RenaissanceRe Q1 2025 Earnings Report

RenaissanceRe EPS Results

• Actual EPS: -$1.49
• Consensus EPS: -$0.32
• Beat/Miss: Missed by -$1.17
• One Year Ago EPS: $12.18

RenaissanceRe Revenue Results

• Actual Revenue: $3.44 billion
• Expected Revenue: $3.36 billion
• Beat/Miss: Beat by +$84.63 million
• YoY Revenue Growth: +7.60%

RenaissanceRe Announcement Details

• Quarter: Q1 2025
• Date: 4/23/2025
• Time: After Market Closes
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 10:00AM ET

RenaissanceRe (NYSE:RNR) provides reinsurance and insurance products around the world. The company was founded in 1993 and is headquartered in Bermuda with offices in Ireland, Australia, Switzerland, Singapore, and the US.

The company operates through two segments that include multiple underlying businesses and investment vehicles. The two main segments are Property and Casualty & Specialty.  The company operates through intermediaries that include DaVinci Resinsurance Inc, Top Layer Reinsurance LTD, and RennaisanceRe Syndicate 1458 among others.

Top Layer Re is the first major venture and was started in 1999. It is a joint venture with State Farm targeting high layers of the US reinsurance business. DaVinci Re was formed in the wake of 9/11 to assist with capacity and it was given added capacity in the wake of hurricanes Katrina, Rita, and Wilma. Medici was formed in 2009 and is an open-ended fund intended to spur investment in the catastrophe bond market.

The Property segment writes catastrophic insurance policies to insure insurance and reinsurance companies against natural and man-made catastrophes. These include but are not limited to hurricanes, floods, freezes, and terrorism.

The Casualty & Specialty segment provides a wide range of consumer products including business insurance, malpractice insurance, liability insurance, workers' compensation, mortgage insurance, and health insurance among others.

Among RenaissanceRe’s Specialty businesses is capital management. The firm offers 6 investment vehicles and has more than $11 billion under management making it the #1 ILS or insurance-linked asset manager in the US. In regards to its credit ratings, the firm and all of its vehicles carry an A or better rating from every credit rating agency.

 

RenaissanceRe Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning. My name is Madison, and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe First Quarter twenty twenty five Earnings Conference Call and Webcast. After the prepared remarks, we will open the call for your questions.

[Operator]

Instructions will be given at that time. Thank you. I will now turn the call over to Keith McHugh, Senior Vice President of Finance and Investor Relations. Please go ahead.

[Keith McCue, Senior Vice President of Finance & Investor Relations at RenaissanceRe]

Thank you, Madison. Good morning, and welcome to RenaissanceRe's first quarter earnings conference call. Joining me today discuss our results are Kevin O'Donnell, President and Chief Executive Officer Bob Cutub, Executive Vice President and Chief Financial Officer and David Marra, Executive Vice President and Group Chief Underwriting Officer. First, some housekeeping matters. Our discussion today will include forward looking statements, including new and updated expectations for our business and results of operations.

[Keith McCue, Senior Vice President of Finance & Investor Relations at RenaissanceRe]

It's important to note that actual results may differ materially from the expectations shared today. Additional information regarding the factors shaping these outcomes can be found in our SEC filings and in our earnings release. During today's call, we will also present non GAAP financial measures. Reconciliations to GAAP metrics and other information concerning non GAAP measures may be found in our earnings release and financial supplement, which are available on our website at renlea.com. And now, I'd like to turn the call over to Kevin.

[Keith McCue, Senior Vice President of Finance & Investor Relations at RenaissanceRe]

Kevin?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Thanks, Keith. Good morning, everyone, and thank you for joining today's call. I want to begin the call today by acknowledging the unprecedented degree of uncertainty in the broader economic environment. The institutions and norms of the postwar period are increasingly being questioned and in some instances disrupted. There are few, if any historic analogs to what we are currently experiencing.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Against this backdrop, we believe Renaissance Re is positioned to outperform. We have limited exposure to the political and economic shocks reverberating around the world. Our business is best described as anti correlated to the current macroeconomic environment, especially when compared to business models that require predictability and consistency. What do I mean by this? As the world becomes more volatile and the value of many assets decrease, we become more valuable.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

We are paid to assume volatility and are intentionally designed to withstand it. Consequently, we seek the volatility that others shun. And as a volatility for us equates to greater opportunity. In an increasingly volatile world, our customers should want more of the protection that we provide and be willing to pay more for protection. This is the type of environment where our business can thrive.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

With the capital mark currently fixated on tariffs, inflation and recession risk, I'd like to address head on their expected impact or lack thereof to our business. As a financial services provider, we do not require inputs or produce products that are subject to trade tariffs. Our property catastrophe business is not directly impacted by tariffs and is highly recession resistant. This is also true for traditional casualty lines that we write and most of our specialty lines. The largest risk that particularly protects against such as hurricanes and earthquakes do not correlate to financial cycles.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

They need to be protected against in good economic times as well as in bad. And as you know, we are one of the largest providers of this protection. Of course, the potential for elevated inflation could increase the cost of rebuilding after large natural catastrophes. Post event loss inflation is something we include in all of our property models. To the extent that tariffs and inflation exasperate demand surge, we have the tools to price for the impact.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

There are a few niche specialty lines we write that may be directly impacted by tariffs or a reduction in trade. The most obvious are trade credit and political risk. I say maybe impacted because so far none of them appear to be. Furthermore, these lines have many built in protections to limit exposure to systemic shock. Regarding recession risk, we believe previous downturns are particularly instructive in demonstrating our immunity to business cycle disruptions.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

For the most part, insurance is necessary or a required purchase and by extension demand for reinsurance will persist. In previous recessions, our reinsurance premiums were largely unaffected. A recession scenario could of course impact our investments. That said, we have positioned our portfolio relatively conservatively in order to protect against the potential for recession. As Bob will cover in more detail, most of our investments are in high quality fixed income securities with relatively limited exposure to both high yield and equities.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

In fact, we have used the recent dislocations as an opportunity to increase our allocations moderately to risk assets such as equities and high yield. We also had some hedges to inflation and geopolitical risk in place such as being long gold futures. This supported our strong mark to market performance this quarter and highlights our broader and integrated approach to portfolio construction across the entire balance sheet. Shifting now to a discussion of the first quarter. The world experienced multiple large catastrophes including California wildfires and the American Airlines tragedy.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Against this backdrop, our performance this quarter was strong. In an environment categorized by significant capital market disruptions and elevated first quarter catastrophes, we reported a modest operating loss. On a net GAAP basis, which drives book value, we made a profit. This was due to the benefit of our diversification and the favorable impact of mark to market gains in our investment portfolio. As a result, our primary metric tangible book value per share plus accumulated dividends increased quarter over quarter despite the catastrophe losses and return of $380,000,000 to shareholders through dividends and share repurchases.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

It's worth taking a step back to put our performance this quarter into perspective. As we have increased income diversification over the past two decades, we have reduced the impact of large loss activity on our results. Losses that used to impact annual results to a significant extent now only impact quarterly results to a limited extent. For example, in 02/2005, the year of hurricanes Katrina, Rita and Wilma, we recorded a net negative impact from large events of $892,000,000 which was 82 percentage points on our annual combined ratio and resulted in annual operating return on equity of negative 13%. In 2017, the year of Hurricane Harvey, Irma and Maria as well as California wildfires, we recorded a net negative impact from large events of $720,000,000 which was 59 percentage points on our annual combined ratio and resulted in an annual operating return on equity of negative 8%.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

In 2022, the year of Hurricane Ian and winter storm Elliott, we recorded a net negative impact from large events of $8.00 $8,000,000 which was 20 percentage points on our annual combined ratio, but this time resulted in an annual operating return of equity on equity of positive 6%. Contrast these annual results with the first quarter of twenty twenty five. Our after tax net negative impact was $700,000,000 This is similar in absolute magnitude to the losses we experienced in each of the previous years I just described. It added about 53 percentage points to our quarterly combined ratio. Hypothetically, this works out to 13 points on our annual combined ratio.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

In addition, we reported an operating return on equity in the quarter of negative 3% and assuming average cat activity for the remainder of the year, we remain on track to deliver solid full year ROE. So you can see a clear trend. Similarly sized losses have had a reduced impact on our combined ratio over the years, declining from 82% in 02/2005 to 59% in 2017 and twenty percent in 2022 to now 13%. At the same time, operating returns consistently increased. We believe this chronology powerfully demonstrates the strength of our three drivers of profit in times of extreme events and macroeconomic instability, in other words, anti correlation.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Bob and David will address renewals and our go forward outlook in more detail shortly. But before turning it over, I'd like to share a few comments on our approach business and capital management overall. To begin, the fact that the wildfires occurred in the first quarter do not change our strategy for the year. Large events occur randomly over time and the fact that they occurred in January should not and does not impact strategic decision making any more than if they occurred in December. Reinsurance pricing remains attractive.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

There is ample latent demand in markets and our focus is squarely on continuing to grow business where it makes sense. That said, we believe the best strategy to grow tangible book value per share in the current environment is to preserve margin. Our willingness and ability to assume the risk that others shun is best channeled into margin preservation. From a capital management perspective, we have the excess capital and liquidity necessary to continue repurchasing shares. We repurchased $360,000,000 of shares during the first quarter.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Since the end of the quarter and during the recent Marconcelo, we continue to repurchasing at very attractive prices. This is another example of our anti correlation providing us opportunities to proactively grow shareholder value when others pull back. That concludes my initial comments. I'll turn it over now to Bob to discuss our financial performance for the quarter before David provides more detailed update on underwriting.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Thanks, Kevin, and good morning, everyone.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

This quarter against the backdrop of one of the largest insured losses in history, we reported an annualized return on average common equity of 7% with a modest operating loss. This is a strong result. Absorbing the California wildfires in our quarterly earnings demonstrates the diversification of our business and the strength of our three drivers of profit. In fact, we even grew our primary metric tangible book value per share plus change in accumulated dividends. This is particularly notable given we also repurchased 1,500,000.0 shares in the quarter for $361,000,000 As you would expect, each of our three drivers of profit responded differently to the large events of the quarter.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Our underwriting income was impacted significantly and we reported a $771,000,000 loss. Fees were also suppressed, although to a lesser extent with fee income of $30,000,000 And finally, net investment income remained strong at $4.00 $5,000,000 or $279,000,000 on a retained basis, helping to partially offset the losses of the quarter. Net investment income has been a steady contributor to our results, especially over the last two years. In fact, you look back at our 2024 results, our retained net investment income was over $1,100,000,000 Comparing this to our average common equity in 2024, you'll see that retained net investment income contributed 12 percentage points to our overall return on average common equity and I expect this to continue into 2025. As usual, I'll provide a more detailed discussion of these three drivers of profit and I'll also touch on capital management including our successful debt raise and expenses.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

First, however, I'll provide some brief comments on tax. As you know, Bermuda's Fifteen Percent corporate income tax came into effect at the beginning of the quarter. Based on our positive pretax earnings in Bermuda, we booked a corresponding Bermuda corporate income tax expense. That said, overall, we reported an income tax benefit of $45,000,000 This was primarily driven by a $37,000,000 release of evaluation allowance against a specific deferred tax asset. Moving now to our first driver of profit underwriting.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

In addition to the California wildfires, there were several smaller specialty events that impacted our underwriting results, including the American Airlines tragedy and two refinery fires. Altogether, large losses in the quarter led to an after tax net negative impact of $7.00 $3,000,000 including $633,000,000 from the California wildfires. The impact of tax effectively reduced our losses by $126,000,000 this quarter. We have broken this tax impact out in the net negative impact table in our earnings release. On a pre tax basis, the net negative impact from the California wildfires remains consistent with what we discussed with you last quarter at approximately $750,000,000 Our overall combined ratio of 128% including a 52.6 percentage point impact from these large losses.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

The California wildfires also led to significant reinstatement premiums, which drove up both gross and net premiums written compared to last year. Moving now to some specific commentary on our Property segment, starting with the property catastrophe, where gross premiums written were up 24% to $1,700,000,000 and net premiums written were up 33% to $1,400,000,000 As I mentioned, this growth was driven by $338,000,000 of gross reinstatement premiums from the California wildfires. Without these reinstatement premiums, gross and net premiums were roughly flat quarter to quarter. As David discussed on our last call, we grew certain property catastrophe lines at oneone, which offset some of the rate decline at the renewal. This quarter, our property catastrophe combined ratio was 176%.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

This reflected a current accident year loss ratio of one hundred and seventy percent and eight points of favorable development from prior year events. Our property catastrophe current year results included a 159 percentage point impact from large loss events driven by the California wildfires. Finally, the acquisition expense ratio declined from Q1 twenty twenty four, primarily due to the impact of reinstatement premiums and the reversal of profit commissions. Moving to other properties where we had a profitable quarter, even after the impact of the California wildfires. Our combined ratio was 84% and the adjusted combined ratio was 82%.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

This reflected a current accident year loss ratio of eighty five percent and thirty three points of favorable development from prior year events attritional book. Our other property current year results included a 30 percentage point impact from large loss events in the quarter also driven by the California wildfires. Going forward, we expect an attritional loss ratio in our other property book in the mid-50s. From a premium perspective, other property gross and net premiums written were both down roughly 15% from the comparable quarter. As we have discussed, this was predominantly driven by Net premiums earned in the other property were $365,000,000 up 6%.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

In the second quarter, we expect net premiums earned to be approximately $380,000,000 Turning now to our Casualty and Specialty portfolio, where our gross and net premiums written were down modestly at 43%, respectively. Within Classes, gross premiums written in General Casualty were up 16%, Professional Liability down 36% and other specialty down 11%. These movements were primarily driven by prior year premium adjustments. We typically make these types of adjustments on quota share deals based on annual reporting by seasons of actual premiums written. In credit, the 16% gross premium written increase was driven by growth on existing mortgage deals.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Our net earned premiums in casualty and specialty were $1,500,000,000 down 2%. Looking ahead to the second quarter, we expect net earned premiums of $1,500,000,000 As a result of several large events in our Specialty book, including the California wildfires, American Airlines tragedy and two refinery fires, reported a casualty and specialty combined ratio of 111% and an adjusted combined ratio of 109%. This included a 9.2 percentage point impact from large events in the quarter and approximately two percentage points from the premium adjustments I just discussed along with some nonrecurring items. These other items partially drove the elevated acquisition expense we showed this quarter. Going forward, we expect a casualty and specialty combined ratio in the high 90s.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Of course, similar to this quarter, we may experience cat like volatility from time to time in our specialty book, which could increase this ratio in certain quarters. Moving now to our second driver, fee income, in our Capital Partners business where fees were also impacted by the events of the quarter and we reported $30,000,000 of fee income, down 64% from the first quarter last year. Management fees were $46,000,000 down 18% as a result of reduced management fees in da Vinci, which we anticipate recovering over time. Performance fees were negative $16,000,000 driven by the reversal of previously recognized commissions in da Vinci and our structured reinsurance products. Looking ahead, absent large losses, we expect management fees to be around $45,000,000 in the second quarter before returning to a more typical run rate of $50,000,000 in the third quarter.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Similarly, we anticipate beginning to recognize performance fees toward the end of the second quarter. Moving now to our third driver of profit, net investment income. Our investment portfolio delivered excellent results this quarter with total retained investment return of $6.00 $7,000,000 Retained net investment income was $279,000,000 with a small drag due to payment of wildfire claims. We experienced retained mark to market gains of $328,000,000 due to lower treasury yields in the quarter as well as gains from inflation and geopolitical related hedges. Late last year, in anticipation of increasing economic uncertainty, we increased our investment portfolio's resilience to inflation.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

We did this by managing the shape of the yield curve through deemphasizing the long end of the treasury market. We also increased our long position in commodity, mainly gold as an inflationary and geopolitical hedge. As we have discussed with you in the past, we actively manage our investment portfolio to support book yield. This relatively conservative posture enabled us to lean into opportunities presented in the market. Specifically, we took advantage of market volatility to increase our exposure to global equities and increase our credit exposure, focusing on investment grade and high yield.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

At the end of the quarter, our retained yield to maturity was 5.1% down from 5.3 and retained duration was three point one years down from 3.4 in the previous quarter. We reduced duration when yields approached the lower end of the recent range in anticipation of rising rates at the longer end of the curve. In the second quarter, we expect retained net investment income to be about flat from Q1. Moving now to other highlights in the quarter starting with capital management. First, we continued repurchasing shares steadily through the quarter buying back 1,500,000.0 shares to $361,000,000 at an average price of $242 per share.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

From April 1 through April 21, we repurchased an additional 278,000 shares for $65,000,000 at an average price of $235 a share. Since we began repurchasing shares in mid-twenty twenty four, we have bought back 4,500,000.0 shares for $1,100,000,000 at an average price of $246 a share. To put this in perspective, in aggregate, we have repurchased approximately half the total shares we issued for the Valis acquisition less than two years ago. This active approach to returning value to shareholders demonstrates the strength of our earnings and our ability to execute highly accretive acquisitions for the benefit of our investors. We remain in a strong capital position, which is largely unchanged from the prior quarter.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Consequently, we have the ability to continue deploying capital into underwriting opportunities, while also repurchasing our shares attractive valuations. Also this quarter, we successfully raised $800,000,000 of debt, which included $500,000,000 of 5.8% Renaissance Re senior notes and $300,000,000 of 5.95 da Vinci senior notes. These deals were significantly oversubscribed and we achieved our tightest spread to ten year U. S. Treasuries to date of 130 basis points for RenaissanceRe and 70 basis points for da Vinci.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

In addition, on 04/01/2025, we repaid in full our $300,000,000 3 point 7 percent senior notes at maturity. Our $150,000,000 of da Vinci four point seven five percent senior notes will be repaid at maturity on May 1. Turning now to expenses. In the first quarter, our operating expense ratio was 3.7%, down from 4.3% compared to the first quarter of twenty twenty four. This decline was due to reduced performance based compensation expenses and the impact of reinstatement premiums.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Looking forward, we expect a normal run rate for operating expenses to be just above 5% as we continue to invest in the business. And finally, in a quarter with significant catastrophe activity, our earnings were resilient. This demonstrates the strength of our three drivers profit. While our quarterly underwriting income and fees were impacted by the large event, investments delivered excellent results. We remain in a strong capital position and can continue to lean into underwriting opportunities while repurchasing our shares.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

In summary, we're in a great position to navigate current macroeconomic environment and expect to continue to deliver value to our shareholders. And with that, I'll now turn it over to David.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Thanks, Bob, and good morning, everyone. As Kevin discussed, we are in a period of heightened macroeconomic volatility. It is at times of uncertainty that RenaissanceRe's expertise, partnership approach and coordination across teams differentiates us as a reinsurance leader. Throughout the quarter, our underwriting teams were focused on supporting our clients and solving their risk challenges. This included conducting ground up loss assessments for the California wildfires and helping clients rapidly pay claims, planning for and executing a successful renewal in Japan preparing for the second quarter property renewals and navigating a concentrated casualty renewal period with a continued focus on claims trends.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Across each class of business we write, we provide expert underwriters, lead market quotes and coordinated consistent delivery of capacity over the long term. As a result, we are often rewarded with differentiated access to programs and attractive signings. This was evident in the most recent January 1 renewal. Despite competition, we successfully deployed more capacity in property catastrophe and grew limit on over 40% of U. S.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Cat renewals. We also maintained our strong position in specialty and credit and shaped the portfolio by reducing in casualty lines as discussed last quarter. Beyond risk selection, we differentiate ourselves in the way that we build efficient portfolios of risk. This includes matching the right risk with the right capital and using our diversified underwriting portfolio to create three distinct drivers of profit in underwriting fee and investment income. You can see the benefit of this approach in our results this quarter as we were able to absorb one of the largest catastrophe losses in history in our quarterly earnings.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Now moving to a more detailed discussion of our two segments and starting with Property. We are keeping the process of quoting midyear renewals and in some instances have already bound lines. Many of the clients impacted by the wildfires have traded with us for decades. Fire is a primary peril covered by the programs and we have written this business profitably. We have learned from recent events and incorporated new information into our models in time for Q2 renewals.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Our confidence in our view of risk, access to efficient capital and willingness to quote earlier than others makes us a first call market for the best clients and give us opportunities for differentiated terms and private deals. Supply and demand are more imbalanced than in January 1 and trading conditions are more favorable. The market remains attractive and we have appetite to continue growing in property catastrophe and we plan to deploy additional limit through midyear. Our primary focus however is on margins. Through our underwriting system REMS, each underwriter can see the return on capital on a deal by deal and even layer by layer basis and the effect on our portfolio in real time.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

This empowers our underwriters to make disciplined margin focused decisions that benefit shareholders. As expected, the 4.1 property renewals in Japan were orderly and we are pleased with the portfolio we underwrote. The Japan market trades separately from The U. S. And rates were down about 10%.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

At these levels, the business is still attractive and we largely retained our share. Shifting to a discussion of other property. This business has been performing well. That said, recent profitability has attracted more competition and rates are decreasing. In upcoming renewals, we will use our suite of tools including ceded reinsurance to construct a book which is complementary to property catastrophe and accretive to our overall underwriting portfolio.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Moving now to the California wildfires. As Bob explained, we reported a post tax net negative impact from the California wildfires of $633,000,000 The majority of this loss was in our property segment with a small amount in our specialty book. That said, there are two primary factors which could reduce our loss. The first is subrogation. This may be available in the future to offset some loss from the Eaton wildfire.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

The Eaton fire makes up about one third of our industry estimate. It is too early to predict the financial benefit of subrogation to our results. But in the meantime, our approach is not to book any subrogation benefit until we are confident in its receipt. The second possible offset is recruitment of California fare plan assessments. The California Insurance Commissioner approved a $1,000,000,000 assessment on insurers to cover claims from the wildfires.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

These assessments increased losses of our cedents and are covered under some reinsurance programs. Part of these assessments may be recoupable from underlying policyholders, which would reduce the reinsurance obligation. Similar to subrogation, however, potential recoupment is not factored into our loss estimate and we are until we are confident in its receipt. Moving now to Casualty and Specialty. As Bob mentioned, we reported an adjusted combined ratio of 109%, which included provisions for several large losses in our Specialty book.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

These losses are unrelated to our ongoing focus on casualty trends. Our view of general liability trends and current loss ratios remained stable in the quarter. In addition to the California wildfires, the specialty losses also included two large refinery fires impacting our marine and energy book and the American Airlines tragedy at Reagan National Airport impacting our aviation book. We expect that the American Airlines loss will be a significant event for the aviation market. Similar to the wildfires, there may be potential for subrogation.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

We will not book this until we are confident in its receipt. While we experienced heightened frequency in our specialty book this quarter, this is not indicative of any longer term trend. As a reminder, much of our specialty book is excess of loss. We expect cat like activity from time to time and reserve for these losses on an event basis. Overall, our Specialty book has been performing well and the Aviation and Marine and Energy markets have been profitable.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

More broadly, as we discussed last quarter, the Casualty and Specialty segment makes a significant contribution to operating income across our three drivers of profit, particularly considering the significant flow it generates for our investment portfolio. Moving now to a discussion of the fourone renewals and the outlook for the midyear. Trends from oneone continue in our Casualty and Specialty business. Specifically, in Casualty, we have been encouraged to see that insurance companies are recognizing increased trend in general liability and taking steps to improve their claims handling and realize greater underlying rate increases. Given the heightened scrutiny around the impact of social inflation on general liability profitability, I wanted to take a minute to expand on this and provide our assessment of the evolving state of the market and increasing sophistication of the claims handling practices of our cedents.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

This is where we have an advantage as a reinsurer. We are better placed to identify best practices because we have a broad overview of the market and can see the differentiated approaches of our customers. Response in two stages. First was to reduce policy limits and increase rates. Second is enhanced claims management.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Starting with the first stage, in 2019, there was growing recognition that general liability lines were increasingly challenged. Insurers responded by reducing policy limits with the intent of limiting severity in the event of a claim. With lower capacity in the market, rates increased over 50%, we grew into this market. Despite the rate increases, however, we held our reserving loss ratios relatively flat to reflect our view of uncertainty. Moving to the second stage.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

In 2022, courts began to reopen following the COVID pandemic and we saw a shift in claims management practices to quickly settling claims. This was intended to reduce the potential for very large awards from nuclear verdicts. The reduction in limits I discussed encouraged this behavior. Rates were still increasing during this period, but at a reduced level of 6% to 8%. More recently, it became clear to us that social inflation trends remained at their pre COVID pace of about ten percent to twelve percent.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

The market responded to this in late twenty twenty four as rate increases began to accelerate to at least 15%. Rates are now cumulatively up over 200% since the start of 2019. Trend, however, is also cumulative and much of that 200% has been needed to keep up. At the end of twenty twenty four, claims defense strategies sophisticated. Rather than quickly settle, certain insurers were more willing to fight problematic claims.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Our casualty book is quota share, which means we take a percentage share of each policy our client writes throughout the year both of premiums and of losses. Given this and the wide disparities we observe and our customers are currently managing claims, we look to select those with the most robust claims management approach. That said, will take time to see the effects of stronger claims defense strategies come through results. And for profitability to improve, rates need to continue increasing at 15% or greater throughout 2025. The market movements I just described since 2019 are a good example of why we say casualty needs over a ten year timeframe.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Trends take time to discern and underwriting and claims actions take time to demonstrate their positive effects. We are taking all the right actions to manage general liability through this cycle. Success will take time to emerge in the data, but we are pleased with the progress and confident that general liability is on track for improved profitability. In the meantime, we are taking a cautious approach. We will continue to reduce exposure to general liability and are not reflecting the additional rate above trend in our loss picks.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Moving now to professional liability. After several quarters of rate decreases, primary capacity is starting to withdraw from the market, although it is too soon to tell if this will drive discipline in the class. We continue to monitor the market, but remain cautious and have reduced our exposure in recent years. In Specialty, we continue to find most lines of business attractive. We grew significantly in Specialty with the recent Valladose acquisition and have excellent access to strong programs.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

While there has been some increased competition, we aim to hold our existing lines, deploy capacity on the best programs and optimize our portfolio across profitable classes. Finally, in credit, we are closely monitoring the global economic environment for any potential impacts to our credit book and believe we are prudently positioned in the event of a recession. While tariffs may impact volume and course of trade, we do not expect this to lead to significant losses at this stage. So in closing, this quarter we demonstrated the strength of our platform and three drivers of profit as we absorbed one of the largest insured losses in history. As we look toward midyear renewals, the underwriting market remains attractive across most of the lines we write.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

We have excellent access to business and our underwriters remain margin focused, building a portfolio that supports strong returns for our shareholders. And with that, I'll turn it back to Kevin.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Thanks, Dave. Our results this quarter demonstrate the strength of our three drivers of profit. We remain in excellent capital and liquidity position despite one of the largest catastrophic losses in history. Looking ahead, the underwriting market remains attractive across most lines that we write and we are well placed to access opportunities at the midyear renewals. While the world struggles with increased macroeconomic uncertainty, we believe our anti correlation will insulate our business and allow us to benefit from increased risk aversion.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Finally, interest rates remain robust, which bolsters our net investment income and we continue to expand our fee generating Capital Partners business. And with that, we'll open it up for questions. Thank you.

[Operator]

You. We'll now take our first question from Elyse Greenspan with Wells Fargo. Please go ahead.

[Elyse Greenspan, Managing Director at Wells Fargo Securities]

Hi, thanks. Good morning. My first question is on the midyear renewals. I was just hoping you could expand just on how you're expecting California fires, right, the loss we saw this year to impact the midyear is right that are very heavily concentrated in Florida. And if you have any data points to support, I guess, perhaps some better pricing during the mid years?

[Elyse Greenspan, Managing Director at Wells Fargo Securities]

And how do you think this could triangulate into growth opportunities for RenRe?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Thanks, Elyse. Let me start with some broader comments, I'll turn it over to Dave. I think it's important to help you guys understand the change in rates. What we focus on is the adequacy of rates. And I think since particularly starting with property from 2023, we increased rates on the property portfolio by 50%, we increased retentions and we changed terms and conditions.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

And what we've said since then is like any financial market, there'll be ups and downs. But I think the important thing is from a rate adequacy perspective, the property market is in exceptional shape compared to where it has been historically. From the casualty, Dave did a good job outlining where casualty is. We're seeing lots of green shoots for improved casualty with rate increase and better claims management. So we feel really confident there and specialty continues to be well rated and in very strong shape.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

So I'll turn it over to Dave to talk more specifically about the upcoming.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Yes. Thanks, Kevin. We feel really good about where the cat market is and the opportunities ahead. And like Kevin said, the rates and retentions are some of the most attractive we've seen. Whether rates are up or down a bit, is less reliant on that.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

It's more we're confident that those trading conditions will continue. We have seen some renewals and we're encouraged by the trading conditions. It is more in favor of reinsurers than it was at oneone. Supply demand are more in balance than what we saw at oneone. There is growing demand and we've been able to construct a really nice portfolio so far.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

With the bulk of the renewals yet to come, we'll have to go through those, but there's a lot more renewals that are loss impacted. Going on to Florida, demand is growing in Florida and pricing is strong, so it will be an opportunity. We have seen more risk move back into the private market from citizens depopulating that does increase demand and the Florida Hurricane Cat Fund is increasing where it attaches. So that increases demand So all that plays to our strengths.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

We'll be able to provide solutions with the new demand, private deals and things like that. Other property is more challenged on the rate side. We had reduction this year. We're expecting additional competition there. We're fully confident we can construct an attractive portfolio using ceded reinsurance, but we're going to be deploying more of our cat capacity on the property cat side.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

And general liability is on good track, which is going to take time like we said.

[Elyse Greenspan, Managing Director at Wells Fargo Securities]

Thanks. And then my follow-up is on casualty specialty, right? I mean you guys did raise the combined ratio guidance there, right, to the high 90s from prior was mid to high 90s. So can you just spend some time talking about what changed specifically this quarter that caused you to raise the combined ratio target for that business?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Yes. I think I'll start again with some of my comments. As Dave pointed out, the casualty market is better this quarter than last quarter and has been improving. We've seen elevated trend, but the trend has been stable at the 10% to 12%. Rates continue to come in strong, but we're going to be slow in recognizing the improvements that we're observing to make sure that those improvements are clearly demonstrated in the development patterns and the data.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

So I think when looking at the casualty market, it is a better market than we have been in. Rates continue to look good, but I'll turn it over to Dave for more specific comments.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Yes. Thanks, Kevin. The casualty market is doing everything it should be to manage this part of the cycle. I think it's been responsive over the last few stages of the cycle, kind of like I went through and how we the market raised rate and reduced limit in 2019. And now there's another need to improve claims management.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Companies are making solid investments in that. It's the right time to be fighting the plaintiff's bar, but that will take time to emerge. And similar to how we didn't recognize that good news until it showed up in reserving loss ratios after 2020, we're going to be taking a conservative approach until we see that coming through the data.

[Operator]

Thank you. And we will take our next question from Josh Shanker with Bank of America. Please go ahead.

[Josh Shanker, Analyst at Bank of America]

Yes. Thank you very much. I want to talk about the balance of cat loss being picked up by DaVinci and the other third party vehicles. Has the proportion of third party ownership of the cat volume increased dramatically at January 1? It does seem like the common shareholder portfolio was more resilient in the face of a very large loss.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Yes. It's relatively stable. So if you reflect back, one of the things we did when we bought Validus is we did reduce the share of risk that went to da Vinci, but increased the size of da Vinci because of the acquisition of Validus. Since then, it's been relatively consistent as to how much we're sharing with Validus. You recall last year we did change our ceded purchases as we underwrote the Validus portfolio onto the right balance sheets.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

So we continue to benefit from that. But I would say the portfolio is relatively stable with the allocation to DaVincios from I think you're asking basically over the one renewal, but it stays relatively stable right now and our plan is not to change it materially as we go forward. There's always some movement in it with ownership, but it's not a material shift.

[Josh Shanker, Analyst at Bank of America]

All right. And then on historically for the last thirty years, you've put up a pretty conservative number when major events have happened, enough time passes that you feel comfortable that you reserve adequately for that loss and you release some reserves. And that's been a big source of earnings long term. And then when big cat happens,

[Josh Shanker, Analyst at Bank of America]

the same thing happens all

[Josh Shanker, Analyst at Bank of America]

over again. But in this quarter, the balance of the favorable loan came from the other property segment, not really the cat segment. And if people are trying to figure out the behaviors of Renoirier as you've transitioned away from being a cat company into a more diverse company, can you talk about what went into the reserve release property? And is there any read through about how you're managing that book of business and how you're managing the reserves on casualty and specialty?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Yes. So nothing has changed in our reserving. We just looking at the wildfires, we make our best assessment. We've talked many times about having a top down approach and a bottom up approach. Top down, we're looking at the industry event.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Bottom up, we're looking at each client individually and then coming up with our assessment. I'll turn it over to Bob to talk a little bit more specifically about the split between the reserve changes this quarter.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Yes. On the favorable development in property came in about a third of it went into and the other two thirds was in the proportional side of the other property. And that's a mix between cat exposed and non cat exposed.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

It's part of a review process that we'll go through on an annual basis. And there was just more releases that came out of that process on the other property. So it's not a targeted focus. It's a byproduct of the process that we go through and look at the events on an annual basis.

[Operator]

Thank you. And we will take our next question from Jimmy Bhullar with JPMorgan. Please go ahead.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Hey, good morning. I just had a couple of questions on your Casualty and Specialty business. So first on the reserve development this quarter, it was modestly positive. Can you go into some details on whether there was some adverse in certain lines and positives and other lines that offset that? Just any color there.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

And then just relatedly, if you could talk about your confidence in your casualty reserves overall. A lot of your seasons have had adverse development in recent years. Your reserves have generally been PYD has been neutral or slightly positive for the last several quarters.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Let

[Kevin O’Donnell, President & CEO at RenaissanceRe]

me start with the second part of your question, then I'll turn it over to Dave for the first part of your question. If you look at how to manage a casualty specialty portfolio, is firstly you need good underwriting and then you need a good process to manage the decisions you made from underwriting to make sure that your reserves are tracking any change in trend, which are different from the underwriting decisions you made at time zero. We've done a good job on both the underwriting. We have a diversified portfolio. There's always classes that have changes in the reserving patterns, which we're reflecting.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

But on balance, the portfolio in casualty specialty is well balanced and has performed well. So when I think about the casualty specialty business, it's one of the reasons in which in my comments I'm able to highlight the resilience of the overall platform is because we have greater diversification across our three drivers of profit because of the beneficial addition of the casualty portfolio. We are highly confident in the construction of the casualty portfolio And in order to be highly confident, we need to be highly confident in the reserve supporting it. Dave, do want to touch on the specifics?

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Yes.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

I can talk more about the specific reserves. I think obviously, there's lot of actuarial rigor that goes into the estimates. But if you step out of that, I think of a reserve analysis in two parts. It's did we get the underwriting right and then did we get the reserving process right? And the answer to both of those in our case is yes.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

We have been making the right decisions on the underwriting side. We've been able to allocate the capacity to the best risks and grow when we should, reduce when we should, use adverse development covers, avoid being overweight any one problematic class. General liability has had less favorable results. The other classes have had more favorable results, but the balance was there. So the segment has been profitable.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

We've had sustained favorable development. And also that's part of getting the reserving process right. Also like we about after 2020, when rates were increasing in casualty, we didn't immediately take that benefit. We have taken some of that and then reversed that to make sure that our more recent years are strongly reserved, but we're comfortable with where those are.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Okay. And if I could just ask one more. Just on your comments on overall market conditions, obviously, prices have come down, but it seems like they're still very adequate. But they have been coming down for the past couple of years. What's different about this market than in prior soft markets that would suggest that this is not the beginning of sort of a multiyear decline in prices?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Well, you're saying prices have been down for several years. Are you referring No,

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

point was 2023 prices went up a lot. Since then, they've come down a little bit, but off of a very, very high level. But there's a concern in the market amongst investors that this is the beginning of an ongoing decline in pricing in reinsurance over the next few years.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Okay.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

There something structurally different in the market that might prevent it or not?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Yes. If you go back to 2023, the reason for the change wasn't in response to a loss. It was in a response from tiresome results of underwriting dropping down too low, too many aggregate covers and expansion of terms over a long period of time. The reset at '23 was not only a change in price of 50%, it was resetting to levels which are much more sustainable from terms and conditions perspective and most importantly from a retention perspective. What was happening before was an unsustainable chain of risk transfer to retro that was too low, reinsurers protecting income statements and primary companies not pushing through rate.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

What we have now is a much more stable and much more historically normal environment where the primary companies have pushed through rate, better reflected deductibles in the insurance product, reinsurers have moved into balance sheet protection and retro has dropped out of the low aggregate coverage that reinsurers were buying. So right now the market is much more stable than where it was and much more historically normal than where it was prior to 2023. With that and what we've consistently said is we think the market like any financial market will trade around the level that we're at. And that's our belief going into this year is that there'll be some trading up and down in different classes. But the level of rate that has been established in the market is not going to trend down.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

So it's not like we went up a ski slope and we're back going to ski down. We've kind of walked up to the top of a mesa and we're going to walk across the top of the mesa at this new level. Sometimes it'll be a little up, sometimes it'll be a little down, but there's no indication that the market is trending back to pre-twenty twenty three levels.

[Operator]

Thank you. And we will take our next question from Bob Huang with Morgan Stanley. Please go ahead.

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

Hi, good morning. Maybe just a few things shifting gears a little bit. First one on capital allocation. You talked about repurchasing shares, continue to repurchasing shares. You also talked about reinsurance still being attractive.

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

If we were to rank the importance of each of your business and share repurchase on capital allocation, yeah, in terms of capital allocation, how would we rank them? Is it property catastrophe first, other property second? Where would casualty fall, where would buyback fall? Just curious how you would think of them from an order of importance?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Yes. Thanks for the question. We're fortunate to be in a capital and liquidity position that we are unencumbered from pursuing everything. We can grow our business. We have capital for that and at the same time repurchase shares.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

But more specifically, the reason we are focused on margin preservation is because our ability to grow the portfolio in a way that maintains the capital exposure and therefore the efficiency in the portfolio at the level we've achieved with the Validus acquisition is not the same as it has been. I think in this business if you try to grow the same amount every year you're likely to fail. It's a ratcheted equilibrium market where there's opportunities to grow and you need to take it and then there's opportunities where you need to think about how you're preserving the capital exposed to maintain the margin. So right now the biggest area of growth is top layers within the property cat space where people are continuing to purchase more cover. That does create opportunities for us through the stack, but for the ability for us to keep that fully deployed at the efficiency we've achieved in the portfolio is more challenged right now.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

So we'll look to do it, But you're asking me to prioritize them. I'm not sure that I can because I don't need to because we have the capital to do it all.

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

Okay. Got it.

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

No, that's very helpful. Second one, I might have missed this, apologies in advance. You talked about now having exposure to gold in the market. Did you disclose how big of a position that is in terms of like the risk you're taking there?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

We did not. And it's I think it's important to highlight this does not reflect any change in the way we think about our investments. We think about our investments in over the long term in contemplation of the enterprise risk that we have, but we thought it was wise because of the high degree of uncertainty to do something that was a little bit different to make sure that should there be shocks that are unknowable at time zero, we had some hedge in place in the portfolio and that's really what we've done.

[Operator]

Thank

[Operator]

you.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Thank you.

[Operator]

And we will take our next question from Meyer Shields with KBW. Please go ahead.

[Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)]

Great. Thanks so much. I want to talk about mid year renewals. I just want to get a sense for Renaissance and your own sort of proprietary pricing tools, how relevant is the fact that so many mid year cedents are going to be loss impacted as opposed to loss for your last twelve months?

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Hi, Meyer. This is David. So it's definitely relevant on each individual deal. I think when there's a deficit in the deal, it's a the clients are very loyal to the renewal reinsurance providers. So we're usually significant providers of these clients.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Some of the clients that we sell wildfire coverage to in particular are some of the blue chip clients we've done business with for multiple decades. So that will be a piece of the negotiation and it makes it very likely that we'll be able to have good results and continue trading with them. I think the other thing that I'll mention though about trading into the post loss environment, with hurricane that's a normal course of business. We already talked about the Florida opportunities. But post wildfire, we have updated our models and that's where we can do that quicker than anyone else in the market.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

We've updated our wildfire model, learned from the last event and can be quoting big lines, growing on some deals exposed to wildfire. And it's just that's what we're able to do. We're working with risk sciences, working with our underwriting team. Our tail is normally steeper than the vendor models. We've been able to make improvements and we'll quote that with confidence.

[Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay. Just going back and it's very helpful information. I'm wondering whether being loss impacted is a predictor of future losses or is it just part of the recruitment mechanism embedded in reinsurance?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Yes. Within our modeling, we're reflecting where we think expected loss comes from on a geographic basis by peril. So in thinking about the discussions that we have with clients at renewal, one of the first discussions is, are we or are you surprised by the level of loss in this instance in California from these wildfires. Does that mean that they're more likely to have a wildfire next time or is their book differently shaped? We try to glean that out of it, but most often it comes to is the information that we've been given accurately reflecting the experience that they're achieving.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

In many cases it is, in some cases there's more to talk about, but I wouldn't say that we look at it as if you've done poorly in event A, you're going to do poorly in event B.

[Operator]

Thank you. And we will take our next question from Mike Ceramisky with BMO. Please go ahead.

[Michael Zaremski, Managing Director & Senior Equity Research Analyst at BMO Capital Markets]

Hey, thanks. Question specifically on the Florida property cat marketplace. There's still some kind of positive commentary coming to Citizens, for example, on the reforms bending the loss curve. Any views there now that we've seen a year plus of kind of data coming through that you think could maybe ultimately benefit the loss ratio or is the industry kind of taking that into account as they model out risk at midyear and pricing?

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Yes. This is David. Thanks for the question. The reforms have had a positive impact on Florida claims. It's still fairly early stages.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

We have had two hurricane events last year and those are early stages of being settled. So while it's positive directionally, we are and we take a favorable view of the Florida market because of opportunities I mentioned. It's just a piece of the overall analysis, but trending in the right direction.

[Michael Zaremski, Managing Director & Senior Equity Research Analyst at BMO Capital Markets]

I guess just to follow-up, do you feel that reinsurers are kind of going to tighten all that benefit? Or are there could be a period of time where it needs time to develop more to bring to a better understanding?

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Well, I could focus more on what we do. And the way we approach it is we are in touch with our clients. We're gathering information similar to it's a much shorter lead time than say what casualty takes to move. But it does take time to be able to analyze the actual effects of changes in claims management. Like I said, it's headed in the right direction and we've seen positive signs, but it's still quite early after the last couple

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

of events.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Yes. A lot of the impact and the benefit of these changes has been to the attritional loss ratios and to the profitability of the domestic Florida companies. Obviously, it impacts cat is a little different, but we definitely think it's directionally beneficial.

[Michael Zaremski, Managing Director & Senior Equity Research Analyst at BMO Capital Markets]

Okay. That's helpful. Lastly, just moving taxes, I heard the comment about the evaluation allowance this quarter, but I'm just curious on a go forward basis, do we put in a number that's a little above 15 or just 15 because you might above 15 because you might have some non U. S. Sorry, non Bermuda income or how do we think about the placeholder we should put in reforms?

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

You're thinking about it right. In some jurisdictions we have a higher rate than 15% that Bermuda has. It's our dominant rate here, but we may have we have exposure in The U. S. Which is a little bit higher rate.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

So modeling just above 15% is probably the right way to go.

[Operator]

Thank you. And we will take our next question from Andrew Anderson with Jefferies. Please go ahead.

[Andrew Andersen, Equity Research Vice President at Jefferies Financial Group]

Hey, good morning. Maybe just back on the Casualty and Specialty segment and perhaps I'm a little confused on the combined ratio piece, but you're saying on the one hand there was no change to GL trends and current loss ratios, but the combined ratio guide did move up to high 90s. So was there a change on specialty or on professional liability?

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Yes. Let me start. It's a good question. I think I tried to cover this in the prepared comments. We had nine points of specialty I mean specialty losses, wildfires, airlines and refineries.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

I did toss in there, there was a couple of other points. You can see in the acquisition ratio was elevated that we're going to be in the mid to upper 90s. We're looking at the 90s because there's going to be ups and downs. We did increase remember last year, the loss rate, it's printing at 67%, which is consistent with last year. So that's what we feel good about.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

And the mix of our business is a byproduct of how we've underwritten the book and what both David and Kevin have spoken to.

[Andrew Andersen, Equity Research Vice President at Jefferies Financial Group]

Okay. And then lastly, just how are you kind of thinking about ILS and non cat bond ILS into the second half of the year and perhaps impact on renewals?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

It's not going to materially impact us from a competitive standpoint. Obviously, we have a large capital partners business. One of the headwinds in that business that I know others are facing is the allocation to

[Kevin O’Donnell, President & CEO at RenaissanceRe]

alternatives

[Kevin O’Donnell, President & CEO at RenaissanceRe]

is under stress. So the ability to bring new capital to the market may be a little bit more challenged. We're in the fortunate position where we generally are not in the same stresses that the market experiences because our offering is different. So from our standpoint, our third party capital footprint will be stable to up for the rest of the year. And I'm not particularly concerned about ILS impacting our ability to price or compete in the market for the rest of the year.

[Operator]

Thank you. And we will take our next question from Wes Carmichael with Autonomous Research. Please go ahead.

[Wes Carmichael, Senior Analyst at Autonomous Research]

Hey, good morning and thanks for fitting me in.

[Wes Carmichael, Senior Analyst at Autonomous Research]

In your prepared remarks,

[Wes Carmichael, Senior Analyst at Autonomous Research]

I think you mentioned subrogation regarding California and too early to book any benefit. But could you maybe just talk about your expectations for timing if that does occur in the future and perhaps the same question on timing of potential fare plan or treatments too?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

I think it would be false precision for us to give you timing on a process that is handled in California by the regulator. At this point, the Eaton fire hasn't even the source of ignition for the Eaton fire has not been confirmed. So it's very difficult to predict the timing as to when there'll be more clarity as to what's going to happen in the California market for insurers and then ultimately the benefit that will accrue to us. So I wish I could give you a more precise answer, but I think it would be false precision at this point.

[Wes Carmichael, Senior Analyst at Autonomous Research]

Okay, fair enough. And Kevin, I think in your comments, noted that if you assumed average or normal cat activity for the remainder of the year, do you think you can still deliver a solid ROE for 2025? Just wondering if you can contextualize that in terms of some ROE range or any kind of color there might be helpful for

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Obviously, there's a lot of uncertainty with the rest of the year, but this might be helpful that if the wildfires happened in December of twenty twenty four rather than the January of twenty twenty five, our ROE for 2024 still would have been above 15%. So looking at the way we're constructing our portfolio, I feel confident that our portfolio this year is going to look similar to next year. So the year may not, but if the decisions we're making put us in a position for what I think is going to be on an expected basis a healthy return and maybe that's a way to contextualize it.

[Wes Carmichael, Senior Analyst at Autonomous Research]

Appreciate the color.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Sure.

[Operator]

Thank you. And we will take our next question from David Motemaden with Evercore. Please go ahead.

[David Motemaden, Managing Director & Sr. Equity Research Analyst - Insurance & Business Services at Evercore ISI]

Hey, thanks for squeezing me in.

[David Motemaden, Managing Director & Sr. Equity Research Analyst - Insurance & Business Services at Evercore ISI]

Just wanted to follow-up on

[David Motemaden, Managing Director & Sr. Equity Research Analyst - Insurance & Business Services at Evercore ISI]

the 6% renewals. So I hear you on the desire to preserve margin there and deploy capital efficiently. Do you think that there are enough opportunities there where we could see an acceleration in cat from the flattish growth that you saw at oneone?

[Kevin O’Donnell, President & CEO at RenaissanceRe]

So I'll start and give some perspective. The market's growing. So I think what we said at oneone is we thought about $10,000,000,000 of new cat demand. Most of that will be towards the top of programs. We think that is actually a bit higher now.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

The decision we're making is we have allocated more capital for growth should we decide to execute on it is something that we will make deal by deal decisions as we go through the renewal. The concern that we have is increasing the exposed capital and reducing the efficiency of the portfolio. The opportunity to write is going to be profitable. It is going to increase the efficiency of our portfolio, which is more questionable. So when we're looking at how to construct a portfolio that's resilient, not only in 2025, but in 2026 and 2027, the best way for us to do that is to manage capital as aggressively we can by pushing into the market, managing it through share repurchases, but not looking at what's immediately available, but making sure that the portfolio is positioned well from a margin perspective to continue to provide the broadest coverage possible into 2026, '20 '20 '7 and 2028.

[David Motemaden, Managing Director & Sr. Equity Research Analyst - Insurance & Business Services at Evercore ISI]

Got it. Thank you.

[Operator]

Thank you. And we will take our next question from Alex Scott with Barclays. Please go ahead.

[Alex Scott, Equity Research Analyst at Barclays]

Hey, thanks for taking the question. On capital, I

[Alex Scott, Equity Research Analyst at Barclays]

just wanted to see if

[Alex Scott, Equity Research Analyst at Barclays]

you could give us a look at how you're thinking about your capital position, ability to grow. Just considering you guys don't provide quite as much around like PMLs and that kind of thing, sometimes hard to tell like how much capacity and firepower you have. So I was interested if you could elaborate at all.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Looking at all our metrics, we do not feel constrained to grow or to buy shares back from a liquidity or capital position across the platform. I'll turn it

[Kevin O’Donnell, President & CEO at RenaissanceRe]

over to Bob for more color on the capital.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

Regarding the depth of it, it's a good question. Thank you. But our capital position is commensurate with our strong earnings that we've demonstrated over the last two years. We've been building earnings with the acquisition of Validus and all three drivers of profit. I talked about the strength of the investment portfolio at 12% ROE contributor to last year's returns and that expectation going into 2025.

[Robert Qutub, Executive VP & CFO at RenaissanceRe]

So the three drivers of profit are performing and they're generating capital and it gives us the ability to deploy into the business, which is our preference, but also return it at attractive prices.

[Alex Scott, Equity Research Analyst at Barclays]

Got it. That's helpful. And as a follow-up, I just wanted to ask about the mortgage business. It seemed like that was a spot you leaned into in C and S this quarter and just interested what the opportunity is there.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

Yes. Thanks for the question. So in terms of the premium growth, there is a bit of noise in the way the premium comes through the quarterly results. So if you think about it on a longer term, we have reduced our mortgage exposure making the book more resilient to a recession mainly by moving up in towers and avoiding some of the lower credit quality items. So I wouldn't view that as a change.

[David Marra, Executive VP & Group Chief Underwriting Officer at RenaissanceRe]

The main trajectory has been to be resilient to a recession.

[Alex Scott, Equity Research Analyst at Barclays]

Got it. Okay. Thank you.

[Operator]

Thank you. And it appears that we have no further questions at this time. I will now turn the program back to Kevin O'Donnell for any closing remarks.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

Thanks for joining today's call. Looking at the first quarter, there's volatility and uncertainty. I feel as if RenReid demonstrated good execution through that. And I think as that continues over the course of the year, I feel as if we have great opportunities to continue to build shareholder value. So thanks for joining today, Carol.

[Kevin O’Donnell, President & CEO at RenaissanceRe]

We look forward to talking to you next quarter.

[Operator]

This concludes the RenaissanceRe first quarter twenty twenty five earnings conference call and webcast. Please disconnect your line at this time and have a wonderful day.

Participants

Executives

• Keith McCue, Senior Vice President of Finance & Investor Relations
• Kevin O’Donnell, President & CEO
• Robert Qutub, Executive VP & CFO
• David Marra, Executive VP & Group Chief Underwriting Officer

Analysts

• Elyse Greenspan, Managing Director at Wells Fargo Securities
• Josh Shanker, Analyst at Bank of America
• Jimmy Bhullar, Equity Research Analyst at JP Morgan
• Jian (Bob) Huang, Executive Director at Morgan Stanley
• Meyer Shields, Managing Director at Keefe, Bruyette & Woods (KBW)
• Michael Zaremski, Managing Director & Senior Equity Research Analyst at BMO Capital Markets
• Andrew Andersen, Equity Research Vice President at Jefferies Financial Group
• Wes Carmichael, Senior Analyst at Autonomous Research
• David Motemaden, Managing Director & Sr. Equity Research Analyst - Insurance & Business Services at Evercore ISI
• Alex Scott, Equity Research Analyst at Barclays