Investors welcomed news that RenaissanceRe had delivered a strong second quarter earnings beat, which included a $92mn net contribution from releases against last year’s natural catastrophe reserves.
After an initial spike, shares were trading hands for around $127.20 a piece in early morning trading in New York, about 2.5 percent more than yesterday’s close.
RenRe’s CEO Kevin O’Donnell described the firm’s second quarter results as “our best portfolio of risks in years” as operating earnings of $5.23 per share smashed the consensus forecast of $2.94, expected by 13 analysts surveyed by MarketWatch.
Net income was also higher than expected at $191.8mn, a marked increase from the $171.1mn it reported in the second quarter of 2017.
The Bermudian reinsurer also earned back $92mn net from an effective $129mn of over-reserving for the 2017 catastrophes, which included Hurricanes Harvey, Irma and Maria, along with the fourth quarter Californian wildfires.
The release is in stark contrast to peer Everest Re which saw its share price close down almost 3 percent last week after adding the equivalent of $250mn after tax to bolster reserves from the same loss events.
RenRe - which is listed on the NYSE - explained that the release followed a review of its potential exposures, discussions with counterparties and cat modelling techniques.
It added that a certain amount of uncertainty continues because of the “relatively limited claims data received to date” and the contingent nature of business interruption.
Gross written premiums were up 18.1 percent to $977.3mn compared to the quarter a year ago, driven by increases of $96.6mn in its casualty/specialty unit and $53.3mn in the property segment.
The combined ratio was a modest 47.2 percent compared to the 71.3 percent it reported a year ago.
O’Donnell added: “We celebrated our 25th anniversary as a company this quarter, and I am proud to report very strong results. We recorded annualized operating return on average common equity of 20.3 percent and growth in tangible book value per common share plus accumulated dividends of 4.9 percent.”
He concluded on an upbeat footing: “Moving forward, a combination of top line growth, an effective gross-to-net strategy, rising interest rates and improved operational efficiency should provide the foundations for continued superior shareholder return”.