Bermuda’s RenaissanceRe Holdings Ltd. bounced back strongly from last year’s catastrophes to post net income for 2006 of $761.635 million, compared to a $281.3 million loss in 2005. Operating income for the fourth quarter was $198.6 million compared to a $206.9 million operating loss in the fourth quarter of 2005.
RenRe’s report said: “The Company generated an operating return on average common equity of 33.3 percent in the fourth quarter of 2006, compared to a negative 44.2 percent operating return on average common equity in the fourth quarter of 2005.
“The Company’s book value per common share increased by 7.9 percent in the fourth quarter of 2006, compared to a 12.4 percent decrease in the fourth quarter of 2005. The Company’s fourth quarter 2006 results benefited significantly from light insured catastrophe loss activity compared to the fourth quarter of 2005.”
RenRe’s combined ratio dropped to 54.7 percent in 2006, after having ballooned to 139.7 percent in 2005.
In a separate announcement (see following article) RenRe said it had concluded a final settlement with the Securities and Exchange Commission over finite reinsurance investigations.
CEO Neill A. Currie commented: “I am pleased to report record full year earnings, resulting in a 40 percent increase in book value per common share, and an operating return on equity of approximately 38 percent. These record earnings are a result of a low level of catastrophe losses and the extraordinary performance of our team. In particular, we supported our clients by providing needed capacity in a highly dislocated U.S. property cat market, further strengthening our franchise.
“We are seeing signs of softening in several of our markets, and recognize that discipline will be critical for long-term success,” he added. “We also recognize the uncertainty created by recent legislative changes in Florida, which will reduce demand for some of our products. We are responding as we have in past cycles — by shrinking in areas that do not meet our standards and growing in areas that we find attractive. Overall, we are now expecting our top line to be down slightly in 2007 versus 2006. In terms of our prospects, we have a strong track record of successfully navigating such markets and are well positioned to do so once again.”
However, RenRe revised its annual premium forecast for its catastrophe unit. “Previously, the Company forecast over 15 percent growth in managed catastrophe premiums for 2007, compared to 2006 managed catastrophe premiums, net of fully-collateralized joint ventures,” said the bulletin. “The Company currently expects its managed catastrophe premiums, net of fully collateralized joint ventures, to be down approximately 5 percent for 2007. The Company currently continues to expect its Individual Risk and specialty reinsurance premiums to be essentially flat in 2007, compared to 2006.”
RenRe explained that “gross premiums written for the fourth quarter of 2006 were $195.0 million, a $93.6 million decrease from the fourth quarter of 2005. The decrease was principally driven by a lack of significant loss related premium in the fourth quarter of 2006. In the fourth quarter of 2005, the Company generated $71.3 million of loss related premium attributable to the 2005 large hurricanes.”
The complete report and a replay of the Company’s earning conference call; may be obtained on its web site at: www.renre.com.
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