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RenaissanceRe Reports Net Loss Attributable to Common Shareholders of $450.2 Million; Operating Loss Attributable to Common Shareholders of $414.5 Million in the Third Quarter of 2021

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·18-min read
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  • Hurricane Ida, severe flooding in Northwestern Europe, and aggregate losses associated with these and other events contributed to a $726.8 million net negative impact on net loss attributable to common shareholders.

  • Strong growth in gross premiums written of $631.1 million, or 55.2%, across both segments; included $254.9 million of reinstatement premiums associated with the Q3 2021 Weather-Related Large Losses in the Property segment, which accounted for approximately one-third of the overall growth.

  • Repurchased $223.8 million of common shares in the third quarter; aggregate of $704.5 million of common shares repurchased in the first three quarters of 2021; and an additional $75.3 million of common shares repurchased from October 1, 2021 through October 21, 2021.

PEMBROKE, Bermuda, October 25, 2021--(BUSINESS WIRE)--RenaissanceRe Holdings Ltd. (NYSE: RNR) ("RenaissanceRe" or the "Company") today announced its financial results for the three months ended September 30, 2021.

Net Loss Attributable to Common Shareholders per Diluted Common Share: $(9.75)

Operating Loss Attributable to Common Shareholders per Diluted Common Share*: $(8.98)

Underwriting Loss

$(678.8)M

Fee Income

$28.3M

Net Investment Income

$78.3M

Change in Book Value per Common Share: (7.5)%

Change in Tangible Book Value per Common Share Plus Change in Accum. Dividends*: (7.6)%

*

Annualized Operating Return on Average Common Equity, Operating (Loss) Income (Attributable) Available to Common Shareholders, Operating (Loss) Income (Attributable) Available 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 Regulation G" for a reconciliation of non-GAAP financial measures.

Kevin J. O’Donnell, President and Chief Executive Officer, said, "This was another active season for natural catastrophes and while our results for the third quarter reflect this volatility, we have maintained a robust capital position and our business fundamentals remain strong. As we look forward to 2022, our fortress balance sheet provides us with great flexibility to create value for shareholders. We believe we will have ample capacity to renew existing risk and underwrite new opportunities if sufficiently profitable, but are equally motivated to return excess capital to shareholders at what we consider very attractive multiples."

Consolidated Financial Results - Third Quarter

Consolidated Highlights

Three months ended
September 30,

(in thousands, except per share amounts and percentages)

2021

2020

Gross premiums written

$

1,774,180

$

1,143,058

Underwriting loss

(678,825

)

(206,072

)

Combined ratio

145.1

%

120.6

%

Net (Loss) income

(Attributable) available to common shareholders

(450,222

)

47,799

(Attributable) available to common shareholders per diluted common share

$

(9.75

)

$

0.94

Operating (Loss) (1)

(Attributable) to common shareholders

(414,538

)

(131,724

)

(Attributable) to common shareholders per diluted common share

$

(8.98

)

$

(2.64

)

Book value per common share

$

128.91

$

135.13

Change in book value per share

(7.5

)%

0.6

%

Tangible book value per common share plus accumulated dividends (1)

$

146.40

$

151.33

Change in tangible book value per common share plus change in accumulated dividends (1)

(7.6

)%

1.0

%

Return on average common equity - annualized

(28.4

)%

2.8

%

Operating return on average common equity - annualized (1)

(26.1

)%

(7.7

)%

(1) See "Comments on Regulation G" for a reconciliation of non-GAAP financial measures.

Net Negative Impact of the Q3 2021 Weather-Related Large Losses

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.

Net negative impact on the consolidated financial statements

Three months ended September 30, 2021

Hurricane
Ida

European
Floods

Other 2021
Catastrophe
Events (1)

Aggregate
Losses (2)

Total Q3 2021
Weather-
Related Large
Losses (3)

(in thousands)

Net claims and claims expenses incurred

$

(784,016

)

$

(388,771

)

$

(33,951

)

$

(65,008

)

$

(1,271,746

)

Assumed reinstatement premiums earned

157,671

93,914

3,269

254,854

Ceded reinstatement premiums earned

(23,318

)

(16,690

)

(40,008

)

Earned profit commissions

8,075

8,075

Net negative impact on underwriting result

(649,663

)

(303,472

)

(30,682

)

(65,008

)

(1,048,825

)

Redeemable noncontrolling interest

211,217

95,078

3,371

12,371

322,037

Net negative impact on net loss attributable to RenaissanceRe common shareholders

$

(438,446

)

$

(208,394

)

$

(27,311

)

$

(52,637

)

$

(726,788

)

Net negative impact on the segment underwriting results and consolidated combined ratio

Three months ended September 30, 2021

Hurricane
Ida

European
Floods

Other 2021
Catastrophe
Events (1)

Aggregate
Losses (2)

Total Q3 2021
Weather-
Related Large
Losses (3)

(in thousands, except percentages)

Net negative impact on Property segment underwriting result

$

(630,868

)

$

(298,156

)

$

(30,682

)

$

(65,008

)

$

(1,024,714

)

Net negative impact on Casualty and Specialty segment underwriting result

(18,795

)

(5,316

)

(24,111

)

Net negative impact on underwriting result

$

(649,663

)

$

(303,472

)

$

(30,682

)

$

(65,008

)

$

(1,048,825

)

Percentage point impact on consolidated combined ratio

43.0

18.8

2.0

4.3

73.8

(1)

"Other 2021 Catastrophe Events" includes the hailstorm in Europe in late June 2021 and the wildfires in California during the third quarter of 2021.

(2)

"Aggregate Losses" includes loss estimates associated with certain aggregate loss contracts triggered during 2021 as a result of weather-related catastrophe events.

(3)

"Q3 2021 Weather-Related Large Losses" includes Hurricane Ida, the European Floods, Other 2021 Catastrophe Events and the Aggregate Losses described above.

Estimates of net negative impact are based on a review of potential exposures, preliminary discussions with certain counterparties and actuarial modeling techniques. 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 losses from 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.

Three Drivers of Profit: Underwriting, Fee and Investment Income

Underwriting Results - Property Segment: Q3 2021 Weather-Related Large Losses contributed 140.5 percentage points to the combined ratio

Property Segment

Three months ended September 30,

Q/Q
Change

(in thousands, except percentages)

2021

2020

Gross premiums written

$

773,692

$

427,765

80.9

%

Underwriting loss

(681,929

)

(206,625

)

Underwriting Ratios

Net claims and claim expense ratio - current accident year

180.0

%

121.9

%

58.1pts

Net claims and claim expense ratio - prior accident years

(17.9

)%

(7.5

)%

(10.4)pts

Net claims and claim expense ratio - calendar year

162.1

%

114.4

%

47.7pts

Underwriting expense ratio

21.4

%

25.6

%

(4.2)pts

Combined ratio

183.5

%

140.0

%

43.5pts

  • Gross premiums written increased 80.9%, driven by:

$254.9 million (property catastrophe - $246.6 million, other property - $8.3 million) of reinstatement premiums associated with the Q3 2021 Weather-Related Large Losses, compared to $52.9 million (all within property catastrophe) of reinstatement premiums in the third quarter of 2020.

Growth in the other property class of business of $190.1 million, or 76.6%, principally as a result of rate improvements driving growth in new and existing business, notably within catastrophe exposed U.S. property excess and surplus lines.

Property catastrophe class of business gross premiums written increased by $155.8 million, or 86.7%, primarily due to the reinstatement premiums discussed above associated with the Q3 2021 Weather-Related Large Losses. Excluding the impact of the reinstatement premiums in each of the respective periods, gross premiums written in the property catastrophe class of business declined. The decline was largely driven by the non-recurrence of certain bespoke deals written in the third quarter of 2020, and movement in other reinstatement premiums, primarily related to favorable development on prior year losses in the third quarter of 2021.

  • Ceded premiums written were $92.6 million, an increase of $43.5 million, or 88.8%. This increase was primarily driven by ceded reinstatement premiums earned of $40.0 million from the Q3 2021 Weather-Related Large Losses.

  • The net claims and claim expense ratio for prior accident years reflected net favorable development of 28.3% for property catastrophe and 5.3% for other property in the quarter, primarily related to the 2017 to 2019 accident years.

  • Underwriting expense ratio decreased 4.2 percentage points, driven by an improvement of 2.7 percentage points in the acquisition expense ratio primarily from reinstatement premiums associated with the Q3 2021 Weather-Related Large Losses.

  • Underwriting loss of $681.9 million and a combined ratio of 183.5%, primarily driven by the Q3 2021 Weather-Related Large Losses which had a $1.0 billion net negative impact on the Property segment underwriting result and added 140.5 percentage points to the combined ratio.

Underwriting Results - Casualty and Specialty Segment: Grew gross premiums written by 39.9% and reported a combined ratio of 99.6%

Casualty and Specialty Segment

Three months ended
September 30,

Q/Q
Change

(in thousands, except percentages)

2021

2020

Gross premiums written

$

1,000,488

$

715,293

39.9

%

Underwriting income

3,104

553

Underwriting Ratios

Net claims and claim expense ratio - current accident year

69.0

%

75.7

%

(6.7)pts

Net claims and claim expense ratio - prior accident years

(0.2

)%

(3.1

)%

2.9pts

Net claims and claim expense ratio - calendar year

68.8

%

72.6

%

(3.8)pts

Underwriting expense ratio

30.8

%

27.3

%

3.5pts

Combined ratio

99.6

%

99.9

%

(0.3)pts

  • Gross premiums written increased 39.9%, primarily driven by growth in the professional liability, general casualty and other specialty lines of business. This growth was principally driven by increases in new and existing business written in the current and prior periods, combined with rate improvements.

  • Net claims and claim expense ratio decreased 3.8 percentage points principally as a result of lower current accident year losses in the third quarter of 2021 as compared to the third quarter of 2020.

Included in the current accident year net claims and claim expense ratio is 3.5 percentage points related to the Q3 2021 Weather-Related Large Losses.

  • The underwriting expense ratio increased 3.5 percentage points driven by an increase in the net acquisition expense ratio, partially offset by a decrease in the operating expense ratio driven by improved operating leverage.

Increase of 4.0 percentage points in the net acquisition expense ratio principally due to reduced profit commissions in the Company’s mortgage guaranty book in the third quarter of 2020.

Fee Income: $28.3 million of fee income; impacted by weather-related large losses in 2021 and favorable development on prior year events

Fee Income

Three months ended
September 30,

Q/Q
Change

(in thousands, except percentages)

2021

2020

Total management fee income

$

23,854

$

30,465

$

(6,611

)

Total performance fee income (loss) (1)

4,481

(12,081

)

16,562

Total fee income

$

28,335

$

18,384

$

9,951

(1)

Performance fees are based on the performance of the individual vehicles or products, and may be negative in a particular period if, for example, large losses occur, which can potentially result in no performance fees or the reversal of previously accrued performance fees.

  • Total fee income increased $10.0 million due to higher performance fee income in the third quarter of 2021, partially offset by lower management fee income.

Lower management fee income in the third quarter of 2021 was primarily due to a deferral of management fees related to DaVinciRe Holdings Ltd. as a result of the Q3 2021 Weather-Related Large Losses.

Higher performance fee income in the third quarter of 2021 resulted from favorable development on prior year events and a lower amount of performance fees available to be reversed in the third quarter of 2021 as compared to the third quarter of 2020.

Investment Results: Performance primarily driven by net realized and unrealized losses in fixed maturity and equity trading portfolios

Investment Results

Three months ended
September 30,

Q/Q
Change

(in thousands, except percentages)

2021

2020

Net investment income

$

78,267

$

83,543

$

(5,276

)

Net realized and unrealized (losses) gains on investments

(42,071

)

224,208

(266,279

)

Total investment result

36,196

307,751

(271,555

)

Total investment return - annualized

0.7

%

6.2

%

(5.5)pts

  • Total investment result decreased $271.6 million, when compared to the third quarter of 2020, due to the difference in net realized and unrealized (losses) gains on investments, principally within the fixed maturity and equity investments portfolios.

Net realized and unrealized losses in the third quarter of 2021 were driven by increasing yields on medium to longer duration U.S. treasuries, an increase in credit spreads in certain fixed maturity investments, and net realized and unrealized losses in equity investments principally in the Company’s strategic investment portfolio.

Net realized and unrealized gains in the third quarter of 2020 were favorably impacted by the recovery in the financial markets following the disruption associated with the COVID-19 pandemic.

  • Managed fixed maturity and short-term investment weighted average yield to maturity was 1.1% and average duration was 3.0 years on total consolidated fixed maturity and short-term investments at fair value of $18.5 billion at September 30, 2021.

Other Items of Note

  • Net loss attributable to redeemable noncontrolling interests was $198.5 million compared to net income attributable to redeemable noncontrolling interests of $19.3 million in the third quarter of 2020, reflecting the impact of the Q3 2021 Weather-Related Large Losses across the Company’s consolidated joint ventures and managed funds in the third quarter of 2021.

  • Income tax benefit of $23.6 million compared to $8.2 million in the third quarter of 2020. The increase in income tax benefit is primarily driven by underwriting losses in the Company’s taxable jurisdictions and unrealized investment losses in the Company’s U.S. based operations.

  • Net foreign exchange losses of $4.8 million compared to a $17.4 million net foreign exchange gain in the third quarter of 2020. The net foreign exchange loss is primarily driven by losses attributable to third-party investors in RenaissanceRe Medici Fund Ltd. and miscellaneous foreign exchange losses generated by underwriting activities.

  • Corporate expenses decreased $37.9 million to $10.2 million, primarily due to the loss on sale of RenaissanceRe UK recorded in the third quarter of 2020.

  • Raised gross proceeds of $500.0 million in July 2021 through the issuance of 20,000,000 Depositary Shares, each of which represents a 1/1,000th interest in a share of the Company’s 4.20% Series G Preference Shares, $1.00 par value and $25,000 liquidation preference per share (equivalent to $25.00 per Depositary Share).

  • Redeemed all 11,000,000 outstanding 5.375% Series E Preference Shares on August 11, 2021 for $275.0 million plus accrued and unpaid dividends thereon.

Conference Call Details and Additional Information

Non-GAAP Financial Measures and Additional Financial Information

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.

Conference Call Information

RenaissanceRe will host a conference call on Tuesday, October 26, 2021 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, RenaissanceRe 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 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 highly competitive nature of the Company’s industry, resulting in consolidation of competitors, customers and insurance and reinsurance brokers, and the Company’s reliance on a small and decreasing number of brokers; 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; the uncertainty of the continuing and future impact of the COVID-19 pandemic, including measures taken in response thereto and the effect of legislative, regulatory and judicial influences on the Company’s potential reinsurance, insurance and investment exposures, or other effects that it may have; the Company’s exposure to credit loss from counterparties; the effect of continued challenging economic conditions throughout the world; the performance of the Company’s investment portfolio and financial market volatility; a contention by the U.S. Internal Revenue Service that any of the Company’s Bermuda subsidiaries are subject to taxation in the U.S.; the effects of U.S. tax reform legislation, Organisation for Economic Co-operation and Development or European Union measures 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; the effects of inflation; the Company’s ability to successfully implement its business strategies and initiatives, and 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 attract and retain key executives and employees; 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; losses the Company could face from terrorism, political unrest or war; the Company’s ability to determine any impairments taken on its investments; 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 accounting rules and regulatory systems applicable to the Company’s business, including changes in Bermuda laws or regulations or as a result of increased global regulation of the insurance and reinsurance industries; 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 serving process or enforcing judgments against the Company in the U.S.; 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 and other political, regulatory or industry initiatives adversely impacting the Company; the Company’s ability to comply with applicable sanctions and foreign corrupt practices laws; 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 SEC, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Prospectus Supplement dated July 7, 2021.

RenaissanceRe Holdings Ltd.

Summary Consolidated Statements of Operations

(in thousands of United States Dollars, except per share amounts and percentages)

(Unaudited)

Three months ended

Nine months ended

September 30,
2021

September 30,
2020

September 30,
2021

September 30,
2020

Revenues

Gross premiums written

$

1,774,180

$

1,143,058

$

6,520,780

$

4,870,651

Net premiums written

$

1,486,440

$

899,411

$

4,822,815

$

3,350,022

Decrease (increase) in unearned premiums

19,825

100,772

(969,924

)

(426,645

)

Net premiums earned

1,506,265

1,000,183

3,852,891

2,923,377

Net investment income

78,267

83,543

238,996

272,321

Net foreign exchange (losses) gains

(4,755

)

17,426

(24,309

)

...

4,503

Equity in earnings of other ventures

5,305

5,457

8,479

19,062

Other income (loss)

1,692

1,476

...

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