RenaissanceRe Holdings Ltd. (NYSE: RNR) (“RenaissanceRe” or the “Company”) today announced its financial results for the second quarter of 2023.
Net Income Available to Common Shareholders per Diluted Common Share: $4.09 Operating Income Available to Common Shareholders per Diluted Common Share*: $8.79 | ||
Underwriting Income $351.0M | Fee Income $56.7M | Net Investment Income $292.7M |
Change in Book Value per Common Share: 11.6% Change in Tangible Book Value per Common Share Plus Change in Accum. Dividends*: 13.3% | ||
* | Operating Return on Average Common Equity, Operating Income (Loss) Available (Attributable) to Common Shareholders, Operating Income (Loss) Available (Attributable) to Common Shareholders per Diluted Common Share and Change in Tangible Book Value per Common Share Plus Change in Accumulated Dividends are non-GAAP financial measures; see “Comments on Non-GAAP Financial Measures” for a reconciliation of non-GAAP financial measures. |
Kevin J. O’Donnell, President and Chief Executive Officer, said, “RenaissanceRe delivered a strong quarter, distinguished by a 28.8% operating return on average common equity with robust underwriting income and record fee and net investment income. In addition, we accelerated our strategy by agreeing to purchase Validus Re, which brings us a large, diversified business in a favorable reinsurance market. In aggregate, our accomplishments this quarter demonstrate the effectiveness of our strategy and strengthen our foundation for delivery of shareholder value.” |
Consolidated Financial Results | |||||||||
Consolidated Highlights | |||||||||
Three months ended June 30, | |||||||||
(in thousands, except per share amounts and percentages) | 2023 | 2022 | |||||||
Gross premiums written | $ | 2,651,621 | $ | 2,464,639 | |||||
Net premiums written | 2,195,803 | 1,863,616 | |||||||
Underwriting income (loss) | 351,015 | 316,386 | |||||||
Combined ratio | 80.3 | % | 78.3 | % | |||||
Net Income (Loss) | |||||||||
Available (attributable) to common shareholders | 191,025 | (324,913 | ) | ||||||
Available (attributable) to common shareholders per diluted common share | $ | 4.09 | $ | (7.53 | ) | ||||
Operating Income (Loss) (1) | |||||||||
Available (attributable) to common shareholders | 407,435 | 238,132 | |||||||
Available (attributable) to common shareholders per diluted common share | $ | 8.79 | $ | 5.51 | |||||
Book value per common share | $ | 129.98 | $ | 113.69 | |||||
Change in book value per share | 11.6 | % | (6.4 | )% | |||||
Tangible book value per common share plus accumulated dividends (1) | $ | 150.79 | $ | 132.05 | |||||
Change in book value per common share plus change in accumulated dividends | 12.0 | % | (6.1 | )% | |||||
Change in tangible book value per common share plus change in accumulated dividends (1) | 13.3 | % | (6.4 | )% | |||||
Return on average common equity - annualized | 13.5 | % | (25.1 | )% | |||||
Operating return on average common equity - annualized (1) | 28.8 | % | 18.4 | % | |||||
(1) | See “Comments on Non-GAAP Financial Measures” for a reconciliation of non-GAAP financial measures. |
Net negative impact of the 2023 Large Loss Events
Net negative impact on underwriting result includes the sum of (1) net claims and claim expenses incurred, (2) assumed and ceded reinstatement premiums earned and (3) earned and lost profit commissions. Net negative impact on net income (loss) available (attributable) to RenaissanceRe common shareholders is the sum of (1) net negative impact on underwriting result and (2) redeemable noncontrolling interest, both before consideration of any related income tax benefit (expense).
The Company’s estimates of net negative impact are based on a review of the Company’s potential exposures, preliminary discussions with certain counterparties and actuarial 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.
Meaningful uncertainty remains regarding the estimates and the nature and extent of the losses from these catastrophe events, driven by the magnitude and recent nature of each event, the geographic areas impacted by the events, 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.
Net negative impact on the consolidated financial statements | ||||||
Three months ended June 30, 2023 | 2023 Large Loss Events (1) | |||||
(in thousands) | ||||||
Net claims and claims expenses incurred | $ | (95,278 | ) | |||
Assumed reinstatement premiums earned | 26,752 | |||||
Ceded reinstatement premiums earned | — | |||||
Earned (lost) profit commissions | — | |||||
Net negative impact on underwriting result | (68,526 | ) | ||||
Redeemable noncontrolling interest | 23,949 | |||||
Net negative impact on net income (loss) available (attributable) to RenaissanceRe common shareholders | $ | (44,577 | ) | |||
Net negative impact on the segment underwriting results and consolidated combined ratio | ||||||
Three months ended June 30, 2023 | 2023 Large Loss Events (1) | |||||
(in thousands, except percentages) | ||||||
Net negative impact on Property segment underwriting result | $ | (68,526 | ) | |||
Net negative impact on Casualty and Specialty segment underwriting result | — | |||||
Net negative impact on underwriting result | $ | (68,526 | ) | |||
Percentage point impact on consolidated combined ratio | 4.2 | |||||
(1) | “2023 Large Loss Events” includes the earthquakes which impacted southern and central Turkey in February 2023, Cyclone Gabrielle which impacted northern New Zealand, the flooding that impacted northern New Zealand in January and February 2023, and various wind and thunderstorm events which impacted states in both the Southern and Midwest U.S. during March 2023 (“Q1 2023 Large Loss Events”), and a series of large, severe weather events that impacted Texas and other southern and central U.S. states in June 2023. Net negative impact for the three months ended June 30, 2023 includes an increase of approximately $20.0 million in the net negative impact of the Q1 2023 Large Loss Events during the second quarter. |
| Three Drivers of Profit: Underwriting, Fee and Investment Income | ||||||||||||
Underwriting Results - Property Segment: Combined ratio of 63.0%; Increase in property catastrophe net premiums written of 54.9% | ||||||||||||
Property Segment | ||||||||||||
Three months ended June 30, | Q/Q Change | |||||||||||
(in thousands, except percentages) | 2023 | 2022 | ||||||||||
Gross premiums written | $ | 1,402,606 | $ | 1,218,321 | 15.1 | % | ||||||
Net premiums written | 1,144,655 | 887,975 | 28.9 | % | ||||||||
Underwriting income (loss) | 281,010 | 264,463 | ||||||||||
Underwriting Ratios | ||||||||||||
Net claims and claim expense ratio - current accident year | 41.3 | % | 33.2 | % | 8.1 | pts | ||||||
Net claims and claim expense ratio - prior accident years | (4.1 | )% | (5.6 | )% | 1.5 | pts | ||||||
Net claims and claim expense ratio - calendar year | 37.2 | % | 27.6 | % | 9.6 | pts | ||||||
Underwriting expense ratio | 25.8 | % | 30.0 | % | (4.2 | )pts | ||||||
Combined ratio | 63.0 | % | 57.6 | % | 5.4 | pts | ||||||
- Gross premiums written increased by $184.3 million, or15.1%, driven by:
- $198.5 million increase in the catastrophe class of business, primarily due to rate improvements on deals written in the second quarter of 2023 which were partially offset by a reduction of premiums written in Upsilon of $110.0 million. In addition, the growth in the catastrophe class of business included an increase in gross reinstatement premiums written of $29.4 million.
- $14.2 million decrease in the other property class of business, primarily due to the non-renewal of certain catastrophe exposed quota share programs that did not meet the Company’s return hurdles.
- Net premiums written increased by $256.7 million, or 28.9%, with an increase of $273.4 million, or 54.9% in the catastrophe class of business, driven by rate improvements and lower ceded premiums written.
- Net claims and claim expense ratio - current accident year increased 8.1 percentage points, primarily as a result of the impact from the 2023 Large Loss Events, which contributed 11.5 percentage points to the current accident year net claims and claim expense ratio.
- Net claims and claim expense ratio - prior accident years reflects net favorable development, primarily from weather-related large losses in the 2017 through 2020 accident years, driven by better than expected loss emergence.
- Underwriting expense ratio decreased 4.2 percentage points, largely driven by improved operating leverage from the increase in net premiums earned from the catastrophe class of business.
Underwriting Results - Casualty and Specialty Segment: Combined ratio of 93.2% and underwriting income of $70.0 million | ||||||||||||
Casualty and Specialty Segment | ||||||||||||
Three months ended June 30, | Q/Q Change | |||||||||||
(in thousands, except percentages) | 2023 | 2022 | ||||||||||
Gross premiums written | $ | 1,249,015 | $ | 1,246,318 | 0.2 | % | ||||||
Net premiums written | 1,051,148 | 975,641 | 7.7 | % | ||||||||
Underwriting income (loss) | 70,005 | 51,923 | ||||||||||
Underwriting Ratios | ||||||||||||
Net claims and claim expense ratio - current accident year | 63.3 | % | 65.1 | % | (1.8 | )pts | ||||||
Net claims and claim expense ratio - prior accident years | (0.1 | )% | (0.9 | )% | 0.8 | pts | ||||||
Net claims and claim expense ratio - calendar year | 63.2 | % | 64.2 | % | ||||||||
