Bermuda-based RenaissanceRe Holdings Ltd. reported second quarter net income dropped nearly 26 percent falling by $47.6 million, when compared with the period last year.
Net income was $135.7 million or $2.13 per share in the second quarter, compared to net income of $183.2 million or $2.53 per share for the same quarter of 2007.
The specialty reinsurer also reported an annualized operating return on average common equity of 23.4 percent compared to 28.5 percent in 2007.
Bank of America's Equity Research called the operating return figure "stellar."
RenaissanceRe had an annualized return on average common equity of 19.9 percent in the second quarter of 2008 compared with 26.8 percent in the second quarter of 2007.
According to Equity Research, strong ROEs were reported in the second quarter, despite a more challenging environment, and "Superior underwriting results, driven by low loss experience and reserve releases, again more than offset weaker than expected alternative asset returns."
The company generated $175.2 million of underwriting income and had a combined ratio of 53.5 in the second quarter of 2008, compared to $133.6 million of underwriting income and a 62.7 combined ratio in the second quarter of 2007–a difference of 31 points.
The company's underwriting results for the second quarter of 2008 were driven by a combination of higher net premiums earned and lower net claims and claim expenses incurred.
RenaissanceRe said it experienced $49.6 million of favorable development on prior year reserves in the second quarter of 2008, compared to $59.1 million of favorable development in the second quarter of 2007.
The favorable development, RenaissanceRe reported, is primarily due to lower than expected claims emergence in both the company's reinsurance and individual risk segments.
The Equity Research report found the company remains "extremely well positioned within the property catastrophe arena," adding that its annualized ROE in the quarter "was a stellar 24 percent, and highlighted the earnings power of the company."
Equity Research said it raised its 2008 EPS estimate to $9.05 from $8.82.
In February, RenaissanceRe said its fourth quarter net income dropped by 65 percent, partly because of the drop in subprime mortgage values. (NU Online News, Feb. 6)
Neill A. Currie, RenaissanceRe's chief executive officer, commented: "I am pleased to report another solid quarter with an annualized operating ROE of over 23 percent. We generated strong underwriting profits and had a successful June 1st renewal season. We are pleased with our portfolio of risks, despite softening market conditions and a challenging investment environment."
Mr. Currie said that during the quarter the company added Agro National LLC, a managing general underwriter of multi-peril crop insurance, and Claims Management Services, Inc., a third party claims administrator.
He added that the company is maintaining strong underwriting discipline in a difficult market and continues to "lay the groundwork for future opportunities."
RenaissanceRe reported $159.9 million in second quarter operating income available to common shareholders, compared to $194.7 million in the second quarter of 2007. Operating income excludes net realized investment losses of $24.2 million and $11.6 million in the second quarters of 2008 and 2007, respectively.
Operating income per diluted common share is $2.50 in the second quarter of 2008, compared to $2.69 in the second quarter of 2007.
Gross premiums written for the second quarter of 2008 were $807.6 million, a $38.3 million decrease from the second quarter of 2007, the company said, noting that the decrease in gross premiums written in the second quarter of 2008, compared to the second quarter of 2007, was primarily due to a $118.4 million decrease in gross premiums written in the company's reinsurance segment and partially offset by a $76.5 million increase in gross premiums written within the company's individual risk segment.
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