June 5, 2012 / 7:57 PM / 5 years ago

TEXT-Fitch affirms RenaissanceRe Holdings

 (The following statement was released by the rating agency)	
 June 5 - 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+'. The Rating Outlook is Stable.  A complete 	
list of ratings is provided at the end of the release.	
	
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.	
	
Fitch views RNR's year-to-year underwriting profitability and returns on capital	
as volatile, but the effect of this volatility on the company's ratings is 	
mitigated somewhat by RNR's low combined ratios and strong returns on capital 	
over extended periods of time.  Fitch considers this as an important factor 	
supporting the company's ratings and as evidence of the company's underwriting 	
and catastrophe modeling skills.	
	
RNR recorded net income of $201 million for the first three months of 2012, 	
improved from a $92 million net loss for full year 2011 due to light catastrophe	
losses thus far in 2012.  As a result, RNR posted a much improved GAAP calendar 	
year combined ratio of 29.4% for the first three 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 and favorable reserve development, RNR's 	
combined ratio for the first three months of 2012 was 49.4%, up slightly from 	
47.1% for full year 2011.  	
	
Fitch believes that RNR has a leading position in the property catastrophe 	
reinsurance market derived largely from the company's ability to provide 	
consistent capacity in the marketplace and its ability to effectively underwrite	
and price catastrophe-related risks. RNR uses a proprietary model in conjunction	
with vendor models in its underwriting and risk evaluation process and Fitch 	
views RNR's property catastrophe underwriters as having a demonstrated record of	
expertise. 	
	
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 three months of 2012,	
the company's total gross and net premiums written both increased by 9% over the	
comparable prior year period.  Excluding the impact of the sizable reinstatement	
premiums in 2011, growth in gross premiums written was much more pronounced at 	
almost 34% for the first quarter 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. 	
	
Fitch considers RNR to use a moderate amount of financial leverage in its 	
capital structure, with an equity-credit adjusted financial leverage ratio of 	
12.7% at March 31, 2012, down from 13.6% at Dec. 31, 2011.	
	
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. 	
--Issuer Default Rating (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+'. 	
	
 (Caryn Trokie, New York Ratings Unit)	
 

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