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RenaissanceRe Reports Third Quarter 2020 Net Income Available to Common Shareholders of $47.8 Million, or $0.94 Per Diluted Common Share; Operating Loss Attributable to Common Shareholders of $131.7 Million, or $2.64 Per Diluted Common Share

PEMBROKE, Bermuda–(BUSINESS WIRE)–RenaissanceRe Holdings Ltd. (NYSE: RNR) (the “Company” or “RenaissanceRe”) today reported net income available to RenaissanceRe common shareholders of $47.8 million, or $0.94 per diluted common share, in the third quarter of 2020, compared to $36.7 million, or $0.83 per diluted common share, in the third quarter of 2019. Operating loss attributable to RenaissanceRe common shareholders was $131.7 million, or $2.64 per diluted common share, in the third quarter of 2020, compared to operating income available to RenaissanceRe common shareholders of $32.7 million, or $0.73 per diluted common share, in the third quarter of 2019. The Company reported an annualized return on average common equity of 2.8% and an annualized operating return on average common equity of negative 7.7% in the third quarter of 2020, compared to 2.8% and 2.5%, respectively, in the third quarter of 2019. Book value per common share increased $0.86, or 0.6%, to $135.13 in the third quarter of 2020, compared to a 0.8% increase in the third quarter of 2019. Tangible book value per common share plus accumulated dividends increased $1.24, or 1.0%, to $151.33 in the third quarter of 2020, compared to a 1.1% increase in the third quarter of 2019.

Kevin J. O’Donnell, President and Chief Executive Officer of RenaissanceRe, commented: “Another active quarter further confirms the critical role RenaissanceRe plays in helping communities rebuild. Our results for the third quarter reflect the climate-change driven frequency of catastrophic events impacting the world, but these are risks that we understand well and are paid to take. As we approach the January renewal, I am confident we will successfully execute our strategy and profitably deploy significant capital by helping our customers solve their biggest problems.”

Third Quarter of 2020 Summary

  • Net negative impact on net income available to RenaissanceRe common shareholders of $321.7 million resulting from Hurricane Laura, Hurricane Sally, the wildfires occurring in California, Oregon and Washington (the “Q3 2020 Wildfires”), other catastrophe events including the August 2020 derecho which impacted the U.S. Midwest, Hurricane Isaias, and Typhoon Maysak (the “Other Q3 2020 Catastrophe Events”), and loss estimates associated with aggregate loss contracts on these and other events in the third quarter of 2020 (collectively, the “Q3 2020 Large Loss Events”).
  • Gross premiums written increased by $282.0 million, or 32.7%, to $1.1 billion, in the third quarter of 2020 compared to the third quarter of 2019, driven by an increase of $168.6 million in the Casualty and Specialty segment and an increase of $113.4 million in the Property segment.
  • Underwriting loss of $206.1 million and a combined ratio of 120.6% in the third quarter of 2020, compared to an underwriting loss of $3.4 million and a combined ratio of 100.4% in the third quarter of 2019. The Property segment incurred an underwriting loss of $206.6 million and had a combined ratio of 140.0% in the third quarter of 2020. The Casualty and Specialty segment generated underwriting income of $0.6 million and had a combined ratio of 99.9% in the third quarter of 2020. The Company’s underwriting result in the third quarter of 2020 was principally impacted by the Q3 2020 Large Loss Events, which resulted in a net negative impact on the underwriting result of $422.4 million and added 43.4 percentage points to the combined ratio, primarily in the Property segment. The third quarter of 2019 included the impacts of Hurricane Dorian and Typhoon Faxai (collectively, the “Q3 2019 Catastrophe Events”), which resulted in an underwriting loss of $181.9 million and added 20.6 percentage points to the combined ratio.
  • Total investment result was $307.8 million in the third quarter of 2020, generating an annualized total investment return of 6.2%, compared to $145.8 million and an annualized total investment return of 3.6% in the third quarter of 2019.

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, may vary from these estimates, perhaps materially. Changes in these estimates will be recorded in the period in which they occur.

There remains meaningful uncertainty regarding the estimates and the nature and extent of the losses from catastrophe events, driven by the magnitude and recent occurrence of each event, the geographic areas in which the events occurred, 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.

The financial data in the table below provides additional information detailing the net negative impact of the Q3 2020 Large Loss Events on the Company’s consolidated financial statements in the third quarter of 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2020

Hurricane Laura

 

Hurricane Sally

 

Q3 2020 Wildfires

 

Other Q3 2020 Catastrophe Events

 

Aggregate Losses

 

Total Q3 2020 Large Loss Events

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net claims and claims expenses incurred

$

(123,076

)

 

$

(72,531

)

 

$

(91,107

)

 

$

(61,586

)

 

$

(120,118

)

 

$

(468,418

)

 

 

Assumed reinstatement premiums earned

18,282

 

 

5,110

 

 

17,604

 

 

7,407

 

 

5,123

 

 

53,526

 

 

 

Ceded reinstatement premiums earned

(334

)

 

(236

)

 

 

 

 

 

 

 

(570

)

 

 

Lost profit commissions

(254

)

 

(418

)

 

(491

)

 

(549

)

 

(5,179

)

 

(6,891

)

 

 

Net negative impact on underwriting result

(105,382

)

 

(68,075

)

 

(73,994

)

 

(54,728

)

 

(120,174

)

 

(422,353

)

 

 

Redeemable noncontrolling interest

20,008

 

 

11,834

 

 

19,580

 

 

17,958

 

 

31,262

 

 

100,642

 

 

 

Net negative impact on net income available to RenaissanceRe common shareholders

$

(85,374

)

 

$

(56,241

)

 

$

(54,414

)

 

$

(36,770

)

 

$

(88,912

)

 

$

(321,711

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The financial data below provides additional information detailing the net negative impact of the Q3 2020 Large Loss Events on the Company’s segment underwriting results and consolidated combined ratio in the third quarter of 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2020

Hurricane Laura

 

Hurricane Sally

 

Q3 2020 Wildfires

 

Other Q3 2020 Catastrophe Events

 

Aggregate Losses

 

Total Q3 2020 Large Loss Events

 

 

(in thousands, except percentages)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net negative impact on Property segment underwriting result

$

(95,845

)

 

$

(68,075

)

 

$

(73,994

)

 

$

(54,728

)

 

$

(120,174

)

 

$

(412,816

)

 

 

Net negative impact on Casualty and Specialty segment underwriting result

(9,537

)

 

 

 

 

 

 

 

 

 

(9,537

)

 

 

Net negative impact on underwriting result

$

(105,382

)

 

$

(68,075

)

 

$

(73,994

)

 

$

(54,728

)

 

$

(120,174

)

 

$

(422,353

)

 

 

Percentage point impact on consolidated combined ratio

10.3

 

 

6.7

 

 

7.2

 

 

5.4

 

 

12.0

 

 

43.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting Results by Segment

Property Segment

Gross premiums written in the Property segment were $427.8 million in the third quarter of 2020, an increase of $113.4 million, or 36.1%, compared to $314.4 million in the third quarter of 2019.

Gross premiums written in the catastrophe class of business were $179.7 million in the third quarter of 2020, an increase of $76.9 million, or 74.8%, compared to the third quarter of 2019. Gross written premiums in the third quarter of 2020 included $52.9 million of reinstatement premiums associated with the Q3 2020 Large Loss Events, as compared to $23.1 million of reinstatement premiums written in the third quarter of 2019 associated with the Q3 2019 Catastrophe Events. In addition, gross written premiums in the third quarter of 2019 included $26.4 million of negative premium adjustments related to the business of the third-party capital vehicles that the Company manages as a result of the acquisition of Tokio Millennium Re AG (now known as RenaissanceRe Europe AG), Tokio Millennium Re (UK) Limited (now known as RenaissanceRe (UK) Limited) (“RenaissanceRe UK”) and their subsidiaries (collectively, “TMR”). The negative premium adjustments were fully ceded and were reflected in ceded premiums written, resulting in no impact to the Company’s results of operations in the third quarter of 2019.

Gross premiums written in the other property class of business were $248.1 million in the third quarter of 2020, an increase of $36.5 million, or 17.2%, compared to the third quarter of 2019. The increase in gross premiums written in the other property class of business was primarily driven by growth from existing relationships and new opportunities across a number of the Company’s underwriting platforms.

Ceded premiums written in the Property segment were $49.1 million in the third quarter of 2020, an increase of $37.6 million, or 329.6%, compared to the third quarter of 2019. In the third quarter of 2020, ceded premiums written included certain of the gross premiums written ceded to third-party investors in the Company’s managed vehicles, primarily RenaissanceRe Upsilon Fund Ltd. Ceded premiums written in the third quarter of 2019 included $26.4 million negative premium adjustments related to the business of the third-party capital vehicles that the Company manages as a result of the acquisition of TMR, as discussed above.

The Property segment incurred an underwriting loss of $206.6 million in the third quarter of 2020, compared to an underwriting loss of $7.7 million in the third quarter of 2019. In the third quarter of 2020, the Property segment generated a net claims and claim expense ratio of 114.4%, an underwriting expense ratio of 25.6% and a combined ratio of 140.0%, compared to 76.1%, 25.6% and 101.7%, respectively, in the third quarter of 2019. The underwriting result and combined ratio in the third quarter of 2020 were principally impacted by the Q3 2020 Large Loss Events, which resulted in a net negative impact on the Property segment underwriting result of $412.8 million and added 84.4 percentage points to the Property segment combined ratio. In comparison, the third quarter of 2019 was impacted by the Q3 2019 Catastrophe Events, which resulted in a net negative impact on the Property segment underwriting result of $178.9 million and added 42.3 percentage points to the Property segment combined ratio.

Casualty and Specialty Segment

Gross premiums written in the Casualty and Specialty segment were $715.3 million in the third quarter of 2020, an increase of $168.6 million, or 30.8%, as compared to the third quarter of 2019. This increase was primarily due to growth from new and existing business opportunities written in the current and prior periods across various classes of business within the segment, partially offset by the non-renewal of a portion of the business acquired in connection with the acquisition of TMR.

The Casualty and Specialty segment generated underwriting income of $0.6 million in the third quarter of 2020, compared to $4.5 million in the third quarter of 2019. In the third quarter of 2020, the Casualty and Specialty segment generated a net claims and claim expense ratio of 72.6%, an underwriting expense ratio of 27.3% and a combined ratio of 99.9%, compared to 68.4%, 30.6% and 99.0%, respectively, in the third quarter of 2019.

The increase in the net claims and claim expense ratio of 4.2 percentage points was principally the result of higher current accident year losses in the third quarter of 2020 compared to the third quarter of 2019. The net claims and claim expense ratio was impacted by net losses resulting from the impact of Hurricane Laura and the purchase of an adverse development cover associated with RenaissanceRe Syndicate 1458’s casualty reserves, which combined to add 3.2 percentage points. While the net claims and claim expense ratio was also impacted by increased reserves in our mortgage guaranty book within our financial lines business, there was an offsetting impact to acquisition expenses as a result of reduced profit commission expense associated with this business. The underwriting expense ratio in the Casualty and Specialty segment decreased 3.3 percentage points, to 27.3%, in the third quarter of 2020 compared to the third quarter of 2019, driven by lower acquisition and operating expense ratios. The decrease in profit commission expense noted above was the principal driver of the decrease in acquisition costs. Operating expenses were impacted by reduced travel, marketing and office operational expenses as a result of the COVID-19 pandemic.

COVID-19

The Company continues to evaluate industry trends and its own potential exposure associated with the ongoing COVID-19 pandemic, and expects historically significant industry losses to emerge over time as the full impact of the pandemic and its effects on the global economy are realized. Among other things, the Company continues to actively monitor information received from or reported by clients, brokers, industry actuaries, regulators, courts, and others, and to assess that information in the context of its own portfolio. Our loss estimates represent our best estimate based on currently available information, and actual losses may vary materially from these estimates.

Other Items

  • The Company’s total investment result, which includes the sum of net investment income and net realized and unrealized gains on investments, was a gain of $307.8 million in the third quarter of 2020, compared to a gain of $145.8 million in the third quarter of 2019, an increase of $162.0 million. The primary driver of the total investment result in the third quarter of 2020 was net realized and unrealized gains on investments of $224.2 million, principally within the equity and fixed maturity investments trading portfolios.
  • Net income attributable to redeemable noncontrolling interests in the third quarter of 2020 was $19.3 million, compared to $62.1 million in the third quarter of 2019. The decrease was primarily driven by underwriting losses in DaVinciRe Holdings Ltd., partially offset by an increase in the net income of RenaissanceRe Medici Fund Ltd. (“Medici”) compared to the third quarter of 2019.
  • In the third quarter of 2020, total fee income decreased by $13.6 million, to $18.4 million, compared to $32.0 million in the third quarter of 2019, primarily driven by a decrease in performance fee income due to lower underlying performance of the Company’s joint ventures and structured reinsurance products, primarily related to the Q3 2020 Large Loss Events, partially offset by an increase in the dollar value of managed capital compared to the third quarter of 2019.
  • In the third quarter of 2020, corporate expenses increased by $34.2 million, to $48.1 million, compared to $13.8 million in the third quarter of 2019, primarily driven by the $30.2 million loss on the sale of RenaissanceRe UK on August 18, 2020, as well as related transaction and other expenses, and expenses associated with senior management departures during the quarter. The loss on sale includes amounts related to prior purchase GAAP adjustments and cumulative currency translation adjustments recorded since the acquisition of RenaissanceRe UK.
  • Income tax benefit was $8.2 million in the third quarter of 2020 compared to income tax expense of $3.7 million in the third quarter of 2019. The income tax benefit was principally driven by lower underwriting performance and other miscellaneous items in the U.S., including amounts resulting from the continued impacts of U.S. tax reform, partially offset by investment gains, primarily in the U.S. based operations.
  • Net foreign exchange gains of $17.4 million in the third quarter of 2020 compared to net foreign exchange losses of $8.3 million in the third quarter of 2019. The net foreign exchange gains were primarily driven by gains attributable to third-party investors in Medici and miscellaneous foreign exchange gains in the Company’s operations with non-U.S. dollar functional currencies.
  • Hurricane Delta, a Category 2 hurricane, made landfall on the Yucatán Peninsula on October 7, 2020, and subsequently in Louisiana on October 9, 2020, causing widespread flooding and damage, including in the region impacted by Hurricane Laura. The Company is also monitoring Hurricane Zeta, which made landfall on October 26, 2020 on the Yucatán Peninsula and is currently in the Gulf of Mexico. Additionally, wildfires impacting several Western U.S. states are ongoing.

This Press Release includes certain financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”) including “operating (loss) income (attributable) available to RenaissanceRe common shareholders,” “operating (loss) income (attributable) 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, October 28, 2020 at 11:00 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, Australia, 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 uncertainty of the continuing impact of the COVID-19 pandemic and measures taken in response thereto; the effect of legislative, regulatory, judicial or social influences related to the COVID-19 pandemic on the Company’s financial performance, including the emergence of unexpected or un-modeled insurance or reinsurance losses, and the Company’s ability to conduct its business; the impact and potential future impacts of the COVID-19 pandemic on the value of the Company’s investments and its access to capital in the future or the pricing or terms of available financing; the effect that measures taken to mitigate the COVID-19 pandemic have on the Company’s operations and those of its counterparties; the frequency and severity of catastrophic and other events the Company covers; the effectiveness of the Company’s claims and claim expense reserving process; the effect of climate change on the Company’s business, including the trend towards increasingly frequent and severe climate events; the Company’s ability to maintain its financial strength ratings; the effect of emerging claims and coverage issues; collection on claimed retrocessional coverage, and new retrocessional reinsurance being available on acceptable terms and providing the coverage that the Company intended to obtain; 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; the performance of the Company’s investment portfolio; a contention by the U.S. 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 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 its joint ventures or other entities it manages; the effect of cybersecurity risks, including technology breaches or failure, on the Company’s business; the success of any of the Company’s strategic investments or acquisitions, including its ability to manage its operations as its product and geographical diversity increases; the Company’s ability to retain its key senior officers and to attract or retain the executives and employees necessary to manage its business; 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; soft reinsurance underwriting market conditions; changes in the method for determining the London Inter-bank Offered Rate (“LIBOR”) and the potential replacement of LIBOR; losses the Company could face from terrorism, political unrest or war; the Company’s ability to successfully implement its business strategies and initiatives; the Company’s ability to determine any impairments taken on its investments; the effects 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 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 industries; 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 and other transactions; difficulties investors may have in servicing process or enforcing judgments against the Company in the U.

Contacts

INVESTOR CONTACT:
Keith McCue

Senior Vice President, Finance & Investor Relations

RenaissanceRe Holdings Ltd.

(441) 239-4830

MEDIA CONTACT:
Keil Gunther

Vice President, Head of Global Marketing & Client Communication

RenaissanceRe Holdings Ltd.

(441) 239-4932

or

Kekst CNC

Dawn Dover

(212) 521-4800

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