August 14, 2001 - 10-Q: Quarterly report pursuant to Section 13 or 15(d) | RenaissanceRe Holdings Ltd. (RNR)

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: June 30, 2001

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 for 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 June 30, 2001 was 19,862,549.

Total number of pages in this report: 26

1

RenaissanceRe Holdings Ltd.

INDEX TO FORM 10-Q

PART I -- FINANCIAL INFORMATION

ITEM 1 -- Financial Statements

Consolidated Balance Sheets as at June 30, 2001 3
(Unaudited) and December 31, 2000

Unaudited Consolidated Statements of Operations for 4
the three and six month periods ended June 30, 2001 and 2000

Unaudited Consolidated Statements of Changes in Shareholders' 5
Equity for the six month periods ended June 30, 2001 and 2000

Unaudited Consolidated Statements of Cash Flows 6
for the six month periods ended June 30, 2001 and 2000

Notes to Unaudited Consolidated Financial Statements 7

ITEM 2 -- Management's Discussion and Analysis of Results of
Operations and Financial Condition 12

ITEM 3 -- Quantitative and Qualitative Disclosures About Market Risk 22

PART II -- Other Information 23

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. 26

2

Part I - Financial information
Item 1 - Financial statements

RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of United States Dollars, except per share amounts)

The accompanying notes are an integral part of these financial statements

3

RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six months ended June 30, 2001 and 2000
(in thousands of United States Dollars, except per share amounts)
(Unaudited)

The accompanying notes are an integral part of these financial statements

4

RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(in thousands of United States Dollars)
(Unaudited)

2001 2000
------------ ------------
Common Stock & additional paid-in capital
Balance -- January 1 $ 22,999 $ 19,686
Exercise of options, and issuance of stock and
restricted stock awards 14,304 8,672
Secondary Offering Expenses - (672)
Repurchase of shares (554) -
------------ ------------
Balance -- June 30 36,749 27,686
------------ ------------
Unearned stock grant compensation
Balance -- January 1 (11,716) (10,026)
Restricted stock grants awarded, net (13,047) (7,141)
Amortization 3,836 2,605
------------ ------------
Balance -- June 30 (20,927) (14,562)
------------ ------------
Accumulated other comprehensive income (loss)(1)
Balance -- January 1 6,831 (18,470)
Net unrealized gains (losses) on securities, net
of adjustment (see disclosure) (490) 6,707
------------ ------------
Balance -- June 30 6,341 (11,763)
------------ ------------
Retained earnings
Balance -- January 1 682,704 609,139
Net income 85,244 53,795
Dividends paid (15,807) (14,618)
Repurchase of shares - (24,436)
------------ ------------
Balance -- June 30 752,141 623,880
------------ ------------
Total Shareholders' Equity $ 774,304 $ 625,241
============ ============
COMPREHENSIVE INCOME
Net income $ 85,244 $ 53,795
Other comprehensive income (loss) (490) 6,707
------------ ------------
Comprehensive income $ 84,754 $ 60,502
============ ============
DISCLOSURE REGARDING NET UNREALIZED GAINS (LOSSES)
Net unrealized holding gains (losses) arising
during period $ 10,007 $ (3,674)
Net realized losses (gains) included in net income (10,497) 10,381
------------ ------------
Change in net unrealized gains (losses) on
securities $ (490) $ 6,707
============ ============

(1) Note - comprehansive income (loss) for the quarters ended June 30, 2001 and
2000 were ($8.6)m and $1.9m, respectively.

The accompanying notes are an integral part of these financial statements

5

RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(in thousands of United States Dollars)
(Unaudited)

The accompanying notes are an integral part of these financial statements

6

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") for
interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for complete
financial statements. The consolidated financial statements include the
accounts of RenaissanceRe Holdings Ltd. ("RenaissanceRe") and its
wholly owned subsidiaries, including Renaissance Reinsurance Ltd.
("Renaissance Reinsurance"), Glencoe Insurance Ltd. ("Glencoe"),
Renaissance U.S. Holdings, Inc. ("Renaissance U.S."), RenaissanceRe
Capital Trust (the "Trust") and Renaissance Underwriting Managers, Ltd.
("Renaissance Managers").

RenaissanceRe and its subsidiaries are collectively referred to herein
as the "Company". All intercompany transactions and balances have been
eliminated on consolidation.

The Company acts as underwriting manager and underwrites worldwide
property catastrophe reinsurance programs on behalf of Overseas
Partners Cat Ltd. ("OPCat"), a subsidiary of Overseas Partners Ltd., a
Bermuda Company. Renaissance Reinsurance has also entered into a joint
venture, Top Layer Reinsurance Ltd. ("Top Layer Re") with State Farm
Automobile Insurance Company.

Minority interests represent the interests of external parties in
respect of net income and shareholders' equity of the Trust.

Certain comparative information has been reclassified to conform to the
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. The Company purchases reinsurance to reduce its exposure to large
losses. The Company currently has in place contracts that provide for
recovery of a portion of certain claims and claims expenses from
reinsurers in excess of various retentions and loss warranties. The
Company would remain liable to the extent that any third party
reinsurance company fails to meet its obligations. The earned
reinsurance premiums ceded were $71.2 million and $75.5 million for the
six month periods ended June 30, 2001 and 2000, respectively. Other
than loss recoveries, certain of the Company's ceded reinsurance
contracts provide for recoveries of additional premiums, reinstatement
premiums and for unrecovered no claims bonuses which are unrecoverable
when losses are ceded to those reinsurance contracts.

Total recoveries (reductions) netted against premiums and claims and
claim expenses incurred for the six months ended June 30, 2001 were
$52.7 million compared to $(0.5) million for the six months ended June
30, 2000.

Included in losses and premiums recoverable are recoverables of $17.0
million which are related to retroactive reinsurance agreements. In
accordance with SFAS No. 113, "Accounting and Reporting for Reinsurance
of Short-Duration and Long-Duration Contracts," losses related to
retroactive reinsurance agreements are required to be included in
claims and claim expenses incurred as they become known. However,
offsetting

7

recoverables, if any, are deferred and reflected in the statement of
operations in future periods, based on the recovery method. As of June
30, 2001, the Company has deferred $9.9 million of recoveries related
to a retroactive reinsurance contract. This has been included in other
liabilities on the consolidated balance sheet. As the amounts are
recovered, the recoveries will offset claims and claim expenses
incurred in the consolidated statement of operations.

The FASB has recently issued SFAS 142, "Goodwill and Other Intangible
Assets." As a result, the Company's goodwill existing at June 30, 2001
will cease to be amortized effective January 1, 2002, and will,
thereafter, be subject to an annual impairment review.

3. The Company paid interest on its outstanding loans of $1.5 million for
the six month period ended June 30, 2001 and $8.6 million for the same
period in the previous year. The decrease in interest payments is
primarily due to repayment of borrowings of $200.0 million during the
fourth quarter of 2000. See "Financial Condition - Capital Resources
and Shareholders' Equity" for further discussion.

4. Basic earnings per share is based on weighted average common shares and
excludes any dilutive effects of options and restricted stock. Diluted
earnings per share assumes the exercise of all dilutive stock options
and restricted stock grants. The following table sets forth the
computation of basic and diluted earnings per share:

- --------------------------------------------------------------------------------
Three months ended June 30,
2001 2000
- --------------------------------------------------------------------------------
(in thousands of U.S. dollars except share and per share data)
- --------------------------------------------------------------------------------
Numerator:

Net Income $ 40,339 $ 29,720
============= =============
Denominator:
Denominator for basic earnings per share -
Weighted average shares 19,279,490 18,851,094
Per share equivalents of employee stock
Options and restricted shares 872,007 295,593
------------- -------------
Denominator for diluted earnings per share -
Adjusted weighted average shares and
assumed conversions 20,151,497 19,146,687
============= =============

Basic earnings per share $ 2.09 $ 1.58
Diluted earnings per share $ 2.00 $ 1.55
- --------------------------------------------------------------------------------

8

- --------------------------------------------------------------------------------
Six months ended June 30,
2001 2000
- --------------------------------------------------------------------------------
(in thousands of U.S. dollars except share and per share data)
- --------------------------------------------------------------------------------
Numerator:

Net Income $ 85,244 $ 53,795
============= =============
Denominator:
Denominator for basic earnings per share -
Weighted average shares 19,253,191 19,058,553
Per share equivalents of employee stock
Options and restricted shares 938,408 252,595
------------- -------------
Denominator for diluted earnings per share -
Adjusted weighted average shares and
assumed conversions 20,191,599 19,311,148
============= =============

Basic earnings per share $ 4.43 $ 2.82
Diluted earnings per share $ 4.22 $ 2.79
- --------------------------------------------------------------------------------

5. The Board of Directors of the Company declared, and the Company paid, a
dividend of $0.40 per share to shareholders of record on each of
February 20 and May 18, 2001. On July 31, 2001, the Board of Directors
declared a dividend of $0.40 per share payable on August 28, 2001 to
shareholders of record on August 14, 2001.

6. The Company has two reportable segments: reinsurance operations and
primary operations. The reinsurance segment provides property
catastrophe reinsurance as well as other reinsurance to selected
insurers and reinsurers on a worldwide basis. The primary segment
provides insurance both on a direct and on a surplus lines basis for
commercial and homeowners catastrophe-exposed property business. Data
for the three and six month periods ended June 30, 2001 and 2000 are as
follows:

- --------------------------------------------------------------------------------
QUARTER ENDED JUNE 30, 2001
(IN THOUSANDS OF U.S. DOLLARS)

REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------
Gross premiums written $ 106,714 $ 15,298 $ - $ 122,012
Total revenues 95,933 4,085 798 100,816
Income (loss) before taxes 44,827 1,549 (5,735) 40,641

ASSETS 1,362,013 247,922 79,733 1,689,668
-----------------------------------------------
Claims and claim expense ratio 44.7% -31.8% - 42.8%
Expense ratio 24.7% 114.6% - 27.1%
-----------------------------------------------
Combined ratio 69.4% 82.8% - 69.9%
===============================================

- --------------------------------------------------------------------------------

9

- --------------------------------------------------------------------------------
QUARTER ENDED JUNE 30, 2000
(IN THOUSANDS OF U.S. DOLLARS)

REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------
Gross premiums written $ 86,666 $ 10,984 $ - $ 97,650
Total revenues 74,188 2,487 3,030 79,705
Income (loss) before taxes 33,441 (887) (3,222) 29,332

ASSETS 1,238,032 255,310 202,707 1,696,049
-----------------------------------------------
Claims and claim expense ratio 41.0% -11.1% - 39.8%
Expense ratio 25.7% 64.7% - 26.7%
-----------------------------------------------
Combined ratio 66.7% 53.6% - 66.5%
===============================================

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS OF U.S. DOLLARS)

REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------
Gross premiums written $ 295,027 $ 25,193 $ - $ 320,220
Total revenues 203,936 8,339 1,513 213,788
Income (loss) before taxes 89,857 4,935 (8,370) 86,422

ASSETS 1,362,013 247,922 79,733 1,689,668
-----------------------------------------------
Claims and claim expense ratio 49.4% -78.9% - 46.5%
Expense ratio 23.8% 119.6% - 26.1%
-----------------------------------------------
Combined ratio 73.2% 40.7% - 72.6%
===============================================

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS OF U.S. DOLLARS)

REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------
Gross premiums written $ 231,418 $ 26,703 $ - $ 258,121
Total revenues 133,718 6,291 5,406 145,415
Income (loss) before taxes 61,621 997 (8,791) 53,827

ASSETS 1,238,032 255,310 202,707 1,696,049
-----------------------------------------------
Claims and claim expense ratio 37.9% 11.1% - 36.9%
Expense ratio 26.9% 39.2% - 27.5%
-----------------------------------------------
Combined ratio 64.8% 50.3% - 64.4%
===============================================

- --------------------------------------------------------------------------------

10

The Company's Bermuda holding company is the primary contributor to the
results reflected in the "Other" category. The pre-tax loss of the
holding company primarily consisted of interest expense on bank loans,
the minority interest on the Capital Securities, corporate expenses,
and realized investment gains (losses) on the sales of investments,
partially offset by investment income.

7. The provision for income taxes is based on income recognized for
financial statement purposes and includes the effects of temporary
differences between financial and tax reporting. Deferred tax assets
and liabilities are determined based on the difference between the
financial statement bases and tax bases of assets and liabilities using
enacted tax rates.

The Company's U.S. subsidiaries are subject to U.S. tax. The net
deferred tax asset of $18.8 million is net of an $8.2 million valuation
allowance. Net operating loss carryforwards and future tax deductions
will be available to offset regular taxable U.S. income during the
carryforward period (ranging from 2018 through 2020), subject to
certain limitations.

8. On July 17, 2001, the Company completed the sale of $150 million of 7%
Senior Notes due 2008 in an underwritten public offering. The Company
plans to use the proceeds from the offering to repay $16.5 million of
outstanding amounts under our $310.0 million revolving credit and term
loan facility and the remainder will be used for general corporate
purposes.

11

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

The following is a discussion and analysis of the Company's results of
operations for the three month and six month periods ended June 30, 2001 and
2000 and financial condition as of June 30, 2001. This discussion and analysis
should be read in conjunction with the attached unaudited consolidated financial
statements and notes thereto and the audited consolidated financial statements
and notes thereto contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.

General

The Company principally provides reinsurance where risk of natural catastrophe
represents a significant component of the overall exposure. The Company's
results depend to a large extent on the frequency and severity of catastrophic
events, and the concentration and coverage offered to clients impacted thereby.
The Company's catastrophe reinsurance business includes 1) writing reinsurance
on its own behalf and 2) writing reinsurance on behalf of two joint ventures,
Top Layer Re and OPCat. The Company receives income based on the performance of
these joint ventures which is reflected in other income. The Company's primary
operations principally provide coverage with respct to risks that are also
exposed to natural catastrophes.

The Company also writes reinsurance with respect to various other lines,
including accident and health, aviation, satellite and finite reinsurance. The
Company may write other lines of reinsurance in the future although there can be
no assurance that any such premiums will be material to the Company. From time
to time, the Company may consider opportunistic diversification into new
ventures, either through organic growth or the acquisition of other companies or
books of business. In evaluating such new ventures, the Company seeks an
attractive return on equity, the ability to develop or capitalize on a
competitive advantage and opportunities that will not detract from its core
reinsurance operations. Accordingly, the Company regularly reviews strategic
opportunities and periodically engages in discussions regarding possible
transactions.

RESULTS OF OPERATIONS

FOR THE QUARTER ENDED JUNE 30, 2001 COMPARED TO THE QUARTER ENDED JUNE 30, 2000

For the quarter ended June 30, 2001, net operating income, excluding realized
investment gains and losses, available to common shareholders was $37.5 million
or $1.86 per share, compared to $33.3 million or $1.74 per share for the same
quarter in 2000. Net income rose to $40.3 million, or $2.00 per share, in the
quarter, from $29.7 million, or $1.55 per share, for the same quarter of 2000.

Gross premiums written for the second quarter of 2001 and 2000 were as follows:

- ------------------------------------------------------

Quarter ended

(in thousands) 30-June-01 30-Jun-00
---------------------------
Reinsurance $ 106,714 $ 86,666

Primary 15,298 10,984
---------------------------
$ 122,012 $ 97,650
===========================

- ------------------------------------------------------

12

The majority of the increase in gross reinsurance premiums written by the
Company during the second quarter was due to two items: 1) an increase in finite
and non-cat premiums written from $4.4 million in the second quarter of 2000 to
$15.5 million in the second quarter of 2001; and 2) approximately $15 million of
increased premiums related to timing differences of premiums recorded in the
second quarter of 2001 compared to the same premiums being recorded in the third
quarter of 2000.

For the quarter ended June 30, 2001, total managed catastrophe premiums were
$92.4 million, $21.7 million of which were derived from the OPCat and Top Layer
Re joint ventures, compared to $83.7 million and $17.8 million for the same
quarter of 2000. Total managed catastrophe premiums written represents gross
catastrophe premiums written by Renaissance Reinsurance and written on behalf of
the OPCat and Top Layer Re joint ventures and is used by the Company to measure
the Company's penetration into the catastrophe reinsurance market.

The growth in other income, to $3.9 million for the quarter ended June 30, 2001
compared to $1.7 million for the quarter ended June 30, 2000, was primarily
related to the income generated from the Company's joint ventures, OPCat and Top
Layer Re.

The table below sets forth the Company's combined ratio and components thereof,
by segment for the quarters ended June 30, 2001 and 2000:

The claims and claim expense ratio of the reinsurance business increased
primarily due to the Company's increase in non-catastrophe and finite premiums
which normally will produce a higher claims and claim expense and combined ratio
than the Company's principal product, property catastrophe reinsurance.

Underwriting expenses are comprised of acquisition expenses and operational
expenses. The operational expenses of the reinsurance operations have remained
relatively flat in comparison to the prior year. However, because of the
increase in net earned premiums in 2001 from the reinsurance operations, there
has been a corresponding decrease in the claims and claim expense ratio of the
reinsurance operations. The dollar increase in acquisition costs to $23.2
million from $14.8 million primarily relates to the Company's increase in
non-catastrophe reinsurance, which typically produces a higher ratio of
acquisition costs to net earned premiums.

The majority of the premiums written by the primary operations are currently
ceded to other reinsurers and as a result, the net earned premiums from the
primary operations were only $3.6 million for the six months ended June 30,
2001, compared to only $4.0 million for the six months ended June 30, 2000.
Based on this reduced level of net earned premiums, relatively modest one-time
adjustments to net written premiums, claim and claim expenses incurred,
acquisition expenses or operating expenses can cause, and did cause, unusual
fluctuations in the claims and claim expense ratio and the underwriting expense
ratio of the primary operations.

Net investment income, excluding realized investment gains and losses, for the
six months ended June 30, 2001 was $36.2 million, compared to $37.7 million for
the same period in 2000. The decrease in investment income primarily relates to
a decrease in investment yields during the first six months of 2001 as compared
to the same period of 2000 and the repayment of $200 million on the revolving
credit facility in the fourth quarter of 2000.

Corporate expenses increased to $6.3 million for the six months ended June 30,
2001, compared to $4.9 million for the same period in 2000. The increase was
primarily due to certain costs related to research and development initiatives
being conducted by the Company.

Interest expense (including interest expense on the Capital Securities which is
reflected as minority interest) for the six months ended June 30, 2001 decreased
to $5.3 million from $12.4 million for the same period in 2000. The decrease was
primarily related to the repayment of $200 million on the revolving credit
facility in the fourth quarter of 2000.

15

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL REQUIREMENTS

As a holding company, RenaissanceRe relies on investment income, cash dividends
and permitted payments from its subsidiaries to make principal payments,
interest payments, cash distributions on outstanding obligations and quarterly
dividend payments, if any, to its shareholders. The payment of dividends by the
Company's Bermuda subsidiaries to RenaissanceRe is, under certain circumstances,
limited under Bermuda insurance law. The Bermuda Insurance Act of 1978,
amendments thereto (the "Act") and related regulations of Bermuda require the
Company's Bermuda subsidiaries to maintain certain measures of solvency and
liquidity. As at June 30, 2001 the statutory capital and surplus of the
Company's Bermuda subsidiaries was $768.2 million, and the amount required to be
maintained was $104.5 million. The Company's US subsidiaries are also required
to maintain certain measures of solvency and liquidity. As at June 30, 2001 the
statutory capital and surplus of the Company's US subsidiaries was $32.3
million, and the amount required to be maintained was $28.6 million. Through
June 30, 2001, Renaissance Reinsurance declared dividends of $52.5 million
compared to $22.6 million for the same period in 2000.

CASH FLOWS

The Company's operating subsidiaries have historically produced sufficient cash
flows to meet expected claims payments and operational expenses and to provide
dividend payments to RenaissanceRe. RenaissanceRe's subsidiaries also maintain a
concentration of investments in high quality liquid securities, which management
believes will provide sufficient liquidity to meet extraordinary claims payments
should the need arise. Additionally, the Company maintains a $310.0 million
credit facility which is available to the holding company, RenaissanceRe, to
meet the liquidity needs of the Company's subsidiaries should the need arise.
$16.5 million was outstanding under this credit facility as of June 30, 2001.

Cash flows from operations in the first six months of 2001 were $187.0 million,
compared to $138.0 million for the same period in 2000. Cash flows exceeded
operating income in this period partly due to paid loss recoveries received from
the Company's reinsurers. The Company has produced cash flows from operations
for the full years of 2001 and 2000 in excess of its commitments. To the extent
that capital is not utilized in the Company's reinsurance business, the Company
will consider using such capital to invest in new opportunities or will consider
returning such capital to its shareholders.

Because of the nature of the coverages the Company provides, which typically can
produce infrequent losses of high severity, it is not possible to predict the
Company's future cash flows from operating activities with precision. As a
consequence, cash flows from operating activities may fluctuate, perhaps
significantly, between individual quarters and years.

16

RESERVES

During the six months ended June 30, 2001 the Company incurred net claims of
$74.2 million and paid net losses of $7.6 million. Due to the high severity and
low frequency of losses related to the property catastrophe insurance and
reinsurance business, there can be no assurance that the Company will continue
to experience this level of losses and/or recoveries.

For the Company's reinsurance operations, estimates of claims and claim expenses
and the related recoveries are based in part upon estimation of claims resulting
from catastrophic events. Estimation by the Company of claims resulting from
catastrophic events based upon its own historical claim experience is inherently
difficult because of the potential severity of property catastrophe claims.
Therefore, the Company utilizes both proprietary and commercially available
models, as well as historical reinsurance industry property catastrophe claims
experience, for purposes of evaluating future trends and providing an estimate
of ultimate claims costs.

On both the Company's reinsurance and primary operations, the Company uses
statistical and actuarial methods to reasonably estimate ultimate expected
claims and claim expenses and the related recoveries. The period of time between
the reporting of a loss to the Company and the settlement of the Company's
liability may be several years. During this period, additional facts and trends
may be revealed. As these factors become apparent, case reserves may be
adjusted, sometimes requiring an increase in the overall reserves of the
Company, and at other times requiring a reallocation of IBNR reserves to
specific case reserves. These estimates are reviewed regularly and adjustments,
if any, are reflected in results of operations in the period in which they
become known and are accounted for as changes in estimates.

CAPITAL RESOURCES AND SHAREHOLDERS' EQUITY

The total capital resources of the Company as at June 30, 2001 and December 31,
2000 were as follows:

17

The Company has a $310.0 million committed revolving credit and term loan
agreement with a syndicate of commercial banks. As of June 30, 2000, the Company
has borrowed $16.5 million against this facilitiy. Interest rates on the
facility are based on a spread above LIBOR, and averaged approximately 6.1
percent during the first six months of 2001 (compared to 6.8 percent for the
same period in 2000). The revolving credit agreement contains certain financial
covenants including requirements that the ratio of consolidated debt to capital
does not exceed 0.35:1; consolidated net worth must exceed the greater of $100.0
million or 125 percent of consolidated debt; and 80 percent of invested assets
must be rated BBB- by S&P or Baa3 by Moody's Investor Service or better. The
Company increased its borrowing by $8.5 million on the revolving credit facility
in June 2001. The Company was in compliance with all the covenants of this
revolving credit and term loan agreement as at June 30, 2001.

Renaissance U.S. has a $18.5 million term loan and $15 million revolving loan
facility with a syndicate of commercial banks. Interest rates on the facility
are based upon a spread above LIBOR, and averaged 5.9 percent during the first
six months of 2001 (compared to 6.7 percent for the first six months of 2000).
The related agreements contain certain financial covenants, the primary one
being that RenaissanceRe, being its principal guarantor, maintain a ratio of
liquid assets to debt service of 4:1. The term loan has mandatory repayment
provisions approximating $9.0 million per year in each of years 2002 and 2003.
The Company repaid $8.5 million of the loan in June 2001. The Company was in
compliance with all the covenants of this term loan and revolving loan facility
as at June 30, 2001.

RenaissanceRe Capital Trust has issued capital securities which pay cumulative
cash distributions at an annual rate of 8.54 percent, payable semi-annually. The
Indenture relating to the Capital Securities contains certain covenants,
including a covenant prohibiting the payment of dividends by the Company if the
Company shall be in default under the Indenture. The Company was in compliance
with all of the covenants of the Indenture at June 30, 2001. From time to time,
the Company may opportunistically repurchase outstanding Capital Securities.

During the first six months of 2001, shareholders' equity increased by $73.5
million, from $700.8 million at December 31, 2000 to $774.3 million at June 30,
2001. The significant components of the change include net income from
continuing operations of $85.2 million, offset by the payment of dividends to
shareholders of $15.8 million.

INVESTMENTS

The table below shows the aggregate amounts of investments available for sale,
equity securities and cash and cash equivalents comprising the Company's
portfolio of invested assets:

18

- --------------------------------------------------------------------------------
June 30, December 31,
(in thousands of U.S. dollars) 2001 2000
- --------------------------------------------------------------------------------
Investments available for sale, at fair value $1,031,217 $ 928,102

Other investments 45,509 29,613

Cash, cash equivalents and short term investments 185,357 124,331
- --------------------------------------------------------------------------------
TOTAL INVESTED ASSETS $1,262,083 $1,082,046
- --------------------------------------------------------------------------------

At June 30, 2001, the invested asset portfolio had a dollar weighted average
rating of AA, an average duration of 2.50 years and an average yield to maturity
of 5.83 percent, net of investment expenses.

At June 30, 2001 the Company held investments and cash totaling $1.3 billion
with a net unrealized appreciation balance of $6.3 million. The Company's
investment portfolio is subject to the risks of declines in realizable value.
The Company attempts to mitigate this risk through the diversification and
active management of its portfolio.

At June 30, 2001, $15.2 million of cash and cash equivalents were invested in
currencies other than the U.S. dollar, which represented 1.2 percent of the
Company's invested assets.

The Company has entered into forward purchase agreements allowing it to acquire
certain foreign currencies to fund the payment of non-dollar losses.

EFFECTS OF INFLATION

The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local or regional economy. The anticipated effects
on the Company are implicitly considered in the Company's catastrophe loss
models. The effects of inflation are also considered in pricing and in
estimating reserves for unpaid claims and claim expenses. The actual effects of
this post event inflation on the results of the Company cannot be accurately
known until claims are ultimately settled.

CURRENT OUTLOOK

Due to industry losses in 1999, and the related contraction of capacity in the
market, the Company received price increases on a substantial majority of its
reinsurance policies sold or renewed during the recent renewal season. However,
even after these price increases, the Company believes that there continues to
be numerous transactions in the market that are underpriced relative to expected
losses.

The Company believes that because of its competitive advantages, including its
technological capabilities, its underwriting expertise, and its relationships
with leading brokers and ceding companies, it is able to identify contracts that
are adequately priced and will continue to find opportunities in the property
catastrophe reinsurance markets.

19

Primarily because of higher than average loss activity in 1999, the Company's
aggregate cost for reinsurance protection increased during 2000 and has
continued to increase slightly during 2001. If prices rise to levels whereby the
Company believes the purchase of reinsurance protection would become
uneconomical, then in certain geographic regions the Company would retain a
greater level of net risk. In order to obtain longer term retrocessional
capacity, the Company has entered into multi-year contracts with respect to a
portion of its portfolio. As of January 1, 2001, approximately 55% of the limits
under the Company's retrocessional coverage were purchased on a multi-year
basis.

The Company's financial strength and underwriting expertise have enabled the
Company to pursue opportunities outside the property catastrophe reinsurance
market, including various lines of reinsurance and the catastrophe exposed
primary insurance market. The Company believes that its financial strength will
enable it to continue to pursue other opportunities in the future. There can be
no assurance that the Company's pursuit of such opportunities will materially
impact its financial condition and results of operations.

During recent fiscal years there has been considerable consolidation among
leading brokerage firms and also among the Company's customers. Although
consolidation may continue to occur, the Company believes that its financial
strength, its position as one of the market leaders in the property catastrophe
reinsurance industry and its ability to provide innovative products to the
industry will minimize any adverse effect of such consolidation on its business.

SAFE HARBOUR DISCLOSURE

In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward-looking statements contained
in this report.

This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934.
Forward-looking statements are necessarily based on estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which, with respect to future business
decisions, are subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ materially from
those expressed in any forward-looking statements made by, or on behalf of, us.

In particular, statements using words such as "expect", "anticipate", "intends",
"believe" or words of similar import generally involve forward-looking
statements. In light of the risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this report should
not be considered as a representation by the Company or any other person that
its objectives or plans will be achieved. Numerous factors could cause the
Company's actual results to differ materially from those addressed by the
forward-looking statements, including the following:

(1) the occurrence of catastrophic events with a frequency or
severity exceeding the Company's estimates;

(2) a decrease in the level of demand for the Company's
reinsurance or insurance business, or increased competition in
the industry;

20

(3) the lowering or loss of one of the financial or claims-paying
ratings of the Company or one or more of its subsidiaries;

(4) risks associated with implementing the Company's business
strategies;

(5) slower than anticipated growth in the Company's fee-based
operations;

(6) changes in economic conditions, including currency rate
conditions which could affect the Company's investment
portfolio;

(7) uncertainties in the Company's reserving process;

(8) failure of the Company's reinsurers to honor their
obligations;

(9) loss of services of any one of the Company's key executive
officers;

(10) the passage of federal or state legislation subjecting
Renaissance Reinsurance to supervision or regulation,
including additional tax regulation, in the United States or
other jurisdictions in which the Company operates;

(11) challenges by insurance regulators in the United States to
Renaissance Reinsurance's claim of exemption from insurance
regulation under the current laws;

(12) a contention by the United States Internal Revenue Service
that the Company's Bermuda subsidiaries, including Renaissance
Reinsurance, are subject to U.S. taxation; and

(13) actions of competitors, including industry consolidation and
the development of competing financial products.

The factors listed above should not be construed as exhaustive. The Company
undertakes no obligation to release publicly the results of any future revisions
the Company may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

21

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET SENSITIVE INSTRUMENTS

The Company's investment portfolio includes investments which are available for
trading purposes and which are subject to changes in market values with changes
in interest rates. The aggregate hypothetical loss generated from an immediate
adverse parallel shift in the treasury yield curve of 100 basis points would
cause a decrease in total return of 2.50 percent, which equates to a decrease in
market value of approximately $26 million on a portfolio valued at $1,031
million at June 30, 2001. An immediate time horizon was used, as this presents
the worst-case scenario.

22

PART II -- OTHER INFORMATION

Item 1 -- Legal Proceedings

None

Item 2 -- Changes in Securities and Use of Proceeds

None

Item 3 -- Defaults Upon Senior Securities

None

Item 4 -- Submission of Matters to a Vote of Security Holders

(a) The registrant's 2001 Annual General Meeting of Shareholders
was held on May 18, 2001.

(b) Proxies were solicited by the Company's management pursuant to
Regulation 14A under the Securities Exchange Act of 1934;
there was no solicitation in opposition to the Company's
nominees listed in the proxy statement; the re-elected
directors were re-elected for three year terms as described in
item (c)(3) below.

The other directors, whose term of office as a director
continued after the meeting are:

James N. Stanard (Chairman)
Thomas A. Cooper
Edmund B. Greene
Brian Hall
W. James MacGinnitie
Scott E. Pardee

(c) The following matters were voted upon at the Annual General
Meeting with the voting results indicated:

(1) The Company Board Size Proposal

The Company's Bye-laws provided for a classified Board,
consisting of eleven members (which the Board may determine to
expand to twelve members) divided into three classes of
approximately equal size. At the Annual Meeting, the
shareholders elected to amend the Bye-laws to provide for a
fixed size of eight members, rather than eleven (which the
Board may determine to expand to eleven members).

Votes for Votes Against Votes Withheld
--------- ------------- --------------

17,654,910 387,137 19,983

23

(2) The Renaissance Voting Proposal

In accordance with the Company's Bye-laws, the Company, as the
holder of all outstanding capital shares of Renaissance
Reinsurance Ltd. ("Renaissance"), was required to submit any
matter required to be submitted to a vote of the shareholders
of Renaissance to the shareholders of the Company and to vote
all the shares of Renaissance owned by the Company in
accordance with and proportional to such vote of the Company's
shareholders. At the Annual Meeting, the shareholders voted to
amend the Bye-laws to remove the requirement that matters
required to be voted on by the shareholders of Renaissance be
submitted to the shareholders of the Company.

Votes for Votes Against Votes Withheld
--------- ------------- --------------

15,810,205 365,597 1,886,228

(3) The Company Board Proposal

The Company's Bye-Laws provide for a classified Board, divided
into three classes of approximately equal size. At the Annual
Meeting, the shareholders elected two of the Company's
Directors as Class III Directors, who shall serve until the
Company's 2004 Annual Meeting.

Nominee Votes for Votes Against
------- --------- --------------

Arthur S. Bahr 17,848,454 213,576
William I. Riker 17,848,454 213,576

(4) The Company's Auditors Proposal

Proposal to appoint Ernst & Young to serve as independent
auditors of the Company for the 2001 fiscal year.

Votes for Votes Against Votes Withheld
--------- ------------- --------------

17,883,069 168,136 10,825

(5) The 2001 Stock Incentive Plan Proposal

The Company adopted the Renaissance Holdings Ltd. 2001 Stock
Incentive Plan (the "2001 Plan") on February 6, 2001. In
accordance with Section 422 of the Code and the requirements
of the New York Stock Exchange, Inc., the shareholders voted
to approve the 2001 Plan at the Annual Meeting.

Votes for Votes Against Votes Withheld
--------- ------------- --------------

11,031,888 4,958,870 2,071,272

24

Item 5 -- Other Information

None

Item 6 -- Exhibits and Reports on Form 8-K

a. Exhibits:

None

b. Current Reports on Form 8-K:

The Registrant filed a report on Form 8-K on April 23, 2001.

25

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.

By: /s/ John M. Lummis
------------------
John M. Lummis
Executive Vice President and
Chief Financial Officer
Date: August 14, 2001

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