RenaissanceRe sees profits rise but warns over 2017 loss estimates

25-07-2018

RenaissanceRe Holdings has reported increased profits in its second quarter 2018 results, but has added the caveat that ‘meaningful uncertainty’ existed around claims from losses from 2017.

The company said that net income for the second quarter of the year came to $191.8 million, up on the $171.1 million it made in the second quarter of 2017. Operating income $209.6 million in the second quarter of 2018, compared to $116.8 million in the second quarter of 2017.

“We celebrated our 25th anniversary as a company this quarter, and I am proud to report very strong results,” said Kevin J. O'Donnell, chief executive officer. “We recorded annualised operating return on average common equity of 20.3 percent and growth in tangible book value per common share plus accumulated dividends of 4.9 percent. I am especially pleased that we were also able to construct our best portfolio of risk in years. Moving forward, a combination of top line growth, an effective gross-to-net strategy, rising interest rates and improved operational efficiency should provide the foundations for continued superior shareholder return.”

Gross premiums written increased by $149.9 million, or 18.1 percent, to $977.3 million, in the second quarter of 2018, compared to the second quarter of 2017, driven by increases of $96.6 million in the casualty and specialty segment and $53.3 million in the property segment. Gross premiums written in the property segment included a $31.4 million reduction in assumed reinstatement premiums written.

Underwriting income of $226.6 million and a combined ratio of 47.2 percent in the second quarter of 2018, compared to $109.7 million and 71.3 percent, respectively, in the second quarter of 2017. Decreases in the estimates of the net negative impact of the 2017 catastrophe events resulted in a net positive impact on the underwriting result of $92.0 million, and a corresponding reduction in the combined ratio of 23.5 percentage points, in the second quarter of 2018, principally within the company’s property segment.

However, net negative impact includes the sum of estimates of net claims and claim expenses incurred, earned reinstatement premiums assumed and ceded, lost profit commissions and redeemable noncontrolling interest. The company said that it’s estimates of net negative impact are based on a review of its potential exposures, preliminary discussions with certain counterparties and catastrophe modelling techniques. The company’s actual net negative impact, both individually and in the aggregate, will vary from these estimates, perhaps materially. Changes in these estimates will be recorded in the period in which they occur.

RenaissanceRe stated that: “Meaningful uncertainty remains regarding the estimates, and the nature and extent of the losses, associated with Hurricanes Harvey, Irma and Maria, the Mexico City Earthquake, and the Q4 2017 California Wildfires, driven by the magnitude and recent occurrence of each event, relatively limited claims data received to date, the contingent nature of business interruption and other exposures, potential uncertainties relating to reinsurance recoveries and other factors inherent in loss estimation, among other things. Seismic events generally have longer development periods than windstorm events, which may be amplified in certain instances by dynamics such as the risk of geological liquefaction and the potential for uncertainty in claims adjudication.”

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