Yahoo Finance RenaissanceRe Reports Q4 2022 Net Income Available to Common Shareholders of $448.1 Million; Operating Income Available to Common Shareholders of $322.2 Million.
RenaissanceRe Reports Annual Net Loss Attributable to Common Shareholders of $1.1 Billion; Operating Income Available to Common Shareholders of $315.6 Million.
41.2% annualized return on average common equity and 29.6% annualized operating return on average common equity in Q4 2022.
Net investment income of $211.2 million in Q4 2022, 162.5% growth compared to Q4 2021.
21.2% growth in net premiums written in 2022; driven by 41.6% growth in Casualty and Specialty.
Casualty and Specialty combined ratio of 93.7% in Q4 2022 and 95.3% in 2022.
Raised $1.4 billion of third-party capital in the Capital Partners business in 2022, with a further $402.9 million raised from third-party investors effective January 1, 2023.
2022 Weather-Related Large Losses had an $807.6 million net negative impact on net loss attributable to common shareholders in 2022, and added 20.0 percentage points to the consolidated combined ratio.
PEMBROKE, Bermuda, January 31, 2023--(BUSINESS WIRE)--RenaissanceRe Holdings Ltd. (NYSE: RNR) ("RenaissanceRe" or the "Company") today announced its financial results for the fourth quarter and full year 2022.
Fourth Quarter 2022
Net Income Available to Common Shareholders per Diluted Common Share: $10.27 Operating Income Available to Common Shareholders per Diluted Common Share*: $7.33 | ||
Underwriting Income $316.3M | Fee Income $30.3M | Net Investment Income $211.2M |
Change in Book Value per Common Share: 10.7% Change in Tangible Book Value per Common Share Plus Change in Accum. Dividends*: 11.9% | ||
* | Operating Return on Average Common Equity, Operating Income (Loss) Available (Attributable) to Common Shareholders, Operating Income (Loss) Available (Attributable) to Common Shareholders per Diluted Common Share and Change in Tangible Book Value per Common Share Plus Change in Accumulated Dividends are non-GAAP financial measures; see "Comments on Regulation G" for a reconciliation of non-GAAP financial measures. |
Kevin J. O’Donnell, President and Chief Executive Officer, said, "We finished the year with an excellent quarter, reporting an annualized operating return on average common equity of 29.6% driven by strong underwriting results, significantly increased net investment income and stable management fees. For the full year, we delivered a 6.3% operating return despite a net negative impact of $807.6 million from catastrophe losses. At the January renewal we demonstrated leadership and discipline, achieving the step change in rate and terms investors required, while providing the reinsurance capacity customers needed. We enter 2023 with expectations of continuing strong demand for our products, ample capital to meet this demand, and anticipation of one of the most successful years in our history." |
Consolidated Financial Results - Fourth Quarter |
Consolidated Highlights | ||||||||
Three months ended | ||||||||
(in thousands, except per share amounts and percentages) | 2022 | 2021 | ||||||
Gross premiums written | $ | 1,585,276 | $ | 1,313,018 | ||||
Net premiums written | 1,345,616 | 1,116,560 | ||||||
Underwriting income (loss) | 316,302 | 276,661 | ||||||
Combined ratio | 80.5 | % | 79.4 | % | ||||
Net Income (Loss) | ||||||||
Available (attributable) to common shareholders | 448,092 | 210,917 | ||||||
Available (attributable) to common shareholders per diluted common share | $ | 10.27 | $ | 4.65 | ||||
Operating Income (Loss) (1) | ||||||||
Available (attributable) to common shareholders | 322,153 | 213,692 | ||||||
Available (attributable) to common shareholders per diluted common share | $ | 7.33 | $ | 4.71 | ||||
Book value per common share | $ | 104.65 | $ | 132.17 | ||||
Change in book value per share | 10.7 | % | 2.5 | % | ||||
Tangible book value per common share plus accumulated dividends (1) | $ | 123.81 | $ | 149.79 | ||||
Change in tangible book value per common share plus change in accumulated dividends (1) | 11.9 | % | 2.8 | % | ||||
Return on average common equity - annualized | 41.2 | % | 14.2 | % | ||||
Operating return on average common equity - annualized (1) | 29.6 | % | 14.4 | % | ||||
(1) | See "Comments on Regulation G" for a reconciliation of non-GAAP financial measures. |
Three Drivers of Profit: Underwriting, Fee and Investment Income - Fourth Quarter |
Underwriting Results - Property Segment: Combined ratio of 62.6%; 19.2 percentage points from weather-related large losses.
Property Segment | |||||||||||
Three months ended | Q/Q | ||||||||||
(in thousands, except percentages) | 2022 | 2021 | |||||||||
Gross premiums written | $ | 372,082 | $ | 384,657 | (3.3 | ) % | |||||
Net premiums written | 372,998 | 375,112 | (0.6 | ) % | |||||||
Underwriting income (loss) | 257,225 | 223,098 | |||||||||
Underwriting Ratios | |||||||||||
Net claims and claim expense ratio - current accident year | 53.8 | % | 43.8 | % | 10.0 pts | ||||||
Net claims and claim expense ratio - prior accident years | (18.9 | ) % | (4.9 | ) % | (14.0) pts | ||||||
Net claims and claim expense ratio - calendar year | 34.9 | % | 38.9 | % | (4.0) pts | ||||||
Underwriting expense ratio | 27.7 | % | 25.5 | % | 2.2 pts | ||||||
Combined ratio | 62.6 | % | 64.4 | % | (1.8) pts | ||||||
Gross premiums written decreased by $12.6 million, or 3.3%, driven by a reduction of $11.8 million within the catastrophe class of business primarily due to lower reinstatement premiums.
Net premiums written decreased by $2.1 million, or 0.6%, also reflecting lower reinstatement premiums.
Net claims and claim expense ratio - current accident year increased 10.0 percentage points, primarily due to the impacts of Winter Storm Elliott and Hurricane Nicole, as well as losses associated with aggregate loss contracts.
– Weather-related large losses contributed 19.2 percentage points to the current accident year net claims and claim expense ratio in the fourth quarter of 2022, compared to a contribution of 11.0 percentage points from weather-related large losses in the fourth quarter of 2021.
Net claims and claim expense ratio - prior accident years reflects net favorable development, primarily from weather-related large losses in the 2019 and 2021 accident years, driven by better than expected loss emergence.
Underwriting expense ratio increased 2.2 percentage points, driven by a lower performance-based compensation expense in the fourth quarter of 2021, in addition to lower management fees due to reductions in Upsilon and the portfolio of structured reinsurance products.
Underwriting income of $257.2 million and a combined ratio of 62.6%. Weather-related large losses had a $131.9 million net negative impact on the Property segment underwriting result and added 19.2 percentage points to the combined ratio in the fourth quarter of 2022.
Underwriting Results - Casualty and Specialty Segment: Combined ratio of 93.7% and growth in net premiums written of 31.2%.
Casualty and Specialty Segment | |||||||||||
Three months ended | Q/Q | ||||||||||
(in thousands, except percentages) | 2022 | 2021 | |||||||||
Gross premiums written | $ | 1,213,194 | $ | 928,361 | 30.7 | % | |||||
Net premiums written | 972,618 | 741,448 | 31.2 | % | |||||||
Underwriting income (loss) | 59,077 | 53,563 | |||||||||
Underwriting Ratios | |||||||||||
Net claims and claim expense ratio - current accident year | 64.9 | % | 63.9 | % | 1.0 pts | ||||||
Net claims and claim expense ratio - prior accident years | (2.7 | )% | (1.3 | )% | (1.4) pts | ||||||
Net claims and claim expense ratio - calendar year | 62.2 | % | 62.6 | % | (0.4) pts | ||||||
Underwriting expense ratio | 31.5 | % | 29.9 | % | 1.6 pts | ||||||
Combined ratio | 93.7 | % | 92.5 | % | 1.2 pts | ||||||
Gross premiums written increased 30.7% with growth across all lines of business. The increase reflects growth in new and existing business and rate improvement, mainly from business written in prior periods.
Net premiums written increased 31.2% consistent with the increase in gross premiums written.
Net claims and claim expense ratio - current accident year increased by 1.0 percentage point principally as a result of a large energy loss in the other specialty lines of business.
Net claims and claim expense ratio - prior accident years reflects higher favorable prior accident year loss development of 1.4 percentage points as compared to the fourth quarter of 2021, driven by favorable experience in other specialty and credit lines of business.
Underwriting expense ratio increased 1.6 percentage points, principally due to:
– Increase in the operating expense ratio of 0.9 percentage points mainly due to a lower performance-based compensation expense in the fourth quarter of 2021; and
– Increase in the net acquisition expense ratio of 0.7 percentage points due to changes in the mix of business and estimated profit commission expense.
Fee Income: $30.3 million of fee income; management fees stable while performance fees impacted by 2022 Weather-Related Large Losses.
Fee Income | ||||||||||
Three months ended | Q/Q | |||||||||
(in thousands, except percentages) | 2022 | 2021 | ||||||||
Total management fee income | $ | 25,984 | $ | 24,723 | $ | 1,261 | ||||
Total performance fee income (loss) (1) | 4,363 | 5,299 | (936 | ) | ||||||
Total fee income | $ | 30,347 | $ | 30,022 | $ | 325 | ||||
(1) | Performance fees are based on the performance of the individual vehicles or products, and may be negative in a particular period if, for example, large losses occur, which can potentially result in no performance fees or the reversal of previously accrued performance fees. |
Management fee income was relatively stable as compared to the fourth quarter of 2021, reflecting increased capital managed at DaVinciRe Holdings Ltd. ("DaVinci"), Vermeer Reinsurance Ltd. ("Vermeer"), RenaissanceRe Medici Fund Ltd. ("Medici"), and Fontana Holdings L.P. and its subsidiaries ("Fontana"), largely offset by reductions in the Company’s structured reinsurance products and Upsilon, as well as a deferral of management fees in DaVinci as a result of the weather-related large losses experienced in the current and prior years.
Performance fee income was lower in the fourth quarter of 2022 compared to the fourth quarter of 2021, and was affected by the cumulative impact of the catastrophe events in 2021 and 2022.
Investment Results: Total investment result improved $320.4 million; driven by 162.5% growth in net investment income and $168.1 million of net realized and unrealized gains in the fixed maturity investments portfolio.
Investment Results | |||||||||||
Three months ended | Q/Q | ||||||||||
(in thousands, except percentages) | 2022 | 2021 | |||||||||
Net investment income | $ | 211,237 | $ | 80,483 | $ | 130,754 | |||||
Net realized and unrealized gains (losses) on investments | 168,139 | (21,518 | ) | 189,657 | |||||||
Total investment result | $ | 379,376 | $ | 58,965 | $ | 320,411 | |||||
Total investment return - annualized | 7.4 | % | 1.1 | % | 6.3 pts | ||||||
Net investment income increased $130.8 million, primarily driven by:
– Rising interest rates and increased yields in the fixed maturity trading and short term investment portfolios;
– Higher yields on catastrophe bonds; and
– Higher average invested assets and yields in private credit fund investments.
Net realized and unrealized gains on investments increased $189.7 million principally driven by:
– Net realized and unrealized gains on fixed maturity investments trading of $77.1 million, which includes unrealized gains of $187.9 million resulting from the modest reduction in interest rates on medium-term U.S. treasuries, as well as a narrowing of credit spreads on the corporate and high yield fixed maturity portfolios, partially offset by realized losses of $110.8 million. This compares to net realized and unrealized losses of $101.0 million in the fourth quarter of 2021 resulting from increases in interest rates.
Total investments were $22.2 billion at December 31, 2022 (December 31, 2021 - $21.4 billion). Weighted average yield to maturity and duration on the Company’s investment portfolio (which excludes investments that have no final maturity, yield to maturity or duration) was 5.7% and 2.5 years (December 31, 2021 - 1.6% and 2.8 years, respectively).
Other Items of Note - Fourth Quarter |
Net income attributable to redeemable noncontrolling interests of $236.4 million was primarily driven by:
– Strong underwriting results for DaVinci and Vermeer;
– Strong net investment income stemming from higher interest rates and yields within the investment portfolios of the Company’s joint ventures and managed funds; and
– Net realized and unrealized gains on investments recorded during the quarter, as described above.
Raised third-party capital of $123.0 million in the fourth quarter of 2022, including $120.0 million in Vermeer.
Redemptions of third-party capital of $224.6 million from Upsilon during the fourth quarter of 2022, reducing the size of Upsilon as a result of the release of collateral associated with prior years’ contracts.
Consolidated Financial Results - Full Year |
Consolidated Highlights | ||||||||
Twelve months ended | ||||||||
(in thousands, except per share amounts and percentages) | 2022 | 2021 | ||||||
Gross premiums written | $ | 9,213,540 | $ | 7,833,798 | ||||
Net premiums written | 7,196,160 | 5,939,375 | ||||||
Underwriting income (loss) | 149,852 | (108,948 | ) | |||||
Combined ratio | 97.7 | % | 102.1 | % | ||||
Net Income (Loss) | ||||||||
Available (attributable) to common shareholders | $ | (1,096,578 | ) | $ | (73,421 | ) | ||
Available (attributable) to common shareholders per diluted common share | $ | (25.50 | ) | $ | (1.57 | ) | ||
Operating Income (Loss) (1) | ||||||||
Available (attributable) to common shareholders | $ | 315,556 | $ | 81,599 | ||||
Available (attributable) to common shareholders per diluted common share | $ | 7.30 | $ | 1.72 | ||||
Book value per common share | $ | 104.65 | $ | 132.17 | ||||
Change in book value per share | (20.8 | )% | (4.5 | )% | ||||
Tangible book value per common share plus accumulated dividends (1) | $ | 123.81 | $ | 149.79 | ||||
Change in tangible book value per common share plus change in accumulated dividends (1) | (20.6 | )% | (4.0 | )% | ||||
Return on average common equity | (22.0 | )% | (1.1 | )% | ||||
Operating return on average common equity (1) | 6.3 | % | 1.3 | % | ||||
(1) | See "Comments on Regulation G" for a reconciliation of non-GAAP financial measures. |
Net negative impact of the 2022 Weather-Related Large Losses
Net negative impact on underwriting result includes the sum of (1) net claims and claim expenses incurred, (2) assumed and ceded reinstatement premiums earned and (3) earned and lost profit commissions. Net negative impact on net income (loss) available (attributable) to RenaissanceRe common shareholders is the sum of (1) net negative impact on underwriting result and (2) redeemable noncontrolling interest, both before consideration of any related income tax benefit (expense).
The Company’s estimates of net negative impact are based on a review of our potential exposures, preliminary discussions with certain counterparties and actuarial modeling techniques. Our actual net negative impact, both individually and in the aggregate, may vary from these estimates, perhaps materially. Changes in these estimates will be recorded in the period in which they occur.
Meaningful uncertainty remains regarding the estimates and the nature and extent of the losses from these catastrophe events, driven by the magnitude and recent nature of each event, the geographic areas impacted by the events, 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.
Net negative impact on the consolidated financial statements
Year ended December 31, 2022 | Hurricane | Other 2022 | Aggregate | Total 2022 | ||||||||||||||
(in thousands) | ||||||||||||||||||
Net claims and claims expenses incurred | $ | (982,189 | ) | $ | (330,973 | ) | $ | (93,810 | ) | $ | (1,406,972 | ) | ||||||
Assumed reinstatement premiums earned | 221,801 | 27,138 | 52 | 248,991 | ||||||||||||||
Ceded reinstatement premiums earned | (57,913 | ) | (579 | ) | — | (58,492 | ) | |||||||||||
Earned (lost) profit commissions | (1,487 | ) | (1,285 | ) | (49 | ) | (2,821 | ) | ||||||||||
Net negative impact on underwriting result | (819,788 | ) | (305,699 | ) | (93,807 | ) | (1,219,294 | ) | ||||||||||
Redeemable noncontrolling interest | 286,910 | 87,398 | 37,399 | 411,707 | ||||||||||||||
Net negative impact on net income (loss) available (attributable) to RenaissanceRe common shareholders | $ | (532,878 | ) | $ | (218,301 | ) | $ | (56,408 | ) | $ | (807,587 | ) | ||||||
Net negative impact on the segment underwriting results and consolidated combined ratio
Year ended December 31, 2022 | Hurricane | Other 2022 | Aggregate | Total 2022 | ||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||
Net negative impact on Property segment underwriting result | $ | (811,828 | ) | $ | (302,080 | ) | $ | (93,807 | ) | $ | (1,207,715 | ) | ||||||
Net negative impact on Casualty and Specialty segment underwriting result | (7,960 | ) | (3,619 | ) | — | (11,579 | ) | |||||||||||
Net negative impact on underwriting result | $ | (819,788 | ) | $ | (305,699 | ) | $ | (93,807 | ) | $ | (1,219,294 | ) | ||||||
Percentage point impact on consolidated combined ratio | 13.4 | 4.9 | 1.5 | 20.0 | ||||||||||||||
(1) | "Other 2022 Catastrophe Events" includes the floods in Eastern Australia in February and March of 2022, Storm Eunice, the severe weather in France in May and June of 2022, Hurricane Fiona and the typhoons in Asia during the third quarter of 2022, and Hurricane Nicole and Winter Storm Elliott during the fourth quarter of 2022. | |
(2) | "2022 Weather-Related Large Losses" includes Hurricane Ian, Other 2022 Catastrophe Events and loss estimates associated with certain aggregate loss contracts triggered during 2022 as a result of weather-related catastrophe events. |
Three Drivers of Profit: Underwriting, Fee, and Investment Income - Full Year |
Underwriting Results - Property Segment: Combined ratio of 100.6%; 46.8 percentage points from the 2022 Weather-Related Large Losses.
Property Segment | |||||||||||
Twelve months ended | Y/Y | ||||||||||
(in thousands, except percentages) | 2022 | 2021 | |||||||||
Gross premiums written | $ | 3,734,241 | $ | 3,958,724 | (5.7 | ) % | |||||
Net premiums written | 2,847,659 | 2,868,002 | (0.7 | ) % | |||||||
Underwriting income (loss) | (16,109 | ) | (185,504 | ) | |||||||
Underwriting Ratios | |||||||||||
Net claims and claim expense ratio - current accident year | 81.2 | % | 91.9 | % | (10.7) pts | ||||||
Net claims and claim expense ratio - prior accident years | (7.4 | )% | (9.0 | )% | 1.6 pts | ||||||
Net claims and claim expense ratio - calendar year | 73.8 | % | 82.9 | % | (9.1) pts | ||||||
Underwriting expense ratio | 26.8 | % | 24.2 | % | 2.6 pts | ||||||
Combined ratio | 100.6 | % | 107.1 | % | (6.5) pts | ||||||
Gross premiums written decreased 5.7%, driven by:
– Decrease in the catastrophe class of business of $159.0 million, or 7.1%, principally driven by lower reinstatement premiums in 2022 compared to 2021, as well as the reduction in the size of Upsilon over the course of the year.
– Decrease in the other property class of business of $65.5 million, or 3.8%, principally due to the non-renewal of certain deals, partially offset by growth and rate improvement across other areas within the other property class of business.
Ceded premiums written were $886.6 million, a decrease of $204.1 million, or 18.7%. This decrease was primarily driven by:
– The reduction in gross premiums written in Upsilon, which are largely ceded to third party investors.
– A reduction in retrocessional purchases as part of the Company’s gross-to-net strategy, in conjunction with the growth in managed third-party capital vehicles.
Net claims and claim expense ratio - current accident year improved by 10.7 percentage points, primarily as a result of a lower impact from the 2022 Weather-Related Large Losses as compared to the impact of weather-related large losses in 2021.
The net claims and claim expense ratio - prior accident years reflected net favorable development of 7.4%, primarily related to weather-related large losses in the 2017 to 2021 accident years.
Underwriting expense ratio increased 2.6 percentage points, driven by a lower performance based compensation expense in 2021, in addition to lower management fees due to reductions in Upsilon and the portfolio of structured reinsurance products.
Underwriting loss of $16.1 million and a combined ratio of 100.6%, primarily driven by the 2022 Weather-Related Large Losses, which had a $1.2 billion net negative impact on the Property segment underwriting result and added 46.8 percentage points to the combined ratio.
Casualty and Specialty Segment: Net premiums written increased by 41.6%; Combined ratio of 95.3%
Casualty and Specialty Segment | |||||||||||
Twelve months ended | Y/Y | ||||||||||
(in thousands, except percentages) | 2022 | 2021 | |||||||||
Gross premiums written | $ | 5,479,299 | $ | 3,875,074 | 41.4 | % | |||||
Net premiums written | 4,348,501 | 3,071,373 | 41.6 | % | |||||||
Underwriting income (loss) | 165,961 | 76,556 | |||||||||
Underwriting Ratios | |||||||||||
Net claims and claim expense ratio - current accident year | 65.5 | % | 66.9 | % | (1.4) pts | ||||||
Net claims and claim expense ratio - prior accident years | (1.1 | )% | (0.7 | )% | (0.4) pts | ||||||
... | |||||||||||
