RenaissanceRe Holdings Ltd. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. RenaissanceRe is a Bermuda-based global provider of property, casualty and specialty reinsurance and insurance. It reports Property and Casualty and Specialty segments, alongside fee income from managing third-party capital and investment income. Figures below are U.S. dollars unless stated otherwise.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Gross premiums written | $8.86 billion | $9.21 billion |
| Net premiums earned | $7.47 billion | $6.33 billion |
| Underwriting income | $1.65 billion | $149.9 million |
| Combined ratio | 77.9% | 97.7% |
| Net investment income | $1.25 billion | $559.9 million |
| Net realized and unrealized investment gains (losses) | $414.5 million | $(1.80) billion |
| Net income (loss) attributable to common shareholders | $2.53 billion | $(1.10) billion |
| Diluted earnings (loss) per common share | $52.27 | $(25.50) |
| Operating cash flow | $1.91 billion | $1.60 billion |
| Cash and cash equivalents at year-end | $1.88 billion | $1.19 billion |
| Debt at year-end | $1.96 billion | $1.17 billion |
| Shareholders’ equity attributable to RenaissanceRe | $9.45 billion | $5.33 billion |
| Book value per common share | $165.20 | $104.65 |
The 2023 combined ratio below 100% indicates profitable underwriting before investment income. Return on average common equity was 40.5%, versus negative 22.0% in 2022. Book value per share plus accumulated dividends increased 59.3% during 2023.
Material changes and acquisition
- Net income swung to $2.53 billion from a $1.10 billion common-shareholder loss. Improved underwriting and investment results were major drivers.
- Property underwriting income was $1.44 billion, compared with a $16.1 million loss in 2022; its combined ratio improved to 53.4% from 100.6%. Casualty and Specialty underwriting income was $208.1 million, with a 95.2% combined ratio, broadly similar to 2022.
- 2023 large loss events reduced underwriting results by $298.6 million and added 4.1 percentage points to the consolidated combined ratio. The comparable 2022 weather-related losses reduced underwriting results by $1.22 billion and added 20.0 points.
- Prior-year claims development was favorable by $450.6 million in 2023, versus $247.6 million in 2022. The reserve outcome remains subject to uncertainty.
- Net investment income rose with higher yields and larger average invested assets. Investment gains also recovered from the substantial 2022 mark-to-market losses as interest-rate movements moderated.
- Gross premiums written declined 3.8%, while net premiums written rose 3.8%. Management cited premium-estimate reductions on prior-year Casualty and Specialty business, non-renewals of certain Property programs, and lower ceded premiums.
- On November 1, 2023, RenaissanceRe completed its Validus acquisition for $3.02 billion of closing-date consideration, including $2.735 billion cash and shares issued to AIG. The 2023 results include Validus only from November 1; therefore, year-over-year comparisons are not on a full-year combined-company basis. Acquired reserves and purchase-price allocations remain preliminary and subject to the measurement period.
Liquidity, capital and unusual items
- Cash from operations was $1.91 billion; investing activities used $3.82 billion, including a $2.43 billion net cash outflow for Validus; financing activities provided $2.59 billion. Management expects operating receipts to meet liquidity needs over the next 12 months, while cautioning that catastrophe claims and investment-market conditions can make cash flows volatile.
- Total investments were $29.22 billion. The fixed maturity and short-term portfolio had an AA weighted-average credit rating and 5.0% weighted-average effective yield. Reinsurance recoverables were $5.34 billion; 60.6% were fully collateralized and 38.5% were due from reinsurers rated A- or higher.
- Debt increased mainly after issuance of $750 million of 5.750% senior notes due 2033 to help fund Validus. The $500 million parent revolving credit facility was undrawn at year-end. Medici had $75 million drawn on its separate facility and repaid it after year-end. The filing states the company believed it was in compliance with debt covenants.
- The company recognized a $510.1 million income-tax benefit, principally from a $593.8 million deferred tax asset related to Bermuda’s newly enacted 15% corporate income tax. The tax is expected to apply to relevant Bermuda operations beginning in 2025, increasing future tax expense; management expects the deferred tax asset to be used predominantly over about 10 years.
- Validus acquisition and integration costs were $76.4 million in 2023; further 2024 costs are expected and could be significant or exceed current estimates. The acquisition added $453.1 million of net identifiable intangible assets at year-end and $89.6 million of preliminary goodwill.
- Common dividends were $1.52 per share for 2023. The board approved a $0.39 quarterly common dividend in February 2024. No shares were repurchased under the public program in 2023; $500 million remained authorized.
Outlook, commentary and principal risks
Management said 2023 renewals and January 2024 renewals benefited from stronger pricing, higher attachment points and improved terms in parts of the reinsurance market. It expects market momentum and growth opportunities to persist into 2024, but provided no specific earnings or premium guidance. Management described Validus integration as proceeding smoothly and characterized the acquisition as immediately accretive; realizing expected benefits remains dependent on integration and retention of business and personnel.
Key risks include unpredictable catastrophe frequency and severity, climate-related exposure, inflation and social inflation, uncertainty in long-tail casualty reserves, and reliance on cedants and delegated underwriters. Three brokers accounted for 84.3% of gross premiums written. Additional risks include retrocession availability and collectability, investment-market and interest-rate volatility, counterparty credit risk, regulatory and tax changes, cybersecurity, and acquisition integration. The company also noted that some acquired Validus processes—covering approximately 8% of assets, 22% of liabilities and 6% of 2023 revenue—were excluded from management’s year-end internal-control assessment pending integration; management otherwise concluded controls were effective.
Important facts for investors to verify
- Whether 2023’s unusually strong underwriting results and favorable prior-year reserve development persist, and how recent catastrophe losses develop.
- The final Validus purchase-price allocation, integration expenses, business retention, and full-year combined-company performance.
- The adequacy and sensitivity of the $20.49 billion claims reserve, particularly the $12.65 billion Casualty and Specialty reserve and its substantial IBNR component.
- The sustainability of investment income and gains amid changes in interest rates, credit spreads and asset valuations, including the liquidity and valuation of private funds and other less-liquid investments.
- The effect of Bermuda’s 15% corporate income tax from 2025, including the timing and recoverability of the deferred tax asset.
- Broker concentration, collateral and retrocession exposures, and the extent of available liquidity after acquisition funding and commitments.