RenaissanceRe Holdings Ltd. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. RenaissanceRe is a global property, casualty and specialty reinsurer and insurer, operating through subsidiaries, joint ventures and managed funds. Unless noted, financial amounts below are U.S. dollars.
Financial performance
| Metric | 2021 | 2020 |
|---|---|---|
| Gross premiums written | $7.834 billion | $5.806 billion |
| Net premiums earned | $5.194 billion | $3.952 billion |
| Net investment income | $319.5 million | $354.0 million |
| Net realized and unrealized investment gains (losses) | $(218.1) million | $820.6 million |
| Underwriting income (loss) | $(108.9) million | $(76.5) million |
| Net income (loss) attributable to common shareholders | $(73.4) million | $731.5 million |
| Diluted earnings (loss) per common share | $(1.57) | $15.31 |
| Combined ratio | 102.1% | 101.9% |
| Operating cash flow | $1.235 billion | $1.993 billion |
- Gross premiums written grew 34.9%, with increases in both Property (+32.0%) and Casualty and Specialty (+38.0%). Management cited new and existing business, rate improvements and catastrophe-related reinstatement premiums.
- Property generated a $185.5 million underwriting loss and a 107.1% combined ratio; Casualty and Specialty generated $76.6 million of underwriting income and a 97.0% combined ratio.
- 2021 weather-related large losses reduced common-shareholder net income by an estimated $962.1 million and reduced underwriting results by $1.403 billion, adding 28.5 percentage points to the consolidated combined ratio. Prior-year reserve development was favorable by $249.5 million.
- Investment results reversed from 2020: the total investment result fell to $101.3 million from $1.175 billion, as investment gains became losses. Net investment income also declined.
Financial position, liquidity and capital
- At year-end, total assets were $33.960 billion, total investments $21.443 billion, cash and cash equivalents $1.859 billion, and shareholders’ equity attributable to RenaissanceRe $6.624 billion, down from $7.560 billion.
- Claims and claim expense reserves were $13.295 billion, up from $10.381 billion; reinsurance recoverable was $4.269 billion, up from $2.926 billion. Premiums receivable were $3.782 billion.
- Total debt was $1.168 billion, including $1.138 billion of senior notes and a $30 million Medici facility draw. No amounts were drawn under the Company’s $500 million revolving credit facility. The filing reports $1.085 billion issued or drawn across significant credit and letter-of-credit facilities.
- Operating, investing and financing cash flows were $1.235 billion, $(816.3) million and $(302.5) million, respectively. Year-end cash increased by $122.2 million.
- The company repurchased 6.6 million common shares for approximately $1.0 billion during 2021. It paid $67.8 million in common dividends and issued $500 million of Series G preference shares, generating $488.7 million net proceeds. Book value per common share was $132.17; book value plus accumulated dividends was $155.69, down 3.5% year over year.
- Of $4.269 billion in reinsurance recoverables, 46.9% was fully collateralized and 52.1% was from reinsurers rated A- or higher. The three largest counterparties represented 19.9%, 8.4% and 4.3% of the balance.
Changes, outlook and risks
- Compared with 2020, premium growth did not translate into profit: catastrophe losses and investment mark-to-market losses drove a swing from common-shareholder income of $731.5 million to a loss of $73.4 million. The 2020 comparison also included $493.6 million of common-shareholder impact from weather losses and $286.6 million from COVID-19 losses.
- Management said it moderated growth at the January 1, 2022 renewals, emphasizing portfolio efficiency, profitability, higher rates, improved terms and reduced aggregate exposure. It reported improved market conditions in many lines, while noting dislocation in property retrocession markets.
- Management expects to continue active capital management and return excess capital if conditions support it, while preferring profitable underwriting opportunities when available. It expects higher interest rates to support future net investment income, but gave no quantified earnings or premium guidance.
- Key uncertainties include catastrophe frequency and severity, climate change, inflation and rebuilding costs, reserve development, social inflation and long-tail casualty claims, COVID-19 claim emergence, investment-market volatility, counterparty and retrocession recoveries, broker concentration and regulatory or tax changes. Three brokers generated 78.0% of 2021 gross premiums written.
- Claims reserves are a major estimate: $9.955 billion of the $13.295 billion reserve was IBNR and additional case reserves. The auditor identified reserve valuation as a critical audit matter. Management reported effective internal controls, and the auditor issued unqualified opinions on the financial statements and internal controls.
Investor verification priorities
- Track development and cash settlement of 2021 catastrophe losses, especially Hurricane Ida, European floods and Winter Storm Uri, and compare outcomes with recorded reserves and reinsurance recoveries.
- Assess reserve adequacy and sensitivity, particularly IBNR in Casualty and Specialty, inflation and social-inflation assumptions, and the durability of favorable prior-year development.
- Review the quality, timing and concentration of the $4.269 billion reinsurance recoverable and $3.782 billion premiums receivable balances.
- Evaluate investment portfolio sensitivity to interest rates and credit spreads, liquidity restrictions on private funds, and the $1.4 billion of remaining investment commitments.
- Monitor capital deployment and shareholder returns against catastrophe exposure, regulatory capital needs, debt covenants and subsidiary dividend restrictions.