RenaissanceRe’s net income fell for the fourth quarter and also 2015 as a whole, as the reinsurer piled on additional premium to its specialty book of business.
Gross premium written shot up by 153.1% in the fourth quarter: to $336.09m, from just $132.78m in 2014.
Across the year as a whole, gross written premium was up 29.7% to reach $2.01bn for 2015, from $1.55bn the previous year.
Profits, however, fell across the quarters and annually. For 2015 the firm made net income of $542.24m, down from $686.26m in 2014.
Net income almost halved for the fourth quarter, dropping to $125.87m in Q4 of 2015 from $220.58m in the same quarter the previous year.
“I am pleased to report $135m of operating income, an annualized operating ROE of 12.5% and 2.3% growth in tangible book value per share plus accumulated dividends for the quarter,” said the reinsurer’s CEO, Kevin O'Donnell.
“In a year in which we acquired and fully integrated Platinum, we generated solid operating income of $477.7 million for the year and delivered an operating ROE of 11.4%,” O’Donnell said.
“Our underwriting team executed well during the most recent renewal period, as pressure on pricing from abundant capacity persisted,” he said.
Specific to its underwriting performance, the Bermudian firm had underwriting income of $494.6m and a combined ratio of 64.7% in 2015, deteriorating from $529.4m and 50.2%, respectively, in 2014.
“We maintained discipline, coming off business that did not meet our return hurdles, buying more reinsurance protection, while also building an attractive portfolio of risks,” said O’Donnell.
For the fourth quarter the combined ratio almost doubled, deteriorating to 61.3% from the 32.3% posted in 2014’s final three months.
“The decrease in underwriting income was primarily driven by a $268.9m increase in current accident year net claims and claim expenses and a $94.1m increase in acquisition expenses, each principally driven by the $338.1m increase in net premiums earned,” read the results statement.
Low insured catastrophe activity allowed RenaissanceRe’s catastrophe reinsurance segment to generate underwriting profit of $132.5m and a combined ratio of 15.4% in the fourth quarter of 2015, compared to $133m the previous year.
Gross premiums written in its cat segment decreased 7% to $868.6m in 2015 from $934m in 2014, the firm citing market conditions that “remained challenging”.
The reinsurer’s premium growth in 2015 was driven by its specialty arm, which mushroomed by 121%.
Gross premiums written in the specialty reinsurance segment amounted to $766.05m in 2015, up from $346.64m in 2014.
The firm said the rise was “driven primarily by increases in certain casualty and credit related lines of business…The company’s specialty reinsurance premiums are prone to significant volatility as this business can be influenced by a relatively small number of relatively large transactions.”
Underwriting profit in the segment was $98m for 2015, giving a combined ratio of 82.1%, compared to $60.7m and 76%, respectively, the previous year.
The firm also grew its Lloyd’s operation. Gross premiums written at Lloyd’s 40% to $376.7m in 2015 from $269.7m the previous year.
This growth came “principally in its casualty and property lines of business, notwithstanding challenging market conditions”, noted the reinsurer.
On the investment side, the company increased its net income by both the quarter and the year.
For the fourth quarter, net investment income almost doubled to $45.92m from $25.89m in Q4 2014.
For 2015 as a whole, net income on the investment side was up to $152.57m from $124.32m the previous year.
However, the reinsurer’s total investment result fared worse – the sum of net investment income, net realised and unrealised gains or losses on investments, plus the change in net unrealised gains on fixed maturity investments available for sale – halved to $82.4m in 2015m, from $164.9m in 2014.
“The decrease in the total investment result was primarily due to net unrealized losses in the company’s portfolio of fixed maturity investments trading, principally the result of an upward shift in the yield curve driven by the increasing interest rate environment, combined with unrealized losses in the company’s portfolio of equity investments trading and lower net investment income from private equity investments,” said the firm in its results.
O’Donnell added: “We are a bigger, stronger company today, than a year ago, and have the management team, global operating platforms and risk management expertise to serve our clients, third party capital providers and shareholders well in the years ahead.”