Bermudian reinsurer and third-party capital management specialist RenaissanceRe reported a 14.8% decline in managed catastrophe premiums in the third-quarter, year-on-year, totalling $76.9 million.
The Bermuda domiciled reinsurance company recently reported its third-quarter and nine-month 2016 financial results, which reveals a decline in the underwriting income of its catastrophe reinsurance segment as managed catastrophe premiums fell.
The firm operates a number of joint-ventures, third-party backed reinsurance vehicles and insurance-linked securities (ILS) funds via its Ventures unit, and of which the performance and impact on the company’s results are included in its managed catastrophe premiums segment.
Overall, managed catastrophe premiums totalled $76.9 million in the third-quarter, falling by $13.3 million from the same period last year. For the first nine months of 2016 the picture was a similar one, although the decline from $952.7 million in 2015 to $924.9 million in 2016, was less severe than witnessed in Q3 alone.
Underwriting income generated by its catastrophe reinsurance segment totalled $96.2 million in Q3, slightly down on the $99.8 million reported in Q3 2015. However, the segment’s combined ratio improved in the period to 20.6%, compared with 37.5% in the previous year.
“Principally impacting underwriting income and the combined ratio in the third quarter of 2016, compared to the third quarter of 2015, was a $38.6 million decrease in net premiums earned, partially offset by a $21.4 million decrease in net claims and claim expenses and a $13.6 million decrease in underwriting expenses,” said RenRe.
One of the most well-known ventures within its managed catastrophe premium segment is the company’s rated and largely third-party capitalised reinsurance vehicle DaVinci Re, which has become and important aspect of RenRe’s overall business operations.
DaVinci catastrophe premiums declined for both the third-quarter and the first nine months of 2016, to $14.56 million and $274.63 million, respectively. This is compared to $20.21 million and $285.85 million in Q3 and the first nine months of 2015, respectively.
As a result of decreases in both Renaissance catastrophe premiums and DaVinci catastrophe premiums for both Q3 and the first nine month period, total catastrophe reinsurance premiums fell for RenRe during Q3 2016 to $67.34 million, and $825.27 million for the first nine months of the year.
DaVinci’s combined ratio improved the quarter to 39.6% from 44.5% in the same period last year, and also an improvement from the 67.7% recorded at the end of Q2 2016. At the same, the DaVinci vehicle increased net income available to common shareholders, from $37.7 million in 2015, to $40.45 million in Q3 2016.
Despite a decline in catastrophe premiums at DaVinci Re the vehicle’s combined ratio of 39.6% is attractive and enables the firm to provide returns for its investor base. This is evidenced by the fact that RenRe distributed greater profit to third-party investors in the period, as net income attributable to non-controlling interests grew to $35.6 million from $31.2 million, which was largely driven by the rise in profitability of DaVinci Re witnessed in Q3, said RenRe.
Furthermore, the company revealed that its ownership in DaVinci had declined to 24% as at September 30th 2016, compared with 26.3% at September 30th 2015.
RenRe’s catastrophe premiums and DaVinci’s catastrophe premiums make up the majority (total catastrophe reinsurance premiums of $67.34 million) of the firm’s overall managed catastrophe premiums, which as noted earlier declined to $76.9 million.
The remaining $9.56 million of managed catastrophe premiums comes from RenRe’s Lloyd’s segment and its joint venture, Top Layer Re, with the latter reporting a loss of $15 million as a result of foreign exchange losses.
Broken down, Top Layer Re recorded catastrophe premiums of $1.45 million in Q3, so actually an increase on the $1.08 million recorded a year earlier, but down significantly from the $25.68 million reported in Q2 2016.
So managed catastrophe premiums were down for RenRe during the third-quarter of 2016 and the first nine months of the year, reflecting challenging market conditions. Its third-party capital backed ventures continue to provide the firm with diversified avenues to access risks and returns.