RenaissanceRe Holdings Ltd. (RNR)

RNR 
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RenaissanceRe Holdings Ltd. (RNR)

Q3 2012 Earnings Call

November 2, 2012 11:00 AM ET

Executives

Peter Hill – IR

Neill Currie – President and CEO

Kevin O’Donnell – EVP and Global Chief Underwriting Officer

Jeff Kelly – EVP and CFO

Analysts

Mike Zaremski – Credit Suisse

Sarah DeWitt – Barclays

Greg Locraft – Morgan Stanley

Amit Kumar – Macquarie

Vinay Misquith – Evercore Partners

Jay Cohen – Bank of America Merrill Lynch

Josh Stirling – Sanford Bernstein

Mike Nannizzi – Goldman Sachs

Seth Bienstock – TimesSquare Capital

Ian Gutterman – Adage Capital

Presentation

Operator

Good afternoon. My name is Gina and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe Third Quarter 2012 Financial Results Conference Call. (Operator Instructions) Thank you. Mr. Peter Hill, you may begin your conference.

Peter Hill

Thank you, and thank you all for joining our Third Quarter 2012 Financial Results Conference Call. Yesterday, after the market closed, we issued our quarterly release. If you didn’t receive a copy, please call me at 212-521-4800, and we’ll be sure to provide you with one.

There will be an audio replay of the call available from approximately 1:00 p.m. Eastern Time today through midnight on November 23. The replay can be accessed by dialing 855-859-2056 or 404-537-3406. The passcode you will need for both numbers is 39721045. Today’s call is also available through the Investor Information section of www.renre.com and will be archived on RenaissanceRe’s website through midnight on January 12, 2013.

Before we begin, I’m obliged to caution that today’s discussion may contain forward-looking statements and actual results may differ materially from those discussed. Additional information regarding these factors shaping the outcomes can be found in RenaissanceRe’s SEC filings, to which we direct you.

With me to discuss today’s results are Neill Currie, Chief Executive Officer; Jeff Kelly, Executive Vice President and Chief Financial Officer, and Kevin O’Donnell, Executive Vice President and Global Chief Underwriting Officer.

I’d like to turn the call over to Neill. Neill?

Neill Currie

Great. Thanks, Peter. Good morning, everyone. Thank you for changing your schedule to be able to join us this morning. We hope that our postponement of the call until today is more convenient for you particularly those in the Northeast and will enable more listeners to participate today. Our thoughts, today, of course, are with all those who have been and continue to be affected by Sandy. It’s a terrible tragedy and I guess the only good news is maybe there’ll be learnings for other people going forward.

I’d like to comment on this event before going on to discuss our third quarter results. Sandy’s appearance at this late stage of the Atlantic hurricane season has reminded people of the constant potential that exists for severe events and the value of being prepared. This season turned out to be quite active with 19 named storms, 10 hurricanes and one major hurricane.

Public forecasts for 2012 under predicted the level of overall activity in the Atlantic Basin but correctly indicated that the number of major hurricanes would be below normal. As Sandy has underscored, though, seasonal forecasts like models are only a guide, ultimately shorter-term atmospheric conditions dictate hurricane tracks and the potential for catastrophic landfalls always remains present even in low-activity years.

As we all know now, there were factors such as the sheer size of the wind field and the combination of a full moon and high tide that contributed to making this storm so unusual. But it’s important to note that the scale and the nature of the loss was not unusual. In fact, we have considered the potential effects of hurricane wind and surge on the Northeastern U.S. for some time now in our modeling of tropical systems in the Atlantic Basin.

Right now, we are applying detailed wind and flood footprints of this storm against our book of business to quantify the loss we have incurred. While it’s too early to give you an estimate at this time, as soon as we have a high-degree of confidence as for our estimated net financial impact, we will provide an update. I can tell you, though, that our expectation is that this loss is an earnings event, not a capital event, and will reduce fourth quarter earnings. Of course, there are always learnings from every event and we are working hard to refine our models and to share information with our clients.

Turning to our third quarter results now and the focus of this call, at the close of business yesterday, RenRe posted operating income of $104 million for the quarter and net income of $181 million. I’m pleased to report we increased our tangible book value per share plus accumulated dividends by 5.3% for the quarter and 16.6% year-to-date.

Our results reflected relatively light insured Cat losses, solid overall underwriting performance, and strong returns from our investment portfolio. We have been busy gearing up for the January 1 renewal season and are having productive meetings. Our focus remains on constructing an attractive and efficient portfolio of business and we continue to be assisted in our efforts by our strong relationships with customers and brokers and our industry-leading risk modeling and risk management capabilities.

The market conditions we talked about on our last call continue to play out. We mentioned in the second quarter that we believed we might be coming to a culmination of the dynamics that had increased demand for property catastrophe coverage. In particular, the markets’ absorption of RMS 11 and the impact of catastrophic losses of 2010 and 2011. At this point, we believe those dynamics have been fully absorbed by the market. We currently don’t believe that Hurricane Sandy will impact supply and it remains to be seen whether it will change demand including market perceptions of risk.

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