UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to __________________
Commission file number: 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 Identification No.)
incorporation or organization)
RENAISSANCE HOUSE
8-12 EAST BROADWAY
PEMBROKE, BERMUDA HM 19
(Address of principal executive offices) (Zip Code)
(441) 295-4513
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
The number of outstanding shares of RenaissanceRe Holding Ltd.'s common
stock, par value US $1.00 per share, as of March 31, 2002 was 22,748,069
Total number of pages in this report: 25
1
RenaissanceRe Holdings Ltd.
INDEX TO FORM 10-Q
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Consolidated Balance Sheets as at March 31, 2002 3
(Unaudited) and December 31, 2001
Unaudited Consolidated Statements of Operations for 4
the three-month periods ended March 31, 2002 and 2001
Unaudited Consolidated Statements of Changes in Shareholders' 5
Equity for the three-month periods ended March 31, 2002 and 2001
Unaudited Consolidated Statements of Cash Flows 6
for the three-month periods ended March 31, 2002 and 2001
Notes to Unaudited Consolidated Financial Statements 7
ITEM 2 -- Management's Discussion and Analysis of Results of Operations
and Financial Condition 11
ITEM 3 -- Quantitative and Qualitative Disclosures About Market Risk 23
PART II - OTHER INFORMATION 24
ITEM 1 -- Legal Proceedings
ITEM 2 -- Changes in Securities and Use of Proceeds
ITEM 3 -- Defaults Upon Senior Securities
ITEM 4 -- Submission of Matters to a Vote of Security Holders
ITEM 5 -- Other Information
ITEM 6 -- Exhibits and Reports on Form 8-K
Signature - RenaissanceRe Holdings Ltd. 25
2
PART I - FINANCIAL INFORMATION
Item 1 - Financial statements
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of United States Dollars, except per share amounts)
AS AT
---------------------------------------
MARCH 31, 2002 DECEMBER 31, 2001
-------------- ------------------
ASSETS (UNAUDITED) (AUDITED)
Fixed maturity investments available for sale, at fair value
(Amortized cost $1,545,137 and $1,266,188 at March 31, 2002
and December 31, 2001, respectively) $ 1,551,140 $ 1,282,483
Short term investments, at cost 10,131 7,372
Other investments 49,965 38,307
Cash and cash equivalents 709,743 866,268
-------------- -----------------
Total investments and cash 2,320,979 2,194,430
Premiums receivable 348,113 102,202
Ceded reinsurance balances 77,828 41,690
Losses and premiums recoverable 213,558 217,556
Accrued investment income 18,192 17,696
Deferred acquisition costs 42,345 12,814
Other assets 69,734 57,264
-------------- -----------------
TOTAL ASSETS $ 3,090,749 $ 2,643,652
============== =================
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
LIABILITIES
Reserve for claims and claim expenses $ 610,493 $ 572,877
Reserve for unearned premiums 402,797 125,053
Debt 183,500 183,500
Reinsurance balances payable 135,923 115,967
Other 71,777 58,650
-------------- -----------------
TOTAL LIABILITIES 1,404,490 1,056,047
-------------- -----------------
MINORITY INTEREST - Company obligated mandatorily redeemable
Capital Securities of a subsidiary trust holding solely junior
subordinated debentures of the Company 84,630 87,630
MINORITY INTEREST - DaVinci 308,530 274,951
SHAREHOLDERS' EQUITY
Series A Preference Shares 150,000 150,000
Common shares and additional paid-in capital 263,173 264,623
Unearned stock grant compensation (17,968) (20,163)
Accumulated other comprehensive income 6,003 16,295
Retained earnings 891,891 814,269
-------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 1,293,099 1,225,024
-------------- -----------------
TOTAL LIABILITIES, MINORITY INTEREST, AND
SHAREHOLDERS' EQUITY $ 3,090,749 $ 2,643,652
============== =================
The accompanying notes are an integral part of these financial statements.
3
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2002 and 2001
(in thousands of United States Dollars, except per share amounts)
(Unaudited)
2002 2001
------------ ------------
REVENUES
Gross Premiums Written $ 460,834 $ 198,208
============ ============
Net premiums written $ 379,096 $ 121,232
Increase in unearned premiums (228,788) (37,332)
------------ ------------
Net premiums earned 150,308 83,900
Net investment income 22,783 17,884
Net foreign exchange losses (1,950) (296)
Other income 8,129 3,868
Net realized gains on investments 686 7,616
------------ ------------
TOTAL REVENUES 179,956 112,972
------------ ------------
EXPENSES
Claims and claim expenses incurred 43,118 41,895
Acquisition expenses 18,549 12,545
Operational expenses 10,663 8,512
Corporate expenses 2,690 1,528
Interest expense 2,714 864
------------ ------------
TOTAL EXPENSES 77,734 65,344
------------ ------------
Income before minority interest and taxes 102,222 47,628
Minority interest - Company obligated mandatorily
redeemable Capital Securities of a subsidiary
trust holding solely junior subordinated
debentures of the Company 1,833 1,847
Minority interest - DaVinci 9,477 --
------------ ------------
Income before taxes 90,912 45,781
Income tax expense 596 876
------------ ------------
NET INCOME 90,316 44,905
Dividends on Series A Preference Shares 3,038 --
------------ ------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 87,278 $ 44,905
============ ============
Earnings per Common Share - basic $ 3.92 $ 2.34
Earnings per Common Share - diluted $ 3.75 $ 2.22
The accompanying notes are an integral part of these financial statements.
4
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(in thousands of United States Dollars)
(Unaudited)
2002 2001
------------- -------------
Series A Preference Shares
Balance --beginning and end of period $ 150,000 $ --
------------- -------------
Common Stock & additonal paid-in capital
Balance -- January 1 264,623 22,999
Exercise of options, and issuance of stock and restricted
stock awards (1,407) 7,314
Secondary offering expenses (73) --
Repurchase of Capital Securities 30 --
------------- -------------
Balance -- March 31 263,173 30,313
------------- -------------
Unearned stock grant compensation
Balance -- January 1 (20,163) (11,716)
Restricted stock grants awarded, net 212 (7,920)
Amortization 1,983 1,675
------------- -------------
Balance -- March 31 (17,968) (17,961)
------------- -------------
Accumulated other comprehensive income
Balance -- January 1 16,295 6,831
Net unrealized gains (losses) on securities, net of
adjustment (see disclosure) (10,292) 8,144
------------- -------------
Balance -- March 31 6,003 14,975
------------- -------------
Retained earnings
Balance -- January 1 814,269 682,704
Net income 90,316 44,905
Dividends paid (12,694) (7,853)
Repurchase of shares -- --
------------- -------------
Balance -- March 31 891,891 719,756
------------- -------------
Total Shareholders'Equity $ 1,293,099 $ 747,083
============= =============
COMPREHENSIVE INCOME
Net income $ 90,316 $ 44,905
Other comprehensive income (loss) (10,292) 8,144
------------- -------------
Comprehensive income $ 80,024 $ 53,049
============= =============
DISCLOSURE REGARDING NET UNREALIZED GAINS (LOSSES)
Net unrealized holding gains (losses) arising during period $ (9,606) $ 15,760
Net realized gains included in net income (686) (7,616)
------------- -------------
Change in net unrealized gains (losses) on securities $ (10,292) $ 8,144
============= =============
The accompanying notes are an integral part of these financial statements.
5
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(in thousands of United States Dollars)
(Unaudited)
--------------------------------
2002 2001
------------- -------------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
NET INCOME $ 90,316 $ 44,905
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Amortization and depreciation 1,855 (91)
Net realized investment gains (686) (7,616)
Change in:
Reinsurance balances, net (225,955) 17,119
Ceded reinsurance balances (36,138) (41,310)
Deferred acquisition costs (29,531) (5,738)
Reserve for claims and claim expenses, net 41,614 20,237
Reserve for unearned premiums 277,744 78,644
Other 317 (31,238)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 119,536 74,912
------------- -------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Proceeds from sale of investments 870,019 854,004
Purchase of investments available for sale (1,163,965) (885,549)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (293,946) (31,545)
------------- -------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Dividends paid - common shares (9,657) (7,853)
Dividends paid - Series A preference shares (3,037) --
Minority Interests 30,579 --
------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 17,885 (7,853)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (156,525) 35,514
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 866,268 110,571
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 709,743 $ 146,085
============= =============
The accompanying notes are an integral part of these financial statements.
6
RenaissanceRe Holdings Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
1. The consolidated financial statements have been prepared on the basis of
U.S. generally accepted accounting principles ("GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. The
consolidated financial statements include the accounts of RenaissanceRe
Holdings Ltd. ("RenaissanceRe") and its wholly owned subsidiaries,
including Renaissance Reinsurance Ltd. ("Renaissance Reinsurance"), Glencoe
Insurance Ltd. ("Glencoe"), Renaissance U.S. Holdings, Inc. ("Renaissance
U.S."), RenaissanceRe Capital Trust (the "Trust") and Renaissance
Underwriting Managers, Ltd. ("Renaissance Managers"). The consolidated
statements also include the accounts of the Company's partially owned
subsidiary, DaVinci Reinsurance Ltd. ("DaVinci").
RenaissanceRe and its subsidiaries are collectively referred to herein as
the "Company." All intercompany transactions and balances have been
eliminated on consolidation.
The Company's principal product is property catastrophe reinsurance,
principally provided through Renaissance Reinsurance. The Company acts as
underwriting manager and underwrites worldwide property catastrophe
reinsurance programs on behalf of joint ventures, including Top Layer
Reinsurance Ltd. ("Top Layer Re") and DaVinci. DaVinci was formed in
October 2001 with other equity investors. The Company owns a minority
equity interest in, but controls a majority of the outstanding votings
shares of, DaVinci.
Minority interests represent the interests of external parties in respect
of net income and shareholders' equity of the Trust and DaVinci. The
Company has also established a wholly-owned subsidiary, RenaissanceRe
Capital Trust II ("Capital Trust II"), which is a financing subsidiary
available to issue certain types of securities on behalf of the Company. As
of March 31, 2002, no such securities have been issued by Capital Trust II.
The Trust is the issuer of $84.6 million of outstanding Company obligated
mandatorily redeemable preferred capital securities and holds a like amount
of junior subordinated debentures issued by the Company. The Company's
guarantee of the distributions on the preferred securities issued by the
Trust (and, if issued, those of Capital Trust II), when taken together with
the Company's obligations under the expense reimbursement agreement with
the Trusts, provides a full and unconditional guarantee of amounts due on
the Trust preferred securities.
Certain comparative information has been reclassified to conform to the
current presentation. Because of the seasonality of the Company's business,
the results of operations for any interim period will not necessarily be
indicative of results of operations for the full fiscal year.
2. The Company purchases reinsurance to reduce its exposure to large losses.
The Company currently has in place contracts that provide for recovery of a
portion of certain claims and claims expenses from reinsurers in excess of
various retentions and loss warranties. The Company would remain liable to
the extent that any third party reinsurance company fails to meet its
obligations. The earned reinsurance premiums ceded were $45.6 million and
$35.7 million for the three-month periods ended March 31, 2002 and 2001,
respectively. Other than loss recoveries, certain of the Company's ceded
reinsurance contracts provide for
7
recoveries of additional premiums, reinstatement premiums and for
unrecovered no claims bonuses which are unrecoverable when losses are ceded
to those reinsurance contracts.
Total recoveries netted against premiums and claims and claim expenses
incurred for the three months ended March 31, 2002 were $14.0 million
compared to $43.8 million for the three months ended March 31, 2001.
Included in losses and premiums recoverable are recoverables of $12.7
million which are related to retroactive reinsurance agreements. In
accordance with Statement of Financial Accounting Standards ("SFAS") No.
113, "Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts," losses related to retroactive reinsurance
agreements are required to be included in claims and claim expenses
incurred as they become known. However, offsetting recoverables, if any,
are deferred and reflected in the statement of operations in future
periods, based on the recovery method. As of March 31, 2002, the Company
has deferred $7.3 million of recoveries related to a retroactive
reinsurance contract. This has been included in other liabilities on the
consolidated balance sheet and will be recognized as a reduction in claims
and claim expenses incurred in the consolidated statement of operations as
amounts are received from the reinsurer.
3. Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." As a result, the Company's goodwill existing at
December 31, 2001 is no longer being amortized but is subject to an annual
impairment review. In accordance with the transition provisions of SFAS No.
142, the Company is working on the first step of the transitional goodwill
impairment test and expects to have this completed by June 30, 2002. The
following table sets forth the effects of adopting SFAS No. 142 on the
comparative period income:
---------------------------------------------------------------------------
(in thousands of U.S. dollars expect share and per share data)
Three months ended
March 31, 2001
------------------
Net income available to common shareholders, as reported $ 44,905
Add back: goodwill amortization expense 139
------------------
Adjusted net income available to common shareholders $ 45,044
==================
Average common shares outstanding - basic 19,226,892
Average common shares outstanding - diluted 20,229,701
Adjusted per common share data
Earnings per common share - basic $ 2.34
Earnings per common share - diluted $ 2.23
---------------------------------------------------------------------------
Included in other assets at March 31, 2002 and December 31, 2001 is
goodwill of $9.2 million, net of accumulated amortization of $14.0 million.
The goodwill recorded by the Company relates entirely to its U.S. primary
business segment.
4. For the three month period ended March 31, 2002, the Company paid interest
of $2.7 million on its outstanding loans and 7% Senior Notes. For the same
period in the previous year the
8
Company paid interest $0.9 million on its outstanding loans. See "Financial
Condition - Capital Resources and Shareholders' Equity" for further
discussion.
5. Basic earnings per share is based on weighted average common shares and
excludes any dilutive effects of options and restricted stock. Diluted
earnings per share assumes the exercise of all dilutive stock options and
restricted stock grants. The following table sets forth the computation of
basic and diluted earnings per share:
--------------------------------------------------------------------------------------------------
Three months ended March 31,
2002 2001
--------------------------------------------------------------------------------------------------
(in thousands of U.S. dollars except share and per share data)
--------------------------------------------------------------------------------------------------
Numerator:
Net income available to common shareholders $ 87,278 $ 44,905
============ ============
Denominator:
Denominator for basic earnings per common share -
Weighted average common shares 22,262,532 19,226,892
Per common share equivalents of employee stock
Options and restricted shares 999,897 1,002,809
------------ ------------
Denominator for diluted earnings per common share -
Adjusted weighted average common shares and
assumed conversions 23,262,429 20,229,701
============ ============
Basic earnings per common share $ 3.92 $ 2.34
Diluted earnings per common share $ 3.75 $ 2.22
--------------------------------------------------------------------------------------------------
6. The Board of Directors of the Company declared, and the Company paid, a
dividend of $0.425 per share to shareholders of record on February 19,
2002. On May 2, 2002, the Board of Directors declared a dividend of $0.425
per share payable on May 30, 2002 to shareholders of record on May 16,
2002. The preceding amounts do not reflect the three-for-one share split
declared by the Board and payable on the same date. See note 9a. On a
post-split basis, the dividend will be $0.142 per share.
7. The Company has two reportable segments: reinsurance operations and primary
operations. The reinsurance segment provides property catastrophe
reinsurance as well as other reinsurance to selected insurers and
reinsurers on a worldwide basis. The primary segment provides insurance
both on a direct and on a surplus lines basis for commercial and homeowners
catastrophe-exposed property business.
9
Data for the three month periods ended March 31, 2002 and 2001 are as
follows:
--------------------------------------------------------------------------------------------
QUARTER ENDED MARCH 31, 2002
(IN THOUSANDS OF U.S. DOLLARS)
REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------------
Gross premiums written $ 433,085 $ 27,749 $ - $ 460,834
Total revenues 164,406 12,391 3,159 179,956
Income (loss) before taxes 89,964 3,057 (2,109) 90,912
Assets 2,659,336 361,686 69,727 3,090,749
-----------------------------------------------------
Claims and claim expense ratio 28.4% 32.5% - 28.7%
Expense ratio 17.2% 52.7% - 19.4%
-----------------------------------------------------
Combined ratio 45.6% 85.2% - 48.1%
=====================================================
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
QUARTER ENDED MARCH 31, 2001
(IN THOUSANDS OF U.S. DOLLARS)
REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------------
Gross premiums written $ 188,313 $ 9,895 $ - $ 198,208
Total revenues 108,003 4,254 715 112,972
Income (loss) before taxes 45,030 3,386 (2,635) 45,781
Assets 1,367,276 242,157 56,303 1,665,736
-----------------------------------------------------
Claims and claim expense ratio 53.6% -133.3% - 49.9%
Expense ratio 23.0% 123.3% - 25.1%
-----------------------------------------------------
Combined ratio 76.6% -10.0% - 75.0%
=====================================================
--------------------------------------------------------------------------------------------
The Company's Bermuda holding company is the primary contributor to the
results reflected in the "Other" category. The pre-tax loss of the holding
company primarily consisted of interest expense on bank loans, the minority
interest on the Company's 8.54 percent junior subordinated debentures due
March 1, 2027 ("Capital Securities") and corporate expenses, partially
offset by realized investment gains on sales of investments and investment
income.
8. The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences
between financial and tax reporting. Deferred tax assets and liabilities
are determined based on the difference between the financial statement
bases and tax bases of assets and liabilities using enacted tax rates.
The Company's U.S. subsidiaries are subject to U.S. tax. The net deferred
tax asset of $3.6 million is net of a $23.3 million valuation allowance.
Net operating loss carryforwards and future tax deductions will be
available to offset regular taxable U.S. income during the
10
carryforward period (which expires during the period ranging from 2018
through 2020), subject to certain limitations.
9. Subsequent Events
a) On May 2, 2002, the Company announced a three-for-one split of the
Company's common shares in the form of a stock dividend. The Company
will issue two shares in respect of every one outstanding on the record
date. The stock dividend will be paid on May 30, 2002 to shareholders
of record on May 16, 2002. Unless expressly stated otherwise, all share
and per share amounts in this quarterly report are given on a pre-split
basis.
b) On April 19, 2002, DaVinci entered into a credit agreement with a
syndicate of commercial banks providing for a $100.0 million revolving
credit facility. As of May 10, 2002, DaVinci borrowed the full $100.0
million available under this facility to repay $100 million bridge
financing provided by RenaissanceRe. Interest rates on the facility are
based on a spread above LIBOR. Neither RenaissanceRe nor Renaissance
Reinsurance is a guarantor of this facility and the lenders have no
recourse against our affiliates other than DaVinci under this facility.
Pursuant to the terms of the $310.0 million facility maintained by
RenaissanceRe a default by DaVinci in its obligations will not result
in a default under the RenaissanceRe facility. Although the Company
only owns a minority of the economic interests of DaVinci, the Company
controls a majority of its outstanding voting power and, accordingly,
DaVinci is included in the Company's consolidated financial statements;
as a result, the replacement of $100 million debt from
RenaissanceRe with $100 million of debt from a third party will cause
the Company's consolidated debt to increase by $100 million.
c) On May 10, 2002, the Company completed the purchase of OPCat, formerly
a subsidiary of Overseas Partners Ltd. ("OPL"). The Company had
previously announced on February 13, 2002 that it would assume the
catastrophe reinsurance business which it had previously written on
behalf of OPCat. The transactions occurred in connection with OPL's
announcement that it will restructure OPL and cause most of its
operations to begin an orderly run-off.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is a discussion and analysis of our results of operations for the
three month period ended March 31, 2002 and financial condition as of March 31,
2002. This discussion and analysis should be read in conjunction with the
attached unaudited consolidated financial statements and notes thereto and the
audited consolidated financial statements and notes thereto contained in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
General
We provide reinsurance that is subject to the risk of natural and man-made
catastrophes, as well as other lines of reinsurance where risk of natural
catastrophe represents a significant component of the overall exposure. Our
results depend to a large extent on the frequency and severity of catastrophic
events, and the concentration and coverage offered to clients impacted thereby.
Our catastrophe reinsurance business includes 1) writing reinsurance on our own
behalf and 2) writing reinsurance on behalf of our joint ventures, principally
Top Layer Re and DaVinci. We receive fee income based on the performance of
these joint ventures. The results of operations from DaVinci are consolidated in
our financial statements. Our primary operations principally provide coverage
with respect to risks that are also exposed to natural catastrophes.
Recently, we have increased our premiums from specialty lines of reinsurance,
including property per risk, aviation, catastrophe-exposed workers compensation
coverages, finite and satellite reinsurance. We have also increased our premiums
written by Glencoe, which primarily provides catastrophe exposed primary
property coverage on an excess and surplus lines basis.
We may write other lines of reinsurance in the future although there can be no
assurance that any such premiums will be material to us. From time to time, we
may consider opportunistic diversification into new ventures, either through
organic growth or the acquisition of other companies or books of business. In
evaluating such new ventures, we seek an attractive return on equity, the
ability to develop or capitalize on a competitive advantage and opportunities
that will not detract from its core reinsurance operations. Accordingly, we
regularly review strategic opportunities and periodically engage in discussions
regarding possible transactions.
12
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 2002 COMPARED TO THE QUARTER ENDED MARCH 31,
2001
A summary of the significant components of our revenues and expenses are as
follows:
- -------------------------------------------------------------------------------------------------
Quarter ended March 31, 2002 2001
- -------------------------------------------------------------------------------------------------
Net underwriting income - Reinsurance (1) $ 76,541 $ 18,716
------------------------
Net underwriting income - Primary (1) 1,437 2,232
Other income 8,129 3,868
Investment income 22,783 17,884
Interest and fixed charges (7,585) (2,711)
Corporate expenses, taxes & other (5,236) (2,700)
Minority Interests (9,477) -
------------------------
Net operating income available to common shareholders (2) 86,592 37,289
Net realized gains 686 7,616
------------------------
Net income $ 87,278 $ 44,905
========================
Operating income per common share - diluted $ 3.72 $ 1.84
Net income per common share - diluted $ 3.75 $ 2.22
(1) Net underwriting income consists of net premiums earned less claims and claim expenses
incurred, acquisition costs and operational expenses.
(2) Net operating income excludes realized gains and losses on investments.
- -------------------------------------------------------------------------------------------------
The $49.3 million increase in operating income in the quarter ended March 31,
2002 compared to the quarter ended March 31, 2001 was primarily the result of
the following items:
o A $48.3 million increase in underwriting income from our reinsurance
operations (offset in part by minority interests), which was primarily
due to the significant growth in written premium, as noted below, and a
corresponding growth in earned premium. Also, during the quarter ended
March 31, 2002, the relatively low level of property catastrophe losses
increased our underwriting income from the reinsurance operations; plus
o A $4.3 million increase in other income caused by an increase of $1.6
million from profits and fees from our joint venture activities, plus
$2.5 million in gains from contracts triggered by physical variables;
less
o A $2.4 million increase in other charges which primarily relates to a
$1.1 million increase in corporate expenses, and a $1.7 million
increase in foreign exchange losses.
On a combined basis, increases in investment income and fixed charges in the
quarter were immaterial. Individually, each component increased as a result of
our capital raising activities during the second half of 2001, where we
increased our assets by $532 million through the issuance of $150 million in
debt, $150 million in Series A preference shares and $232 million common shares.
13
For the quarter ended March 31, 2002, net operating income available to common
shareholders, excluding realized investment gains and losses, was $86.6 million
or $3.72 per common share, compared to $37.3 million or $1.84 per common share
for the same quarter in 2001. Net income available to common shareholders rose
94% to $87.3 million, or $3.75 per common share, in the quarter, compared to
$44.9 million, or $2.22 per share, for the same quarter of 2001.
Gross premiums written for the first quarter of 2002 and 2001 were as follows:
- ----------------------------------------------------------------------
Quarter ended March 31, 2002 2001
--------------------------
Cat Premium
Renaissance $ 201,920 $ 166,047
Assumed from OP Cat 34,873 -
DaVinci 95,269 -
--------------------------
Total Cat Premium 332,062 166,047
Specialty Reinsurance 101,023 22,266
--------------------------
Total Reinsurance 433,085 188,313
--------------------------
Insurance Premiums Glencoe 22,677 1,756
Insurance Premiums other 5,072 8,139
--------------------------
Total Insurance premiums 27,749 9,895
--------------------------
Total gross written premiums $ 460,834 $ 198,208
==========================
- ----------------------------------------------------------------------
The increase in gross premiums written during the quarter ended March 31, 2002
as compared to the quarter ended March 31, 2001 was primarily the result of the
hardening market environment which arose following the large losses incurred by
many insurance and reinsurance companies from the World Trade Center tragedy.
The losses incurred by many insurers and reinsurers from the World Trade Center
tragedy were greater than they expected and caused many insurers and reinsurers
to reevaluate 1) the risks they were assuming, 2) the correlation of the risks
they were assuming and 3) the prices they were charging for insuring these
risks. We believe that as a result many insurers and reinsurers have either 1)
withdrawn from certain segments of the insurance or reinsurance market or 2)
increased prices for coverages offered to insureds. Both of these factors,
withdrawal of capacity and increasing prices, have provided opportunities for us
to substantially grow our written premiums.
Our property catastrophe premiums have increased primarily due to increased
prices across our markets, which has resulted in higher prices on our renewing
business, and has increased the number of contracts which are being marketed on
terms which meet our exposure criteria and which are priced at economical rates
of return.
The market conditions described above have also contributed to our expansion in
1) the specialty reinsurance market, which includes coverages such as
catastrophe exposed workers compensation, finite and aviation risks and 2) the
primary insurance market, where we provide catastrophe exposed property coverage
on an excess and surplus lines basis, primarily through our subsidiary Glencoe
Insurance.
Following the World Trade Center tragedy, we have also increased our penetration
into the property catastrophe reinsurance market, which we measure based on the
amount of managed catastrophe
14
premiums we write. For the quarter ended March 31, 2002, our total managed
catastrophe premiums, which are catastrophe premiums we write on behalf of
Renaissance Reinsurance and our joint ventures were $370.4 million, $168.4
million of which were derived from DaVinci, OPCat and Top Layer Re. For the
quarter ended March 31, 2001, total managed catastrophe premiums were $214.7
million, $48.8 million of which were derived from our joint ventures.
The increase in other income to $8.1 million for the quarter ended March 31,
2002 compared to $3.9 million for the quarter ended March 31, 2001, was
primarily due to 1) an increase of $1.6 million from profits and fees earned
from our joint venture activities and 2) $2.5 million of gains from contracts
triggered by physical variables. In the future, we expect our fee income from
our joint ventures to be affected by the projected growth of DaVinci, partially
offset by our direct assumption of the business we previously managed for OPCat.
The underwriting results of an insurance or reinsurance company are often
measured by reference to its loss ratio, expense ratio, and combined ratio. The
loss ratio is the result of dividing claims and claim expenses incurred by net
premiums earned. The expense ratio is the result of dividing underwriting
expenses (acquisition and operational expenses) by net premiums earned. The
combined ratio is the sum of the loss ratio and the expense ratio.
The table below sets forth our combined ratio and components thereof, by
segment, for the quarters ended March 31, 2002 and 2001:
----------------------------------------------------------------
REINSURANCE PRIMARY TOTAL
----------------------------------------------------------------
QUARTER ENDED: 31-Mar-02 31-Mar-01 31-Mar-02 31-Mar-01 31-Mar-02 31-Mar-01
----------------------------------------------------------------
Loss ratio 28.4% 53.6% 32.5% -133.3% 28.7% 49.9%
Expense ratio 17.2% 23.0% 52.7% 123.3% 19.4% 25.1%
----------------------------------------------------------------
Combined ratio 45.6% 76.6% 85.2% -10.0% 48.1% 75.0%
----------------------------------------------------------------
We have benefited from the relatively low level of catastrophe losses in the
first quarter of 2002 and, accordingly, the loss ratio of our reinsurance
business decreased to 28.4% for the quarter ended March 31, 2002, compared to
53.6% for the same quarter in 2001.
Based on the decreased level of net earned premiums in the first quarter of
2001, relatively modest one time adjustments to net written premiums, claims and
claim expenses incurred, acquisition expenses or operating expenses can cause,
and did cause, unusual fluctuations in the claims and claim expense ratio and
the underwriting expense ratio of our primary operations.
Net investment income, excluding realized investment gains and losses, for the
first quarter of 2002 was $22.8 million, compared to $17.9 million for the same
period in 2001. The increase in investment income primarily relates to the
increase of our investment assets as a result of our capital raising activities
during the second half of 2001, offset partially by decreases in investment
yields during the first quarter of 2002 as compared to the first quarter of
2001.
Operating expenses were $10.7 million for the first quarter of 2002, compared to
$8.5 million for the same quarter of 2001. The increase was due to additional
costs for personnel and operating expenses associated with our increase in
operations.
Interest expense (including interest expense on the Capital Securities which is
reflected as minority interest) for the quarter ended March 31, 2002 increased
to $4.5 million from $2.7 million for the same period in 2001. The increase in
interest expense was primarily due to interest paid on the 7% Senior Notes
(which were issued in July 2001) during the first quarter of 2002.
15
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL REQUIREMENTS
Our holding company, RenaissanceRe, relies on investment income, cash dividends
and permitted payments from our subsidiaries to make principal payments,
interest payments, cash distributions on outstanding obligations and quarterly
dividend payments, if any, to our shareholders. The payment of dividends by our
Bermuda subsidiaries to our holding company, RenaissanceRe is, under certain
circumstances, limited under Bermuda insurance law. The Bermuda Insurance Act of
1978, amendments thereto (the "Act") and related regulations of Bermuda require
our Bermuda subsidiaries to maintain certain measures of solvency and liquidity.
As at March 31, 2002 the statutory capital and surplus of our Bermuda
subsidiaries was $1,686.6 million, and the amount required to be maintained was
$231.0 million. Our U.S. insurance subsidiaries are also required to maintain
certain measures of solvency and liquidity. As at March 31, 2002 the statutory
capital and surplus of our U.S. subsidiaries was $30.3 million, and the amount
required to be maintained was $24.3 million. In the three month period through
March 31, 2002, our subsidiary, Renaissance Reinsurance, declared dividends of
$40.5 million compared to $52.5 million for the same period in 2001.
CASH FLOWS
Our operating subsidiaries have historically produced sufficient cash flows to
meet expected claims payments and operational expenses and to provide dividend
payments to our holding company, RenaissanceRe. Our subsidiaries also maintain a
concentration of investments in high quality liquid securities, which we believe
will provide sufficient liquidity to meet extraordinary claims payments should
the need arise. Additionally, we maintain a $310.0 million credit facility which
is available to meet the liquidity needs of our subsidiaries should the need
arise. No amount was outstanding under this credit facility as of March 31,
2002.
Cash flows from operations in the first three months of 2002 were $119.5
million, compared to $74.9 million for the same period in 2001. Cash flows
exceeded operating income in this period partly due to paid loss recoveries
received from our reinsurers. We have produced cash flows from operations for
the full years of 2002 and 2001 in excess of our commitments. To the extent that
capital is not utilized in our reinsurance business, we will consider using such
capital to invest in new opportunities or will consider returning such capital
to our shareholders.
During the quarter, in order to meet additional capacity demands in the market
emanating from the World Trade Center tragedy, we contributed additional capital
to Renaissance Reinsurance, bringing the total capital of Renaissance
Reinsurance to $1 billion.
Because of the nature of the coverages we provide, which typically can produce
infrequent losses of high severity, it is not possible to predict our future
cash flows from operating activities with precision. As a consequence, cash
flows from operating activities may fluctuate, perhaps significantly, between
individual quarters and years.
RESERVES
For most insurance and reinsurance companies, the most significant judgment made
by management is the estimation of the claims and claim expense reserves.
Because of the variability and uncertainty
16
associated with loss estimation, it is possible that our individual case
reserves for any loss event will vary from our ultimate loss results,
possibly materially. The period of time from the reporting of a loss to us
through the settlement of our liability may be several years. During this
period, additional facts and trends will be revealed and as these factors become
apparent, reserves may be adjusted. Therefore, adjustments to our loss reserves
can impact our current net income by 1) increasing our net income if our
reserves prove to be redundant, or 2) reducing our net income if our reserves
prove to be insufficient. The impact on net income from changes in prior years
loss reserves was an increase of $2.3 million during the first quarter of 2002,
compared to a decrease of $6.3 million for the same period in 2001.
Unlike the loss reserves of U.S. insurers, the loss reserves established by
Bermuda companies are not regularly examined by insurance regulators.
For our insurance and reinsurance operations, our estimates of claims reserves
are based on 1) claims reports from insureds, 2) our underwriters' experience in
setting claims reserves, 3) the use of computer models where applicable and 4)
historical industry claims experience. Where necessary, we will also use
statistical and actuarial methods to estimate ultimate expected claims and claim
expenses. We review our reserves on a regular basis.
Our principal business is property catastrophe reinsurance, which subjects us to
potential losses that are generally infrequent, but can be significant, such as
losses from hurricanes and earthquakes. Because the loss events to which we are
exposed are generally characterized by low frequency but high severity, our
claims and claim expense reserves will normally fluctuate, sometimes materially,
based upon the occurrence of a significant natural or man-made catastrophic loss
for which we provide reinsurance. Our reserves will also fluctuate based on the
payments we make for these large loss events. As we pay losses related to these
large events, if no other events have occurred, our loss reserves would normally
tend to decrease.
17
The table below sets out our gross and net claims and claim expense reserves as
at March 31, 2002 and December 31, 2001, compared to the balance of our
shareholders' equity:
- --------------------------------------------------------------------------
As at March 31, As at December 31,
2002 2001
------------------------------------
Gross reserves $ 610,493 $ 572,877
Recoverables 213,558 217,556
------------------------------------
Net reserves $ 396,935 $ 355,321
====================================
Shareholders' equity 1,293,099 1,225,024
Gross reserves as a % of equity 47.2% 46.8%
Net reserves as a % of equity 30.7% 29.0%
- --------------------------------------------------------------------------
During the three months ended March 31, 2002 we incurred net claims of $43.1
million and paid net losses of $6.4 million. Due to the high severity and low
frequency of losses related to the property catastrophe insurance and
reinsurance business, there can be no assurance that we will continue to
experience this level of losses and/or recoveries. Incurred but not reported
("IBNR") reserves at March 31, 2002 were $312.6 million compared with $286.7
million at December 31, 2001.
CAPITAL RESOURCES AND SHAREHOLDERS' EQUITY
Our total capital resources as at March 31, 2002 and December 31, 2001 were as
follows:
- ---------------------------------------------------------------------------------------------------------------
March 31, December 31,
(in thousands of U. S. dollars) 2002 2001
- ---------------------------------------------------------------------------------------------------------------
Common shareholders' equity $1,143,099 $ 1,075,024
Series A preference shares 150,000 150,000
---------- -----------
Total shareholders' equity 1,293,099 1,225,024
7% senior notes - due 2008 150,000 150,000
Term loan and borrowed revolving credit facility payable (Renaissance U.S.) 33,500 33,500
Revolving Credit Facility - borrowed (RenaissanceRe) -- --
Revolving Credit Facility - unborrowed (RenaissanceRe) 310,000 310,000
Minority interest - Company obligated mandatorily
redeemable capital securities of a subsidiary trust 84,630 87,630
- ---------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL RESOURCES $1,871,229 $ 1,806,154
========== ===========
- ---------------------------------------------------------------------------------------------------------------
18
We have a $310.0 million committed revolving credit and term loan agreement with
a syndicate of commercial banks. As of March 31, 2002, we had no borrowings
outstanding against this facility. Interest rates on the facility are based on a
spread above LIBOR, and averaged approximately 6.9 percent during the first
three months of 2001.
Our subsidiary, Renaissance U.S., has an $18.5 million term loan and $15 million
revolving loan facility with a syndicate of commercial banks. Interest rates on
the facility are based upon a spread above LIBOR, and averaged 2.5 percent
during the first three months of 2002 (compared to 6.7 percent for the first
three months of 2001). The related agreements contain certain financial
covenants, the primary one being that our holding company, RenaissanceRe, being
the principal guarantor, maintain a ratio of Liquid Assets to debt service of
4:1. The term loan has mandatory repayment provisions approximating $9.0 million
per year in each of years 2002 and 2003. We were in compliance with all the
covenants of this term loan and revolving loan facility as at March 31, 2002.
Our subsidiary, RenaissanceRe Capital Trust, has issued Capital Securities which
pay cumulative cash distributions at an annual rate of 8.54 percent, payable
semi-annually. The Indenture relating to the Capital Securities contains certain
covenants, including a covenant prohibiting the payment of dividends by us if we
are in default under the Indenture. We were in compliance with all of the
covenants of the Indenture at March 31, 2002. From time to time, we may
opportunistically repurchase outstanding Capital Securities. The Company's
guarantee of the distributions on the preferred securities issued by the Trust,
when taken together with the Company's obligations under the expense
reimbursement agreement with the Trust, provides a full and unconditional
guarantee of amounts due on the Trust preferred securities.
During the first three months of 2002, shareholders' equity increased by $68.1
million, from $1,225.0 million at December 31, 2001 to $1,293.1 million at March
31, 2002. Shareholders' equity attributable to common shareholders was $1,143.1
at March 31, 2002 and $1,075.0 at December 31, 2001. The significant components
of the change in shareholders' equity were net income from continuing operations
of $90.3 million, partially offset by a decrease in unrealized gains on
investments of $10.3 million and dividends to common shareholders and Series A
preference shareholders of $12.7 million.
INVESTMENTS
The table below shows the aggregate amounts of investments available for sale,
equity securities and cash and cash equivalents comprising our portfolio of
invested assets:
- --------------------------------------------------------------------------------------------------------
March 31, December 31,
(in thousands of U.S. dollars) 2002 2001
- --------------------------------------------------------------------------------------------------------
Investments available for sale, at fair value $ 1,551,140 $ 1,282,483
Other investments 49,965 38,307
Cash, cash equivalents and short term investments 719,874 873,640
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTED ASSETS $ 2,320,979 $ 2,194,430
- --------------------------------------------------------------------------------------------------------
19
At March 31, 2002, our invested asset portfolio had a weighted average rating of
AA, an average duration of 2.2 years and an average yield to maturity of 4.45
percent, net of investment expenses.
At March 31, 2002 we held investments and cash totaling $2.3 billion with a net
unrealized appreciation balance of $6.0 million. Our investment portfolio is
subject to the risks of declines in realizable value. We attempt to mitigate
this risk through diversification and active management of our portfolio.
At March 31, 2002, $21.4 million of cash and cash equivalents were invested in
currencies other than the U.S. dollar, which represented less than 1% percent of
our invested assets.
CATASTROPHE LINKED INSTRUMENTS
We have assumed risk through catastrophe and derivative instruments under which
losses could be triggered by an industry loss index or geological or physical
variables. During the first quarter of 2002 and 2001, we recorded recoveries on
these contracts of $2.5 million and nil, respectively. We report these
recoveries in other income.
EFFECTS OF INFLATION
The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local or regional economy. The anticipated effects
on us are implicitly considered in our catastrophe loss models. The effects of
inflation are also considered in pricing and in estimating reserves for unpaid
claims and claim expenses. The actual effects of this post-event inflation on
our results cannot be accurately known until claims are ultimately settled.
OFF BALANCE SHEET AND SPECIAL PURPOSE ENTITY ARRANGEMENTS
As of March 31, 2002, we have not entered into any guarantees, or guaranteed the
liabilities of any non-consolidated affiliates or subsidiaries or other
non-related parties.
CURRENT OUTLOOK
The changes to the market environment caused by the World Trade Center tragedy
are expected to continue to be a factor during 2002. We believe that prices for
risks assumed by insurance and reinsurance companies are continuing to increase,
and that there is generally an improved understanding of the correlation between
the various lines of business which some participants may previously have seen
to be independent. In addition, the sensitivity to credit quality of insurers
and reinsurers continues to be a factor in the industry.
Because RenaissanceRe experienced relatively limited losses from the World Trade
Center tragedy and continues to have stable, high credit ratings, we believe
that we are well positioned to continue to significantly increase our managed
catastrophe premiums.
Also, during the quarter ended March 31, 2002, we wrote $101.0 million of
premium related to specialty reinsurance coverages, as compared to $22.3 million
for the first quarter of 2001. We anticipate that we will continue to expand our
presence in specialty reinsurance coverages, which we define as coverages which
are not specifically property catastrophe reinsurance coverages.
20
We also anticipate that we will continue to increase the premiums written by our
Bermuda-based primary insurance company, Glencoe. Glencoe, which primarily
provides catastrophe exposed primary property coverage on an excess and surplus
lines basis, wrote $22.7 million of gross written premiums for the first quarter
of 2002, as compared to $12.9 million in 2001.
We are expanding and enhancing our underwriting, risk management and operational
capabilities in specialty reinsurance and Glencoe. We can not assure you that we
will succeed in the execution of our growth plans for Glencoe or our specialty
reinsurance business, or that these business will sustain their current premium
levels if market conditions change.
As a result of the World Trade Center tragedy, we expect the cost of reinsurance
protection to increase during 2002. If prices rise to levels whereby we believe
the purchase of reinsurance protection would become uneconomical, we may retain
a greater level of net risk in certain geographic regions. In order to obtain
longer-term retrocessional capacity, we have entered into multi-year contracts
with respect to a portion of our portfolio. We have also begun to enter into
quota share type reinsurance relationships from which we receive fees and profit
commissions.
The World Trade Center tragedy has caused insurers and reinsurers to seek to
limit their potential exposures to losses from terrorism attacks. We often
exclude losses from terrorism in the reinsurance and insurance that we write,
but do have potential exposures to this risk. We continue to monitor our
aggregate exposure to terrorist attacks.
Subsequent to the World Trade Center tragedy, a substantial amount of capital
entered the insurance and reinsurance markets both through investments in
established companies and through start-up ventures. Currently, we do not
believe that the new capital has resulted in significant adverse changes to the
prevailing pricing structure in the property catastrophe reinsurance market.
However, it is possible that the combination of the addition of new capital in
the marketplace and an environment with continued light catastrophe losses,
could cause a reduction in prices of our products and may shorten the time
horizon of the current price increases. To the extent that industry pricing of
our products is reduced to levels we believe to be uneconomical, then we would
reduce our future underwriting premiums.
SAFE HARBOR DISCLOSURE
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 contained
in this report.
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934.
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, us.
In particular, statements using words such as "expect", "anticipate", "intends",
"believe" or words of similar import 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
21
be considered as a representation by the Company or any other person that its
objectives or plans will be achieved. Numerous factors could cause the Company's
actual results to differ materially from those addressed by the forward-looking
statements, including the following:
(1) the occurrence of natural or man-made catastrophic events with a
frequency or severity exceeding our estimates;
(2) a decrease in the level of demand for our reinsurance or insurance
business, or increased competition in the industry;
(3) the lowering or loss of one of the financial or claims-paying ratings
of ours or one or more of our subsidiaries;
(4) risks associated with implementing our business strategies and
initiatives for organic growth, including risks relating to managing that
growth;
(5) acts of terrorism or acts of war;
(6) slower than anticipated growth in our fee-based operations;
(7) changes in economic conditions, including interest and currency rate
conditions which should affect our investment portfolio;
(8) uncertainties in our reserving process;
(9) failure of our reinsurers to honor their obligations;
(10) extraordinary events affecting our clients, such as bankruptcies and
liquidations;
(11) loss of services of any one of our key executive officers;
(12) the passage of federal or state legislation subjecting Renaissance
Reinsurance to supervision or regulation, including additional tax
regulation, in the United States or other jurisdictions in which we
operate;
(13) challenges by insurance regulators in the United States to Renaissance
Reinsurance's claim of exemption from insurance regulation under current
laws;
(14) a contention by the United States Internal Revenue Service that our
Bermuda subsidiaries, including Renaissance Reinsurance, are subject to
U.S. taxation; and
(15) actions of competitors, including industry consolidation, the launch
of new entrants and the development of competing financial products.
The factors listed above should not be construed as exhaustive. Certain of
these factors may be described in more detail from time to time in our
filings with the Securities and Exchange Commission. We undertake no
obligation to release publicly the results of any future revisions we may
make to forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
22
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET SENSITIVE INSTRUMENTS
The Company's investment portfolio includes investments which are available for
trading purposes and which are 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 2.2 percent, which equates to a decrease in
market value of approximately $47.6 million on a portfolio valued at $2,164.1
million at March 31, 2002. An immediate time horizon was used, as this presents
the worst-case scenario.
23
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings
None
Item 2 -- Changes in Securities and Use of Proceeds
None
Item 3 -- Defaults Upon Senior Securities
None
Item 4 -- Submission of Matters to a Vote of Security Holders
None
Item 5 -- Other Information
None
Item 6 -- Exhibits and Reports on Form 8-K
a. Exhibits:
Credit Agreement between DaVinciRe Holdings Ltd. and Citibank, N.A.
dated as of April 19, 2002.
b. Current Reports on Form 8-K:
None
24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
RENAISSANCERE HOLDINGS LTD.
By: /s/ John M. Lummis
-------------------------------
John M. Lummis
Executive Vice President and
Chief Financial Officer
Date: May 15, 2002
25