Good morning. My name is Jim, and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe Third Quarter 2024 Earnings Conference Call and Webcast. After the prepared remarks, we will open the call for your questions. Instructions will be given at that time. [Operator Instructions] Thank you. I would now like to turn the call over to Keith McCue, Senior Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you, Jim. Good morning. And welcome to RenaissanceRe’s third quarter earnings conference call. Joining me today to discuss our results are Kevin O'Donnell, President and Chief Executive Officer; Bob Qutub, 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. 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 renre.com. And now I’d like to turn the call over to Kevin. Kevin?

Thanks, Keith. Good morning, everybody, and thank you for joining today’s call. I am pleased to report that RenaissanceRe delivered another quarter of strong performance. We earned over $540 million of operating income. This represents an operating return on average common equity of 22%. Year-to-date, we have earned $1.8 billion in operating income and delivered a 26% operating return on equity. Our results this quarter were due to a strong performance by the entire team. I believe the superior returns we have been delivering can persist into 2025. Each of our three drivers of profit continues to perform well. In underwriting, we have demonstrated our ability to grow aggressively when markets are favorable. Both our Property business and our Specialty business are two years into very attractive markets that show little sign of abating. Year-to-date, topline growth in these businesses has been between 35% and 75%, depending on the particular line of business. In investments, interest rates have persisted at elevated levels and remain attractive relative to almost any point over the prior two decades. These elevated rates, in combination with our increased asset leverage, allows investment income to remain a significant contributor to our earnings. Finally, our Capital Partners business, already one of the largest managers of third-party capital, continues to grow while generating consistent management fees and attractive performance fees. Our acquisition of Validus has been a significant contributor to growth across each of our three drivers over the last year. But that is not the only way we’ve already created value from the Validus acquisition. Our recently completed integration efforts have also resulted in significant capital and liquidity. We purchased Validus knowing we would unlock value by bringing it onto our platform and sharing risk with our Capital Partners. We have access to multiple forms of efficient…

Thanks, Kevin, and good morning, everyone. We had a strong third quarter with net income of $1.2 billion and annualized return on average common equity of 47%. Operating income was $540 million and our annualized operating return on average common equity was 22%. During the quarter, we reported a net negative impact of $243 million from large events, including $125 million from Hurricane Helene. As we have discussed, RenaissanceRe has built a very resilient platform to manage our customers’ risk while producing strong returns for our investors. All three drivers of profit performed well this quarter. Underwriting income was $394 million with an adjusted combined ratio of 82%. Fees were $82 million, up 27%, and retained net investment income was $292 million, up 35%. When we acquired Validus, we noted that the transaction would be accretive to all three drivers of profit in addition to our key metrics. You can clearly see this in our 2024 results. Specifically, for the last nine months, operating income is up more than 50% year-over-year, with strong contributions from our three drivers of profit. Operating earnings per share are up 36% year-over-year and tangible book value per share plus change in accumulated dividends is up 30% since December 2023. Importantly, we have been generating these strong returns in a year with catastrophes. Year-to-date industry losses have exceeded $100 billion, which is slightly above the 10-year average, and this is before considering Hurricane Milton, which occurred in the fourth quarter. Moving now to capital management. During the quarter, we repurchased $107 million of our common shares. For the year, we have repurchased a total of $215 million at an average price of $224 per share. Last night, we were pleased to announce a 50% increase in our share repurchase authorization from $500 million to $750…

Thanks, Bob, and good morning, everyone. With less than two months to go in 2024, we are deep in preparation for the January 1st renewals and are excited about the opportunities ahead of us. Our customers have been overwhelmingly supportive of the Validus integration and we are entering the renewal season with a larger and more diversified portfolio and deeper partnerships. Our focus leading into January 1 is on serving customers and deploying capacity at our increased scale. Our enduring portfolio is very attractive. We will retain the combined portfolio and look for opportunities to deploy capacity where it’s at or above adequacy. As we have discussed, portfolio management is a continuous process. Our team is nimble and deeply experienced and we can increase our participations on deals or classes where returns are most attractive and reduce where hurdles are not met. As we look forward, we are in a strong position to grow with our customers. They know we are a trusted partner to help them manage their risk across portfolios and across market cycles. Especially in the current environment where the market is contemplating several large Property losses and growing concerns around Casualty trends, we offer certainty of execution that others cannot. This consistency and confidence is the direct result of our clear risk appetite, deep customer relationships, strong balance sheets and the flexibility of our growth to net strategy. Shifting now to a deeper discussion of the Property segment. This has been an active quarter for catastrophes and I want to express our sympathies to everyone impacted by these events. RenaissanceRe is proud of the role that we play in helping communities recover and we are paying claims quickly to aid in these efforts. Diving deeper into the events of the quarter, Hurricane Helene was the most…

Thanks, David. In closing, we reported a strong quarter in what so far has been an excellent year. We delivered superior results across our three drivers of profit, underwriting, fees, and net investment income with a manageable level of catastrophe losses. We have unlocked significant capital synergies with Validus, and as a result, we have now increased our share repurchase authorization by 50%. We expect the Property market to remain attractive, and in Casualty, we are taking a proactive client-by-client approach. Consequently, I could not be more excited about our potential for future performance and ability to create value for shareholders. Thank you, and with that, we’ll open it up for questions.

[Operator Instructions] We will now take our first question from Elyse Greenspan at Wells Fargo.

Hi. Thanks. Good morning. My first question is about the 1.1 renewals on the cat side. You guys have pointed to your excess capital to meet the additional supply that you’re talking about and you’re generating record ROEs. Isn’t that an environment when you put that all together where probably it shakes out to flat or rate declines during the renewals?

So, Elyse, thank you for the question. Just thinking pure supply and demand, we also believe there will be $10 billion or so new capacity coming to the market. We’ve seen capacity be continuously introduced in 2024. We expect that to continue in 2025. That additional demand will help stabilize the pricing environment. So, when we go in, we believe rates are fair and adequate for the Property Cat market, and that’s the way we’ll approach the renewals. And I think it’ll trade, as we’ve said before, at the new level in which the market reset to in the beginning of 2024. Equally important, I think the slips that are in place with the level of retention will likely persist as well. So, the reset and retentions, I think, will continue, and I think rates will be, as with any financial market, but they’ll trade roughly around the level that we’re at.

Thanks. And then my follow-up is on Specialty Casualty, right? So, you guys said that you’re going to start hooking this to a higher adjusted combined ratio, right, mid-to-high 90s next year. I guess it’s kind of a two-part question. If you’re responding to social inflation, why wouldn’t you have, I guess, started booking it higher this year? And if you’re thinking trends are going to go up, is that reflected in where your reserves sit today for the segment?

So, thanks for that question, Elyse. I pointed that out in my comments that we have – we are increasing the combined ratio. We’ve been booking it in the mid-90s for the last couple of years, and now we’re looking at changing in trend, whether it’s mix or trend that David was referring to, and I’ll turn it back to him in a second. But we did reflect that in the current, two points to make. One, it’s in the current accident year on a forward-looking basis. Two, we’ve talked about our historical portfolio that we have and how we’ve shaped that portfolio over the years, shaping meaning we didn’t grow it back in the challenging years. We grew it later on, and through acquisitions, we did get protections around it, and we talked about that in the past. But that’s really the driver of it, and it’s more on the trends that we’re seeing going into it and how we’re responding to those trends on a forward-looking basis.

Hey, Elyse. This is David. I can talk about what we’re seeing on the underwriting side. We’ve been following loss trend for several years and it’s a known issue in the market. There’s a good awareness on the insurer side. If insurers are taking action, we’ve done what we can to support this by engaging early, getting more data in advance of renewal, data like claim settlement patterns, individual case-reserving data that normally wouldn’t be part of the annual submission process. So we’re using that to have feedback loops to our customers. They’re taking the right action. They’re getting rate. They’re improving claims handling processes. Trend is a cumulative thing, so all those actions will be taking place over the next year and it’s too early to know the net-net result of cumulative loss versus all those actions. So it’s a pertinent thing to do to look at where we’re going to next year, but it is a 2025 issue more so than a current issue.

Thank you.

Our next question today will come from Yaron Kinar at Jefferies. Please go ahead. Your line is open.

Thank you. Good morning. First, maybe following up on the last question, I want to better understand why the loss trend issues that we’re seeing emerging wouldn’t be also reflected in a potential need to revisit some of the reserves of prior years, whether for the company itself or for decedents that could ultimately reflect company results?

Yeah. Hi. This is David. Thanks for the question. I think what goes into the current reserves is the cumulative effect of all the actions we’ve taken over the last 10 years and there’s a lot to that. So it starts with just, first of all, good underwriting and how we’ve constructed the portfolio, avoiding the most extreme areas of inflation like commercial auto. We’ve also been very active in scaling the book up into the better years and so we have more exposure to more recent years and use ceded reinsurance as a way to manage our net risk in a lot of different ways. As far as the reserving process, our process is independent from what our clients book. So one of the examples of how that manifests itself is when we grew into the 2021, 2020 market, rates were improving rapidly, but we didn’t adjust our picks down as much as that rate would have implied we should. That has the effect of having our reserves be more resilient when we’re facing inflation like we are now. So our focus is more on how do we get the right rate in 2025 and differentiate between portfolios rather than the current reserve pool.

Got it. And then my second question, I want to touch on the buyback authorization, the 50% increase. I just want to understand what changed this quarter, because if my recollection is correct, we’ve already talked about the expectation of the benefits from the Validus deal coming in when the $500 million authorization was set last quarter. So what’s changed in these three months? Is it that the very active earnings season that we expected turned out to be not as active or were there other puts and takes?

Yeah. Both Kevin and I talked about that in our prepared comments, and the common theme is scale is really where I have to put that. The last time we did an increase in our share authorization was back in 2007 and so that was quite a long time ago. A lot has changed. You start to see a number of things change in terms of size, volume in the market, and we just felt it was the prudent thing to do to be able to take advantage of what we’ll see as attractive opportunities. That’s the simple answer to that one.

In adding to your comments, Bob, the other thing that happened is we were able to consolidate the Validus balance sheets onto the RenRe balance sheets, which produced the final piece of liquidity that rolled up to the holding company. So nothing’s changed in the way we’re going to manage our capital position, where we’re going to deploy first into the market and then be good stewards and return capital to shareholders. This is really a reflection of the change in scale, and the flexibility and the timing really reflects the fact that the integration of Validus is complete and the capital flexibility and liquidity that we expected to achieve from the transaction has been realized.

Thank you.

Our next question will come from the line of Ryan Tunis with Autonomous Research.

Hey. Thanks. I guess following up on that last question, Kevin, you said there’s $10.5 billion of common equity and a portion of that is increased undeployed capital. Just trying to get a feel for how much equity capital does this combined business of RenRe and Validus need at this juncture? It’s not $10.5 billion. Is it $10.5 billion minus $7.5 billion, or is the excess here a lot more significant?

So, I think we generally manage the company with a degree of undeployed capital. That provides us flexibility to leverage into markets. It also provides a buffer for the balance sheets, should there be a loss. We don’t specifically disclose the amount of excess capital. What I would say is that we are in an above-average period of financial flexibility with the undeployed capital that we have. We do think we’ll have some opportunities to deploy it into the market in 2025. We also believe we’ll have equally strong opportunities to return to shareholders.

Got it. Then just on the 1.1 renewal, it’s been an active loss year in Europe, but then I guess the 3Q hurricane is more U.S.-centric. I was thinking it might be a little bit more June 1. But it’s – first part like, to what extent are the elevated losses in Europe going to affect the conversation around the 1.1 renewal and is there a reason to think that some of the momentum we might pick up from Helene and Milton might be more evident 6.1?

Hey, Ryan. This is David. I’ll start with that one. There has been loss activity in Europe, like you mentioned. That’s in the bucket of attritional losses that we’re seeing in North America and in Europe. so it does have the impact of keeping the conversation around stability and retentions and how important that is to the reinsurance market. So we see that U.S. and Europe were expecting stable retention, stable structures and the conversation is around price. Like we say, the price will trade around the current levels we’re at. We see opportunities with our market position post-Validus to potentially deploy capital in both sides, both North America and in Europe, with where we are now.

Yeah. The final thing I’d add to Dave’s comments is Milton is a Florida event, so I would say that if there are to be loss-specific discussions, those will be largely more 6.1. I also believe that the market’s matured a bit with what happened in 2024 and discussions around loss and loss-affected covers and that being the only catalyst for sustaining rate are no longer really the fixture of the market. I think everybody recognizes that today’s structures and today’s prices will persist.

Thank you.

The next question will come from the line of Joshua Shanker at Bank of America. Your line is open, please.

Thank you for taking my question. So you guys have this larger share repurchase authorization at $750 million. Over the past 12 months, operating income has been $2.5 billion and net income has been $3.5 billion. We don’t know what’s going to be in the future for earnings, but at the rate you guys are generating capital, you’re going to have a significantly higher capital position over the next few months heading into 2025 as you did a year ago. Is that amount of share repurchase adequate to think about a year ahead or could you burn through that more quickly than you foresee?

Thanks, Josh. This is Bob. Good question. I tried to address that in my prepared comments. You point out appropriately that we have been generating excess capital to our operating incomes. All three drivers of profit have been contributing significantly. Also, the efficiency on what Kevin described in his 3-2-1 for validates generate excess capital. So we do have the capital, and what I had talked about in my prepared comment, we have the option to do both at the same time. We’ll be deploying capital into the business at the renewals next year, to which David and Kevin have spoken to regarding opportunities, as well as new demand. But in the same light, we’ll be returning capital as well at attractive valuations. The authorization increase from $500 million to $750 million is part of our scale that Kevin talked about and we look at that each quarter. So if you go back in time, we approve that every quarter. So whether we use all of it or none of it, or tap into it, we look at that every quarter. So it’s not an annual, it’s quarterly.

And I realize that once you establish a quarterly common dividend, it’s a promise in perpetuity to the future. Does -- do special dividends make sense, maybe not at the current valuation? How would RenRe approach that as a way of giving capital back to shareholders?

I think it’s a great question. I think we look at every way possible for us to think about managing capital. Obviously, our first, as I mentioned several times, our first protocol is to deploy it into the business. Our preferred methodology, and what we see as the most accretive over the long-term to tangible book value per share is through the share, through repurchasing our own shares. If that was a different calculation, we would certainly look at different mechanisms to manage capital. Our history suggests that we have a bias to share buybacks, and that’s simply because the economics are most accretive to our existing shareholders. I don’t see that changing in the near-term.

Thank you very much.

Yeah. Thank you.

Meyer Shields at KBW. Your line is open.

Great. Thanks. So, one question I’m getting a lot of this morning is whether the flat reserve movement in Casualty and Specialty, is there significant variation by accident year or by Casualty versus Specialty?

I talked a little bit about that in my prior comments regarding the overall profitability of Casualty, but more specifically, when it comes down to purchase accounting, it’s amortized into the acquisition ratio and prior year reserves. That was actually affected by about $10 million, $11 million. When you negate that, the $1 million actually becomes a much larger and more consistent number than what you’ve seen before. But again, it’s the purchase accounting that’s the story, not by about $10 million or $11 million.

One thing I’d add to Bob’s comments is, if you look at the reserve profile that we have, we grew pretty substantially in 2020 and forward, which are seen to be better years. We also have a nice balance of Casualty and Specialty. Within the Casualty segment and the area of problem for the industry has been commercial auto and we’re not a commercial auto writer. So, it’s not only that we’re in good years, I think we have a better balance of better business in our reserve pool than what the industry would reflect as well.

Okay. That’s helpful. Thank you. Second question and it’s so easy for me to ask this, but how hard would it be to shift your focus on Casualty lines to excess of loss, so you’re not dependent on your client’s rate actions?

Hi. This is David. The market does trade on a quota share basis mostly, and that is a good structure with which we participate in the business because it aligns interest between the seedant and the reinsurer. So it’s important that we engage with customers and understand how they’re settling claims, understand how they’re getting rate, and those are all very positive conversations, and they’re making strong actions now and we expect them to continue to do that in 2025. The other dial that we have to turn is the seeding commission and seeding commissions are reducing with the earlier annuals that we’ve seen up until this season and we expect that to continue, and that has the effect of having more of a net premium with a lower seeding commission than we would with a higher one, and it benefits our net position.

Yeah. One thing I’d add -- two things I’d add to Dave’s comments is it’s a good time for quota share because the primary companies are aligned with our view of what needs to happen from a rate perspective. So they are pushing through primary rates, and we’re harvesting the benefit of their work. The second thing is with trend, there’s been an increased frequency of severity. Being excess on that, you can be more impaired by that trend compared to quota share. So again, it’s another reason to support the quota share market at this time.

Okay. For sure. Thanks so much.

Mike Zaremski at BMO. Please go ahead with your question.

Good morning. Thanks. On back to the Casualty Specialty, some color you’ve offered in the guidance of mid-to-upper 90s. Can you give us a flavor of whether you’re contemplating within that guide any improvement in Casualty seeding commissions for the reinsurance marketplace, and also just on just overall pricing in your prepared remarks, you did, Kevin, talk about the need for more rate, and at least the data points we see so far, especially in 3Q, points to the market moving higher in terms of rate. So I’m curious, too, if you’re contemplating in that guide, especially since you’re not taking any reserve charges on your back book, if you are contemplating the market moving higher on rate materially? Thanks.

Yes. We definitely are. And we priced in some additional loss trend into 2025 and some additional rate. It’s the best estimate that we have at this point. We’re seeing the same things you are. The market is responding to this known issue, which is accelerating loss trend in some areas. They’re getting more rate. They’re taking underwriting actions. They’re also improving the way they settle claims. That’s a big differentiator that I think will become more and more important over the next few years. But that’s how we’re approaching it. If rate continues to accelerate, that will be positive news. But as always with our reserving process, we’ll wait to recognize that good news until the business seasons and recognize the potential for trend like we are now early.

Got it. Okay. And sticking on Casualty, and I know this question has been asked many different ways, but I’m still getting incoming questions on it from investors. So the reason you didn’t take a reserve charge, is it in layman’s terms, can we say that it’s because you read books more conservatively and there is a cushion still even though you are seeing a materially higher trend line?

Yeah. So I’ll continue on and kind of reference some of my remarks earlier about the process we follow in 2020, 2021, there was significant improvement in the business and we didn’t reduce our reserving fix very significantly. That in some cases might lend to that we’re booking those years higher than some of the market and that’s just part of the process. The other thing that we have is we have curves, developing curves that are slow enough to make sure that we wait until we see positive development before we recognize the good news. And if our curves were faster, then the 2020, 2021 years might have reacted already, but that’s not the way we approach the reserving process.

Okay. That’s helpful. Thank you.

Moving on we’ll hear from Brian Meredith at UBS.

Yeah. Thanks. Two questions here for you. First one, just hopefully a simple one. Could you provide us some color on how much is left in the Tokyo Marine adverse development cover? Is that kind of helping some of the reserve development?

We don’t disclose specific transactions. Tokyo has been a great partner. We’re delighted to have that book as part of our portfolio and we -- that’s a last to pay cover. There’s still a limit available and it still remains unpaid.

Great. Helpful. Thank you. And then second question, I’m just curious, what is your anticipation of kind of retrocapacity availability as we look into 2025 Property retrocapacity? Do you think we’ll see any increase?

That’s a tough call right now because there isn’t a ton of price discovery in the market. I think the retromarket will have limited impact from the events that have happened so far this year. That’s generally a good sign that the capacity in the retromarket will be at least stable. From our perspective, we use the retromarket to really shape our portfolios. We’ll build our performance with the expectation as to what we will likely purchase to help with that shaping. I would say at this point we have an expectation that we will purchase slightly less retro in 2025, but we also have a belief that it will be available.

Thank you.

Yeah.

And now we will hear from Evercore ISI’s David Motemaden. Please go ahead.

Hey. Thanks. Good morning. I had a question. So I think a few times you’ve mentioned that you haven’t assumed as much loss ratio improvement in your Casualty picks during the hard market years. I’m just wondering how much improvement you guys have assumed if I were to look at accident year 2019 compared to accident year 2020 or 2021, 2022. How much improvement have you guys assumed?

Let me talk a little bit about our process for reserving and kind of the way we think about it because I’m not sure that we have that information here with us for the call. What we do is we will set the initial loss pick and then we develop a curve. As the curve develops, we amend the curve to make sure we’re reflecting what our observations are for trend. We believe we set the initial expected. We know we set it independent to the primaries and our observation is we set it higher. Additionally, we are very slow to recognize good news, which means our curves will develop slowly. I believe when I look at the balance of our reserves, they’re in a very healthy state and they reflect our best estimate. The other thing which I do want to go back to is a lot of the conversation for Casualty is around commercial auto. That is an insignificant part of our reserve base. The second thing is we spend a lot of time talking about rate coming through on the current accident year for Casualty. And one of the things that’s important is when we talk about the need for a rate, we are talking about the need for margin for the risk that we’re taking. So we feel as if we’re in a good position for the portfolio, but we want to make sure that we enhance the margin, because we’re looking at this over 10 years. The margin that we’re getting today is not the margin that we would target over 10 years. So the book balance is in good shape. I believe we’ve got a great process, which reflects the uncertainty that emerges in Casualty and reflecting that uncertainty by being cautious and slow. And then we are in a position where we’re enjoying the benefit of a shared view of a difficult Casualty market, harvesting additional rate, which will help enhance margin.

Got it. Thanks. Then it definitely sounds like you guys stepped up the engagement with the Casualty seeding this quarter. How far along are we in that information gathering process? Is that something where we should expect you guys to reflect what you’ve gleaned from those conversations in your reserves and in your picks in addition to what has happened this quarter?

Yeah. I would say we’re in the normal course of business the submissions come in 10.1, 11.1, 12.1, 1.1. We started much earlier than that. We engaged with the brokers and the clients directly to let them know that we’re seeing this in aggregate data because we see the whole market. We’re not relying on just one company’s data. We could see where the trends were and where they weren’t and what we needed to be able to help price that as accurately as possible. Very positive conversations. And the first focus of the outcome of those will be for us to select our portfolio, price the right rate, price the right seeding commission and make the right risk decisions into 2025. We’ll continue to keep you updated as we see more information on trends evolving, but that’s the area of focus. Besides just the data, we’re also getting the right level of information about claim settlement practices and underwriting adjustments, which all of those work together in order to create the right result into the future.

Thank you.

That was our final question from the audience today. Mr. O'Donnell, I’m happy to turn it back to you, sir, for any additional or closing remarks.

Thank you, everybody, for joining today’s call. We’re looking forward to the 1.1 renewal and looking forward to talking to you in February. Thanks again.

Ladies and gentlemen, this concludes the RenaissanceRe third quarter 2024 earnings call and webcast. Please disconnect your line at this time and have a wonderful day.