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RenaissanceRe Reports Net Income Of $26.8 Million For The Second Quarter Of 2013 Or $0.60 Per Diluted Common Share; Quarterly Operating Income Of $96.4 Million Or $2.17 Per Diluted Common Share

Stocks in this article: RNR

RenaissanceRe Holdings Ltd. (NYSE: RNR) today reported net income available to RenaissanceRe common shareholders of $26.8 million or $0.60 per diluted common share in the second quarter of 2013, compared to $142.3 million or $2.75 per diluted common share in the second quarter of 2012. Operating income available to RenaissanceRe common shareholders was $96.4 million, or $2.17 per diluted common share for the second quarter of 2013, compared to $111.5 million or $2.14, respectively, in the second quarter of 2012. The Company reported an annualized return on average common equity of 3.4% and an annualized operating return on average common equity of 12.2% in the second quarter of 2013, compared to 17.5% and 13.7%, respectively, in the second quarter of 2012. Book value per common share increased $0.31, or 0.4%, in the second quarter of 2013 to $71.38, compared to a 3.8% increase in the second quarter of 2012. Tangible book value per common share plus accumulated dividends increased $0.59, or 0.8%, in the second quarter of 2013, compared to a 4.3% increase in the second quarter of 2012.

Kevin J. O'Donnell, CEO, commented: "In the second quarter of 2013, we generated an annualized operating ROE of 12.2% and increased our tangible book value per share plus dividends by 0.8%, despite several notable catastrophe losses and a challenging investment environment."

Mr. O'Donnell continued: "Although the expected decline in property catastrophe market pricing overall at June 1 st accelerated, our team executed well in a rapidly changing market and I am pleased with our results from the recent renewal. We focused on our strategy of meeting clients' needs and matching desirable risks with efficient capital, which enabled us to build an attractive portfolio of risks. We recently launched a new platform in the U.S. to support the growth of our specialty reinsurance business. By expanding our footprint in the U.S., Asia and Lloyd's, we believe we will be able to leverage our core specialty and property catastrophe businesses over time, bringing new options for our clients in an evolving market."

SECOND QUARTER 2013 HIGHLIGHTS (1)

  • Underwriting income of $113.3 million and a combined ratio of 61.2%, compared to $127.9 million and 47.7%, respectively. The decrease in underwriting income was primarily driven by a $35.8 million increase in current accident year net claims and claim expenses principally due to the floods in Europe during late May and early June 2013 (the "European Floods") and the tornadoes that impacted Texas and Oklahoma during May 2013 (the "May 2013 U.S. Tornadoes") and a decrease of $18.6 million in favorable development on prior accident years net claims and claim expenses, partially offset by a $47.5 million increase in net premiums earned due to a combination of higher gross premiums written during the preceding twelve months and a decrease in ceded premiums written principally within the Company's catastrophe unit.
  • The net negative impact (2) from the European Floods and May 2013 U.S. Tornadoes was $20.0 million and $18.8 million, respectively, for a total of $38.8 million from these events, as detailed in the table below.
  • Gross premiums written increased $35.9 million, or 5.4%, to $703.2 million with the increase being driven by growth in the Company's specialty unit and Lloyd's segment, partially offset by a decrease in the Company's catastrophe unit.
  • Total investment losses of $43.5 million, which includes the sum of net investment income, net realized and unrealized (losses) gains on investments and net other-than-temporary impairments, compared to gains of $44.8 million. The decrease was primarily driven by lower total returns in the Company's fixed maturity investment portfolio as a result of a rising interest rate environment and widening credit spreads.
  • Other income declined $10.7 million to $0.6 million, compared to $11.3 million, primarily driven by a $4.1 million decrease in the profitability in the Company's weather and energy risk management operations and a $4.7 million reduction in the fair value of the Company's assumed and ceded reinsurance contracts accounted for at fair value.

European Floods and May 2013 U.S. Tornadoes

The following is supplemental financial data regarding the net financial statement impact on the Company's segment underwriting results and consolidated results for the second quarter of 2013 due to the European Floods and May 2013 U.S. Tornadoes:

     

Three months ended June 30, 2013

European Floods

May 2013 U.S. Tornadoes

Total
(in thousands, except percentages)
Net claims and claim expenses incurred $ (30,378 ) $ (26,271 ) $ (56,649 )
Reinstatement premiums earned 6,666 3,157 9,823
Profit commissions 85   374   459  
Net negative impact on underwriting result $ (23,627 ) $ (22,740 ) (46,367 )
Redeemable noncontrolling interest 3,621   3,968   7,589  
Net negative impact (2) $ (20,006 ) $ (18,772 ) $ (38,778 )
Percentage point impact on consolidated combined ratio 9.2 8.3 17.8
 
Net negative impact on Reinsurance segment underwriting result $ (19,647 ) $ (21,723 ) $ (41,370 )
Net negative impact on Lloyd's segment underwriting result (3,980 ) (1,017 ) (4,997 )
Net negative impact on underwriting result $ (23,627 ) $ (22,740 ) $ (46,367 )
 

Underwriting Results by Segment (1)

Reinsurance Segment

Gross premiums written in the Reinsurance segment were $635.4 million, an increase of $18.4 million, or 3.0%, comprised of:

  • a $21.2 million, or 56.9% increase in the Company's specialty unit to $58.5 million, compared to $37.3 million, primarily due to a number of new contracts and higher renewal rates across certain lines of business within the specialty unit; and partially offset by
  • a $2.8 million decrease in the Company's catastrophe unit primarily reflecting reduced risk-adjusted pricing in the Florida market as a whole and the non-renewal of a number of contracts during the June renewals, partially offset by net positive reinstatement premiums written of $9.8 million during the current quarter related to the European Floods and May 2013 U.S. Tornadoes (compared to net negative reinstatement premiums written of $30.7 million in the comparative quarter related to the 2011 New Zealand and Tohoku Earthquakes), and $37.4 million of gross premiums written related to increased quota share premium in the second quarter of 2013.

Managed catastrophe premiums, net of reinstatement premiums written, totaled $608.3 million, a decrease of $50.7 million, or 7.7%, primarily driven by the reduction in gross premiums written in the catastrophe unit discussed above. The Company's managed catastrophe premiums are prone to significant volatility due to the timing of contract inception and also due to the business being characterized by a relatively small number of relatively large transactions.

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