- Annualized Operating Return on Average Common Equity: 28%
- Operating Income: $651 million
- Underwriting Net Income: $479 million, up 37% from Q2 2023
- Fee Income: $84 million, up 48%
- Retained Net Investment Income: $283 million, up 50%
- Operating EPS: $12.41 per share, up 40% from a year ago
- Gross Premiums Written: Up 29% for the quarter
- Net Premiums Written: Up 29% for the quarter
- Adjusted Combined Ratio: 79%
- Property Catastrophe Gross Premiums Written: Up 26%
- Property Catastrophe Net Premiums Written: Up 16%
- Property Catastrophe Adjusted Combined Ratio: 25%
- Other Property Gross Premiums Written: Up 22%
- Other Property Net Premiums Written: Up 24%
- Other Property Adjusted Combined Ratio: 90%
- Casualty and Specialty Gross Premiums Written: Up 34%
- Casualty and Specialty Net Premiums Written: Up 41%
- Casualty and Specialty Adjusted Combined Ratio: 95.6%
- Management Fees: $55 million, up 27%
- Performance Fees: $29 million
- Operating Expense Ratio: 4.3%
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RenaissanceRe Holdings Ltd (RNR, Financial) reported an annualized operating return on average common equity of 28%, consistent with the previous year despite a significant increase in average common equity.
- The company successfully integrated the Validus Re acquisition, achieving key objectives in underwriting, people, and capital management.
- Gross premiums written increased by 29% for the quarter and 36% year-to-date, driven by growth in property catastrophe and specialty classes.
- Fee income from the capital partners business rose by 48%, with management fees up 27% and performance fees contributing significantly.
- Retained net investment income grew by 50% year-over-year, benefiting from a larger asset base and higher interest rates.
Negative Points
- The current accident year loss ratio for the casualty and specialty portfolio was impacted by specific losses, leading to a higher than expected ratio.
- The other property segment experienced higher loss ratios due to US severe convective storms and the Taiwan earthquake.
- There were some non-catastrophe events that led to higher than expected losses in the other property book.
- The acquisition expense ratio increased by about 2 percentage points, driven by purchase accounting adjustments and reinstatement premiums.
- The company acknowledged the potential for an active hurricane season, which could impact future results.
Q & A Highlights
Q: Can you provide more color on the growth you're seeing in both the legacy RenaissanceRe and Validus books of business?
A: We are proud of the growth achieved, particularly since the Validus acquisition. Year-to-date numbers reflect strong growth percentages, with over $3 billion in additional premium. The Validus portfolio was more heavily weighted to a 1/1 book compared to our own, which explains some of the quarterly variations.
Q: How are you factoring economic and social inflation into your loss picks for the casualty-specialty segment?
A: We are monitoring casualty trends closely. Our current years are developing within expectations. We are pricing in increasing trends in some areas of general liability to stay ahead of them. The couple of claims that elevated the current accident year loss ratio are just normal volatility and not indicative of a trend.
Q: Can you explain the impact of the $94 million return of premium in professional lines on the casualty-specialty margin?
A: The impact on the underwriting margin is nominal. These adjustments are normal and based on estimates of what the client will actually underwrite for risk attaching.
Q: Why did the current accident year loss ratio in the casualty segment deteriorate despite no significant casualty catastrophes this quarter?
A: The elevated loss ratio is due to a couple of one-off claims in subsets of our major classes. These are indicative of the normal volatility we might expect in the business and do not reflect a broader trend.
Q: What is your appetite for writing aggregate covers in the property business, given the market's current stance?
A: There is very little appetite in the market for aggregate covers that provide earnings level protection. The aggregate covers that do exist attach at proper catastrophic levels and are not the low aggregates that were prevalent in the market prior to 2020.
Q: Can you provide more detail on the competitive environment and the type of capital entering the market?
A: The market is balanced between the amount of capital looking to be deployed and the demand for reinsurance. The reset in pricing that happened in 2023 is persistent, and we are not seeing a negative trend back to 2022 pricing levels.
Q: Why did you decide to repurchase shares ahead of the peak hurricane season?
A: We have had seven quarters of profitable results, increasing our capital base significantly. We have also been freeing up liquidity with the integration of Validus. We found attractive opportunities to buy back shares at good value while still being able to grow into attractive markets.
Q: How are you working with cedents to stay updated on loss activity and actual-to-expected within your casualty portfolios?
A: We track actual versus expected loss activity and benchmark clients' data against the whole market. This allows us to develop an independent view and make informed decisions on scaling our participations and selecting risks.
Q: Why are you not willing to take up Southeast wind risk on a percentage of equity basis if returns are solid?
A: We aim to get the best set of returns across the full distribution of outcomes. We had more success than anticipated in retro purchasing, allowing us to leverage into a steeper curve. This strategy provides better protection for the income statement, especially going into an active wind season.
Q: Can you quantify the difference in gross written premium based on accounting differences with legacy Validus?
A: The biggest correction was made in the purchase accounting during the fourth quarter and into the first quarter. Validus used to recognize quota share on a gross written basis all in the quarter it was written, whereas we recognize it over the course of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
