year net claims and claim expenses in the third quarter of 2007, compared to $78.7 million in the third quarter of 2006, a decrease of $10.0 million. In addition, the Individual Risk segment experienced $4.4 million of favorable development in the third quarter of 2007 compared to $4.5 million of adverse development in the third quarter of 2006. Overall, the Individual Risk segment generated a net claims and claim expense ratio of 51.7%, an underwriting expense ratio of 34.1% and a combined ratio of 85.8% in the third quarter of 2007, compared to a net claims and claim expense ratio, underwriting expense ratio and combined ratio of 63.6%, 34.4% and 98.0%, respectively, in the third quarter of 2006.
Other Items
-- The Company's results for the third quarter of 2007 were
impacted by a $36.0 million charge to reflect an anticipated
third quarter loss at ChannelRe, driven by unrealized
mark-to-market losses in ChannelRe's portfolio of financial
guaranty contracts accounted for as derivatives under GAAP.
The unrealized mark-to-market losses were principally driven
by the widening of credit spreads in the third quarter of
2007.
-- Net investment income for the third quarter of 2007 was $95.6
million, compared to $80.4 million for the same quarter in
2006, principally reflecting higher average invested assets in
the Company's portfolio of fixed maturity investments
available for sale and short term investments and strong
returns from the Company's hedge fund and private equity
investments. Other investments, which include the Company's
hedge fund and private equity investments, generated $19.8
million of net investment income in the third quarter of 2007
compared with $12.8 million in the third quarter of 2006.
-- During the third quarter of 2007, the Company repurchased 1.4
million shares at an aggregate cost of $77.1 million. At
September 30, 2007, $489.2 million remained available under
the Company's share repurchase program.
-- The Company's cash flows from operations were $284.9 million
for the third quarter of 2007, compared to $176.9 million for
the third quarter of 2006.
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 premium". 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 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 Wednesday, October 31, 2007 at 8:30 a.m. (EST) to discuss this release. Live broadcast of the conference call will be available through the Investor 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 news 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, 2006 and its quarterly reports on Form 10-Q for the quarters ending March 31, 2007 and June 30, 2007.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Statements of Operations
For the three and nine months ended September 30, 2007 and 2006
(in thousands of U.S. dollars, except per share amounts)
(Unaudited)
Three months ended Nine months ended
------------------- ---------------------
September September September September
30, 2007 30, 2006 30, 2007 30, 2006
--------- --------- ---------- ----------
Revenues
Gross premiums written $ 208,821 $ 257,752 $1,687,410 $1,748,695
========= ========= ========== ==========
Net premiums written $ 149,163 $ 162,695 $1,330,032 $1,372,774
Decrease (increase) in
unearned premiums 217,894 204,381 (241,903) (223,085)
--------- --------- ---------- ----------
Net premiums earned 367,057 367,076 1,088,129 1,149,689
Net investment income 95,594 80,427 321,749 234,873
Net foreign exchange losses (5,424) (2,160) (630) (1,578)
Equity in (losses) earnings
of other ventures (23,986) 10,131 (3,610) 25,904
Other (loss) income (10,008) 2,006 (17,709) 243
Net realized gains (losses)
on investments 1,592 4,151 (5,889) (36,953)
--------- --------- ---------- ----------
Total revenues 424,825 461,631 1,382,040 1,372,178
--------- --------- ---------- ----------
Expenses
Net claims and claim
expenses incurred 131,700 42,436 416,546 348,950
Acquisition expenses 63,719 63,998 186,957 207,409
Operational expenses 27,126 27,364 82,177 77,351
Corporate expenses 7,158 5,121 19,089 16,431
Interest expense 7,226 9,492 26,400 29,163
--------- --------- ---------- ----------
Total expenses 236,929 148,411 731,169 679,304
--------- --------- ---------- ----------
Income before minority
interest and taxes 187,896 313,220 650,871 692,874
Minority interest -
DaVinciRe (43,820) (52,830) (110,326) (105,494)
--------- --------- ---------- ----------
Income before taxes 144,076 260,390 540,545 587,380
Income tax expense (101) (616) (888) (893)
--------- --------- ---------- ----------
Net income 143,975 259,774 539,657 586,487
Dividends on preference
shares (10,575) (8,662) (32,286) (25,987)
--------- --------- ---------- ----------
Net income available to
common shareholders $ 133,400 $ 251,112 $ 507,371 $ 560,500
========= ========= ========== ==========
Operating income available
to common shareholders per
Common Share - diluted (1) $ 2.33 $ 3.42 $ 7.60 $ 8.30
Net income available to
common shareholders per
Common Share - basic $ 1.89 $ 3.53 $ 7.14 $ 7.89
Net income available to
common shareholders per
Common Share - diluted $ 1.85 $ 3.48 $ 7.02 $ 7.79
Average shares outstanding -
basic 70,575 71,093 71,038 71,026
Average shares outstanding -
diluted 71,945 72,115 72,296 71,942
Net claims and claim expense
ratio 35.9% 11.6% 38.3% 30.4%
Underwriting expense ratio 24.7% 24.9% 24.7% 24.8%
--------- --------- ---------- ----------
Combined ratio 60.6% 36.5% 63.0% 55.2%
========= ========= ========== ==========
Operating return on average
common equity - annualized
(1) 23.6% 45.6% 27.1% 39.8%
========= ========= ========== ==========
(1) Excludes net realized gains and losses on investments and,
commencing in the third quarter of 2007, net unrealized gains and
losses on credit derivatives issued by entities included in
investments in other ventures, under equity method (see- "Comments on
Regulation G").
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Balance Sheets
(in thousands of U.S. dollars, except per share amounts)
At
-----------------------
September December
30, 2007 31, 2006
------------ ----------
(Unaudited) (Audited)
Assets
Fixed maturity investments available for sale,
at fair value $3,475,449 $3,111,930
Short term investments, at cost 2,418,958 2,410,971
Other investments, at fair value 716,686 592,829
Investments in other ventures, under equity
method 176,256 227,075
----------- ----------
Total investments 6,787,349 6,342,805
Cash and cash equivalents 317,295 214,399
Premiums receivable 714,495 419,150
Ceded reinsurance balances 194,357 133,971
Losses recoverable 220,037 301,854
Accrued investment income 41,483 41,234
Deferred acquisition costs 142,171 106,918
Receivable for investments sold 197,110 61,061
Other assets 147,041 147,634
----------- ----------
Total assets $8,761,338 $7,769,026
=========== ==========
Liabilities, Minority Interest and
Shareholders' Equity
Liabilities
Reserve for claims and claim expenses $2,128,644 $2,098,155
Reserve for unearned premiums 880,714 578,424
Debt 450,540 450,000
Subordinated obligation to capital trust - 103,093
Reinsurance balances payable 358,333 395,083
Payable for investments purchased 511,153 88,089
Other liabilities 148,388 125,401
----------- ----------
Total liabilities 4,477,772 3,838,245
----------- ----------
Minority interest - DaVinciRe 761,815 650,284
Shareholders' Equity
Preference shares 650,000 800,000
Common shares 70,852 72,140
Additional paid-in capital 212,297 284,123
Accumulated other comprehensive income 29,649 25,217
Retained earnings 2,558,953 2,099,017
----------- ----------
Total shareholders' equity 3,521,751 3,280,497
----------- ----------
Total liabilities, minority interest and
shareholders' equity $8,761,338 $7,769,026
=========== ==========
Book value per common share $ 40.53 $ 34.38
=========== ==========
Common shares outstanding 70,852 72,140
=========== ==========
RenaissanceRe Holdings Ltd. and Subsidiaries
Unaudited Supplemental Financial Data - Segment Information
(in thousands of U.S. dollars, except ratios)
Three months ended September 30, 2007
-------------------------------------------------------
Reinsurance Individual Elimi Other Total
Risk -nations(1)
----------- ----------- ----------- --------- ---------
Gross premiums
written $ 141,545 $101,534 $(34,258) $ - $ 208,821
=========== =========== =========== =========
Net premiums
written $ 91,112 $ 58,051 - $ 149,163
=========== =========== =========
Net premiums
earned $ 242,520 $124,537 - $ 367,057
Net claims and
claim
expenses
incurred 67,335 64,365 - 131,700
Acquisition
expenses 32,122 31,597 - 63,719
Operational
expenses 16,301 10,825 - 27,126
----------- ----------- --------- ---------
Underwriting
income $ 126,762 $ 17,750 - 144,512
=========== ===========
Net investment
income 95,594 95,594
Equity in
losses of
other
ventures (23,986) (23,986)
Other loss (10,008) (10,008)
Interest and
preference
share
dividends (17,801) (17,801)
Minority
interest -
DaVinciRe (43,820) (43,820)
Other items,
net (12,683) (12,683)
Net realized
gains on
investments 1,592 1,592
--------- ---------
Net income
available to
common
shareholders $(11,112) $ 133,400
========= =========
Net claims and
claim
expenses
incurred -
current
accident year $ 83,104 $ 68,755 $ 151,859
Net claims and
claim
expenses
incurred -
prior
accident
years (15,769) (4,390) (20,159)
----------- ----------- ---------
Net claims and
claim
expenses
incurred -
total $ 67,335 $ 64,365 $ 131,700
=========== =========== =========
Net claims and
claim expense
ratio -
current
accident year 34.3% 55.2% 41.4%
Net claims and
claim expense
ratio - prior
accident
years (6.5%) (3.5%) (5.5%)
----------- ----------- ---------
Net claims and
claim expense
ratio -
calendar year 27.8% 51.7% 35.9%
Underwriting
expense ratio 20.0% 34.1% 24.7%
----------- ----------- ---------
Combined ratio 47.8% 85.8% 60.6%
=========== =========== =========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
----------------------------------------------------------------------
Three months ended September 30, 2006
-------------------------------------------------------
Reinsurance Individual Elimi Other Total
Risk -nations(1)
----------- ----------- ----------- --------- ---------
Gross premiums
written $ 123,345 $166,238 $(31,831) $ - $ 257,752
=========== =========== =========== =========
Net premiums
written $ 77,062 $ 85,633 - $ 162,695
=========== =========== =========
Net premiums
earned $ 236,310 $130,766 - $ 367,076
Net claims and
claim
expenses
incurred (40,756) 83,192 - 42,436
Acquisition
expenses 27,890 36,108 - 63,998
Operational
expenses 18,495 8,869 - 27,364
----------- ----------- --------- ---------
Underwriting
income $ 230,681 $ 2,597 - 233,278
=========== ===========
Net investment
income 80,427 80,427
Equity in
earnings of
other
ventures 10,131 10,131
Other income 2,006 2,006
Interest and
preference
share
dividends (18,154) (18,154)
Minority
interest -
DaVinciRe (52,830) (52,830)
Other items,
net (7,897) (7,897)
Net realized
gains on
investments 4,151 4,151
--------- ---------
Net income
available to
common
shareholders $ 17,834 $ 251,112
========= =========
Net claims and
claim
expenses
incurred -
current
accident year $ 17,131 $ 78,736 $ 95,867
Net claims and
claim
expenses
incurred -
prior
accident
years (57,887) 4,456 (53,431)
----------- ----------- ---------
Net claims and
claim
expenses
incurred -
total $(40,756) $ 83,192 $ 42,436
=========== =========== =========
Net claims and
claim expense
ratio -
current
accident year 7.2% 60.2% 26.1%
Net claims and
claim expense
ratio - prior
accident
years (24.4%) 3.4% (14.5%)
----------- ----------- ---------
Net claims and
claim expense
ratio -
calendar year (17.2%) 63.6% 11.6%
Underwriting
expense ratio 19.6% 34.4% 24.9%
----------- ----------- ---------
Combined ratio 2.4% 98.0% 36.5%
=========== =========== =========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Unaudited Supplemental Financial Data - Segment Information (cont'd.)
(in thousands of United States Dollars, except ratios)
Nine months ended September 30, 2007
--------------------------------------------------------
Re Individual Elimi Other Total
-insurance Risk -nations(1)
---------- ----------- ----------- ---------- ----------
Gross
premiums
written $1,263,727 $ 463,241 $ (39,558) $ - $1,687,410
========== =========== =========== ==========
Net premiums
written $ 995,686 $ 334,346 - $1,330,032
========== =========== ==========
Net premiums
earned $ 723,286 $ 364,843 - $1,088,129
Net claims
and claim
expenses
incurred 221,990 194,556 - 416,546
Acquisition
expenses 86,411 100,546 - 186,957
Operational
expenses 50,943 31,234 - 82,177
---------- ----------- ---------- ----------
Underwriting
income $ 363,942 $ 38,507 - 402,449
========== ===========
Net
investment
income 321,749 321,749
Equity in
losses of
other
ventures (3,610) (3,610)
Other loss (17,709) (17,709)
Interest and
preference
share
dividends (58,686) (58,686)
Minority
interest -
DaVinciRe (110,326) (110,326)
Other items,
net (20,607) (20,607)
Net realized
losses on
investments (5,889) (5,889)
---------- ----------
Net income
available
to common
shareholders $ 104,922 $ 507,371
========== ==========
Net claims
and claim
expenses
incurred -
current
accident
year $ 317,718 $ 225,207 $ 542,925
Net claims
and claim
expenses
incurred -
prior
accident
years (95,728) (30,651) (126,379)
---------- ----------- ----------
Net claims
and claim
expenses
incurred -
total $ 221,990 $ 194,556 $ 416,546
========== =========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 43.9% 61.7% 49.9%
Net claims
and claim
expense
ratio -
prior
accident
years (13.2%) (8.4%) (11.6%)
---------- ----------- ----------
Net claims
and claim
expense
ratio -
calendar
year 30.7% 53.3% 38.3%
Underwriting
expense
ratio 19.0% 36.1% 24.7%
---------- ----------- ----------
Combined
ratio 49.7% 89.4% 63.0%
========== =========== ==========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
----------------------------------------------------------------------
Nine months ended September 30, 2006
--------------------------------------------------------
Re Individual Elimi Other Total
-insurance Risk -nations(1)
---------- ----------- ----------- ---------- ----------
Gross
premiums
written $1,269,444 $ 547,791 $ (68,540) $ - $1,748,695
========== =========== =========== ==========
Net premiums
written $ 987,077 $ 385,697 - $1,372,774
========== =========== ==========
Net premiums
earned $ 727,744 $ 421,945 - $1,149,689
Net claims
and claim
expenses
incurred 93,869 255,081 - 348,950
Acquisition
expenses 87,487 119,922 - 207,409
Operational
expenses 50,802 26,549 - 77,351
---------- ----------- ---------- ----------
Underwriting
income $ 495,586 $ 20,393 - 515,979
========== ===========
Net
investment
income 234,873 234,873
Equity in
earnings of
other
ventures 25,904 25,904
Other income 243 243
Interest and
preference
share
dividends (55,150) (55,150)
Minority
interest -
DaVinciRe (105,494) (105,494)
Other items,
net (18,902) (18,902)
Net realized
losses on
investments (36,953) (36,953)
---------- ----------
Net income
available to
common
shareholders $ 44,521 $ 560,500
========== ==========
Net claims
and claim
expenses
incurred -
current
accident
year $ 193,620 $ 261,995 $ 455,615
Net claims
and claim
expenses
incurred -
prior
accident
years (99,751) (6,914) (106,665)
---------- ----------- ----------
Net claims
and claim
expenses
incurred -
total $ 93,869 $ 255,081 $ 348,950
========== =========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 26.6% 62.1% 39.6%
Net claims
and claim
expense
ratio -
prior
accident
years (13.7%) (1.6%) (9.2%)
---------- ----------- ----------
Net claims
and claim
expense
ratio -
calendar
year 12.9% 60.5% 30.4%
Underwriting
expense
ratio 19.0% 34.7% 24.8%
---------- ----------- ----------
Combined
ratio 31.9% 95.2% 55.2%
========== =========== ==========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Unaudited Supplemental Financial Data
(in thousands of U.S. dollars)
Three months ended Nine months ended
------------------- ----------------------
Reinsurance Segment September September September September
30, 2007 30, 2006 30, 2007 30, 2006
--------------------------- --------- --------- ---------- -----------
Renaissance catastrophe
premiums $ 84,271 $ 92,150 $ 665,211 $ 753,009
Renaissance specialty
premiums 39,536 20,367 240,384 169,947
--------- --------- ---------- -----------
Total Renaissance
premiums 123,807 112,517 905,595 922,956
--------- --------- ---------- -----------
DaVinci catastrophe
premiums 17,856 10,578 348,708 322,922
DaVinci specialty premiums (118) 250 9,424 23,566
--------- --------- ---------- -----------
Total DaVinci premiums 17,738 10,828 358,132 346,488
--------- --------- ---------- -----------
Total Reinsurance premiums $141,545 $123,345 $1,263,727 $1,269,444
========= ========= ========== ===========
Total specialty premiums $ 39,418 $ 20,617 $ 249,808 $ 193,513
========= ========= ========== ===========
Total catastrophe premiums $102,127 $102,728 $1,013,919 $1,075,931
Catastrophe premiums
written on behalf of
our joint venture, Top
Layer Re (1) - 1,189 63,725 51,244
Catastrophe premiums
assumed from the
Individual Risk
segment (34,258) (31,109) (39,558) (66,205)
--------- --------- ---------- -----------
Total managed
catastrophe premiums
(2) 67,869 72,808 1,038,086 1,060,970
Managed premiums
assumed for fully-
collateralized joint
ventures (938) (3,046) (60,301) (114,299)
--------- --------- ---------- -----------
Total managed
catastrophe premiums,
net of fully-
collateralized joint
ventures (2) $ 66,931 $ 69,762 $ 977,785 $ 946,671
========= ========= ========== ===========
(1)Top Layer Re is accounted for under the equity method of
accounting.
(2)See Comments on Regulation G.
----------------------------------------------------------------------
Three months ended Nine months ended
------------------- ----------------------
Individual Risk Segment September September September September
30, 2007 30, 2006 30, 2007 30, 2006
--------------------------- --------- --------- ---------- -----------
Commercial multi-line $ 60,428 $ 92,056 $ 280,694 $ 296,045
Commercial property 26,361 46,597 143,879 179,006
Personal lines property 14,745 27,585 38,668 72,740
--------- --------- ---------- -----------
Total Individual Risk
premiums $101,534 $166,238 $ 463,241 $ 547,791
========= ========= ========== ===========
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 the Company's investments and, commencing in the third quarter of 2007, net unrealized gains and losses on credit derivatives issued by entities included in investments in other ventures, under equity method. Prior to the third quarter of 2007, the Company had no 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 for the current period 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 guarantee 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 income available to common shareholders to operating income available to common shareholders; 2) net income 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 Nine months ended
------------------- -------------------
(In thousands of U.S. dollars, September September September September
except for per share amounts) 30, 2007 30, 2006 30, 2007 30, 2006
--------- --------- --------- ---------
Net income available to common
shareholders $133,400 $251,112 $507,371 $560,500
Adjustment for net realized
(gains) losses on
investments (1,592) (4,151) 5,889 36,953
Adjustment for net
unrealized losses on
credit derivatives issued
by entities included in
investments in other
ventures, under equity
method 35,970 - 35,970 -
--------- --------- --------- ---------
Operating income available to
common shareholders $167,778 $246,961 $549,230 $597,453
========= ========= ========= =========
Net income available to common
shareholders per common share
- diluted $ 1.85 $ 3.48 $ 7.02 $ 7.79
Adjustment for net realized
(gains) losses on
investments (0.02) (0.06) 0.08 0.51
Adjustment for net
unrealized losses on
credit derivatives issued
by entities included in
investments in other
ventures, under equity
method 0.50 - 0.50 -
--------- --------- --------- ---------
Operating income available to
common shareholders per
common share - diluted $ 2.33 $ 3.42 $ 7.60 $ 8.30
========= ========= ========= =========
Return on average common
equity - annualized 18.8% 46.3% 25.0% 37.3%
Adjustment for net realized
(gains) losses on
investments (0.2%) (0.7%) 0.3% 2.5%
Adjustment for net
unrealized losses on
credit derivatives issued
by entities included in
investments in other
ventures, under equity
method 5.0% 0.0% 1.8% 0.0%
--------- --------- --------- ---------
Operating return on average
common equity - annualized 23.6% 45.6% 27.1% 39.8%
========= ========= ========= =========
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 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 October 30, 2007