UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number: 34-0-26512
RENAISSANCERE HOLDINGS LTD.
---------------------------
(Exact name of registrant as specified in its charter)
BERMUDA 98-013-8020
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
SOFIA HOUSE, 48 CHURCH STREET
HAMILTON, BERMUDA HM 12
(Address of principal executive offices) (Zip Code)
(441) 295-4513
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No___
-----
The number of outstanding shares of RenaissanceRe Holding Ltd.'s common shares,
par value US $1.00 per share, as of March 31, 1996 was 25,605,000.
RENAISSANCERE HOLDINGS LTD.
INDEX TO FORM 10-Q
PART I -- Financial Information Page
----
ITEM 1 -- Financial Statements
Consolidated Balance Sheets as of March 31, 1996 1
(unaudited) and December 31, 1995
Unaudited Consolidated Statements of Operations for 2
the Three Months Ended March 31, 1996 and 1995.
Unaudited Consolidated Statements of Cash Flows 3
for the Three Months Ended March 31, 1996 and 1995
Notes to Unaudited Consolidated Financial Statements 4
ITEM II -- Management's Discussion and Analysis of 5
Results of Operations and Financial Condition
PART II -- Other Information 8
ITEM 1 -- Legal Proceedings
ITEM 2 -- Changes in Securities
ITEM 3 -- Defaults Upon Senior Securities
ITEM 4 -- Submission of Matters to a Vote of Security Holders
ITEM 5 -- Other Information
ITEM 6 -- Exhibits and Reports on Form 8-K
Signature - RenaissanceRe Holdings Ltd. 9
EXHIBIT 27 -- Financial Data Schedule
PART I -- Financial Information
Item 1 -- Financial Statements
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
(United States Dollars)
(in thousands, except per share amounts)
As at
--------------------------------------------------
March 31, 1996 December 31, 1995
------------------ --------------------
(Unaudited)
ASSETS
- - -------------------------------------------------------------------------------
Investments available for sale, at fair value $ 565,085 $ 523,848
(Amortized cost $568,194 and $521,149, at March 3, 1996 and
December 31, 1995, respectively)
Short-term investments 4,989 4,988
Cash and cash equivalents 126,751 139,163
Premiums receivable 117,532 62,773
Accrued investment income 14,015 14,851
Deferred acquisition costs 13,679 6,163
Other assets 5,218 5,274
------------------ --------------------
TOTAL ASSETS $ 847,269 $ 757,060
================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
- - -------------------------------------------------------------------------------
LIABILITIES
Reserve for claims and claim adjustment expenses $ 104,496 $ 100,445
Reserve for unearned premiums 137,459 60,444
Bank loan 80,000 100,000
Other liabilities 11,174 9,835
------------------ --------------------
TOTAL LIABILITIES 333,129 270,724
------------------ --------------------
SHAREHOLDERS' EQUITY
- - -------------------------------------------------------------------------------
Common shares 25,605 25,605
Additional paid-in capital 173,855 174,370
Loans to officers and employees (2,651) (2,728)
Net unrealized appreciation (depreciation) on investments (3,109) 2,699
Retained earnings 320,440 286,390
------------------ --------------------
TOTAL SHAREHOLDERS' EQUITY 514,140 486,336
------------------ --------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 847,269 $ 757,060
================== ====================
BOOK VALUE PER COMMON SHARE $ 20.08 $ 18.99
================== ====================
COMMON SHARES OUTSTANDING 25,605 25,605
1
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(United States Dollars)
(in thousands, except per share amounts)
(Unaudited)
QUARTERS ENDED
-----------------------------------
MARCH 31, 1996 MARCH 31, 1995
--------------- ---------------
REVENUES
Net premiums written $ 138,715 $ 155,516
Increase in unearned premiums (77,016) (88,930)
--------------- ---------------
Net premiums earned 61,699 66,586
Net investment income 10,058 7,014
Net foreign exchange gains (losses) (94) 1,428
Net realized gains (losses) on
investments (617) 566
--------------- ---------------
TOTAL REVENUES 71,046 75,594
--------------- ---------------
EXPENSES
Claims and claim adjustment
expenses incurred 19,981 20,863
Acquisition expenses 6,322 6,709
Operating expenses 3,301 2,094
Corporate expenses 687 3,875
Interest expense 1,584 1,078
--------------- ---------------
TOTAL EXPENSES 31,875 34,619
--------------- ---------------
Pre-tax income 39,171 40,975
Income tax expense - -
--------------- ---------------
NET INCOME 39,171 40,975
Net Income allocable to Series B
Preference Shares - 1,941
--------------- ---------------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 39,171 $ 39,034
=============== ===============
NET INCOME PER COMMON SHARE $ 1.50 $ 1.72
=============== ===============
Weighted average common shares and
common share equivalents outstanding 26,088 22,750
Expense ratio 15.6% 13.2%
Claims and claims expense ratio 32.4% 31.4%
--------------- ---------------
Combined ratio 48.0% 44.6%
2
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(United States Dollars in thousands)
(Unaudited)
QUARTERS ENDED
----------------------------------
MARCH 31, 1996 MARCH 31, 1995
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 39,171 $ 40,975
ADJUSTMENTS TO RECONCILE NET INCOME TO
CASH PROVIDED BY OPERATING ACTIVITIES
Amortization and depreciation 703 799
Realized investment (gains) losses 617 (566)
Change in:
Reserve for unearned premiums 77,015 88,272
Reinsurance balances receivable (54,418) (65,913)
Reserve for claims and claim
adjustment expenses 4,051 9,211
Deferred acquisition costs (7,516) (9,309)
Other 1,452 1,608
-------------- ---------------
Cash provided by
operating activities 61,075 65,077
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 79,279 166,237
Purchase of investments available
for sale (127,645) (131,054)
-------------- ---------------
Cash provided by (applied
to) investing activities (48,366) 35,183
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares - 4,309
Repayment of bank loan (20,000) -
Dividends paid (5,121) -
Organizational expenses - 1,708
-------------- ---------------
Cash provided by (applied
to) financing activities (25,121) 6,017
-------------- ---------------
Net increase in cash and cash
equivalents (12,412) 106,277
Cash and cash equivalents, balance
at beginning of period 139,163 153,049
-------------- ---------------
Cash and cash equivalents, balance
at end of period $ 126,751 $ 259,326
============== ===============
3
RenaissanceRe Holdings Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(unaudited)
1. The consolidated financial statements have been prepared on the basis of
United States generally accepted accounting principles ("GAAP") and include the
accounts of RenaissanceRe Holdings Ltd. and its wholly owned subsidiaries,
Renaissance Reinsurance Ltd. ("Renaissance Reinsurance") and Glencoe Insurance
Ltd. ("Glencoe") (collectively, the "Company"). In the opinion of management,
these financial statements reflect all the normal recurring adjustments
necessary for a fair presentation of the Company's financial position at March
31, 1996 and December 31, 1995, its results for the three months ended March 31,
1996 and 1995 and cash flows for the three months ended March 31, 1996 and 1995.
These consolidated financial statements should be read in conjunction with the
1995 audited consolidated financial statements and related notes thereto.
2. Earnings per share are calculated by dividing net income available to
common shareholders by weighted average common shares and common share
equivalents outstanding. For the quarter ended March 31, 1996, weighted average
common shares outstanding were 26.1 million consisting of 25.6 million weighted
average common shares and 0.5 million weighted average common share equivalents.
For the quarter ended March 31, 1995, weighted average common shares outstanding
were 22.8 million consisting of 22.5 million weighted average common shares and
0.3 million weighted average common share equivalents.
3. During the quarter the Board of Directors declared, and the Company paid, a
dividend of $0.20 per share to shareholders of record as of February 20, 1996.
4. In early January 1996, the Company capitalized a new subsidiary, Glencoe,
with $50 million of initial capital, to participate in certain attractive
insurance markets utilizing the modeling, underwriting, customer service, and
capital management approaches that Renaissance Reinsurance has successfully
employed. Glencoe is not expected to contribute significantly to results in
1996.
5. In February 1996, the Company completed a secondary offering of 3 million
common shares at $28.00 per share. The Company's initial institutional investors
each sold 14% of their holdings, which doubled the public float of the Company's
shares. The secondary offering did not have any impact on shares outstanding
because all shares were sold by existing shareholders.
6. Interest paid was $1.6 million for the quarter ended March 31, 1996 and
$0.7 million for the same quarter in the previous year.
-4-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the quarter ended March 31, 1996 compared to the quarter ended March 31,
1995
For the quarter ended March 31, 1996, net income available to common
shareholders was $39.2 million, compared to $39.0 million reported for the same
quarter in 1995. Net income per common share for the quarter ended March 31,
1996 was $1.50 compared to $1.72 for the same period in 1995, a decrease of 13%,
because of a 13% increase in the number of shares outstanding in 1996 as a
result of the Company's 3.1 million initial public offering (the "IPO") in July
1995. Operating earnings per common share (excluding realized gains and losses
on investments) were $1.53 for the first quarter of 1996, compared to $1.69 for
the same period in 1995.
Net premiums written for the first quarter of 1996 declined 11% to $138.7
million from the $155.5 million reported for the same quarter of 1995. The
decline in net premiums written was primarily related to the competitive market
for property catastrophe reinsurance, booking of a multi-year policy in the
first quarter of 1995 that will not renew until 1997, and lower reinstatement
premiums in the first quarter of 1996 compared to the first quarter of 1995.
The premium decrease of 11% was the result of a 9% decrease due to certain
clients not renewing coverage, a decrease of 4% related to a multi-year policy
that will not renew until 1997, a decrease of 2% caused by a reduction in
reinstatement premiums booked, a decrease in pricing of renewed business and
adjustments of 3%, which was partially offset by increased premiums related to
new business of 7%. Reinstatement premiums for the first quarter of 1996 were
$1.5 million compared to $5.4 million for the same quarter of 1995. Net premiums
earned for the first quarter of 1996 were $61.7 million, compared to $66.6
million for the same quarter of 1995. Total revenues for the first quarter of
1996 decreased to $71.0 million from $75.6 million reported for the same quarter
of 1995.
The table below sets forth the Company's combined ratio and components thereof:
QUARTERS ENDED MARCH 31,
------------------------
1996 1995
---------- --------
Loss ratio....................................... 32.4% 31.4%
Expense ratio.................................... 15.6% 13.2%
-------- --------
Combined Ratio................................... 32.4% 44.6%
======== ========
-5-
Claims and claim adjustment expenses incurred for the quarter ended March 31,
1996 were $20.0 million or 32.4 percent of net premiums earned and included the
provision of $7.0 million for losses related to the Northeast USA winter storms.
In comparison, claims and claim adjustment expenses for the quarter ended March
31, 1995 were $21.0 million or 31.4 percent of net premiums earned.
Acquisition costs were $6.3 million for the quarter ended March 31, 1996
compared to $6.7 million for the same period in 1995. These costs were
consistent at 10.2 percent and 10.1 percent of net premiums earned for the
quarters ended March 31, 1996 and 1995, respectively.
Net investment income (excluding net realized investment gains and losses) was
$10.1 million for the quarter ended March 31, 1996 compared to $7.0 million for
the same period in 1995. The increase was due to the increase in the Company's
invested assets. The increase in invested assets over the prior year amount was
the result of cash flow provided by operating activities, borrowings under the
Company's revolving credit facility with a syndicate of commercial banks (the
"Revolving Credit Facility") and the proceeds of the IPO, offset by the
Company's retirement of its Series B 15% Cumulative Redeemable Voting
Preference Shares (the "Series B Preference Shares") in April 1995. Net
realized losses on investments were $0.6 million for the quarter March 31, 1996,
compared to net realized gains of $0.6 million for the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
In July 1995, the Company completed the IPO raising approximately $54.9 million
in net proceeds. The net proceeds from the IPO were used to reduce the Company's
outstanding borrowings under its Revolving Credit Facility and for general
corporate purposes.
In January 1996, the Company amended and restated the Revolving Credit Facility,
increasing the aggregate borrowing limit thereunder to $150.0 million from
$120.0 million. The full amount of the Revolving Credit Facility is available
until February 1, 1999, with two optional one year extensions, if requested by
the Company and approved by the lenders.
On February 28, 1996, the Company completed a secondary offering of 3 million
common shares at $28.00 per share. The Company's initial institutional
investors each sold 14% of their holdings, which doubled the public float of the
Company's shares. The secondary offering did not have any impact on shares
outstanding because all shares were sold by existing shareholders.
At March 31, 1996, total assets were $847.3 million compared to $757.1 million
at December 31, 1995, an increase of 12 percent. The increase in total assets
was due primarily to cash flows provided by operating activities partially
offset by reduced borrowings under the Company's Revolving Credit Facility.
During the quarter ended March 31, 1996, the Company reduced its borrowings
under the Revolving Credit Facility by $20 million. At March 31, 1996, the
-6-
Company had $70 million of unused borrowing capacity under its Revolving
Credit Facility.
The Company's investment portfolio of $696.8 million consisted of debt
securities with fixed maturities of $565.1 million, short-term investments of
$5.0 million, and cash and cash equivalents of $126.8 million. At March 31,
1996, the investment portfolio had an average rating of AA+ as measured by
Standard & Poor's Ratings Group, an average duration of 1.4 years and an average
yield to maturity of 6.1 percent before investment expenses. The Company's
investment in cash and cash equivalents includes $25.9 million of investments in
non - U.S. currencies, representing approximately 4 percent of invested assets.
The remaining 96 percent of the Company's invested assets are invested in U.S.
Dollar denominated investments. The portfolio does not contain any direct
investments in real estate, mortgage loans or other securities.
-7-
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings
None.
Item 2 -- Changes in Securities
None
Item 3 -- Defaults Upon Senior Securities
None
Item 4 -- Submission of Matters to a Vote of Security Holders
None
Item 5 -- Other Information
None
Item 6 -- Exhibits and Reports on From 8-K
a. Exhibits:
Exhibit 27-- Financial Data Schedule
b. Current Reports on Form 8-K:
The Registrant did not file any reports on Form 8-K during
the period beginning January 1, 1996 and ending March 31,
1996.
-8-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
RENAISSANCERE HOLDINGS LTD.
Date: May 7, 1996
By: /s/ Keith S. Hynes
--------------------------------
Keith S. Hynes
Senior Vice President and
Chief Financial Officer
-9-
7
1,000
3-MOS
DEC-31-1996
MAR-31-1996
565,085
0
0
0
0
0
565,085
131,740
0
13,679
847,269
104,496
137,459
0
0
80,000
0
0
25,605
488,535
847,269
61,699
10,058
(617)
(94)
19,981
6,322
3,301
39,171
0
39,171
0
0
0
39,171
1.50
0
0
0
0
0
0
0
0
