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RenRe raises forecasts on strong cat demand

Bermudian firm RenaissanceRe Holdings Ltd (RenRe) has upped its estimates for catastrophe reinsurance business after writing more premiums than expected in the first half of the year.

The reinsurer slashed its targets in the aftermath of legislation to expand the Florida Hurricane Catastrophe Fund earlier this year, forecasting a 15 percent decline in its managed catastrophe premiums.

But in its second quarter results yesterday (31 August) RenRe said it now expects the business to fall just 5 percent against 2006 as a result of “better than expected” renewals in the period. It was a further indication that catastrophe reinsurance demand in 2007 has remained strong despite fears that increased capacity, Florida’s actions and the trend for higher retentions would damage the prospects for the industry’s specialist (re)insurers.

RenRe also projected a 35 percent rise in specialty reinsurance premiums in 2007 – where previously it had forecast flat growth – following a single large transaction in the second quarter.

The improved outlook came as the reinsurer reported $194.7mn operating profit for the second quarter, up from the $154.8mn booked in the prior-year period.

Net profits were $183.2mn, up against $130.4mn, generated from gross premiums written that rose $103.3mn to $845.9mn for the quarter.

The specialty reinsurance win – an assumed portfolio transfer of a personal lines property quota share contract for $75.4mn premiums – and a $49.7mn favourable development in prior-year reinsurance reserves were offset by catastrophe losses from the UK floods in the quarter, and general market softening.

RenRe said it had booked $53mn of net claims and claim expenses from the flooding, resulting in a net negative impact of $41.4mn.

The company reported annualised operating return on equity of 28 percent, and 5.9 percent growth in book value per share in the period.

The reinsurer’s CEO Neill Currie commented: “Through the first six months, we have written more property catastrophe reinsurance and less individual risk insurance than originally contemplated. I'm very pleased with the in-force portfolio of risks that our team has constructed.”

RenRe also confirmed the renewal of its Starbound II sidecar vehicle in the quarter, as previously reported by The Insurance Insider.

The reinsurer holds a $10mn, or 9.8 percent, stake in the $375mn fully-collateralised joint venture, ceding additional property catastrophe premiums to the vehicle.

Separately, RenRe’s compatriot Endurance Specialty Holdings Ltd reported net profits of $135.5mn for the second quarter, more than doubling the $64.1mn it posted in the prior-year period as it continued its drive in specialty business.

For the first half, net profits were $237.2mn, compared to $171.1mn in the first six months of 2006.

The “Class of 2001” (re)insurer saw second quarter total premiums up 5.9 percent on the prior-year period to $526.8mn, but six-month premiums down 5.5 percent to $1.1bn.

The company has been growing its insurance business, with premiums up from $239.4mn in the first half of 2006 to $345mn, driven by continued development of its workers’ compensation line. At the same time its reinsurance business has been contracting, with premiums of $758.3mn in the six months to 30 June, down from $928.5mn in the prior-year period.

Net investment income was up 30.3 percent to $78.5mn in the quarter, and up 25.9 percent to $153.4mn in the half-year period.

The company’s chairman and CEO Ken LeStrange said: “Our specialty focus continues to generate strong underwriting results, and we believe this specialty focus has allowed us to create a portfolio that is will balanced between risk and reward.”

He said the company would continue to look to identify new business, as well as being “proactive in non-renewing business that no longer meets our underwriting requirements”.

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