RenaissanceRe Reports Operating Income of $194.7 Million for the Second Quarter of 2007 or $2.69 Per Common Share
Net Income of $183.2 Million for the Second Quarter of 2007 or $2.53 Per Common Share Book Value Per Common Share Grows by 5.9% in the Second Quarter of 2007
PEMBROKE, Bermuda--(BUSINESS WIRE)--
RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported $194.7 million in second quarter operating income available to common shareholders compared to $154.8 million in the second quarter of 2006. Operating income excludes net realized investment losses of $11.6 million and $24.3 million in the second quarters of 2007 and 2006, respectively. Operating income per diluted common share was $2.69 in the second quarter of 2007, compared to $2.15 in the second quarter of 2006. Net income available to common shareholders was $183.2 million or $2.53 per diluted common share in the quarter, compared to net income available to common shareholders of $130.4 million or $1.81 per diluted common share for the same quarter of 2006.
Neill A. Currie, CEO, commented: "We are pleased to report another quarter of strong financial performance with an annualized operating ROE of over 28% and 5.9% growth in book value per share. We generated solid underwriting profits, despite the U.K. floods, achieved strong investment income and participated in the creation of another new fully-collateralized joint venture during the quarter, Starbound II, which helped bring additional capacity to our clients."
Mr. Currie added: "Our focus is on underwriting as much attractive business as possible rather than trying to achieve premium volume targets. Through the first six months, we have written more property catastrophe reinsurance and less individual risk insurance than originally contemplated. I'm very pleased with the in-force portfolio of risks that our team has constructed."
SECOND QUARTER 2007 RESULTS
Underwriting Results
Gross premiums written for the second quarter of 2007 were $845.9 million, a $103.3 million increase from the second quarter of 2006. As described in more detail below, the Company generated $133.6 million of underwriting income and had a combined ratio of 62.7% in the second quarter of 2007, compared to $120.0 million of underwriting income and a 72.2% combined ratio in the second quarter of 2006. The Company's underwriting results for the second quarter of 2007 were driven by an attractive market for the Company's core products and strong renewals and signings by the Company's reinsurance operating subsidiaries, including the inception of an assumed portfolio transfer of a personal lines property quota share reinsurance contract representing $75.4 million of gross premiums written within the Company's specialty unit. Offsetting the factors noted above were losses from flooding in the United Kingdom ("U.K.") and a softening market for other products offered by the Company, which resulted in the Company determining not to renew certain business. In addition, the Company experienced $59.1 million of favorable development on prior year reserves in the second quarter of 2007, compared to $11.3 million of favorable development in the second quarter of 2006.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment increased $43.9 million to $606.2 million in the second quarter of 2007, compared to $562.3 million in the second quarter of 2006. The increase in gross premiums written was primarily driven by the impact of an assumed portfolio transfer of a personal lines property quota share reinsurance contract which resulted in $75.4 million of gross premiums written in the quarter within the Company's specialty unit. Also included in gross premiums written within the Reinsurance segment is $65.8 million of premium that was written on behalf of a new fully-collateralized joint venture, Starbound Reinsurance II Limited. ("Starbound II"), in return for a profit commission and an expense override. The premium is ceded to this joint venture, and therefore, does not impact the Company's net premiums written.
The Reinsurance segment generated $121.1 million of underwriting income and had a combined ratio of 46.5% in the second quarter of 2007, compared to $129.3 million of underwriting income and a combined ratio of 53.5% in the second quarter of 2006. Included in the Reinsurance segment underwriting results for the second quarter of 2007 are $53.0 million of net claims and claim expenses associated with the flooding that occurred in the U.K. in the second quarter of 2007. The Company currently estimates a net negative impact from this event of $41.4 million. Net negative impact includes the sum of net claims and claims expenses incurred and minority interest. The Reinsurance segment experienced $49.7 million of favorable development on prior year reserves or a decrease of 22.0 percentage points to the Company's Reinsurance segment quarterly loss ratio in the second quarter of 2007, compared to $2.8 million of favorable development or a decrease of 1.0 percentage point to the Reinsurance segment quarterly loss ratio in the second quarter of 2006. The favorable development in the second quarter of 2007 was principally the result of lower than expected claims emergence.
Individual Risk
Gross premiums written for the Company's Individual Risk segment increased $27.6 million to $238.4 million in the second quarter of 2007, compared to $210.8 million in the second quarter of 2006. The increase in gross premiums written was primarily due to an increase in the Company's commercial multi-line premium.
The Individual Risk segment generated $12.5 million of underwriting income and had a combined ratio of 90.7% in the second quarter of 2007, compared to a $9.3 million underwriting loss and a 106.1% combined ratio in the second quarter of 2006. The increase in underwriting income in the second quarter of 2007 compared to the second quarter of 2006 was primarily due to a lower net claims and claim expense ratio and underwriting expense ratio. The Individual Risk segment experienced favorable development of $9.5 million and $8.5 million on prior year reserves in the second quarters of 2007 and 2006, respectively, principally attributable to lower than expected claims emergence.
Starbound II
During the second quarter of 2007, the Company participated in the establishment of a new fully-collateralized joint venture, Starbound II. Similar to Starbound Reinsurance Limited ("Starbound Re") which was established in the second quarter of 2006, this joint venture enabled the Company to write additional property catastrophe excess of loss reinsurance business for the Company's clients that it may not have otherwise written due to portfolio management or other considerations. The premium for this joint venture is reflected in gross and ceded premiums written, and therefore, has no impact on the Company's net premiums written. The underwriting result on this business, net of a profit commission and expense override, accrues to the investors in the joint venture. The limit ceded to this joint venture, including any reinstatable limits, is fully-collateralized by highly-rated short term and fixed maturity investments as well as the premium receivable.
In conjunction with the Starbound II transaction, the Company made a $10.0 million equity investment in Starbound II, representing a 9.8% ownership interest. This equity investment is accounted for under the equity method of accounting.
Other Items
-- Net investment income for the second quarter of 2007 was
$118.1 million, compared to $74.0 million for the same quarter
in 2006 as a result of strong returns from the Company's hedge
fund and private equity investments and higher average
invested assets in the Company's portfolio of fixed maturity
investments available for sale and short term investments.
Other investments, which include the Company's hedge fund and
private equity investments, generated $41.6 million of net
investment income in the second quarter of 2007 compared with
$11.1 million in the second quarter of 2006.
-- During the second quarter of 2007, the Company incurred $12.1
million of other than temporary impairment charges on the
Company's fixed maturity investments available for sale,
compared to $23.7 million in the second quarter of 2006.
-- The Company's cash flows from operations were $190.7 million
for the second quarter of 2007, compared to $237.4 million for
the second quarter of 2006.
PREMIUM FORECASTS
The Company is revising its annual premium forecasts. Previously, the Company was forecasting a 15% decline in its managed catastrophe premiums for the year. The Company now expects its managed catastrophe premiums for the year will decrease by approximately 5% from 2006. In addition, the Company now expects its specialty reinsurance premiums to grow by approximately 35% in 2007; the Company's previous guidance was for its specialty reinsurance premiums to be essentially flat for the year. The Company now expects its Individual Risk premiums to be down by at least 10% in 2007; the Company's previous guidance was for its Individual Risk premiums to be essentially flat for the year. The reduction in the Company's expected decline in managed catastrophe premiums for 2007 is due to better than expected renewals during the second quarter of 2007. The increase in the Company's specialty reinsurance premium forecast for 2007 is due principally to one large transaction that incepted in the second quarter of 2007. The decrease in the Company's forecasted Individual Risk premium is due to softening market conditions.
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 Investors 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, August 1, 2007 at 8:00 a.m. (ET) 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. Our business consists of two segments: (1) Reinsurance, which includes catastrophe reinsurance, specialty reinsurance and certain joint ventures and other investments managed by our 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 report on Form 10-Q for the quarter ending March 31, 2007.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Statements of Operations
For the three and six months ended June 30, 2007 and 2006
(in thousands of U.S. dollars, except per share amounts)
(Unaudited)
Three months ended Six months ended
-------------------- -----------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
---------- --------- ----------- -----------
Revenues
Gross premiums written $ 845,860 $742,551 $1,478,589 $1,490,943
========== ========= =========== ===========
Net premiums written $ 609,842 $512,244 $1,180,869 $1,210,079
Increase in unearned
premiums (251,388) (81,303) (459,797) (427,466)
---------- --------- ----------- -----------
Net premiums earned 358,454 430,941 721,072 782,613
Net investment income 118,140 74,012 226,155 154,446
Net foreign exchange
(losses) gains (373) (2,441) 4,794 582
Equity in earnings of
other ventures 9,675 9,221 20,376 15,773
Other loss (5,498) (84) (7,701) (1,763)
Net realized losses on
investments (11,566) (24,348) (7,481) (41,104)
---------- --------- ----------- -----------
Total revenues 468,832 487,301 957,215 910,547
---------- --------- ----------- -----------
Expenses
Net claims and claim
expenses incurred 138,854 207,336 284,846 306,514
Acquisition expenses 59,509 74,597 123,238 143,411
Operational expenses 26,527 29,056 55,051 49,987
Corporate expenses 4,927 5,571 11,931 11,310
Interest expense 7,195 10,370 19,174 19,671
---------- --------- ----------- -----------
Total expenses 237,012 326,930 494,240 530,893
---------- --------- ----------- -----------
Income before minority
interest and taxes 231,820 160,371 462,975 379,654
Minority interest -
DaVinciRe (37,399) (21,207) (66,506) (52,664)
---------- --------- ----------- -----------
Income before taxes 194,421 139,164 396,469 326,990
Income tax expense (680) (94) (787) (277)
---------- --------- ----------- -----------
Net income 193,741 139,070 395,682 326,713
Dividends on preference
shares (10,575) (8,662) (21,711) (17,325)
---------- --------- ----------- -----------
Net income available to
common shareholders $ 183,166 $130,408 $ 373,971 $ 309,388
========== ========= =========== ===========
Operating income
available to common
shareholders per Common
Share - diluted (1) $ 2.69 $ 2.15 $ 5.26 $ 4.88
Net income available to
common shareholders per
Common Share - basic $ 2.57 $ 1.84 $ 5.25 $ 4.36
Net income available to
common shareholders per
Common Share - diluted $ 2.53 $ 1.81 $ 5.16 $ 4.31
Average shares
outstanding - basic 71,259 71,049 71,270 70,992
Average shares
outstanding - diluted 72,430 71,926 72,472 71,856
Net claims and claim
expense ratio 38.7% 48.1% 39.5% 39.2%
Underwriting expense
ratio 24.0% 24.1% 24.7% 24.7%
---------- --------- ----------- -----------
Combined ratio 62.7% 72.2% 64.2% 63.9%
========== ========= =========== ===========
Operating return on
average common equity -
annualized (1) 28.5% 31.3% 28.8% 36.8%
========== ========= =========== ===========
(1) Excludes net realized losses on investments (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
------------------------
June 30, December 31,
2007 2006
----------- ------------
(Unaudited) (Audited)
Assets
Fixed maturity investments available for
sale, at fair value $ 3,179,189 $ 3,111,930
Short term investments, at cost 2,268,172 2,410,971
Other investments, at fair value 661,709 592,829
Investments in other ventures, under equity
method 235,371 227,075
----------- ------------
Total investments 6,344,441 6,342,805
Cash and cash equivalents 266,455 214,399
Premiums receivable 927,657 419,150
Ceded reinsurance balances 241,488 133,971
Losses recoverable 236,990 301,854
Accrued investment income 41,824 41,234
Deferred acquisition costs 171,931 106,918
Receivable for investments sold 248,406 61,061
Other assets 134,190 147,634
----------- ------------
Total assets $ 8,613,382 $ 7,769,026
=========== ============
Liabilities, Minority Interest and
Shareholders' Equity
Liabilities
Reserve for claims and claim expenses $ 2,128,216 $ 2,098,155
Reserve for unearned premiums 1,145,739 578,424
Debt 450,000 450,000
Subordinated obligation to capital trust - 103,093
Reinsurance balances payable 344,945 395,083
Payable for investments purchased 255,852 88,089
Other liabilities 114,406 125,401
----------- ------------
Total liabilities 4,439,158 3,838,245
----------- ------------
Minority interest - DaVinciRe 714,186 650,284
Shareholders' Equity
Preference shares 650,000 800,000
Common shares 72,266 72,140
Additional paid-in capital 283,693 284,123
Accumulated other comprehensive income 12,939 25,217
Retained earnings 2,441,140 2,099,017
----------- ------------
Total shareholders' equity 3,460,038 3,280,497
----------- ------------
Total liabilities, minority interest and
shareholders' equity $ 8,613,382 $ 7,769,026
=========== ============
Book value per common share $ 38.88 $ 34.38
=========== ============
Common shares outstanding 72,266 72,140
=========== ============
RenaissanceRe Holdings Ltd. and Subsidiaries
Unaudited Supplemental Financial Data - Segment Information
(in thousands of U.S. dollars)
----------------------------------------------------------------------
Three months ended June 30, 2007
--------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ---------- ------------ --------- ----------
Gross
premiums
written $606,215 $238,391 $ 1,254 $ - $845,860
=========== ========== ============ ==========
Net premiums
written $428,355 $181,487 - $609,842
=========== ========== ==========
Net premiums
earned $225,987 $132,467 - $358,454
Net claims
and claim
expenses
incurred 62,528 76,326 - 138,854
Acquisition
expenses 25,927 33,582 - 59,509
Operational
expenses 16,451 10,076 - 26,527
----------- ---------- --------- ----------
Underwriting
income $121,081 $ 12,483 - 133,564
=========== ==========
Net
investment
income 118,140 118,140
Equity in
earnings of
other
ventures 9,675 9,675
Other loss (5,498) (5,498)
Interest and
preference
share
dividends (17,770) (17,770)
Minority
interest -
DaVinciRe (37,399) (37,399)
Other items,
net (5,980) (5,980)
Net realized
losses on
investments (11,566) (11,566)
--------- ----------
Net income available to
common shareholders $ 49,602 $183,166
========= ==========
Net claims
and claim
expenses
incurred -
current
accident
year $112,208 $ 85,793 $198,001
Net claims
and claim
expenses
incurred -
prior
accident
years (49,680) (9,467) (59,147)
----------- ---------- ----------
Net claims
and claim
expenses
incurred -
total $ 62,528 $ 76,326 $138,854
=========== ========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 49.7% 64.8% 55.2%
Net claims
and claim
expense
ratio -
prior
accident
years (22.0%) (7.1%) (16.5%)
----------- ---------- ----------
Net claims
and claim
expense
ratio -
calendar
year 27.7% 57.7% 38.7%
Underwriting
expense
ratio 18.8% 33.0% 24.0%
----------- ---------- ----------
Combined
ratio 46.5% 90.7% 62.7%
=========== ========== ==========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
----------------------------------------------------------------------
----------------------------------------------------------------------
Three months ended June 30, 2006
--------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ---------- ------------ --------- ----------
Gross
premiums
written $562,325 $210,829 $(30,603) $ - $742,551
=========== ========== ============ ==========
Net premiums
written $361,558 $150,686 - $512,244
=========== ========== ==========
Net premiums
earned $278,061 $152,880 - $430,941
Net claims
and claim
expenses
incurred 97,945 109,391 - 207,336
Acquisition
expenses 31,091 43,506 - 74,597
Operational
expenses 19,763 9,293 - 29,056
----------- ---------- --------- ----------
Underwriting
income
(loss) $129,262 $ (9,310) - 119,952
=========== ==========
Net
investment
income 74,012 74,012
Equity in
earnings of
other
ventures 9,221 9,221
Other loss (84) (84)
Interest and
preference
share
dividends (19,032) (19,032)
Minority
interest -
DaVinciRe (21,207) (21,207)
Other items,
net (8,106) (8,106)
Net realized
losses on
investments (24,348) (24,348)
--------- ----------
Net income available to
common shareholders $ 10,456 $130,408
========= ==========
Net claims
and claim
expenses
incurred -
current
accident
year $100,776 $117,892 $218,668
Net claims
and claim
expenses
incurred -
prior
accident
years (2,831) (8,501) (11,332)
----------- ---------- ----------
Net claims
and claim
expenses
incurred -
total $ 97,945 $109,391 $207,336
=========== ========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 36.2% 77.1% 50.7%
Net claims
and claim
expense
ratio -
prior
accident
years (1.0%) (5.5%) (2.6%)
----------- ---------- ----------
Net claims
and claim
expense
ratio -
calendar
year 35.2% 71.6% 48.1%
Underwriting
expense
ratio 18.3% 34.5% 24.1%
----------- ---------- ----------
Combined
ratio 53.5% 106.1% 72.2%
=========== ========== ==========
(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)
----------------------------------------------------------------------
Six months ended June 30, 2007
---------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ----------- ------------ --------- ----------
Gross
premiums
written $ 1,122,182 $ 361,707 $ (5,300) $ - $1,478,589
=========== =========== ============ ==========
Net premiums
written $ 904,574 $ 276,295 - $1,180,869
=========== =========== ==========
Net premiums
earned $ 480,766 $ 240,306 - $ 721,072
Net claims
and claim
expenses
incurred 154,655 130,191 - 284,846
Acquisition
expenses 54,289 68,949 - 123,238
Operational
expenses 34,642 20,409 - 55,051
----------- ----------- --------- ----------
Underwriting
income $ 237,180 $ 20,757 - 257,937
=========== ===========
Net
investment
income 226,155 226,155
Equity in
earnings of
other
ventures 20,376 20,376
Other loss (7,701) (7,701)
Interest and
preference
share
dividends (40,885) (40,885)
Minority
interest -
DaVinciRe (66,506) (66,506)
Other items,
net (7,924) (7,924)
Net realized
losses on
investments (7,481) (7,481)
--------- ----------
Net income available to
common shareholders $ 116,034 $ 373,971
========= ==========
Net claims
and claim
expenses
incurred -
current
accident
year $ 234,614 $ 156,452 $ 391,066
Net claims
and claim
expenses
incurred -
prior
accident
years (79,959) (26,261) (106,220)
----------- ----------- ----------
Net claims
and claim
expenses
incurred -
total $ 154,655 $ 130,191 $ 284,846
=========== =========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 48.8% 65.1% 54.2%
Net claims
and claim
expense
ratio -
prior
accident
years (16.6%) (10.9%) (14.7%)
----------- ----------- ----------
Net claims
and claim
expense
ratio -
calendar
year 32.2% 54.2% 39.5%
Underwriting
expense
ratio 18.5% 37.2% 24.7%
----------- ----------- ----------
Combined
ratio 50.7% 91.4% 64.2%
=========== =========== ==========
(1) Represents gross premiums ceded from the Individual Risk segment
to the Reinsurance segment.
----------------------------------------------------------------------
----------------------------------------------------------------------
Six months ended June 30, 2006
---------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ----------- ------------ --------- ----------
Gross
premiums
written $ 1,146,099 $ 381,553 $ (36,709) $ - $1,490,943
=========== =========== ============ ==========
Net premiums
written $ 910,015 $ 300,064 - $1,210,079
=========== =========== ==========
Net premiums
earned $ 491,434 $ 291,179 - $ 782,613
Net claims
and claim
expenses
incurred 134,625 171,889 - 306,514
Acquisition
expenses 59,597 83,814 - 143,411
Operational
expenses 32,307 17,680 - 49,987
----------- ----------- --------- ----------
Underwriting
income $ 264,905 $ 17,796 - 282,701
=========== ===========
Net
investment
income 154,446 154,446
Equity in
earnings of
other
ventures 15,773 15,773
Other loss (1,763) (1,763)
Interest and
preference
share
dividends (36,996) (36,996)
Minority
interest -
DaVinciRe (52,664) (52,664)
Other items,
net (11,005) (11,005)
Net realized
losses on
investments (41,104) (41,104)
--------- ----------
Net income available to
common shareholders $ 26,687 $ 309,388
========= ==========
Net claims
and claim
expenses
incurred -
current
accident
year $ 176,489 $ 183,259 $ 359,748
Net claims
and claim
expenses
incurred -
prior
accident
years (41,864) (11,370) (53,234)
----------- ----------- ----------
Net claims
and claim
expenses
incurred -
total $ 134,625 $ 171,889 $ 306,514
=========== =========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 35.9% 62.9% 46.0%
Net claims
and claim
expense
ratio -
prior
accident
years (8.5%) (3.9%) (6.8%)
----------- ----------- ----------
Net claims
and claim
expense
ratio -
calendar
year 27.4% 59.0% 39.2%
Underwriting
expense
ratio 18.7% 34.9% 24.7%
----------- ----------- ----------
Combined
ratio 46.1% 93.9% 63.9%
=========== =========== ==========
(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 Six months ended
-------------------- ---------------------
June 30, June 30, June 30, June 30,
Reinsurance Segment 2007 2006 2007 2006
--------------------------- --------- ---------- ---------- ----------
Renaissance catastrophe
premiums $ 340,913 $ 377,063 $ 580,940 $ 660,859
Renaissance specialty
premiums 93,258 27,736 200,848 149,580
--------- ---------- ---------- ----------
Total Renaissance premiums 434,171 404,799 781,788 810,439
--------- ---------- ---------- ----------
DaVinci catastrophe
premiums 171,915 155,430 330,852 312,344
DaVinci specialty premiums 129 2,096 9,542 23,316
--------- ---------- ---------- ----------
Total DaVinci premiums 172,044 157,526 340,394 335,660
--------- ---------- ---------- ----------
Total Reinsurance premiums $ 606,215 $ 562,325 $1,122,182 $1,146,099
========= ========== ========== ==========
Total specialty premiums $ 93,387 $ 29,832 $ 210,390 $ 172,896
========= ========== ========== ==========
Total catastrophe premiums $ 512,828 $ 532,493 $ 911,792 $ 973,203
Catastrophe premiums
written on behalf of our
joint venture, Top Layer
Re (1) 26,822 24,270 63,725 50,055
Catastrophe premiums
assumed from the
Individual Risk segment 1,254 (28,990) (5,300) (35,096)
--------- ---------- ---------- ----------
Total managed catastrophe
premiums (2) 540,904 527,773 970,217 988,162
Managed premiums assumed
for fully-collateralized
joint ventures (65,798) (111,253) (59,363) (111,253)
--------- ---------- ---------- ----------
Total managed catastrophe
premiums, net of fully-
collateralized joint
ventures (2) $ 475,106 $ 416,520 $ 910,854 $ 876,909
========= ========== ========== ==========
(1) Top Layer Re is accounted for under the equity method of
accounting.
(2) See Comments on Regulation G.
----------------------------------------------------------------------
----------------------------------------------------------------------
Three months ended Six months ended
-------------------- ---------------------
June 30, June 30, June 30, June 30,
Individual Risk Segment 2007 2006 2007 2006
--------------------------- --------- ---------- ---------- ----------
Commercial multi-line $ 161,125 $ 137,162 $ 220,266 $ 203,989
Commercial property 75,013 78,407 117,518 132,409
Personal lines property 2,253 (4,740) 23,923 45,155
--------- ---------- ---------- ----------
Total Individual Risk
premiums $ 238,391 $ 210,829 $ 361,707 $ 381,553
========= ========== ========== ==========
----------------------------------------------------------------------
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. In addition, 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, which is not considered by management to be a relevant indicator 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 Six months ended
------------------ -----------------
(In thousands of U.S. dollars, June 30, June 30, June 30, June 30,
except for per share amounts) 2007 2006 2007 2006
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Net income available to common
shareholders $ 183,166 $130,408 $373,971 $309,388
Adjustment for net realized
losses on investments 11,566 24,348 7,481 41,104
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Operating income available to
common shareholders $ 194,732 $154,756 $381,452 $350,492
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Net income available to common
shareholders per common share -
diluted $ 2.53 $ 1.81 $ 5.16 $ 4.31
Adjustment for net realized
losses on investments 0.16 0.34 0.10 0.57
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Operating income available to
common shareholders
per common share - diluted $ 2.69 $ 2.15 $ 5.26 $ 4.88
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Return on average common equity -
annualized 26.8% 26.4% 28.2% 32.5%
Adjustment for net realized
losses on investments 1.7% 4.9% 0.6% 4.3%
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Operating return on average
common equity - annualized 28.5% 31.3% 28.8% 36.8%
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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 Re, Starbound II 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 July 31, 2007