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RenRe profit soars on investment gains

Kevin O'Donnell, RenRe CEO

RenaissanceRe Holdings Ltd almost doubled its third-quarter profit to $146.8 million, helped by strong investment gains.

The Bermuda reinsurer’s net income broke down to $3.56 per share, compared to $75.5 million, or $1.66 per share in the same quarter of 2015.

Operating income of $87 million, or $2.09 per share fell short of the $2.19 per share consensus of analysts tracked by Yahoo Finance and fell from $116.7 million, or $2.58 per share last year.

Kevin O’Donnell, RenRe’s chief executive officer, said: “Our results benefited from a low level of insured catastrophe activity, favourable reserve development and mark-to-market investment gains.

“For the first nine months of the year, we have generated $411.1 million of net income and grown tangible book value per share by 9.5 per cent, after adjusting for dividends, while also returning almost $350 million of capital to our shareholders through share repurchases and dividends.”

He added: “Given where we are in the reinsurance cycle, we are executing our gross to net strategy, trading underwriting risk for fee income, and protecting our balance sheet for the long term.”

Gross premiums written of $430.2 million increased $60.6 million, or 16.4 per cent, compared to the third quarter of 2015, with the company’s Specialty Reinsurance and Lloyd’s segments experiencing increases of $56.5 million, or 26.4 per cent, and $18.4 million, or 25 per cent, respectively, partially offset by a decrease in the Catastrophe Reinsurance segment of $14.3 million, or 17.5 per cent.

Underwriting income was $112.9 million, while the combined ratio — the proportion of premium dollars spent on claims and expenses — was 67.4 per cent in the third, compared to 64.2 per cent in last year’s third quarter.

Favourable development on prior-year reserves fell to $45.8 million in the third quarter, from $70.4 million in the corresponding period of 2015.

The total investment result, which includes the sum of net investment income and net realised and unrealised gains on investments, was $111.2 million in the third quarter of 2016, compared to a loss of $13 million in the third quarter of 2015, an increase of $124.2 million.

RenRe said the improvement was driven by unrealised gains on equity investments that performed well during the quarter, as well as realised gains on the company’s fixed-maturity investment portfolio.

The company added that corporate expenses increased $4.2 million year over year to $11.5 million in the third quarter, primarily reflecting expenses associated with an executive retirement.