Business context and reporting period
RenaissanceRe Holdings Ltd. is a Bermuda-based global provider of property, casualty and specialty reinsurance and insurance, with managed joint ventures and funds. This Form 10-Q covers the three and six months ended June 30, 2021, compared with the corresponding 2020 periods. Dollar amounts below are U.S. dollars.
Financial results and key metrics
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Gross premiums written | $2.094bn | $1.702bn | $4.747bn | $3.728bn |
| Net premiums earned | $1.193bn | $1.010bn | $2.347bn | $1.923bn |
| Underwriting income | $329.0m | $217.1m | $293.2m | $281.2m |
| Combined ratio | 72.4% | 78.5% | 87.5% | 85.4% |
| Net income | $577.7m | $701.9m | $247.2m | $727.0m |
| Net income available to common shareholders | $456.8m | $575.8m | $165.9m | $493.9m |
| Diluted earnings per common share | $9.35 | $12.63 | $3.35 | $11.02 |
| Total investment result | $271.9m | $537.7m | $6.2m | $526.5m |
Q2 underwriting improved year over year, led by Property, which earned $315.1m with a 43.8% combined ratio; Casualty and Specialty earned $13.9m with a 97.8% ratio. For the first half, Property underwriting income was $273.3m and Casualty and Specialty income was $19.9m. The first-half combined ratio worsened year over year, despite improved Casualty and Specialty results.
Cash flow from operations for the six months was $335.2m, versus $857.0m in 2020; investing activities provided $118.4m and financing activities used $399.7m. Cash and cash equivalents ended at $1.790bn, compared with $1.737bn at year-end 2020. Investments totaled $20.065bn, including $4.393bn in short-term investments. Total assets were $32.727bn; claims reserves were $10.945bn; reinsurance recoverable was $3.188bn.
Debt was $1.137bn at June 30, with a fair value of $1.245bn. No amounts were drawn under the revolving credit facility; $990.9m of letter-of-credit facilities were issued or drawn. Shareholders’ equity attributable to RenaissanceRe was $7.218bn. Book value per common share was $139.35, or $162.15 including accumulated dividends, up 1.2% from year-end on the latter measure. The company reported that its insurance subsidiaries and branches exceeded applicable minimum solvency, capital and surplus requirements.
Material changes versus prior periods
- First-half common-shareholder income fell to $165.9m from $493.9m, principally reflecting a $154.5m investment loss versus $337.7m of investment gains in the prior-year period, and losses from Winter Storm Uri.
- Uri had an estimated $291.2m negative impact on first-half underwriting results and added 13.3 percentage points to the consolidated combined ratio. After redeemable noncontrolling interests, the estimated negative impact on common-shareholder income was $181.1m.
- First-half gross premiums written rose 27.3%, with growth in both Property and Casualty and Specialty, supported by rate improvements and new and existing business. Q2 gross premiums written increased 23.1% year over year.
- First-half net favorable prior-year reserve development was $61.1m, compared with $1.5m in 2020. The release included $56.1m in Property, largely related to prior catastrophe years.
- First-half fee income declined to $70.1m from $90.9m, mainly because Uri reduced performance fees; higher management fees partly offset the decline.
- The company repurchased 3.0m common shares for $480.7m in the first half. Common shareholders’ equity declined $342.6m from year-end.
Outlook, commentary and risks
Management said 2021 renewals were active and broadly as anticipated, and cited growth opportunities in casualty and specialty and catastrophe-exposed U.S. property excess and surplus lines. It expects low interest rates to constrain investment income, while rising rates could increase income over time; management also cautioned that inflation and rate trends may affect longer-tail casualty and other property exposures. No specific earnings or underwriting guidance was provided.
Risks include catastrophe frequency and severity, reserve estimation uncertainty, climate-related events, COVID-19 claims and coverage disputes, investment-market volatility, inflation, counterparty and retrocession recoveries, and competitive and regulatory conditions. Management highlighted ongoing adverse claims, litigation and exposure trends in Florida and said it had reduced exposure to some risks and accounts there. In July 2021, severe flooding in Northwestern Europe occurred; the company said its loss estimate was preliminary and that the impact would be reported in Q3.
Subsequent to quarter-end, the company issued $500m of 4.20% Series G preference shares, with proceeds intended in part to redeem all $275m of outstanding 5.375% Series E preference shares. Through July 19, it also repurchased 920,000 common shares for $137.5m. The filing reported no material changes to previously disclosed legal proceedings or contractual obligations and no individual litigation or arbitration expected to have a material adverse effect.
Important facts for investors to verify
- How estimates for Winter Storm Uri and the July 2021 Northwestern Europe floods develop, including ceded recoveries and the effect on future underwriting results.
- Whether the $61.1m first-half favorable prior-year reserve development persists or reverses as claims mature.
- How much of the first-half investment loss reflects market movements and how sensitive investment income and fair values remain to interest rates and credit spreads.
- Whether premium growth and rate improvements translate into sustainable underwriting profitability, particularly in Casualty and Specialty and catastrophe-exposed property lines.
- Liquidity and capital allocation after substantial share repurchases, the Series G issuance and planned Series E redemption; also monitor the $1.2bn of remaining investment commitments disclosed at quarter-end.