RenaissanceRe Sees Q4 Operating Loss of $207M

Bermuda-based RenaissanceRe Holdings Ltd. reported a net operating loss attributable to common shareholders of $206.9 million in the fourth quarter of 2005, principally reflecting a $313.9 million net negative impact from hurricane Wilma.

These results compared to net operating income available to common shareholders of $188.6 million reported for the fourth quarter of 2004. Net operating (loss) income excludes net realized investment losses of $3.5 million in the fourth quarter of 2005 and net realized investment gains of $2.8 million in the fourth quarter of 2004.

Net operating loss per common share was $2.92 in the fourth quarter of 2005, compared to net operating income per common share of $2.62 in the fourth quarter of 2004. Net loss attributable to common shareholders was $210.4 million or $2.97 per common share in the quarter, compared to net income available to common shareholders of $191.5 million or $2.66 per common share for the same quarter of 2004.

Neill Currie, CEO, commented: “For the first time in our corporate history, we’ve had an operating loss for the year, which was chiefly the result of the very active hurricane season. While disappointing from a financial perspective, 2005 demonstrated the value that Renaissance delivers to its customers–through rapid and reliable claims payment, through our capacity to price and bind contracts in all market conditions and through the strength of our balance sheet.

“For 2006, we are projecting operating EPS of $6.50 to $7.00, reflecting an operating return on equity of approximately 25%, assuming normal loss activity. This projection assumes over 15% growth in managed catastrophe premiums, 15% growth in individual risk premiums, and a 35% decline in specialty reinsurance premiums compared to normalized levels of premiums for 2005. While market conditions are not as attractive as we had hoped in specialty reinsurance, we saw many opportunities in our catastrophe reinsurance business this renewal season, and expect to see more opportunities in both catastrophe reinsurance and in individual risk over the course of 2006.”

Hurricane Wilma resulted in a $313.9 million net negative impact to the company and reflects an increase from the company’s prior initial estimate of $250 to $300 million. The company’s Reinsurance segment was negatively impacted by $258.6 million and its Individual Risk segment was negatively impacted by $55.3 million.

Gross premiums written for the fourth quarter of 2005 were $288.5 million, compared to $163.8 million for the same quarter of 2004. Gross premiums written include $134.6 million in gross premiums written for the company’s Reinsurance segment in the fourth quarter of 2005, compared to $58.2 million for the same quarter of 2004; and $153.9 million in gross premiums written for the company’s Individual Risk segment in the fourth quarter of 2005, compared to $105.5 million for the same quarter of 2004.

Gross premiums written in the Reinsurance segment include $71.3 million in reinstatement premiums written as a result of the 2005 hurricane losses. During the same period in 2004, gross premiums written in the Reinsurance segment included $10.4 million in reinstatement premiums written in the Reinsurance segment as a result of the 2004 hurricane losses.

Net premiums written for the fourth quarter of 2005 were $249.5 million, compared to $143.9 million for the same quarter of 2004. Net premiums written include $137.1 million in net premiums written for the company’s Reinsurance segment in the fourth quarter of 2005, compared to $51.0 million for the same quarter of 2004; and $112.4 million in net premiums written for the company’s Individual Risk segment in the fourth quarter of 2005, compared to $92.9 million for the same quarter of 2004.

Net premiums earned for the fourth quarter of 2005 were $414.1 million, compared to $331.3 million for the same quarter of 2004. Net premiums earned include $309.8 million in net premiums earned for the company’s Reinsurance segment in the fourth quarter of 2005, compared to $230.8 million for the same quarter of 2004; and $104.3 million in net premiums earned for the company’s Individual Risk segment in the fourth quarter of 2005, compared to $100.6 million for the same quarter of 2004.

Premiums for the fourth quarter of 2005 include $24.5 million of gross premiums written, $36.0 million of net premiums written and $85.2 million of net premiums earned by the company’s consolidated joint venture, DaVinci Reinsurance Ltd. (“DaVinci Re”), during the fourth quarter of 2005, compared to $6.4 million of gross premiums written, $7.2 million of net premiums written and $48.6 million of net premiums earned by DaVinci Re during the fourth quarter of 2004.

For the fourth quarter of 2005, the company generated a combined ratio of 183.0%, a loss ratio of 160.0% and an expense ratio of 23.0%, compared to a combined ratio, loss ratio and expense ratio of 58.1%, 37.7% and 20.4% for the fourth quarter of 2004, respectively.

The company’s Reinsurance segment generated a loss ratio of 184.7% and an expense ratio of 14.7% for the fourth quarter of 2005, compared to a loss ratio and an expense ratio of 22.6% and 16.6%, for the fourth quarter of 2004, respectively. The fourth quarter 2005 Reinsurance loss ratio was negatively impacted by hurricane Wilma which added 134.5 percentage points to the Reinsurance loss ratio. In addition, the Reinsurance segment recorded an additional $20.4 million of ceded premium earned attributable to hurricane Wilma, which negatively impacted the Reinsurance loss ratio by 11.4 percentage points and the expense ratio by 0.9 percentage points.

For the quarter, the company’s Individual Risk segment generated a loss ratio of 86.4% and an expense ratio of 47.6%, compared to a loss ratio and an expense ratio of 72.2% and 29.4%, for the fourth quarter of 2004, respectively. The fourth quarter 2005 Individual Risk loss ratio was negatively impacted by hurricane Wilma which added 32.2 percentage points to the Individual Risk loss ratio. The fourth quarter 2005 Individual Risk loss ratio was favorably impacted by the Individual Risk reserve review (as discussed below) by 1.1 percentage points.

In addition, the Individual Risk segment recorded an additional $21.2 million of ceded premium earned attributable to hurricane Wilma, which negatively impacted the Individual Risk loss ratio by 14.6 percentage points and the expense ratio by 8.0 percentage points.

During the quarter, the company recorded unfavorable development on prior year reserves of $4.8 million or an increase of 1.2 percentage points to the company’s quarterly loss ratio. The company’s Reinsurance segment contributed $5.9 million of unfavorable development, and the company’s Individual Risk segment contributed $1.1 million of favorable development. Net paid losses for the quarter were $477.9 million.

The company announced on May 3, 2005 that it would undertake, during 2005, a review of its processes and assumptions used in establishing its reserves. The company completed reviews of its catastrophe and specialty reinsurance reserves in the second and third quarters of 2005, respectively, and completed a review of its Individual Risk reserves this quarter.

As a result of this review of Individual Risk reserves, the company reduced its reserves within the Individual Risk segment by $1.1 million, which reduced the company’s quarterly Individual Risk loss ratio by 1.1 percentage points.