RenaissanceRe Holdings Ltd saw its net income drop by three quarters during the third quarter of 2011 as the volatility of the capital markets impacted the company’s investment portfolio.The re/insurer posted a profit of $49.3 million, or 95 cents per share, in the third quarter compared to $204.8 million. or $3.70 per share for the same period in 2010.Operating income was $32.7 million, or 62 cents per share, for the quarter versus $90.9 million, or $1.59 per share last year.The company reported an annualised return on average common equity of 6.6 percent and an annualised operating return on average common equity of 4.4 percent in the third quarter of 2011 compared to 25.4 percent and 11.3 percent, respectively, during the corresponding period in 2010.Book value per common share increased 59 cents, or one percent, in the third quarter to $57.89 versus a 6.3 percent rise in the third quarter of 2010.Neill Currie, CEO of RenaissanceRe, said: “Our insured catastrophe losses were relatively modest during the third quarter in a season that experienced a relatively large number of tropical storm formations.“On the other hand, there was notable volatility in the capital markets which adversely impacted our investment results. We reported $49.3 million of net income, $32.7 million of operating income and a one percent increase in book value per share in the quarter.”He continued: “We have been pleased to be there for our clients and brokers during this active year, paying valid claims with industry leading speed. During 2012, we will work closely with our clients to help them understand the effect of catastrophe modelling changes and the knowledge obtained from the recent events on their business.”During the quarter gross premiums written increased 25.5 percent, or $28.4 million, to $139.9 million, primarily due to $20 million of reinstatement premiums written principally from the February 2011 New Zealand earthquake ($15 million) and Hurricane Irene ($5.5 million), combined with improving market conditions in the company’s core markets.The re/insurer reported underwriting income of $83.2 million and a combined ratio of 63.7 percent compared to $71.3 million and 66.4 percent, respectively. This was positively impacted by an increase in net premiums earned and $12.9 million of underwriting income due to the net favourable development of certain major events occurring in prior periods, and negatively impacted by underwriting losses of $30.1 million and $24.7 million related to certain aggregate loss contracts and Hurricane Irene, respectively, which occurred in the third quarter of 2011.The third quarter of 2010 was negatively impacted by the September 2010 New Zealand earthquake, with the company incurring an underwriting loss of $80.2 million and adding 26.9 percentage points to the combined ratio. Favourable development on prior accident years was $8.6 million compared to $36.9 million.RenRe made a total investment loss of $18.6 million, including the sum of net investment losses, net realised and unrealised gains on investments and net other-than-temporary impairments in contrast to a total investment income of $148.5 million in the third quarter of 2010.The decrease in its investment results was primarily due to lower total returns on the fixed maturity investments portfolio, principally driven by a widening in credit spreads and a $19.2 million negative impact from derivatives and futures used to hedge the interest rate exposure of credit sensitive fixed maturity investments.