RenaissanceRe Holdings Ltd. reported a steep fall in first-quarter net income as it absorbed a US$702.8 million after-tax loss, largely attributed to California wildfires. The reinsurance company posted US$161.1 million in net income attributable to common shareholders, compared with US$364.8 million during the same period last year.
Despite the significant catastrophe-related impact, gross premiums written rose to US$4.16 billion from US$3.99 billion a year earlier. However, the company’s combined ratio, a key measure of underwriting profitability, deteriorated sharply to 128.3 from 77.9. Ratios above 100 indicate an underwriting loss.
“This quarter, we grew our primary metric, tangible book value per share plus accumulated dividends, against a backdrop of elevated natural catastrophe losses and significant macroeconomic volatility,” said Kevin J. O’Donnell, president and chief executive officer, in a statement.
RenaissanceRe recorded an annualized return on average common equity of 6.6% for the quarter. It also returned US$380 million to shareholders through share buybacks and dividends.
The California wildfires were a leading driver of the company’s losses this quarter. Speaking earlier this year, O’Donnell noted that the reinsurance market may see increased demand as a result of these events. However, he also emphasized the need for model revisions to account for growing catastrophe risks. Models will have to be updated to reflect a longer tail for such events in terms of both absolute dollar losses and return period, he said in a January conference call.
RenaissanceRe’s underwriting entities currently maintain Best’s Financial Strength Ratings of A+ (Superior) and A (Excellent).
Shares of RenaissanceRe Holdings Ltd. (NYSE: RNR) closed at US$239.96 on Wednesday, a decrease of 1.45% from the previous trading day.
In February, RenaissanceRe announced the pricing of a US$500 million offering of 5.800% senior notes due 2035. The company intends to use the net proceeds for general corporate purposes, which may include the redemption, repayment, or refinancing of certain indebtedness. The notes are expected to be rated A3 by Moody’s, BBB+ by S&P, and A- by Fitch Ratings.
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