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

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.

The Reinsurance segment generated underwriting income of $116.9 million and a combined ratio of 53.2%, compared to $128.4 million and 40.1%, respectively. The $11.5 million decrease in underwriting income was primarily a result of a $25.6 million increase in current accident year net claims and claim expenses and a $17.3 million reduction in favorable development on prior accident years net claims and claim expenses, partially offset by a $35.4 million increase in net premiums earned. Included in current accident year net claims and claim expenses is $26.4 million and $25.2 million related to the European Floods and May 2013 U.S. Tornadoes, respectively. The increase in net premiums earned was 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 Reinsurance segment experienced $23.8 million of favorable development on prior years reserves, compared to $41.1 million, including $18.5 million and $5.4 million of favorable development in the catastrophe and specialty units, respectively. Favorable development on prior years reserves within the catastrophe unit was primarily due to reductions of $4.7 million and $4.1 million related to the 2008 Hurricanes and the 2011 New Zealand Earthquake, respectively, with the remainder due to a number of relatively small reductions in estimated ultimate losses on prior period events. The specialty unit experienced prior accident years favorable development of $5.4 million principally due to the application of the Company's formulaic actuarial reserving methodology.

Lloyd's Segment

Gross premiums written in the Lloyd's segment were $68.8 million, an increase of $18.5 million, or 36.7%, primarily due to continued organic growth within the segment. The Lloyd's segment generated an underwriting loss of $3.5 million and a combined ratio of 108.4%, compared to an underwriting loss of $0.9 million and a combined ratio of 103.0%, respectively. The increase in the underwriting loss in the Lloyd's segment reflects an increase in net claims and claims expenses of $10.6 million, primarily due to attritional loss activity and $5.0 million related to the European Floods and May 2013 U.S. Tornadoes.

Other Items (1)

  • During the second quarter of 2013, the Company repurchased 128 thousand common shares in open market transactions at an aggregate cost of $10.7 million and at an average share price of $83.32.
  • Net income attributable to noncontrolling interests of $14.0 million decreased from $33.6 million, primarily impacted by a decrease in profitability of DaVinciRe and an increase in the Company's ownership percentage in DaVinciRe from 31.5% at June 30, 2012 to 32.9% at June 30, 2013.
  • In May 2013, the Company raised $275.0 million through the issuance of 11.0 million 5.375% Series E Preference Shares at $25 per share. The proceeds of the issuance of the Series E Preference Shares were used to redeem the remaining 6.0 million, or $150.0 million liquidation preference, of the outstanding 6.60% Series D Preference Shares and 5.0 million, or $125.0 million liquidation preference, of the outstanding 6.08% Series C Preference Shares. Following the redemptions, 5.0 million Series C Preference Shares remain outstanding.
  • Corporate expenses increased $17.5 million, primarily due to costs associated with the Company's recently announced senior management changes.
  • Prior to 2013, investments-related derivative net realized and unrealized gains (losses) were included in net investment income and were also included in the calculation of operating income available to RenaissanceRe common shareholders and related measures. Commencing in 2013, the Company has reclassified its investments-related derivatives to net realized and unrealized gains (losses) on investments and has reclassified prior periods for comparability. Effective January 1, 2013, the Company now excludes these net realized and unrealized gains (losses) on investments-related derivatives from operating income and related measures. See Comments on Regulation G for a reconciliation of non-GAAP measures.As a result of this reclassification, included in net realized and unrealized losses on investments of $69.5 million, is $20.5 million of net realized and unrealized gains on investments-related derivatives, compared to $2.9 million net realized and unrealized losses on investments-related derivatives included in $28.1 million of net realized and unrealized gains on investments.

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”, “managed catastrophe premiums”, "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 “Investor Information - 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 Holdings Ltd. will host a conference call on Wednesday, July 31, 2013 at 10:00 a.m. (ET) to discuss this release. Live broadcast of the conference call will be available through the “Investor Information - Company Webcasts” section of RenaissanceRe's website at www.renre.com.

RenaissanceRe Holdings Ltd. is a global provider of reinsurance and insurance. The Company's business consists of two reportable segments: (i) Reinsurance, which includes catastrophe reinsurance, specialty reinsurance and certain property catastrophe and specialty joint ventures managed by the Company's ventures unit, and (ii) Lloyd's, which includes reinsurance and insurance business written through Syndicate 1458.

Cautionary Statement under “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995: Statements made in this earnings release contain information about the Company's future business prospects. These statements may be considered “forward-looking.” These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. For further information regarding cautionary statements and factors affecting future results, please refer to RenaissanceRe Holdings Ltd.'s filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
(1)   All comparisons are with the second quarter of 2012 unless specifically stated.
 
(2) Net negative impact includes the sum of estimates of net claims and claim expenses incurred, earned reinstatement premiums assumed and ceded, profit commissions and redeemable noncontrolling interest. The Company's estimates are based on a review of its potential exposures, preliminary discussions with certain counterparties and catastrophe modeling techniques. Given the magnitude and recent occurrence of these events, delays in receiving claims data, potential uncertainties relating to reinsurance recoveries and other uncertainties inherent in loss estimation, meaningful uncertainty remains regarding losses from these events. Accordingly, the Company's actual net impact from these events will vary from these preliminary estimates, perhaps materially so. Changes in these estimates will be recorded in the period in which they occur.
 
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, 2013
 

June 30, 2012

June 30, 2013
 

June 30, 2012
Revenues
Gross premiums written $ 703,223   $ 667,336   $ 1,338,641   $ 1,331,487  
Net premiums written $ 559,109 $ 427,630 $ 995,922 $ 920,205
Increase in unearned premiums (267,220 ) (183,214 ) (432,778 ) (397,124 )
Net premiums earned 291,889 244,416 563,144 523,081
Net investment income 27,324 17,673 70,518 83,149
Net foreign exchange (losses) gains (1,085 ) 2,410 671 950
Equity in earnings of other ventures 3,772 6,846 9,607 12,316
Other income (loss) 631 11,289 7,635 (27,805 )
Net realized and unrealized (losses) gains on investments (69,544 ) 28,073 (55,273 ) 75,681
Total other-than-temporary impairments (234 ) (395 )
Portion recognized in other comprehensive income, before taxes   25     52  
Net other-than-temporary impairments   (209 )   (343 )
Total revenues 252,987   310,498   596,302   667,029  
Expenses
Net claims and claim expenses incurred 103,962 49,551 131,213 65,103
Acquisition expenses 31,767 25,608 56,776 49,719
Operational expenses 42,819 41,407 88,833 83,790
Corporate expenses 21,588 4,067 26,117 8,878
Interest expense 4,300   5,716   9,334   11,434  
Total expenses 204,436   126,349   312,273   218,924  
Income from continuing operations before taxes 48,551 184,149 284,029 448,105
Income tax expense (247 ) (898 ) (369 ) (861 )
Income from continuing operations 48,304 183,251 283,660 447,244
Income from discontinued operations   1,393     1,220  
Net income 48,304 184,644 283,660 448,464
Net income attributable to noncontrolling interests (14,015 ) (33,624 ) (52,622 ) (87,265 )
Net income available to RenaissanceRe 34,289 151,020 231,038 361,199
Dividends on preference shares (7,483 ) (8,750 ) (13,758 ) (17,500 )
Net income available to RenaissanceRe common shareholders $ 26,806   $ 142,270   $ 217,280   $ 343,699  
 
Income from continuing operations available to RenaissanceRe common shareholders per common share - basic $ 0.61 $ 2.75 $ 4.93 $ 6.70
Income from discontinued operations available to RenaissanceRe common shareholders per common share - basic   0.03     0.02  
Net income available to RenaissanceRe common shareholders per common share - basic $ 0.61   $ 2.78   $ 4.93   $ 6.72  
Income from continuing operations available to RenaissanceRe common shareholders per common share - diluted $ 0.60 $ 2.72 $ 4.83 $ 6.61
Income from discontinued operations available to RenaissanceRe common shareholders per common share - diluted   0.03     0.02  
Net income available to RenaissanceRe common shareholders per common share - diluted $ 0.60   $ 2.75   $ 4.83   $ 6.63  
 
Average shares outstanding - basic 43,372 50,278 43,453 50,328
Average shares outstanding - diluted 44,243 51,012 44,303 50,997
 
Net claims and claim expense ratio 35.6 % 20.3 % 23.3 % 12.4 %
Underwriting expense ratio 25.6 % 27.4 % 25.9 % 25.6 %
Combined ratio 61.2 % 47.7 % 49.2 % 38.0 %
Operating income available to RenaissanceRe common shareholders per common share - diluted (1) $ 2.17 $ 2.14 $ 6.08 $ 5.13
Operating return on average common equity - annualized (1) 12.2 % 13.7 % 17.3 % 16.7 %
 
(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, 2013

December 31, 2012
Assets
Fixed maturity investments trading, at fair value $ 4,371,306 $ 4,665,421
Fixed maturity investments available for sale, at fair value 40,785   83,442
Total fixed maturity investments, at fair value 4,412,091 4,748,863
Short term investments, at fair value 924,843 821,163
Equity investments trading, at fair value 108,620 58,186
Other investments, at fair value 630,606 644,711
Investments in other ventures, under equity method 93,049   87,724
Total investments 6,169,209 6,360,647
Cash and cash equivalents 285,594 325,358
Premiums receivable 954,142 491,365
Prepaid reinsurance premiums 214,804 77,082
Reinsurance recoverable 175,103 192,512
Accrued investment income 26,658 33,478
Deferred acquisition costs 125,682 52,622
Receivable for investments sold 311,783 168,673
Other assets 196,126 218,405
Goodwill and other intangibles 8,282   8,486
Total assets $ 8,467,383   $ 7,928,628
Liabilities, Noncontrolling Interests and Shareholders' Equity
Liabilities
Reserve for claims and claim expenses $ 1,710,408 $ 1,879,377
Unearned premiums 970,017 399,517
Debt 250,411 351,775
Reinsurance balances payable 387,425 290,419
Payable for investments purchased 463,923 278,787
Other liabilities 216,086   253,438
Total liabilities 3,998,270   3,453,313
Redeemable noncontrolling interest 897,123 968,259
Shareholders' Equity
Preference shares 400,000 400,000
Common shares 44,385 45,542
Accumulated other comprehensive income 4,909 13,622
Retained earnings 3,119,003   3,043,901
Total shareholders' equity attributable to RenaissanceRe 3,568,297 3,503,065
Noncontrolling interest 3,693   3,991
Total shareholders' equity 3,571,990   3,507,056
Total liabilities, noncontrolling interests and shareholders' equity $ 8,467,383   $ 7,928,628
 
Book value per common share $ 71.38   $ 68.14
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Segment Information
(in thousands of United States Dollars, except percentages)
(Unaudited)
         
Three months ended June 30, 2013
Reinsurance Lloyd’s Other Eliminations (1) Total
Gross premiums written $ 635,442   $ 68,769   $   $ (988 ) $ 703,223  
Net premiums written $ 494,200   $ 64,643   $ 266   $ 559,109  
Net premiums earned $ 249,689 $ 41,933 $ 267 $ 291,889
Net claims and claim expenses incurred 78,426 25,536 103,962
Acquisition expenses 23,206 8,484 77 31,767
Operational expenses 31,194   11,456   169   42,819  
Underwriting income (loss) $ 116,863   $ (3,543 ) $ 21   113,341
Net investment income 27,324 27,324
Net foreign exchange losses (1,085 ) (1,085 )
Equity in earnings of other ventures 3,772 3,772
Other income 631 631
Net realized and unrealized losses on investments (69,544 ) (69,544 )
Corporate expenses (21,588 ) (21,588 )
Interest expense (4,300 ) (4,300 )
Income from continuing operations before taxes 48,551
Income tax expense (247 ) (247 )
Net income attributable to noncontrolling interests (14,015 ) (14,015 )
Dividends on preference shares (7,483 ) (7,483 )
Net income available to RenaissanceRe common shareholders $ 26,806  
 
Net claims and claim expenses incurred – current accident year $ 102,272 $ 28,517 $ $ 130,789
Net claims and claim expenses incurred – prior accident years (23,846 ) (2,981 )   (26,827 )
Net claims and claim expenses incurred – total $ 78,426   $ 25,536   $   $ 103,962  
 
Net claims and claim expense ratio – current accident year 41.0 % 68.0 % % 44.8 %
Net claims and claim expense ratio – prior accident years (9.6 )% (7.1 )% % (9.2 )%
Net claims and claim expense ratio – calendar year 31.4 % 60.9 % % 35.6 %
Underwriting expense ratio 21.8 % 47.5 % 92.1 % 25.6 %
Combined ratio 53.2 % 108.4 % 92.1 % 61.2 %
 
 
Three months ended June 30, 2012
Reinsurance Lloyd’s Other Eliminations (1) Total
Gross premiums written $ 617,039   $ 50,297   $   $   $ 667,336  
Net premiums written $ 379,369   $ 48,510   $ (249 ) $ 427,630  
Net premiums earned $ 214,296 $ 30,369 $ (249 ) $ 244,416
Net claims and claim expenses incurred 35,488 14,960 (897 ) 49,551
Acquisition expenses 20,098 5,510 25,608
Operational expenses 30,346   10,806   255   41,407  
Underwriting income (loss) $ 128,364   $ (907 ) $ 393   127,850
Net investment income 17,673 17,673
Net foreign exchange gains 2,410 2,410
Equity in earnings of other ventures 6,846 6,846
Other income 11,289 11,289
Net realized and unrealized gains on investments 28,073 28,073
Net other-than-temporary impairments (209 ) (209 )
Corporate expenses (4,067 ) (4,067 )
Interest expense (5,716 ) (5,716 )
Income from continuing operations before taxes 184,149
Income tax expense (898 ) (898 )
Income from discontinued operations 1,393 1,393
Net income attributable to noncontrolling interests (33,624 ) (33,624 )
Dividends on preference shares (8,750 ) (8,750 )
Net income available to RenaissanceRe common shareholders $ 142,270  
 
Net claims and claim expenses incurred – current accident year $ 76,631 $ 18,366 $ $ 94,997
Net claims and claim expenses incurred – prior accident years (41,143 ) (3,406 ) (897 ) (45,446 )
Net claims and claim expenses incurred – total $ 35,488   $ 14,960   $ (897 ) $ 49,551  
 
Net claims and claim expense ratio – current accident year 35.8 % 60.5 % % 38.9 %
Net claims and claim expense ratio – prior accident years (19.2 )% (11.2 )% 360.2 % (18.6 )%
Net claims and claim expense ratio – calendar year 16.6 % 49.3 % 360.2 % 20.3 %
Underwriting expense ratio 23.5 % 53.7 % (102.4 )% 27.4 %
Combined ratio 40.1 % 103.0 % 257.8 % 47.7 %
 
(1)   Represents $1.0 million of gross premiums ceded from the Lloyd's segment to the Reinsurance segment for the three months ended June 30, 2013 (2012 - $Nil).
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Segment Information
(in thousands of United States Dollars, except percentages)
(Unaudited)
         
Six months ended June 30, 2013
Reinsurance Lloyd’s Other Eliminations (1) Total
Gross premiums written $ 1,196,568   $ 143,061   $   $ (988 ) $ 1,338,641  
Net premiums written $ 875,072   $ 120,567   $ 283   $ 995,922  
Net premiums earned $ 483,149 $ 79,712 $ 283 $ 563,144
Net claims and claim expenses incurred 91,826 40,064 (677 ) 131,213
Acquisition expenses 41,265 15,400 111 56,776
Operational expenses 64,869   23,634   330   88,833  
Underwriting income $ 285,189   $ 614   $ 519   286,322
Net investment income 70,518 70,518
Net foreign exchange gains 671 671
Equity in earnings of other ventures 9,607 9,607
Other income 7,635 7,635
Net realized and unrealized losses on investments (55,273 ) (55,273 )
Corporate expenses (26,117 ) (26,117 )
Interest expense (9,334 ) (9,334 )
Income from continuing operations before taxes 284,029
Income tax expense (369 ) (369 )
Net income attributable to noncontrolling interests (52,622 ) (52,622 )
Dividends on preference shares (13,758 ) (13,758 )
Net income available to RenaissanceRe common shareholders $ 217,280  
 
Net claims and claim expenses incurred – current accident year $ 149,301 $ 46,388 $ $ 195,689
Net claims and claim expenses incurred – prior accident years (57,475 ) (6,324 ) (677 ) (64,476 )
Net claims and claim expenses incurred – total $ 91,826   $ 40,064   $ (677 ) $ 131,213  
 
Net claims and claim expense ratio – current accident year 30.9 % 58.2 % % 34.7 %
Net claims and claim expense ratio – prior accident years (11.9 )% (7.9 )% (239.2 )% (11.4 )%
Net claims and claim expense ratio – calendar year 19.0 % 50.3 % (239.2 )% 23.3 %
Underwriting expense ratio 22.0 % 48.9 % 155.8 % 25.9 %
Combined ratio 41.0 % 99.2 % (83.4 )% 49.2 %
 
 
Six months ended June 30, 2012
Reinsurance Lloyd’s Other Eliminations (1) Total
Gross premiums written $ 1,226,801   $ 105,114   $   $ (428 ) $ 1,331,487  
Net premiums written $ 838,007   $ 82,447   $ (249 ) $ 920,205  
Net premiums earned $ 468,114 $ 55,191 $ (224 ) $ 523,081
Net claims and claim expenses incurred 43,812 23,961 (2,670 ) 65,103
Acquisition expenses 39,484 10,178 57 49,719
Operational expenses 62,390   20,863   537   83,790  
Underwriting income $ 322,428   $ 189   $ 1,852   324,469
Net investment income 83,149 83,149
Net foreign exchange gains 950 950
Equity in earnings of other ventures 12,316 12,316
Other loss (27,805 ) (27,805 )
Net realized and unrealized gains on investments 75,681 75,681
Net other-than-temporary impairments (343 ) (343 )
Corporate expenses (8,878 ) (8,878 )
Interest expense (11,434 ) (11,434 )
Income from continuing operations before taxes 448,105
Income tax expense (861 ) (861 )
Income from discontinued operations 1,220 1,220
Net income attributable to noncontrolling interests (87,265 ) (87,265 )
Dividends on preference shares (17,500 ) (17,500 )
Net income available to RenaissanceRe common shareholders $ 343,699  
 
Net claims and claim expenses incurred – current accident year $ 131,775 $ 34,646 $ $ 166,421
Net claims and claim expenses incurred – prior accident years (87,963 ) (10,685 ) (2,670 ) (101,318 )
Net claims and claim expenses incurred – total $ 43,812   $ 23,961   $ (2,670 ) $ 65,103  
 
Net claims and claim expense ratio – current accident year 28.2 % 62.8 % % 31.8 %
Net claims and claim expense ratio – prior accident years (18.8 )% (19.4 )% 1,192.0 % (19.4 )%
Net claims and claim expense ratio – calendar year 9.4 % 43.4 % 1,192.0 % 12.4 %
Underwriting expense ratio 21.7 % 56.3 % (265.2 )% 25.6 %
Combined ratio 31.1 % 99.7 % 926.8 % 38.0 %
 
(1)   Represents $1.0 million of gross premiums ceded from the Lloyd's segment to the Reinsurance segment for the six months ended June 30, 2013 (2012 - $0.4 million).
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Gross Premiums Written and Managed Premiums
(in thousands of United States Dollars)
(Unaudited)
       
Three months ended Six months ended

June 30,

2013

June 30, 2012

June 30, 2013

June 30, 2012

Reinsurance Segment
Renaissance catastrophe premiums $ 368,077 $ 345,094 $ 678,079 $ 675,521
Renaissance specialty premiums 56,567   35,778   138,184   135,323
Total Renaissance premiums 424,644   380,872   816,263   810,844
DaVinci catastrophe premiums 208,826 234,644 377,620 413,457
DaVinci specialty premiums 1,972   1,523   2,685   2,500
Total DaVinci premiums 210,798   236,167   380,305   415,957
Total catastrophe unit premiums 576,903 579,738 1,055,699 1,088,978
Total specialty unit premiums 58,539   37,301   140,869   137,823
Total Reinsurance segment gross premiums written $ 635,442   $ 617,039   $ 1,196,568   $ 1,226,801
 

Lloyd's Segment
Specialty $ 53,207 $ 32,925 $ 108,964 $ 72,254
Catastrophe 15,562   17,372   34,097   32,860
Total Lloyd's segment gross premiums written $ 68,769   $ 50,297   $ 143,061   $ 105,114
 

Managed Premiums (1)
Total catastrophe unit gross premiums written $ 576,903 $ 579,738 $ 1,055,699 $ 1,088,978
Catastrophe premiums written on behalf of the Company's joint venture, Top Layer Re (2) 25,682 31,180 58,064 65,485
Catastrophe premiums written in the Lloyd's segment 15,562   17,372   34,097   32,860
Total managed catastrophe premiums (1) $ 618,147   $ 628,290   $ 1,147,860   $ 1,187,323
 
(1)   See Comments on Regulation G for a reconciliation of non-GAAP financial measures.
(2) Top Layer Re is accounted for under the equity method of accounting.
 
RenaissanceRe Holdings Ltd.
Supplemental Financial Data - Total Investment Result
(in thousands of United States Dollars)
(Unaudited)
       
Three months ended Six months ended

June 30, 2013

June 30, 2012

June 30, 2013

June 30, 2012
Fixed maturity investments $ 22,842 $ 25,366 $ 46,731 $ 50,204
Short term investments 374 234 692 734
Equity investments trading 344 181 344 351
Other investments
Hedge funds and private equity investments 2,237 (10,413 ) 17,117 18,060
Other 4,354 4,975 11,349 19,145
Cash and cash equivalents 9   54   61   80  
30,160 20,397 76,294 88,574
Investment expenses (2,836 ) (2,724 ) (5,776 ) (5,425 )
Net investment income 27,324   17,673   70,518   83,149  
 
Gross realized gains 17,548 19,458 51,628 55,744
Gross realized losses (14,601 ) (3,294 ) (19,155 ) (10,244 )
Net realized gains on fixed maturity investments 2,947 16,164 32,473 45,500
Net unrealized (losses) gains on fixed maturity investments trading (95,695 ) 12,538 (118,760 ) 26,795
Net realized and unrealized gains (losses) on investments-related derivatives 20,510 (2,930 ) 20,931 (1,435 )
Net realized gains on equity investments trading 74 17,635
Net unrealized gains (losses) on equity investments trading 2,620   2,301   (7,552 ) 4,821  
Net realized and unrealized (losses) gains on investments (69,544 ) 28,073 (55,273 ) 75,681
Total other-than-temporary impairments (234 ) (395 )
Portion recognized in other comprehensive income, before taxes   25     52  
Net other-than-temporary impairments (209 ) (343 )
Change in net unrealized gains on fixed maturity investments available for sale (1,239 ) (706 ) (7,306 ) 72  
Total investment result $ (43,459 ) $ 44,831   $ 7,939   $ 158,559  
 

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 in this Press Release within the meaning of Regulation G. The Company has provided these financial measurements in previous investor communications and the Company's management believes that these measurements 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 the 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, net other-than-temporary impairments, and commencing in 2013, also excludes net realized and unrealized gains and losses on investments-related derivatives. Prior to 2013, investments-related derivative net realized and unrealized gains and losses were included in net investment income and were also included in the calculation of operating income available to RenaissanceRe common shareholders and related measures. 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 and equity investments trading. 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 percentages)

June 30, 2013
 

June 30, 2012

June 30, 2013
 

June 30, 2012
Net income available to RenaissanceRe common shareholders $ 26,806 $ 142,270 $ 217,280 $ 343,699
Adjustment for net realized and unrealized gains on investments 69,544 (28,073 ) 55,273 (75,681 )
Adjustment for investments-related derivative net realized and unrealized losses (gains) included in operating income prior to 2013 (2,930 ) (1,435 )
Adjustment for net other-than-temporary impairments   209     343  
Operating income available to RenaissanceRe common shareholders $ 96,350   $ 111,476   $ 272,553   $ 266,926  
 
Net income available to RenaissanceRe common shareholders per common share - diluted $ 0.60 $ 2.75 $ 4.83 $ 6.63
Adjustment for net realized and unrealized gains on investments 1.57 (0.55 ) 1.25 (1.48 )
Adjustment for investments-related derivative net realized and unrealized losses (gains) included in operating income prior to 2013 (0.06 ) (0.03 )
Adjustment for net other-than-temporary impairments       0.01  
Operating income available to RenaissanceRe common shareholders per common share - diluted $ 2.17   $ 2.14   $ 6.08   $ 5.13  
 
Return on average common equity - annualized 3.4 % 17.5 % 13.8 % 21.5 %
Adjustment for net realized and unrealized gains on investments 8.8 % (3.4 )% 3.5 % (4.7 )%
Adjustment for investments-related derivative net realized and unrealized losses (gains) included in operating income prior to 2013 % (0.4 )% % (0.1 )%
Adjustment for net other-than-temporary impairments % % % %
Operating return on average common equity - annualized 12.2 % 13.7 % 17.3 % 16.7 %
 

The Company has also included in this Press Release “managed catastrophe premiums”. “Managed catastrophe premiums” is defined as gross catastrophe premiums written by Renaissance Reinsurance and its related joint ventures. “Managed catastrophe premiums” differs from total catastrophe unit gross premiums written, which the Company believes is the most directly comparable GAAP measure, due to the inclusion of catastrophe premiums written on behalf of the Company's joint venture Top Layer Re, which is accounted for under the equity method of accounting and the inclusion of catastrophe premiums written on behalf of the Company's Lloyd's segment. The Company's management believes “managed catastrophe premiums” is useful to investors and other interested parties because it provides a measure of total catastrophe premiums, as applicable, assumed by the Company through its consolidated subsidiaries and related joint ventures.

The Company has also 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. “Tangible book value per common share” differs from book value per common share, which the Company believes is the most directly comparable GAAP measure, due to the exclusion of goodwill and intangible assets per share. 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, 2013
 

March 31, 2013
 

December 31, 2012
 

September 30, 2012
 

June 30, 2012
Book value per common share $ 71.38 $ 71.07 $ 68.14 $ 68.20 $ 65.07
Adjustment for goodwill and other intangibles (1) (0.85 ) (0.85 ) (0.86 ) (0.85 ) (0.83 )
Tangible book value per common share 70.53 70.22 67.28 67.35 64.24
Adjustment for accumulated dividends 12.56   12.28   12.00   11.73   11.46  
Tangible book value per common share plus accumulated dividends $ 83.09   $ 82.50   $ 79.28   $ 79.08   $ 75.70  
 
Quarterly change in book value per common share 0.4 % 4.3 % (0.1 )% 4.8 % 3.8 %
Quarterly change in tangible book value per common share plus change in accumulated dividends 0.8 % 4.8 % 0.3 % 5.3 % 4.3 %
Year to date change in book value per common share 4.8 % 9.8 %
Year to date change in tangible book value per common share plus change in accumulated dividends 5.7 % 10.8 %
 
(1)   At June 30, 2013, March 31, 2013, December 31, 2012, September 30, 2012 and June 30, 2012, goodwill and other intangibles included $29.3 million, $29.3 million, $30.4 million, $32.2 million and $33.3 million, respectively, of goodwill and other intangibles included in investments in other ventures, under equity method.

Copyright Business Wire 2010

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