Business context and reporting period
RenaissanceRe Holdings Ltd. is a Bermuda-based global reinsurer and insurer focused on property catastrophe, casualty and specialty risks. This Form 10-K reports the fiscal year ended December 31, 2019; TMR, acquired March 22, 2019, is included from the acquisition date. The filing also provides unaudited fourth-quarter results.
Financial performance and condition
| Metric | 2019 | 2018 |
|---|---|---|
| Gross premiums written | $4.81 billion | $3.31 billion |
| Net premiums earned | $3.34 billion | $1.98 billion |
| Underwriting income | $256.4 million | $244.9 million |
| Combined ratio | 92.3% | 87.6% |
| Net investment income | $423.8 million | $261.9 million |
| Net realized and unrealized investment gains (losses) | $414.5 million | $(175.1) million |
| Net income | $950.3 million | $268.9 million |
| Net income available to common shareholders | $712.0 million; diluted EPS $16.29 | $197.3 million; diluted EPS $4.91 |
| Operating cash flow | $2.14 billion | $1.22 billion |
Return on average common equity was 14.1%, versus 4.7%. Book value per common share rose to $120.53 from $104.13; including accumulated dividends, the measure increased 17.1% during 2019.
For the fourth quarter, net income available to common shareholders was $33.8 million, compared with a loss of $83.9 million in fourth-quarter 2018. Net premiums earned were $970.1 million versus $574.6 million.
At year-end, total assets were $26.33 billion, investments $17.37 billion, cash and cash equivalents $1.38 billion, claims reserves $9.38 billion, debt $1.38 billion and shareholders’ equity attributable to RenaissanceRe $5.97 billion. The $250 million 5.75% senior notes mature in 2020. The revolving credit facility had no borrowings outstanding; letters of credit issued or drawn under listed facilities totaled $1.11 billion.
Material changes versus the prior comparable period
- Gross premiums written increased 45.2%, with growth in both Property and Casualty and Specialty, reflecting TMR, expanded participation in transactions, new business and rate improvements.
- Common-shareholder net income increased substantially, supported by stronger investment results and TMR’s contribution. TMR contributed $99.2 million of net income available to common shareholders from acquisition through year-end, including acquisition and integration costs.
- Underwriting income increased modestly, but the combined ratio worsened to 92.3% from 87.6%. 2019 large loss events had a $418.9 million net negative impact on underwriting results and added 12.9 percentage points to the combined ratio.
- Prior-year reserve releases were $26.9 million, compared with $270.7 million in 2018. The Property segment’s prior-year favorable development fell to $2.9 million from $221.3 million.
- Investment gains swung to $414.5 million from losses of $175.1 million, principally reflecting falling interest rates and stronger equity returns. The investment portfolio’s weighted-average yield was 2.1%, down from 3.2%.
- Total debt increased by $393.0 million, primarily following issuance of $400 million of 3.60% senior notes due 2029. Shareholders’ equity attributable to RenaissanceRe rose by $926.3 million.
Outlook, commentary and risks
Management described improving pricing and terms in selected property, retrocessional, casualty and specialty markets, including at January 2020 renewals. It intended to allocate relatively more capital to assumed retrocessional business, U.S. excess and surplus lines, and other property opportunities, while maintaining underwriting discipline. Management cautioned that rate improvements may not offset exposure growth, social inflation or climate-related risks, and may not persist.
The filing estimates industry insured catastrophe losses of approximately $75 billion in 2019. RenaissanceRe’s 2019 large-loss impact included Hurricane Dorian, Typhoons Faxai and Hagibis, and aggregate loss contracts. Estimates remain uncertain; the company also reported adverse development on some 2018 events, partly offset by favorable development on 2017 events.
Key risks include catastrophe frequency and severity, climate change, reserve uncertainty, casualty social inflation and long-tail claims, retrocession availability and collectability, counterparty and broker concentration, investment-market volatility, low yields, regulation and taxation, and TMR integration. Three brokers generated 79.6% of gross premiums written. No individual litigation or arbitration was considered likely to have a material adverse effect. Auditors issued an unqualified opinion on the financial statements; internal-control assessments excluded TMR, which represented 17.3% of year-end assets.
Most important facts for investors to verify
- How TMR integration, retention of counterparties and anticipated efficiencies affect future underwriting profitability and expenses.
- Whether reserves—particularly casualty and specialty IBNR and catastrophe-event estimates—develop adversely; these estimates are a critical accounting judgment.
- Whether 2019 investment gains are repeatable, given their sensitivity to interest rates and equity markets and the lower portfolio yield.
- Whether pricing and terms improve enough to compensate for rising exposures, social inflation and catastrophe risk, and how much risk is ceded through retrocession and managed vehicles.
- Liquidity and capital flexibility around the 2020 note maturity, collateral and letter-of-credit needs, and regulatory limits on subsidiary dividends.