RenaissanceRe grows in Q1 but warns of pricing pressure
RenaissanceRe enjoyed strong growth of almost 11 percent in the first quarter of 2014 driven by its Lloyd’s and specialty businesses. Its profits dipped, however, as its chief executive warned of pressure on pricing and available capital in the market outstripping demand.
The company made a net profit of $151.0 million in the quarter, a 20 percent decline on the same period the year before when it made $190.5 million. Its operating income for the period was $136.1 million compared with $176.2 million a year earlier. Its annualised return on equity was 17.6 percent compared with 24.3 percent the year before.
The company generated underwriting income of $151.3 million and a combined ratio of 47.2 percent in the first quarter of 2014, compared with $173.0 million and 36.2 percent in the first quarter of 2013, respectively. It said the decrease in underwriting income was primarily driven by a $21.0 million decrease in favourable development on prior accident years net claims and claim expenses to $16.7 million in the first quarter of 2014, compared to $37.6 million the first quarter of 2013.
The company enjoyed some good growth, however. Its gross premiums written hit $705.3 million in the quarter, an increase of $69.8 million, or 11 percent compared with the first quarter of 2013. It said the increase was primarily driven by its specialty reinsurance and Lloyd’s segments, which experienced growth in gross premiums written of $72 million and $9 million, respectively, or 87.4 percent and 12.1 percent respectively.
Its catastrophe reinsurance business saw a small decrease with gross premiums written hitting $467.7 million in the first quarter of 2014, a decrease of $11.1 million. It said this was primarily driven by reduced risk-adjusted pricing for the first quarter renewals.
Kevin O’Donnell, chief executive of RenaissanceRe, said: “We reported a solid first quarter, generating $151.0 million of net income, an annualized operating ROE of 15.9 percent and 2.8 percent growth in tangible book value per share plus accumulated dividends. Our results were driven by strong underwriting in each of our segments and good investment performance.”
O’Donnell added: “Pressure on pricing persists, as abundant supply from many forms of capital continues to outstrip demand. Despite the challenging environment, we are well positioned to bring efficient risk management solutions to clients and to build an attractive portfolio through our unique mix of owned rated balance sheets, non-owned rated balance sheets, and collateralized vehicles.”
