RenRe CEO praises ‘best market in years’

Renaissance Re CEO Kevin O'Donnell said during the reinsurer’s second quarter 2018 earnings call that he sees “reasonable tailwind” for business.

“This is the best market we have seen in years,” O'Donnell said.

“This quarter you saw what a reasonable tailwind can do for our results,” O'Donnell said.

The Bermudian reinsurer made a net profit of $191.8 million in the second quarter compared with $171.1 million in the second quarter of 2017. Gross written premiums increased by 18.1 percent year on year, or $149.9 million to $977.3 million in the second quarter, driven by increases of $96.6 million in the casualty and specialty segment and $53.3 million in the property segment.

In casualty, growth was principally due to selective growth from new business opportunities within the general casualty, financial lines and other specialty classes of business.

The increase in gross premiums written in the “other property” class of business was primarily driven by growth in the Lloyd’s underwriting platform.

“Long ago we recognized the changes to our market are more secular than cyclical due to the increasing efficiency of the reinsurance marketplace,” O'Donnell said. While admitting that better pricing makes things easier, O'Donnell said that the current market also requires great underwriting, intelligent portfolio construction, great partners as well as the ability to deploy all forms of capital.

He attributed the pessimism in the market to an exaggerated focus on price.

“We have more tools at our disposal to aid us in building efficient portfolios of risk,” O'Donnell said. “Although we seek rate increases we are not dependent upon them to produce superior returns,” he added.

Chief financial officer Bob Qutub noted that RenRe’s performance in the second quarter was driven by favourable prior year development from the 2017 catastrophe events, higher net earned premiums from targeted top line growth over the past year and continued operating efficiency.

RenRe benefitted from a reversing of about $31.2 million of reinstatement premiums that had previously been booked in the third quarter of 2017.

Overall, the company posted underwriting income of $226.6 million and a combined ratio of 47.2 percent in the second quarter of 2018, compared with $109.7 million and 71.3 percent, respectively, in the second quarter of 2017.

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