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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1999 COMMISSION FILE NO. 34-0-26512
RENAISSANCERE HOLDINGS LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BERMUDA 98-013-8020
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
RENAISSANCE HOUSE, 8-12 EAST BROADWAY, PEMBROKE HM 19 BERMUDA
(Address of Principal Executive Offices)
(441) 295-4513
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: COMMON SHARES, PAR
VALUE $1.00 PER SHARE
NAME OF EACH EXCHANGE ON WHICH REGISTERED: NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
The aggregate market value of Common Shares held by nonaffiliates of the
Registrant as of March 15, 2000 was $468,195,452 based on the closing sale price
of the Common Shares on the New York Stock Exchange on that date.
The number of Common Shares outstanding as of March 15, 2000 was
19,614,655.
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DOCUMENTS INCORPORATED BY REFERENCE
Sections of the Registrant's Annual Report to Shareholders mailed to
shareholders on or about March 25, 2000 (the "Annual Report") are incorporated
by reference into Part II of this Form 10-K. With the exception of the sections
of the Annual Report specifically incorporated by reference herein, the Annual
Report is not deemed to be filed as part of this Form 10-K.
Sections of the Registrant's definitive proxy statement filed on March 24,
2000 with the Securities and Exchange Commission (the "Commission") pursuant to
Regulation 14A under the Securities Exchange Act of 1934 relating to the
Registrant's Annual General Meeting of Shareholders to be held on May 3, 2000
(the "Proxy Statement") are incorporated by reference into Part III of this Form
10-K. With the exception of the sections of the Proxy Statement specifically
incorporated by reference herein, the Proxy Statement is not deemed to be filed
as part of this Form 10-K.
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RENAISSANCERE HOLDINGS LTD.
TABLE OF CONTENTS
Page
PART I
Item 1. Business............................................................ 1
Item 2. Properties......................................................... 22
Item 3. Legal Proceedings.................................................. 22
Item 4. Submission of Matters to a Vote of Security Holders................ 22
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters............................................................ 22
Item 6. Selected Consolidated Financial Data............................... 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 22
Item 7a. Quantitative and Qualitative Disclosures about Market Risk......... 22
Item 8. Financial Statements and Supplementary Data........................ 22
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure........................................... 23
PART III
Item 10. Directors and Executive Officers of the Company.................... 23
Item 11. Executive Compensation............................................. 23
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 23
Item 13. Certain Relationships and Related Transactions..................... 23
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 23
SIGNATURES .................................................................. 27
(i)
PART I
Unless the context otherwise requires, references herein to the "Company"
include RenaissanceRe Holdings Ltd. ("RenaissanceRe") and its subsidiaries,
which principally include Renaissance Reinsurance Ltd. ("Renaissance
Reinsurance"), DeSoto Insurance Company ("DeSoto"), Nobel Insurance Company
("Nobel"), Glencoe Insurance Ltd. ("Glencoe"), Renaissance Services Ltd.
("Services"), Renaissance Reinsurance of Europe ("Renaissance Europe"),
Renaissance U.S. Holdings, Inc. ("Renaissance U.S."), Renaissance Underwriting
Managers Ltd. ("Renaissance Managers"), Pembroke Managing Agents, Inc.
("Pembroke") and Paget Insurance Agency, LLC ("Paget"). Certain terms used below
are defined in the "Glossary of Selected Insurance Terms" appearing on pages
19-21 of this Report.
NOTE ON FORWARD-LOOKING STATEMENTS
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward-looking statements in the
following discussion and elsewhere in this Annual Report on Form 10-K.
Forward-looking statements are necessarily based on estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which, with respect to future business
decisions, are subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ materially from
those expressed in any forward-looking statements made by, or on behalf of,
theCompany. In particular, statements using verbs such as "expect",
"anticipate", "intends", "believe" or words of similar impact generally involve
forward-looking statements. In light of the risks and uncertainties inherent in
all future projections, the inclusion of forward-looking statements in this
report should not be considered as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved. Numerous
factors could cause the Company's actual results to differ materially from those
in the forward-looking statements, including the following: (i) the occurrence
of catastrophic events with a frequency or severity exceeding the Company's
estimates; (ii) a decrease in the level of demand for the Company's reinsurance
or insurance business, or increased competition in the industry or from other
products which provide similar coverages; (iii) the lowering or loss of one of
the financial or claims-paying ratings of the Company or one or more of its
subsidiaries; (iv) risks associated with implementing business strategies of the
Company; (v) uncertainties in the Company's reserving process; (vi) a failure of
the Company's reinsurers to honor their obligations; (vii) actions of
competitors including industry consolidation; (viii) loss of services of any one
of the Company's key executive officers; (ix) the passage of federal or state
legislation subjecting the Company's Bermuda subsidiaries to supervision or
regulation in the United States or other jurisdictions in which the Company
operates; (x) challenges by insurance regulators in the United States to
Renaissance Reinsurance's claim of exemption from insurance regulation under
current laws; (xi) changes in economic conditions, including currency rate
conditions which could affect the Company's investment portfolio; (xii) a
contention by the United States Internal Revenue Service that Renaissance
Reinsurance is engaged in the conduct of a trade or business within the U.S.;
(xiii) changes in the U.S. laws or regulations relating to Bermuda insurance
companies which could adversely affect the Company; or (xiv) slower than
anticipated growth in the Company's fee-based operations. The foregoing review
of important factors should not be construed as exhaustive; the Company
undertakes no obligation to release publicly the results of any future revisions
it may make to forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
ITEM 1. BUSINESS
GENERAL
RenaissanceRe Holdings Ltd. ("RenaissanceRe") is a Bermuda based holding
company with operating subsidiaries engaged in reinsurance, insurance and
related services. RenaissanceRe's principal operating subsidiary, Renaissance
Reinsurance Ltd. ("Renaissance Reinsurance") provides property catastrophe
reinsurance coverage to insurers and reinsurers, primarily on an excess of loss
basis. During 1999, Renaissance Reinsurance wrote $282.3 million of premium
(1998 - $207.2 million) and, based on gross premiums written, Renaissance
Reinsurance is one of the largest providers of property catastrophe reinsurance
coverage in the world. Excess of loss catastrophe coverage generally provides
coverage for claims arising from large natural catastrophes, such as earthquakes
and
1
hurricanes, in excess of a specified loss. In connection with the coverage it
provides, Renaissance Reinsurance is also exposed to claims arising from other
natural and man-made catastrophes such as winter storms, freezes, floods, fires
and tornadoes.
Renaissance Reinsurance of Europe ("Renaissance Europe") was incorporated
in 1998 under the laws of Ireland as a wholly owned subsidiary of Renaissance
Reinsurance. Renaissance Europe was formed to provide certain property
catastrophe reinsurance coverage in Europe.
Glencoe Insurance Ltd. ("Glencoe") was incorporated in 1996 as a wholly
owned subsidiary of RenaissanceRe. Glencoe provides primary catastrophe exposed
property coverage on an excess and surplus lines basis, and is eligible to write
business in 29 states. During 1999, Glencoe wrote $5.0 million of primary
insurance premium (1998 - $5.6 million).
DeSoto Insurance Company ("DeSoto") was incorporated in 1997 as a wholly
owned subsidiary of Glencoe. DeSoto is a special purpose Florida homeowners
insurance company that is licensed to assume and renew homeowner policies from
the Florida JUA, a state sponsored insurance company. During 1999, DeSoto wrote
$14.3 million of primary homeowners insurance premium (1998 - $26.7 million).
RenaissanceRe owns a U.S. holding company, Renaissance U.S. Holdings, Inc.
("Renaissance U.S."), whose principal subsidiary was Nobel Insurance Company, a
Texas-domiciled insurance company ("Nobel"). Following a 1998 fourth quarter
after-tax charge of $40.1 million, Nobel disposed of its principal business
lines in 1999. Nobel continues to be a licensed insurer in all 50 states,
although there can be no assurance such licenses can be retained. Currently,
Renaissance U.S. also owns Paget Insurance Agency, L.L.C., Pembroke Managing
Agents, Inc. and DeSoto Prime Insurance Company, all of which are active in the
Florida homeowners market.
In January 1999, Renaissance Reinsurance entered into a joint venture, Top
Layer Reinsurance Ltd. ("Top Layer Re"), with SPAN State Farm Mutual Automobile
Insurance Company ("State Farm") to provide high layer coverage for non-U.S.
risks.
In November 1999, RenaissanceRe incorporated Renaissance Underwriting
Managers Ltd. ("Renaissance Managers") to act as underwriting manager to
Overseas Partners Cat Ltd. ("OPCat"), a subsidiary of Overseas Partners Ltd.
Renaissance Managers will underwrite worldwide property catastrophe reinsurance
programs for OPCat.
RenaissanceRe and its subsidiaries' (the "Company") results depend to a
large extent on the frequency and severity of catastrophic events, and the
coverage offered to clients impacted thereby. In addition, from time to time,
the Company may consider opportunistic diversification into new ventures, either
through organic growth or the acquisition of other companies or books of
business. Accordingly, the Company regularly reviews strategic opportunities and
periodically engages in discussions regarding possible transactions, however
there can be no assurance that the Company will complete any such transactions
and that any such transaction would contribute materially to the Company's
results of operations or financial condition.
RATINGS
Renaissance Reinsurance has been assigned an "A" claims-paying ability
rating from each of Standard & Poor's Insurance Ratings Services ("S&P") and
A.M. Best Company, Inc. ("A.M. Best"), and Glencoe has been assigned an "A-"
claims-paying ability rating from A.M. Best, representing independent opinions
of the financial strength and ability of Renaissance Reinsurance and Glencoe to
meet their respective obligations to their policyholders.
The "A" range ("A+," "A" and "A-") is the third highest of four ratings
ranges within what S&P considers the "secure" category. Insurance companies
assigned a claims-paying ability rating in the "A" range are believed by S&P to
provide good financial security, but their capacity to meet policyholder
obligations is somewhat susceptible to adverse economic and underwriting
conditions.
2
"A (Excellent)" and "A- (Excellent)" are the third and fourth highest of
A.M. Best's sixteen ratings designations. Insurance companies assigned an "A" or
"A-" rating by A.M. Best are companies which, in A.M. Best's opinion, have
demonstrated excellent overall performance when compared to the standards
established by A.M. Best.
STRATEGY
The principal components of the Company's business strategy are to:
o Focus on the property catastrophe reinsurance business. The Company's
primary focus is property catastrophe reinsurance, which represented
approximately 80% of the Company's gross premiums written in 1999, 77% in
1998 and 91% in 1997, respectively.
o Build a superior portfolio of property catastrophe reinsurance by
utilizing proprietary modeling capabilities. The Company assesses
underwriting decisions on the basis of the expected incremental return on
equity of each new reinsurance contract in relation to the Company's
overall portfolio of reinsurance contracts. To facilitate this, the
Company has developed REMS(Copyright), a proprietary, computer-based
pricing and exposure management system. The Company utilizes
REMS(Copyright) to assess property catastrophe risks, price treaties and
limit aggregate exposure. The Company combines the analyses generated by
REMS(Copyright) with its own knowledge of the client submitting the
proposed program to assess the premium offered against the risk of loss
that such program presents. See "Underwriting."
o Utilize the Company's capital base efficiently while maintaining prudent
risk levels in the Company's reinsurance portfolio. The Company manages its
risks through a variety of means, including the use of contract terms,
portfolio selection methodology, diversification criteria and probability
analyses. By using such measures and by employing its proprietary modeling
capabilities, the Company attempts to construct a portfolio of reinsurance
contracts which maximizes the use of its capital while optimizing the
risk-reward characteristics of its portfolio. The Company relies less on
traditional ratios, such as net premiums written to surplus, because the
Company believes that such statistics do not adequately reflect the risk in
the property catastrophe reinsurance business. Management believes the
level of net premiums written relative to surplus does not reflect the
composition of a reinsurer's attachment points, aggregate limits,
geographic diversification, and other material elements of the risk
exposures embodied in a reinsurer's book of business.
o Capitalize on the experience and skill of management. The Company's senior
management team has extensive experience in the reinsurance and/or
insurance industries, with an average of approximately 19 years of
experience for the four senior executives of the Company.
o Build and maintain long-term relationships with brokers and clients. The
Company markets its reinsurance products worldwide exclusively through
reinsurance brokers. The Company believes that its existing portfolio of
reinsurance business is a valuable asset given the renewal practices of the
reinsurance industry. The Company believes that it has established a
reputation with its brokers and clients for prompt response on underwriting
submissions, for fast claims payments and for the development of customized
reinsurance programs. See "Marketing."
o Maintain a low cost structure. Management believes that as a result of its
ability to maintain a small staff and by basing operations in the favorable
regulatory and tax environment of Bermuda, the Company is able to maintain
low operating costs relative to its capital base and net premiums earned.
As of March 15, 2000, the Company, including Nobel, had 78 employees. See
"Regulation."
o Leverage the Company's modeling expertise by expanding into other insurance
markets with significant natural catastrophe exposures. The Company is
reviewing opportunities in the United States to write new lines of business
including primary insurance, where natural catastrophe exposures represent
a significant component of the overall exposure.
3
INDUSTRY TRENDS
The competitive pressures that have existed since 1995 continued in the
property catastrophe market through 1998. However, due to industry losses in
1999 and the related contraction of capacity in the market, the Company has seen
price increases in certain pockets of the property catastrophe market, which
contributed to the Company's increased gross written premiums during this past
year.
Because of continued catastrophic loss activity, the Company anticipates
that additional price increases may occur in other pockets of the property
catastrophe market. At this time, the Company does not believe that price
increases will become prevalent across all market segments, and believes that
there continues to be numerous transactions in the market that are under-priced.
The Company believes that because of its competitive advantages, including
its technological capabilities and its relationships with leading brokers and
ceding companies, it will continue to find additional opportunities in the
property catastrophe reinsurance markets.
Because of recent loss activity, the Company believes that its aggregate
cost for reinsurance protection will continue to increase during the upcoming
year. It is also likely that a portion of the Company's reinsurance protection
may become uneconomical and that the Company would determine to purchase less of
such reinsurance. Accordingly, it is possible that the Company will retain a
greater level of net risk in the upcoming year as compared with the previous
year.
Nobel has completed the sale and/or reinsurance of its principal operating
units, although Nobel continues to operate a portion of such businesses on a
transitional basis. Accordingly, the Company believes that its future
consolidated results will reflect a reduced impact from Nobel and its
affiliates. During 1999, the Company recorded $49.6 million of gross written
premiums, $20.0 million of net premiums earned and net income of $2.9 million
related to Nobel and its affiliates. The Company expects that Nobel and its
affiliates will continue to conduct certain functions on a transitional basis
and the Company expects to continue to maintain ownership of Nobel along with
its licenses in the 50 U.S. states, although there can be no assurance that such
licenses can be successfully maintained.
During 1999 nine significant worldwide catastrophic events occurred: the
hail storms in Sydney, Australia in April; the mid-western ("Oklahoma")
tornadoes in May; Hurricane Floyd in September; Typhoon Bart which struck Japan
in September; Turkish and Taiwanese earthquakes in August and September,
respectively; the Danish windstorm Anatol; and the French windstorms, Lothar
and Martin in December. At least seven of these events are each expected to
cause over $1 billion of insured damages. These events caused net incurred
losses for Renaissance Reinsurance to increase to $64.4 million for 1999 or a
loss ratio of 32.7 percent, compared with $42.4 million for 1998 or a loss ratio
of 25.0 percent. Due to the potential high severity of claims related to the
property catastrophe reinsurance business, there can be no assurance that
Renaissance Reinsurance will continue to experience this level of net claims in
future years.
The Company's financial strength has enabled it to pursue opportunities
outside of the property catastrophe reinsurance market into other markets,
including the catastrophe exposed primary insurance market, and the Company will
continue to pursue other opportunities in the upcoming year. There can be no
assurance that the Company's pursuit of such opportunities will materially
impact the Company's financial condition and results of operations.
During recent fiscal years there has been considerable consolidation among
leading brokerage firms and also among the Company's customers. Although
consolidations may continue to occur, the Company believes that its financial
strength, its position as one of the market leaders in the property catastrophe
reinsurance industry and its ability to provide innovative products to the
industry will minimize any adverse effect of such consolidation on the Company's
business.
Management is aware of a number of new, proposed or potential legislative
or industry changes that may impact the worldwide demand for property
catastrophe reinsurance and other products offered by the Company. Management is
also aware of many potential initiatives by capital market participants to
produce alternative products that may compete with the existing catastrophe
reinsurance markets. The foregoing new, proposed or potential
4
initiatives may affect the demand for the Company's products or the risks which
may be available for the Company to consider underwriting.
SEGMENT INFORMATION
Certain information regarding the Company's segments of operations are
provided on the following pages. Further information regarding the Company's
segments of operations are contained in Note 15 to the Consolidated Financial
Statements of the Company commencing on page 48 of the Company's Annual Report
to Shareholders for the year ended December 31, 1999, and is incorporated herein
by reference thereto.
REINSURANCE PRODUCTS
The Company's property catastrophe reinsurance contracts are generally "all
risk" in nature. The Company's most significant exposure is to losses from
earthquakes and hurricanes, although the Company is also exposed to claims
arising from other natural and man-made catastrophes, such as winter storms,
freezes, floods, fires and tornadoes, in connection with the coverages it
provides. The Company's predominant exposure under such coverage is to property
damage. However, other risks, including business interruption and other
non-property losses, may also be covered under the property reinsurance contract
when arising from a covered peril. In accordance with market practice, the
Company's property reinsurance contracts generally exclude certain risks such as
war, nuclear contamination or radiation.
Because of the wide range of the possible catastrophic events to which the
Company is exposed, and because of the potential for multiple events to occur in
the same time period, the Company's business is volatile, and its results of
operations may reflect such volatility. Further, the Company's financial
condition may be impacted by this volatility over time or at any point in time.
The effects of claims from one or a number of severe catastrophic events could
have a material adverse effect on the Company. The Company expects that
increases in the values and concentrations of insured property and the effects
of inflation will increase the severity of such occurrences per year in the
future.
The Company seeks to moderate the volatility described in the preceding
paragraph through the use of contract terms, portfolio selection methodology,
diversification criteria and probability analyses. Also, consistent with its
risk management practices, the Company purchases property catastrophe coverage
for its own account to seek to further reduce the potential volatility of its
results.
5
Type of Reinsurance
The following table sets forth the Company's gross premiums written and
number of programs written by type of reinsurance.
YEAR ENDED DECEMBER 31,
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1999 1998 1997
--------------------- --------------------- ---------------------
GROSS NUMBER GROSS NUMBER GROSS NUMBER
PREMIUMS OF PREMIUMS OF PREMIUMS OF
TYPE OF REINSURANCE WRITTEN PROGRAMS WRITTEN PROGRAMS WRITTEN PROGRAMS
- ------------------- ------- -------- ------- -------- ------- --------
(in millions)
Catastrophe excess of loss. $173.6 242 $137.0 249 $150.8 311
Excess of loss retrocession 84.1 85 39.8 64 37.6 74
Proportional retrocession of
catastrophe excess of loss 21.2 8 20.3 13 21.9 11
Marine, aviation and other. 3.4 13 10.1 15 10.9 25
------- ------ ------- ------ ------- ------
Total Reinsurance... $282.3 348 $207.2 341 $221.2 421
======= ====== ======= ====== ======= ======
Catastrophe Excess of Loss Reinsurance. Catastrophe excess of loss
reinsurance provides coverage to primary insurers when aggregate claims and
claim expenses from a single occurrence of a covered peril exceed the attachment
point specified in a particular contract. A portion of the Company's property
catastrophe excess of loss contracts limit coverage to one occurrence in a
contract year, but most such contracts provide for coverage of a second
occurrence after the payment of a reinstatement premium. The coverage provided
under excess of loss retrocessional contracts may be on a worldwide basis or
limited in scope to selected geographic areas. Coverage can also vary from "all
property" perils to limited coverage on selected perils, such as "earthquake
only" coverage.
Excess of Loss Retrocessional Reinsurance. The Company also enters into
retrocessional contracts pursuant to which it provides property catastrophe
coverage to other reinsurers or retrocedents. In providing retrocessional
reinsurance, the Company focuses on property catastrophe retrocessional
reinsurance which covers the retrocedent on an excess of loss basis when
aggregate claims and claim expenses from a single occurrence of a covered peril
and from a multiple number of reinsureds exceed a specified attachment point.
The coverage provided under excess of loss retrocessional contracts may be on a
worldwide basis or limited in scope to selected geographic areas. Coverage can
also vary from "all property" perils to limited coverage on selected perils,
such as "earthquake only" coverage. In general, excess of loss retrocessional
contracts are for a term of one year. Retrocessional coverage is characterized
by high volatility, principally because retrocessional contracts expose a
reinsurer to an aggregation of losses from a single catastrophic event. In
addition, the information available to retrocessional underwriters concerning
the original primary risk can be less precise than the information received from
primary companies directly. Moreover, exposures from retrocessional business can
change within a contract term as the underwriters of a retrocedent alter their
book of business after retrocessional coverage has been bound.
Proportional Retrocessional Reinsurance. The Company writes proportional
retrocessions of catastrophe excess of loss reinsurance treaties when it
believes that premium rates and volume are attractive. In such proportional
retrocessional reinsurance, the Company assumes a specified proportion of the
risk on a specified coverage and receives an equal proportion of the premium.
The ceding insurer receives a commission, based upon the premiums ceded to the
reinsurer, and may also be entitled to receive a profit commission based on the
ratio of losses, loss adjustment expense and the reinsurer's expenses to
premiums ceded. A proportional retrocessional catastrophe reinsurer is dependent
upon the ceding insurer's underwriting, pricing and claims administration to
yield an underwriting profit, although the Company generally obtains detailed
underwriting information concerning the exposures underlying the proportional
retrocessions of catastrophe excess of loss reinsurance treaties written by the
Company. In addition, all of the Company's proportional retrocessions of
catastrophe excess of loss reinsurance contracts have aggregate per event risk
exposure limits.
Marine, Aviation and Other Reinsurance. The Company has also written
short-tail marine and aviation reinsurance and retrocessional reinsurance for
selected domestic and foreign insurers and reinsurers. Marine and aviation risks
involve primarily property damage, although certain marine and aviation risks
may involve casualty coverage arising from the same event causing the property
claim. Coverage is generally written in excess of a
6
substantial attachment point, so events likely to cause a claim will occur
infrequently, such as the destruction of a drilling platform, the loss of a
satellite or the loss of a sizable vessel and its contents. Although the Company
focuses on writing catastrophe excess of loss reinsurance, the Company also
writes risk excess of loss reinsurance and retrocessions. The risk excess of
loss treaties in which the Company participates generally contain limited
reinstatement provisions. In selected cases, the Company also writes customized
financial reinsurance contracts when the expected returns are particularly
attractive.
PRIMARY INSURANCE OPERATIONS; GLENCOE, DESOTO, AND NOBEL
The Company is reviewing opportunities in the United States to write
primary insurance where natural catastrophe exposures represent a significant
component of the overall exposure.
Glencoe -- In January 1996, the Company incorporated Glencoe in Bermuda as
an excess and surplus lines insurance company. Glencoe is pursuing opportunities
in the catastrophe-exposed primary insurance business in the United States, and
is writing policies that primarily are exposed to earthquake and wind perils.
Glencoe is eligible to do business in the United States on an excess and surplus
lines basis in 29 states. For the year ended December 31, 1999, Glencoe
generated gross premiums written of $5.0 million and net income of $2.8 million.
For the year ended December 31, 1998, Glencoe generated gross premiums written
of $5.6 million and net income of $4.0 million. For the year ended December 31,
1997, Glencoe generated gross premiums written of $7.0 million and net income of
$2.4 million.
DeSoto -- In September 1997, Glencoe organized DeSoto in Florida to pursue
the assumption of policies from the Florida Residential Property and Casualty
Joint Underwriting Association (the "JUA"). In January 1998, the Company began
to provide personal lines coverages through DeSoto with an initial assumption of
approximately 12,000 policies with an in-force premium of approximately $10
million. For the year ended December 31, 1999, DeSoto generated $14.3 million of
gross written premium and net loss of $0.1 million. For the year ended December
31, 1998, DeSoto generated $26.7 million of gross written premium and net income
of $2.4 million.
Nobel -- On June 25, 1998, the Company completed its acquisition of the
U.S. operating subsidiaries of Nobel Limited for $56.1 million. The Company
accounted for this acquisition using the purchase method of accounting and
issued no shares as part of the purchase.
During the fourth quarter of 1998, the Company recorded an after tax charge
of $40.1 million, consisting of $29.6 million of adverse development on Nobel's
casualty and surety books of business, a goodwill write-down of $6.6 million,
and other related costs of $3.9 million. Consequently, at the end of 1998,
RenaissanceRe adopted a plan to exit each of Nobel's business units. During
1999, Nobel completed the reinsurance of the casualty and surety books of
business and signed agreements under which its bail and low-value dwelling books
of business have been assumed by third parties, with obligations to make certain
future payments to Nobel based on future revenues and/or profitability of these
businesses. Also, Nobel has completed the sale of its IAS/Cat Crew subsidiary to
its management team in an earn-out transaction.
Nobel and its affiliates have continued to conduct certain functions of the
casualty, surety, low-value dwelling and bail businesses on a transitional
basis. Renaissance U.S. expects to retain ownership of Nobel along with its
licenses in the 50 U.S. states, although there can be no assurance that such
licenses can be successfully maintained following the disposition of the
business units.
For the year ended December 31, 1999, Nobel generated $49.6 million of
gross written premium and net income of $2.9 million. As a result of the
Company's disposition of the principal businesses of Nobel, it is anticipated
that the future consolidated results of the Company will reflect a reduced
impact from Nobel.
POTENTIAL DIVERSIFICATION
From time to time, the Company may consider opportunistic diversification
into new ventures, either through organic growth or the acquisition of other
companies or books of business. Accordingly, the Company regularly
7
reviews strategic opportunities and periodically engages in discussions
regarding possible transactions. However, there can be no assurance that the
Company will enter into any such agreement in the future, or that any
consummated transaction would contribute materially to the Company's results.
GEOGRAPHIC DIVERSIFICATION
The Company seeks to diversify its exposures across geographic zones. The
Company writes the majority of its business within the United States because the
returns obtained relative to the risks involved are currently most attractive in
the United States and because it is able to obtain the most detailed
underwriting information on U.S. risks. Within the United States, the Company's
zones of highest exposure are Southern California, Northern California,
metropolitan New York, New Madrid (midwestern United States) and Southern
Florida. The following table sets forth the percentage of the Company's gross
insurance and reinsurance premiums written allocated to the territory of
coverage exposure.
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1999 1998 1997
---- ---- ----
PERCENTAGE PERCENTAGE PERCENTAGE
GROSS OF GROSS GROSS OF GROSS GROSS OF GROSS
PREMIUMS PREMIUMS PREMIUMS PREMIUMS PREMIUMS PREMIUMS
GEOGRAPHIC AREA WRITTEN WRITTEN WRITTEN WRITTEN WRITTEN WRITTEN
- --------------- ------- ------- ------- ------- ------- -------
(in millions)
United States - reinsurance $160.2 45.6% $128.4 47.5% $116.7 54.2%
United States - primary.... 69.0 19.6 63.3 23.4 7.0 3.1
Worldwide.................. 49.5 14.1 20.6 7.6 27.9 12.2
Worldwide (excluding U.S.)(1) 27.3 7.8 26.4 9.8 32.0 14.0
Europe (including U.K.).... 26.4 7.5 18.5 6.8 21.0 9.2
Other...................... 15.7 4.5 9.4 3.5 16.8 7.4
Australia and New Zealand.. 3.2 0.9 3.9 1.4 6.9 3.0
------ --- ------ ----- ------ -----
Total...................... $351.3 100.0% $270.5 100.0% $228.3 100.0%
====== ===== ====== ===== ====== =====
- ----------
(1) The category "Worldwide (excluding U.S.)" consists of contracts that cover
more than one geographic zone (other than the U.S.). The exposure in this
category for gross premiums written to date is predominantly from Europe.
PROGRAM LIMITS
The following table sets forth the number of the Company's reinsurance
programs in force at December 31, 1999 by aggregate program limits.
AGGREGATE
PROGRAM NUMBER OF
LIMIT PROGRAMS
------- --------
$50-70 million..................................... 7
$40-50 million..................................... 9
$30-40 million..................................... 8
$20-30 million..................................... 14
$10-20 million..................................... 43
Less than $10 million.............................. 267
-----
Total......................................... 348
=====
UNDERWRITING
The Company's primary underwriting goal is to construct a portfolio of
reinsurance and insurance contracts that maximizes the return on shareholders'
equity subject to prudent risk constraints.
Management assesses underwriting decisions on the basis of the expected
incremental return on equity of each new reinsurance contract in relation to the
Company's overall portfolio of reinsurance contracts. To facilitate this,
Management has developed REMS(Copyright), a proprietary, computer-based pricing
and exposure management system.
8
Management utilizes REMS(Copyright) to assess property catastrophe risks, price
treaties and limit aggregate exposure. REMS was developed with consulting
assistance from Tillinghast, an actuarial consulting unit of Towers, Perrin,
Forster & Crosby, Inc., and AIR, the developer of the CATMAP(Trademark) system.
REMS(Copyright) has analytic and modeling capabilities that assist the Company's
underwriters in assessing the catastrophe exposure risk and return of each
incremental reinsurance contract in relation to the Company's overall portfolio
of reinsurance contracts. The Company has licensed and integrated into
REMS(Copyright) a number of commercially available catastrophe computer models
in addition to the Company's base model. The Company uses these models to
validate and stress test its base REMS(Copyright) results. In addition, the
Company stress tests its exposures and potential future results by increasing
the frequency and severity of catastrophic events above the levels embedded in
the models purchased from the outside consultants. Management combines the
analyses generated by REMS(Copyright) with its own knowledge of the client
submitting the proposed program to assess the premium offered against the risk
of loss which such program presents.
REMS(Copyright) provides more precise exposure information than is generally
analyzed currently throughout the property catastrophe reinsurance industry.
REMS(Copyright) combines computer-generated statistical simulations that
estimate catastrophic event probabilities with exposure and coverage information
on each client's reinsurance contract to produce expected claims for reinsurance
programs submitted to the Company. REMS(Copyright) then uses simulation
techniques to generate 40,000 years of catastrophic event activity, including
events causing in excess of $300 billion in insured industry losses. From this
40,000 year simulation, the Company is able to obtain expected claims, expected
profits and a probability distribution of potential outcomes for each program in
its portfolio and for its total portfolio.
Management believes that REMS(Copyright) provides the Company's
underwriters with several competitive advantages which are not generally
available. These include (i) the ability to simulate 40,000 years of
catastrophic event activity compared to a much smaller sample in generally
available models, allowing the Company to analyze its exposure to a greater
number and combination of potential events, (ii) the ability to analyze the
incremental impact of an individual reinsurance contract on the Company's
overall portfolio, and (iii) the ability to collect detailed data from a wide
variety of sources which allows the Company to measure geographic exposure at a
detailed level.
For its property catastrophe reinsurance business, the Company has
developed underwriting guidelines that limit the amount of exposure it will
underwrite directly for any one cedent, the exposure to claims from any single
catastrophic event and the exposure to losses from a series of catastrophic
events. The Company also attempts to distribute its exposure across a range of
attachment points.
As part of its pricing and underwriting process, the Company also assesses
a variety of factors, including the reputation of the proposed cedent and the
likelihood of establishing a long-term relationship with the cedent; the
geographic area in which the cedent does business and its market share;
historical loss data for the cedent and, where available, for the industry as a
whole in the relevant regions, in order to compare the cedent's historical
catastrophe loss experience to industry averages; the cedent's pricing
strategies; and the perceived financial strength of the cedent.
During 1999, consistent with its risk management practices and the
availability of coverage responsive to the Company's risk profile, the Company
increased the level of property catastrophe reinsurance coverage purchased for
its own account. Ceded premiums written in the Company's reinsurance operations
during 1999 were $77.2 million compared to $47.7 million in 1998. Additionally,
the Company's primary operations had ceded premiums of $60.6 million (compared
to $27.7 million in 1998). To the extent that appropriately priced coverage is
available, the Company anticipates continued use of its reinsurance to reduce
potential volatility of its results. See "Industry Trends," above.
MARKETING
The Company markets its reinsurance products worldwide exclusively through
reinsurance brokers. The Company focuses its marketing efforts on targeted
brokers and insurance and reinsurance companies, placing primary emphasis on
existing clients. Management believes that its existing portfolio of business is
a valuable asset given the renewal nature of the reinsurance industry and,
therefore, attempts to continually strengthen relationships
9
with its existing brokers and clients. The Company also targets prospects that
are deemed likely to enhance the risk/return composition of its portfolio, that
are capable of supplying detailed and accurate underwriting data and that
potentially add further diversification to the Company's book of business.
Glencoe markets its products through a diverse group of surplus lines brokers
operating primarily in cat exposed states.
Management believes that primary insurers' and brokers' willingness to use
a particular reinsurer is based not just on pricing terms, but on the financial
security of the reinsurer, its claim paying ability ratings, perceptions of the
quality of a reinsurer's service, the reinsurer's willingness to design
customized programs, its long-term stability and its commitment to provide
reinsurance capacity. Management believes that the Company has established a
reputation with its brokers and clients for prompt response on underwriting
submissions and for fast claims payments. Since the Company selectively writes
large lines on a limited number of property catastrophe reinsurance contracts,
it can establish reinsurance terms and conditions on these contracts that are
attractive in its judgment, make large commitments to the most attractive
programs and provide superior client responsiveness. In addition, the Company
acts as sole reinsurer on certain property catastrophe reinsurance contracts,
which allows the Company to take advantage of its ability to develop customized
reinsurance programs. Management believes that such customized programs help the
Company to develop long-term relationships with brokers and clients.
The reinsurance brokers perform data collection, contract preparation and
other administrative tasks, enabling the Company to market its reinsurance
products cost effectively by maintaining a smaller staff. The Company believes
that by maintaining close relationships with brokers, it is able to obtain
access to a broad range of potential reinsureds. Subsidiaries and affiliates
of J&H Marsh & McLennan, Inc., AON Re Group, E. W. Blanch & Co., Greig Fester,
and Willis Faber accounted for approximately 24.5%, 20.5%, 20.3%, 7.1% and 6.4%,
respectively, of the Company's premiums written in 1999. During 1999,
Renaissance Reinsurance issued authorization for coverage on programs submitted
by 33 brokers worldwide. The Company received approximately 1,474 program
submissions during 1999. The Company is highly selective and, from such
submissions, the Company issued authorizations for coverage in 1999 for only 348
programs, or 23.6 percent of the program submissions received.
RESERVES
The Company incurred claims of $77.1 million, $112.8 million, and $50.0
million for the years ended December 31, 1999, 1998 and 1997, respectively. The
reserve for claims and claim expenses includes estimates for unpaid claims and
claim expenses on reported losses as well as an estimate of losses incurred but
not reported. The reserve is based on individual claims, case reserves and other
reserve estimates reported by insureds and ceding companies as well as
management estimates of ultimate losses. Inherent in the estimates of ultimate
losses are expected trends in claim severity and frequency and other factors
which could vary significantly as claims are settled. Accordingly, ultimate
losses may vary materially from the amounts provided in the consolidated
financial statements. These estimates are reviewed regularly and, as experience
develops and new information becomes known, the reserves are adjusted as
necessary. Such adjustments, if any, are reflected in the consolidated statement
of income in the period in which they become known and are accounted for as
changes in estimates.
For the Company's reinsurance operations, estimates of claims and claim
expenses and losses recoverable are based in part upon the estimation of claims
resulting from catastrophic events. Estimation by the Company of claims
resulting from catastrophic events based upon its own historical claim
experience is inherently difficult because of the variability and uncertainty
associated with property catastrophe claims. Therefore, the Company utilizes
both proprietary and commercially available models, as well as historical
reinsurance industry property catastrophe claims experience, for purposes of
evaluating future trends and providing an estimate of ultimate claims costs.
On both the Company's reinsurance and primary operations, the Company uses
statistical and actuarial methods to reasonably estimate ultimate expected
claims and claim expenses. The period of time from the reporting of a loss to
the Company to the settlement of the Company's liability may be significant.
During this period, additional facts and trends will be revealed. As these
factors become apparent, case reserves will be adjusted, sometimes requiring an
increase in the overall reserves of the Company, and at other times requiring a
reallocation of IBNR reserves to specific case reserves. These estimates are
reviewed regularly, and such adjustments, if any, are reflected in results of
operations in the period in which they become known and are accounted for as
changes in estimates.
10
Claim reserves and losses recoverable represent estimates, including
actuarial and statistical projections at a given point in time, of an insurer's
or reinsurer's expectations of the ultimate settlement and administration costs
of claims incurred, and it is possible that the ultimate liability may exceed or
be less than such estimates. Such estimates are not precise in that, among other
things, they are based on predictions of future developments and estimates of
future trends in claim severity and frequency and other variable factors such as
inflation. During the claim settlement period, it often becomes necessary to
refine and adjust the estimates of liability or recovery on a claim either
upward or downward. Even after such adjustments, ultimate liability or recovery
may exceed or be less than the revised estimates. Moreover, reserve estimates by
relatively new property catastrophe reinsurers, such as the Company, may be
inherently more volatile than the reserve estimates of a reinsurer with a more
established claims history.
INVESTMENTS
As of December 31, 1999, the Company held investments and cash totaling
$1,074.8 million with net unrealized depreciation of $18.5 million. The
Company's strategy is to maximize its underwriting profitability and fully
deploy its capital through its underwriting activities; consequently, the
Company has established an investment policy which it considers to be
conservative. The Company's investment guidelines, which are established by
Management and approved by the Company's Board of Directors, stress preservation
of capital, market liquidity, and diversification of risk. Notwithstanding the
foregoing, the Company's investments are subject to market-wide risks and
fluctuations, as well as to risks inherent in particular securities. The primary
objective of the portfolio, as set forth in such guidelines, is to maximize
investment returns consistent with these policies. To achieve this objective,
the Company's current fixed income investment guidelines call for an average
credit quality of "AA" as measured by Standard & Poor's Ratings Group.
Primarily because of the potential for large claims payments, the Company's
investment portfolio is structured to provide a high level of liquidity. The
table below shows the aggregate amounts of investments available for sale,
equity securities and cash and cash equivalents comprising the Company's
portfolio of invested assets:
AT DECEMBER 31,
---------------------------------------
1999 1998 1997
-------- ------- ------
(IN MILLIONS)
Investments available for sale, at fair value............. $920.5 $825.0 $710.2
Other investments, at fair value.......................... 22.2 1.6 26.4
Cash and cash equivalents................................. 132.1 115.7 122.9
-------- ------ ------
Total invested assets..................................... $1,074.8 $942.3 $859.5
======== ====== ======
The growth in the Company's portfolio of invested assets for the year ended
December 31, 1999 resulted primarily from net cash provided by operating
activities of $130.3 million, compared with $102.5 million in 1998. The 1999
cash flows from operations were primarily utilized to purchase $80.1 million of
the Company's Common Shares and pay aggregate dividends of $28.9 million. Also
during 1999, the Company borrowed an additional $150.0 million under its
revolving credit facility, which was primarily used to purchase additional fixed
income securities for the holding company's portfolio of investments.
At December 31, 1999, the Company's invested asset portfolio had a dollar
weighted average rating of AA, an average duration of 2.7 years and an average
yield to maturity of 7.15 percent before investment expenses.
Under the terms of certain reinsurance contracts, the Company may be
required to provide letters of credit to reinsureds in respect of reported
claims and/or unearned premiums. The Company has obtained capacity from one of
its primary lenders for the issuance of letters of credit. Issued letters of
credit are secured by a lien on a portion of the Company's investment portfolio.
At December 31, 1999 the Company had outstanding letters of credit aggregating
$73.2 million. Also, in connection with the Company's January 6, 1999 investment
in Top Layer Reinsurance Ltd., the Company has committed $37.5 million of
collateral in the form of a letter of credit. This letter of credit is also
secured by a portion of the Company's investments.
11
Derivative Instruments
The Company has assumed risk through catastrophe and weather linked
securities and derivative instruments under which losses could be triggered by
an industry loss index or natural parameters. To date the Company has not
experienced any losses from such securities or derivatives although there can be
no assurance this performance will continue. In each of the fourth quarters of
1999 and 1998, the Company recorded recoveries on non-indemnity catastrophe
index transactions. These recoveries are included in other income. In the
future, the Company may also utilize other derivative instruments.
Market Sensitive Instruments
The Company's investment portfolio includes investments whicha re subject
to changes in market values with changes in interest rates. The aggregate
hypothetical loss generated from an immediate adverse parallel shift in the
treasury yield curve of 100 basis points would cause a decrease in total return
of 2.70 percent, which equates to a decrease in market value of approximately
$28.4 million on a portfolio valued at $1,052.6 million at December 31, 1999. As
of December 31, 1998, the decrease in total return would have been 2.76 percent,
which equates to a decrease in market value of approximately $25.5 million on a
portfolio valued at $942.3 million. The foregoing reflects the use of an
immediate time horizon, since this presents the worst-case scenario. Credit
spreads are assumed to remain constant in these hypothetical examples.
Investment Agreements
During 1999, the Company had in place an investment advisory agreement with
GE Investment Management, an affiliate of General Electric Company. GE
Investment Management managed approximately 15.0 percent of the Company's
portfolio, subject to the Company's investment guidelines. The terms of the
investment advisory agreement were determined in arms length negotiations. The
performance of, and the fees paid to GE Investment Management were reviewed
periodically by the Board. Such fees paid to GE advisors aggregated to $0.2
million, $0.4 million and $1.2 million for the years ended December 31, 1999,
1998 and 1997, respectively. This agreement expired on December 31, 1999 and was
not renewed.
The following table summarizes the fair value of the investments and cash
and cash equivalents of the Company as of the dates indicated.
AT DECEMBER 31,
---------------------------------------
TYPE OF INVESTMENT 1999 1998 1997
------------------ -------- ------ ------
(IN MILLIONS)
Fixed Maturities Available for Sale:
U.S. Government and agency debt securities........... $295.7 $564.6 $248.3
U.S. Corporate debt securities....................... 356.6 137.8 --
Non-U.S. government debt securities.................. 54.4 30.6 256.9
Non-U.S. corporate debt securities................... 54.0 67.0 188.6
Non-U.S. mortgage backed securities.................. -- -- 6.9
U.S. mortgage backed securities...................... 147.0 -- --
Subtotal....................................... 907.7 800.0 700.7
Other investments.................................... 22.2 1.6 26.4
Short-term investments.................................... 12.8 25.0 9.5
Cash and cash equivalents................................. 132.1 115.7 122.9
-------- ------ ------
Total fixed maturity investments, equity
securities, short-term investments and cash
and cash equivalents........................ $1,074.8 $942.3 $859.5
======== ====== ======
The following table summarizes the fair value by contractual maturities of
the Company's fixed maturity investment portfolio as of the dates indicated.
AT DECEMBER 31,
---------------------------------------
1999 1998 1997
-------- ------ ------
(IN MILLIONS)
Due in less than one year................................. $ 2.8 $ 193.7 $ 74.6
Due after one through five years.......................... 456.4 393.7 473.0
12
Due after five through ten years.......................... 226.1 121.4 90.9
Due after ten years....................................... 75.4 91.2 62.2
U.S. mortgage backed securities........................... 147.0 -- --
-------- ------ ------
Total..................................................... $907.7 $800.0 $700.7
======== ====== ======
Maturity and Duration of Fixed Maturity Portfolio
Currently, the Company maintains a target duration of approximately three
years on a weighted average basis, reflecting Management's belief that it is
important to maintain a liquid, shorter-duration portfolio to better assure the
Company's ability to pay claims on a timely basis. The actual portfolio duration
may not exceed the target duration by more than two years. From time to time,
the Company expects to reevaluate the target duration in light of estimates of
the duration of its liabilities and market conditions, including then prevailing
levels of interest rates.
Quality of Debt Securities in Portfolio
The Company's guidelines for its various investment classes have strict
restrictions on credit quality, duration and benchmark relative exposures.
The following table summarizes the composition of the fair value of the
fixed maturity portfolio as of the dates indicated by rating as assigned by S&P
or, with respect to non-rated issues, as estimated by the Company's investment
managers.
AT DECEMBER 31,
----------------------------------------
RATING 1999 1998 1997
- ------ ---- ---- ----
AAA 72.9% 70.9% 56.9%
AA 5.0 4.3 12.2
A 5.9 9.2 14.9
BBB 4.8 3.7 5.0
BB 3.7 5.2 4.9
B 5.3 2.2 6.1
NR 2.4 4.5 --
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
FOREIGN CURRENCY EXPOSURES
The Company's functional currency is the United States ("U.S.") dollar. The
Company writes a substantial portion of its business in currencies other than
U.S. dollars and may, from time to time, experience significant exchange gains
and losses and incur underwriting losses in currencies other than U.S. dollars,
which will in turn affect the Company's financial statements.
The Company's foreign currency policy is to hold foreign currency assets,
including cash and receivables, that approximate the net monetary foreign
currency liabilities, including loss reserves and reinsurance balances payable.
All changes in the exchange rates are recognized currently in the Company's
statement of income. As a result of the Company's exposure to foreign currency
fluctuations, it is anticipated that during periods in which the U.S. dollar
appreciates, the Company will likely recognize foreign exchange losses.
COMPETITION
The property catastrophe reinsurance industry is highly competitive and is
undergoing a variety of challenging developments, including a marked trend
toward greater consolidation. The Company competes, and will continue to
compete, with major U.S. and non-U.S. property catastrophe insurers, reinsurers,
and certain underwriting
13
syndicates. Many of these competitors have greater financial, marketing and
management resources than the Company. In addition, new companies may enter the
property catastrophe reinsurance market or existing reinsurers may deploy
additional capital in the property catastrophe reinsurance market. The Company
cannot predict what effect any of these developments may have on the Company and
its business.
Competition in the types of reinsurance business that the Company
underwrites is based on many factors, including premium charges and other terms
and conditions offered, services provided, speed of claims payment, ratings
assigned by independent rating agencies, the perceived financial strength and
the experience of the reinsurer in the line of reinsurance to be written. The
number of jurisdictions in which a reinsurer is licensed or authorized to do
business is also a factor. Some of the reinsurers who have entered the Bermuda
and London-based reinsurance markets have or could have greater financial,
marketing or managerial resources or brand recognition than the Company.
Ultimately, increasing competition could affect the Company's ability to attract
business on terms having the potential to yield an attractive return on equity.
The primary insurance business is also highly competitive. Primary insurers
compete on the basis of factors including selling effort, product, price,
service and financial strength. The Company generally seeks to adjust its
overall primary insurance pricing and pricing to individual customers to achieve
underwriting profits and, as a result, may lose primary insurance business to
competition offering competitive insurance products at lower prices. The
Company's competitors in the primary insurance market include independent
insurance companies, subsidiaries or affiliates of major worldwide insurance
companies, underwriting syndicates and others, many of which have greater
financial resources, brand equity and more diversified primary insurance
products than the Company.
Management is also aware of many potential initiatives by capital market
participants to produce alternative products that may compete with the existing
catastrophe reinsurance markets. Among other things, over the last several years
capital markets participants, including exchanges and financial intermediaries,
have developed financial products intended to compete with traditional
reinsurance, the usage of which has grown in volume. In addition, the tax
policies of the countries where the Company's clients operate can affect demand
for reinsurance. Management is unable to predict the extent to which the
foregoing new, proposed or potential initiatives may affect the demand for the
Company's products or the risks which may be available for the Company to
consider underwriting.
EMPLOYEES
As of March 15, 2000, the Company and its subsidiaries employed 78 people.
The Company believes that its employee relations are satisfactory. None of the
Company's employees are subject to collective bargaining agreements, and the
Company knows of no current efforts to implement such agreements at the Company.
Many Bermuda based employees of RenaissanceRe and Renaissance Reinsurance,
including all of the Company's senior management, are employed pursuant to work
permits granted by the Bermuda authorities. These permits expire at various
times over the next few years. The Company has no reason to believe that these
permits would not be extended at expiration upon request, although no assurance
can be given in this regard.
REGULATION
Bermuda
The Insurance Act 1978, as amended, and Related Regulations (the "Insurance
Act"), which regulates the business of Renaissance Reinsurance and Glencoe,
provides that no person shall carry on an insurance business (including the
business of reinsurance) in or from within Bermuda unless registered as an
insurer under the Insurance Act by the Bermuda Minister of Finance (the
"Minister"). Renaissance Reinsurance and Glencoe are registered as a Class 4 and
a Class 3 insurer under the Insurance Act, respectively. The Minister, in
deciding whether to grant registration, has broad discretion to act as he thinks
fit in the public interest. The Minister is required by the Insurance Act to
determine whether the applicant is a fit and proper body to be engaged in the
insurance business and, in particular, whether it has, or has available to it,
adequate knowledge and expertise. In connection with the
14
applicant's registration, the Minister may impose conditions relating to the
writing of certain types of insurance. Further, the Insurance Act stipulates
that no person shall, in or from within Bermuda, act as an insurance manager,
broker, agent or salesman unless registered for the purpose by the Minister.
Rennaissance Managers is registered as an insurance manager under the Insurance
Act.
An Insurance Advisory Committee appointed by the Minister advises him on
matters connected with the discharge of his functions, and sub-committees
thereof supervise and review the law and practice of insurance in Bermuda,
including reviews of accounting and administrative procedures.
The Insurance Act imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
Minister powers to supervise, investigate and intervene in the affairs of
insurance companies. Certain significant aspects of the Bermuda insurance
regulatory framework are set forth below.
Cancellation of Insurer's Registration. An insurer's registration may be
canceled by the Minister on certain grounds specified in the Insurance Act,
including failure of the insurer to comply with a requirement made of it under
the Insurance Act or, if in the opinion of the Minister, after consultation with
the Insurance Advisory Committee, the insurer has not been carrying on business
in accordance with sound insurance principles.
Independent Approved Auditor. Every registered insurer must appoint an
independent auditor who will annually audit and report on the Statutory
Financial Statements and the Statutory Financial Return of the insurer, both of
which, in the case of each of a Class 3 insurer and a Class 4 insurer, are
required to be filed annually with the Registrar of Companies (the "Registrar"),
who is the chief administrative officer under the Insurance Act. The auditor
must be approved by the Minister as the independent auditor of the insurer. The
approved auditor may be the same person or firm which audits the insurer's
financial statements and reports for presentation to its shareholders.
Loss Reserve Specialist. Each Class 3 and Class 4 insurer is required to
submit an annual loss reserve opinion when filing the Annual Statutory Financial
Return. This opinion must be issued by the insurer's approved Loss Reserve
Specialist. The Loss Reserve Specialist, who will normally be a qualified
casualty actuary, must be approved by the Minister.
Statutory Financial Statements. An insurer must prepare annual Statutory
Financial Statements. The Insurance Act prescribes rules for the preparation and
substance of such Statutory Financial Statements (which include, in statutory
form, a balance sheet, income statement, and a statement of capital and surplus,
and detailed notes thereto). The insurer is required to give detailed
information and analyses regarding premiums, claims, reinsurance and
investments. The Statutory Financial Statements are not prepared in accordance
with GAAP and are distinct from the financial statements prepared for
presentation to the insurer's shareholders under the Companies Act 1981 of
Bermuda, which financial statements may be prepared in accordance with GAAP. The
insurer is required to submit the Annual Statutory Financial Statements as part
of the Annual Statutory Financial Return. The Statutory Financial Statements and
the Statutory Financial Return do not form part of the public records maintained
by the Registrar.
Minimum Solvency Margin and Restrictions on Dividends and Distributions.
The Insurance Act provides that the statutory assets of an insurer must exceed
its statutory liabilities by an amount greater than the prescribed minimum
solvency margin which varies with the type of registration of the insurer under
the Insurance Act and the insurer's net premiums written and loss reserve level.
The minimum solvency margin for a Class 4 insurer is the greatest of $100.0
million, 50% of net premiums written (with a credit for reinsurance ceded not
exceeding 25% of gross premiums) and 15% of loss and loss expense provisions and
other insurance reserves. The minimum solvency margin for a Class 3 insurer is
the greatest of $1.0 million, 20% of the first $6.0 million of net premiums
written plus 15% of net premiums written in excess of $6.0 million, and 15% of
loss and loss expense provisions and other insurance reserves.
The Insurance Act mandates certain actions and filings with the Minister
and the Registrar if a Class 3 insurer or a Class 4 insurer fails to meet and or
maintain the required minimum solvency margin. Both Class 3 insurers and Class 4
insurers are prohibited from declaring or paying any dividends if in breach of
the required minimum
15
solvency margin or minimum liquidity ratio (the relevant margins) or if the
declaration or payment of such dividend would cause the insurer to fail to meet
the relevant margins. Where an insurer fails to meet its relevant margins on the
last day of any financial year it is prohibited from declaring or paying any
dividends during the next financial year without the approval of the Minister.
Further, a Class 4 insurer is prohibited from declaring or paying in any
financial year dividends of more than 25% of its total statutory capital and
surplus (as shown on its previous financial year's statutory balance sheet)
unless it files (at least seven days before payment of such dividends) with the
Registrar an affidavit stating that it will continue to meet its relevant
margins. Class 3 insurers and Class 4 insurers must obtain the Minister's prior
approval for a reduction by 15% or more of the total statutory capital as set
forth in its previous year's financial statements. These restrictions on
declaring or paying dividends and distributions under the Insurance Act are in
addition to those under the Companies Act 1981 which apply to all Bermuda
companies.
Minimum Liquidity Ratio. The Insurance Act provides a minimum liquidity
ratio for general business insurers. An insurer engaged in general business is
required to maintain the value of its relevant assets at not less than 75% of
the amount of its relevant liabilities. Relevant assets include cash and time
deposits, quoted investments, unquoted bonds and debentures, first liens on real
estate, investment income due and accrued, accounts and premiums receivable and
reinsurance balances receivable. There are certain categories of assets which,
unless specifically permitted by the Minister, do not automatically qualify as
relevant assets, such as unquoted equity securities, investments in and advances
to affiliates, real estate and collateral loans. The relevant liabilities are
total general business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities (by interpretation, those not
specifically defined).
Annual Statutory Financial Return. Class 3 and Class 4 insureres are
required to file with the Registrar a Statutory Financial Return no later than
four months after the insurer's financial year end (unless specifically
extended). The Statutory Financial Return includes, among other items, a report
of the approved independent auditor on the Statutory Financial Statements of the
insurer; a declaration of the statutory ratios; a solvency certificate; the
Statutory Financial Statements themselves; the opinion of the approved Loss
Reserve Specialist in respect of the loss and loss expense provisions and, only
in the case of Class 4 insurers, certain details concerning ceded reinsurance.
The solvency certificate and the declaration of the statutory ratios must be
signed by the principal representative and at least two directors of the
insurer, who are required to state whether the Minimum Solvency Margin and, in
the case of the solvency certificate, the Minimum Liquidity Ratio, have been
met, and the independent approved auditor is required to state whether in its
opinion it was reasonable for them to so state and whether the declaration of
the statutory ratios complies with the requirements of the Insurance Act. Where
an insurer's accounts have been audited for any purpose other than compliance
with the Insurance Act, a statement to that effect must be filed with the
Statutory Financial Return.
Supervision, Investigation and Intervention. The Minister may appoint an
inspector with extensive powers to investigate the affairs of an insurer if the
Minister believes that an investigation is required in the interest of the
insurer's policyholders or persons who may become policyholders. In order to
verify or supplement information otherwise provided to him, the Minister may
direct an insurer to produce documents or information relating to matters
connected with the insurer's business.
If it appears to the Minister that there is a risk of the insurer becoming
insolvent, or that the insurer is in breach of the Insurance Act or any
conditions or its registration under the Insurance Act, the Minister may direct
the insurer not to take on any new insurance business; not to vary any insurance
contract if the effect would be to increase the insurer's liabilities; not to
make certain investments; to realize certain investments; to maintain in, or
transfer to the custody of a specified bank, certain assets; not to declare or
pay any dividends or other distributions or to restrict the making of such
payments and/or to limit its premium income.
An insurer is required to maintain a principal office in Bermuda and to
appoint and maintain a principal representative in Bermuda. For the purpose of
the Insurance Act, the principal office of each of Renaissance Reinsurance and
Glencoe is at the Company's offices at Renaissance House, 8-12 East Broadway,
Pembroke HM 19 Bermuda and Mr. John D. Nichols, the Company's Senior Vice
President, is the principal representative of Renaissance Reinsurance and
Glencoe. Without a reason acceptable to the Minister, an insurer may not
terminate the appointment of its principal representative, and the principal
representative may not cease to act as such, unless thirty days' notice in
writing to the Minister is given of the intention to do so. It is the duty of
the principal
16
representative, within thirty days of his reaching the view that there is a
likelihood of the insurer for which he acts becoming insolvent or its coming to
his knowledge, or his having reason to believe, that a reportable event has
occurred, to make a report in writing to the Minister setting out all the
particulars of the case that are available to him. Examples of such an event
include failure by the insurer to comply substantially with a condition imposed
upon the insurer by the Minister relating to a solvency margin or a liquidity or
other ratio.
Certain other Bermuda Law Considerations. As "exempted companies,"
RenaissanceRe and its Bermuda subsidiaries are exempt from certain Bermuda laws
restricting the percentage of share capital that may be held by non-Bermudians.
However, as exempted companies, RenaissanceRe and its Bermuda subsidiaries may
not participate in certain business transactions, including (1) the acquisition
or holding of land in Bermuda (except that required for their business and held
by way of lease or tenancy for terms of not more than 50 years) without required
authorization, (2) the taking of mortgages on land in Bermuda to secure an
amount in excess of $50,000 without the consent of the Minister, (3) the
acquisition of any bonds or debentures secured by any land in Bermuda, other
than certain types of Bermuda government securities or (4) the carrying on of
business of any kind in Bermuda, except in furtherance of their business carried
on outside Bermuda or under license granted by the Minister. Generally it is not
permitted without a special licence granted by the Minister to insure Bermuda
domestic risks or risks of persons of, in or based in Bermuda.
RenaissanceRe and its Bermuda subsidiaries must comply with the provisions
of the Companies Act regulating the payment of dividends and making
distributions from contributed surplus. A company shall not declare or pay a
dividend, or make a distribution out of contributed surplus, if there are
reasonable grounds for believing that: (a) the company is, or would after the
payment be, unable to pay its liabilities as they become due; or (b) the
realizable value of the company's assets would thereby be less than the
aggregate of its liabilities and its issued share capital and share premium
accounts.
United States and Other
Renaissance Reinsurance is not admitted to do business in any jurisdiction
except Bermuda. The insurance laws of each state of the United States and of
many other countries regulate the sale of insurance and reinsurance within their
jurisdictions by alien insurers, such as Renaissance Reinsurance, which are not
admitted to do business within such jurisdiction. With some exceptions, such
sale of insurance or reinsurance within a jurisdiction where the insurer is not
admitted to do business is prohibited. Renaissance Reinsurance does not intend
to maintain an office or to solicit, advertise, settle claims or conduct other
insurance activities in any jurisdiction other than Bermuda where the conduct of
such activities would require that Renaissance Reinsurance be so admitted.
Glencoe is eligible to write insurance in 29 states and is subject to the
regulation and reporting requirements of these states. In accordance with
certain requirements of the National Association of Insurance Commissioners (the
"NAIC"), Glencoe has established, and is required to maintain, a trust funded
with a minimum of $15.0 million as a condition of its status as a licensed,
non-admitted insurer in the U.S.
DeSoto is a licensed insurer in Florida and Nobel is subject to regulation
in all 50 U.S. states and the District of Columbia. The Company's U.S.
operations are subject to extensive regulation under statutes which delegate
regulatory, supervisory and administrative powers to state insurance
commissioners. Such regulation generally is designed to protect policyholders
rather than investors, and relates to such matters as the standard of solvency
which must be met and maintained; the licensing of insurers and their agents;
the nature of and extermination of the affairs of insurance companies, which
includes periodic market conduct examinations by the regulatory authorities;
annual and other reports, prepared on a statutory accounting basis, required to
be filed on the financial condition of insurers or for other purposes;
establishment and maintenance of reserves for unearned premiums and losses; and
requirements regarding numerous other matters. In general, regulated insurers
must file all rates for directly underwritten insurance with the insurance
department of each state in which they operate on an admitted basis; however,
reinsurance generally is not subject to rate regulation. Further, state
insurance statutes typically place limitations on the amount of dividends or
other distributions payable by insurance companies in order to protect their
solvency. Florida, the jurisdiction of incorporation of DeSoto, requires that
dividends be paid only out of earned surplus and limits the annual amount
payable without the prior approval of the Florida Insurance Department to the
greater of 10% of policyholders' surplus adjusted for unrealized gains or 100%
of prior year statutory net income. Texas, the jurisdiction of incorporation of
Nobel, currently requires that dividends be paid only out of earned
17
statutory surplus and limits the annual amount of dividends payable without the
prior approval of the Texas Insurance Department to the greater of 10% of
statutory capital and surplus at the end of the previous calendar year or 100%
of statutory net income from operations for the previous calendar year. These
laws also impose prior approval requirements for certain transactions with
affiliates.
Further, as a result of the Company's ownership of DeSoto and Nobel, under
the terms of applicable state statutes, any person or entity desiring to
purchase more than 10 percent of the Company's outstanding voting securities is
required to obtain prior regulatory approval for the purchase.
The NAIC has established eleven financial ratios to assist state insurance
departments in their oversight of the financial condition of insurance companies
operating in their respective states. The NAIC calculates these ratios based on
information submitted by insurers on an annual basis and shares the information
with the applicable state insurance departments. The failure of the Company's
U.S. insurance subsidiaries to comply with the acceptable range of such ratios
could have an adverse effect on the Company.
In their ongoing effort to improve solvency regulations, the NAIC and
individual states have enacted certain laws and statutory financial statement
reporting requirements. For example, NAIC rules require audited statutory
financial statements as well as actuarial certification of loss and loss
adjustment expense reserves therein. Other activities are focused on greater
disclosure of an insurer's reliance on reinsurance and changes in its
reinsurance programs and stricter rules on accounting for certain overdue
reinsurance. In addition, the NAIC has implemented risk-based capital
requirements for property and casualty insurance companies (see below). These
regulatory initiatives, and the overall focus on solvency, may intensify the
restructuring and consolidation of the insurance industry. It is also possible
that the U.S. Congress may enact legislation regulating the insurance industry.
While the impact of these regulatory efforts on the Company's operations cannot
be quantified until enacted, the Company believes it will be adequately
positioned to compete in an environment of more stringent regulation.
The NAIC has implemented a risk-based capital measurement formula to be
applied to all property/casualty insurance companies, which formula calculates a
minimum required statutory net worth based on the underwriting, investment,
credit loss reserve and other business risks applicable to the insurance
company's operations. An insurance company that does not meet threshold
risk-based capital measurement standards could be required to reduce the scope
of its operations and ultimately could become subject to statutory receivership
proceedings.
The Company's U.S. insurance subsidiaries are subject to guaranty fund laws
which can result in assessments, up to prescribed limits, for losses incurred by
policyholders as a result of the impairment or insolvency of unaffiliated
insurance companies. Typically, an insurance company is subject to the guaranty
fund laws of the states in which it conducts insurance business; however,
companies which conduct business on a surplus lines basis in a particular state
are generally exempt from that state's guaranty fund laws. The Company does not
expect the amount of any such guaranty fund assessments to be paid by the
Company, if any, in 2000 to be material.
The expansion of the Company's primary insurance operations, together with
the potential of further expansion into additional insurance markets, could
expose the Company or subsidiaries of the Company to increasing regulatory
oversight. However, the Company intends to continue to conduct its operations so
as to minimize the likelihood that RenaissanceRe or Renaissance Reinsurance will
become subject to U.S. regulation.
OTHER AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. For further information regarding the Company,
reference is made to such reports, proxy statements and other information which
are available as described under "Available Information" and "Incorporation of
Certain Documents by Reference."
18
GLOSSARY OF SELECTED INSURANCE TERMS
Attachment point The amount of loss (per occurrence or in the aggregate, as
the case may be) above which excess of loss reinsurance
becomes operative.
Broker One who negotiates contracts of insurance or reinsurance,
receiving a commission for placement and other services
rendered, between (1) a policy holder and a primary insurer,
on behalf of the insured party, (2) a primary insurer and
reinsurer, on behalf of the primary insurer, or (3) a
reinsurer and a retrocessionaire, on behalf of the
reinsurer.
Catastrophe excess
of loss reinsurance A form of excess of loss reinsurance that, subject to a
specified limit, indemnifies the ceding company for the
amount of loss in excess of a specified retention with
respect to an accumulation of losses resulting from a
"catastrophe cover."
Cede; Cedent;
Ceding company When a party reinsures its liability with another, it
"cedes" business and is referred to as the "cedent" or
"ceding company."
Claim expenses The expenses of settling claims, including legal and other
fees and the portion of general expenses allocated to claim
settlement costs.
Claim reserves Liabilities established by insurers and reinsurers to
reflect the estimated cost of claims payments and the
related expenses that the insurer or reinsurer will
ultimately be required to pay in respect of insurance or
reinsurance it has written. Reserves are established for
losses and for claim adjustment expenses.
Excess of loss
reinsurance A generic term describing reinsurance that indemnifies the
reinsured against all or a specified portion of losses on
underlying insurance policies in excess of a specified
amount, which is called a "level" or "retention." Also known
as non-proportional reinsurance. Excess of loss reinsurance
is written in layers. A reinsurer or group of reinsurers
accepts a band of coverage up to a specified amount. The
total coverage purchased by the cedent is referred to as a
"program" and will typically be placed with predetermined
reinsurers in pre-negotiated layers. Any liability exceeding
the outer limit of the program reverts to the ceding
company, which also bears the credit risk of a reinsurer's
insolvency.
Funded cover A form of insurance where the insured pays premiums to a
reinsurer to serve essentially as a deposit in order to
offset future losses. On a funded cover, there is generally
limited or no transfer of risk for catastrophe losses from
the insured to the reinsurer.
Generally accepted
accounting
principles Accounting principles as set forth in opinions of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and/or statements of the
Financial Accounting Standards Board and/or their respective
successors and which are applicable in the circumstances as
of the date in question.
Incurred but
not reported Reserves for estimated losses that have been incurred by
insureds and reinsureds but not yet reported to the insurer
or reinsurer including
19
unknown future developments on losses which are known to the
insurer or reinsurer.
Layer The interval between the retention or attachment point and
the maximum limit of indemnity for which a reinsurer is
responsible.
Net premiums
written Gross premiums written for a given period less premiums
ceded to reinsurers and retrocessionaires during such
period.
Proportional
reinsurance A generic term describing all forms of reinsurance in which
the reinsurer shares a proportional part of the original
premiums and losses of the reinsured. (Also known as pro
rata reinsurance, quota share reinsurance or participating
reinsurance.) In proportional reinsurance the reinsurer
generally pays the ceding company a ceding commission. The
ceding commission generally is based on the ceding company's
cost of acquiring the business being reinsured (including
commissions, premium taxes, assessments and miscellaneous
administrative expense) and also may include a profit
factor.
Reinstatement
premium The premium charged for the restoration of the reinsurance
limit of a catastrophe contract to its full amount after
payment by the reinsurer of losses as a result of an
occurrence.
Reinsurance An arrangement in which an insurance company, the reinsurer,
agrees to indemnify another insurance or reinsurance
company, the ceding company, against all or a portion of the
insurance or reinsurance risks underwritten by the ceding
company under one or more policies. Reinsurance can provide
a ceding company with several benefits, including a
reduction in net liability on individual risks and
catastrophe protection from large or multiple losses.
Reinsurance also provides a ceding company with additional
underwriting capacity by permitting it to accept larger
risks and write more business than would be possible without
a concomitant increase in capital and surplus, and
facilitates the maintenance of acceptable financial ratios
by the ceding company. Reinsurance does not legally
discharge the primary insurer from its liability with
respect to its obligations to the insured.
Retention The amount or portion of risk that an insurer retains for
its own account. Losses in excess of the retention level are
paid by the reinsurer. In proportional treaties, the
retention may be a percentage of the original policy's
limit. In excess of loss business, the retention is a dollar
amount of loss, a loss ratio or a percentage.
Retrocessional
Reinsurance;
Retrocessionaire A transaction whereby a reinsurer cedes to another
reinsurer, the retrocessionaire, all or part of the
reinsurance that the first reinsurer has assumed.
Retrocessional reinsurance does not legally discharge the
ceding reinsurer from its liability with respect to its
obligations to the reinsured. Reinsurance companies cede
risks to retrocessionaires for reasons similar to those that
cause primary insurers to purchase reinsurance: to reduce
net liability on individual risks, to protect against
catastrophic losses, to stabilize financial ratios and to
obtain additional underwriting capacity.
20
Risk excess of
loss reinsurance A form of excess of loss reinsurance that covers a loss of
the reinsured on a single "risk" in excess of its retention
level of the type reinsured, rather than to aggregate losses
for all covered risks, as does catastrophe excess of loss
reinsurance. A "risk" in this context might mean the
insurance coverage on one building or a group of buildings
or the insurance coverage under a single policy, which the
reinsured treats as a single risk.
Statutory
accounting
principles ("SAP") Recording transactions and preparing financial statements in
accordance with the rules and procedures prescribed or
permitted by Bermuda and/or the United States state
insurance regulatory authorities including the NAIC, which
in general reflect a liquidating, rather than going concern,
concept of accounting.
Underwriting The insurer's or reinsurer's process of reviewing
applications submitted for insurance coverage, deciding
whether to accept all or part of the coverage requested and
determining the applicable premiums.
Underwriting
capacity The maximum amount that an insurance company can underwrite.
The limit is generally determined by the company's retained
earnings and investment capital. Reinsurance serves to
increase a company's underwriting capacity by reducing its
exposure from particular risks.
Underwriting
expenses The aggregate of policy acquisition costs, including
commissions, and the portion of administrative, general and
other expenses attributable to underwriting operations.
21
ITEM 2. PROPERTIES
The Company leases office space in Bermuda, where its executive offices are
located.
Nobel owns a 39,000 square foot building at 8001 LBJ Freeway, Dallas,
Texas. Approximately 10,000 square feet of this building is leased to unrelated
tenants. Additionally, Nobel owns a 24,000 square foot building at 6923 North
Trenholm Road, Columbia, South Carolina. Since Nobel has sold or reinsured a
substantial portion of its operating businesses, it is considering the sale of
these properties.
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation and arbitration
that arises in the normal course of its business operations. While any
proceeding contains an element of uncertainty, the Company believes that it is
not presently a party to any such litigation or arbitration that is likely to
have a material adverse effect on its business or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The information with respect to the market for the Common Shares and
related shareholder matters is contained under the caption "Financial and
Investor Information" on page 56 of the Company's Annual Report to Shareholders
for the year ended December 31, 1999 (the "Annual Report") and is incorporated
herein by reference thereto in response to this item.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Selected Consolidated Financial Data is listed on page 20 of the Annual
Report and is incorporated herein by reference thereto in response to this item.
The selected financial data of the Company should be read in conjunction with
the Consolidated Financial Statements of the Company and related Notes thereto
contained in the Annual Report and incorporated herein by reference thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information with respect to Management's discussion and analysis of
financial condition and results of operations is contained under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 21 through 32 of the Annual Report and is incorporated
herein by reference thereto in response to this item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information with regard to Quantitative and Qualitative Disclosures
About Market Risk is contained on page 12 of this Form 10-K under the caption
"Investments - Market Sensitive Instruments."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company are contained on pages
34 through 54 of the Annual Report and are incorporated herein by reference
thereto in response to this item. Reference is made to Item 14(a) of this Report
for the Schedules to the Consolidated Financial Statements.
22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
This information with respect to directors and officers of the Company is
contained under the captions "Directors and Executive Officers of the Company"
on pages 4 through 7 of the Company's Definitive Proxy Statement in respect of
the Annual General Meeting of Shareholders to be held on May 3, 2000 (the "Proxy
Statement") and "Proposal 1" on page 25 of the Proxy Statement, and is
incorporated herein by reference thereto in response to this item.
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation is contained under
the subcaption "Executive Officer and Director Compensation" on pages 17 through
24 of the Proxy Statement, and is incorporated herein by reference thereto in
response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information with respect to security ownership of certain beneficial
owners and Management is contained under the caption "Security Ownership of
Certain Beneficial Owners, Management and Directors" on pages 7 through 9 of the
Proxy Statement, and is incorporated herein by reference thereto in response to
this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information with respect to certain relationships and related
transactions is contained under the caption "Certain Relationships and Related
Transactions" on pages 10 through 12 of the Proxy Statement, and is incorporated
herein by reference thereto in response to this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a) Financial Statements and Exhibits.
1. The Consolidated Financial Statements of the Company and related Notes
thereto are contained on pages 34 through 54 of the Company's 1999 Annual
Report to Shareholders are incorporated herein by reference thereto.
2. The Schedules to the Consolidated Financial Statements of the Company are
listed in the accompanying Index to Schedules to Consolidated Financial
Statements and are filed as part of this Report.
3. The following exhibits are included in this Report:
3.1 Memorandum of Association.*
3.2 Amended and Restated Bye-Laws.##
3.3 Memorandum of Increase in Share Capital of Company.##
4.1 Specimen Common Share certificate.*
23
10.1 Investment Management Agreement, dated as of November 1, 1993, between GE
Investment Management Incorporated and Renaissance Reinsurance Ltd.*
10.2 RenaissanceRe Holdings Ltd. Restricted Stock Plan.*
10.3 Agreement and Plan of Recapitalization, dated as of March 26, 1995, by
and among RenaissanceRe Holdings, Ltd., Renaissance Reinsurance Ltd. and
Investors named therein.*
10.4 Third Amended and Restated Employment Agreement, dated as of July 1,
1997, between Renaissance Reinsurance Ltd. and James N. Stanard, amended
and restated as of June 3, 1998.#
10.5 Employment Agreement, dated as of February 4, 1998, between Renaissance
Reinsurance Ltd. and William I. Riker.###
10.6 Employment Agreement, dated as of July 1, 1999, between Renaissance
Reinsurance Ltd. and David A. Eklund.
10.7 Employment Agreement, dated as of October 17, 1997, between Renaissance
Reinsurance Ltd. John M. Lummis.
10.8 Credit Agreement, dated as of October 5, 1999, among RenaissanceRe
Holdings Ltd., various financial institutions which are, or may become,
parties thereto (the "Lenders"), Deutsche Bank AG, as LC Issuer and
Syndication Agent, Fleet National Bank,as Co-Agents, and Bank of America,
National Association, as Administrative Agent for the Lenders.+++
10.9 Accession Agreement dated as of November 8, 1999, among RenaissanceRe
Holdings Ltd. (the "Borrower"), Bank of America, National Association, as
Administrative Agent (the "Administrative Agent"), Deutsche Bank AG, New
York Branch, as LC Issuer (the "LC Issuer") and Mellon Bank, N.A.,
relating to the Credit Agreement dated as of October 5, 1999, among the
Borrower, certain financial institutions which are signatories thereto,
the LC Issuer and the Administrative Agent.
10.10 Equity Purchase Agreement, dated as of December 13, 1996, by and among
RenaissanceRe Holdings Ltd., Warburg, Pincus Investors, L.P., Trustees of
General Electric Pension Trust, GE Private Placement Partners I, Limited
Partnership and United States Fidelity and Guaranty Company.^
10.11 RenaissanceRe Holdings Ltd. Second Amended and Restated 1993 Stock
Incentive Plan.###
10.12 RenaissanceRe Holdings Ltd. Amended and Restated Non-Employee Director
Stock Plan.###
10.13 Stock Purchase Agreement, dated December 19, 1997, by and among
RenaissanceRe Holdings Ltd. and Renaissance U.S. Holdings, Inc. and Nobel
Insurance Limited and Nobel Holdings, Inc.++
10.14 Guaranty Agreement, dated June 23, 1997, between RenaissanceRe Holdings
Ltd. and The Bank of America.+
10.15 Amended and Restated Shareholders Agreement, dated as of March 23, 1998,
by and among Warburg, Pincus Investors, L.P., Trustees of General
Electric Pension Trust, GE Private Placement Partners I, Limited
Partnership and United States Fidelity and Guaranty Company.###
10.16 Amended and Restated Registration Rights Agreement, dated as of March 23,
1998, by and among Warburg, Pincus Investors, L.P., PT Investments Inc.,
GE Private Placement Partners I-Insurance, Limited Partnership and United
States Fidelity and Guaranty Company.###
24
10.17 Amended and Restated Declaration of Trust of RenaissanceRe Capital Trust,
dated as of March 7, 1997, among the Company, as Sponsor, The Bank of New
York, as Property Trustee, The Bank of New York (Delaware), as Delaware
Trustee, and the Administrative Trustees named therein.^^
10.18 Indenture, dated as of March 7, 1997, among the Company, as Sponsor, and
The Bank of New York, as Debenture Trustee.^^
10.19 Series A Capital Securities Guarantee Agreement, dated as of March 7,
1997, between the Company and The Bank of New York, as Trustee.^^
10.20 Registration Rights Agreement, dated March 7, 1997, among the Company,
the Trust, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc.^^
10.21 Credit Agreement between Renaissance U.S. Holdings, Inc., the Lenders
named therein, and Bank of America National Trust and Savings Association
as Administrative Agent, dated as of June 24, 1998.#
10.22 First Amendment to Credit Agreement between Renaissance U.S. Holdings
Inc. the Lenders named therein, and Bank of America National Trust and
Savings Association as Administrative Agent, dated as of December 31,
1998. @
10.23 Guaranty, dated as of June 24, 1998, among RenaissanceRe Holdings, Ltd.,
as Guarantor, and Bank of America National Trust & Savings Association.#
10.24 Share Purchase Agreement, dated as of November 17, 1999, between
RenaissanceRe Holdings Ltd. And The St. Paul Companies, Inc.
13.1 Annual Report to Shareholders of RenaissanceRe Holdings Ltd. for the year
ended December 31, 1999 (with the exception of the information
incorporated by reference into Items 5, 7, 8 and 14 of this Report, such
Annual Report to Shareholders is furnished for the information of the
Commission and is not deemed "filed" as part of this Report).
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young.
27.1 Financial Data Schedule for the Year Ended December 31, 1999.
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K with the Commission
during the fourth quarter of 1999.
- --------------------------------------------------------------------------------
* Incorporated by reference to the Registration Statement on Form S-1 of
the Company (Registration No. 33-70008) which was declared effective by
the Commission on July 26, 1995.
^ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on December 16, 1996, relating to an event
which occurred on December 31, 1996.
^^ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on March 19, 1997, relating to certain events
which occurred on March 7, 1997.
25
+ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, filed with the Commission on
October 22, 1997.
++ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on January 6, 1998, relating to certain events
which occurred on December 19, 1997.
+++ Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, filed with the Commission on March 21,
1997.
++++ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999, filed with the Commission on
November 15, 1999.
# Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1998, filed with the Commission on August
4, 1998.
## Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1998, filed with the Commission on May 14,
1998.
### Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, filed with the Commission on March 31,
1999.
@ Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, filed with the Commission on March 31,
1999.
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Hamilton, Bermuda
on March 30, 2000.
RENAISSANCERE HOLDINGS LTD.
/s/ James N. Stanard
-------------------------------
James N. Stanard
President, Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ James N. Stanard President and Chief Executive Officer and March 30, 2000
- -----------------------------
James N. Stanard Chairman of the Board of Directors
/s/ John M. Lummis Senior Vice President and Chief Financial March 30, 2000
- ---------------------------
John M. Lummis Officer (Principal Accounting Officer)
/s/ Arthur S. Bahr Director March 30, 2000
- ----------------------
Arthur S. Bahr
/s/ Thomas A. Cooper Director March 30, 2000
- ----------------------
Thomas A. Cooper
/s/ Edmund B. Greene Director March 30, 2000
- ----------------------
Edmund B. Greene
/s/ Brian Hall Director March 30, 2000
- ----------------------
Brian Hall
/s/ Gerald L. Igou Director March 30, 2000
- ----------------------
Gerald L. Igou
/s/ Kewsong Lee Director March 30, 2000
- ----------------------
Kewsong Lee
/s/ Paul J. Liska Director March 30, 2000
- ----------------------
Paul J. Liska
/s/ W. James MacGinnitie Director March 30, 2000
- ----------------------
W. James MacGinnitie
27
/s/ Howard H. Newman Director March 30, 2000
- ----------------------
Howard H. Newman
/s/ Scott E. Pardee Director March 30, 2000
- ----------------------
Scott E. Pardee
/s/ William I. Riker Director & Executive Vice President March 30, 2000
- ----------------------
William I. Riker
28
RENAISSANCERE HOLDINGS LTD AND SUBSIDIARIES.
INDEX TO SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Report of Independent Auditors on Schedules................................. S-2
I Summary of Investments other than Investments in Related
Parties at December 31, 1999......................................... S-3
III Condensed Financial Information of the Registrant.................... S-4
V Supplementary Insurance Information for the years ended
December 31, 1999, 1998 and 1997..................................... S-7
VI Reinsurance for the years ended December 31, 1999, 1998 and 1997..... S-8
X Supplementary Information Concerning Property-Casualty
Insurance Operations................................................. S-9
Schedules other than those listed above are omitted for the reason that
they are not applicable.
S-1
REPORT OF INDEPENDENT AUDITORS ON SCHEDULES
To the Board of Directors and Shareholders of RenaissanceRe Holdings Ltd.
We have audited the consolidated financial statements of RenaissanceRe
Holdings Ltd. and Subsidiaries as of December 31, 1999 and 1998, and for each of
the three years in the period ended December 31, 1999, and have issued our
report thereon dated January 28, 2000; such financial statements and our report
thereon are incorporated by reference elsewhere in this Annual Report on Form
10-K. Our audits also included the financial statement schedules listed in item
14(a)(2) of this Registration Statement. These schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young
Hamilton, Bermuda
January 28, 2000
S-2
SCHEDULE I
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(MILLIONS OF UNITED STATES DOLLARS)
YEAR ENDED
DECEMBER 31, 1999
----------------------- AMOUNT AT
WHICH SHOWN
AMORTIZED MARKET IN THE
TYPE OF INVESTMENT: COST VALUE BALANCE SHEET
- ------------------- --------- -------- -------------
Fixed Maturities Available for Sale:
U.S. Government bonds................................ $298.7 $295.7 $295.7
U.S. corporates...................................... 371.6 356.6 356.6
Non U.S. sovereign government bonds.................. 55.3 54.4 54.4
Non U.S. corporate debt securities................... 50.5 54.0 54.0
U.S. mortgage backed securities...................... 150.0 147.0 147.0
-------- -------- --------
Subtotal....................................... 926.1 907.7 907.7
Other investments......................................... 8.6 8.6 8.6
Short-term investments.................................... 12.8 12.8 12.8
Cash and cash equivalents................................. 132.1 132.1 132.1
-------- -------- --------
Total investments, short-term
investments, cash and cash
equivalents.......................... $1,079.6 $1,061.2 $1,061.2
======== ======== ========
S-3
SCHEDULE III
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RENAISSANCERE HOLDINGS LTD. BALANCE SHEETS
(PARENT COMPANY)
(THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31
-----------------------------------
1999 1998
------------ ------------
ASSETS
Cash....................................................... $ 48,483 $ 7,702
Investments available for sale............................. 144,739 80,487
Investment in subsidiaries................................. 673,229 650,515
Dividend receivable........................................ 30,637 24,294
Other assets............................................... 942 4,262
------------ ------------
Total assets...................................... $ 898,030 $ 767,260
============ ============
LIABILITIES
Loans payable.............................................. $ 200,000 $ 50,000
Minority interest - Company obligated, manditorily redeemable
capital securities of a subsidiary trust holding solely
junior subordinated debentures of the Company............ 89,630 100,000
Other liabilities.......................................... 8,071 5,028
------------ ------------
Total liabilities................................. 297,701 155,028
============ ============
SHAREHOLDERS' EQUITY
Common Shares: $1 par value-authorized 225,000,000 shares
issued and outstanding at December 31, 1999 - 19,686,480
(1998 - 21,645,913)...................................... 19,686 21,646
Additional paid-in capital................................. -- 17,389
Unearned Stock Grant Compensation.......................... (10,026) (8,183)
Accumulated other comprehensive income..................... (18,470) (5,144)
Retained earnings.......................................... 609,139 586,524
------------ ------------
Total shareholders' equity........................ 600,329 612,232
------------ ------------
Total liabilities and shareholders' equity. $ 898,030 $ 767,260
============ ============
S-4
SCHEDULE III (CONT'D.)
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RENAISSANCERE HOLDINGS LTD.
STATEMENTS OF INCOME
(PARENT COMPANY)
(THOUSANDS OF UNITED STATES DOLLARS)
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
Income:
Investment income........................................... $ 5,945 $ 1,364 $ 5,723
--------- --------- ----------
Total income................................................ 5,945 1,364 5,723
--------- --------- ----------
Expenses:
Interest expense............................................ 6,805 3,059 4,271
Corporate expenses.......................................... 3,120 3,317 3,218
--------- --------- ----------
Total expenses.............................................. 9,925 6,376 7,489
--------- --------- ----------
Loss before equity in net income of subsidiaries & taxes.... (3,980) (5,012) (1,766)
Equity in net income of Renaissance Reinsurance............. 117,408 126,768 146,209
Equity in net income of Renaissance U.S..................... (2,746) (44,274) --
Equity in net income of Glencoe............................. 2,809 6,340 2,421
Equity in net income of Renaissance Services................ (962) -- --
--------- --------- ----------
Income before minority interests & taxes 112,529 83,822 146,864
Minority interest - Company obligated,
mandatorily redeemable capital securities of a
subsidiary trust holding solely junior subordinated
debentures of the Company ................................. (8,288) (8,540) (6,998)
Minority interest - Glencoe................................. -- (705) (617)
--------- --------- ----------
Net income before taxes .................................... 104,241 74,577 139,249
Income tax expense.......................................... -- -- --
--------- --------- ----------
Net income ................................................. $ 104,241 $ 74,577 $ 139,249
========= ========= ==========
S-5
SCHEDULE III (CONT'D.)
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT-(CONTINUED)
RENAISSANCERE HOLDINGS LTD.
STATEMENTS OF CASH FLOWS
(PARENT COMPANY)
(THOUSANDS OF UNITED STATES DOLLARS)
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
Cash flows provided by (applied to) operating activities:
Net income................................................. $ 104,241 $ 74,577 $ 139,249
Less equity in net income of subsidiaries.................. 116,509 88,129 148,013
--------- --------- ----------
(12,268) (13,552) (8,764)
Adjustments to reconcile net loss to net cash provided by
(applied to) operating activities
Other...................................................... 13,172 2,085 (4,013)
--------- --------- ----------
Net cash provided by (applied to) operating activities..... 904 (11,467) (12,777)
--------- --------- ----------
Cash flows provided by investing activities:
Contributions to subsidiary................................ (14,846) (22,516) (12,000)
Proceeds from sales of investments......................... 199,562 76,770 73,793
Purchases of investments................................... (265,979) (109,295) (105,223)
Dividends from subsidiary.................................. 88,714 102,061 124,770
Purchase of minority interest in subsidiary................ -- -- (5,185)
--------- --------- ----------
Net cash provided by investing activities.................. 7,451 47,020 76,155
--------- --------- ----------
Cash flows provided by (applied to) financing activities:
Proceeds from issuance (purchase) of Capital Securities.... (8,591) -- 100,000
Repurchase of Common Shares................................ (80,098) (42,724) (53,458)
Dividend to Common Shareholders............................ (28,885) (26,720) (22,643)
Net proceeds from (repayment of) bank loan................. 150,000 -- (100,000)
Repayments of officer loans................................ -- -- 4,104
--------- --------- ----------
Net cash provided by (applied to) financing activities..... 32,426 (69,444) (71,997)
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents....... 40,781 (33,891) (8,619)
Balance at beginning of year............................... 7,702 41,593 50,212
--------- --------- ----------
Balance at end of year..................................... $ 48,483 $ 7,702 $ 41,593
--------- --------- ----------
S-6
SCHEDULE V
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(THOUSANDS OF UNITED STATES DOLLARS)
DECEMBER 31, 1999 YEAR ENDED DECEMBER 31, 1999
--------------------------------- --------------------------------------------------------------------------------
FUTURE
POLICY
BENEFITS, BENEFITS, AMORTIZATION
DEFERRED LOSSES, CLAIMS, OF DEFERRED
POLICY CLAIMS AND NET LOSSES AND POLICY OTHER NET
ACQUISITION CLAIMS UNEARNED PREMIUM INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
COSTS EXPENSES PREMIUMS REVENUE INCOME EXPENSES COSTS EXPENSES WRITTEN
Property... $ 14,221 $ 478,601 $ 98,386 $ 221,117 $ 60,334 $ 77,141 $ 25,500 $ 36,768 $213,513
========== ========= ========== ========= ========== ========== ========== ========== ========
DECEMBER 31, 1998 YEAR ENDED DECEMBER 31, 1998
--------------------------------- --------------------------------------------------------------------------------
FUTURE
POLICY
BENEFITS, BENEFITS, AMORTIZATION
DEFERRED LOSSES, CLAIMS, OF DEFERRED
POLICY CLAIMS AND NET LOSSES AND POLICY OTHER NET
ACQUISITION CLAIMS UNEARNED PREMIUM INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
COSTS EXPENSES PREMIUMS REVENUE INCOME EXPENSES COSTS EXPENSES WRITTEN
Property... $ 10,997 $ 298,829 $ 94,466 $ 204,947 $ 52,834 $ 112,752 $ 26,506 $ 34,525 $195,019
========== ========= ========== ========= ========== ========== ========== ========== ========
DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1997
--------------------------------- --------------------------------------------------------------------------------
FUTURE
POLICY
BENEFITS, BENEFITS, AMORTIZATION
DEFERRED LOSSES, CLAIMS, OF DEFERRED
POLICY CLAIMS AND NET LOSSES AND POLICY OTHER NET
ACQUISITION CLAIMS UNEARNED PREMIUM INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
COSTS EXPENSES PREMIUMS REVENUE INCOME EXPENSES COSTS EXPENSES WRITTEN
Property... $ 5,739 $ 110,037 $ 57,008 $ 211,490 $49,573 $ 50,015 $ 25,227 $ 25,131 $195,752
========== ========= ========== ========= ========== ========== ========== ========== ========
S-7
SCHEDULE VI
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
REINSURANCE
(THOUSANDS OF UNITED STATES DOLLARS)
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
-------- ---------- ----------- --------- ----------
Year ended December 31, 1999
Property Premiums Written.............. $ 68,961 $ 137,792 $ 282,344 $ 213,513 132%
======== ========= ========= =========
Year ended December 31, 1998
Property Premiums Written.............. $ 63,271 $ 75,441 $ 207,189 $ 195,019 106%
======== ========= ========= =========
Year ended December 31, 1997
Property Premiums Written.............. $ 7,041 $ 32,535 $ 221,246 $ 195,752 113%
======== ========= ========= =========
S-8
SCHEDULE X
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION CONCERNING
PROPERTY/CASUALTY INSURANCE OPERATIONS
(EXPRESSED IN UNITED STATES DOLLARS)
(DOLLARS IN THOUSANDS)
Reserve for Unpaid Net
Deferred Policy Claims Discount Unearned Earned Investment
Affiliation with Registrant Acquisition Costs and Claims Expenses if any, Deducted Premiums Premiums Income
- --------------------------- ----------------- ------------------- ---------------- -------- -------- ------
Consolidated Subsidiaries
Year ended December 31, 1999 $ 14,221 $478,601 $ -- $ 98,386 $221,117 $ 60,334
======== ======== ====== ======== ======== ========
Year ended December 31, 1998 $ 10,997 $298,829 $ -- $ 94,466 $204,947 $ 52,834
======== ======== ====== ======== ======== ========
Year ended December 31, 1997 $ 5,739 $110,037 $ -- $ 57,008 $211,490 $ 49,573
======== ======== ====== ======== ======== ========
Claims and Claims
Expense Incurred
Related to Amortization of
--------------------------- Deferred Policy Paid Claim and Net
Affiliation with Registrant Current Year Prior Years Acquisition Costs Claims Expenses Premiums Written
- --------------------------- ------------ ----------- ----------------- --------------- ----------------
Consolidated Subsidiaries
Year ended December 31, 1999 $ 111,720 $(34,579) $ 25,500 $ 99,740 $213,513
========= ======== ======== ======== ========
Year ended December 31, 1998 $ 96,431 $ 16,321 $ 26,506 $ 80,594 $195,019
========= ======== ======== ======== ========
Year ended December 31, 1997 $ 50,015 $ 0 $ 25,227 $ 45,399 $195,752
========= ======== ======== ======== ========
S-9
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
TO
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1999
RenaissanceRe Holdings Ltd.
1. The Consolidated Financial Statements of the Company and related Notes
thereto are contained on pages 34 through 54 of the Company's 1999 Annual
Report to Shareholders are incorporated herein by reference thereto.
2. The Schedules to the Consolidated Financial Statements of the Company are
listed in the accompanying Index to Schedules to Consolidated Financial
Statements and are filed as part of this Report.
3. The following exhibits are included in this Report:
3.1 Memorandum of Association.*
3.2 Amended and Restated Bye-Laws.#
3.3 Memorandum of Increase in Share Capital of Company.##
4.1 Specimen Common Share certificate.*
10.1 Investment Management Agreement, dated as of November 1, 1993, between GE
Investment Management Incorporated and Renaissance Reinsurance Ltd.*
10.2 RenaissanceRe Holdings Ltd. Restricted Stock Plan.*
10.3 Agreement and Plan of Recapitalization, dated as of March 26, 1995, by
and among RenaissanceRe Holdings, Ltd., Renaissance Reinsurance Ltd. and
Investors named therein.*
10.4 Third Amended and Restated Employment Agreement, dated as of July 1,
1997, between Renaissance Reinsurance Ltd. and James N. Stanard, amended
and restated as of June 3, 1998.#
10.5 Employment Agreement, dated as of February 4, 1998, between Renaissance
Reinsurance Ltd. and William I. Riker.###
10.6 Employment Agreement, dated as of July 1, 1999, between Renaissance
Reinsurance Ltd. and David A. Eklund.
10.7 Employment Agreement, dated as of October 17, 1997, between Renaissance
Reinsurance Ltd. and John M. Lummis.
10.8 Credit Agreement, dated as of October 5, 1999, among RenaissanceRe
Holdings Ltd., various financial institutions which are, or may become,
parties thereto (the "Lenders"), Deutsche Bank AG, as LC Issuer and
Syndication Agent, Fleet National Bank, as Co-Agents, and Bank of
America, National Association, as Administrative Agent for the
Lenders.+++
10.9 Accession Agreement dated as of November 8, 1999, among RenaissanceRe
Holdings Ltd. (the "Borrower"), Bank of America, National Association, as
Administrative Agent (the "Administrative Agent"), Deutsche Bank AG, New
York Branch, as LC Issuer (the "LC Issuer") and Mellon Bank, N.A.,
relating to the Credit Agreement dated as of October 5, 1999, among the
Borrower, certain financial institutions which are signatories thereto,
the LC Issuer and the Administrative Agent.
10.10 Equity Purchase Agreement, dated as of December 13, 1996, by and among
RenaissanceRe Holdings Ltd., Warburg, Pincus Investors, L.P., Trustees of
General Electric Pension Trust, GE Private Placement Partners I, Limited
Partnership and United States Fidelity and Guaranty Company.^
10.11 RenaissanceRe Holdings Ltd. Second Amended and Restated 1993 Stock
Incentive Plan.###
-2-
10.12 RenaissanceRe Holdings Ltd. Amended and Restated Non-Employee Director
Stock Plan.###
10.13 Stock Purchase Agreement, dated December 19, 1997, by and among
RenaissanceRe Holdings Ltd. and Renaissance U.S. Holdings, Inc. and Nobel
Insurance Limited and Nobel Holdings, Inc.++
10.14 Guaranty Agreement, dated June 23, 1997, between RenaissanceRe Holdings
Ltd. and The Bank of America.+
10.15 Amended and Restated Shareholders Agreement, dated as of March 23, 1998,
by and among Warburg, Pincus Investors, L.P., Trustees of General
Electric Pension Trust, GE Private Placement Partners I, Limited
Partnership and United States Fidelity and Guaranty Company.###
10.16 Amended and Restated Registration Rights Agreement, dated as of March 23,
1998, by and among Warburg, Pincus Investors, L.P., PT Investments Inc.,
GE Private Placement Partners I-Insurance, Limited Partnership and United
States Fidelity and Guaranty Company.###
10.17 Amended and Restated Declaration of Trust of RenaissanceRe Capital Trust,
dated as of March 7, 1997, among the Company, as Sponsor, The Bank of New
York, as Property Trustee, The Bank of New York (Delaware), as Delaware
Trustee, and the Administrative Trustees named therein.^^
10.18 Indenture, dated as of March 7, 1997, among the Company, as Sponsor, and
The Bank of New York, as Debenture Trustee.^^
10.19 Series A Capital Securities Guarantee Agreement, dated as of March 7,
1997, between the Company and The Bank of New York, as Trustee.^^
10.20 Registration Rights Agreement, dated March 7, 1997, among the Company,
the Trust, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc.^^
10.21 Credit Agreement between Renaissance U.S. Holdings, Inc., the Lenders
named therein, and Bank of America National Trust and Savings Association
as Administrative Agent, dated as of June 24, 1998.#
10.22 First Amendment to Credit Agreement between Renaissance U.S. Holdings
Inc. the Lenders named therein, and Bank of America National Trust and
Savings Association as Administrative Agent, dated as of December 31,
1998. @
10.23 Guaranty, dated as of June 24, 1998, among RenaissanceRe Holdings, Ltd.,
as Guarantor, and Bank of America National Trust & Savings Association.#
10.24 Share Purchase Agreement, dated as of November 17, 1999, between
RenaissanceRe Holdings Ltd. And The St. Paul Companies, Inc.
13.1 Annual Report to Shareholders of RenaissanceRe Holdings Ltd. for the year
ended December 31, 1999 (with the exception of the information
incorporated by reference into Items 5, 7, 8 and 14 of this Report, such
Annual Report to Shareholders is furnished for the information of the
Commission and is not deemed "filed" as part of this Report).
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young.
27.1 Financial Data Schedule for the Year Ended December 31, 1999.
- --------------------------------------------------------------------------------
-3-
* Incorporated by reference to the Registration Statement on Form S-1 of
the Company (Registration No. 33-70008) which was declared effective by
the Commission on July 26, 1995.
^ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on December 16, 1996, relating to an event
which occurred on December 31, 1996.
^^ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on March 19, 1997, relating to certain events
which occurred on March 7, 1997.
+ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, filed with the Commission on
October 22, 1997.
++ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on January 6, 1998, relating to certain events
which occurred on December 19, 1997.
+++ Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, filed with the Commission on March 21,
1997.
++++ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended September 30, 1999, filed with the Commission on
November 15, 1999.
# Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1998, filed with the Commission on August
14, 1998.
## Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the period ended March 31, 1998, filed with the Commission on May 14,
1998.
### Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, filed with the Commission on March 31,
1998.
@ Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, filed with the Commission on March 31,
1999.
-4-