RenaissanceRe Holdings Ltd. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise stated. RenaissanceRe is a Bermuda-based provider of property, casualty and specialty reinsurance and insurance solutions. Financial amounts below are U.S. dollars.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Gross premiums written | $2.79 billion | $2.94 billion |
| Net premiums written | $2.26 billion | $2.17 billion |
| Net premiums earned | $1.68 billion | $1.49 billion |
| Underwriting income | $369.6 million | $200.3 million |
| Net investment income | $254.4 million | $83.7 million |
| Realized and unrealized investment gains (losses) | $279.5 million | ($673.0 million) |
| Net income (loss) attributable to RenaissanceRe common shareholders | $564.1 million | ($394.4 million) |
| Diluted earnings (loss) per common share | $12.91 | ($9.10) |
| Operating cash flow | $435.7 million | $168.2 million |
Total revenue was $2.21 billion, compared with $876.4 million. The improvement in earnings chiefly reflected stronger investment results and higher underwriting income. Investment gains were substantially driven by falling U.S. Treasury rates during the quarter; investment losses in Q1 2022 were primarily associated with rising rates.
- Underwriting: The consolidated combined ratio improved to 78.0% from 86.5%. Property underwriting income was $298.7 million with a 56.6% combined ratio; Casualty and Specialty underwriting income was $70.9 million with a 92.9% combined ratio.
- Margins and loss activity: The consolidated current-year claims ratio was 53.9%, and prior-year reserve releases reduced the calendar-year claims ratio by 6.2 percentage points. Q1 2023 large loss events—including earthquakes in Turkey, Cyclone Gabrielle and flooding in New Zealand, and U.S. wind and thunderstorm events—reduced underwriting income by an estimated $79.1 million and added 4.7 percentage points to the combined ratio. The comparable Q1 2022 weather losses reduced underwriting income by $102.3 million; Russia-Ukraine War losses also affected 2022.
- Premium trends: Gross premiums written declined 5.2%, while net premiums written rose 4.6%. Property net premiums written increased 14.6%, reflecting rate improvement and lower ceded premiums; Casualty and Specialty net premiums written declined 2.4%.
Financial position and liquidity
- At March 31, 2023, total investments were $23.21 billion, cash and cash equivalents $1.06 billion, total assets $38.27 billion, and total liabilities $27.05 billion.
- Claims reserves were $16.00 billion, up from $15.89 billion at year-end 2022. Reinsurance recoverable was $4.71 billion. Management identifies reserve estimation as a significant accounting judgment; actual claim payments may differ materially from estimates.
- Debt was $1.14 billion, down from $1.17 billion at year-end, after repayment of a $30 million Medici credit-facility balance. The company reported no amount drawn on its revolving credit facilities and stated it believed it was in compliance with debt covenants.
- Shareholders’ equity attributable to RenaissanceRe was $5.87 billion. Book value per common share increased to $116.44 from $104.65 at year-end; book value per share plus accumulated dividends rose 11.6% during the quarter. The common dividend was $0.38 per share.
- Operating cash flow was positive, but investing activities used $684.7 million, principally for purchases of short-term and other investments. Cash decreased $130.6 million during the quarter. Management expects operating receipts to meet liquidity needs over the next 12 months, while noting that catastrophe losses and investment conditions make future cash flows uncertain.
Material changes, outlook and risks
- Management describes reinsurance supply as constrained, demand as higher, and terms and rates as improving in certain lines. It expects attractive opportunities to continue during 2023, including at June 1 renewals, and cites capital strength, deployment capacity and property catastrophe expertise as advantages. The filing provides no quantitative earnings or premium guidance.
- Management says it is growing property catastrophe business while optimizing or reducing selected other property programs, and sees opportunities across Casualty and Specialty while maintaining underwriting discipline. It notes that business lines are at different points in their cycles.
- Higher interest rates have supported investment income through reinvestment at higher yields, but rate movements can produce significant mark-to-market volatility. The quarter’s investment gains could therefore be sensitive to future interest-rate changes.
- Key stated uncertainties include catastrophe frequency and severity, climate change, inflation and claims-cost trends, reserve adequacy, investment-market volatility, reinsurance recoveries and counterparty credit, competition, regulation, cybersecurity, and access to capital. The filing also notes that fund-investment valuations may rely on delayed manager reports and estimates.
- There were no material changes to previously disclosed risk factors, legal proceedings or contractual obligations. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- How the Q1 investment gains and higher reinvestment yields develop as interest rates and markets change.
- Whether favorable prior-year reserve development persists, and how estimates for recent catastrophe events and longer-tail casualty claims evolve.
- Whether rate improvement and expected reinsurance-market opportunities translate into profitable growth, particularly given lower gross premiums written and changing ceded protection.
- The liquidity and valuation implications of $1.2 billion in remaining investment commitments, including the limited short-term redemption options for private credit and private equity funds.
- The portion of consolidated earnings and capital attributable to third-party investors: Q1 net income attributable to redeemable noncontrolling interests was $267.4 million, and redeemable noncontrolling interests totaled $5.36 billion at quarter-end.