Fitch Affirms RenaissanceRe's Ratings; Outlook Stable
CHICAGO--(BUSINESS WIRE)--
Fitch Ratings has affirmed the ratings of RenaissanceRe Holdings Ltd.
(NYSE: RNR) and its subsidiaries, including the Issuer Default Rating
(IDR) for RNR at 'A', and the Insurer Financial Strength (IFS) rating of
Renaissance Reinsurance Ltd. at 'A+'. A full rating list is shown below.
The Rating Outlook is Stable.
Fitch's rationale for the affirmation of RNR's ratings reflects the
company's continued strong leadership position in the property
catastrophe reinsurance market, RNR's reasonable operating and financial
leverage, and overall high-quality and liquid portfolio of fixed-income
and short-term investments. The ratings also reflect the competitive but
improved property catastrophe market rate environment, volatile
underwriting results, and potential volatility from the company's
alternative investments.
RNR announced an initial estimated net negative impact from Hurricane
Sandy of $130 million on its fourth quarter 2012 results of operations.
Fitch considers this level to be manageable given the company's solid
capitalization (representing about 3% of shareholders' equity at Sept.
30, 2012), although the loss estimate is still subject to significant
uncertainty.
Fitch views RNR's year-to-year underwriting profitability and returns on
capital as volatile, as reflected by the company's unfavorable results
in 2011, when sizable catastrophe losses led to a net loss. However, the
effect of this volatility on the company's ratings is mitigated somewhat
by RNR's strong run-rate profitability over the long term, with low
combined ratios and high returns on capital in most years. Fitch
considers this an important factor supporting the company's ratings and
as evidence of the company's underwriting and catastrophe modeling
skills.
RNR posted a much improved GAAP calendar-year combined ratio of 43.1%
for the first nine months of 2012, compared to 118.6% for full year
2011, which included 85.4 points for catastrophe losses from the
Japanese and New Zealand earthquakes, Thailand floods, U.S. tornadoes,
aggregate loss contracts, Hurricane Irene, and Australian flooding.
Excluding the impact of significant catastrophes (3.6 points) and
favorable reserve development (15.5 points), RNR's combined ratio for
the first nine months of 2012 was 55.0%, up from 47.1% for the full year
2011 accident year period excluding catastrophes, due to estimated
ultimate losses related to potential exposure to LIBOR related claims.
RNR has been able to take advantage of the more recent favorable market
conditions in its core property catastrophe reinsurance business
following the significant catastrophe losses in 2011. Through the first
nine months of 2012, the company's total gross premiums written
increased by 5% over the comparable prior year period. However,
excluding the impact of sizable reinstatement premiums in 2011 and
negative reinstatement premiums adjustments in 2012, growth in gross
premiums written was much more pronounced at 21% for the first nine
months of 2012.
Fitch believes that RNR's capital position provides an adequate cushion
against the operational and financial risks the company faces. RNR
utilizes a reasonable amount of operating leverage with a ratio of net
premiums written to shareholders' equity of 0.2x-0.3x in recent periods,
which is low compared to the overall reinsurance industry, but in line
with those of other reinsurers with property catastrophe concentrations.
To the extent that the premium rate environment continues to improve,
Fitch expects RNR's operating leverage to increase somewhat, although it
is not expected to exceed 0.5x.
Key rating triggers that could lead to a downgrade include significant
deterioration in RNR's historically strong profitability, as
demonstrated by sustained underwriting losses or adverse investment
portfolio results, material weakening in the company's current balance
sheet strength, as measured by net premiums written to shareholders'
equity above 0.5x or equity-credit adjusted financial leverage above
25%, and a catastrophe event loss that is 25% or more of shareholders'
equity.
Fitch considers a rating upgrade to be unlikely in the near term due to
the earnings and capital volatility inherent in the company's property
catastrophe reinsurance focus. Key rating triggers that could lead to an
upgrade over the long term include continued favorable underwriting
results relative to other property catastrophe reinsurers and comparably
rated property/casualty (re)insurer peers, improvement in RNR's
competitive position in profitable market segments outside of property
catastrophe reinsurance, including its specialty reinsurance and Lloyd's
business, and material risk adjusted capital growth.
Fitch affirms the following ratings with a Stable Outlook: RenaissanceRe
Holdings Ltd.
--IDR at 'A'; --$100 million 5.875% senior notes due 2013 at 'A-'; --$250
million 6.08% series C preferred stock at 'BBB'; --$300 million
6.6% series D preferred stock at 'BBB'.
RenRe North America Holdings, Inc. --$250 million 5.75% senior
notes due 2020 at 'A-'.
Renaissance Reinsurance Ltd. --IFS at 'A+'.
Additional information is available at www.fitchratings.com.
The ratings above were unsolicited and have been provided by Fitch as a
service to investors.
Applicable Criteria and Related
Research: -- Insurance Rating Methodology (October 18, 2012)
Applicable Criteria and Related Research: Insurance Rating
Methodology -- Amended http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=692293
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE.
Fitch Ratings Primary Analyst: Brian C. Schneider, CPA, CPCU,
ARe, +1-312-606-2321 Senior Director Fitch, Inc. 70 W.
Madison Street Chicago, IL 60602 or Secondary Analyst: Greg
Dickerson, +1-212-908-0220 Director or Committee
Chairperson: Julie A. Burke, CPA, CFA, +1-312-368-3158 Managing
Director or Media Relations: Brian Bertsch,
+1-212-908-0549 brian.bertsch@fitchratings.com
Press Release $RNR RenaissanceRe Holdings Ltd.
CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings of RenaissanceRe Holdings Ltd. (NYSE: RNR) and its subsidiaries, including the Issuer Default Rating (IDR) for RNR at 'A', and the Insurer Financial Strength (IFS) rating of Renaissance Reinsurance Ltd. at 'A+'. A full rating list is shown below. The Rating Outlook is Stable.
Fitch's rationale for the affirmation of RNR's ratings reflects the company's continued strong leadership position in the property catastrophe reinsurance market, RNR's reasonable operating and financial leverage, and overall high-quality and liquid portfolio of fixed-income and short-term investments. The ratings also reflect the competitive but improved property catastrophe market rate environment, volatile underwriting results, and potential volatility from the company's alternative investments.
RNR announced an initial estimated net negative impact from Hurricane Sandy of $130 million on its fourth quarter 2012 results of operations. Fitch considers this level to be manageable given the company's solid capitalization (representing about 3% of shareholders' equity at Sept. 30, 2012), although the loss estimate is still subject to significant uncertainty.
Fitch views RNR's year-to-year underwriting profitability and returns on capital as volatile, as reflected by the company's unfavorable results in 2011, when sizable catastrophe losses led to a net loss. However, the effect of this volatility on the company's ratings is mitigated somewhat by RNR's strong run-rate profitability over the long term, with low combined ratios and high returns on capital in most years. Fitch considers this an important factor supporting the company's ratings and as evidence of the company's underwriting and catastrophe modeling skills.
RNR posted a much improved GAAP calendar-year combined ratio of 43.1% for the first nine months of 2012, compared to 118.6% for full year 2011, which included 85.4 points for catastrophe losses from the Japanese and New Zealand earthquakes, Thailand floods, U.S. tornadoes, aggregate loss contracts, Hurricane Irene, and Australian flooding. Excluding the impact of significant catastrophes (3.6 points) and favorable reserve development (15.5 points), RNR's combined ratio for the first nine months of 2012 was 55.0%, up from 47.1% for the full year 2011 accident year period excluding catastrophes, due to estimated ultimate losses related to potential exposure to LIBOR related claims.
RNR has been able to take advantage of the more recent favorable market conditions in its core property catastrophe reinsurance business following the significant catastrophe losses in 2011. Through the first nine months of 2012, the company's total gross premiums written increased by 5% over the comparable prior year period. However, excluding the impact of sizable reinstatement premiums in 2011 and negative reinstatement premiums adjustments in 2012, growth in gross premiums written was much more pronounced at 21% for the first nine months of 2012.
Fitch believes that RNR's capital position provides an adequate cushion against the operational and financial risks the company faces. RNR utilizes a reasonable amount of operating leverage with a ratio of net premiums written to shareholders' equity of 0.2x-0.3x in recent periods, which is low compared to the overall reinsurance industry, but in line with those of other reinsurers with property catastrophe concentrations. To the extent that the premium rate environment continues to improve, Fitch expects RNR's operating leverage to increase somewhat, although it is not expected to exceed 0.5x.
Key rating triggers that could lead to a downgrade include significant deterioration in RNR's historically strong profitability, as demonstrated by sustained underwriting losses or adverse investment portfolio results, material weakening in the company's current balance sheet strength, as measured by net premiums written to shareholders' equity above 0.5x or equity-credit adjusted financial leverage above 25%, and a catastrophe event loss that is 25% or more of shareholders' equity.
Fitch considers a rating upgrade to be unlikely in the near term due to the earnings and capital volatility inherent in the company's property catastrophe reinsurance focus. Key rating triggers that could lead to an upgrade over the long term include continued favorable underwriting results relative to other property catastrophe reinsurers and comparably rated property/casualty (re)insurer peers, improvement in RNR's competitive position in profitable market segments outside of property catastrophe reinsurance, including its specialty reinsurance and Lloyd's business, and material risk adjusted capital growth.
Fitch affirms the following ratings with a Stable Outlook:
RenaissanceRe Holdings Ltd.
--IDR at 'A';
--$100 million 5.875% senior notes due 2013 at 'A-';
--$250 million 6.08% series C preferred stock at 'BBB';
--$300 million 6.6% series D preferred stock at 'BBB'.
RenRe North America Holdings, Inc.
--$250 million 5.75% senior notes due 2020 at 'A-'.
Renaissance Reinsurance Ltd.
--IFS at 'A+'.
Additional information is available at www.fitchratings.com. The ratings above were unsolicited and have been provided by Fitch as a service to investors.
Applicable Criteria and Related Research:
-- Insurance Rating Methodology (October 18, 2012)
Applicable Criteria and Related Research:
Insurance Rating Methodology -- Amended
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=692293
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Fitch Ratings
Primary Analyst:
Brian C. Schneider, CPA, CPCU, ARe, +1-312-606-2321
Senior Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst:
Greg Dickerson, +1-212-908-0220
Director
or
Committee Chairperson:
Julie A. Burke, CPA, CFA, +1-312-368-3158
Managing Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
Source: Fitch Ratings