Rate increases propel RenRe to Q2 profit turnaround

Bermuda-based re/insurer RenaissanceRe today reported it turned a $191 million profit in the second quarter, reversing a $324 million loss from a year ago.

The company saw improvements in all drivers of profitability, with investment income almost tripling from $107 million to $292 million while gross written premiums rose from $2.64 billion to $2.65 billion as the company benefited from the hard reinsurance market.

RenRe said its underwriting income rose from $316 million to $351 million while its combined ratio edged up to 80% from 78%.

Chief executive officer Kevin O’Donnell said: “RenaissanceRe delivered a strong quarter, distinguished by a 28.8% operating return on average common equity with robust underwriting income and record fee and net investment income.

“In addition, we accelerated our strategy by agreeing to purchase Validus Re, which brings us a large, diversified business in a favorable reinsurance market. In aggregate, our accomplishments this quarter demonstrate the effectiveness of our strategy and strengthen our foundation for delivery of shareholder value.”

RenRe announced in the quarter its agreement to buy Validus Re from American International Group for $2.985 billion. It also raised $2.09 billion through a share issuance and a $750 million bond issuance to finance the acquisition.

Claims in the quarter rose to $931 million from $706 million, as the company saw increases in claims from large loss events.

But this was partly offset by surges in the property income segment, which saw gross premiums written increased by $184.3 million, or 15.1%, driven by, with a $198.5 million increase in the catastrophe class of business, “primarily due to rate improvements on deals written in the second quarter of 2023 which were partially offset by a reduction of premiums written in Upsilon of $110.0 million.”

The company said property catastrophe net written premiums rose by $273.4 million or 54.9%, driven by significant rate increases and a reduction in ceded premiums written.

Property’s combined ratio edged up to 63% from 57%.

The casualty and specialty lines segment was largely flat, with GWP rising just 0.2% to $1.25 billion but underwriting income improved to $70 million from $51 million as claims fell.

Fees from RenRe associated companies DaVinci Re, Vermeer Re and the Medici Fund, all of which are active in the ILS sector, enjoyed a strong quarter as management fees and performance fees rose from $31 million and $3 million to $43 million and $13 million respectively.

RenRe said the overall rise from $34 million to $56 million was due to increased capital under management and improved underwriting results.

It said net income attributable to redeemable noncontrolling interests of $174.9 million was primarily driven by strong underwriting results for DaVinci and Vermeer, strong net investment income driven by higher interest rates and yields within the investment portfolios of the Company’s joint ventures and managed funds; and net realized and unrealised gains on catastrophe bonds recorded during the quarter in Medici.

It said the companies raised third-party capital of $350.5 million in the second quarter of 2023, including $170.5 million in Medici and $150 million in a newly formed segregated account focused on investing in insurance-linked securities (ILS), primarily catastrophe bonds.

It also redeemed $313 million in third-party capital, of which $285.6 million was from Upsilon Diversified Fund, as a result of the release of collateral associated with prior years’ contracts.