RenaissanceRe Reports Operating Income of $186.2 Million for the Fourth Quarter of 2007 or $2.64 Per Common Share; Net Income of $62.2 Million or $0.88 Per Common Share
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- Annual Operating Income of $735.5 Million for 2007 or $10.24 Per
Common Share;
- Annual Net Income of $569.6 Million or $7.93 Per Common Share
- Book Value per Common Share Increases 19.3% in 2007 to $41.03
PEMBROKE, Bermuda--(BUSINESS WIRE)--Feb. 5, 2008--RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported $186.2 million in fourth quarter operating income available to common shareholders compared to $198.6 million in the fourth quarter of 2006. Operating income excludes net realized investment gains of $7.2 million and $2.5 million in the fourth quarters of 2007 and 2006, respectively, and, in the fourth quarter of 2007, reported losses of $131.2 million arising from net unrealized losses on credit derivatives issued by ChannelRe Holdings Ltd. ("ChannelRe"), as previously announced. Operating income per diluted common share was $2.64 in the fourth quarter of 2007, compared to $2.74 in the fourth quarter of 2006. Net income available to common shareholders was $62.2 million or $0.88 per diluted common share in the fourth quarter of 2007, compared to net income available to common shareholders of $201.1 million or $2.78 per diluted common share for the same quarter of 2006.
The Company generated an operating return on average common equity of 26.1% for the fourth quarter of 2007, compared to 33.3% in the fourth quarter of 2006. The Company also reported a return on average common equity of 8.7% for the fourth quarter of 2007, compared to 33.7% in the fourth quarter of 2006. Book value per common share increased 1.2% in the fourth quarter of 2007 compared to a 7.9% increase in fourth quarter of 2006. The Company's book value per common share increased 19.3% in 2007, compared to a 40.2% increase in 2006.
Neill A. Currie, CEO, commented: "I am pleased to report strong full year earnings, resulting in an increase in book value per common share of over 19% and an operating return on equity of 27%. These earnings are a result of a relatively low level of insured catastrophe losses for the full year, solid investment income and strong performance by our team."
Mr. Currie added: "Although our premium volume is down, we are pleased with the results of our January 1 renewals and have constructed an attractive portfolio of business for 2008. We will maintain our underwriting discipline, focusing on profit rather than premium volume. This discipline has been part of our culture since our formation and we believe this strategy will continue to benefit our shareholders over the long term."
FOURTH QUARTER 2007 HIGHLIGHTS
Underwriting Results
Gross premiums written for the fourth quarter of 2007 were $122.2 million, a $72.7 million decrease from the fourth quarter of 2006, driven by premium decreases in both of the Company's segments as described in more detail below. The Company generated $177.3 million of underwriting income and had a combined ratio of 47.3% in the fourth quarter of 2007, compared to $177.3 million of underwriting income and a combined ratio of 53.4% in the fourth quarter of 2006. The Company experienced $106.8 million of favorable development on prior year reserves in the fourth quarter of 2007, compared to $29.9 million in the fourth quarter of 2006.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment decreased $25.0 million to $26.7 million in the fourth quarter of 2007, compared to $51.7 million in the fourth quarter of 2006. The decrease is principally due to a $34.0 million decease in gross premiums written in the Company's catastrophe reinsurance unit. The principal component of this reduction was $20.2 million of estimated negative premium adjustments, reflecting reduced premiums written by the Company's reinsurance clients, which was principally driven by a decrease in the Company's clients' estimated gross premiums written. This decline was partially offset by a $9.0 million increase in gross premiums written in the Company's specialty reinsurance unit. The increase in gross premiums written in the Company's specialty reinsurance unit was principally due to $18.3 million of gross premiums written on a personal lines property quota share reinsurance contract which incepted in the second quarter of 2007. The Company does not currently expect this contract to renew in its existing form.
The Reinsurance segment generated $164.7 million of underwriting income and had a combined ratio of 29.7% in the fourth quarter of 2007, compared to $140.7 million of underwriting income and a 42.4% combined ratio in the fourth quarter of 2006. The increase in underwriting income in the fourth quarter of 2007 was driven by a comparably low level of insured catastrophes, favorable development on prior year reserves of $98.6 million, compared to $25.5 million of favorable development in the fourth quarter of 2006, and offset by an increase in the Company's current accident year reserves, which includes a $55.0 million charge relating to an increase in incurred but not reported ("IBNR") reserves for sub-prime related exposures in the Company's casualty clash reinsurance book of business within its specialty reinsurance unit, as previously announced. The favorable development in the fourth quarter of 2007 includes $61.1 million related to the Company's catastrophe reinsurance unit, which benefited from favorable development attributable to the 2005 hurricanes combined with favorable development on the 2006 accident year, and $37.6 million related to the Company's specialty reinsurance unit which was principally attributable to lower than expected claims emergence.
Individual Risk Segment
Gross premiums written for the Company's Individual Risk segment decreased $48.2 million to $93.4 million in the fourth quarter of 2007, compared to $141.6 million in the fourth quarter of 2006, with the decrease driven in part by actions management has taken to maintain underwriting discipline in an increasingly softening U.S. property and casualty market. The Individual Risk segment's commercial multi-line, commercial property and personal lines property businesses all experienced declines in gross premiums written compared to the same period in 2006. The Company experienced a $26.6 million decrease in commercial property gross premiums written due primarily 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, personal lines property gross premiums written experienced a $19.1 million decrease principally due to the Company's decision 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 has found pricing and terms more attractive. Driven primarily by the factors described above, net premiums earned decreased $34.0 million to $101.9 million in the fourth quarter of 2007, compared to $135.8 million in the fourth quarter of 2006.
The Individual Risk segment generated $12.5 million of underwriting income and had a combined ratio of 87.7% in the fourth quarter of 2007, compared to $36.6 million of underwriting income and a 73.1% combined ratio in the fourth quarter of 2006. The decrease in underwriting income in the fourth quarter of 2007 was driven by the $34.0 million decrease in net premiums earned as noted above, combined with a higher combined ratio. The Individual Risk segment experienced $8.1 million of favorable development on prior year reserves in the fourth quarter of 2007, compared to $4.4 million of favorable development in the fourth quarter of 2006, principally due to lower than expected claims emergence.
Other Items
- As previously announced, the Company's fourth quarter 2007
results include a $131.2 million loss related to ChannelRe,
which when combined with a $4.5 million reversal of the
Company's share of ChannelRe's accumulated other comprehensive
loss, results in the full reduction in the Company's carried
value of ChannelRe from $126.7 million at September 30, 2007
to $nil at December 31, 2007. The reduction in carried value
principally arises from ChannelRe's estimate of its fourth
quarter unrealized mark-to-market losses from financial
guaranty contracts accounted for as derivatives under
generally accepted accounting principles ("GAAP"), based on
information furnished to ChannelRe by its sole cedant.
ChannelRe has informed the Company that these mark-to-market
charges contributed to a fourth quarter loss exceeding
ChannelRe's GAAP shareholders' equity. The Company accounts
for its 32.7% interest in ChannelRe under the equity method of
accounting. The Company has no further economic exposure to
ChannelRe.
- During the fourth quarter of 2007, the Company incurred $7.5
million of other than temporary impairment charges on the
Company's fixed maturity investments available for sale,
compared to $2.9 million in the fourth quarter of 2006. None
of these charges were credit-related.
- As a result of the Company's continued profitability within
its taxable operations, the Company has reduced its deferred
tax asset valuation allowance, resulting in an income tax
benefit of $19.3 million in the fourth quarter of 2007.
- During the fourth quarter of 2007, the Company repurchased
approximately 2.0 million common shares in open market
transactions at an aggregate cost of $111.9 million and at an
average share price of $57.07.
- The Company's cash flows from operations were $166.9 million
for the fourth quarter of 2007, compared to $253.0 million for
the fourth quarter of 2006.
FULL YEAR 2007 HIGHLIGHTS
For the year ended December 31, 2007, the Company generated operating income available to common shareholders of $735.5 million, compared to $796.1 million in 2006. Operating income excludes net realized investment gains of $1.3 million and net realized investment losses of $34.5 million for 2007 and 2006, respectively, and net unrealized losses on credit derivatives issued by ChannelRe of $167.2 million and $nil in 2007 and 2006, respectively. Operating income per diluted common share was $10.24 in 2007, compared to $11.05 in 2006. Net income available to common shareholders was $569.6 million or $7.93 per diluted common share in 2007, compared to net income available to common shareholders of $761.6 million or $10.57 per diluted common share for 2006.
The Company generated an operating return on average common equity of 27.0% for 2007, compared to 37.9% for 2006. The Company generated a return on average common equity of 20.9% for 2007, compared to 36.3% for 2006. The Company's book value per common share increased 19.3% in 2007, compared to a 40.2% increase in 2006. Whereas the Company benefited from a hard market for property catastrophe reinsurance and a low level of insured catastrophe losses in 2006, the Company's results in 2007 were negatively impacted by a reduced level of gross premiums written due primarily to a softening market as well as $56.7 million and $45.2 million in net negative impact related to the flooding in the United Kingdom ("U.K.") and European windstorm Kyrill ("Kyrill"), respectively. The net negative impact described above includes the sum of net claims and claim expenses incurred, reinstatement premiums earned and minority interest. In addition, the Company's 2007 results were negatively affected by $167.2 million in losses as a result of the Company's reduction in its carried value of ChannelRe and a $60.0 million increase in IBNR for sub-prime related exposures in the Company's casualty clash reinsurance book of business. Partially offsetting these items was an $84.4 million increase in net investment income due to higher returns and a higher level of average invested assets and a $96.6 million increase in favorable loss reserve development.
Underwriting Results
Gross premiums written for 2007 were $1,809.6 million, a $134.0 million decrease from 2006. The Company's managed catastrophe and Individual Risk premiums experienced declines of 4.9% and 19.3%, respectively, in 2007 compared to 2006, primarily due to a softening market and selective underwriting where the Company chose to reduce its gross premiums written for certain classes of business. The Company's specialty reinsurance gross premiums written increased 29.4% in 2007 compared to 2006, principally due to one new large transaction. As described in more detail below, the Company generated $579.7 million of underwriting income and had a combined ratio of 59.3% in 2007, compared to $693.3 million of underwriting income and a 54.7% combined ratio in 2006. The $113.6 million reduction in underwriting income in 2007 was principally due to a $105.4 million decrease in net premiums earned combined with an increase in net claims and claim expenses of $33.0 million and partially offset by a $24.9 million decrease in underwriting expenses. In addition, the Company experienced $233.2 million of favorable development on prior year reserves in 2007, compared to $136.6 million of favorable development in 2006.
Reinsurance Segment
Gross premiums written for the Company's Reinsurance segment decreased $30.7 million to $1,290.4 million in 2007, compared to $1,321.2 million in 2006. For the year ended December 31, 2007, the Company's managed catastrophe premiums and its specialty premiums, totaled $1,032.6 million and $287.3 million, respectively, compared to $1,085.8 million and $222.0 million, respectively, in 2006. The $53.2 million decrease in managed catastrophe premiums was principally due to softening market conditions in 2007 where the pricing for property catastrophe reinsurance decreased from 2006. The softening market conditions also resulted in a $54.6 million decrease in managed catastrophe premiums assumed on behalf of fully-collateralized joint ventures. The $65.3 million increase in specialty premiums was principally driven by one new large transaction in 2007 that resulted in $98.8 million of gross premiums written. In the absence of this contract, the Company's specialty premiums would have declined in 2007 compared to 2006. The Company does not currently expect this contract to renew in its existing form. The Reinsurance segment's gross premiums written are increasingly comprised of a relatively small number of large transactions which can result in significant increases or decreases in gross premiums written from one period to the next.
The Reinsurance segment generated $528.7 million of underwriting income and had a combined ratio of 44.8% in 2007, compared to $636.2 million of underwriting income and a 34.5% combined ratio in 2006. The decrease in underwriting income in 2007 was principally driven by an increase of $217.5 million in net claims and claims expenses as a result of losses related to Kyrill, the U.K. floods and sub-prime related casualty losses. The Company experienced $194.4 million of favorable development on prior year reserves in 2007, compared to $125.2 million of favorable development in 2006. The favorable development in 2007 included $93.1 million attributable to the Company's catastrophe reinsurance unit and was principally driven by a reduction of ultimate losses in the 2006 and 2005 accident years. The specialty reinsurance unit experienced $101.3 million of favorable development which was principally due to lower than expected claims emergence.
Individual Risk Segment
Gross premiums written for the Company's Individual Risk segment decreased $132.8 million to $556.6 million in 2007, compared to $689.4 million in 2006. The decrease was driven in part by actions management has taken to maintain underwriting discipline in an increasingly softening U.S. property and casualty market. In addition, the Company continued to reduce its quota share personal lines property capacity in 2007 and redeploy this capacity to property catastrophe excess of loss reinsurance in the Company's Reinsurance segment, where it found the pricing and terms more attractive.
The Individual Risk segment generated $51.0 million of underwriting income and had a combined ratio of 89.1% in 2007, compared to $57.0 million of underwriting income and an 89.8% combined ratio in 2006. The decrease in the Individual Risk segment underwriting income in 2007 was principally driven by a decrease in net premiums earned of $91.1 million due to the decrease in gross premiums written noted above, and offset by a decrease in net claims and claim expenses incurred of $60.0 million due in part to the decrease in net earned premiums noted above which resulted in a lower level of attritional losses, and a $25.0 million decrease in underwriting expenses which was principally driven by the decline in net premiums earned.
Other Items
- The Company's results for 2007 were impacted by a $167.2
million reduction in the carried value of ChannelRe, driven by
unrealized mark-to-market losses in ChannelRe's portfolio of
financial guaranty contracts accounted for as derivatives
under GAAP. As previously discussed, the Company has no
further economic exposure to ChannelRe.
- Net investment income increased $84.4 million to $402.5
million for 2007, primarily 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 $105.5
million of net investment income in 2007, compared to $65.7
million in 2006.
- During 2007, the Company incurred $25.5 million of other than
temporary impairment charges on the Company's fixed maturity
investments available for sale, compared to $46.4 million in
2006. None of these charges were credit-related.
- During 2007, the Company repurchased approximately 3.6 million
common shares in open market transactions at an aggregate cost
of $200.1 million and at an average share price of $55.77.
- The Company's cash flows from operations were $793.2 million in 2007, compared to $813.3 million in 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 premiums". A reconciliation of such measures to the most comparable GAAP figures in accordance with Regulation G is presented in the attached supplemental financial data.
Please refer to the Investor Information - Financial 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, February 6, 2008 at 11:00 a.m. (ET) to discuss this release. Live broadcast of the conference call will be available through the Investor Information - Company Webcast section of RenaissanceRe's website at www.renre.com.
RenaissanceRe Holdings Ltd. is a global provider of reinsurance and insurance. The Company's business consists of two segments: (1) Reinsurance, which includes catastrophe reinsurance, specialty reinsurance and certain joint ventures and other investments managed by the Company's subsidiary RenaissanceRe Ventures Ltd., and (2) Individual Risk, which includes primary insurance and quota share reinsurance.
Cautionary Statement under "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995: Statements made in this earnings release contain information about the Company's future business prospects. These statements may be considered "forward-looking." These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. For further information regarding cautionary statements and factors affecting future results, please refer to RenaissanceRe Holdings Ltd.'s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2006 and its quarterly reports on Form 10-Q for the quarters ending March 31, 2007, June 30, 2007 and September 30, 2007.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Statements of Operations
For the three and twelve months ended December 31, 2007 and 2006
(in thousands of United States Dollars, except per share amounts)
(Unaudited)
Three months ended Twelve months ended
------------------------- -------------------------
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
Revenues
Gross premiums
written $122,227 $194,952 $1,809,637 $1,943,647
============ ============ ============ ============
Net premiums
written $105,303 $156,846 $1,435,335 $1,529,620
Decrease
(increase) in
unearned premiums 230,937 223,242 (10,966) 157
------------ ------------ ------------ ------------
Net premiums
earned 336,240 380,088 1,424,369 1,529,777
Net investment
income 80,714 83,233 402,463 318,106
Net foreign
exchange gains
(losses) 4,598 (1,715) 3,968 (3,293)
Equity in (losses)
earnings of other
ventures (124,999) 8,624 (128,609) 34,528
Other loss (20,221) (4,160) (37,930) (3,917)
Net realized gains
(losses) on
investments 7,182 2,489 1,293 (34,464)
------------ ------------ ------------ ------------
Total revenues 283,514 468,559 1,665,554 1,840,737
------------ ------------ ------------ ------------
Expenses
Net claims and
claim expenses
incurred 62,728 97,280 479,274 446,230
Acquisition
expenses 67,973 73,288 254,930 280,697
Operational
expenses 28,287 32,235 110,464 109,586
Corporate expenses 9,771 7,987 28,860 24,418
Interest expense 7,226 8,439 33,626 37,602
------------ ------------ ------------ ------------
Total expenses 175,985 219,229 907,154 898,533
------------ ------------ ------------ ------------
Income before
minority interest
and taxes 107,529 249,330 758,400 942,204
Minority interest -
DaVinciRe (54,070) (38,665) (164,396) (144,159)
------------ ------------ ------------ ------------
Income before taxes 53,459 210,665 594,004 798,045
Income tax benefit
(expense) 19,320 (42) 18,432 (935)
------------ ------------ ------------ ------------
Net income 72,779 210,623 612,436 797,110
Dividends on
preference shares (10,575) (9,488) (42,861) (35,475)
------------ ------------ ------------ ------------
Net income
available to
common
shareholders $62,204 $201,135 $569,575 $761,635
============ ============ ============ ============
Operating income available to
common shareholders
per Common Share -
diluted (1) $2.64 $2.74 $10.24 $11.05
Net income available to common
shareholders
per Common Share -
basic $0.90 $2.83 $8.08 $10.72
Net income available to common
shareholders
per Common Share -
diluted $0.88 $2.78 $7.93 $10.57
Average shares
outstanding -
basic 68,966 71,178 70,520 71,064
Average shares
outstanding -
diluted 70,413 72,467 71,825 72,073
Net claims and
claim expense
ratio 18.7% 25.6% 33.6% 29.2%
Expense ratio 28.6% 27.8% 25.7% 25.5%
------------ ------------ ------------ ------------
Combined ratio 47.3% 53.4% 59.3% 54.7%
============ ============ ============ ============
Operating return on
average common
equity -
annualized (1) 26.1% 33.3% 27.0% 37.9%
============ ============ ============ ============
(1) See Comments on Regulation G for a reconciliation of operating
income to net income.
RenaissanceRe Holdings Ltd. and Subsidiaries
Summary Consolidated Balance Sheets
(in thousands of United States Dollars, except per share amounts)
At
-----------------------------------
December 31, 2007 December 31, 2006
----------------- -----------------
Unaudited Audited
Assets
Fixed maturity investments
available for sale, at fair value $3,914,363 $3,111,930
Short term investments, at cost 1,821,549 2,410,971
Other investments, at fair value 807,864 592,829
Investments in other ventures,
under equity method 90,572 227,075
---------------- -----------------
Total investments 6,634,348 6,342,805
Cash and cash equivalents 330,226 214,399
Premiums receivable 475,075 419,150
Ceded reinsurance balances 107,916 133,971
Losses recoverable 183,275 301,854
Accrued investment income 39,084 41,234
Deferred acquisition costs 104,212 106,918
Receivable for investments sold 144,037 61,061
Other secured assets 90,488 -
Other assets 177,694 147,634
---------------- -----------------
Total assets $8,286,355 $7,769,026
================ =================
Liabilities, Minority Interest and
Shareholders' Equity
Liabilities
Reserve for claims and claim
expenses $2,028,496 $2,098,155
Reserve for unearned premiums 563,336 578,424
Debt 451,951 450,000
Subordinated obligation to capital
trust - 103,093
Reinsurance balances payable 275,430 395,083
Payable for investments purchased 422,974 88,089
Other secured liabilities 88,920 -
Other liabilities 162,294 125,401
---------------- -----------------
Total liabilities 3,993,401 3,838,245
---------------- -----------------
Minority interest - DaVinciRe 815,451 650,284
Shareholders' Equity
Preference shares 650,000 800,000
Common shares 68,920 72,140
Additional paid-in capital 107,867 284,123
Accumulated other comprehensive
income 44,719 25,217
Retained earnings 2,605,997 2,099,017
---------------- -----------------
Total shareholders' equity 3,477,503 3,280,497
---------------- -----------------
Total liabilities, minority
interest and shareholders' equity $8,286,355 $7,769,026
================ =================
Book value per common share $ 41.03 $ 34.38
================ =================
Common shares outstanding 68,920 72,140
================ =================
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Segment Information
(in thousands of United States Dollars)
(Unaudited)
Three months ended December 31, 2007
----------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ----------- ------------- ---------- ---------
Gross
premiums
written $26,693 $93,353 $2,181 $ - $122,227
=========== =========== ============= =========
Net premiums
written $28,807 $76,496 - $105,303
=========== =========== =========
Net premiums
earned $234,375 $101,865 - $336,240
Net claims
and claim
expenses
incurred 19,128 43,600 - 62,728
Acquisition
expenses 33,504 34,469 - 67,973
Operational
expenses 17,026 11,261 - 28,287
----------- ----------- ---------- ---------
Underwriting
income $164,717 $12,535 - 177,252
=========== ===========
Net
investment
income 80,714 80,714
Equity in
losses of
other
ventures (124,999) (124,999)
Other loss (20,221) (20,221)
Interest and
preference
share
dividends (17,801) (17,801)
Minority
interest -
DaVinciRe (54,070) (54,070)
Other items,
net 14,147 14,147
Net realized
gains on
investments 7,182 7,182
---------- ---------
Net income
available
to common
shareholders $(115,048) $62,204
========== =========
Net claims
and claim
expenses
incurred -
current
accident
year $117,777 $51,722 $169,499
Net claims
and claim
expenses
incurred -
prior
accident
years (98,649) (8,122) (106,771)
----------- ----------- ---------
Net claims
and claim
expenses
incurred -
total $19,128 $43,600 $62,728
=========== =========== =========
Net claims
and claim
expense
ratio -
current
accident
year 50.3% 50.8% 50.4%
Net claims
and claim
expense
ratio -
prior
accident
years (42.1%) (8.0%) (31.7%)
----------- ----------- ---------
Net claims
and claim
expense
ratio -
calendar
year 8.2% 42.8% 18.7%
Underwriting
expense
ratio 21.5% 44.9% 28.6%
----------- ----------- ---------
Combined
ratio 29.7% 87.7% 47.3%
=========== =========== =========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
Three months ended December 31, 2006
----------------------------------------------------------
Reinsurance Individual Eliminations Other Total
Risk (1)
----------- ----------- ------------- ---------- ---------
Gross
premiums
written $51,719 $141,601 $1,632 $- $194,952
=========== =========== ============= =========
Net premiums
written $52,026 $104,820 - $156,846
=========== =========== =========
Net premiums
earned $244,273 $135,815 - $380,088
Net claims
and claim
expenses
incurred 54,183 43,097 - 97,280
Acquisition
expenses 27,837 45,451 - 73,288
Operational
expenses 21,603 10,632 - 32,235
----------- ----------- ---------- ---------
Underwriting
income $140,650 $36,635 - 177,285
=========== ===========
Net
investment
income 83,233 83,233
Equity in
earnings of
other
ventures 8,624 8,624
Other loss (4,160) (4,160)
Interest and
preference
share
dividends (17,927) (17,927)
Minority
interest -
DaVinciRe (38,665) (38,665)
Other items,
net (9,744) (9,744)
Net realized
gains on
investments 2,489 2,489
---------- ---------
Net income
available
to common
shareholders $23,850 $201,135
========== =========
Net claims
and claim
expenses
incurred -
current
accident
year $79,666 $47,507 $127,173
Net claims
and claim
expenses
incurred -
prior
accident
years (25,483) (4,410) (29,893)
----------- ----------- ---------
Net claims
and claim
expenses
incurred -
total $54,183 $43,097 $97,280
=========== =========== =========
Net claims
and claim
expense
ratio -
current
accident
year 32.6% 35.0% 33.5%
Net claims
and claim
expense
ratio -
prior
accident
years (10.4%) (3.2%) (7.9%)
----------- ----------- ---------
Net claims
and claim
expense
ratio -
calendar
year 22.2% 31.8% 25.6%
Underwriting
expense
ratio 20.2% 41.3% 27.8%
----------- ----------- ---------
Combined
ratio 42.4% 73.1% 53.4%
=========== =========== =========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Segment Information (cont'd.)
(in thousands of United States Dollars)
(Unaudited)
Twelve months ended December 31, 2007
----------------------------------------------------------
Individual Eliminations
Reinsurance Risk (1) Other Total
----------- ----------- ------------- --------- ----------
Gross
premiums
written $1,290,420 $556,594 $(37,377) $ - $1,809,637
=========== =========== ========= ==========
Net premiums
written $1,024,493 $410,842 - $1,435,335
=========== =========== ==========
Net premiums
earned $957,661 $466,708 - $1,424,369
Net claims
and claim
expenses
incurred 241,118 238,156 - 479,274
Acquisition
expenses 119,915 135,015 - 254,930
Operational
expenses 67,969 42,495 - 110,464
----------- ----------- --------- ----------
Underwriting
income $528,659 $51,042 - 579,701
=========== ===========
Net
investment
income 402,463 402,463
Equity in
losses of
other
ventures (128,609) (128,609)
Other loss (37,930) (37,930)
Interest and
preference
share
dividends (76,487) (76,487)
Minority
interest -
DaVinciRe (164,396) (164,396)
Other items,
net (6,460) (6,460)
Net realized
gains on
investments 1,293 1,293
--------- ----------
Net income
available
to common
shareholders $(10,126) $569,575
========= ==========
Net claims
and claim
expenses
incurred -
current
accident
year $435,495 $276,929 $712,424
Net claims
and claim
expenses
incurred -
prior
accident
years (194,377) (38,773) (233,150)
----------- ----------- ----------
Net claims
and claim
expenses
incurred -
total $241,118 $238,156 $479,274
=========== =========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 45.5% 59.3% 50.0%
Net claims
and claim
expense
ratio -
prior
accident
years (20.3%) (8.3%) (16.4%)
----------- ----------- ----------
Net claims
and claim
expense
ratio -
calendar
year 25.2% 51.0% 33.6%
Underwriting
expense
ratio 19.6% 38.1% 25.7%
----------- ----------- ----------
Combined
ratio 44.8% 89.1% 59.3%
=========== =========== ==========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
Twelve months ended December 31, 2006
----------------------------------------------------------
Individual Eliminations
Reinsurance Risk (1) Other Total
----------- ----------- ------------- --------- ----------
Gross
premiums
written $1,321,163 $689,392 $(66,908) $ - $1,943,647
=========== =========== ============= ==========
Net premiums
written $1,039,103 $490,517 - $1,529,620
=========== =========== ==========
Net premiums
earned $972,017 $557,760 - $1,529,777
Net claims
and claim
expenses
incurred 148,052 298,178 - 446,230
Acquisition
expenses 115,324 165,373 - 280,697
Operational
expenses 72,405 37,181 - 109,586
----------- ----------- --------- ----------
Underwriting
income $636,236 $57,028 - 693,264
=========== ===========
Net
investment
income 318,106 318,106
Equity in
earnings of
other
ventures 34,528 34,528
Other loss (3,917) (3,917)
Interest and
preference
share
dividends (73,077) (73,077)
Minority
interest -
DaVinciRe (144,159) (144,159)
Other items,
net (28,646) (28,646)
Net realized
losses on
investments (34,464) (34,464)
--------- ----------
Net income
available
to common
shareholders $68,371 $761,635
========= ==========
Net claims
and claim
expenses
incurred -
current
accident
year $273,286 $309,502 $582,788
Net claims
and claim
expenses
incurred -
prior
accident
years (125,234) (11,324) (136,558)
----------- ----------- ----------
Net claims
and claim
expenses
incurred -
total $148,052 $298,178 $446,230
=========== =========== ==========
Net claims
and claim
expense
ratio -
current
accident
year 28.1% 55.5% 38.1%
Net claims
and claim
expense
ratio -
prior
accident
years (12.9%) (2.0%) (8.9%)
----------- ----------- ----------
Net claims
and claim
expense
ratio -
calendar
year 15.2% 53.5% 29.2%
Underwriting
expense
ratio 19.3% 36.3% 25.5%
----------- ----------- ----------
Combined
ratio 34.5% 89.8% 54.7%
=========== =========== ==========
(1)Represents gross premiums ceded from the Individual Risk segment to
the Reinsurance segment.
RenaissanceRe Holdings Ltd. and Subsidiaries
Supplemental Financial Data - Gross Premiums Written Analysis
(in thousands of United States Dollars)
(Unaudited)
Three months ended Twelve months ended
------------------------- -------------------------
Reinsurance December 31, December 31, December 31, December 31,
Segment 2007 2006 2007 2006
------------------ ------------ ------------ ------------ ------------
Renaissance
catastrophe
premiums $(2,224) $20,630 $662,987 $773,638
Renaissance
specialty
premiums 37,498 28,164 277,882 198,111
------------ ------------ ------------ ------------
Total Renaissance
premiums 35,274 48,794 940,869 971,749
------------ ------------ ------------ ------------
DaVinci
catastrophe
premiums (8,591) 2,554 340,117 325,476
DaVinci specialty
premiums 10 371 9,434 23,938
------------ ------------ ------------ ------------
Total DaVinci
premiums (8,581) 2,925 349,551 349,414
------------ ------------ ------------ ------------
Total Reinsurance
premiums $26,693 $51,719 $1,290,420 $1,321,163
============ ============ ============ ============
Total specialty
premiums $37,508 $28,535 $287,316 $222,049
============ ============ ============ ============
Total catastrophe
premiums $(10,815) $23,184 $1,003,104 $1,099,114
Catastrophe
premiums written
on behalf of our
joint venture,
Top Layer Re (1) 2,711 - 66,436 51,244
Catastrophe
premiums assumed
from the
Individual Risk
segment 2,590 1,632 (36,968) (64,573)
------------ ------------ ------------ ------------
Total managed
catastrophe
premiums (2) (5,514) 24,816 1,032,572 1,085,785
Managed
premiums
assumed for
fully-
collateralized
joint ventures 883 322 (59,418) (113,977)
------------ ------------ ------------ ------------
Total managed
catastrophe
premiums, net of
fully-
collateralized
joint ventures
(2) $(4,631) $25,138 $973,154 $971,808
============ ============ ============ ============
(1)Top Layer Re is accounted for under the equity method of
accounting.
(2)See Comments on Regulation G.
Three months ended Twelve months ended
------------------------- -------------------------
Individual Risk December 31, December 31, December 31, December 31,
Segment 2007 2006 2007 2006
------------------ ------------ ------------ ------------ ------------
Commercial multi-
line $60,456 $62,942 $341,150 $358,987
Commercial
property 20,559 47,199 164,438 226,205
Personal lines
property 12,338 31,460 51,006 104,200
------------ ------------ ------------ ------------
Total
Individual
Risk premiums $93,353 $141,601 $556,594 $689,392
============ ============ ============ ============
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 net unrealized gains and losses on credit derivatives issued by entities included in investments in other ventures, under equity method. In the presentation below, the only adjustments in respect of unrealized gains and losses reflect unrealized mark-to-market losses on credit derivatives and other credit-related products issued by ChannelRe, a financial guaranty reinsurer whose investment is accounted for by the Company under the equity method. The Company believes that the prevailing convention among financial guaranty insurers, reinsurers and other market participants, such as ChannelRe, is to exclude from operating income such unrealized gains and losses attributable to credit derivatives and other credit-related products. The Company's management believes that "operating income" is useful to investors because it more accurately measures and predicts the Company's results of operations by removing the variability arising from fluctuations in the Company's investment portfolio and credit derivatives issued by entities included in investments in other ventures, under equity method, which are not considered by management to be relevant indicators of business operations. The Company also uses "operating income" to calculate "operating income per common share - diluted" and "operating return on average common equity - annualized". The following is a reconciliation of: 1) net 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 Twelve months ended
------------------------- -------------------------
(in thousands of December 31, December 31, December 31, December 31,
United States 2007 2006 2007 2006
dollars, except
for per share
amounts)
------------ ------------ ------------ ------------
Net income
available to
common
shareholders $62,204 $201,135 $569,575 $761,635
Adjustment for
net realized
(gains) losses
on investments (7,182) (2,489) (1,293) 34,464
Adjustment for
net unrealized
losses on
credit
derivatives
issued by
entities
included in
investments in
other ventures,
under equity
method 131,201 - 167,171 -
------------ ------------ ------------ ------------
Operating income
available to
common
shareholders $186,223 $198,646 $735,453 $796,099
============ ============ ============ ============
Net income
available to
common
shareholders per
common share -
diluted $0.88 $2.78 $7.93 $10.57
Adjustment for
net realized
(gains) losses
on investments (0.10) (0.04) (0.02) 0.48
Adjustment for
net unrealized
losses on
credit
derivatives
issued by
entities
included in
investments in
other ventures,
under equity
method 1.86 - 2.33 -
------------ ------------ ------------ ------------
Operating income
available to
common
shareholders per
common share -
diluted $2.64 $2.74 $10.24 $11.05
============ ============ ============ ============
Return on average
common equity -
annualized 8.7% 33.7% 20.9% 36.3%
Adjustment for
net realized
(gains) losses
on investments (1.0%) (0.4%) (0.1%) 1.6%
Adjustment for
net unrealized
losses on
credit
derivatives
issued by
entities
included in
investments in
other ventures,
under equity
method 18.4% - 6.2% -
------------ ------------ ------------ ------------
Operating return on
average common
equity -
annualized 26.1% 33.3% 27.0% 37.9%
============ ============ ============ ============
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.
CONTACT: Investors:
RenaissanceRe Holdings Ltd.
Fred R. Donner, 441-295-4513
Chief Financial Officer and Executive Vice President
Media:
Kekst and Company
David Lilly or Dawn Dover, 212-521-4800
SOURCE: RenaissanceRe Holdings Ltd.