Business context and reporting period
RenaissanceRe Holdings Ltd. filed this unaudited Form 10-Q for the three months ended March 31, 2021. The Bermuda-based group provides property, casualty and specialty reinsurance and insurance, through operating subsidiaries, joint ventures and managed funds. Results are seasonal and catastrophe-sensitive; first-quarter results are not necessarily indicative of the full year.
Financial results and key metrics
Unless otherwise noted, amounts are U.S. dollars. Figures below are in millions.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Gross premiums written | $2,652.4 | $2,025.7 |
| Net premiums written | $1,824.1 | $1,269.8 |
| Net premiums earned | $1,153.8 | $913.1 |
| Net investment income | $79.8 | $99.5 |
| Realized and unrealized investment losses | $(345.6) | $(110.7) |
| Total investment result | $(265.8) | $(11.2) |
| Underwriting income (loss) | $(35.8) | $64.1 |
| Net income (loss) | $(330.5) | $25.2 |
| Net loss attributable to RenaissanceRe common shareholders | $(290.9) | $(82.0) |
| Diluted loss per common share | $(5.87) | $(1.89) |
| Operating cash flow | $206.5 | $475.5 |
The consolidated combined ratio was 103.1%, versus 93.0% a year earlier; above 100% indicates an underwriting loss before investment income. The current-year claims ratio was 75.9% and the underwriting expense ratio was 28.0%. Property’s combined ratio was 106.9% (65.1% in 2020); Casualty and Specialty’s was 98.9% (116.9% in 2020). Prior-year reserve development was favorable by $9.0 million, compared with adverse development of $13.9 million in Q1 2020.
At March 31, 2021, total assets were $32.2 billion, total investments $20.4 billion, cash and cash equivalents $1.3 billion, and debt $1.14 billion. Shareholders’ equity attributable to RenaissanceRe was $7.08 billion. Book value per common share was $131.15, down from $138.46 at year-end; book value per share plus accumulated dividends fell 5.0% to $153.59. The company paid $0.36 per common share in dividends and repurchased $171.6 million of shares during the quarter.
Cash and cash equivalents decreased $450.2 million during the quarter. Investing activities used $463.1 million and financing activities used $193.6 million. The revolving credit facility was undrawn; reported credit-facility letters of credit issued or drawn totaled $1.11 billion. Cash and investments of $8.4 billion were on deposit or in trust for counterparties and regulatory purposes, limiting availability for general use.
Material changes versus the prior comparable period
- Gross premiums written rose 30.9%, with growth in both Property and Casualty and Specialty, reflecting new and existing business, rate improvements and Uri-related reinstatement premiums.
- Winter Storm Uri had an estimated $291.5 million negative impact on underwriting results and added 26.9 percentage points to the consolidated combined ratio. After redeemable noncontrolling interests, its estimated negative impact on net loss attributable to RenaissanceRe common shareholders was $179.8 million.
- Investment results worsened by $254.5 million year over year, principally due to unrealized fixed-maturity losses as U.S. Treasury yields rose. Net investment income also declined, mainly because of lower yields.
- Casualty and Specialty underwriting improved from a loss to modest income, principally because Q1 2020 included $103.8 million of COVID-19-related claims. Property underwriting swung to a loss, primarily because of Uri.
- Operating cash flow declined to $206.5 million from $475.5 million. Management cited premium receivable growth and higher prepaid reinsurance premiums, among other working-capital movements.
Outlook, management commentary and risks
The filing gives no specific earnings or revenue guidance. Management said it expected reinsurance markets to continue hardening in 2021 and planned to pursue growth opportunities, particularly in Casualty and Specialty and other Property. It reported expanding participation at January 1 and April 1 property renewals, primarily with existing customers at improved rates, while monitoring Florida market claims, litigation and exposure trends and remaining prepared to reduce affected exposures.
Management said COVID-19 losses and coverage disputes remained uncertain and expected significant industry losses to emerge over time. It also identified market volatility, low interest rates, potential inflation, climate-related catastrophe trends, reserve-estimation uncertainty, counterparty and retrocession recoverability, and investment-market risks. Rising rates may improve future investment income, but can cause near-term fixed-income valuation losses; inflation may increase claims costs, particularly in longer-tail lines. The company cautioned that Uri loss estimates are preliminary and may change materially.
Claims reserves were $10.95 billion, including $6.38 billion of IBNR. Management identifies reserve estimation as a significant accounting judgment. Reinsurance recoverable was $3.16 billion; 45.2% was fully collateralized and 52.9% was due from reinsurers rated A- or higher. The company reported no material change in previously disclosed litigation or contractual obligations and said no individual current lawsuit or arbitration was likely to have a material adverse effect.
Subsequent to quarter-end, Medici raised more than $100 million effective April 1, and the company repurchased 330,000 additional common shares through April 23 for $55.3 million. Disclosure controls were reported effective as of March 31, 2021.
Most important facts for investors to verify
- How Uri claims and recoveries develop from the preliminary $291.5 million underwriting impact, including the effect on reserves and reinsurance recoverables.
- Whether investment losses from rising yields and equity-market movements persist, and how portfolio returns affect earnings and book value.
- Whether COVID-19-related claims, coverage disputes and longer-term casualty losses exceed current estimates.
- The adequacy and sensitivity of the $10.95 billion claims reserve, particularly IBNR, and the collectability of reinsurance recoverables.
- Liquidity available after considering pledged or trust-held assets, growth in premiums receivable, and share repurchases and dividends.
- Execution of the growth strategy and market-hardening outlook, including exposure to Florida property risks, inflation and catastrophe frequency and severity.