Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

October 22, 1997

Documents

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on October 22, 1997



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: September 30, 1997

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)


Renaissance House
8--12 East Broadway
Pembroke, Bermuda HM 19
(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 stock,
par value US $1.00 per share as of September 30, 1997 was 22,447,110

Total number of pages in this report: 15

RenaissanceRe Holdings Ltd.

INDEX TO FORM 10-Q




Part I -- Financial Information


Item 1 -- Financial Statements


Consolidated Balance Sheets as of September 30, 1997 3
(unaudited) and December 31, 1996

Unaudited Consolidated Statements of Operations for 4
the Nine Months Ended September 30, 1997 and 1996.

Unaudited Consolidated Statements of Cash Flows 5
for the Nine Months Ended September 30, 1997 and 1996

Notes to Unaudited Consolidated Financial Statements 6

Item II -- Management's Discussion and Analysis of 9
Financial Condition and Results of Operations

Part II -- Other Information 14

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. 15


2

Part I - Financial Information
Item 1 - Financial Statements

RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Balance Sheets
(United States Dollars)
(in thousands, except per share amounts)



As at
-------------------------------------------------
September 30, 1997 December 31, 1996
------------------------ ---------------------

Assets (Unaudited)
Fixed maturities available for sale, at fair value
(Amortized cost $674,496 and $601,907, at September 30, 1997
and December 31, 1996, respectively) $ 678,408 $ 603,484
Equity securities at market (Cost $49,169) 55,544 --
------------------------ ---------------------
Total investments 733,952 603,484

Cash and cash equivalents 123,828 198,982
Reinsurance premiums receivable 88,603 56,685
Ceded reinsurance balances 22,512 19,783
Accrued investment income 16,686 13,913
Deferred acquisition costs 10,656 6,819
Other assets 10,571 5,098
------------------------ ---------------------

Total assets $ 1,006,808 $ 904,764
======================== =====================
Liabilities, Capital Securities, Minority Interest and Shareholders' Equity

Liabilities
Reserve for claims and claim adjustment expenses $ 113,748 $ 105,421
Reserve for unearned premiums 103,407 65,617
Bank loan 50,000 150,000
Reinsurance balances payable 27,762 18,072
Other 5,547 4,215
------------------------ ---------------------

Total liabilities 300,464 343,325
------------------------ ---------------------

Company obligated mandatorily redeemable capital securities
of a subsidiary trust holding solely junior subordinated
debentures of the Company (Note 7) 100,000 --
Minority interest in consolidated subsidiary 10,672 15,236

Shareholders' Equity
Common shares 22,447 23,531
Additional paid-in capital 53,423 102,902
Loans to officers (3,364) (3,868)
Net unrealized appreciation on investments 10,287 1,577
Retained earnings 512,879 422,061
------------------------ ---------------------

Total shareholders' equity 595,672 546,203
------------------------ ---------------------
Total liabilities, capital securities, minority interest,
and shareholders' equity $ 1,006,808 $ 904,764
======================== =====================

Book value per Common Share $ 26.54 $ 23.21
======================== =====================

Common Shares outstanding 22,447 23,531
======================== =====================



The accompanying notes are an integral part of these financial statements.

3



RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Operations
(United States Dollars)
(in thousands, except per share amounts)
(Unaudited)



Quarters Ended September 30, Year-to-Date September 30,
---------------------------------- ---------------------------------
1997 1996 1997 1996
---------------- ---------------- --------------- ----------------

Gross Premiums Written $ 60,411 $ 73,591 $ 215,574 $ 253,157
================ ================ =============== ================

Revenues
Net premiums written $ 46,740 $ 65,238 $ 184,964 $ 236,635
Decrease (increase) in unearned premiums 6,255 (1,785) (24,605) (49,468)
---------------- ---------------- --------------- ----------------

Net premiums earned 52,995 63,453 160,359 187,167
Net investment income 12,653 12,620 36,994 32,945
Net foreign exchange gains (losses) (356) 266 (1,520) (386)
Net realized gains (losses) on investments 1,053 (660) 917 (2,791)
---------------- ---------------- --------------- ----------------

Total revenues 66,345 75,679 196,750 216,935
---------------- ---------------- --------------- ----------------

Expenses
Claims and claim expenses incurred 14,673 26,298 40,017 65,615
Acquisition costs 6,663 6,606 18,978 19,018
Operating expenses 6,116 4,456 18,133 11,594
Corporate expenses 295 307 2,857 1,440
Interest expense 786 1,453 3,488 4,246
---------------- ---------------- --------------- ----------------

Total expenses 28,533 39,120 83,473 101,913
---------------- ---------------- --------------- ----------------

Income before minority interest and taxes 37,812 36,559 113,277 115,022
Minority interest - Company obligated mandatorily
redeemable capital securities of a subsidiary
trust holding solely junior subordinated
debentures of the Company (Note 7) (2,088) -- (4,816) --
Minority interest - Glencoe (316) (96) (611) (107)
---------------- ---------------- --------------- ----------------

Income before taxes 35,408 36,463 107,850 114,915
Income tax expense -- -- -- --
---------------- ---------------- --------------- ----------------

Net income $ 35,408 $ 36,463 $ 107,850 $ 114,915
================ ================ =============== ================

Net income per Common Share $ 1.55 $ 1.40 $ 4.66 $ 4.41
================ ================ =============== ================
Weighted average Common Shares and
common equivalent shares outstanding 22,856 26,084 23,137 26,082
================ ================ =============== ================

Claims and claim expense ratio 27.7% 41.5% 25.0% 35.1%
Expense ratio 24.1% 17.4% 23.1% 16.3%
---------------- ---------------- --------------- ----------------

Combined ratio 51.8% 58.9% 48.1% 51.4%
================ ================ =============== ================


The accompanying notes are an integral part of these financial statements.

4



RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(United States Dollars in thousands)
(Unaudited)




Year-to-Date September 30,
----------------------------------
1997 1996
--------------- ----------------

Cash Flows from Operating Activities
Net income $ 107,850 $ 114,915
Adjustments to reconcile net income to
cash provided by operating activities

Amortization and depreciation 797 398
Realized investment (gains) losses (917) 2,791
Minority share of income 611 107
Change in:
Reinsurance balances, net (22,228) (22,568)
Ceded reinsurance balances receivable (2,729) (21,347)
Deferred acquisition costs (3,837) (5,390)
Reserve for claims and claim adjustment expenses 8,327 5,729
Reserve for unearned premiums 37,790 49,467
Other (337) 8,864
--------------- ----------------

Cash provided by operating activities 125,327 132,966
--------------- ----------------

Cash flows from investing activities
Proceeds from sale of investments 359,530 237,135
Purchase of investments available for sale (483,438) (312,448)
Proceeds from sale of (purchase of) minority interest in Glencoe (5,185) 15,126
--------------- ----------------

Cash applied to investing activities (129,093) (60,187)
--------------- ----------------

Cash flows from financing activities
Proceeds from issuance of Company obligated mandatorily
redeemable capital securities of a subsidiary trust holding
solely junior subordinated debentures of the Company (Note 7) 98,500 --
Proceeds from (repayment of) bank loan (100,000) 50,000
Dividends paid (17,031) (15,366)
Proceeds from repayment of officer loan 601 --
Purchase of Common Shares (53,458) (613)
--------------- ----------------

Cash provided by (used in) financing activities (71,388) 34,021
--------------- ----------------

Net increase (decrease) in cash and cash equivalents (75,154) 106,800

Cash and cash equivalents, balance at beginning of period 198,982 139,163
--------------- ----------------

Cash and cash equivalents, balance at end of period $ 123,828 $ 245,963
=============== ================



The accompanying notes are an integral part of these financial statements.

5

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. (the "Company") and its subsidiaries,
including Renaissance Reinsurance Ltd. ("Renaissance Reinsurance") and Glencoe
Insurance Ltd. ("Glencoe"). 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 September 30, 1997, its
results of operations for the three month and nine month periods ended September
30, 1997 and 1996 and cash flows for the nine month periods ended September 30,
1997 and 1996. These consolidated financial statements should be read in
conjunction with the 1996 audited consolidated financial statements and related
notes thereto. Certain comparative information has been reclassified to conform
to current presentation. Because of the seasonality of the Company's business
the results of operations for any interim period will not necessarily be
indicative of results of operations for the full fiscal year.

2. Earnings Per Share is calculated by dividing net income by the weighted
average number of common shares and common share equivalents outstanding.

For the three month period ended September 30, 1997, the Company had
22,856,000 weighted average common shares outstanding consisting of 22,409,000
weighted average common shares and 447,000 weighted average common share
equivalents issuable pursuant to the Company's stock option plans. For the
three month period ended September 30, 1996, the Company had 26,084,000 weighted
average common shares outstanding consisting of 25,614,000 weighted average
common shares and 470,000 weighted average common share equivalents issuable
pursuant to the Company's stock option plans.

For the nine months ended September 30, 1997, the Company had 23,137,000
weighted average common shares outstanding, consisting of 22,704,000 weighted
average common shares and 433,000 weighted average common share equivalents
issuable pursuant to the Company's stock option plans. For the nine months
ended September 30, 1996, the Company had 26,082,000 weighted average common
shares outstanding, consisting of 25,609,000 weighted average common shares and
473,000 weighted average common share equivalents issuable pursuant to the
Company's stock option plans. Total Common Shares outstanding as at September
30, 1997 and 1996 were 22,447,110 and 25,615,977, respectively.

3. The Board of Directors of the Company declared, and the Company paid,
dividends of $.25 per share to shareholders of record on each of August 20, May
22, and February 19, 1997. On October 22, 1997, the Board of Directors of the
Company declared a dividend of $.25 per share payable on December 5, 1997 to
shareholders of record on November 20, 1997.

4. During the third quarter of 1997, the Company executed the First Amendment
to the Third Amended and Restated Credit Agreement dated as of December 12, 1996
(the "Credit Facility"). The amendments became effective on September 8, 1997,
except for the amendments relating to invested assets which were effective on
June 30, 1997. The Credit Facility was amended to a) extend the termination
date from December 1, 1999 to December 1, 2001, b) specifically define the
Capital Securities as a component of Net

6

Worth, c) amend the definition of invested assets and the covenants related to
invested assets, d) amend certain restrictions regarding acquisitions and e)
amend certain fee schedules.

5. During the third quarter of 1997 the Company increased its ownership of
Glencoe through the purchase of an additional 9.9 percent interest in Glencoe.
The Company paid $5.2 million for the additional shares in Glencoe and increased
its ownership from 70.1 percent to 80 percent.

6. On June 23, 1997 the Company completed a secondary offering of 3.4 million
common shares at $38.00 per share. All shares sold were owned by the Company's
founding institutional shareholders or their successors, and the Company did not
receive any of the proceeds of the offering. Concurrent with the secondary
offering on June 23, 1997, the Company also purchased, for cancellation, an
aggregate of 700,000 common shares at $36.29 per share or an aggregate purchase
price of $25.4 million from the Company's founding institutional shareholders or
their successors (the "Company Purchase"). Expenses of $700,000 related to the
offerings were charged to additional paid in capital during the second quarter
of 1997.

7. On March 7, 1997 the Company completed the sale of $100 million of "Company
Obligated, Mandatorily Redeemable Capital Securities of a Subsidiary Trust
holding solely $103,092,783.51 of the Company's 8.54% Junior Subordinated
Debentures due March 1, 2027" ("Capital Securities") issued by RenaissanceRe
Capital Trust (the "Trust"), a newly created subsidiary business trust of the
Company. The Capital Securities pay cumulative cash distributions at an annual
rate of 8.54 percent, payable semi-annually commencing September 1, 1997.
Proceeds from the offering were used to repay a portion of the Company's
outstanding indebtedness. Effective September 11, 1997 the Trust exchanged the
Capital Securities for substantially the same securities registered under the
Securities Act of 1933, as amended.

The Trust is a wholly owned subsidiary of the Company. The financial
statements of the Trust are consolidated into the Company's consolidated
financial statements, and the Capital Securities and the related accrued
dividends are reflected in the financial statements as a minority interest.

8. In January 1997, the Company completed a fixed price tender offer and
repurchased and cancelled 813,190 Common Shares from its public shareholders at
$34.50 per share, or an aggregate purchase price of $28.1 million (the "Tender
Offer").

9. Interest paid was $3.1 million for the nine months ended September 30, 1997
and $4.2 million for the same period in the previous year. On September 1, 1997
the Company paid $4.1 million of dividends on the Capital Securities.

10. During 1997 the Company renegotiated and extended employment agreements
with certain key employees.

11. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 128, Earnings per Share. SFAS No.
128 simplifies the standards for computing earnings per share ("EPS") previously
found in APB Opinion No. 15, Earnings per Share. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures. Management does not believe this
new pronouncement will materially affect the Company's current disclosures as
the Company's capital structure is not considered complex nor is there
significant dilution from other securities or other contracts to issue

7

common stock.

SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods and requires restatement of
all prior-period EPS data presented. Earlier application is not permitted.

If SFAS No. 128 had been effective for the current reporting period, the pro
forma affects would be as follows:




Three Months Ended September 30,
- --------------------------------
1997 1996
---- ----

Basic EPS $1.58 $1.42

Diluted EPS $1.55 $1.40

Nine Months Ended September 30,
- --------------------------------
1997 1996
---- ----
Basic EPS $4.75 $4.49

Diluted EPS $4.66 $4.41

Year Ended December 31,
- -----------------------
1996 1995
---- ----
Basic EPS $6.12 $6.84

Diluted EPS $6.01 $6.75


In June 1997 the Financial Accounting Standards Board issued SFAS 130 and SFAS
131.

SFAS 130 establishes standards for reporting and displaying comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. This statement requires that an
enterprise (a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position.

SFAS 130 is effective for fiscal years beginning after December 15, 1997. The
Company is presently considering its disclosure alternatives.

SFAS 131 establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.

SFAS 131 is effective for financial periods beginning after December 15, 1997.
The Company is presently considering its disclosure alternatives.

8

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

For the quarter ended September 30, 1997 compared to the quarter ended September
30, 1996

For the quarter ended September 30, 1997, net income was $35.4 million or $1.55
per share, compared to $36.5 million or $1.40 per share for the same quarter in
1996. The decrease in reported net income was primarily related to lower net
premiums earned, resulting from lower in force gross premiums as well as
increased ceded reinsurance premiums resulting from the expansion of the
Company's ceded retrocessional programs, offset by lower claims and claim
expenses attributable to a light Atlantic hurricane season. Per share amounts
for 1997 benefited from a lower number of common shares outstanding as a result
of the Company's purchase of 3.6 million common shares since December 13, 1996.

Gross premiums written for the third quarter of 1997 declined 17.9 percent to
$60.4 million, and included $2.6 million of premiums written by Glencoe. Gross
premiums written for the same period in 1996 were $73.6 million. The decline in
gross premiums written was primarily related to the Company's decision not to
renew certain contracts due to the competitive market for property catastrophe
reinsurance as well as lower overall pricing on reinsurance contracts. The 17.9
percent premium decrease was the result of a 13.3 percent decrease in premiums
due to the Company not renewing coverage and a 11.1 percent decrease related to
changes in pricing, participation levels and coverage on renewed business,
partially offset by a 6.5 percent increase in premiums related to new business.

Net premiums written for the third quarter of 1997 were $46.7 million compared
to $65.2 million for the third quarter of 1996. Net premiums earned for the
third quarter of 1997 were $53.0 million, compared to $63.5 million for the same
quarter of 1996, a decrease of 16.5 percent. Total revenues for the third
quarter of 1997 decreased to $66.3 million from $75.7 million reported for the
same quarter of 1996.

During 1997, consistent with its risk diversification and risk management
practices and the availability of coverage responsive to the Company's risk
profile, the Company increased the level of property catastrophe reinsurance
coverage purchased for its own account. During the third quarter of 1997, ceded
premiums written were $13.7 million compared to $8.4 million for the same
quarter in 1996.

The table below sets forth the Company's combined ratio and components thereof
for the quarters ended September 30, 1997 and 1996:




Quarters Ended September 30,
----------------------------
1997 1996
---- ----

Loss ratio 27.7% 41.5%
Expense ratio 24.1% 17.4%
- --------------------------------------------------------------------------------

Combined ratio 51.8% 58.9%
================================================================================


Claims and claim expenses incurred for the quarter ended September 30, 1997 were
$14.7 million or 27.7 percent of net premiums earned. In comparison, claims and
claim expenses incurred for the quarter ended September 30, 1996 were $26.3
million

9

or 41.5 percent of net premiums earned, and included a provision of $15 million
for Hurricane Fran.

Underwriting expenses are comprised of acquisition expenses and operational
expenses. Acquisition expenses were $6.7 million for the quarter ended
September 30, 1997 compared to $6.6 million for the same quarter in 1996. The
increase in acquisition costs as a percentage of net premiums earned is
primarily related to the increase in reinsurance purchased, which provides no
reduction in the associated acquisition expenses, and an increase in premiums
written by Glencoe, which have a higher ratio of acquisition costs. Operating
expenses for the third quarter of 1997 increased to $6.1 million compared with
$4.5 million for the same quarter of 1996 as a result of increased staffing at
Renaissance Reinsurance, the development of Glencoe and the Company's continuing
investment in modeling technology.

Net investment income (excluding net realized and unrealized investment gains
and losses) was $12.7 million for the quarter ended September 30, 1997 compared
to $12.6 million for the same period in 1996.

During the quarter ended September 30, 1997, the Company accrued $2.1 million
for dividends related to the Capital Securities that were issued in March 1997.
Interest expense for the quarter ended September 30, 1997 decreased to $.8
million from $1.5 million for the same period in 1996 as a result of a decreased
amount outstanding under the Company's Revolving Credit Facility.

For the nine months ended September 30, 1997 compared to the nine months ended
September 30, 1996

For the nine months ended September 30, 1997, net income available to common
shareholders was $107.9 million or $4.66 per share, compared to $114.9 million
or $4.41 per share for the same period in 1996. The decrease in reported net
income was primarily related to lower net premiums earned, resulting from lower
in force gross premiums as well as higher ceded reinsurance premiums, partially
offset by lower claims and claim expenses incurred. Per share amounts for 1997
benefited from a lower number of common shares outstanding as a result of the
Company's purchase of 3.6 million common shares since December 13, 1996.

Gross premiums written for the first nine months of 1997 declined 14.8 percent
to $215.6 million, and included $5.2 million of premiums written by Glencoe.
Gross premiums written for the same period in 1996 were $253.2 million. The
decline in gross premiums written was primarily related to the Company's
decision not to renew certain contracts due to the competitive market for
property catastrophe reinsurance as well as lower overall pricing on reinsurance
contracts. The premium decrease of 14.8 percent was the result of a 17.6
percent decrease in premiums due to the Company not renewing coverage and a 8.4
percent decrease related to changes in pricing, participation level and coverage
on renewed business, partially offset by a 11.2 percent increase in premiums
related to new business.

During 1997, consistent with its risk diversification and risk management
practices and the availability of coverage responsive to the Company's risk
profile, the Company increased the level of property catastrophe reinsurance
coverage purchased for its own account. During the first nine months of 1997,
ceded premiums written were $30.6 million compared to $16.5 million for the same
period in 1996.

Net premiums written for the first nine months of 1997 were $185.0 million
compared with $236.6 million for the same period in 1996. Net premiums earned
for first nine

10

months of 1997 were $160.4 million, compared to $187.2 million for the same
period in 1996, a decrease of 14.2 percent. Total revenues for the first nine
months of 1997 decreased to $196.8 million from $216.9 million reported for the
same period in 1996.

The table below sets forth the Company's combined ratio and components thereof
for the nine months ended September 30, 1997 and 1996:




Nine Months Ended September 30,
1997 1996
---- ----

Loss ratio 25.0% 35.1%
Expense ratio 23.1% 16.3%
- --------------------------------------------------------------------------------

Combined ratio 48.1% 51.4%
================================================================================


Claims and claim expenses incurred for the nine months ended September 30, 1997
were $40.0 million or 25.0 percent of net premiums earned. In comparison, claims
and claim expenses incurred for the nine months ended September 30, 1996 were
$65.6 million or 35.1 percent of net premiums earned.

Underwriting expenses are comprised of acquisition expenses and operational
expenses. Acquisition expenses were $19.0 million for the nine months ended
September 30, 1997 and 1996. The increase in acquisition costs as a percentage
of net premiums earned is primarily related to the increase in reinsurance
purchased, which provides no reduction in the associated acquisition expenses,
and an increase in premiums written by Glencoe, which have a higher ratio of
acquisition costs. Operating expenses for the first nine months of 1997
increased to $18.1 million compared with $11.6 million for the same period in
1996 as a result of increased staffing at Renaissance Reinsurance, the continued
development of Glencoe and the Company's continuing investment in modeling
technology.

Corporate expenses for the first nine months of 1997 were $2.9 million and
included one-time fees of $1.5 million related to the issuance of the $100
million of Capital Securities in March of 1997.

Net investment income (excluding net realized and unrealized investment gains
and losses) was $37.0 million for the nine months ended September 30, 1997
compared to $32.9 million for the same period in 1996. The increase in net
investment income for the first nine months of 1997 was the result of higher
average invested assets, primarily related to cash provided by operations, which
was partially offset by amounts used to purchase common stock.

During the nine months ended September 30, 1997, the Company accrued $4.8
million for dividends related to the Capital Securities that were issued in
March 1997. Interest expense for the nine months ended September 30, 1997
decreased to $3.5 million from $4.2 million for the same period in 1996 as a
result of a decreased amount outstanding under the Company's Revolving Credit
Facility.

RECENT DEVELOPMENTS

On October 20, 1997, the Company announced that it intends to file a
registration statement with the Securities and Exchange Commission for the sale
of up to 4,600,000 common shares (including up to 600,000 shares solely to cover
overallotment options) in an underwritten secondary offering, subject to market
and other customary conditions, at the request of the Company's initial
institutional investors. All of the shares to be sold in

11

the offering will be sold by the Company's initial institutional investors or
their successors, and the Company will not receive any of the proceeds of the
offering. The Company expects to incur approximately $600,000 in expenses
related to the offering, which will be charged to additional paid in capital.

LIQUIDITY AND CAPITAL RESOURCES

As a holding company, the Company relies on cash dividends and other permitted
payments from its subsidiaries to make principal payments, interest payments and
cash distributions on outstanding obligations and pay dividends, if any, to the
Company's shareholders. The payment of dividends by the Company's subsidiaries
to the Company is, under certain circumstances, limited under Bermuda insurance
law. The Bermuda Insurance Act of 1978, amendments thereto and related
regulations of Bermuda, require the Company's subsidiaries to maintain a minimum
solvency margin and a minimum liquidity ratio. Presently, restrictions on the
payment of dividends by the Company's subsidiaries to the Company are not
material relative to the capital of the subsidiaries.

The Company anticipates that the primary insurance operations of Glencoe,
combined with other primary insurance opportunities, may become an increasingly
important element of the Company over time. The growth of the Company's primary
insurance business may require additional capital, either to support organic
growth of the business or possible acquisitions. The Company currently believes
that internally generated capital will be sufficient to support this business,
but external financing may be needed to facilitate a substantial strategic
acquisition or significant growth of this business.

The Company periodically reviews strategic acquisition opportunities and from
time to time engages in discussions regarding possible acquisitions. Any future
acquisitions by the Company could result in, among other things, the incurrence
of additional debt and/or amortization of expenses related to goodwill and
intangible assets that could adversely affect the Company's liquidity and/or
profitability. However, the Company has not presently entered into any
definitive agreements with respect to future acquisitions and there can be no
assurance that it will do so in the future.

Cash flows from operating activities resulted principally from premium and
investment income, net of paid losses, acquisition costs and other related
expenses. Because of the high severity and low frequency of the coverages
written by the Company and the seasonality of the Company's business, it is not
possible to accurately predict the future cash flows from operating activities.
As a consequence, cash flows from operating activities may fluctuate between
individual quarters and years.

Neither the Company nor its subsidiaries have material commitments for capital
expenditures. Based on its current operating plans, the Company believes that
its liquidity will be adequate in both the short and long term.

On June 23, 1997 the Company completed a secondary offering of 3.4 million
common

12

shares at $38.00 per share. All shares sold were owned by the Company's founding
institutional shareholders or their successors, and the Company did not receive
any of the proceeds of the offering. Concurrent with the secondary offering on
June 23, 1997, the Company also purchased, for cancellation, an aggregate of
700,000 common shares at $36.29 per share or an aggregate purchase price of
$25.4 million from the Company's founding institutional shareholders or their
successors. Expenses of $700,000 related to the offerings were charged to
additional paid in capital during the second quarter of 1997.

On March 7, 1997 the Company completed the sale of $100 million of Capital
Securities issued by RenaissanceRe Capital Trust (the Trust), a newly created
subsidiary business trust of the Company. The Capital Securities pay cumulative
cash distributions at an annual rate of 8.54 percent, payable semi-annually
commencing September 1, 1997. Proceeds from the offering were used to repay a
portion of the Company's outstanding indebtedness.

In January 1997, the Company repurchased and cancelled 813,190 Common Shares for
a total value of $28.1 million through the completion of the Company's Tender
Offer.

During 1997 the Company allocated $50.0 million of its fixed maturity
investments towards the purchase of non-U.S. equity securities. At September 30,
1997, the Company's investments in equity securities had a fair value of $55.5
million and an unrealized gain position of $6.4 million.

The Company's investment portfolio had a fair value of $857.7 million at
September 30, 1997 and consisted of fixed maturity investments of $678.4
million, equity security investments of $55.5 million, and cash and cash
equivalents of $123.8 million. At September 30, 1997, the fixed maturity
investment portfolio had an average rating of AA as measured by Standard &
Poor's Ratings Group, an average duration of 2.3 years and an average yield to
maturity of 6.6 percent before investment expenses.

The Company's equity securities and its investment in cash and cash equivalents
include $55.1 million and $16.9 million of investments denominated in currencies
other than the U.S. Dollar, respectively, representing approximately 8.4 percent
of total invested assets. The remaining 91.6 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 or mortgage loans.

The Company believes that its readily marketable portfolio of investments and
available credit line will provide it with adequate liquidity to fund its
operating cash needs.

13

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 Form 8-K

a. Exhibits:

Exhibit 10 -- Material Contracts

10.1 Guaranty, dated as of June 23, 1997, between
RenaissanceRe Holdings Ltd. and Bank of America
National Illinois

10.2 First Amendment Agreement, dated as of September 8,
1997 to the Third Amended and Restated Credit
Agreement, dated as of December 12, 1996.

10.3 Employment Agreement, dated as of June 23, 1997
between Renaissance Reinsurance Ltd. And James N.
Stanard

10.4 Form of Employment Agreement, dated as of May 27,
1997 between Renaissance Reinsurance Ltd. And Keith
S. Hynes*


* - A substantially similar Form of Employment Agreement has
been entered into by Renaissance Reinsurance and each of
Messrs. Riker & Eklund.

Exhibit 27.1 -- Financial Data Schedule


b. Current Reports on Form 8-K:


The Registrant filed a Current Report on Form 8-K on July 11,
1997.

14

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: October 22, 1997

By: /s/ John M. Lummis
-------------------------------

John M. Lummis
Senior Vice President and
Chief Financial Officer

15