RenRe produces $1bn turnaround as it celebrates Validus Re purchase

RenaissanceRe, which this week closed its purchase of Validus Re from American International Group, said it made a more than $1 billion turnaround in the third quarter – producing net income of $194 million compared to a loss of $825 million in the same period in 2022.

However, the Bermuda-based re/insurer said gross written premiums declined 27% to $1.62 billion from $2.22 billion in 2022 as the company reduced underwriting in its property catastrophe and mortgage underwriting books.

Despite the decline  in GPW and in net premiums written (2023: $1.42 billion, 2022: $1.82 billion), the company reported underwriting income of $386 million compared to a loss of $683 million in the same period in 2022, and its combined ratio improved to 78% from 138%.

“In 2023, we continued to confidently execute our strategy and are pleased with the results we are achieving and excited about the future of our company,” said Kevin O’Donnell, chief executive officer.

“On November 1, 2023, we closed the acquisition of Validus Re, adding risk expertise and scale in a favourable market and building a solid foundation for the continued execution of our strategy.

“In addition, we reported strong results for the third quarter, delivering a 25.0% operating return on average common equity driven by significant contributions from each of our three drivers of profit – underwriting, fee and investment income.

“As we approach the January 1 renewals, we remain resolutely focused on executing our strategy as a unified company, retaining the Validus portfolio and capturing additional attractive growth opportunities that support our customers and deliver value for our shareholders.”

RenRe closed its $3.3 billion purchase of Validus Re from AIG this week.

The company said it suffered a $97 million loss on its underwriting result from large loss events, including the Hawaii wildfires and Hurricane Idalia along with earlier events in 2023 including the earthquake in Turkey, Cyclone Gabrielle and various wind and thunderstorm events in the US.

These sparked $113 million in claims, which was offset by the reinstatement of premiums earned and the payments from redeemable non-controlling interests.

RenRe’s property segment reported a 36% decline in GPW from $800.3 million to $511 million and an underwriting profit of $356 million compared to a $722 million loss in 2022 while the segment’s combined ratio was 53.2% compared to 186% in 2022.

The decline in GPW was driven by a $230.5 million decrease in the catastrophe class of business, largely due to a $236.5 million reduction in gross reinstatement premiums from lower weather-related large losses in the third quarter of 2023.

There was also a $58.8 million decrease in the other property class of business, primarily due to the non-renewal of certain catastrophe exposed quota share programs that did not meet the company’s return hurdles.RenRe’s casualty and specialty segment also saw a 22% decline in GPW, which fell to $1.1 billion from $1.4 billion. The segment’s underwriting profit also fell 13.2% from $39.5 million to $29.7 billion while the combined ratio edged up from 95.7% to 97%.

The company said the drop in GPW was largely due to a $226.7 million decrease in the credit class of business, “principally due to significant premium growth in the third quarter of 2022 associated with opportunistic deals written in the mortgage book of business, which do not renew annually and earn over several years”.

The segment had also seen positive adjustments to premium estimates in the third quarter of 2022 for business underwritten in prior years while premium growth in the other specialty class of business as compared to the third quarter of 2022 was offset by a decrease in the casualty classes of business, “reflecting proactive cycle management”.

However, the company’s fee income jumped in the period, rising to $64.6 million from $25.7 million as management fee income almost doubled from $25 million to $44.5 million and performance fee income ballooned from $739,000 to $20 million.

This was largely driven by increases capital managed by RenRe’s insurance linked securities vehicles while the performance fees were driven by current year underwriting results which were particularly strong for subsidiary DaVinciRe Holdings.

Investment results recorded a $580 million turnaround as net investment income improved to $329 million from $157 million and the company’s realised and unrealised gains decreased to a loss of $228 million from a $641 million loss in the third quarter of 2022.

The realised and unrealised losses were largely driven by interest rate increases while there were gains on catastrophe bonds of $32.5 million compared to losses of $127 million a year earlier, largely due to improvements in risk spreads in the wider market.

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