RENAISSANCERE HOLDINGS LTD quarterly report, Q2 FY2022

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Business context and reporting period

RenaissanceRe Holdings Ltd. is a Bermuda-based global provider of property, casualty and specialty reinsurance and insurance. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2022; comparisons are with the corresponding 2021 periods unless stated otherwise. Amounts below are U.S. dollars.

Financial results and position

Second quarter 2022

  • Gross premiums written were $2.465 billion, up 17.7%; net premiums earned were $1.456 billion, up 22.1%.
  • Underwriting income was $316.4 million versus $329.0 million. The combined ratio was 78.3%, compared with 72.4% (below 100% indicates underwriting profit). Property produced $264.5 million of underwriting income and a 57.6% combined ratio; Casualty and Specialty produced $51.9 million and a 93.8% combined ratio.
  • Net investment income rose to $107.2 million from $80.9 million, but realized and unrealized investment losses were $654.1 million, versus gains of $191.0 million a year earlier. The resulting total investment loss was $546.9 million.
  • Net loss attributable to common shareholders was $324.9 million, or $7.53 per diluted share, versus net income of $456.8 million, or $9.35 per diluted share. Annualized return on average common equity was negative 25.1%.

Six months ended June 30, 2022

  • Gross premiums written increased 13.9% to $5.408 billion; net premiums earned increased to $2.943 billion from $2.347 billion.
  • Underwriting income rose to $516.7 million from $293.2 million, and the combined ratio improved to 82.4% from 87.5%. Net loss attributable to common shareholders was $719.3 million, compared with net income of $165.9 million. Diluted loss per share was $16.64.
  • Total investment loss was $1.136 billion, compared with a $6.2 million gain in the prior-year period. Net investment income increased to $190.9 million from $160.7 million.
  • Operating cash flow was $269.2 million, versus $335.2 million. Investing activities used $955.5 million and financing activities provided $206.4 million. Cash and cash equivalents declined by $460.9 million to $1.398 billion.

Balance sheet and capital

  • At June 30, total investments were $20.598 billion; total assets were $35.034 billion; claims reserves were $13.443 billion; debt was $1.169 billion; and redeemable noncontrolling interests were $4.353 billion.
  • Shareholders’ equity attributable to RenaissanceRe was $5.739 billion, down from $6.624 billion at year-end 2021. Book value per common share was $113.69, versus $132.17 at year-end; including accumulated dividends, the reported decline was 13.4%.
  • Debt was broadly unchanged from year-end. The company reported no debt covenant violations and no amounts drawn under its main revolving credit facility; $30 million was drawn under Medici’s facility. The filing states insurance subsidiaries and branches exceeded applicable minimum solvency, capital and surplus requirements.
  • Six-month common-share repurchases totaled $137.5 million; $475.2 million remained authorized at quarter-end. Common dividends were $0.37 per share for the quarter.

Material changes and notable items

  • Investment losses drove the swing from prior-year profit to a second-quarter and year-to-date net loss. Management attributed fixed-income mark-to-market losses principally to rising interest rates, and equity losses to broad market declines.
  • Casualty and Specialty premiums expanded substantially: six-month gross premiums written rose 46.2%. Property gross premiums written declined 8.5% over six months, partly reflecting lower Upsilon RFO and reinstatement premiums.
  • Six-month underwriting results included an estimated $104.9 million negative impact from 2022 weather-related large losses, including Australian floods and Storm Eunice; the estimated common-shareholder impact was $71.5 million. Russia-Ukraine war losses had an estimated $25.0 million negative common-shareholder impact. By comparison, Winter Storm Uri had a $181.1 million negative common-shareholder impact in the first half of 2021.
  • Prior-year claims development was favorable by $60.8 million in the first half of 2022. Management cautions that reserve estimates are uncertain and ultimate losses may differ materially.
  • Fontana, a casualty and specialty joint venture, launched April 1, 2022. After quarter-end, RenaissanceRe sold $75 million of DaVinciRe shares, reducing its noncontrolling economic ownership to 30.9%; it also repurchased 175,700 common shares through July 22 for $25.3 million.

Outlook, risks and contingencies

  • No specific earnings or premium guidance was provided. Management described favorable pricing and growth opportunities, particularly in property catastrophe and casualty and specialty, while emphasizing disciplined risk selection and capital management.
  • Management expects higher interest rates over time to support investment income, while noting that rate increases have caused near-term portfolio valuation losses. Inflation, recession risk, the war in Ukraine, supply-chain issues and climate-related catastrophe trends remain relevant uncertainties.
  • Key exposures include catastrophe frequency and severity, reserve adequacy, inflation-sensitive casualty and other-property claims, investment and foreign-exchange volatility, reinsurance recoverability, counterparty credit, collateral requirements, and access to retrocession. Management states that actual catastrophe losses and reserve outcomes may differ materially from estimates.
  • The company reported no material changes to previously disclosed legal proceedings, risk factors, commitments or contingencies. It said no individual current litigation or arbitration was likely to have a material adverse effect.

Important facts for investors to verify

  • How much of the investment loss is unrealized and how interest-rate and equity-market changes may affect future results and book value.
  • Whether premium growth, especially in Casualty and Specialty, sustains profitable underwriting as reserves mature; monitor combined ratios and claims development.
  • Updates to estimates for 2022 weather events, Russia-Ukraine exposures, inflation-sensitive claims and prior-year reserves, including reinsurance recoveries.
  • Liquidity and capital needs, collateral commitments, investment fund unfunded commitments, and the effect of capital deployment, dividends and share repurchases.
  • Progress and economics of Fontana, DaVinciRe ownership changes, and management’s evolving market outlook; the filing provides no quantified forward guidance.