RenaissanceRe(RNR) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2018, the company grew its book value per share by 4% and tangible book value per share plus change and accumulated dividends by 6.4% [7] - The return on equity was reported at 4.7% and operating return on equity at 8.8% [8] - For the fourth quarter, the company reported a net loss of $84 million or $2.10 per diluted common share, while operating income was positive at $1.2 million or $0.02 per diluted common share [29] Business Line Data and Key Metrics Changes - The property segment saw gross premiums written grow by $320 million or 22% for the year, with a combined ratio of 75% [34][31] - The casualty segment's gross premiums written increased by $192 million or 14% for the year, but reported an underwriting loss of $17 million with a combined ratio of 102% [37][38] - The company experienced significant underwriting losses in both segments due to natural catastrophe events, particularly the California wildfires [38][49] Market Data and Key Metrics Changes - The company noted skepticism in the collateralized market's ability to reload for property renewals, with expectations of diminished third-party capital in 2019 compared to 2018 [17][20] - The January 1 renewal saw property reinsurance rates increase by 10% on average for loss-impacted business, while non-loss impacted business was flat to up 5% [56] Company Strategy and Development Direction - The company launched a new joint venture vehicle, Vermeer Re, which received an A.M. Best rating of A and aims to enhance its integrated system [12] - The acquisition of Tokio Millennium Re is expected to improve access to risk and scale platforms with minimal dilution to shareholders [13] - The company is focused on leveraging operational and capital efficiency while continuing to invest in underwriting capabilities and human capital [16] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with financial performance in a challenging year, highlighting the importance of strategic execution [11] - The company anticipates continued improvement in operational and capital leverage, particularly with the integration of Tokio Millennium Re [11][26] - Management expects the market to consolidate with a focus on high-quality managers, indicating confidence in future opportunities despite market challenges [75] Other Important Information - The company reported total fee income of $8.6 million for the quarter, down from the previous year due to loss performance fees [45] - Direct expenses totaled $212 million for the year, reflecting ongoing investments in the business [32] Q&A Session Summary Question: Internal assessment of excess capital from TMR transaction - Management is optimistic about a pre-closing dividend of at least $250 million and believes there is excess capital above this amount [67][70] Question: Pricing outlook and ILS capital - Management believes that capital allocated from the ILS market to the reinsurance market will be down in 2019 compared to 2018, but they are well-positioned to access business regardless [72][75] Question: Florida market expectations - Management indicated that Florida currently represents about 5% of gross written premiums and expects that percentage to decrease if rates do not improve [88] Question: Upside potential from TMR - Management confirmed that there is potential upside to the $100 million target from the TMR transaction, depending on various factors including investment performance [84] Question: Aggregate covers appetite - Management expressed confidence in selling aggregate covers, particularly to clients with whom they have strong relationships, despite some pressure on aggregate pricing [92]