RenRe’s hard market tango: profits jump even as premiums slide

RenaissanceRe increased its Q1 underwriting income 1.8x to $269.6 million even as its revenue counts drifted down as it leverages the hard market more to position for margin than volume.

Gross written premium (GWP) for the group drifted down in excess of 5% from the prior year read, but earnings shot north, benefitting from a reduction Q1 large loss, a notable downward revision in loss estimates from prior year periods and a return of investment earnings.

CEO Kevin O’Donnell (pictured) gave credit to “strong underwriting results, growing capital partners fees, and increased net investment income,” then declared a conviction that “we expect these three drivers of profit to continue to improve” on a continuation of what he considers an “attractive reinsurance market …. providing us with many opportunities to deploy additional capital as the year progresses.”

In the property segment, the $39 million or 2.9% decrease in GWP came as rate-driven gains in property cat lines were offset by non-renewals of cat-exposed quota share deals and lower premiums at collateralised ILS unit Upsilon. Net premiums were up reduced cessions.

Net written premiums just in property catastrophe were said to have grown by $214.7 million or 35.7%, led by “significant rate increases,” partially offset by reduced reinstatement premiums.

The property segment combined ratio ultimately came by a jaw-dropping 13.5 percentage points (pps) to 56.6% as reduced large loss events took 5.5 pps from the current year loss ratio and the company hacked down prior period reserves to the tune of 11.9 combined ratio points.

Large loss events rendered $81.5 million in net claims and loss expense and ultimately took $79.1 million from the property segment underwriting income tally.

Stated as underwriting income, the Q1 tally in property rose 61% or $113 million to $298.7 million.

In casualty and specialty, gross written premiums were down by a headier 7.1% or $113 million. Management cited decreases in casualty lines, principally professional liability. A reduction in retro cessions held the cut in net written premium to 2.4%.

The combined ratio in the casualty and specialty segment fell 5.3 pps to 92.9%, reflecting a 3.1 pps decline in the current year loss ratio and an increase in prior period reserve adjustments for another 2.3 combined ratio points.

Elsewhere on the P&L, asset management and performance fee income from the varied ILS operations rose $16.4 million and net investment income added $254 million to the Q1 tally, triple the prior year period and still ahead of the mass of realized and unrealized investment gains.

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