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RenRe underwriting loss widens to $679mn in Q3, the worst since 2017

RenaissanceRe logo Bermuda.jpg

The underwriting loss at RenaissanceRe grew to $679mn in the third quarter, from $206mn last year, as $727mn in net third-quarter catastrophe claims pushed the reinsurer to its worst earnings period since the third quarter in 2017.

On Monday, the Bermuda-based company said it generated a $8.98 per share operating loss in the third quarter, widening from the $2.64 per share loss last year. It amounted to a $415mn negative operating result, compared with $132mn in the year-ago period.

However, RenRe’s third-quarter results beat analysts’ forecasts of a $9.02 operating loss per share for the period.

The companywide combined ratio leapt to 145.1%, from 120.6%, driven by a deterioration of the reinsurer’s Q3 loss ratio to 119.4% from 94.2% a year earlier, despite a slight improvement in the expense ratio to 25.7% from 26.4%.

The company had previously reported it expected its earnings to be impacted by around $725mn in catastrophe claims, including $440mn in losses from Hurricane Ida and $210mn in claims from the flooding in Northwestern Europe in July.

The carrier’s cat losses were the worst since Q3 2017, when it recorded an underwriting loss of $793.2mn and a combined ratio of 244.8%, driven by hurricanes Harvey, Irma and Maria and the Mexico City earthquake. In that quarter, the company was hit with $625mn in net cat claims.

In the quarter just-ended, RenRe reported $1.3bn in gross cat losses – including $784mn from Hurricane Ida and $389mn from the European floods – but benefited from cessions to third-party capital vehicles as well as the collection of reinstatement premiums.

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Gallagher, Jamie (US)

Growth: Gross written premium in RenRe’s property segment surged 81% to $774mn, as its property cat business grew 87% to $156mn. The growth in cat business, however, came entirely from the uptick in reinstatement premiums due to cat activity.

The reinsurer said cat premiums would have declined, absent reinstatement premiums. Other property premiums were up 77%, to $190mn, which RenRe said was the result of rate improvements driving on new and existing business, pointing to cat-exposed US property excess and surplus lines business in particular.

Casualty and specialty premiums were 40% higher, primarily driven by growth in the professional liability, general casualty and other specialty lines of business.

Underwriting: The $682mn in property cat losses (moving the property segment’s combined ratio to 183.5% from 140%) overshadowed improvement within RenRe’s casualty and specialty book. The combined ratio for the casualty and specialty book moved down to 99.6% from 99.9% last year, generating a $3.1mn underwriting gain versus $0.5mn a year ago.

Its underlying loss ratio for the segment improved by 6.7 points to 69%, which was partially offset by a 3.5-point jump in its expense ratio. RenRe said the increase in the expense ratio – to 30.8% – came from higher profit commissions in its mortgage business. The property division’s expense ratio fell 4.2 points, to 21.4%.

Investments: Net investment income totaled $78mn, down $5mn from last year, owing to widening fixed income yields and weaker equity market performance.

Commentary: RenRe president and CEO Kevin J O’Donnell said: “This was another active season for natural catastrophes and while our results for the third quarter reflect this volatility, we have maintained a robust capital position and our business fundamentals remain strong.”

"While our results for the third quarter reflect this volatility, we have maintained a robust capital position and our business fundamentals remain strong. As we look forward to 2022, our fortress balance sheet provides us with great flexibility to create value for shareholders.”

“We believe we will have ample capacity to renew existing risk and underwrite new opportunities if sufficiently profitable, but are equally motivated to return excess capital to shareholders at what we consider very attractive multiples,” he concluded.

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