Bermuda-based reinsurer RenaissanceRe Holdings has fallen to a net loss of $325 million in the second quarter of 2022, as the macro financial market environment drove a negative investment result, somewhat offset by a solid underwriting performance in the period.
While net investment income rose by more than $26 million to $107 million on the back of higher investment yields, RenRe has reported net realised and unrealised losses on investments of more than $654 million in Q2, driven by the increase in interest rates and broad equity market declines.
As a result, the reinsurer’s net result deteriorated year-on-year, from income of $457 million in Q2 2021 to a loss of $325 million in Q2 2022.
However, on the underwriting side of the balance sheet, it was another strong quarter for the Bermudian with RenRe posting Q2 2022 underwriting income of $316 million, against $329 million in Q2 2021, resulting in a combined ratio across the business of 78.3%, which is up slightly on Q2 2021’s 72.4%.
All in all, RenRe has reported gross premiums written (GPW) of $2.5 billion and net premiums written (NPW) of $1.9 billion for Q2 2022, compared with GPW of $2.1 billion and NPW of $1.5 billion a year earlier.
Within the impressive underwriting result, the reinsurer has reported a strong performance in all segments, including property, which experienced relatively low catastrophe activity in the period. In this part of the business in Q2 2022, RenRe has announced GPW growth of nearly 3% to $1.2 billion, NPW growth of 10.5% to $888 million, and underwriting income of $265 million, which is down on last year’s $315 million.
RenRe attributes the growth in GPW to an improving rate environment as well as new opportunities within the property catastrophe class of business. In terms of the NPW growth, the firm notes a reduction in ceded premiums written due to lower levels of retrocessional purchase as part of its gross-to-net strategy.
The property segment’s combined ratio weakened by 13.8 percentage points, year-on-year, but remained strong at 57.6%, comprised of a 30% underwriting expense ratio, and a 27.6% net claims and claims expense ratio.
In its casualty and specialty business, GPW and NPW increased by 37% and 38%, respectively, in Q2 2022, as underwriting income jumped from $14 million in Q2 2021 to $52 million this year. The segment’s combined ratio strengthened by 4 percentage points to 93.8%, and is comprised of a lower underwriting expense ratio of 29.6%, and a lower net claims and claim expense ratio of 64.2%.
In this part of the business, RenRe says that the GPW growth was mainly seen in the professional liability and financial lines classes of business, driven by both new and existing business written in the current and prior periods, as well as rate improvements.
In terms of fee income, RenRe has reported a decline from $46 million in Q2 2021 to $34 million in Q2 2022. Management fee income, which declined slightly to $30.7 million, saw reductions in the firm’s structured reinsurance products and lower capital managed at Upsilon, largely offset by increased capital managed at DaVinciRe Holdings, Vermeer Reinsurance, Medici, and Fontana Holdings L.P. and its subsidiaries, which was launched in Q2 2022.
Performance fee income also declined, year-on-year, to $3.6 million, and continues to be impacted by deficit carried forward from the weather-related losses in 2021 in the current period, says the reinsurer.
At the same time, RenRe did raise capital of $567.7 million in the second quarter of 2022 through its Medici fund and the previously announced launch of Fontana, including $136.3 million from the firm.
The company’s President and Chief Executive Officer (CEO), Kevin O’Donnell, commented: “We reported a strong quarter, with continuing top line growth and solid operating profitability demonstrating the power of our diversified platform. Our financial results were driven by strong performance across both underwriting segments, a significant increase in net investment income and an expanding Capital Partners business.
“We are pleased with our 18.4% annualized operating return on average common equity during the quarter, and are confident that our consistent strategy, leadership in a strengthening market and robust capital position will enable us to continue maximizing shareholder value.”