Summary

• RenaissanceRe Holdings Ltd. (RNR) was founded in 1993 by James Stanard and Stephen Velotti. The company emerged in response to a shifting landscape in the reinsurance market following Hurricane Andrew, a $16 billion loss event.
• RenaissanceRe is a global provider of reinsurance and insurance specializing in aligning well-structured risks with sources of capital. The company offers property, casualty, and specialty reinsurance, along with certain insurance solutions, primarily through intermediaries.
• The company's profitability is driven by three main factors, creating diversified earnings streams: underwriting income, fee income, and investment income. Underwriting income is derived from the core underwriting business, while fee income, primarily from managing third-party capital in the Capital Partners unit, includes management fee income and performance fee income.
• In addition to these income sources, RenaissanceRe actively explores various opportunities, such as establishing and managing joint ventures and managed funds, executing customized reinsurance transactions to assume or cede risk, and managing strategic investments focused on risk classes beyond catastrophe reinsurance.
• In 2022, the company experienced a decline in sales, with total sales reaching $5,060 million. This marked a decrease of $217 million or 4.1% compared to the sales figure of $5,277 million in 2021.
• The company's gross profit for 2022 amounted to $6,334 million, reflecting an increase of $1,140 million or 22% from the gross profit of $5,194 million in the previous year, 2021.
• Additionally, the company's operating profit decreased in 2022, totaling $-1,218 million, which was lower by $-1,104 million or 96.8% compared to the operating profit of $-114 million in 2021.
• The net profit for the year 2022 was $-1,096 million, representing an increase of $-1,023 million or 1,402% compared to the net profit of $-73 million in 2021.
• Moreover, the diluted earnings per share (EPS) for 2022 were reported as $-25.50, which showed a decrease of $-23.93 or 1,524% compared to the diluted EPS of $-1.57 in 2021.

Brief Company Overview

RenaissanceRe Holdings Ltd. (NYSE:RNR) is a global provider of reinsurance and insurance. The Company provides property, casualty and specialty reinsurance and certain insurance solutions to customers, principally through intermediaries. The Company has two segments. The Property segment is comprised of catastrophe and other property reinsurance and insurance written on behalf of its operating subsidiaries, joint ventures, and managed funds. The Casualty and Specialty segment is comprised of casualty and specialty reinsurance and insurance written on behalf of its operating subsidiaries, joint ventures, and managed funds. The Company writes catastrophe reinsurance and insurance coverage protecting against natural and man-made catastrophes, such as earthquakes, hurricanes, typhoons and tsunamis, winter storms, freezes, floods, fires, windstorms, tornadoes, explosions and acts of terrorism, among others. Its subsidiaries include Renaissance Reinsurance Ltd., Validus Reinsurance Ltd. and others.

RenaissanceRe’s principal wholly-owned operating subsidiaries are Renaissance Reinsurance, RREAG, Renaissance Reinsurance U.S., RenaissanceRe Specialty U.S., and Syndicate 1458. Through these subsidiaries, the company writes property and casualty and specialty (re)insurance that drives its underwriting income. Renaissance Reinsurance is the company’s flagship balance sheet, through which it has broad exposure to a range of risks. RenaissanceRe’s other balance sheets allow it to optimize where and how it writes specific risks, considering geographic location, regulatory flexibility, and the ability to access different markets of risk. For example, RenaissanceRe Specialty U.S. writes excess and surplus U.S. risk, which can be supported on a quota-share reinsurance or delegated authority basis through managing general agents. The company utilizes an integrated and flexible underwriting platform to ensure that risks are matched with the optimal wholly-owned operating subsidiary balance sheet.

As of September 2023, the company had a 52-week share price range of $174.22 to $227.16. The trailing P/E ratio of the company is 7.06 times, the price-to-sales ratio (ttm) is 1.24 times, the profit margin is 17.97%, the operating margin is 25.49%, the return on assets (ttm) is 4.06%, the return on equity is 20.84%, and the diluted earnings per share (ttm) is $30.46. The aggregate market value of Common Shares held by nonaffiliated of the registrant at June 30, 2022 was $6.7 billion based on the closing sale price of the Common Shares on the New York Stock Exchange on that date. The number of Common Shares, par value US $1.00 per share, outstanding at February 3, 2023 was 43,719,732.

Recent Developments

• On May 22, 2023, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with American International Group, Inc. (together with its affiliates and subsidiaries, “AIG”) pursuant to which, upon the terms and subject to the conditions thereof, the Company agreed to purchase certain direct and indirect subsidiaries of AIG, including Validus Holdings, Ltd., Validus Specialty, LLC, and Validus Reinsurance, Ltd. (the acquisitions under the Stock Purchase Agreement, together with the other transactions contemplated thereby, the “Validus Acquisition”). The Validus Acquisition, which is currently expected to close during the fourth quarter of 2023, is subject to customary closing conditions, including, among others, receipt of required regulatory approvals.¹
• Completed acquisition of Validus Re from American International Group, Inc.(AIG) on November 1, 2023.² AIG received total consideration of $3.3 billion in cash, including a pre-closing dividend, and approximately $275 million in RenaissanceRe common shares. The deal, which was announced on May 22, 2023, includes Validus Reinsurance Ltd. and its consolidated subsidiaries, AlphaCat Managers Ltd., and all renewal rights to the Assumed Reinsurance Treaty Unit of Talbot (together known as Validus Re).

Recent Financing Activities

• On May 26, 2023, the Company completed an offering of 7,245,000 of common shares at the public offering price of $192.00 per share. The Company received net proceeds of approximately $1,352.0 million from the offering of common shares after deducting the underwriting discounts and estimated offering expenses payable.³
• On June 5, 2023, the Company completed an offering of $750.0 million aggregate principal amount of the Company’s 5.750% Senior Notes due 2033. The Company received net proceeds of approximately $741.0 million from the offering of senior notes after deducting the underwriting discounts and estimated offering expenses payable.

Financial Performance Highlights

Q2 2023 Highlights

In the second quarter of 2023, the company reported sales of $1,825.15 million, reflecting a decrease of $20.38 million or 1.1% compared to the second quarter of 2022, which had sales of $1,845.53 million. The net profit for the second quarter of 2023 was $193.99 million, showing an increase of $2.99 million or 1.6% when compared to the net profit of $191 million in the second quarter of 2022. Furthermore, the company's diluted earnings per share (EPS) for the second quarter of 2023 increased to $7.85, a positive change of $4.05 or 106.6% compared to the diluted EPS of $3.80 in the second quarter of 2022.

Annual Performance Highlights

In 2022, the company experienced a decline in sales, with total sales reaching $5,060 million. This marked a decrease of $217 million or 4.1% compared to the sales figure of $5,277 million in 2021. The company's gross profit for 2022 amounted to $6,334 million, reflecting an increase of $1,140 million or 22% from the gross profit of $5,194 million in the previous year, 2021. Additionally, the company's operating profit decreased in 2022, totaling $-1,218 million, which was lower by $-1,104 million or 96.8% compared to the operating profit of $-114 million in 2021. The net profit for the year 2022 was $-1,096 million, representing an increase of $-1,023 million or 1,402% compared to the net profit of $-73 million in 2021. Moreover, the diluted earnings per share (EPS) for 2022 were reported as $-25.50, which showed a decrease of $-23.93 or 1,524% compared to the diluted EPS of $-1.57 in 2021.

In 2022, RenaissanceRe reported a significant net loss attributable to common shareholders of $1.1 billion, in contrast to a $73.4 million loss in 2021. This resulted in a negative 22.0% return on average common equity and a 19.7% decrease in book value per common share. The notable factors influencing financial performance in 2022, compared to 2021, include a substantial investment loss of $1.2 billion, primarily driven by realized and unrealized losses on fixed maturity trading and equity investment portfolios. The company also faced negative impacts of $807.6 million from the 2022 Weather-Related Large Losses and $23.9 million from losses related to the Russia-Ukraine War. On the positive side, underwriting results improved, with underwriting income of $149.9 million and a combined ratio of 97.7%, compared to an underwriting loss of $108.9 million and a combined ratio of 102.1% in 2021. Additionally, gross premiums written increased by $1.4 billion to $9.2 billion in 2022, with the Casualty and Specialty segment driving the growth, offset by a decrease in the Property segment. The net negative impact on the underwriting result was influenced by the 2022 Weather-Related Large Losses. The company acknowledges the uncertainty in estimating losses from these events, considering factors such as limited claims data, contingent nature of business interruption exposures, and potential uncertainties in reinsurance recoveries.

Operating Activities:

In 2022, the company's cash flows provided by operating activities increased to $1.6 billion from $1.2 billion in 2021. This improvement was mainly driven by adjustments reconciling a net loss of $1.2 billion to net cash provided by operating activities. Key contributing factors included a $2.6 billion increase in the reserve for claims and claim expenses related to 2022 Weather-Related Large Losses, $1.6 billion in net realized and unrealized losses on investments due to mark-to-market losses from increased interest rates, a $1.0 billion rise in unearned premiums from growth in gross premiums written, and other adjustments related to reinsurance, premiums receivable, reinsurance recoverable, and prepaid reinsurance premiums.

Investing Activities: During 2022, cash flows used in investing activities were $3.0 billion, principally reflecting netpurchases of fixed maturity investments trading of $2.8 billion, equity investments of $202.3 million, and other investments of $618.8 million, partially offset by cash flow from net sales of short term investments of $640.4 million. The net purchases of fixed maturity investments trading was primarily funded by cash flows provided by operating activities, as described above, whereas the net purchase of other investments during 2022, was primarily driven by an increased allocation to catastrophe bonds and fund investments.

Financing Activities: In 2022, cash flows provided by financing activities amounted to $725.3 million, primarily driven by net inflows of $1.0 billion related to third-party redeemable noncontrolling interest share transactions in Medici, DaVinci, and Fontana. This was partially offset by the repurchase of 1.1 million common shares at a cost of $162.8 million and dividends paid on common shares ($64.7 million) and preference shares ($35.4 million).

Business Overview

RenaissanceRe is a global provider of reinsurance and insurance specializing in aligning well-structured risks with sources of capital. The company offers property, casualty, and specialty reinsurance, along with certain insurance solutions, primarily through intermediaries. With offices in Bermuda, Australia, Ireland, Singapore, Switzerland, the U.K., and the U.S., it is recognized as a prominent provider of property, casualty, and specialty reinsurance.

RenaissanceRe's core products encompass property, casualty, and specialty reinsurance, in addition to certain insurance products. The company's profitability is driven by three main factors, creating diversified earnings streams: underwriting income, fee income, and investment income. Underwriting income is derived from the core underwriting business, while fee income, primarily from managing third-party capital in the Capital Partners unit, includes management fee income and performance fee income. Investment income is earned from the investment portfolio, with fee income and investment income serving as relatively stable sources. In addition to these income sources, RenaissanceRe actively explores various opportunities, such as establishing and managing joint ventures and managed funds, executing customized reinsurance transactions to assume or cede risk, and managing strategic investments focused on risk classes beyond catastrophe reinsurance. The major revenue-generating streams for RenaissanceRe includes:

Underwriting Income

RenaissanceRe’s primary source of profit is underwriting income, derived from its core underwriting business. The results of underwriting activities are segmented into two categories:

1. Property Segment:
   • Catastrophe and other property (re)insurance written on behalf of consolidated operating subsidiaries, joint ventures, and managed funds.
2. Casualty and Specialty Segment:
   • Casualty and specialty (re)insurance written on behalf of consolidated operating subsidiaries, joint ventures, and managed funds.

The underwriting results encompass the entire value of the business written for consolidated operating subsidiaries, joint ventures, and managed funds. Before reflecting the interests of third-party investors in consolidated joint ventures and managed funds that are not retained by us.

The table below illustrates the allocation of gross premiums written across segments:

Within the segments, the company engage in both proportional business and excess of loss business, as well as certain insurance business through delegated authority arrangements. The mix of business between proportional and excess of loss has varied in the past and is expected to fluctuate in the future. Proportional and delegated authority business typically involves higher premiums per unit of expected underwriting income, along with higher acquisition expense ratios and combined ratios compared to traditional excess of loss reinsurance. These coverages are generally exposed to relatively more attritional and frequent losses while being subject to lower expected severity.

The table below details the allocation of gross premiums written among excess of loss, proportional, and delegated authority for each segment:

Property Segment Overview:

The Property segment comprises two primary classes of business, each serving distinct purposes within the realm of insurance and reinsurance.

1. Catastrophe Class of Business:
   • Principally composed of excess of loss reinsurance and excess of loss retrocessional reinsurance.
   • Designed to provide coverage to insurance and reinsurance companies against natural and man-made catastrophes.
2. Other Property Class of Business:

• Mainly includes proportional reinsurance, property per risk, property (re)insurance, binding facilities, and regional U.S. multi-line reinsurance.
• Combining both Catastrophe and Other Property classes, the total gross premiums written in the Property segment for the same period amounted to $3,734,241.

RenaissanceRe specializes in catastrophe reinsurance and insurance coverage safeguarding against a spectrum of natural and man-made catastrophes, encompassing events such as earthquakes, hurricanes, typhoons, tsunamis, winter storms, freezes, floods, fires, windstorms, tornadoes, explosions, and acts of terrorism. This coverage is primarily offered to insurance companies and reinsurers on an excess of loss basis, with payment commencing when claims from a catastrophe exceed a specified retained amount. The company also provides proportional coverages and other structures on a catastrophe-exposed basis. While the primary focus of the excess of loss property contracts is on natural perils, coverage may extend to other risks, including business interruption and non-property losses, arising from covered perils.

RenaissanceRe operates globally, and due to the diverse range of potential catastrophic events, the size of such events, and the possibility of multiple events occurring simultaneously, the property business is characterized by volatility. The company manages this volatility by adjusting its presence in the property business based on market conditions and their assessment of risk-adjusted pricing adequacy. To mitigate risk exposure, the company frequently engages in purchasing reinsurance or other protection for their own account. This strategic approach serves various purposes, including optimizing the expected outcome of the underwriting portfolio, managing capital requirements for regulated entities, and reducing the financial impact of significant catastrophes on overall results.

Casualty and Specialty Segment:

The company specializes in underwriting casualty and specialty reinsurance and insurance, covering a diverse array of classes of business. These encompass general casualty, professional liability, credit, and various other specialty lines. While the predominant focus is on reinsurance, the company also engages in underwriting insurance business, primarily facilitated through delegated authority arrangements.

RNR predominantly offers casualty and specialty reinsurance products on a proportional basis, supplementing these with excess of loss coverage. These products are often customized with specific features, such as limits or sub-limits, tailored to meet the unique needs of clients. Any liability surpassing or not falling under these predefined limits is reverted to the cedant.

Within the Casualty and Specialty segment, the company extends its offerings to include certain casualty insurance products. This encompasses lines of business like general liability and professional liability. Syndicate 1458, operating under the same segment, also participates in writing business through delegated authority arrangements. The approach to writing this business mirrors that of reinsurance, with a strategic perspective akin to viewing it as a comprehensive portfolio of risks. This underscores the company's commitment to a systematic and comprehensive evaluation of both reinsurance and insurance components within the casualty and specialty domain.

Geographic Breakdown:

The company’s risk exposures are typically well-diversified across various geographic zones, with considerations given to prevailing market conditions and opportunities. Historically, its most substantial exposure has been to the U.S. and the Caribbean. The table below presents the amounts and percentages of gross premiums written, categorized by the territory of coverage exposure for the year ending December 31, 2022:

Other Business Information

Unanticipated legal developments and societal changes may lead to unexpected claims under insurance and reinsurance contracts of RenaissanceRe. These developments could adversely affect the company by imposing additional coverage obligations or increasing the number and size of claims. The company believes that recent periods have seen adverse impacts on their property results due to increasing fraud and abuses at the primary claims level, as well as other forms of social inflation. Assignment of benefits practices in Florida has led to larger and more frequent claims and litigation, directly affecting the company's policies and reducing the value of investments in Florida domestic reinsurers. The complexity of legal and social changes makes it challenging to predict the full extent of the company's liability, and exposure to uncertainties may grow with the expansion of their casualty business, which involves longer-tail lines where claims can be made over many years, making them more susceptible to emerging trends.  

Company History

Founding and Early Years (1993): RenaissanceRe Holdings Ltd. (RNR) was founded in 1993 by James Stanard and Stephen Velotti. The company emerged in response to a shifting landscape in the reinsurance market following Hurricane Andrew, a $16 billion loss event. At this time, there was a notable industry-wide withdrawal of capacity as reinsurers reduced their participation in the market. RNR, backed by a group of investors led by Warburg Pincus, seized the opportunity to establish itself as a Bermuda-based startup specializing in property catastrophe reinsurance in the U.S. and internationally.

Strategic Focus on Underwriting Excellence (1993-1995): RNR's early years were marked by a commitment to underwriting excellence through technology and exceptional human capital. With the strategic support of Warburg Pincus, the company focused on building a broad-based, offshore property reinsurer. RNR quickly became one of the largest underwriters of catastrophe reinsurance among its Bermuda peers, leveraging its innovative underwriting strategies and risk management practices.

IPO and Growth (1995-1996): In July 1995, RenaissanceRe successfully completed its initial public offering (IPO) on the New York Stock Exchange (NYSE). The IPO marked a significant milestone for the company, providing capital to support its operations and further growth. RNR's expansion continued as it became one of the most profitable reinsurers in the industry, achieving a strong position in the market.

Warburg Pincus Exit (2000): Warburg Pincus, an early investor and supporter of RNR's value proposition, remained an investor in the company for nearly seven years. In 2000, Warburg Pincus fully exited its position in RenaissanceRe, indicating confidence in the company's ability to stand independently and succeed in the reinsurance market.

Acquisition and Expansion (2015): In 2015, RNR completed a significant acquisition, purchasing Platinum Underwriters Holdings Ltd., a Bermuda-based reinsurer, for $1.9 billion. This strategic move aimed to expand RNR's presence in the global reinsurance market and enhance its underwriting capabilities, further solidifying its position as a market leader.

Joint Ventures and Corporate Social Responsibility: Throughout its history, RNR has actively engaged in establishing joint ventures to broaden its reach and capabilities. Notable ventures include Renaissance Re Syndicate Management Ltd. in the UK, serving the Lloyd's insurance market, and DaVinci Re Holdings Ltd., a joint venture with Deutsche Bank focused on providing reinsurance solutions.

In addition to its business operations, RNR has demonstrated a commitment to corporate social responsibility. The company has established a charitable foundation that supports various causes globally, including disaster relief, education, and healthcare.

References

1. ^ https://cbonds.com/news/2329972/
2. ^ https://www.insurancejournal.com/news/international/2023/11/01/746483.htm
3. ^ https://www.bloomberg.com/press-releases/2023-07-25/renaissancere-reports-q2-2023-net-income-available-to-common-shareholders-of-191-0-million-operating-income-available-to