RenaissanceRe(US:RNR)2022-01-26 20:03Financial Data and Key Metrics Changes - The company reported an annualized operating return on average common equity of 14.4% for Q4 2021, despite a net negative impact of $53 million from weather-related large losses [18] - For the full year, the operating return on average common equity was 1.3%, which was considered disappointing due to elevated catastrophe losses and low interest rates [8][18] - Net premiums written increased by $1.8 billion, or 45%, reaching $5.9 billion for the year [22][27] Business Line Data and Key Metrics Changes - The Property segment grew gross written premiums by 32%, with other property up 55% and property catastrophe up 18% [31] - The Casualty segment reported a growth in gross written premiums of 38% from the prior year, with a current accident year loss ratio of 67% and a combined ratio of 97% [29][30] - The company achieved an underwriting gain of $277 million in Q4 2021, with a current accident year loss ratio of 55% and a combined ratio of 79% for the quarter [25][27] Market Data and Key Metrics Changes - The insurance industry faced its fifth consecutive year of elevated catastrophe losses, exceeding $100 billion in insured losses [4] - Rates on Property CAT treaties increased by 5% to 20% for U.S. business, with aggregate covers up between 15% and 30% [41] - The company noted a significant dislocation in the Property retro market, with quota share capacity down meaningfully [43] Company Strategy and Development Direction - The company aims to focus on capital management and profit maximization in 2022, having increased net premiums written by 75% over the last few years [7][12] - The strategy includes optimizing the portfolio, improving customer relationships, and enhancing risk selection and capital management [10][12] - The company is committed to its ESG strategy, focusing on climate resilience, closing the protection gap, and inducing positive societal change [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in improving financial performance in 2022, expecting to earn more on investments and grow the fee-generating Capital Partners business [9][24] - The company is monitoring inflation closely, adjusting its models to account for increased rebuilding costs due to rising wages and commodity prices [49] - Management believes that the strong growth and portfolio optimization implemented in 2021 will benefit shareholders in 2022 and beyond [50] Other Important Information - The company returned over $1 billion of capital to shareholders in 2021, including share repurchases and dividends [22][23] - The company raised over $663 million across its joint ventures in preparation for the 2022 renewal [34] Q&A Session Summary Question: Can you provide more details on the return profile of the business written at January 1? - Management indicated that the focus was on optimizing the portfolio rather than just writing more business due to rate increases, resulting in a more efficient portfolio [52][54] Question: What are the implications of the potential capital changes put forth by S&P? - Management noted that while the internal model is crucial, they are assessing the effects of the new S&P model on their balance sheets and market opportunities [56][58] Question: Can you clarify the expectations for the Property book and the improvements made? - Management explained that while the Property book is expected to be broadly flat, they are being paid more for the same level of risk, reflecting an elevated view of risk [62][64] Question: How do you see the demand for casualty reinsurance changing? - Management anticipates a continuing trend of rate increases at a decelerating rate, with potential pressure on ceding commissions if rates flatten [80][82] Question: What is the outlook for alternative capital and investor demand? - Management expressed that while there may be skepticism towards more volatile funds, opportunities for third-party capital remain, particularly in CAT bonds [85][86]