Business context and reporting period
RenaissanceRe Holdings Ltd. is a Bermuda-based global provider of property, casualty and specialty reinsurance and insurance, supported by wholly owned operations, joint ventures and managed capital vehicles. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods unless stated otherwise. Amounts below are U.S. dollars.
Financial results and position
| Metric | Q3 2021 | Nine months 2021 | Comparable 2020 |
|---|---|---|---|
| Gross premiums written | $1.77 billion | $6.52 billion | $1.14 billion; $4.87 billion |
| Net premiums earned | $1.51 billion | $3.85 billion | $1.00 billion; $2.92 billion |
| Net income (loss) attributable to common shareholders | $(450.2) million | $(284.3) million | $47.8 million; $541.7 million |
| Diluted earnings (loss) per common share | $(9.75) | $(5.94) | $0.94; $11.58 |
| Combined ratio | 145.1% | 110.0% | 120.6%; 97.4% |
| Net investment income | $78.3 million | $239.0 million | $83.5 million; $272.3 million |
| Net realized and unrealized investment gains (losses) | $(42.1) million | $(196.6) million | $224.2 million; $561.9 million |
Q3 underwriting loss was $678.8 million; the Property segment lost $681.9 million while Casualty and Specialty earned $3.1 million. For the nine months, underwriting loss was $385.6 million: Property lost $408.6 million and Casualty and Specialty earned $23.0 million. Net loss for the consolidated company was $638.9 million in Q3 and $391.7 million for the nine months.
At September 30, 2021, total assets were $33.54 billion, including $20.87 billion of investments and $1.44 billion of cash and cash equivalents. Total liabilities were $23.33 billion, including $13.23 billion of claims reserves; redeemable noncontrolling interests were $3.46 billion. RenaissanceRe-attributable shareholders’ equity was $6.75 billion, down from $7.56 billion at year-end 2020. Book value per common share was $128.91, versus $138.46 at year-end; including accumulated dividends, the decrease was 6.1%.
For the first nine months, operating cash flow was $801.9 million, down from $1.33 billion; investing cash flow was $(654.9) million and financing cash flow was $(447.8) million. Cash declined $296.1 million from year-end. Debt carrying value was $1.14 billion, broadly unchanged from December 31, 2020. No amounts were drawn under the revolving credit facility; reported letter-of-credit facilities issued or drawn totaled $966.7 million.
Material changes versus prior periods
- Catastrophe losses: Q3 2021 weather-related large losses, including Hurricane Ida and European floods, reduced common-shareholder results by an estimated $726.8 million and added 73.8 percentage points to the consolidated combined ratio. The corresponding Q3 2020 events reduced common-shareholder results by $321.7 million.
- For the nine months, 2021 weather-related large losses reduced common-shareholder results by an estimated $908.7 million and added 36.8 percentage points to the combined ratio; 2020 large-loss events reduced results by $327.5 million.
- Premium growth: Gross premiums written rose 55.2% in Q3 and 33.9% for the nine months, across both segments. Growth reflected new and existing business, rate improvements and catastrophe-related reinstatement premiums.
- Investment performance: Investment results weakened sharply against 2020’s market recovery. The filing attributes 2021 fixed-income losses principally to rising Treasury yields and wider spreads; equity results also included losses on the strategic Trupanion investment.
- Reserves and prior-year development: Claims reserves increased to $13.23 billion from $10.38 billion at year-end, including higher property IBNR. Nine-month prior-year reserve development was favorable by $208.7 million, versus $55.4 million favorable in 2020, mainly from property catastrophe years 2017–2019.
- Common shares repurchased during the nine months totaled 4.5 million for $704.5 million. The company issued $500 million gross of 4.20% Series G preference shares and redeemed $275 million of 5.375% Series E preference shares.
Outlook, commentary and risks
Management reported continued premium growth and sees opportunities across both segments. It expects increased rates and improved terms at January 1 property renewals, particularly in catastrophe business, and continued growth opportunities in other property. It also reported accelerating underlying rate increases in multiple Casualty and Specialty lines. These are expectations, not assured outcomes; the filing gives no numerical earnings or revenue guidance.
Management said higher interest rates could improve future investment income, while noting that low yields have weighed on returns. It expects retrocessional coverage may be more limited and expensive in 2022 following significant catastrophe losses. Management stated that if shares remain attractively priced, it expects to use capital to return excess funds to shareholders, while preferring profitable business opportunities where available.
Key uncertainties include the ultimate size and timing of catastrophe claims and recoveries, reserve estimation, climate-related event frequency and severity, inflation’s effect on claims, COVID-19 exposures, reinsurer and other counterparty credit, investment-market volatility, currency movements, and the cost and availability of retrocession. The company also noted that global tax reform proposals, including the OECD global minimum tax framework, could affect tax burdens, but implementation details and company impact were not yet clear. Fund valuations may use lagged or estimated data and final values could differ materially. Management reported no material change in legal proceedings, contractual obligations or market-risk disclosures; no material off-balance-sheet arrangements; and effective disclosure controls.
Important facts for investors to verify
- How actual ultimate losses from Ida, European floods, Winter Storm Uri and other 2021 events compare with the preliminary estimates, including recoveries and reinstatement premiums.
- Whether the large increase in claims reserves and favorable prior-year development persist as additional claims data emerges.
- Whether premium growth and rate improvements translate into profitable underwriting, especially in Property; Q3’s 145.1% combined ratio reflects substantial catastrophe losses.
- The sensitivity of investment income, fair values and book value to interest rates, credit spreads, equity prices and delayed private-fund valuations.
- Liquidity and capital availability after substantial share repurchases, preference-share transactions and collateral requirements; verify the status of the remaining repurchase authorization and subsequent purchases.
- Whether retrocessional protection remains available on acceptable terms and how COVID-19, inflation, climate-related losses and tax changes affect exposure and results.