RenaissanceRe Reports Operating Income of $186.7 Million for the First Quarter of 2007 or $2.57 Per Common Share.
Net Income of $190.8 Million for the First Quarter of 2007 or $2.63 Per Common Share. Annualized ROE of 29.7% for the First Quarter of 2007.
PEMBROKE, Bermuda--(BUSINESS WIRE)--
RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported $186.7 million in first quarter operating income available to common shareholders compared to $195.7 million in the first quarter of 2006. Operating income excludes net realized investment gains of $4.1 million and net realized investment losses of $16.8 million in the first quarters of 2007 and 2006, respectively. Operating income per diluted common share was $2.57 in the first quarter of 2007, compared to $2.73 in the first quarter of 2006. Net income available to common shareholders was $190.8 million or $2.63 per diluted common share in the quarter, compared to net income available to common shareholders of $179.0 million or $2.49 per diluted common share for the same quarter of 2006.
Neill A. Currie, CEO, commented: "We are pleased to report another highly profitable quarter with an annualized operating ROE of 29% and over 6% growth in book value per share in the quarter. We generated solid underwriting profits, despite European windstorm Kyrill, and our investment portfolio generated strong returns for the quarter. We are maintaining our disciplined underwriting given current market conditions, but finding good opportunities in our core markets to build upon an already attractive portfolio of risks."
FIRST QUARTER 2007 RESULTS
Underwriting Results
Gross premiums written for the first quarter of 2007 were $632.7 million, a $115.7 million decrease from the first quarter of 2006. The decrease in gross premiums written was primarily driven by softer markets in both our Reinsurance and Individual Risk segments compared to the first quarter of 2006. As described in more detail below, the Company generated $124.4 million of underwriting income and had a combined ratio of 65.6% in the first quarter of 2007, compared to $162.7 million of underwriting income and a 53.7% combined ratio in the first quarter of 2006. The decrease in underwriting income in 2007 was principally driven by European Windstorm Kyrill ("Kyrill"), which negatively impacted underwriting income by $70.9 million and added 21.1 percentage points to the Company's consolidated net claims and claim expense ratio. During the first quarter of 2007, the Company recorded $45.3 million of net negative impact from Kyrill. Net negative impact includes the sum of net claims and claim expenses incurred, reinstatement premiums earned and minority interest. The net negative impact is all attributable to the Company's Reinsurance segment. The Company experienced $47.1 million of favorable development on prior year reserves in the first quarter of 2007, compared to $41.9 million of favorable development in the first quarter of 2006.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment decreased $67.8 million to $516.0 million in the first quarter of 2007, compared to $583.8 million in the first quarter of 2006, due to a reduction in the Company's property catastrophe and specialty reinsurance premiums.
The Reinsurance segment generated $116.1 million of underwriting income and had a combined ratio of 54.4% in the first quarter of 2007, compared to $135.6 million of underwriting income and a 36.4% combined ratio in the first quarter of 2006. The first quarter 2007 underwriting income was negatively impacted by $70.9 million related to Kyrill which added 30.4 percentage points to the Reinsurance segment net claims and claim expense ratio in the first quarter of 2007. The Reinsurance segment experienced $30.3 million of favorable development on prior year reserves in the first quarter of 2007, compared to $39.0 million of favorable development in the first quarter of 2006. The favorable development in the first quarter of 2007 was principally attributable to lower than expected claims emergence in the Company's specialty reinsurance unit.
Individual Risk Segment
Gross premiums written for the Company's Individual Risk segment decreased $47.4 million to $123.3 million in the first quarter of 2007, compared to $170.7 million in the first quarter of 2006. The decrease was primarily due to the fact that the Company terminated certain personal lines property quota share contracts in the second quarter of 2006, which, as a result, were included in the Individual Risk segment premiums for the first quarter of 2006, but are not included in the first quarter of 2007.
The Individual Risk segment generated $8.3 million of underwriting income and had a combined ratio of 92.3% in the first quarter of 2007, compared to $27.1 million of underwriting income and an 80.4% combined ratio in the first quarter of 2006. The decrease in underwriting income in the first quarter of 2007 compared to the first quarter of 2006 was primarily due to a decrease in net earned premiums of $30.5 million and a higher net claims and claim expense ratio and underwriting expense ratio. The Individual Risk segment experienced favorable development of $16.8 million and $2.9 million on prior year reserves in the first quarters of 2007 and 2006, respectively, principally attributable to lower than expected claims emergence.
Other Items
-- Net investment income for the first quarter of 2007 was $108.0
million, compared to $80.4 million for the same quarter in
2006 as a result of strong returns and higher average invested
assets in the Company's portfolio of fixed maturity
investments available for sale and short term investments. In
addition, other investments, which include the Company's hedge
fund and private equity investments, generated $37.0 million
of net investment income in the first quarter of 2007 compared
with $26.7 million in the first quarter of 2006.
-- During the first quarter of 2007, the Company incurred $1.5
million of other than temporary impairments on the Company's
fixed maturity investments available for sale, compared to
$18.8 million in the first quarter of 2006.
-- On January 16, 2007, the Company redeemed all of its issued
and outstanding Series A Preference Shares for $150.0 million
plus accrued and unpaid dividends.
-- On March 1, 2007, the Company's Capital Trust redeemed all of
its issued and outstanding 8.54% trust preferred Capital
Securities and the Company redeemed all of its underlying
8.54% junior subordinated debentures held by the Capital
Trust. In connection with this redemption, the Company paid a
redemption premium of $3.6 million, which is reflected in
interest expense.
-- The Company's cash flows from operations were $150.6 million
for the first quarter of 2007, compared to $146.1 million for
the first 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 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, May 2, 2007 at 8:30 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.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Statements of Operations
For the three months ended March 31, 2007 and 2006
(in thousands of U.S. dollars, except per share amounts)
(Unaudited)
Three months ended
-------------------
March 31, March 31,
2007 2006
--------- ---------
Revenues
Gross premiums written $632,729 $748,392
========= =========
Net premiums written $571,027 $697,835
Increase in unearned premiums (208,409) (346,163)
--------- ---------
Net premiums earned 362,618 351,672
Net investment income 108,015 80,434
Net foreign exchange gains 5,167 3,023
Equity in earnings of other ventures 10,701 6,552
Other loss (2,203) (1,679)
Net realized gains (losses) on investments 4,085 (16,756)
--------- ---------
Total revenues 488,383 423,246
--------- ---------
Expenses
Net claims and claim expenses incurred 145,992 99,178
Acquisition expenses 63,729 68,814
Operational expenses 28,524 20,931
Corporate expenses 7,004 5,739
Interest expense 11,979 9,301
--------- ---------
Total expenses 257,228 203,963
--------- ---------
Income before minority interest and taxes 231,155 219,283
Minority interest - DaVinciRe (29,107) (31,457)
--------- ---------
Income before taxes 202,048 187,826
Income tax expense (107) (183)
--------- ---------
Net income 201,941 187,643
Dividends on preference shares (11,136) (8,663)
--------- ---------
Net income available to common shareholders $190,805 $178,980
========= =========
Operating income available to common shareholders
per Common Share - diluted (1) $2.57 $2.73
Net income available to common shareholders
per Common Share - basic $2.68 $2.52
Net income available to common shareholders
per Common Share - diluted $2.63 $2.49
Average shares outstanding - basic 71,281 70,935
Average shares outstanding - diluted 72,514 71,786
Net claims and claim expense ratio 40.2% 28.2%
Underwriting expense ratio 25.4% 25.5%
--------- ---------
Combined ratio 65.6% 53.7%
========= =========
Operating return on average common equity -
annualized (1) 29.1% 42.7%
========= =========
(1) Excludes net realized gains and 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
-------------------------
March 31, December 31,
2007 2006
------------ ------------
(Unaudited) (Audited)
Assets
Fixed maturity investments available for
sale, at fair value $3,155,864 $3,111,930
Short term investments, at cost 2,183,564 2,410,971
Other investments, at fair value 620,576 592,829
Investments in other ventures, under equity
method 239,021 227,075
------------ ------------
Total investments 6,199,025 6,342,805
Cash and cash equivalents 270,608 214,399
Premiums receivable 538,720 419,150
Ceded reinsurance balances 116,020 133,971
Losses recoverable 248,599 301,854
Accrued investment income 41,881 41,234
Deferred acquisition costs 124,282 106,918
Receivable for investments sold 109,554 61,061
Other assets 138,427 147,634
------------ ------------
Total assets $7,787,116 $7,769,026
============ ============
Liabilities, Minority Interest and
Shareholders' Equity
Liabilities
Reserve for claims and claim expenses $2,109,864 $2,098,155
Reserve for unearned premiums 768,882 578,424
Debt 450,000 450,000
Subordinated obligation to capital trust - 103,093
Reinsurance balances payable 232,832 395,083
Payable for investments purchased 138,110 88,089
Other liabilities 104,300 125,401
------------ ------------
Total liabilities 3,803,988 3,838,245
------------ ------------
Minority interest - DaVinciRe 679,568 650,284
Shareholders' Equity
Preference shares 650,000 800,000
Common shares 72,289 72,140
Additional paid-in capital 279,979 284,123
Accumulated other comprehensive income 27,420 25,217
Retained earnings 2,273,872 2,099,017
------------ ------------
Total shareholders' equity 3,303,560 3,280,497
------------ ------------
Total liabilities, minority interest and
shareholders' equity $7,787,116 $7,769,026
============ ============
Book value per common share $36.71 $34.38
============ ============
Common shares outstanding 72,289 72,140
============ ============
RenaissanceRe Holdings Ltd. and Subsidiaries
Unaudited Supplemental Financial Data - Segment Information
(in thousands of U.S. dollars)
----------------------------------------------------------------------
Three months ended March 31, 2007
-------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ----------- ------------ -------- ---------
Gross
premiums
written $515,967 $123,316 $(6,554) $- $632,729
=========== =========== ============ =========
Net premiums
written $476,219 $94,808 - $571,027
=========== =========== =========
Net premiums
earned $254,779 $107,839 - $362,618
Net claims
and claim
expenses
incurred 92,127 53,865 - 145,992
Acquisition
expenses 28,362 35,367 - 63,729
Operational
expenses 18,191 10,333 - 28,524
----------- ----------- -------- ---------
Underwriting
income $116,099 $8,274 - 124,373
=========== ===========
Net
investment
income 108,015 108,015
Equity in
earnings of
other
ventures 10,701 10,701
Other loss (2,203) (2,203)
Interest and
preference
share
dividends (23,115) (23,115)
Minority
interest -
DaVinciRe (29,107) (29,107)
Other items,
net (1,944) (1,944)
Net realized
gains on
investments 4,085 4,085
-------- ---------
Net income available to
common shareholders $66,432 $190,805
======== =========
Net claims
and claim
expenses
incurred -
current
accident
year $122,406 $70,659 $193,065
Net claims
and claim
expenses
incurred -
prior
accident
years (30,279) (16,794) (47,073)
----------- ----------- ---------
Net claims
and claim
expenses
incurred -
total $92,127 $53,865 $145,992
=========== =========== =========
Net claims
and claim
expense
ratio -
current
accident
year 48.0% 65.5% 53.2%
Net claims
and claim
expense
ratio -
prior
accident
years (11.9%) (15.6%) (13.0%)
----------- ----------- ---------
Net claims
and claim
expense
ratio -
calendar
year 36.1% 49.9% 40.2%
Underwriting
expense
ratio 18.3% 42.4% 25.4%
----------- ----------- ---------
Combined
ratio 54.4% 92.3% 65.6%
=========== =========== =========
(1) Represents gross premiums ceded from the Individual Risk segment
to the Reinsurance segment.
Three months ended March 31, 2006
-------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ----------- ------------ -------- ---------
Gross
premiums
written $583,774 $170,724 $(6,106) $ - $748,392
=========== =========== ============ =========
Net premiums
written $548,457 $149,378 - $697,835
=========== =========== =========
Net premiums
earned $213,373 $138,299 - $351,672
Net claims
and claim
expenses
incurred 36,680 62,498 - 99,178
Acquisition
expenses 28,506 40,308 - 68,814
Operational
expenses 12,544 8,387 - 20,931
----------- ----------- -------- ---------
Underwriting
income $135,643 $27,106 - 162,749
=========== ===========
Net
investment
income 80,434 80,434
Equity in
earnings of
other
ventures 6,552 6,552
Other loss (1,679) (1,679)
Interest and
preference
share
dividends (17,964) (17,964)
Minority
interest -
DaVinciRe (31,457) (31,457)
Other items,
net (2,899) (2,899)
Net realized
losses on
investments (16,756) (16,756)
-------- ---------
Net income available to
common shareholders $16,231 $178,980
======== =========
Net claims
and claim
expenses
incurred -
current
accident
year $75,713 $65,367 $141,080
Net claims
and claim
expenses
incurred -
prior
accident
years (39,033) (2,869) (41,902)
----------- ----------- ---------
Net claims
and claim
expenses
incurred -
total $36,680 $62,498 $99,178
=========== =========== =========
Net claims
and claim
expense
ratio -
current
accident
year 35.5% 47.3% 40.1%
Net claims
and claim
expense
ratio -
prior
accident
years (18.3%) (2.1%) (11.9%)
----------- ----------- ---------
Net claims
and claim
expense
ratio -
calendar
year 17.2% 45.2% 28.2%
Underwriting
expense
ratio 19.2% 35.2% 25.5%
----------- ----------- ---------
Combined
ratio 36.4% 80.4% 53.7%
=========== =========== =========
(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
-------------------
Reinsurance Segment March 31, March 31,
2007 2006
------------------- --------- ---------
Renaissance catastrophe premiums $240,027 $283,797
Renaissance specialty premiums 107,590 121,843
--------- ---------
Total Renaissance premiums 347,617 405,640
--------- ---------
DaVinci catastrophe premiums 158,937 156,913
DaVinci specialty premiums 9,413 21,221
--------- ---------
Total DaVinci premiums 168,350 178,134
--------- ---------
Total Reinsurance premiums $515,967 $583,774
========= =========
Total specialty premiums $117,003 $143,064
========= =========
Total catastrophe premiums $398,964 $440,710
Catastrophe premiums written on behalf of our
joint venture, Top Layer Re (1) 36,903 25,785
Catastrophe premiums assumed from the
Individual Risk segment (6,554) (6,106)
--------- ---------
Total managed catastrophe
premiums (2) (3) $429,313 $460,389
========= =========
(1) Top Layer Re is accounted for under the equity method of
accounting.
(2) Managed catastrophe premiums include negative premiums written of
$6.4 million and $nil for the three months ended March 31, 2007 and
2006, respectively, on behalf of fully-collateralized joint ventures,
Starbound Reinsurance Limited and Timicuan Reinsurance Limited.
(3) See Comments on Regulation G.
Three months ended
-----------------------------
Individual Risk Segment March 31, 2007 March 31, 2006
----------------------- -------------- --------------
Commercial multi-line $59,141 $66,827
Commercial property 42,505 54,002
Personal lines property 21,670 49,895
------------- --------------
Total Individual Risk premiums $123,316 $170,724
============= ==============
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
-------------------
(In thousands of U.S. dollars, except for per March 31, March 31,
share amounts) 2007 2006
--------- ---------
Net income available to common shareholders $190,805 $178,980
Adjustment for net realized (gains) losses on
investments (4,085) 16,756
--------- ---------
Operating income available to common shareholders $186,720 $195,736
========= =========
Net income available to common shareholders per
common share $2.63 $2.49
Adjustment for net realized (gains) losses on
investments (0.06) 0.24
--------- ---------
Operating income available to common shareholders
per common share - diluted $2.57 $2.73
========= =========
Return on average common equity - annualized 29.7% 39.0%
Adjustment for net realized (gains) losses on
investments (0.6%) 3.7%
--------- ---------
Operating return on average common equity -
annualized 29.1% 42.7%
========= =========
The Company has also included in this Press Release "managed catastrophe premiums". "Managed catastrophe premiums" is defined as gross catastrophe premiums written by Renaissance Reinsurance and its related joint ventures, excluding catastrophe premiums assumed from the Company's Individual Risk segment. "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 and the exclusion of catastrophe premiums assumed from the Company's Individual Risk segment. 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.
Source: RenaissanceRe Holdings Ltd.
Released May 1, 2007