Bermuda-based reinsurer RenaissanceRe saw its first quarter earnings fall below expectations with net income declining 74 percent to $44.3 million from $168.87 million a year prior.

Despite the fall in profit, RenRe affirmed previous earnings guidance of $6.30 to $6.70 in earnings per share for 2005.

A major first quarter storm in northern Europe as well as other claims during the period were at fault for the fall in income, CEO James Stanard said.

The hit comes after RenRe - which sells large amounts of property catastrophe reinsurance - was significantly impacted by claims in the third quarter 2004 from unprecedented storm activity last year when a wave of hurricanes ripped through the Caribbean and Florida.

During the first quarter, 2005 the company also saw a decline in the level of reinsurance it sold. (See report card)

“Our first quarter profit was well below our expectations for a normal catastrophe quarter, as a result of European windstorm Erwin and various smaller events and expense items.

“With respect to premiums, the decline in catastrophe reinsurance was in line with our previously announced expectations. Specialty reinsurance premium came in light relative to our anticipation of ten percent growth, but we may be able to hit that growth target for the year. Individual Risk premium was relatively low in the first quarter, as previously indicated, although we have transactions in process for the second quarter that should support our growth expectation of 35 percent for the year. We are maintaining our earnings expectations for 2005, although there is more downside risk than upside potential,” Mr. Stanard said in an earnings statement last night.

RenRe said its earnings from stakes in joint ventures added a $7.6 million to the coffer in the first quarter of 2005 compared to $6.5 million in income in the first quarter of 2004.

Included in this is RenaissanceRe's equity in the earnings of the company's investments in Top Layer Reinsurance Ltd. and ChannelRe Holdings Ltd. for the first quarter of 2005.

RenRe said during the second quarter it planned to review its processes and assumptions used in establishing catastrophe reinsurance reserves - including the possibility of a reduction to its loss reserves, which the company warned could be a material development. RenRe will follow that review with similar ones into reserves for other lines of business later in 2005.

Operating expenses for the company increased to $18.8 million from $12.4 million year on year, with the company benefiting from an accrual for incentive compensation expense in the first quarter of 2004 that did not recur in 2005.

In February, RenRe announced it was restating three years of earnings to correct accounting errors relating to the “timing of the recognition of premium on multi-year ceded reinsurance contracts” with Inter-Ocean, a finite risk reinsurer in which it had a stake with several other large reinsurers. The effect of the restatement - which had a zero net impact - was to increase RenaissanceRe's 2003 net income by $1.3 million, reduce its 2002 net income by $21.9 million and increase its 2001 net income by $20.6 million, the company reported in a previous filing.

Inter-Ocean has since made public plans to run off its operations.