RenaissanceRe Reports Net Income of $1.59 Per Common Share for 2003 Third Quarter Compared to $1.26 Per Common Share for 2002 Third Quarter
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Continued Growth in Individual Risk Premiums - Ahead of Previous Expectations
Achieves Annualized Operating Return on Equity of 24% for the Three Months Ended September 30, 2003
PEMBROKE, Bermuda, Oct 21, 2003 (BUSINESS WIRE) -- RenaissanceRe Holdings Ltd. (NYSE: RNR): >RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported $112.0 million in third quarter net operating income available to common shareholders, compared to $78.0 million in the third quarter of 2002. Operating income excludes realized investment gains of $1.2 million and $10.2 million in the third quarters of 2003 and 2002, respectively. Operating income per common share grew to $1.57 in the third quarter of 2003, from $1.11 per common share in the third quarter of the previous year. Net income available to common shareholders rose 28.3% to $113.2 million or $1.59 per common share in the quarter, from $88.2 million or $1.26 per common share for the same quarter of 2002.
James N. Stanard, Chairman and CEO, commented: "We again delivered outstanding financial results in the third quarter. Our Reinsurance segment performed in line with our expectations, and continued to deliver market leading returns on equity. Managed Cat premiums are roughly flat for the nine months, although quarterly premiums have fluctuated as large programs move in and out of our portfolio. Our Individual Risk segment generated premium growth of over 50% comparing the 2003 third quarter with the 2002 third quarter--excluding the benefit of $50 million of premium associated with the assumption of a portfolio of business in 2003. We continue to be very pleased with the strong performance of the Individual Risk segment, which includes primary insurance and quota share reinsurance."
For the nine months ended September 30, 2003, net operating income available to common shareholders was $372.8 million or $5.25 per common share, compared to $258.0 million or $3.68 per common share for the same period in 2002. Operating income excludes realized investment gains of $71.9 million and $13.7 million for the nine months ended September 30, 2003 and 2002, respectively, and, in 2002, the cumulative effect of a change in accounting principle of $9.2 million - goodwill. Net income available to common shareholders for the nine months ended September 30, 2003 was $444.7 million or $6.27 per common share, compared to $262.6 million or $3.75 per common share for the same period in 2002.
Gross premiums written for the third quarter of 2003 were $313.3 million, compared to $282.6 million for the same quarter of 2002. Net premiums written for the third quarter of 2003 were $236.6 million, versus $192.7 million for the same quarter of 2002. Net premiums earned for the third quarter of 2003 were $277.4 million, compared to $191.3 million for the same quarter of 2002. Those premiums include $25.1 million of gross written premiums, $29.5 million of net written premiums and $49.9 million of net premiums earned by the Company's consolidated joint venture, DaVinci Re during the third quarter of 2003, compared to $38.5 million of gross written premiums, $36.2 million of net written premiums and $42.3 million of net premiums earned by DaVinci Re during the third quarter of 2002.
Gross premiums written for the nine months ended September 30, 2003 were $1,211.0 million, compared to $1,013.7 million for the same period of 2002. Net premiums written for the nine months ended September 30, 2003 were $987.2 million, compared to $770.3 million for the same period of 2002. Net premiums earned for the first nine months of 2003 were $816.4 million, compared to $526.4 million for the same period of 2002. Those premiums include $168.7 million of gross written premiums, $175.0 million of net written premiums and $145.7 million of net premiums earned by DaVinci Re during the first nine months of 2003, compared to $168.6 million of gross written premiums, $166.3 million of net written premiums and $100.1 million of net premiums earned by DaVinci Re for the first nine months of 2002.
Total Managed Catastrophe Premiums Written, representing gross catastrophe premiums written by Renaissance Reinsurance and by related joint ventures, was $109.3 million for the third quarter, compared to $165.9 million for the same quarter of 2002. Total Managed Cat Premium for the nine months ended September 30, 2003 were $677.8 million, compared to $681.1 million for the same period in 2002. See the attached supplemental financial data for additional details regarding managed premiums.
Total Individual Risk premiums written during the quarter were $173.7 million, compared to $81.2 million for the same quarter of 2002. Individual Risk premiums for the quarter include $50 million of premium from the assumption of an in-force book of business. Excluding the assumption of this portfolio of business, Individual Risk premiums increased by $42.5 million or greater than 50% as compared with the same quarter for 2002. Total Individual Risk premiums written for the nine months ended September 30, 2003 were $335.2 million, an 81% increase from the $185.0 million reported for the comparable period of 2002.
Net investment income, excluding realized and unrealized gains and losses on available for sale securities, for the third quarter of 2003 increased to $28.3 million, compared to $23.7 million for the same period in 2002. Net investment income, excluding realized and unrealized gains and losses on available for sale securities, for the nine months ended September 30, 2003 was $93.8 million, compared to $73.0 million for the same period in 2002. Net investment income for the third quarter of 2003 includes appreciation of $3.5 million related to investments in hedge funds and private equity funds, compared with a loss of $2.3 million for the same quarter in 2002. For the first nine months of 2003, income from these investments totaled $12.9 million as compared to a loss of $2.2 million for the same nine month period in 2002.
Claims and claim expenses incurred for the quarter ended September 30, 2003 were $96.9 million, or 34.9% of net premiums earned. In comparison, claims and claim expenses incurred for the quarter ended September 30, 2002 were $82.9 million, or 43.3% of net premiums earned. Claims and claim expenses incurred for the nine months ended September 30, 2003 were $279.7 million or 34.3% of net premiums earned, compared to $199.2 million or 37.8% of net premiums earned for the same period in 2002. During the quarter, the Company recorded favorable development on prior period reserves of $25.5 million or a benefit of 9.2 points to the Company's quarterly loss ratio. For the nine month period ended September 30, 2003, the Company has recorded favorable reserve development on prior period reserves of $50.0 million, or a benefit of 6.1 points to the Company's year to date loss ratio.
During the quarter the Company's expense ratio increased to 26.8% compared to 17.5% for the third quarter of 2002. The increase in the expense ratio primarily relates to the Company's increase in premiums related to the Individual Risk segment, which typically generates higher expense ratios as compared with the Company's reinsurance operations.
During the quarter, income from the DaVinci joint venture and other fee income on managed cat business was $32.6 million, compared to $29.8 million during the third quarter of 2002. Of this, $19.3 million was generated from fees and profit commissions, compared to $14.1 million in the third quarter of 2002, and $14.1 million was generated from the Company's equity pick up from joint ventures, versus $13.6 million in the comparable quarter of 2002. A summary of income from joint venture relationships, which includes aggregate earnings from joint venture activities, fees related to catastrophe business, and miscellaneous other items, is presented in the supplemental disclosures. The principal differences between other income as reported and the summary of income in the supplemental disclosure are that the results of DaVinci Re are reflected as if it were reported under the equity accounting method, and the summary presentation also includes fees earned on certain quota share cessions of catastrophe business by the Company which are reflected on the income statement as a reduction of acquisition and operational expenses.
Shareholders' equity attributable to common shareholders was $1.93 billion at September 30, 2003, compared to $1.49 billion at December 31, 2002. Book value per common share at September 30, 2003 was $27.41, compared to $21.39 per common share at December 31, 2002.
Effective in the third quarter, the Company adopted Statement of Financial Accounting Standard No. 150 ("SFAS 150"), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equities". As a result, the Company's obligated, mandatorily redeemable capital securities of a subsidiary trust, previously classified as minority interest, have been reclassified to liabilities on the balance sheet and the related dividends have been reclassified to interest expense in the income statement, respectively, for all periods presented.
As previously announced, RenaissanceRe is in the process of negotiating a long-term strategic investment, along with three highly experienced partners, MBIA, Partner Re and Koch Financial, to form a new financial guaranty reinsurer, Channel Re. RenaissanceRe anticipates that Channel Re will be a stable, long-term financial guaranty reinsurer, and will benefit from a strong alignment of interests with MBIA. Channel Re is expected to have a senior management team comprised of seasoned industry professionals. Upon inception, Channel Re would assume a portfolio of in-force business from MBIA, participate in MBIA's reinsurance treaty and provide facultative reinsurance support to MBIA. RenaissanceRe's total financial commitment is expected to be in the range of $115 - $125 million, and Channel Re is expected to produce attractive financial returns for its shareholders. The consummation of the transaction remains subject to final documentation, numerous closing conditions, regulatory approval and the completion of the process to obtain appropriate financial strength ratings.
RenaissanceRe Holdings Ltd. will host a conference call on Wednesday, October 22, 2003 at 10:00 a.m. (EDT) 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. (NYSE: RNR), is a global provider of reinsurance and insurance. The Company's business primarily consists of four components: (1) catastrophe reinsurance; (2) catastrophe reinsurance written for the account of joint ventures Top Layer Reinsurance Ltd. and DaVinci Reinsurance Ltd; (3) specialty reinsurance; and (4) individual risk business 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 operations 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, 2002, and Form 10-Q for the quarters ended March 31 and June 30, 2003.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Statements of Income
For the three and nine months ended September 30, 2003 and 2002
(in thousands of United States Dollars, except per share amounts)
(Unaudited)
Quarters Ended Nine Months Ended
------------------- -----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
--------- --------- ----------- -----------
Revenues
Gross premiums written $313,317 $282,597 $1,211,044 $1,013,725
========= ========= =========== ===========
Net premiums written $236,570 $192,687 $987,163 $770,300
Decrease (increase) in
unearned premiums 40,794 (1,377) (170,790) (243,940)
--------- --------- ----------- -----------
Net premiums earned 277,364 191,310 816,373 526,360
Net investment income 28,280 23,737 93,823 73,021
Net foreign exchange
gains 252 888 11,843 2,588
Other income 7,979 7,951 20,722 24,227
Net realized gains on
investments 1,172 10,219 71,944 13,736
--------- --------- ----------- -----------
Total revenues 315,047 234,105 1,014,705 639,932
--------- --------- ----------- -----------
Expenses
Claims and claim expenses
incurred 96,856 82,931 279,712 199,198
Acquisition expenses 56,317 23,802 139,154 62,719
Operational expenses 17,882 9,616 49,121 30,241
Corporate expenses 4,456 3,466 12,601 10,844
Interest expense 6,145 5,258 19,261 15,069
--------- --------- ----------- -----------
Total expenses 181,656 125,073 499,849 318,071
--------- --------- ----------- -----------
Income before minority
interest and taxes and
change in accounting
principle 133,391 109,032 514,856 321,861
Minority interest - DaVinci 15,211 17,689 56,246 40,636
--------- --------- ----------- -----------
Income before taxes and
change in accounting
principle 118,180 91,343 458,610 281,225
Income tax benefit
(expense) (37) (59) 18 (382)
Cumulative effect of a
change in accounting
principle - SFAS 142 -
Goodwill - - - (9,187)
Net income 118,143 91,284 458,628 271,656
Dividends on Preference
Shares 4,903 3,038 13,939 9,079
--------- --------- ----------- -----------
Net income available to
Common Shareholders $113,240 $88,246 $444,689 $262,577
========= ========= =========== ===========
Operating Earnings per
Common Share - diluted * $1.57 $1.11 $5.25 $3.68
Earnings per Common Share -
basic $1.63 $1.30 $6.45 $3.90
Earnings per Common Share -
diluted $1.59 $1.26 $6.27 $3.75
Average shares outstanding
- basic 69,307 67,865 68,938 67,326
Average shares outstanding
- diluted 71,187 70,272 70,936 70,090
Claims and claim expense
ratio 34.9% 43.3% 34.3% 37.8%
Expense ratio 26.8% 17.5% 23.0% 17.7%
--------- --------- ----------- -----------
Combined ratio 61.7% 60.8% 57.3% 55.5%
========= ========= =========== ===========
Operating return on average
equity (annualized) * 23.9% 24.2% 28.9% 28.7%
========= ========= =========== ===========
* Excludes realized gains on investments and, in 2002, the cumulative
effect of a change in accounting principle - SFAS 142 - Goodwill.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Balance Sheets
(in thousands of United States Dollars, except per share amounts)
As at
------------------------------------
September 30, 2003 December 31, 2002
------------------ -----------------
(Unaudited) (Audited)
Assets
Fixed maturity investments
available for sale, at fair value
(Amortized cost $2,640,852 and
$2,153,715 at September 30, 2003
and December 31, 2002,
respectively) $2,698,720 $2,221,109
Short term investments 964,309 570,497
Other investments 224,699 129,918
Equity investment in reinsurance
company at fair value (Cost
$84,199 at September 30, 2003 and
December 31, 2002) 136,432 120,288
Cash and cash equivalents 84,029 87,067
------------------ -----------------
Total investments and cash 4,108,189 3,128,879
Premiums receivable 312,199 199,449
Ceded reinsurance balances 108,694 73,360
Losses recoverable 157,059 199,533
Accrued investment income 29,605 25,833
Deferred acquisition costs 95,376 55,853
Other assets 58,070 62,829
------------------ -----------------
Total assets $4,869,192 $3,745,736
================== =================
Liabilities, Minority Interest and
Shareholders' Equity
Liabilities
Reserve for claims and claim expenses $981,687 $804,795
Reserve for unearned premiums 538,262 331,985
Debt 434,630 359,630
Reinsurance balances payable 198,413 146,732
Other 121,613 97,013
------------------ -----------------
Total liabilities 2,274,605 1,740,155
------------------ -----------------
Minority Interest - DaVinci 416,942 363,546
Shareholders' Equity
Preference Shares 250,000 150,000
Common shares and additional
paid-in capital 310,094 320,936
Unearned stock grant compensation - (18,468)
Accumulated other comprehensive income 110,101 95,234
Retained earnings 1,507,450 1,094,333
------------------ -----------------
Total shareholders' equity 2,177,645 1,642,035
------------------ -----------------
Total liabilities, minority
interest, and shareholders'
equity $4,869,192 $3,745,736
================== =================
Book value per Common Share $27.41 $21.39
================== =================
Common Shares outstanding 70,324 69,750
================== =================
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data
(in thousands of United States Dollars)
(Unaudited)
Gross Written Premiums Quarters Ended Nine Months Ended
-------------------- ----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
--------- ---------- ---------- ----------
Renaissance Cat Premium $ 84,780 $ 114,756 $ 457,710 $ 439,403
Renaissance Specialty
Premium 29,806 48,104 249,445 220,759
--------- --------- ---------- ----------
Total Renaissance
Reinsurance Premium 114,586 162,860 707,155 660,162
--------- --------- ---------- ----------
DaVinci Cat Premium 22,735 38,491 145,953 168,554
DaVinci Specialty Premium 2,324 - 22,733 -
--------- --------- ---------- ----------
Total DaVinci
Reinsurance
Premium 25,059 38,491 168,686 168,554
--------- --------- ---------- ----------
Total
Reinsurance
Premium 139,645 201,351 875,841 828,716
Individual Risk
Premium (1) 173,672 81,246 335,203 185,009
--------- --------- ---------- ----------
Total Premiums $ 313,317 $ 282,597 $1,211,044 $1,013,725
========= ========= ========== ==========
Total Managed Cat
Premiums (2) $ 109,285 $ 165,906 $ 677,794 $ 681,056
========= ========= ========== ==========
(1) Includes combined premium ceded to Renaissance and DaVinci of
$18.5 million and $nil for the quarters ended September 30, 2003
and 2002 respectively, and $24.2 million and $1.0 million for the
nine months ended September 30, 2003 and 2002, respectively. Such
amounts of premium are excluded from the Renaissance and DaVinci
premiums shown above.
(2) Total Managed Cat Premiums include Renaissance and DaVinci Cat
Premium, as above, and Cat Premium of $1.8 million and $12.7
million for the quarters ended September 30, 2003 and 2002,
respectively, and $74.1 million and $73.1 million for the nine
months ended September 30, 2003 and 2002, respectively, written on
behalf of our joint venture, Top Layer Re.
Other Income Quarters Ended Nine Months Ended
-------------------- ----------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2003 2002 2003 2002
--------- --------- ---------- ----------
As Reported
-----------
Fee income $ 3,530 $ 941 $ 6,008 $ 2,941
Equity pick up 5,272 4,923 17,833 16,059
Other items (823) 2,087 (3,119) 5,227
--------- --------- ---------- ----------
Total other income
- as reported $ 7,979 $ 7,951 $ 20,722 $ 24,227
========= ========= ========== ==========
Summary of all income
from joint venture
relationships (3)
---------------------
Fee income (4) $ 19,312 $ 14,106 $ 55,132 $ 38,295
Equity pick up 14,112 13,622 48,336 37,478
Other items (823) 2,087 (3,119) 5,227
--------- --------- ---------- ----------
Total $ 32,601 $ 29,815 $ 100,349 $ 81,000
========= ========= ========== ==========
(3) Reported GAAP presentation adjusted to reflect:
-- fee income and the Company's interest in DaVinci as if DaVinci
were accounted for under the equity method
-- other fee income on managed cat business which is reflected on
the income statement as a reduction of acquisition and
operational expenses
(4) Excludes fee income received on capital invested by RenaissanceRe
Holdings.
SOURCE: RenaissanceRe Holdings Ltd.
Investor Contact:
RenaissanceRe Holdings Ltd.
Martin J. Merritt
Senior Vice President - Finance
441-299-7230
or
Media Contact:
Kekst and Company
David Lilly or Dawn Dover
212-521-4800