RenaissanceRe Reports Net Income Available to Common Shareholders of $191.8 Million for the Second Quarter of 2018, or $4.78 Per Diluted Common Share

Quarterly Operating Income Available to Common Shareholders of $209.6 Million or $5.23 Per Diluted Common Share

PEMBROKE, Bermuda--()--RenaissanceRe Holdings Ltd. (NYSE: RNR) (the “Company” or “RenaissanceRe”) today reported net income available to RenaissanceRe common shareholders of $191.8 million, or $4.78 per diluted common share, in the second quarter of 2018, compared to $171.1 million, or $4.24 per diluted common share, in the second quarter of 2017. Operating income available to RenaissanceRe common shareholders was $209.6 million, or $5.23 per diluted common share, in the second quarter of 2018, compared to $116.8 million, or $2.88 per diluted common share, in the second quarter of 2017. The Company reported an annualized return on average common equity of 18.6% and an annualized operating return on average common equity of 20.3% in the second quarter of 2018, compared to 15.2% and 10.3%, respectively, in the second quarter of 2017. Book value per common share increased $4.27, or 4.3%, to $104.56, in the second quarter of 2018, compared to a 3.4% increase in the second quarter of 2017. Tangible book value per common share plus accumulated dividends increased $4.57, or 4.9%, to $116.53 in the second quarter of 2018, compared to a 3.9% increase in the second quarter of 2017.

Kevin J. O'Donnell, CEO, commented: “We celebrated our 25th anniversary as a company this quarter, and I am proud to report very strong results. We recorded annualized operating return on average common equity of 20.3% and growth in tangible book value per common share plus accumulated dividends of 4.9%. I am especially pleased that we were also able to construct our best portfolio of risk in years. Moving forward, a combination of top line growth, an effective gross-to-net strategy, rising interest rates and improved operational efficiency should provide the foundations for continued superior shareholder return.”

SECOND QUARTER 2018 SUMMARY

  • Gross premiums written increased by $149.9 million, or 18.1%, to $977.3 million, in the second quarter of 2018, compared to the second quarter of 2017, driven by increases of $96.6 million in the Casualty and Specialty segment and $53.3 million in the Property segment. Gross premiums written in the Property segment included a $31.4 million reduction in assumed reinstatement premiums written.
  • Underwriting income of $226.6 million and a combined ratio of 47.2% in the second quarter of 2018, compared to $109.7 million and 71.3%, respectively, in the second quarter of 2017. Decreases in the estimates of the net negative impact of the 2017 Catastrophe Events (as defined herein) resulted in a net positive impact on the underwriting result of $92.0 million, and a corresponding reduction in the combined ratio of 23.5 percentage points, in the second quarter of 2018, principally within the Company’s Property segment.
  • The Company’s portfolio of fixed maturity and short term investments had a yield to maturity of 3.0% at June 30, 2018.

Net Negative Impact

Net negative impact includes the sum of estimates of net claims and claim expenses incurred, earned reinstatement premiums assumed and ceded, lost profit commissions and redeemable noncontrolling interest. The Company’s estimates of net negative impact are based on a review of its potential exposures, preliminary discussions with certain counterparties and catastrophe modeling techniques. The Company’s actual net negative impact, both individually and in the aggregate, will vary from these estimates, perhaps materially. Changes in these estimates will be recorded in the period in which they occur.

Meaningful uncertainty remains regarding the estimates, and the nature and extent of the losses, associated with Hurricanes Harvey, Irma and Maria, the Mexico City Earthquake, and the Q4 2017 California Wildfires (collectively, the “2017 Catastrophe Events”), driven by the magnitude and recent occurrence of each event, relatively limited claims data received to date, the contingent nature of business interruption and other exposures, potential uncertainties relating to reinsurance recoveries and other factors inherent in loss estimation, among other things. Seismic events generally have longer development periods than windstorm events, which may be amplified in certain instances by dynamics such as the risk of geological liquefaction and the potential for uncertainty in claims adjudication.

See the financial data below for additional information detailing the net positive impact on the Company’s consolidated financial statements in the second quarter of 2018 resulting from decreases in the estimates of the net negative impact of the 2017 Catastrophe Events.

     

Three months ended June 30, 2018

Change in Estimates of
2017 Catastrophe
Events (1)

(in thousands, except percentages)
Decrease in net claims and claims expenses incurred $ 128,626
Assumed reinstatement premiums earned (32,266 )
Ceded reinstatement premiums earned 2,180
Lost profit commissions (6,577 )
Net positive impact on underwriting result 91,963
Redeemable noncontrolling interest - DaVinciRe (15,263 )
Net positive impact $ 76,700  
Percentage point impact on consolidated combined ratio (23.5 )
 
Net positive impact on Property segment underwriting result $ 86,136
Net positive impact on Casualty and Specialty segment underwriting result 5,827  
Net positive impact on underwriting result $ 91,963  
(1)     An initial estimate of the net negative impact of the 2017 Catastrophe Events was recorded in the Company's consolidated financial statements during 2017. The amounts noted in the table above reflect changes in the estimates of the net negative impact of the 2017 Catastrophe Events recorded in the second quarter of 2018.
 

Underwriting Results by Segment

Property Segment

Gross premiums written in the Property segment were $552.6 million in the second quarter of 2018, an increase of $53.3 million, or 10.7%, compared to $499.3 million in the second quarter of 2017.

Gross premiums written in the catastrophe class of business were $437.7 million in the second quarter of 2018, an increase of $26.2 million, or 6.4%, compared to the second quarter of 2017. Excluding a $31.2 million reduction in assumed reinstatement premiums written in the catastrophe class of business in the second quarter of 2018 associated with the 2017 Catastrophe Events, gross premiums written in the catastrophe class of business would have increased $57.4 million, or 14.0%. The increase in gross premiums written in the catastrophe class of business was driven primarily by expanded participation on existing transactions and certain new transactions. Gross premiums written in the other property class of business were $114.9 million in the second quarter of 2018, an increase of $27.1 million, or 30.8%, compared to the second quarter of 2017. The increase in gross premiums written in the other property class of business was primarily driven by growth in the Lloyd’s underwriting platform, both from existing relationships and through new opportunities.

Ceded premiums written in the Property segment were $254.8 million in the second quarter of 2018, an increase of $91.9 million, or 56.4%, compared to the second quarter of 2017. The increase in ceded premiums written was principally due to additional purchases of retrocessional reinsurance as part of the management of the Company’s risk portfolio.

Net premiums written in the Property segment were $297.8 million in the second quarter of 2018, a decrease of $38.6 million or 11.5%, compared to the second quarter of 2017. Excluding a $29.5 million reduction in net reinstatement premiums written in the Property segment associated with the 2017 Catastrophe Events, net premiums written decreased by $9.1 million due to an increase in ceded purchases made as part of the Company’s gross-to-net strategy which is core to the construction of its net portfolios of risk.

The Property segment generated underwriting income of $213.7 million and a combined ratio of negative 4.7% in the second quarter of 2018, compared to $106.6 million and positive 44.5%, respectively, in the second quarter of 2017. Principally impacting the Property segment underwriting result and combined ratio in the second quarter of 2018 were decreases in the net negative impact of the 2017 Catastrophe Events, which resulted in a net positive impact on the underwriting result of $86.1 million, and a corresponding reduction in the combined ratio of 50.1 percentage points.

Primarily as a result of the decreases in the estimates of the net negative impact of the 2017 Catastrophe Events noted above, the Property segment experienced:

  • favorable development on prior accident years net claims and claim expenses of $143.1 million, or 70.1 percentage points, during the second quarter of 2018, compared to $23.9 million, or 12.4 percentage points, in the second quarter of 2017; and
  • an increase in the underwriting expense ratio to 31.7% in the second quarter of 2018, compared to 27.3% in the second quarter of 2017, principally driven by lower ceded profit commissions, as well as a reduction in net premiums earned due to the negative reinstatement premiums noted above.

Casualty and Specialty Segment

Gross premiums written in the Casualty and Specialty segment were $424.7 million in the second quarter of 2018, an increase of $96.6 million, or 29.5%, compared to the second quarter of 2017. The increase was principally due to selective growth from new business opportunities within the general casualty, financial lines and other specialty classes of business. Much of this growth is a result of the Company’s differentiated strategy to provide bespoke customer solutions, which may be non-recurring.

The Casualty and Specialty segment generated underwriting income of $13.0 million and had a combined ratio of 94.2% in the second quarter of 2018, compared to $2.8 million and 98.5%, respectively, in the second quarter of 2017. The improvement in the Casualty and Specialty segment combined ratio was principally driven by a 6.2 percentage point decrease in the underwriting expense ratio, primarily the result of a decrease in the net acquisition ratio and a decrease in the operating expense ratio due to the combination of both lower operating expenses and improved operating leverage as a result of the increase in net premiums earned, partially offset by a 1.9 percentage point increase in the net claims and claim expenses ratio.

During the second quarter of 2018, the Casualty and Specialty segment experienced net favorable development on prior accident years net claims and claim expenses of $13.0 million, or 5.8 percentage points, compared to $21.0 million, or 11.0 percentage points, in the second quarter of 2017. The net favorable development during the second quarter of 2018 was principally driven by reported losses generally coming in lower than expected on attritional net claims and claim expenses across a number of lines of business, and a decrease in the estimate of the net negative impact of the 2017 Catastrophe Events.

Other Items

  • The Company’s total investment result, which includes the sum of net investment income and net realized and unrealized gains and losses on investments, was a gain of $53.5 million in the second quarter of 2018, compared to a gain of $112.3 million in the second quarter of 2017, a decrease of $58.8 million. The decrease in the total investment result was principally due to realized and unrealized losses on the Company’s fixed maturity investment portfolio in the second quarter of 2018 driven by an upward shift of the interest rate yield curve, compared to realized and unrealized gains in the second quarter of 2017 primarily driven by a tightening of credit spreads and a decrease in interest rates at the longer end of the yield curve. In addition, the Company’s equity investments trading portfolio experienced lower realized and unrealized gains during the second quarter of 2018, compared to second quarter of 2017.
  • During the second quarter of 2018, Upsilon RFO issued $205.4 million of non-voting preference shares to investors, including $32.8 million to the Company. At June 30, 2018, the Company’s participation in the risks assumed by Upsilon RFO was 14.6%.
  • In June 2018, the Company raised $250.0 million through the issuance of 10,000,000 Depositary Shares, each of which represents 1/1,000th interest in a share of the Company’s 5.750% Series F Preference Shares, $1.00 par value and $25,000 liquidation preference per share (equivalent to $25.00 per Depositary Share). The proceeds of the issuance of the Series F Preference Shares will be used for general corporate purposes.

This Press Release includes certain non-GAAP financial measures including “operating income available to RenaissanceRe common shareholders”, “operating income available to RenaissanceRe common shareholders per common share - diluted”, “operating return on average common equity - annualized”, “tangible book value per common share” and “tangible book value per common share plus accumulated dividends.” A reconciliation of such measures to the most comparable GAAP figures in accordance with Regulation G is presented in the attached supplemental financial data.

Please refer to the “Investors - Financial Reports - Financial Supplements” section of the Company’s website at www.renre.com for a copy of the Financial Supplement which includes additional information on the Company’s financial performance.

RenaissanceRe will host a conference call on Wednesday, July 25, 2018 at 10:00 a.m. ET to discuss this release. Live broadcast of the conference call will be available through the “Investors - Webcasts & Presentations” section of the Company’s website at www.renre.com.

About RenaissanceRe

RenaissanceRe is a global provider of reinsurance and insurance that specializes in matching well-structured risks with efficient sources of capital. The Company provides property, casualty and specialty reinsurance and certain insurance solutions to customers, principally through intermediaries. Established in 1993, the Company has offices in Bermuda, Ireland, Singapore, Switzerland, the United Kingdom and the United States.

Cautionary Statement Regarding Forward-Looking Statements

Any forward-looking statements made in this Press Release reflect RenaissanceRe’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to numerous factors that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements, including the following: the frequency and severity of catastrophic and other events that the Company covers; the effectiveness of the Company’s claims and claim expense reserving process; the Company’s ability to maintain its financial strength ratings; the effect of climate change on the Company’s business; collection on claimed retrocessional coverage, and new retrocessional reinsurance being available on acceptable terms and providing the coverage that we intended to obtain; the effects of U.S. tax reform legislation and possible future tax reform legislation and regulations, including changes to the tax treatment of the Company’s shareholders or investors in the Company’s joint ventures or other entities the Company manages; the effect of emerging claims and coverage issues; continued soft reinsurance underwriting market conditions; the Company’s reliance on a small and decreasing number of reinsurance brokers and other distribution services for the preponderance of its revenue; the Company’s exposure to credit loss from counterparties in the normal course of business; the effect of continued challenging economic conditions throughout the world; a contention by the Internal Revenue Service that Renaissance Reinsurance Ltd., or any of the Company’s other Bermuda subsidiaries, is subject to taxation in the U.S.; the success of any of the Company’s strategic investments or acquisitions, including the Company’s ability to manage its operations as its product and geographical diversity increases; the Company’s ability to retain key senior officers and to attract or retain the executives and employees necessary to manage its business; the performance of the Company’s investment portfolio; losses that the Company could face from terrorism, political unrest or war; the effect of cybersecurity risks, including technology breaches or failure on the Company’s business; the Company’s ability to successfully implement its business strategies and initiatives; the Company’s ability to determine the impairments taken on investments; the effect of inflation; the ability of the Company’s ceding companies and delegated authority counterparties to accurately assess the risks they underwrite; the effect of operational risks, including system or human failures; the Company’s ability to effectively manage capital on behalf of investors in joint ventures or other entities it manages; foreign currency exchange rate fluctuations; the Company’s ability to raise capital if necessary; the Company’s ability to comply with covenants in its debt agreements; changes to the regulatory systems under which the Company operates, including as a result of increased global regulation of the insurance and reinsurance industry; changes in Bermuda laws and regulations and the political environment in Bermuda; the Company’s dependence on the ability of its operating subsidiaries to declare and pay dividends; aspects of the Company’s corporate structure that may discourage third-party takeovers or other transactions; the cyclical nature of the reinsurance and insurance industries; adverse legislative developments that reduce the size of the private markets the Company serves or impede their future growth; consolidation of competitors, customers and insurance and reinsurance brokers; the effect on the Company’s business of the highly competitive nature of its industry, including the effect of new entrants to, competing products for and consolidation in the (re)insurance industry; other political, regulatory or industry initiatives adversely impacting the Company; increasing barriers to free trade and the free flow of capital; international restrictions on the writing of reinsurance by foreign companies and government intervention in the natural catastrophe market; the effect of Organisation for Economic Co-operation and Development or European Union (“EU”) measures to increase the Company’s taxes and reporting requirements; the effect of the vote by the U.K. to leave the EU; changes in regulatory regimes and accounting rules that may impact financial results irrespective of business operations; the Company’s need to make many estimates and judgments in the preparation of its financial statements; and other factors affecting future results disclosed in RenaissanceRe’s filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.

 
RenaissanceRe Holdings Ltd.
Summary Consolidated Statements of Operations
(in thousands of United States Dollars, except per share amounts and percentages)
(Unaudited)
      Three months ended     Six months ended
June 30,
2018
    June 30,
2017
June 30,
2018
    June 30,
2017
Revenues
Gross premiums written $ 977,343   $ 827,415   $ 2,136,995   $ 1,749,505  
Net premiums written $ 604,509 $ 555,745 $ 1,267,553 $ 1,099,881
Increase in unearned premiums (175,124 ) (173,480 ) (397,886 ) (351,571 )
Net premiums earned 429,385 382,265 869,667 748,310
Net investment income 71,356 54,163 127,832 108,488
Net foreign exchange (losses) gains (10,687 ) 3,109 (6,930 ) 11,274
Equity in earnings of other ventures 5,826 5,543 6,683 4,036
Other income (losses) 1,225 2,392 (17 ) 4,057
Net realized and unrealized (losses) gains on investments (17,901 ) 58,113   (100,045 ) 101,486  
Total revenues 479,204   505,585   897,190   977,651  
Expenses
Net claims and claim expenses incurred 60,167 142,587 231,870 335,668
Acquisition expenses 105,052 88,251 202,763 171,533
Operational expenses 37,543 41,766 78,815 89,049
Corporate expenses 8,301 4,636 15,034 9,922
Interest expense 11,768   10,091   23,535   20,617  
Total expenses 222,831   287,331   552,017   626,789  
Income before taxes 256,373 218,254 345,173 350,862
Income tax expense (4,506 ) (3,904 ) (1,099 ) (4,238 )
Net income 251,867 214,350 344,074 346,624
Net income attributable to noncontrolling interests (54,483 ) (37,612 ) (84,382 ) (71,939 )
Net income attributable to RenaissanceRe 197,384 176,738 259,692 274,685
Dividends on preference shares (5,596 ) (5,596 ) (11,191 ) (11,191 )
Net income available to RenaissanceRe common shareholders $ 191,788   $ 171,142   $ 248,501   $ 263,494  
 
Net income available to RenaissanceRe common shareholders per common share - basic $ 4.78 $ 4.25 $ 6.21 $ 6.50
Net income available to RenaissanceRe common shareholders per common share - diluted $ 4.78 $ 4.24 $ 6.21 $ 6.47
Operating income available to RenaissanceRe common shareholders per common share - diluted (1) $ 5.23 $ 2.88 $ 8.64 $ 4.16
 
Average shares outstanding - basic 39,641 39,937 39,597 40,172
Average shares outstanding - diluted 39,654 40,024 39,622 40,324
 
Net claims and claim expense ratio 14.0 % 37.3 % 26.7 % 44.9 %
Underwriting expense ratio 33.2 % 34.0 % 32.3 % 34.8 %
Combined ratio 47.2 % 71.3 % 59.0 % 79.7 %
 
Return on average common equity - annualized 18.6 % 15.2 % 12.2 % 11.7 %
Operating return on average common equity - annualized (1) 20.3 % 10.3 % 16.9 % 7.4 %
(1)     See Comments on Regulation G for a reconciliation of non-GAAP financial measures.
 
 
RenaissanceRe Holdings Ltd.
Summary Consolidated Balance Sheets
(in thousands of United States Dollars, except per share amounts)
         
June 30,
2018
December 31,
2017
Assets (Unaudited) (Audited)
Fixed maturity investments trading, at fair value $ 7,420,778 $ 7,426,555
Short term investments, at fair value 2,031,943 991,863
Equity investments trading, at fair value 432,804 388,254
Other investments, at fair value 713,200 594,793
Investments in other ventures, under equity method 111,935   101,974
Total investments 10,710,660 9,503,439
Cash and cash equivalents 548,472 1,361,592
Premiums receivable 1,959,647 1,304,622
Prepaid reinsurance premiums 925,501 533,546
Reinsurance recoverable 1,454,991 1,586,630
Accrued investment income 44,810 42,235
Deferred acquisition costs 511,155 426,551
Receivable for investments sold 505,907 103,145
Other assets 122,048 121,226
Goodwill and other intangibles 240,187   243,145
Total assets $ 17,023,378   $ 15,226,131
Liabilities, Noncontrolling Interests and Shareholders’ Equity
Liabilities
Reserve for claims and claim expenses $ 4,702,345 $ 5,080,408
Unearned premiums 2,267,450 1,477,609
Debt 990,371 989,623
Reinsurance balances payable 2,085,034 989,090
Payable for investments purchased 490,589 208,749
Other liabilities 134,100   792,771
Total liabilities 10,669,889   9,538,250
Redeemable noncontrolling interest 1,493,428 1,296,506
Shareholders’ Equity
Preference shares 650,000 400,000
Common shares 40,263 40,024
Additional paid-in capital 35,094 37,355
Accumulated other comprehensive (loss) income (1,101 ) 224
Retained earnings 4,135,805   3,913,772
Total shareholders’ equity attributable to RenaissanceRe 4,860,061   4,391,375
Total liabilities, noncontrolling interests and shareholders’ equity $ 17,023,378   $ 15,226,131
 
Book value per common share $ 104.56   $ 99.72
 
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Segment Information
(in thousands of United States Dollars, except percentages)
(Unaudited)
      Three months ended June 30, 2018
Property    

Casualty and
Specialty

    Other     Total
Gross premiums written $ 552,627   $ 424,716   $   $ 977,343  
Net premiums written $ 297,832   $ 306,677   $   $ 604,509  
Net premiums earned $ 204,138 $ 225,247 $ $ 429,385
Net claims and claim expenses incurred (74,269 ) 134,524 (88 ) 60,167
Acquisition expenses 40,850 64,201 1 105,052
Operational expenses 23,810   13,552   181   37,543  
Underwriting income (loss) $ 213,747   $ 12,970   $ (94 ) 226,623
Net investment income 71,356 71,356
Net foreign exchange losses (10,687 ) (10,687 )
Equity in earnings of other ventures 5,826 5,826
Other income 1,225 1,225
Net realized and unrealized losses on investments (17,901 ) (17,901 )
Corporate expenses (8,301 ) (8,301 )
Interest expense (11,768 ) (11,768 )
Income before taxes and redeemable noncontrolling interests 256,373
Income tax expense (4,506 ) (4,506 )
Net income attributable to redeemable noncontrolling interests (54,483 ) (54,483 )
Dividends on preference shares (5,596 ) (5,596 )
Net income attributable to RenaissanceRe common shareholders $ 191,788  
 
Net claims and claim expenses incurred – current accident year $ 68,876 $ 147,520 $ $ 216,396
Net claims and claim expenses incurred – prior accident years (143,145 ) (12,996 ) (88 ) (156,229 )
Net claims and claim expenses incurred – total $ (74,269 ) $ 134,524   $ (88 ) $ 60,167  
 
Net claims and claim expense ratio – current accident year 33.7 % 65.5 % 50.4 %
Net claims and claim expense ratio – prior accident years (70.1 )% (5.8 )% (36.4 )%
Net claims and claim expense ratio – calendar year (36.4 )% 59.7 % 14.0 %
Underwriting expense ratio 31.7 % 34.5 % 33.2 %
Combined ratio (4.7 )% 94.2 % 47.2 %
 
Three months ended June 30, 2017
Property

Casualty and
Specialty

Other Total
Gross premiums written $ 499,347   $ 328,068   $   $ 827,415  
Net premiums written $ 336,464   $ 219,281   $   $ 555,745  
Net premiums earned $ 192,198 $ 190,065 $ 2 $ 382,265
Net claims and claim expenses incurred 33,017 109,797 (227 ) 142,587
Acquisition expenses 28,500 59,752 (1 ) 88,251
Operational expenses 24,053   17,712   1   41,766  
Underwriting income $ 106,628   $ 2,804   $ 229   109,661
Net investment income 54,163 54,163
Net foreign exchange gains 3,109 3,109
Equity in earnings of other ventures 5,543 5,543
Other income 2,392 2,392
Net realized and unrealized gains on investments 58,113 58,113
Corporate expenses (4,636 ) (4,636 )
Interest expense (10,091 ) (10,091 )
Income before taxes and noncontrolling interests 218,254
Income tax expense (3,904 ) (3,904 )
Net income attributable to noncontrolling interests (37,612 ) (37,612 )
Dividends on preference shares (5,596 ) (5,596 )
Net income available to RenaissanceRe common shareholders $ 171,142  
 
Net claims and claim expenses incurred – current accident year $ 56,889 $ 130,802 $ $ 187,691
Net claims and claim expenses incurred – prior accident years (23,872 ) (21,005 ) (227 ) (45,104 )
Net claims and claim expenses incurred – total $ 33,017   $ 109,797   $ (227 ) $ 142,587  
 
Net claims and claim expense ratio – current accident year 29.6 % 68.8 % 49.1 %
Net claims and claim expense ratio – prior accident years (12.4 )% (11.0 )% (11.8 )%
Net claims and claim expense ratio – calendar year 17.2 % 57.8 % 37.3 %
Underwriting expense ratio 27.3 % 40.7 % 34.0 %
Combined ratio 44.5 % 98.5 % 71.3 %
 
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Segment Information
(in thousands of United States Dollars, except percentages)
(Unaudited)
      Six months ended June 30, 2018
Property    

Casualty and
Specialty

    Other     Total
Gross premiums written $ 1,259,595   $ 877,400   $   $ 2,136,995  
Net premiums written $ 651,909   $ 615,644   $   $ 1,267,553  
Net premiums earned $ 429,187 $ 440,480 $ $ 869,667
Net claims and claim expenses incurred (43,662 ) 275,602 (70 ) 231,870
Acquisition expenses 81,571 121,191 1 202,763
Operational expenses 50,356   28,145   314   78,815  
Underwriting income (loss) $ 340,922   $ 15,542   $ (245 ) 356,219
Net investment income 127,832 127,832
Net foreign exchange losses (6,930 ) (6,930 )
Equity in earnings of other ventures 6,683 6,683
Other loss (17 ) (17 )
Net realized and unrealized losses on investments (100,045 ) (100,045 )
Corporate expenses (15,034 ) (15,034 )
Interest expense (23,535 ) (23,535 )
Income before taxes and redeemable noncontrolling interests 345,173
Income tax expense (1,099 ) (1,099 )
Net income attributable to redeemable noncontrolling interests (84,382 ) (84,382 )
Dividends on preference shares (11,191 ) (11,191 )
Net income attributable to RenaissanceRe common shareholders $ 248,501  
 
Net claims and claim expenses incurred – current accident year $ 127,045 $ 292,389 $ $ 419,434
Net claims and claim expenses incurred – prior accident years (170,707 ) (16,787 ) (70 ) (187,564 )
Net claims and claim expenses incurred – total $ (43,662 ) $ 275,602   $ (70 ) $ 231,870  
 
Net claims and claim expense ratio – current accident year 29.6 % 66.4 % 48.2 %
Net claims and claim expense ratio – prior accident years (39.8 )% (3.8 )% (21.5 )%
Net claims and claim expense ratio – calendar year (10.2 )% 62.6 % 26.7 %
Underwriting expense ratio 30.8 % 33.9 % 32.3 %
Combined ratio 20.6 % 96.5 % 59.0 %
 
Six months ended June 30, 2017
Property

Casualty and
Specialty

Other Total
Gross premiums written $ 1,019,876   $ 729,629   $   $ 1,749,505  
Net premiums written $ 626,335   $ 473,546   $   $ 1,099,881  
Net premiums earned $ 379,186 $ 369,124 $ $ 748,310
Net claims and claim expenses incurred 71,855 264,368 (555 ) 335,668
Acquisition expenses 57,603 113,931 (1 ) 171,533
Operational expenses 51,718   37,319   12   89,049  
Underwriting income (loss) $ 198,010   $ (46,494 ) $ 544   152,060
Net investment income 108,488 108,488
Net foreign exchange gains 11,274 11,274
Equity in earnings of other ventures 4,036 4,036
Other income 4,057 4,057
Net realized and unrealized gains on investments 101,486 101,486
Corporate expenses (9,922 ) (9,922 )
Interest expense (20,617 ) (20,617 )
Income before taxes and noncontrolling interests 350,862
Income tax expense (4,238 ) (4,238 )
Net income attributable to noncontrolling interests (71,939 ) (71,939 )
Dividends on preference shares (11,191 ) (11,191 )
Net income available to RenaissanceRe common shareholders $ 263,494  
 
Net claims and claim expenses incurred – current accident year $ 96,655 $ 255,111 $ $ 351,766
Net claims and claim expenses incurred – prior accident years (24,800 ) 9,257   (555 ) (16,098 )
Net claims and claim expenses incurred – total $ 71,855   $ 264,368   $ (555 ) $ 335,668  
 
Net claims and claim expense ratio – current accident year 25.5 % 69.1 % 47.0 %
Net claims and claim expense ratio – prior accident years (6.6 )% 2.5 % (2.1 )%
Net claims and claim expense ratio – calendar year 18.9 % 71.6 % 44.9 %
Underwriting expense ratio 28.9 % 41.0 % 34.8 %
Combined ratio 47.8 % 112.6 % 79.7 %
 
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Gross Premiums Written
(in thousands of United States Dollars)
(Unaudited)
         
Three months ended Six months ended
June 30,
2018
    June 30,
2017
June 30,
2018
    June 30,
2017

Property Segment

Catastrophe $ 437,720 $ 411,500 $ 1,028,057 $ 825,924
Other property 114,907   87,847   231,538   193,952
Property segment gross premiums written $ 552,627   $ 499,347   $ 1,259,595   $ 1,019,876
 

Casualty and Specialty Segment

General casualty (1) $ 153,648 $ 107,994 $ 280,274 $ 230,287
Professional liability (2) 97,811 101,447 254,924 233,753
Financial lines (3) 88,215 69,314 181,482 154,457
Other (4) 85,042   49,313   160,720   111,132
Casualty and Specialty segment gross premiums written $ 424,716   $ 328,068   $ 877,400   $ 729,629
(1)    

Includes automobile liability, casualty clash, employer’s liability, umbrella or excess casualty, workers’ compensation and general liability.

(2) Includes directors and officers, medical malpractice, and professional indemnity.
(3) Includes financial guaranty, mortgage guaranty, political risk, surety and trade credit.
(4) Includes accident and health, agriculture, aviation, cyber, energy, marine, satellite and terrorism. Lines of business such as regional multi-line and whole account may have characteristics of various other classes of business, and are allocated accordingly.
 
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Total Investment Result
(in thousands of United States Dollars, except percentages)
(Unaudited)
                 
Three months ended Six months ended
June 30,
2018
June 30,
2017
June 30,
2018
June 30,
2017
Fixed maturity investments $ 50,416 $ 44,356 $ 96,059 $ 87,775
Short term investments 7,633 2,981 12,937 4,705
Equity investments trading 1,490 889 2,188 1,700
Other investments
Private equity investments 3,860 6,611 3,426 14,413
Other 10,658 2,899 18,681 6,971
Cash and cash equivalents 1,039   295   1,604   484  
75,096 58,031 134,895 116,048
Investment expenses (3,740 ) (3,868 ) (7,063 ) (7,560 )
Net investment income 71,356   54,163   127,832   108,488  
 
Gross realized gains 5,133 15,249 9,716 26,710
Gross realized losses (26,519 ) (7,243 ) (52,372 ) (23,776 )
Net realized (losses) gains on fixed maturity investments (21,386 ) 8,006 (42,656 ) 2,934
Net unrealized (losses) gains on fixed maturity investments trading (9,420 ) 18,760 (64,792 ) 43,395
Net realized and unrealized gains (losses) on investments-related derivatives 1,038 (268 ) (3,326 ) (324 )
Net realized gains on equity investments trading 348 15,146 582 36,061
Net unrealized gains on equity investments trading 11,519   16,469   10,147   19,420  
Net realized and unrealized (losses) gains on investments (17,901 ) 58,113   (100,045 ) 101,486  
Total investment result $ 53,455   $ 112,276   $ 27,787   $ 209,974  
 
Total investment return - annualized 2.0 % 4.8 % 0.5 % 4.5 %
 

Comments on Regulation G

In addition to the GAAP financial measures set forth in this Press Release, the Company has included certain non-GAAP financial measures within the meaning of Regulation G. The Company has provided these financial measures in previous investor communications and the Company’s management believes that these measures are important to investors and other interested persons, and that investors and such other persons benefit from having a consistent basis for comparison between quarters and for comparison with other companies within the industry. These measures may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on these non-GAAP measures in assessing the Company’s overall financial performance.

The Company uses “operating income available to RenaissanceRe common shareholders” as a measure to evaluate the underlying fundamentals of its operations and believes it to be a useful measure of its corporate performance. “Operating income available to RenaissanceRe common shareholders” as used herein differs from “net income available to RenaissanceRe common shareholders,” which the Company believes is the most directly comparable GAAP measure, by the exclusion of net realized and unrealized gains and losses on investments and the associated income tax expense or benefit. The Company’s management believes that “operating income available to RenaissanceRe common shareholders” is useful to investors because it more accurately measures and predicts the Company’s results of operations by removing the variability arising from fluctuations in the Company’s fixed maturity investment portfolio, equity investments trading and investments-related derivatives and the associated income tax expense or benefit of those fluctuations. The Company also uses “operating income available to RenaissanceRe common shareholders” to calculate “operating income available to RenaissanceRe common shareholders per common share - diluted” and “operating return on average common equity - annualized”. The following is a reconciliation of: 1) net income available to RenaissanceRe common shareholders to operating income available to RenaissanceRe common shareholders; 2) net income available to RenaissanceRe common shareholders per common share - diluted to operating income available to RenaissanceRe common shareholders per common share - diluted; and 3) return on average common equity - annualized to operating return on average common equity - annualized:

      Three months ended     Six months ended
(in thousands of United States Dollars, except per share amounts and percentages) June 30,
2018
    June 30,
2017
June 30,
2018
    June 30,
2017
Net income available to RenaissanceRe common shareholders $ 191,788 $ 171,142 $ 248,501 $ 263,494
Adjustment for net realized and unrealized losses (gains) on investments 17,901 (58,113 ) 100,045 (101,486 )
Adjustment for income tax (benefit) expense (1) (58 ) 3,785   (3,706 ) 8,492  
Operating income available to RenaissanceRe common shareholders $ 209,631   $ 116,814   $ 344,840   $ 170,500  
 
Net income available to RenaissanceRe common shareholders per common share - diluted $ 4.78 $ 4.24 $ 6.21 $ 6.47
Adjustment for net realized and unrealized losses (gains) on investments 0.45 (1.45 ) 2.52 (2.52 )
Adjustment for income tax (benefit) expense (1)   0.09   (0.09 ) 0.21  
Operating income available to RenaissanceRe common shareholders per common share - diluted $ 5.23   $ 2.88   $ 8.64   $ 4.16  
 
Return on average common equity - annualized 18.6 % 15.2 % 12.2 % 11.7 %
Adjustment for net realized and unrealized losses (gains) on investments 1.7 % (5.2 )% 4.9 % (4.5 )%
Adjustment for income tax (benefit) expense (1) % 0.3 % (0.2 )% 0.2 %
Operating return on average common equity - annualized 20.3 % 10.3 % 16.9 % 7.4 %
(1)     Adjustment for income tax (benefit) expense represents the income tax (benefit) expense associated with the adjustment for net realized and unrealized losses (gains) on investments. The income tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors.
 

The Company has included in this Press Release “tangible book value per common share” and “tangible book value per common share plus accumulated dividends”. “Tangible book value per common share” is defined as book value per common share excluding goodwill and intangible assets per share. “Tangible book value per common share plus accumulated dividends” is defined as book value per common share excluding goodwill and intangible assets per share, plus accumulated dividends. The Company’s management believes “tangible book value per common share” and “tangible book value per common share plus accumulated dividends” are useful to investors because they provide a more accurate measure of the realizable value of shareholder returns, excluding the impact of goodwill and intangible assets. The following is a reconciliation of book value per common share to tangible book value per common share and tangible book value per common share plus accumulated dividends:

      At
June 30,
2018
    March 31,
2018
    December 31,
2017
    September 30,
2017
    June 30,
2017
Book value per common share $ 104.56 $ 100.29 $ 99.72 $ 100.00 $ 113.08
Adjustment for goodwill and other intangibles (1) (6.69 ) (6.66 ) (6.49 ) (6.55 ) (6.56 )
Tangible book value per common share 97.87 93.63 93.23 93.45 106.52
Adjustment for accumulated dividends 18.66   18.33   18.00   17.68   17.36  
Tangible book value per common share plus accumulated dividends $ 116.53   $ 111.96   $ 111.23   $ 111.13   $ 123.88  
 
Quarterly change in book value per common share 4.3 % 0.6 % (0.3 )% (11.6 )% 3.4 %
Quarterly change in tangible book value per common share plus change in accumulated dividends 4.9 % 0.8 % 0.1 % (12.0 )% 3.9 %
Year to date change in book value per common share 4.9 % 0.6 % (8.0 )% (7.8 )% 4.3 %
Year to date change in tangible book value per common share plus change in accumulated dividends 5.7 % 0.8 % (7.2 )% (7.3 )% 5.2 %
(1)     At June 30, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, goodwill and other intangibles included $29.1 million, $26.3 million, $16.7 million, $17.4 million and $18.1 million, respectively, of goodwill and other intangibles included in investments in other ventures, under equity method.
 

Contacts

INVESTORS:
RenaissanceRe Holdings Ltd.
Keith McCue, 441-239-4830
Senior Vice President, Finance & Investor Relations
or
MEDIA:
RenaissanceRe Holdings Ltd.
Keil Gunther, 441-239-4932
Vice President, Marketing & Communications
or
Kekst and Company
Peter Hill or Dawn Dover, 212-521-4800

Contacts

INVESTORS:
RenaissanceRe Holdings Ltd.
Keith McCue, 441-239-4830
Senior Vice President, Finance & Investor Relations
or
MEDIA:
RenaissanceRe Holdings Ltd.
Keil Gunther, 441-239-4932
Vice President, Marketing & Communications
or
Kekst and Company
Peter Hill or Dawn Dover, 212-521-4800