Edgar Filing: RENAISSANCERE HOLDINGS LTD

Form 10-Q

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, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-14428

RENAISSANCERE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)

Bermuda

98-014-1974

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

Renaissance House, 12 Crow Lane, Pembroke HM 19 Bermuda

(Address of principal executive offices)

(441) 295-4513

(Registrant’s telephone number, including area code)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x, Accelerated filer ¨, Non-accelerated filer ¨, Smaller reporting company ¨.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of outstanding shares of RenaissanceRe Holdings Ltd.’s common shares, par value US $1.00 per share, as of April 25, 2011 was 51,744,269.

Total number of pages in this report: 79

RenaissanceRe Holdings Ltd.

INDEX TO FORM 10-Q


Part I — FINANCIAL INFORMATION

	Item 1 —	Financial Statements

		Consolidated Balance Sheets at March 31, 2011 (Unaudited) and December 31, 2010	3

		Unaudited Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010	4

		Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2011 and 2010	5

		Unaudited Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2011 and 2010	6

		Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010	7

		Notes to Unaudited Consolidated Financial Statements	8

	Item 2 —	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42

	Item 3 —	Quantitative and Qualitative Disclosures About Market Risk	75

	Item 4 —	Controls and Procedures	75

Part II — OTHER INFORMATION			76

	Item 1 —	Legal Proceedings	76

	Item 1A —	Risk Factors	76

	Item 2 —	Unregistered Sales of Equity Securities and Use of Proceeds	76

	Item 3 —	Defaults Upon Senior Securities	77

	Item 5 —	Other Information	77

	Item 6 —	Exhibits	77

Signatures —		RenaissanceRe Holdings Ltd.	79

PART I — FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Balance Sheets

(in thousands of United States Dollars)


	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Assets
Fixed maturity investments trading, at fair value
(Amortized cost $3,662,417 and $3,859,442 at March 31, 2011 and December 31, 2010, respectively)	$	3,678,549	$	3,871,780
Fixed maturity investments available for sale, at fair value
(Amortized cost $212,700 and $225,549 at March 31, 2011 and December 31, 2010, respectively)		232,320		244,917
Short term investments, at fair value		1,518,542		1,110,364
Equity investments trading, at fair value		12,707		—
Other investments, at fair value		782,325		787,548
Investments in other ventures, under equity method		78,623		85,603

Total investments		6,303,066		6,100,212
Cash and cash equivalents		252,631		277,738
Premiums receivable		574,547		322,080
Prepaid reinsurance premiums		125,722		60,643
Reinsurance recoverable		324,124		101,711
Accrued investment income		33,580		34,560
Deferred acquisition costs		56,656		35,648
Receivable for investments sold		136,943		99,226
Other secured assets		14,169		14,250
Other assets		176,644		205,373
Goodwill and other intangibles		14,537		14,690
Assets of discontinued operations held for sale		2,481		872,147

*Total assets*	$	8,015,100	$	8,138,278


Liabilities, Noncontrolling Interests and Shareholders’ Equity
Liabilities
Reserve for claims and claim expenses	$	2,070,095	$	1,257,843
Unearned premiums		500,165		286,183
Debt		549,178		549,155
Reinsurance balances payable		256,663		318,024
Payable for investments purchased		417,257		195,383
Other secured liabilities		14,000		14,000
Other liabilities		165,717		222,310
Liabilities of discontinued operations held for sale		2,246		598,511

*Total liabilities*		3,975,321		3,441,409

Commitments and Contingencies

Redeemable noncontrolling interest - DaVinciRe		536,717		757,655

Shareholders’ Equity
Preference shares		550,000		550,000
Common shares		51,742		54,110
Accumulated other comprehensive income		19,845		19,823
Retained earnings		2,878,315		3,312,392

Total shareholders’ equity attributable to RenaissanceRe		3,499,902		3,936,325
Noncontrollling interest		3,160		2,889

*Total shareholders’ equity*		3,503,062		3,939,214

*Total liabilities, noncontrolling interest and shareholders’ equity*	$	8,015,100	$	8,138,278

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Operations

For the three months ended March 31, 2011 and 2010

(in thousands of United States Dollars, except per share amounts)

(Unaudited)


	Three months ended
	March 31, 2011			March 31, 2010
Revenues
Gross premiums written	$	610,505		$	516,011

Net premiums written	$	452,575		$	407,159
Increase in unearned premiums		(147,034	)		(156,506	)

Net premiums earned		305,541			250,653
Net investment income		60,281			65,709
Net foreign exchange gains (losses)		660			(11,342	)
Equity in (losses) earnings of other ventures		(23,753	)		2,156
Other income (loss)		50,145			(6,191	)
Net realized and unrealized (losses) gains on investments		(5,214	)		48,200
Total other-than-temporary impairments		—			(33	)
Portion recognized in other comprehensive income, before taxes		—			—

Net other-than-temporary impairments		—			(33	)

*Total revenues*		387,660			349,152

Expenses
Net claims and claim expenses incurred		628,537			97,340
Acquisition expenses		32,335			26,435
Operational expenses		41,830			45,150
Corporate expenses		2,064			5,309
Interest expense		6,195			3,156

*Total expenses*		710,961			177,390

(Loss) income from continuing operations before taxes		(323,301	)		171,762
Income tax benefit		52			2,963

*(Loss) income from continuing operations*		(323,249	)		174,725
(Loss) income from discontinued operations		(1,526	)		11,447

*Net (loss) income*		(324,775	)		186,172
Net loss (income) attributable to noncontrolling interests		85,492			(10,550	)

*Net (loss) income attributable to RenaissanceRe*		(239,283	)		175,622
Dividends on preference shares		(8,750	)		(10,575	)

*Net (loss) income (attributable) available to RenaissanceRe common shareholders*	$	(248,033	)	$	165,047


(Loss) income from continuing operations (attributable) available to RenaissanceRe common shareholders per common share - basic	$	(4.66	)	$	2.55
(Loss) income from discontinued operations (attributable) available to RenaissanceRe common shareholders per common share - basic		(0.03	)		0.20


Net (loss) income (attributable) available to RenaissanceRe common shareholders per common share - basic	$	(4.69	)	$	2.75


(Loss) income from continuing operations (attributable) available to RenaissanceRe common shareholders per common share - diluted (1)	$	(4.66	)	$	2.54
(Loss) income from discontinued operations (attributable) available to RenaissanceRe common shareholders per common share - diluted (1)		(0.03	)		0.19


Net (loss) income (attributable) available to RenaissanceRe common shareholders per common share - diluted (1)	$	(4.69	)	$	2.73


Dividends per common share	$	0.26		$	0.25

(1)	Earnings per share calculations use average common shares outstanding - basic, when in a net loss position, as required by FASB ASC Topic Earnings per Share.

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the three months ended March 31, 2011 and 2010

(in thousands of United States Dollars)

(Unaudited)


	Three months ended
	March 31, 2011			March 31, 2010
Preference shares
Balance - January 1	$	550,000		$	650,000
Repurchase of shares		—			—

Balance - March 31		550,000			650,000


Common shares
Balance - January 1		54,110			61,745
Repurchase of shares		(2,655	)		(3,716	)
Exercise of options and issuance of restricted stock and awards		287			291

Balance - March 31		51,742			58,320


Additional paid-in capital
Balance - January 1		—			—
Repurchase of shares		546			(14,284	)
Change in redeemable noncontrolling interest - DaVinciRe		26			6,125
Exercise of options and issuance of restricted stock and awards		(572	)		8,159

Balance - March 31		—			—


Accumulated other comprehensive income
Balance - January 1		19,823			41,438
Change in net unrealized gains on fixed maturity investments available for sale		22			(10,667	)

Balance - March 31		19,845			30,771


Retained earnings
Balance - January 1		3,312,392			3,087,603
Net (loss) income		(324,775	)		186,172
Net loss (income) attributable to noncontrolling interests		85,492			(10,550	)
Repurchase of shares		(172,683	)		(185,658	)
Dividends on common shares		(13,361	)		(14,792	)
Dividends on preference shares		(8,750	)		(10,575	)

Balance - March 31		2,878,315			3,052,200

Noncontrolling interest		3,160			—

Total shareholders’ equity	$	3,503,062		$	3,791,291

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

For the three months ended March 31, 2011 and 2010

(in thousands of United States Dollars)

(Unaudited)


	Three months ended
	March 31, 2011			March 31, 2010

Comprehensive (loss) income
Net (loss) income	$	(324,775	)	$	186,172
Change in net unrealized gains on fixed maturity investments available for sale		19			(8,929	)
Portion of other-than-temporary impairments recognized in other comprehensive income		—			—

Comprehensive (loss) income		(324,756	)		177,243
Net loss (income) attributable to noncontrolling interests		85,492			(10,550	)
Change in net unrealized gains on fixed maturity investments available for sale attributable to noncontrolling interests		3			(1,738	)

Comprehensive loss (income) attributable to redeemable noncontrolling interest - DaVinciRe		85,495			(12,288	)

Comprehensive (loss) income attributable to RenaissanceRe	$	(239,261	)	$	164,955

Disclosure regarding net unrealized gains
Total realized and net unrealized holding (losses) gains on fixed maturity investments available for sale and net other-than-temporary impairments	$	(390	)	$	34,204
Net realized losses (gains) on fixed maturity investments available for sale		412			(44,904	)
Net other-than-temporary impairments recognized in earnings		—			33


Change in net unrealized gains on fixed maturity investments available for sale	$	22		$	(10,667	)

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

For the three months ended March 31, 2011 and 2010

(in thousands of United States dollars)

(Unaudited)


	Three months ended
	March 31, 2011			March 31, 2010

*Cash flows (used in) provided by operating activities*

Net (loss) income	$	(324,775	)	$	186,172

*Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities*
Amortization, accretion and depreciation		10,523			13,987
Equity in undistributed losses of other ventures		26,368			10,731
Net realized and unrealized gains on fixed maturity investments		5,214			(48,598	)
Net other-than-temporary impairments		—			33
Net unrealized gains included in net investment income		(28,067	)		(24,940	)
Net unrealized (gains) losses included in other income (loss)		(56,820	)		1,419
Change in:
Premiums receivable		(252,467	)		77,995
Prepaid reinsurance premiums		(65,079	)		(29,984	)
Deferred acquisition costs		(21,008	)		(12,619	)
Reserve for claims and claim expenses, net		589,839			30,812
Unearned premiums		213,982			167,841
Reinsurance balances payable		(61,361	)		(140,004	)
Other		(42,646	)		(2,256	)

*Net cash (used in) provided by operating activities*		(6,297	)		230,589


*Cash flows provided by (used in) investing activities*

Proceeds from sales and maturities of fixed maturity investments available for sale		13,997			2,461,565
Purchases of fixed maturity investments available for sale		(13	)		(376,820	)
Proceeds from sales and maturities of fixed maturity investments trading		1,628,600			812,692
Purchases of fixed maturity investments trading		(1,414,735	)		(3,078,390	)
Purchases of equity investments trading		(12,108	)		—
Net (purchases) sales of short term investments		(249,878	)		137,978
Net sales of other investments		38,083			16,101
Net purchases of investments in other ventures		(21,000	)		—
Net sales of other assets		47,400			2,729
Net proceeds from sale of discontinued operations held for sale		269,520			—

*Net cash provided by (used in) investing activities*		299,866			(24,145	)


*Cash flows used in financing activities*

Dividends paid - RenaissanceRe common shares		(13,361	)		(14,792	)
Dividends paid - preference shares		(8,750	)		(10,575	)
RenaissanceRe common share repurchases		(174,792	)		(203,658	)
Third party DaVinciRe share transactions		(124,047	)		(123,084	)
Issuance of 5.75% Senior Notes		—			249,086

*Net cash used in financing activities*		(320,950	)		(103,023	)

Effect of exchange rate changes on foreign currency cash		2,274			(5,364	)

*Net (decrease) increase in cash and cash equivalents*		(25,107	)		98,057

*Net increase in cash and cash equivalents of discontinued operations*		—			(33,890	)

*Cash and cash equivalents, beginning of period*		277,738			203,112

*Cash and cash equivalents, end of period*	$	252,631		$	267,279

See accompanying notes to the consolidated financial statements

RenaissanceRe Holdings Ltd. and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Expressed in U.S. Dollars) (Unaudited)

NOTE 1.

ORGANIZATION AND BASIS OF PRESENTATION

The consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in conformity 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. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position and results of operations as at the end of and for the periods presented. All significant intercompany accounts and transactions have been eliminated from these statements. Except as discussed in “Note 2. Discontinued Operations,” and unless otherwise noted, the notes to the consolidated financial statements reflect the Company’s continuing operations.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The major estimates reflected in the Company’s consolidated financial statements include, but are not limited to, the reserve for claims and claim expenses, reinsurance recoverables, including allowances for reinsurance recoverables deemed uncollectible, estimates of written and earned premiums, fair value, including the fair value of investments, financial instruments and derivatives, impairment charges and the Company’s net deferred tax asset.

This report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

RenaissanceRe Holdings Ltd. (“RenaissanceRe”) was formed under the laws of Bermuda on June 7, 1993. Together with its wholly owned and majority-owned subsidiaries and DaVinciRe (as defined below), which are collectively referred to herein as the “Company”, RenaissanceRe provides reinsurance and insurance coverages and related services to a broad range of customers.

•

Renaissance Reinsurance Ltd. (“Renaissance Reinsurance”), the Company’s principal reinsurance subsidiary, provides property catastrophe and specialty reinsurance coverages to insurers and reinsurers on a worldwide basis.

•

The Company also manages property catastrophe and specialty reinsurance business written on behalf of joint ventures, which principally include Top Layer Reinsurance Ltd. (“Top Layer Re”), recorded under the equity method of accounting, and DaVinci Reinsurance Ltd. (“DaVinci”). Because the Company owns a noncontrolling equity interest in, but controls a majority of the outstanding voting power of, DaVinci’s parent, DaVinciRe Holdings Ltd. (“DaVinciRe”), the results of DaVinci and DaVinciRe are consolidated in the Company’s financial statements. Redeemable noncontrolling interest – DaVinciRe represents the interests of external parties with respect to the net income and shareholders’ equity of DaVinciRe. Renaissance Underwriting Managers Ltd. (“RUM”), a wholly owned subsidiary, acts as exclusive underwriting manager for these joint ventures in return for fee-based income and profit participation.

•

RenaissanceRe Syndicate 1458 (“Syndicate 1458”) is the Company’s Lloyd’s syndicate which was licensed to start writing certain lines of insurance and reinsurance business effective June 1, 2009. RenaissanceRe Corporate Capital (UK) Limited (“RenaissanceRe CCL”), a wholly owned subsidiary of the Company, is Syndicate 1458’s sole corporate member and RenaissanceRe Syndicate Management Ltd. (“RSML”), a wholly owned subsidiary of the Company from November 2, 2009, is the managing agent for Syndicate 1458.

•

The Company, through Renaissance Trading Ltd. (“Renaissance Trading”) and RenRe Energy Advisors Ltd. (“REAL”), transacts certain derivative-based risk management products primarily to address weather and energy risk and engages in hedging and trading activities related to those transactions.

•

On November 18, 2010, the Company entered into a definitive stock purchase agreement (the “Stock Purchase Agreement”) with QBE Holdings, Inc. (“QBE”) to sell substantially all of its U.S.-based insurance operations including its U.S. property and casualty business underwritten through managing general agents, its crop insurance business underwritten through Agro National Inc. (“Agro National”), its commercial property insurance operations and its claims operations. At December 31, 2010, the Company classified the assets and liabilities associated with this transaction as held for sale. The financial results for these operations have been presented in the Company’s consolidated financial statements as “discontinued operations” for all periods presented. On March 4, 2011, the Company and QBE closed the transaction contemplated by the Stock Purchase Agreement. Refer to “Note 2. Discontinued Operations,” for more information. Insurance policies previously written in connection with the Company’s Bermuda-based insurance operations not sold to QBE are included in the Company’s continuing operations and are included in the Company’s Insurance segment.

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 and cash flows for any interim period will not necessarily be indicative of the results of operations and cash flows for the full fiscal year or subsequent quarters.

NOTE 2.

DISCONTINUED OPERATIONS

U.S.-Based Insurance Operations

On November 18, 2010, the Company entered into a Stock Purchase Agreement with QBE to sell substantially all of its U.S.-based insurance operations, including its U.S. property and casualty business underwritten through managing general agents, its crop insurance business underwritten through Agro National, its commercial property insurance operations and its claims operations. At December 31, 2010, the Company classified the assets and liabilities associated with this transaction as held for sale and the assets and liabilities were recorded at the lower of the carrying value or fair value less costs to sell. The financial results for these operations have been presented as discontinued operations in the Company’s consolidated statements of operations for all periods presented.

Consideration for the transaction was book value at December 31, 2010, for the aforementioned businesses, payable in cash at closing and subject to adjustment for certain tax and other items. The transaction closed on March 4, 2011 and net consideration of $269.5 million was received by the Company.

NOTE 3.

CEDED REINSURANCE

The Company purchases reinsurance and other protection to manage its risk portfolio and 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 claim expenses, generally in excess of various retentions or on a proportional basis. In addition to loss recoveries, certain of the Company’s ceded reinsurance contracts provide for recoveries of additional premiums, reinstatement premiums and for lost no-claims bonuses, which are incurred when losses are ceded to other reinsurance contracts. The Company remains liable to the extent that any reinsurance company fails to meet its obligations.

The following tables set forth the effect of reinsurance and retrocessional activity on premiums written and earned and on net claims and claim expenses incurred:


Three months ended March 31,	2011			2010
(in thousands of U.S. dollars)
Premiums written
Direct	$	6,252		$	1,493
Assumed		604,253			514,518
Ceded		(157,930	)		(108,852	)

Net premiums written	$	452,575		$	407,159

Premiums earned
Direct	$	2,482		$	561
Assumed		394,535			329,550
Ceded		(91,476	)		(79,458	)

Net premiums earned	$	305,541		$	250,653

Claims and claim expenses
Gross claims and claim expenses incurred	$	863,323		$	134,125
Claims and claim expenses recovered		(234,786	)		(36,785	)

Net claims and claim expenses incurred	$	628,537		$	97,340

NOTE 4.

EARNINGS PER SHARE

The Company accounts for its weighted average shares in accordance with FASB ASC Topic Earnings per Share. Basic earnings per common share is based on weighted average common shares and excludes any dilutive effects of stock options and restricted stock. Diluted earnings per common share assumes the exercise of all dilutive stock options and restricted stock grants. In accordance with FASB ASC Topic Earnings per Share, earnings per share calculations use average common shares outstanding – basic, when the Company is in a net loss position for the period.

The following tables set forth the computation of basic and diluted earnings per common share:


Three months ended March 31,	2011			2010
(in thousands of U.S. dollars, except per share data)
Numerator:
Net (loss) income (attributable) available to RenaissanceRe common shareholders	$	(248,033	)	$	165,047
Amount allocated to participating common shareholders (1)		6,327			(4,196	)

	$	(241,706	)	$	160,851

Denominator (in thousands):
Denominator for basic (loss) income per RenaissanceRe common share -
Weighted average common shares		51,504			58,407

Per common share equivalents of employee stock options and restricted shares		—			480


Denominator for diluted (loss) income per RenaissanceRe common share -
Adjusted weighted average common shares and assumed conversions (2)		51,504			58,887

Basic (loss) income per RenaissanceRe common share	$	(4.69	)	$	2.75

Diluted (loss) income per RenaissanceRe common share (2)	$	(4.69	)	$	2.73

(1)	Represents earnings attributable to holders of unvested restricted shares issued under the Company’s 2001 Stock Incentive Plan, Non-Employee Director Stock Incentive Plan and for the three months ended March 31, 2011, the 2010 Performance-Based Equity Incentive Plan.

(2)	Earnings per share calculations use average common shares outstanding - basic, when in a net loss position, as required by the FASB ASC Topic Earnings Per Share.

NOTE 5.

DIVIDENDS AND COMMON SHARE REPURCHASES

The Board of Directors of RenaissanceRe declared, and RenaissanceRe paid, a dividend of $0.26 per common share to shareholders of record on March 15, 2011.

On February 23, 2011, the Board of Directors approved an increase in the Company’s authorized share repurchase program to an aggregate amount of $500.0 million. Unless terminated earlier by resolution of the Company’s Board of Directors, the program will expire when the Company has repurchased the full value of the shares authorized. The Company repurchased 2.7 million shares in open market transactions during the quarter ended March 31, 2011, at an aggregate cost of $174.8 million and at an average share price of $65.84. Future repurchases of common shares will depend on, among other matters, the market price of the common shares and the capital requirements of the Company. See “Part II, Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds” for additional information.

NOTE 6.

SEGMENT REPORTING

The Company has three reportable segments: Reinsurance, Lloyd’s and Insurance.

The Company’s Reinsurance operations are comprised of: 1) property catastrophe reinsurance, primarily written through Renaissance Reinsurance and DaVinci; 2) specialty reinsurance, primarily written through Renaissance Reinsurance and DaVinci; and 3) certain property catastrophe and specialty joint ventures, as described herein. The Reinsurance segment is managed by the Global Chief Underwriting Officer, who leads a team of underwriters, risk modelers and other industry professionals, who have access to the Company’s proprietary risk management, underwriting and modeling resources and tools.

The Company’s Lloyd’s segment includes reinsurance and insurance business written through Syndicate 1458. Syndicate 1458 started writing certain lines of insurance and reinsurance business incepting on or after June 1, 2009. The syndicate was established to enhance the Company’s underwriting platform by providing access to Lloyd’s extensive distribution network and worldwide licenses and is managed by the Chief Underwriting Officer Lloyd’s. RenaissanceRe Corporate Capital (UK) Limited (“RenaissanceRe CCL”), an indirect wholly owned subsidiary of the Company, is the sole corporate member of Syndicate 1458.

The Company’s Insurance segment includes the operations of the Company’s former Insurance segment that were not sold pursuant to the Stock Purchase Agreement with QBE, as discussed in “Note 1. Organization and Basis of Presentation”. The Insurance segment is managed by the Global Chief Underwriting Officer. The Insurance business is written by Glencoe Insurance Ltd. (“Glencoe”). Glencoe is a Bermuda domiciled excess and surplus lines insurance company that is currently eligible to do business on an excess and surplus lines basis in 49 U.S. states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.

The financial results of the Company’s strategic investments, weather and energy risk management operations and noncontrolling interests are included in the Other category of the Company’s segment results. Also included in the Other category of the Company’s segment results are the Company’s investments in other ventures, investments unit, corporate expenses and capital servicing costs.

The Company does not manage its assets by segment; accordingly, net investment income and total assets are not allocated to the segments.

A summary of the significant components of the Company’s revenues and expenses is as follows:


Three months ended March 31, 2011	Reinsurance			Lloyd’s			Insurance			Eliminations (1)			Other			Total
Gross premiums written	$	573,682		$	36,620		$	280		$	(77	)	$	—		$	610,505

Net premiums written	$	423,566		$	28,737		$	272						—		$	452,575

Net premiums earned	$	289,429		$	15,674		$	438						—		$	305,541
Net claims and claim expenses incurred		595,404			30,523			2,610						—			628,537
Acquisition expenses		29,792			2,461			82						—			32,335
Operational expenses		32,363			8,972			495						—			41,830

Underwriting loss	$	(368,130	)	$	(26,282	)	$	(2,749	)					—			(397,161	)

Net investment income														60,281			60,281
Net foreign exchange gains														660			660
Equity in losses of other ventures														(23,753	)		(23,753	)
Other income														50,145			50,145
Net realized and unrealized losses on investments														(5,214	)		(5,214	)
Corporate expenses														(2,064	)		(2,064	)
Interest expense														(6,195	)		(6,195	)

Loss from continuing operations before taxes																	(323,301	)
Income tax benefit														52			52
Loss from discontinued operations														(1,526	)		(1,526	)
Net loss attributable to noncontrolling interests														85,492			85,492
Dividends on preference shares														(8,750	)		(8,750	)

Net loss attributable to RenaissanceRe common shareholders																$	(248,033	)

Net claims and claim expenses incurred - current accident year	$	667,362		$	29,326		$	9								$	696,697
Net claims and claim expenses incurred - prior accident years		(71,958	)		1,197			2,601									(68,160	)

Net claims and claim expenses incurred - total	$	595,404		$	30,523		$	2,610								$	628,537

Net claims and claim expense ratio - current accident year		230.6	%		187.1	%		2.1	%								228.0	%
Net claims and claim expense ratio - prior accident years		(24.9	%)		7.6	%		593.8	%								(22.3	%)

Net claims and claim expense ratio - calendar year		205.7	%		194.7	%		595.9	%								205.7	%
Underwriting expense ratio		21.5	%		73.0	%		131.7	%								24.3	%

Combined ratio		227.2	%		267.7	%		727.6	%								230.0	%

(1)	Represents $0.1 million of gross premiums ceded from the Reinsurance segment to the Lloyd’s segment.


Three months ended March 31, 2010	Reinsurance			Lloyd’s			Insurance			Eliminations (1)			Other			Total
Gross premiums written	$	498,585		$	14,024		$	4,427		$	(1,025	)	$	—		$	516,011

Net premiums written	$	388,658		$	13,651		$	4,850						—		$	407,159

Net premiums earned	$	243,069		$	6,971		$	613						—		$	250,653
Net claims and claim expenses incurred		98,947			2,587			(4,194	)					—			97,340
Acquisition expenses		22,659			1,159			2,617						—			26,435
Operational expenses		34,017			6,134			4,999						—			45,150

Underwriting income (loss)	$	87,446		$	(2,909	)	$	(2,809	)					—			81,728

Net investment income														65,709			65,709
Net foreign exchange losses														(11,342	)		(11,342	)
Equity in earnings of other ventures														2,156			2,156
Other loss														(6,191	)		(6,191	)
Net realized and unrealized gains on fixed maturity investments														48,200			48,200
Net other-than-temporary impairments														(33	)		(33	)
Corporate expenses														(5,309	)		(5,309	)
Interest expense														(3,156	)		(3,156	)

Income from continuing operations before taxes																	171,762
Income tax benefit														2,963			2,963
Income from discontinued operations														11,447			11,447
Net income attributable to redeemable noncontrolling interest - DaVinciRe														(10,550	)		(10,550	)
Dividends on preference shares														(10,575	)		(10,575	)

Net income available to RenaissanceRe common shareholders																$	165,047

Net claims and claim expenses incurred - current accident year	$	204,065		$	2,686		$	2,859								$	209,610
Net claims and claim expenses incurred - prior accident years		(105,118	)		(99	)		(7,053	)								(112,270	)

Net claims and claim expenses incurred - total	$	98,947		$	2,587		$	(4,194	)							$	97,340

Net claims and claim expense ratio - current accident year		84.0	%		38.5	%		466.4	%								83.6	%
Net claims and claim expense ratio - prior accident years		(43.3	%)		(1.4	%)		(1,150.6	%)								(44.8	%)

Net claims and claim expense ratio - calendar year		40.7	%		37.1	%		(684.2	%)								38.8	%
Underwriting expense ratio		23.3	%		104.6	%		1,242.4	%								28.6	%

Combined ratio		64.0	%		141.7	%		558.2	%								67.4	%

(1)	Represents $0.8 million and $0.2 million of gross premiums ceded from the Insurance segment to the Reinsurance segment and from the Reinsurance segment to the Lloyd’s segment, respectively.

NOTE 7.

INVESTMENTS

Fixed Maturity Investments Trading

The following table summarizes the fair value of fixed maturity investments trading:


(in thousands of U.S. dollars)	March 31, 2011		December 31, 2010
U.S. treasuries	$	522,006	$	761,461
Agencies		278,501		216,963
Non-U.S. government (Sovereign debt)		220,658		157,867
FDIC guaranteed corporate		305,745		388,468
Non-U.S. government-backed corporate		315,240		356,119
Corporate		1,490,329		1,476,029
Agency mortgage-backed securities		412,220		383,403
Non-agency mortgage-backed securities		8,840		5,765
Commercial mortgage-backed securities		121,863		125,705
Asset-backed securities		3,147		—

Total fixed maturity investments trading, at fair value	$	3,678,549	$	3,871,780

Fixed Maturity Investments Available For Sale

The following table summarizes the amortized cost, fair value and related unrealized gains and losses and non-credit other-than-temporary impairments of fixed maturity investments available for sale:


			Included in Accumulated Other Comprehensive Income
At March 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
(in thousands of U.S. dollars)
Non-U.S. government (Sovereign debt)	$	20,700	$	2,306	$	(58	)	$	22,948	$	—
Non-U.S. government-backed corporate		1,329		49		—			1,378		—
Corporate		29,494		3,707		(306	)		32,895		(1,520	)
Agency mortgage-backed securities		16,742		1,243		(13	)		17,972		—
Non-agency mortgage-backed securities		23,489		3,541		(22	)		27,008		(2,010	)
Commercial mortgage-backed securities		83,827		8,122		(3	)		91,946		—
Asset-backed securities		37,119		1,110		(56	)		38,173		(598	)

Total	$	212,700	$	20,078	$	(458	)	$	232,320	$	(4,128	)

(1)

Represents the non-credit component of other-than-temporary impairments recognized in accumulated other comprehensive income since the adoption of guidance related to the recognition and presentation of other-than-temporary impairments under FASB ASC Topic Investments - Debt and Equity Securities, during the second quarter of 2009, adjusted for subsequent sales of securities. It does not include the change in fair value subsequent to the impairment measurement date.


			Included in Accumulated Other Comprehensive Income
At December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit Other-Than- Temporary Impairments (1)
(in thousands of U.S. dollars)
Non-U.S. government (Sovereign debt)	$	23,836	$	2,830	$	(146	)	$	26,520	$	—
Non-U.S. government-backed corporate		1,332		53		—			1,385		—
Corporate		33,018		3,768		(404	)		36,382		(1,818	)
Agency mortgage-backed securities		17,159		1,245		—			18,404		—
Non-agency mortgage-backed securities		24,972		3,452		(40	)		28,384		(2,063	)
Commercial mortgage-backed securities		86,194		7,570		(29	)		93,735		—
Asset-backed securities		39,038		1,124		(55	)		40,107		(598	)

Total fixed maturity investments available for sale	$	225,549	$	20,042	$	(674	)	$	244,917	$	(4,479	)

(1)

Contractual maturities of fixed maturity investments are as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Trading				Available for Sale				Total Fixed Maturity Investments
At March 31, 2011	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
(in thousands of U.S. dollars)
Due in less than one year	$	206,071	$	207,160	$	1,363	$	1,262	$	207,434	$	208,422
Due after one through five years		1,942,769		1,948,779		18,671		20,712		1,961,440		1,969,491
Due after five through ten years		796,117		807,466		18,527		20,181		814,644		827,647
Due after ten years		168,643		169,074		12,962		15,066		181,605		184,140
Mortgage-backed securities		545,671		542,923		124,058		136,926		669,729		679,849
Asset-backed securities		3,146		3,147		37,119		38,173		40,265		41,320

Total	$	3,662,417	$	3,678,549	$	212,700	$	232,320	$	3,875,117	$	3,910,869



Equity Investments Trading

The following table summarizes the fair value of equity investments trading:
(in thousands of U.S. dollars)	March 31, 2011			December 31, 2010
Financial institution securities	$	12,707		$	—


Net Investment Income

The components of net investment income are as follows:

Three months ended March 31, 2011	2011			2010
(in thousands of U.S. dollars)
Fixed maturity investments	$	27,913		$	28,875
Short term investments		595			486
Equity investments trading		14			—
Other investments
Hedge funds and private equity investments		23,507			17,536
Other		10,827			21,218
Cash and cash equivalents		41			61

		62,897			68,176
Investment expenses		(2,616	)		(2,467	)

Net investment income	$	60,281		$	65,709

The Company’s net realized and unrealized gains on investments and net other-than-temporary impairments are as follows:


Three months ended March 31, 2011	2011			2010
(in thousands of U.S. dollars)
Gross realized gains	$	10,562		$	48,848
Gross realized losses		(12,617	)		(5,170	)

Net realized (losses) gains on fixed maturity investments		(2,055	)		43,678
Net unrealized (losses) gains on fixed maturity investments trading		(3,758	)		4,522
Net unrealized gains on equity investments trading		599			—

Net realized and unrealized (losses) gains on investments	$	(5,214	)	$	48,200

Total other-than-temporary impairments	$	—		$	(33	)
Portion recognized in other comprehensive income, before taxes		—			—

Net other-than-temporary impairments	$	—		$	(33	)

The following tables provide an analysis of the length of time the Company’s fixed maturity investments available for sale in an unrealized loss have been in a continual unrealized loss position.


	Less than 12 Months					12 Months or Greater					Total
At March 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
(in thousands of U.S. dollars)
Non-U.S. government (Sovereign debt)	$	1,991	$	(47	)	$	109	$	(11	)	$	2,100	$	(58	)
Corporate		1,108		(185	)		1,046		(121	)		2,154		(306	)
Agency mortgage-backed securities		1,962		(13	)		—		—			1,962		(13	)
Non-agency mortgage-backed securities		609		—			964		(22	)		1,573		(22	)
Commercial mortgage-backed securities		562		(3	)		—		—			562		(3	)
Asset-backed securities		3,172		(40	)		3,196		(16	)		6,368		(56	)

Total	$	9,404	$	(288	)	$	5,315	$	(170	)	$	14,719	$	(458	)


	Less than 12 Months					12 Months or Greater					Total
At December 31, 2010	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
(in thousands of U.S. dollars)
Non-U.S. government (Sovereign debt)	$	2,363	$	(129	)	$	291	$	(17	)	$	2,654	$	(146	)
Corporate		2,581		(285	)		801		(119	)		3,382		(404	)
Non-agency mortgage-backed securities		—		—			1,645		(40	)		1,645		(40	)
Commercial mortgage-backed securities		2,199		(29	)		—		—			2,199		(29	)
Asset-backed securities		3,172		(39	)		3,196		(16	)		6,368		(55	)

Total	$	10,315	$	(482	)	$	5,933	$	(192	)	$	16,248	$	(674	)

At March 31, 2011, the Company held 19 fixed maturity investments available for sale securities that were in an unrealized loss position for twelve months or greater. The Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before the anticipated recovery of the remaining amortized cost basis. The Company performed reviews of its investments for the quarters ended March 31, 2011 and 2010, respectively, in order to determine whether declines in the fair value below the amortized cost basis of its fixed maturity investments available for sale were considered other-than-temporary in accordance with the applicable guidance, as discussed below.

Pledged Investments

At March 31, 2011, $1.1 billion of cash and investments at fair value were on deposit with, or in trust accounts for the benefit of various counterparties, including with respect to the Company’s principal letter of credit facility. Of this amount, $81.2 million is on deposit with, or in trust accounts for the benefit of, U.S. state regulatory authorities.

Other-Than-Temporary Impairment Process

The Company’s process for assessing whether declines in the fair value of its fixed maturity investments available for sale represent impairments that are other-than-temporary includes reviewing each fixed maturity investment available for sale that is impaired and determining: (i) if the Company has the intent to sell the debt security or (ii) if it is more likely than not that the Company will be required to sell the debt security before its anticipated recovery; and (iii) whether a credit loss exists, that is, where the Company expects that the present value of the cash flows expected to be collected from the security are less than the amortized cost basis of the security.

In assessing the Company’s intent to sell securities, the Company’s procedures may include actions such as discussing planned sales with its third party investment managers, reviewing sales that have occurred shortly after the balance sheet date, and consideration of other qualitative factors that may be indicative of the Company’s intent to sell or hold the relevant securities. For the quarter ended March 31, 2011, the Company recognized $Nil of other-than-temporary impairments due to the Company’s intent to sell these securities as of March 31, 2011 (March 31, 2010 - $Nil).

In assessing whether it is more likely than not that the Company will be required to sell a security before its anticipated recovery, the Company considers various factors including its future cash flow forecasts and requirements, legal and regulatory requirements, the level of its cash, cash equivalents, short term investments, fixed maturity investments trading and fixed maturity investments available for sale in an unrealized gain position, and other relevant factors. For the quarters ended March 31, 2011 and 2010, the Company recognized $Nil of other-than-temporary impairments due to required sales.

In evaluating credit losses, the Company considers a variety of factors in the assessment of a security including: (i) the time period during which there has been a significant decline below cost; (ii) the extent of the decline below cost and par; (iii) the potential for the security to recover in value; (iv) an analysis of the financial condition of the issuer; (v) the rating of the issuer; (vi) the implied rating of the issuer based on an analysis of option adjusted spreads; (vii) the absolute level of the option adjusted spread for the issuer; and (viii) an analysis of the collateral structure and credit support of the security, if applicable.

Once the Company determines that it is possible that a credit loss may exist for a security, the Company performs a detailed review of the cash flows expected to be collected from the issuer. The Company estimates expected cash flows by applying estimated default probabilities and recovery rates to the contractual cash flows of the issuer, with such default and recovery rates reflecting long-term historical averages adjusted to reflect current credit, economic and market conditions, giving due consideration to collateral and credit support, if applicable, and discounting the expected cash flows at the purchase yield on the security. In instances in which a determination is made that an impairment exists but the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before the anticipated recovery of its remaining amortized cost basis, the impairment is separated into: (i) the amount of the total other-than-temporary impairment related to the credit loss; and (ii) the amount of the total other-than-temporary impairment related to all other factors. The amount of the other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the other-than-temporary impairment related to all other factors is recognized in other comprehensive income. For the quarters ended March 31, 2011 and 2010, the Company recognized $Nil and $33 thousand of credit related other-than-temporary impairments, respectively, which were recognized in earnings and $Nil and $Nil, respectively, related to other factors.

The following table provides a rollforward of the amount of other-than-temporary impairments related to credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in accumulated other comprehensive income:


Three months ended March 31,	2011			2010
(in thousands of U.S. dollars)
Balance - January 1	$	3,098		$	9,987
Additions:
Amount related to credit loss for which an other-than-temporary impairment was not previously recognized		—			—
Amount related to credit loss for which an other-than-temporary impairment was previously recognized		—			31
Reductions:
Securities sold during the period		(223	)		(5,954	)
Securities for which the amount previously recognized in other comprehensive income was recognized in earnings, because the Company intends to sell the security or is more likely than not the Company will be required to sell the security		—			—
Increases in cash flows expected to be collected that are recognized over the remaining life of the security		—			—

Balance - March 31	$	2,875		$	4,064

NOTE 8.

FAIR VALUE MEASUREMENTS

The use of fair value to measure certain assets and liabilities with resulting unrealized gains or losses is pervasive within the Company’s financial statements. Fair value is defined under accounting guidance currently applicable to the Company to be the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between open market participants at the measurement date. The Company recognizes the change in unrealized gains and losses arising from changes in fair value in its consolidated statements of operations, with the exception of changes in unrealized gains and losses on its fixed maturity investments available for sale, which are recognized as a component of accumulated other comprehensive income in shareholders’ equity.

FASB ASC Topic Fair Value Measurements and Disclosures prescribes a fair value hierarchy that prioritizes the inputs to the respective valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

•

Fair values determined by Level 1 inputs utilize unadjusted quoted prices obtained from active markets for identical assets or liabilities for which the Company has access. The fair value is determined by multiplying the quoted price by the quantity held by the Company;

•

Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals, broker quotes and certain pricing indices; and

•

Level 3 inputs are based on unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In these cases, significant management assumptions can be used to establish management’s best estimate of the assumptions used by other market participants in determining the fair value of the asset or liability.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement of the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the asset or liability.

In order to determine if a market is active or inactive for a security, the Company considers a number of factors, including, but not limited to, the spread between what a seller is asking for a security and what a buyer is bidding for the same security, the volume of trading activity for the security in question, the price of the security compared to its par value (for fixed maturity investments), and other factors that may be indicative of market activity.

There have been no material changes in the Company’s valuation techniques, nor have there been any transfers between Level 1 and Level 2, or Level 2 and Level 3, respectively, during the period represented by these consolidated financial statements.

Below is a summary of the assets and liabilities that are measured at fair value on a recurring basis and also represents the carrying amount on the Company’s consolidated balance sheet:


At March 31, 2011	Total			Level 1			Level 2		Level 3
(in thousands of U.S. dollars)
Fixed maturity investments
U.S. treasuries	$	522,006		$	522,006		$	—	$	—
Agencies		278,501			—			278,501		—
Non-U.S. government (Sovereign debt)		243,606			—			243,606		—
FDIC guaranteed corporate		305,745			—			305,745		—
Non-U.S. government-backed corporate		316,618			—			316,618		—
Corporate		1,523,224			—			1,501,398		21,826
Agency mortgage-backed securities		430,192			—			430,192		—
Non-agency mortgage-backed securities		35,848			—			35,848		—
Commercial mortgage-backed securities		213,809			—			213,809		—
Asset-backed securities		41,320			—			41,320		—

Total fixed maturity investments		3,910,869			522,006			3,367,037		21,826
Short term investments		1,518,542			—			1,518,542		—
Equity investments trading		12,707			12,707			—		—
Other investments
Private equity partnerships		362,717			—			—		362,717
Senior secured bank loan funds		171,559			—			161,166		10,393
Catastrophe bonds		107,570			—			105,197		2,373
Non-U.S. fixed income funds		87,336			—			87,336		—
Hedge funds		40,616			—			40,616		—
Miscellaneous other investments		12,527			—			6,195		6,332

Total other investments		782,325			—			400,510		381,815

Other secured assets		14,169			—			14,169		—

Other assets and (liabilities)
Assumed and ceded (re)insurance contracts		44,634			—			—		44,634
Derivatives		(2,444	)		(8,530	)		305		5,781
Other		17,602			(363	)		—		17,965

Total other assets and (liabilities)		59,792			(8,893	)		305		68,380

	$	6,298,404		$	525,820		$	5,300,563	$	472,021


At December 31, 2010	Total		Level 1			Level 2		Level 3
(in thousands of U.S. dollars)
Fixed maturity investments
U.S. treasuries	$	761,461	$	761,461		$	—	$	—
Agencies		216,963		—			216,963		—
Non-U.S. government (Sovereign debt)		184,387		—			184,387		—
FDIC guaranteed corporate		388,468		—			388,468		—
Non-U.S. government-backed corporate		357,504		—			357,504		—
Corporate		1,512,411		—			1,490,626		21,785
Agency mortgage-backed securities		401,807		—			401,807		—
Non-agency mortgage-backed securities		34,149		—			34,149		—
Commercial mortgage-backed securities		219,440		—			219,440		—
Asset-backed securities		40,107		—			40,107		—

Total fixed maturity investments		4,116,697		761,461			3,333,451		21,785
Short term investments		1,110,364		—			1,110,364		—
Other investments
Private equity partnerships		347,556		—			—		347,556
Senior secured bank loan funds		166,106		—			158,386		7,720
Catastrophe bonds		123,961		—			123,961		—
Non-U.S. fixed income funds		80,224		—			80,224		—
Hedge funds		41,005		—			41,005		—
Miscellaneous other investments		28,696		—			21,870		6,826

Total other investments		787,548		—			425,446		362,102

Other secured assets		14,250		—			14,250		—

Other assets and (liabilities)
Platinum warrants		44,925		—			44,925		—
Assumed and ceded (re)insurance contracts		1,772		—			—		1,772
Derivatives		2,693		(51	)		6,245		(3,501	)
Other		13,629		(4,599	)		—		18,228

Total other assets and (liabilities)		63,019		(4,650	)		51,170		16,499

	$	6,091,878	$	756,811		$	4,934,681	$	400,386

Fixed Maturity Investments

Fixed maturity investments included in Level 1 consist of the Company’s investments in U.S. treasuries. Fixed maturity investments included in Level 2 are agencies, non-U.S. government, FDIC guaranteed corporate, non-U.S. government-backed corporate, corporate, agency mortgage-backed, non-agency mortgage-backed, commercial mortgage-backed and asset-backed fixed maturity investments.

The Company’s fixed maturity investments portfolios are priced using broker quotations and pricing services, such as index providers and pricing vendors. The pricing vendors provide pricing for a high volume of liquid securities that are actively traded. For securities that do not trade on an exchange, the pricing services generally utilize market data and other observable inputs in matrix pricing models to determine prices. Prices are generally verified using third party data. Prices obtained from broker quotations are considered non-binding, however they are based on observable inputs and by observing secondary trading of similar securities obtained from active, non-distressed markets. The Company considers these Level 2 inputs as they are corroborated with other externally obtained information. The techniques generally used to determine the fair value of our fixed maturity investments are detailed below by asset class.

U.S. treasuries

At March 31, 2011, the Company’s U.S. treasuries fixed maturity investments had a weighted average yield to maturity of 1.3%, a weighted average credit quality of AAA, and are primarily priced by pricing vendors. When pricing these securities, the vendor utilizes daily data from many real time market sources, including active broker dealers, as such, the Company considers its U.S. treasuries fixed maturity investments Level 1. All data sources are regularly reviewed for accuracy to ensure the most reliable price source is used for each issue and maturity date.

Agencies

At March 31, 2011, the Company’s agencies fixed maturity investments had a weighted average yield to maturity of 1.0% and a weighted average credit quality of AAA. The issuers of the Company’s agencies fixed maturity investments primarily consist of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and other agencies. Fixed maturity investments included in agencies are primarily priced by pricing vendors. When evaluating these securities, the vendor gathers information from market sources and integrates other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The dollar value for each security is individually computed using analytical models which incorporate option adjusted spreads and other daily interest rate data. The Company considers its agencies fixed maturity investments Level 2.

Non-U.S. government (Sovereign debt)

Non-U.S. government fixed maturity investments held by the Company at March 31, 2011, had a weighted average yield to maturity of 2.7% and a weighted average credit quality of AA. The issuers for securities in this sector are generally non-U.S. governments and agencies as well as supranational organizations. Securities held in these sectors are primarily priced by pricing vendors who employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing vendor then applies a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing vendor utilizes data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets. The Company considers its non-U.S. government fixed maturity investments Level 2.

FDIC guaranteed corporate

The Company’s FDIC guaranteed corporate fixed maturity investments had a weighted average yield to maturity of 0.6% and a weighted average credit quality of AAA at March 31, 2011. The issuers consist of well known corporate issuers who participate in the FDIC program. The Company’s FDIC guaranteed corporate fixed maturity investments are primarily priced by pricing vendors. When evaluating these securities, the vendor gathers information from market sources regarding the issuer of the security, obtain credit data, as well as other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing vendor also considers the specific terms and conditions of the securities, including any specific features which may influence risk. Each security is individually evaluated using a spread model which is added to the U.S. treasury curve. The Company considers its FDIC guaranteed corporate fixed maturity investments Level 2.

Non-U.S. government-backed corporate

Non-U.S. government-backed corporate fixed maturity investments are considered Level 2 by the Company and had a weighted average yield to maturity of 1.5% and a weighted average credit quality of AAA at March 31, 2011. Non-U.S. government-backed fixed maturity investments are primarily priced by pricing vendors who employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing vendor then applies a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing vendor utilizes data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets.

Corporate

At March 31, 2011, the Company’s corporate fixed maturity investments had a weighted average yield to maturity of 4.0% and a weighted average credit quality of A, and principally consist of U.S. and international corporations. The Company’s corporate fixed maturity investments are primarily priced by pricing vendors, and are considered Level 2 by the Company. When evaluating these securities, the vendor gathers information from market sources regarding the issuer of the security, obtains credit data, as well as other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing vendor also considers the specific terms and conditions of the securities, including any specific features which may influence risk. Each security is individually evaluated using a spread model which is added to the U.S. treasury curve.

The fair value of certain corporate fixed maturity investments are valued using internally developed models and are considered Level 3 by the Company. The internally developed models use a combination of quantitative and qualitative factors, which may include, but are not limited to, discounted cash flow analysis, financial statements, budgets and forecasts, capital transactions and third party valuations.

Agency mortgage-backed

At March 31, 2011, the Company’s agency mortgage-backed fixed maturity investments included agency residential mortgage-backed securities with a weighted average yield to maturity of 3.7%, a weighted average credit quality of AAA and a weighted average life of 5.0 years. The Company’s agency mortgage-backed fixed maturity investments are primarily priced by pricing vendors using a mortgage pool specific model which utilizes daily inputs from the active and the to be announced (“TBA”) market which is very liquid, as well as the U.S. treasury market. The vendor model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated with daily active market quotes. The Company considers its agency mortgage-backed fixed maturity investments Level 2.

Non-agency mortgage-backed

The Company’s non-agency mortgage-backed fixed maturity investments include non-agency prime residential mortgage-backed and non-agency Alt-A fixed maturity investments, and the Company considers these fixed maturity investments Level 2. The Company has no fixed maturity investments classified as sub-prime held in its fixed maturity investments portfolio. At March 31, 2011, the Company’s non-agency prime residential mortgage-backed fixed maturity investments have a weighted average yield to maturity of 5.4%, a weighted average credit quality of AA and a weighted average life of 4.5 years. The Company’s non-agency Alt-A fixed maturity investments held at March 31, 2011 have a weighted average yield to maturity of 5.3%, a weighted average credit quality of AA, a weighted average life of 3.9 years, and are from vintage years 2006 and prior. Securities held in these sectors are primarily priced by pricing vendors using a mortgage pool specific model which utilizes daily inputs from the active TBA market which is extremely liquid, as well as the U.S. treasury market. The vendor model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated by daily active market quotes.

Commercial mortgage-backed

The Company’s commercial mortgage-backed fixed maturity investments held at March 31, 2011 have a weighted average yield to maturity of 3.6%, a weighted average credit quality of AA and a weighted average life of 3.3 years. Securities held in these sectors are primarily priced by pricing vendors and are considered Level 2 by the Company. The pricing vendor applies dealer quotes and other available trade information such as bid and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The model utilizes a single cash flow stream and computes both a yield to call and weighted average yield to maturity. The model generates a derived price for the bond by applying the most likely scenario.

Asset-backed

At March 31, 2011, the Company’s asset-backed fixed maturity investments had a weighted average yield to maturity of 1.1%, a weighted average credit quality of AAA and a weighted average life of 4.5 years. The underlying collateral for the Company’s asset-backed fixed maturity investments primarily consists of student loans, credit card receivables and other receivables. Securities held in these sectors are primarily priced by pricing vendors and are considered Level 2 by the Company. The pricing vendor applies dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The model utilizes a single cash flow stream and computes both a yield to call and weighted average yield to maturity. The model generates a derived price for the bond by applying the most likely scenario.

Short term investments

Short term investments are considered Level 2 and fair values are generally determined using amortized cost which approximates fair value and, in certain cases, in a manner similar to the Company’s fixed maturity investments noted above.

Equity investments, classified as trading

Equity investments are considered Level 1 by the Company and fair values are primarily priced by pricing vendors, reflecting the closing price quoted for the final trading day of the period. When pricing these securities, the vendor utilizes daily data from many real time market sources, including active broker dealers and applicable securities exchanges. All data sources are regularly reviewed for accuracy to ensure the most reliable price source is used for each issue. For accounting purposes, the Company’s portfolio of equity investments is classified as trading.

Other Investments

Private equity partnerships

Included in the Company’s investments in private equity partnerships at March 31, 2011 are alternative asset limited partnerships (or similar corporate structures) that invest in certain private equity asset classes including U.S. and global leveraged buyouts; mezzanine investments; distressed securities; real estate; and oil, gas and power. The fair value of private equity partnership investments is based on net asset values obtained from the investment manager or general partner of the respective entity. The type of underlying investments held by the investee which form the basis of the net asset valuation include assets such as private business ventures, for which the Company does not have access to financial information, and as a result is unable to corroborate the fair value measurement and therefore requires significant management judgment to determine the underlying value of the private equity partnership and accordingly the fair value of the Company’s investment in each private equity partnership is considered Level 3. The Company also considers factors such as recent financial information, the value of capital transactions with the partnership and management’s judgment regarding whether any adjustments should be made to the net asset value. The Company regularly reviews the performance of its private equity partnerships directly with the fund managers.

Senior secured bank loan funds

At March 31, 2011, the Company’s investments in senior secured bank loan funds include funds that invest primarily in bank loans and other senior debt instruments. The fair value of the Company’s senior secured bank loan funds are estimated using the net asset value per share of the funds. Investments of $161.2 million are redeemable, in whole or in part, on a monthly basis, and are valued at the net asset value of the fund and are considered Level 2.

The Company also has a $10.4 million investment in a closed end fund which invests primarily in loans. The Company has no right to redeem its investment in this fund. The Company’s investment in this fund is valued using monthly net asset valuations received from the investment manager. The lock up provisions in this fund result in a lack of current observable market transactions between the fund participants and the fund, and therefore, the Company considers the fair value of its investment in this fund to be determined using Level 3 inputs.

Catastrophe bonds

The Company’s other investments include investments in catastrophe bonds which are recorded at fair value. The fair value of the Company’s investments in catastrophe bonds considered Level 2 are based on quoted market prices, or when such prices are not available, by reference to broker or underwriter bid indications. In addition, the Company’s investments in catastrophe bonds considered Level 3 are based on internal valuation models with the inputs to the internal valuation model based on quoted market prices, or when such prices are not available, by reference to broker or underwriter bid indications.

Non-U.S. fixed income funds

The Company considers its investments in non-U.S. fixed income funds Level 2. The Company’s non-U.S. fixed income funds invest primarily in European high yield bonds and non-U.S. convertible securities. The fair values of the investments in this category have been estimated using the net asset value per share of the investments which are provided by third parties such as the relevant investment manager or administrator, recent financial information issued by the applicable investee entity or available market data.

Hedge funds

The Company has investments in hedge funds that pursue multiple strategies without limiting itself to a predefined strategy or set of strategies. The strategies employed include, among others, the following: fundamentally driven long/short; event oriented; global multi-strategy; and private investments. The fair values of the Company’s hedge funds have been estimated using the net asset value per share of the investments which are provided by third parties such as the relevant investment manager or administrator, recent financial information issued by the applicable investee entity or available market data to estimate fair value. The Company considers its hedge fund investments Level 2.

Other secured assets

Other secured assets represent contractual rights under a purchase agreement, contingent purchase agreement and credit derivatives agreement with a major bank to sell certain securities within the Company’s catastrophe-linked securities portfolio. The Company’s other secured assets are accounted for at fair value based on quoted market prices, or when such prices are not available, by reference to broker or underwriter bid indications. As such, the Company considers its catastrophe bonds Level 2.

Other assets and liabilities

Included in other assets and liabilities measured at fair value at March 31, 2011 is certain derivative-based risk management products primarily to address weather and energy risks, and hedging and trading activities related to these risks. The trading markets for these derivatives are generally linked to energy and agriculture commodities, weather and other natural phenomena and the fair value of these contracts is obtained through the use of exchange traded market prices, or in the absence of such market prices, industry or internal valuation models, as such, these products are considered Level 1 and Level 3, respectively. The Company considers assumed and ceded reinsurance contracts accounted for at fair value as Level 3, as the fair value of these contracts is obtained through the use of internal valuation models with the inputs to the internal valuation model based on proprietary data as observable market inputs are not available. In addition, other assets and liabilities include certain other derivatives entered into by the Company; the fair value of these transactions include the fair value of certain exchange traded foreign currency forward contracts which are considered Level 1, and the fair value of certain credit derivatives, determined using industry valuation models and considered Level 2, as the inputs to the valuation model are based on observable market inputs.

Reinsurance Contracts Accounted for at Fair Value

The Company assumes and cedes certain reinsurance contracts that are accounted for at fair value under the fair value option. The fair value of these contracts is obtained through the use of internal valuation models. These contracts are recorded on the Company’s balance sheet in other assets and other liabilities and totaled $45.0 million and $0.4 million, respectively, at March 31, 2011 (December 31, 2010 – $1.8 million and $Nil, respectively). During the three months ended March 31, 2011, the Company recorded gains of $43.6 million which are included in other income (loss) and represent changes in the fair value of these contracts (March 31, 2010 – losses of $1.4 million).

Weather and Energy Transactions Accounted for at Fair Value

Through the business conducted by Renaissance Trading on a regular basis and otherwise from time to time, the Company enters into certain weather and energy insurance type contracts through its trading activities that it has elected to account for at fair value under the fair value option. These contracts are recorded on the Company’s balance sheet and totaled $Nil at March 31, 2011 (December 31, 2010 – other liabilities of $44 thousand). During the three months ended March 31, 2011, the Company recorded unrealized losses of $46 thousand which are included in other income (loss) and represent changes in the fair value of these contracts (March 31, 2010 – $3.0 million).

Senior Notes

In January 2003, RenaissanceRe issued $100.0 million, which represents the carrying amount on the Company’s consolidated balance sheet, of 5.875% Senior Notes due February 15, 2013, with interest on the notes payable on February 15 and August 15 of each year. At March 31, 2011, the fair value of the 5.875% Senior Notes was $106.0 million (December 31, 2010 – $105.9 million).

In March 2010, RenRe North America Holdings Inc. (“RRNAH”) issued $250.0 million of 5.75% Senior Notes due March 15, 2020, with interest on the notes payable on March 15 and September 15 of each year. At March 31, 2011, the fair value of the 5.75% Senior Notes was $254.3 million (December 31, 2010 – $252.4 million). The fair value of RenaissanceRe’s 5.875% Senior Notes and RRNAH’s 5.75% Senior Notes is determined using indicative market pricing obtained from third-party service providers.

Below is a reconciliation of the beginning and ending balances, for the periods shown, of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs. Interest and dividend income are included in net investment income and are excluded from the reconciliation.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands of U.S. dollars)	Fixed maturity investments trading		Other investments			Other assets and (liabilities)			Total
Balance - January 1, 2011	$	21,785	$	362,102		$	16,499		$	400,386

Total unrealized gains (losses)
Included in net investment income		41		23,757			—			23,798
Included in other income (loss)		—		—			40,068			(3,492	)

Total realized gains
Included in other income (loss)		—		—			10,955			54,515

Total foreign exchange losses		—		1,369			(51	)		1,318

Purchases		—		17,465			1,631			19,096
Sales		—		—			(4,160	)		(4,160	)
Settlements		—		(22,878	)		3,438			(19,440	)

Net transfers in and/or out of Level 3		—		—			—			—

Balance - March 31, 2011	$	21,826	$	381,815		$	68,380		$	472,021


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(in thousands of U.S. dollars)	Other investments			Other assets and (liabilities)			Total
Balance - January 1, 2010	$	393,913		$	17,026		$	410,939

Total net unrealized gains (losses)
Included in net investment income		8,891			—			8,891
Included in other loss		—			(8,907	)		(8,907	)

Total net realized gains
Included in other loss		—			5,719			5,719

Total net foreign exchange losses		(2,215	)		(484	)		(2,699	)

Purchases		5,279			3,433			8,712
Issuances		—			(17,169	)		(17,169	)
Settlements		(12,480	)		8,768			(3,712	)

Net transfers in and/or out of Level 3		—			—			—

Balance - March 31, 2010	$	393,388		$	8,386		$	401,774

The Fair Value Option for Financial Assets and Financial Liabilities

The Company has elected to account for certain assets and liabilities at fair value under FASB ASC Topic Financial Instruments. The Company has elected to use the guidance under FASB ASC Topic Financial Instruments, as it represents the most current authoritative GAAP. Below is a summary of the balances the Company has elected to account for at fair value:


(in thousands of U.S. dollars)	March 31, 2011		December 31, 2010
Other investments	$	782,325	$	787,548

Other secured assets	$	14,169	$	14,250

Other assets and (liabilities)	$	62,599	$	20,000

Included in net investment income for the three months ended March 31, 2011 was $28.1 million of net unrealized gains related to the changes in fair value of other investments (March 31, 2010 – $24.9 million). Net unrealized losses related to the changes in the fair value of other secured assets recorded in other income (loss) was $0.1 million for the quarter ended March 31, 2011 (March 31, 2010 – net unrealized gains of $0.1 million). Net unrealized losses related to the changes in the fair value of other assets and liabilities recorded in other income (loss) was $42.7 million for the three months ended March 31, 2011 (March 31, 2010 – $10.1 million).

Measuring the Fair Value of Other Investments Using Net Asset Valuations

The table below shows the Company’s portfolio of other investments measured using net asset valuations:


At March 31, 2011	Fair Value		Unfunded Commitments		Redemption Frequency		Redemption Notice Period
(in thousands of U.S. dollars)
Private equity partnerships	$	362,717	$	181,505		See below		See below
Senior secured bank loan funds		171,559		14,636		See below		See below
Non-U.S. fixed income funds		87,336		—		Monthly, bi-monthly		5 - 20 days
Hedge funds		40,616		—		Annually, bi-annually		45 - 90 days

Total other investments measured using net asset valuations	$	662,228	$	196,141

Private equity partnerships – Included in the Company’s investments in private equity partnerships are alternative asset limited partnerships (or similar corporate structures) that invest in certain private equity asset classes including U.S. and global leveraged buyouts; mezzanine investments; distressed securities; real estate; and oil, gas and power. The fair values of the investments in this category have been estimated using the net asset value per share of the investments. The Company generally has no right to redeem its interest in any of these private equity partnerships in advance of dissolution of the applicable partnership. Instead, the nature of these investments is that distributions are received by the Company in connection with the liquidation of the underlying assets of the applicable limited partnership. It is estimated that the majority of the underlying assets of the limited partnerships would liquidate over 7 to 10 years from inception of the limited partnership.

Senior secured bank loan funds – The Company’s investment in senior secured bank loan funds includes funds that invest primarily in bank loans and other senior debt instruments. The fair values of the investments in this category have been estimated using the net asset value per share of the funds. Investments of $161.2 million are redeemable, in whole or in part, on a monthly basis.

The Company also has a $10.4 million investment in a closed end fund which invests in loans. The Company has no right to redeem its investment in this fund.

Non-U.S. fixed income funds – The Company’s non-U.S. fixed income funds invest primarily in European high yield bonds and non-U.S. convertible securities. The fair values of the investments in this category have been estimated using the net asset value per share of the funds. Investments of $51.0 million are redeemable, in whole or in part, on a bi-monthly basis. The remaining $36.3 million can generally only be redeemed by the Company at a rate of 10% per month. The issuers of these securities may permit redemptions which exceed this amount, but they are not obliged to do so.

Hedge funds – The Company invests in hedge funds that pursue multiple strategies. The strategies employed include, among others, the following: fundamentally driven long/short; event oriented; and private investments. The fair values of the investments in this category have been estimated using the net asset value per share of the funds. Included in the Company’s hedge funds is $8.4 million of so called “side pocket” investments which are not redeemable at the option of the shareholder. As to each investment in a hedge fund that includes side pocket investments, if the investment is otherwise fully redeemed, the Company will still retain its interest in the side pocket investments until the underlying investments attributable to such side pockets are liquidated, realized or deemed realized at the discretion of the fund manager.

NOTE 9.

NONCONTROLLING INTERESTS

Redeemable Noncontrolling Interest – DaVinciRe

In October 2001, the Company formed DaVinciRe and DaVinci with other equity investors. RenaissanceRe owns a noncontrolling economic interest in DaVinciRe; however, because RenaissanceRe controls a majority of DaVinciRe’s outstanding voting rights, the consolidated financial statements of DaVinciRe are included in the consolidated financial statements of the Company. The portion of DaVinciRe’s earnings owned by third parties for the three months ended March 31, 2011 and 2010 is recorded in the consolidated statements of operations as net loss (income) attributable to noncontrolling interests.

DaVinciRe shareholders are party to a shareholders agreement (the “Shareholders Agreement”) which provides DaVinciRe shareholders, excluding RenaissanceRe, with certain redemption rights that enable each shareholder to notify DaVinciRe of such shareholder’s desire for DaVinciRe to repurchase up to half of such shareholder’s initial aggregate number of shares held, subject to certain limitations, such as limiting the aggregate of all share repurchase requests to 25% of DaVinciRe’s capital in any given year and satisfying all applicable regulatory requirements. If total shareholder requests exceed 25% of DaVinciRe’s capital, the number of shares repurchased will be reduced among the requesting shareholders pro-rata, based on the amounts desired to be repurchased. Shareholders desiring to have DaVinci repurchase their shares must notify DaVinciRe before March 1 of each year. The repurchase price will be based on GAAP book value as of the end of the year in which the shareholder notice is given, and the repurchase will be effective as of such date. Payment will be made by April 1 of the following year, following delivery of the audited financial statements for the year in which the repurchase was effective. The repurchase price is subject to a true-up for development on outstanding loss reserves after settlement of all claims relating to the applicable years. The Company’s ownership in DaVinciRe was 44.0% at March 31, 2011 (December 31, 2010 – 41.2%).

Certain third party shareholders of DaVinciRe submitted repurchase notices on or before the required annual redemption notice date of March 1, 2010, in accordance with the Shareholders Agreement. The repurchase notices submitted on or before March 1, 2010, were for shares of DaVinciRe with a GAAP book value of $88.4 million at December 31, 2010. Furthermore, DaVinciRe resolved to return additional capital of $86.6 million to the remaining shareholders, including the Company, after the receipt of the repurchase notices described above. Effective January 1, 2011, DaVinciRe redeemed the shares and returned additional capital for an aggregate of $175.0 million, less a $17.5 million reserve holdback. As a result of the above transactions, the Company’s ownership interest in DaVinciRe increased to 44.0% effective January 1, 2011.

In advance of the March 1, 2011 redemption notice date, certain third party shareholders of DaVinciRe have submitted repurchase notices, in accordance with the Shareholders Agreement, for shares of DaVinciRe with a GAAP book value of $17.0 million at March 31, 2011. The Company expects its ownership in DaVinciRe to fluctuate over time.

The activity in the Company’s redeemable noncontrolling interest – DaVinciRe is detailed in the table below:


Three months ended March 31,	2011			2010
(in thousands of U.S. dollars)
Balance - January 1	$	757,655		$	786,647
Net purchase of shares from redeemable noncontrolling interest		(135,172	)		(140,410	)
Comprehensive income:
Net (loss) income attributable to redeemable noncontrolling interest		(85,763	)		10,550
Other comprehensive (loss) income attributable to redeemable noncontrolling interest		(3	)		1,738

Balance - March 31	$	536,717		$	658,525

Angus Fund L.P. (the “Angus Fund”)

In December 2010, REAL and RenRe Commodity Advisors Inc. (“RRCA”), both wholly owned subsidiaries of the Company, formed the Angus Fund with other equity investors. REAL, the general partner of the Angus Fund, invested $40 thousand in the Angus Fund, representing a 1.0% ownership interest at March 31, 2011 (December 31, 2010 – $40 thousand and 1.0%, respectively), and RRCA, a limited partner, invested $1.0 million in the Angus Fund, representing a 24.75% ownership interest at March 31, 2011 (December 31, 2010 – $1.0 million and 24.75%, respectively). The Angus Fund was formed to provide capital to, and make investments in, companies primarily in the heating oil and propane distribution industries to supplement the Company’s weather and energy risk management operations. The Angus Fund meets the definition of a variable interest entity (“VIE”), and therefore the Company evaluated its ownership in the Angus Fund to determine if it is the primary beneficiary. The Company has concluded it is the primary beneficiary of the Angus Fund as it has the power to direct, and has a more than insignificant economic interest in, the activities of the Angus Fund and as such, the financial position and results of operations of the Angus Fund are consolidated. The Company expects its ownership in the Angus Fund to fluctuate over time. The portion of the Angus Fund’s earnings owned by third parties for the quarter ended March 31, 2011 is recorded in the consolidated statements of operations as net loss (income) attributable to noncontrolling interests.

The activity in noncontrolling interest is detailed in the table below:


Three months ended March 31,	2011
(in thousands of U.S. dollars)
Balance - January 1	$	2,889
Net income attributable to noncontrolling interest		271

Balance - March 31	$	3,160

NOTE 10.

DERIVATIVE INSTRUMENTS AND OTHER SECURED ASSETS AND OTHER SECURED LIABILITIES

The Company enters into derivative instruments such as futures, options, swaps, forward contracts and other derivative contracts primarily in order to manage its foreign currency exposure, obtain exposure to a particular financial market, for yield enhancement, or for trading and speculation. The Company accounts for its derivatives in accordance with FASB ASC Topic Derivatives and Hedging, which requires all derivatives to be recorded at fair value on the Company’s balance sheet as either assets or liabilities, depending on the rights or obligations of the derivatives, with changes in fair value reflected in current earnings. The Company does not currently apply hedge accounting in respect of any positions reflected in its consolidated financial statements. Where the Company has entered into master netting agreements with counterparties, or the Company has the legal and contractual right to offset positions, the derivative positions are generally netted by counterparty and are reported accordingly in other assets and other liabilities.

The table below shows the location on the consolidated balance sheets and fair value of the Company’s principal derivative instruments:


	Derivative Assets
	At March 31, 2011				At December 31, 2010
(in thousands of U.S. dollars)	Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value

Interest rate futures		Other assets	$	654		Other assets	$	2,459
Foreign currency forward contracts (1)		Other assets		1,147		Other assets		6,341
Foreign currency forward contracts (2)		Other assets		—		Other assets		—
Foreign currency forward contracts (3)		Other assets		—		Other assets		—
Credit default swaps		Other assets		3,606		Other assets		3,064
Energy and weather contracts (4)		Other assets		9,713		Other assets		17,925
Platinum warrant		Other assets		—		Other assets		44,925

Total			$	15,120			$	74,714


	Derivative Liabilities
	At March 31, 2011				At December 31, 2010
(in thousands of U.S. dollars)	Balance Sheet Location		Fair Value		Balance Sheet Location		Fair Value

Interest rate futures		Other liabilities	$	16		Other liabilities	$	719
Foreign currency forward contracts (1)		Other liabilities		3,674		Other liabilities		—
Foreign currency forward contracts (2)		Other liabilities		9,864		Other liabilities		3,141
Foreign currency forward contracts (3)		Other liabilities		78		Other liabilities		44
Energy and weather contracts (4)		Other liabilities		3,932		Other liabilities		15,013

Total			$	17,564			$	18,917

(1)	Contracts used to manage foreign currency risks in underwriting operations.

(2)	Contracts used to manage foreign currency risks in investment operations.

(3)	Contracts used to manage foreign currency risks in energy and risk operations.

(4)

Included in other assets is $10.5 million of derivative assets and $0.8 million of derivative liabilities at March 31, 2011 (December 31, 2010 - $21.7 million and $3.7 million, respectively). Included in other liabilities is $5.1 million of derivative assets and $9.0 million of derivative liabilities at March 31, 2011 (December 31, 2010 - $9.9 million and $24.9 million, respectively).

The location and amount of the gain (loss) recognized in the Company’s consolidated statements of operations related to its derivative instruments is shown in the following table:


Three months ended March 31,	Location of gain (loss) recognized on derivatives		Amount of gain (loss) recognized on derivatives
Three months ended March 31,	Location of gain (loss) recognized on derivatives		2011			2010
(in thousands of U.S. dollars)
Interest rate futures		Net investment income	$	(654	)	$	(553	)
Foreign currency forward contracts (1)		Net foreign exchange gains (losses)		7,799			(1,708	)
Foreign currency forward contracts (2)		Net foreign exchange gains (losses)		(13,400	)		15,452
Foreign currency forward contracts (3)		Net foreign exchange gains (losses)		(436	)		(2,983	)
Credit default swaps		Other income (loss)		722			282
Energy and weather contracts		Other income (loss)		8,500			3,090
Platinum warrant		Other income (loss)		2,975			(3,697	)

Total			$	5,506		$	9,883

(1)	Contracts used to manage foreign currency risks in underwriting operations.

(2)	Contracts used to manage foreign currency risks in investment operations.

(3)	Contracts used to manage foreign currency risks in energy and risk operations.

The Company is not aware of the existence of any credit risk-related contingent features that it believes would be triggered in its derivative instruments that are in a net liability position at March 31, 2011.

Interest Rate Futures

The Company uses interest rate futures within its portfolio of fixed maturity investments to manage its exposure to interest rate risk, which can include increasing or decreasing its exposure to this risk. At March 31, 2011, the Company had $2.8 billion of notional long positions and $217.1 million of notional short positions of primarily Eurodollar and U.S. Treasury and non-U.S. dollar futures contracts (December 31, 2010 - $2.2 billion and $209.1 million, respectively). The fair value of these derivatives is determined using exchange traded prices.

Foreign Currency Derivatives

The Company’s functional currency is the U.S. dollar. The Company writes a portion of its business in currencies other than U.S. dollars and may, from time to time, experience foreign exchange gains and losses in the Company’s consolidated financial statements. All changes in exchange rates, with the exception of non-U.S. dollar denominated investments classified as available for sale and non-monetary assets and liabilities, are recognized currently in the Company’s consolidated statements of operations.

Underwriting Operations Related Foreign Currency Contracts

The Company’s foreign currency policy with regard to its underwriting operations is generally to hold foreign currency assets, including cash, investments and receivables that approximate the foreign currency liabilities, including claims and claim expense reserves and reinsurance balances payable. When necessary, the Company may use foreign currency forward and option contracts to minimize the effect of fluctuating foreign currencies on the value of non-U.S. dollar denominated assets and liabilities associated with its underwriting operations. At March 31, 2011, the Company had outstanding underwriting related foreign currency contracts of $145.7 million in long positions and $313.7 million in short positions, denominated in U.S. dollars (December 31, 2010 - $42.0 million and $188.1 million, respectively).

Investment Portfolio Related Foreign Currency Forward Contracts

The Company’s investment operations are exposed to currency fluctuations through its investments in non-U.S. dollar fixed maturity investments, short term investments and other investments. To economically hedge its exposure to currency fluctuations from these investments, the Company has entered into foreign currency forward contracts. Foreign exchange gains (losses) associated with the Company’s hedging of these non-U.S. dollar investments are recorded in net foreign exchange losses in its consolidated statements of operations. At March 31, 2011, the Company had outstanding investment portfolio related foreign currency contracts of $63.8 million in long positions and $352.8 million in short positions, denominated in U.S. dollars (December 31, 2010 - $69.2 million and $281.0 million, respectively).

Energy and Risk Operations Related Foreign Currency Contracts

The Company’s energy and risk operations are exposed to currency fluctuations through certain derivative transactions it enters into that are denominated in non-U.S. dollars. The Company may, from time to time, use foreign currency forward and option contracts to minimize the effect of fluctuating foreign currencies on the value of non-U.S. dollar denominated assets and liabilities associated with these operations. At March 31, 2011, the Company’s energy and risk management operations had outstanding foreign currency contracts of $0.4 million in long positions and $11.5 million in short positions, denominated in U.S. dollars (December 31, 2010 - $Nil and $10.0 million, respectively).

Credit Derivatives

The Company’s exposure to credit risk is primarily due to its fixed maturity investments, short term investments, premiums receivable and reinsurance recoverable. From time to time, the Company purchases credit derivatives to hedge its exposures in the insurance industry, to assist in managing the credit risk associated with ceded reinsurance, or to assume or hedge credit risk. The fair value of the credit derivatives is determined using industry valuation models, broker bid indications or internal pricing valuation techniques. The fair value of these credit derivatives can change based on a variety of factors including changes in credit spreads, default rates and recovery rates, the correlation of credit risk between the referenced credit and the counterparty, and market rate inputs such as interest rates. At March 31, 2011, the Company had outstanding credit derivatives of $15.0 million in long positions and $138.0 million in short positions, denominated in U.S. dollars (December 31, 2010 - $15.0 million and $118.0 million, respectively).

Energy and Weather-Related Derivatives

The Company regularly transacts in certain derivative-based risk management products primarily to address weather and energy risks and engages in hedging and trading activities related to these risks. The trading markets for these derivatives are generally linked to energy and agriculture commodities, weather and other natural phenomena. Currently, a significant percentage of the Company’s derivative-based risk management products are transacted on a dual-trigger basis combining weather or other natural phenomenon, with prices for commodities or securities related to energy or agriculture. The fair value of these contracts is obtained through the use of quoted market prices, or in the absence of such quoted prices, industry or internal valuation models. Generally, the Company’s current portfolio of such derivative contracts is of comparably short duration and such contracts are predominantly seasonal in nature. Over time, the Company currently expects that its participation in these markets, and the impact of these operations on its financial results, is likely to increase on both an absolute and relative basis.

The Company had the following gross derivative contract positions outstanding relating to its energy and weather derivatives trading activities.


	Quantity (1)
	March 31, 2011		December 31, 2010		Unit of measurement
Energy		107,133,293		136,767,119	One million British thermal units (“MMBTUs”)
Temperature		2,181,883		5,419,846	$ per Degree Day Fahrenheit
Agriculture		8,131,292		260,000	Bushels

(1)	Represents the sum of gross long and gross short derivative contracts.

At March 31, 2011, RenaissanceRe had provided guarantees in the aggregate amount of $228.3 million to certain counterparties of the weather and energy risk operations of Renaissance Trading. In the future, RenaissanceRe may issue guarantees for other purposes or increase the amount of guarantees issued to counterparties of Renaissance Trading.

Platinum Warrant

In 2002, the Company purchased a warrant, which was due to expire on October 30, 2012, to purchase up to 2.5 million common shares of Platinum for $27.00 per share. The Company recorded its investment in the Platinum warrant at fair value. The fair value of the warrant was estimated using either the Black-Scholes option pricing model or the in-the-money value, the greater of which the Company considers the best estimate of the exit value of the warrant. On January 20, 2011, the Company sold its warrant to Platinum for $47.9 million and recognized a gain on the sale of $3.0 million during the first quarter of 2011.

Other Secured Assets and Other Secured Liabilities

Other secured assets and other secured liabilities represent contractual rights and obligations under a purchase agreement, contingent purchase agreement and credit derivatives agreement (collectively, the “Agreements”) with a major bank to sell certain securities within the Company’s catastrophe-linked securities portfolio (“Cat-Linked Securities”). Under the terms of the Agreements, the Company sells its ownership interest in Cat-Linked Securities to the bank at par. During the quarter ended March 31, 2011, Cat-Linked Securities with a par amount of $Nil matured (March 31, 2010 - $Nil million). The Agreements allow the Company to repurchase these securities at par and obligate the Company to repurchase the securities under certain circumstances including catastrophe triggering events and events of default. As a result of these transactions, the Company is receiving the spread over LIBOR on the remaining $14.0 million of Cat-Linked Securities, less a financing fee.

The Company accounted for the sale of the Cat-Linked Securities under the Agreements as a secured borrowing with a pledge of collateral under the provisions of FASB ASC Topic Transfers and Servicing, and accordingly recognized no gain or loss upon the transaction date. The credit derivatives agreement is accounted for at fair value with changes in fair value recognized in other income (loss). As a result of the Agreements, the Company recognized its Cat-Linked Securities as other secured assets which totaled $14.2 million at March 31, 2011, representing the fair value of the pledged collateral and credit derivatives agreement, and recognized a $14.0 million liability, representing its obligation to repurchase the Cat-Linked Securities at par. The Company recognized $82 thousand of other loss in its consolidated statements of operations from these transactions, representing the spread over LIBOR less the financing fee on the Cat-Linked Securities for the quarter ended March 31, 2011, inclusive of the change in the fair value of the credit derivatives agreement (March 31, 2010 - $79 thousand).

Under the terms of the Agreements, the Company may sell other catastrophe-linked securities.

NOTE 11.

CONDENSED CONSOLIDATING FINANCIAL INFORMATION PROVIDED IN CONNECTION WITH OUTSTANDING DEBT OF SUBSIDIARIES

The following tables present condensed consolidating balance sheets at March 31, 2011 and December 31, 2010, condensed consolidating statements of operations for the three months ended March 31, 2011 and 2010, and statements of cash flows for the three months ended March 31, 2011 and 2010, respectively, for RenaissanceRe, RRNAH and RenaissanceRe’s other subsidiaries. RRNAH is a wholly owned subsidiary of RenaissanceRe.

On March 17, 2010, RRNAH issued, and RenaissanceRe guaranteed, $250.0 million of 5.75% Senior Notes due March 15, 2020, with interest on the notes payable on March 15 and September 15. The notes can be redeemed by RRNAH prior to maturity subject to payment of a “make-whole” premium. The notes, which are senior obligations, contain various covenants, including limitations on mergers and consolidations, restrictions as to the disposition of the stock of designated subsidiaries and limitations on liens of the stock of designated subsidiaries.


Condensed Consolidating Balance Sheet March 31, 2011	RenaissanceRe Holdings Ltd. (Parent Guarantor)		RenRe North America Holdings Inc. (Subsidiary Issuer)		Other RenaissanceRe Holdings Ltd. Subsidiaries and Eliminations (Non-guarantor Subsidiaries) (1)		Consolidating Adjustments (2)			RenaissanceRe Consolidated
Assets
Total investments	$	592,019	$	142,258	$	5,568,789	$	—		$	6,303,066
Cash and cash equivalents		1,171		5,329		246,131		—			252,631
Investments in subsidiaries		3,486,002		133,061		—		(3,619,063	)		—
Due from subsidiaries and affiliates		—		—		—		—			—
Premiums receivable		—		—		574,547		—			574,547
Prepaid reinsurance premiums		—		—		125,722		—			125,722
Reinsurance recoverable		—		—		324,124		—			324,124
Accrued investment income		3,541		17		30,022		—			33,580
Deferred acquisition costs		—		—		56,656		—			56,656
Other assets		12,318		4,463		325,512		—			342,293
Assets of discontinued operations held for sale		—		2,481		—		—			2,481

*Total assets*	$	4,095,051	$	287,609	$	7,251,503	$	(3,619,063	)	$	8,015,100


Liabilities, Noncontrolling Interests and Shareholders’ Equity
Liabilities
Reserve for claims and claim expenses	$	—	$	—	$	2,070,095	$	—		$	2,070,095
Unearned premiums		—		—		500,165		—			500,165
Debt		381,018		249,178		200,000		(281,018	)		549,178
Amounts due to subsidiaries and affiliates		200,412		3,272		—		(203,684	)		—
Reinsurance balances payable		—		—		256,663		—			256,663
Other liabilities		13,719		602		582,653		—			596,974
Liabilities of discontinued operations held for sale		—		2,246		—		—			2,246

*Total liabilities*		595,149		255,298		3,609,576		(484,702	)		3,975,321


Redeemable noncontrolling interest - DaVinciRe		—		—		536,717		—			536,717

Shareholders’ Equity
*Total shareholders’ equity*		3,499,902		32,311		3,105,210		(3,134,361	)		3,503,062

*Total liabilities, noncontrolling interests and shareholders’ equity*	$	4,095,051	$	287,609	$	7,251,503	$	(3,619,063	)	$	8,015,100

(1)	Includes all other subsidiaries of RenaissanceRe Holdings Ltd. and eliminations.

(2)	Includes Parent Guarantor and Subsidiary Issuer consolidating adjustments.


Condensed Consolidating Balance Sheet December 31, 2010	RenaissanceRe Holdings Ltd. (Parent Guarantor)		RenRe North America Holdings Inc. (Subsidiary Issuer)		Other RenaissanceRe Holdings Ltd. Subsidiaries and Eliminations (Non-guarantor Subsidiaries) (1)		Consolidating Adjustments (2)			RenaissanceRe Consolidated
Assets
Total investments	$	517,640	$	12,560	$	5,570,012	$	—		$	6,100,212
Cash and cash equivalents		3,414		3,940		270,384		—			277,738
Investments in subsidiaries		3,533,266		140,923		—		(3,674,189	)		—
Due from subsidiaries and affiliates		145,298		—		—		(145,298	)		—
Premiums receivable		—		—		322,080		—			322,080
Prepaid reinsurance premiums		—		—		60,643		—			60,643
Reinsurance recoverable		—		—		101,711		—			101,711
Accrued investment income		3,720		5		30,835		—			34,560
Deferred acquisition costs		—		—		35,648		—			35,648
Other assets		139,654		2,307		318,077		(126,499	)		333,539
Assets of discontinued operations held for sale		—		872,147		—		—			872,147

*Total assets*	$	4,342,992	$	1,031,882	$	6,709,390	$	(3,945,986	)	$	8,138,278


Liabilities, Noncontrolling Interests and Shareholders’ Equity
Liabilities
Reserve for claims and claim expenses	$	—	$	—	$	1,257,843	$	—		$	1,257,843
Unearned premiums		—		—		286,183		—			286,183
Debt		377,512		374,196		200,000		(402,553	)		549,155
Amounts due to subsidiaries and affiliates		—		843		—		(843	)		—
Reinsurance balances payable		—		—		318,024		—			318,024
Other liabilities		29,155		22,623		379,915		—			431,693
Liabilities of discontinued operations held for sale		—		598,511		—		—			598,511

*Total liabilities*		406,667		996,173		2,441,965		(403,396	)		3,441,409


Redeemable noncontrolling interest - DaVinciRe		—		—		757,655		—			757,655

Shareholders’ Equity
*Total shareholders’ equity*		3,936,325		35,709		3,509,770		(3,542,590	)		3,939,214

*Total liabilities, noncontrolling interests and shareholders’ equity*	$	4,342,992	$	1,031,882	$	6,709,390	$	(3,945,986	)	$	8,138,278

(1)	Includes all other subsidiaries of RenaissanceRe Holdings Ltd. and eliminations.

(2)	Includes Parent Guarantor and Subsidiary Issuer consolidating adjustments.


Condensed Consolidating Statement of Operations For the three months ended March 31, 2011	RenaissanceRe Holdings Ltd. (Parent Guarantor)			RenRe North America Holdings Inc. (Subsidiary Issuer)			Other RenaissanceRe Holdings Ltd. Subsidiaries and Eliminations (Non-guarantor Subsidiaries) (1)			Consolidating Adjustments (2)			RenaissanceRe Consolidated
Revenues
Net premiums earned	$	—		$	—		$	305,541		$	—		$	305,541
Net investment income		5,164			16			55,202			(101	)		60,281
Net foreign exchange gains		91			—			569			—			660
Equity in losses of other ventures		—			—			(23,753	)		—			(23,753	)
Other income		166			—			49,979			—			50,145
Net realized and unrealized losses on investments		(992	)		—			(4,222	)		—			(5,214	)

*Total revenues*		4,429			16			383,316			(101	)		387,660

Expenses
Net claims and claim expenses incurred		—			—			628,537			—			628,537
Acquisition expenses		—			—			32,335			—			32,335
Operational expenses		(1,220	)		1,502			41,548			—			41,830
Corporate expenses		2,041			61			(38	)		—			2,064
Interest expense		4,975			3,718			1,109			(3,607	)		6,195

*Total expenses*		5,796			5,281			703,491			(3,607	)		710,961

(Loss) income before equity in net (loss) income of subsidiaries and taxes		(1,367	)		(5,265	)		(320,175	)		3,506			(323,301	)
Equity in net (loss) income of subsidiaries		(238,206	)		1,836			—			236,370			—

(Loss) income from continuing operations before taxes		(239,573	)		(3,429	)		(320,175	)		239,876			(323,301	)
Income tax benefit (expense)		290			1,565			(1,803	)		—			52

*(Loss) income from continuing operations*		(239,283	)		(1,864	)		(321,978	)		239,876			(323,249	)
Loss from discontinued operations		—			(1,526	)		—			—			(1,526	)

*Net (loss) income*		(239,283	)		(3,390	)		(321,978	)		239,876			(324,775	)
Net loss attributable to noncontrolling interests		—			—			85,492			—			85,492

*Net (loss) income attributable to RenaissanceRe*		(239,283	)		(3,390	)		(236,486	)		239,876			(239,283	)
Dividends on preference shares		(8,750	)		—			—			—			(8,750	)

*Net (loss) income (attributable) available to RenaissanceRe common shareholders*	$	(248,033	)	$	(3,390	)	$	(236,486	)	$	239,876		$	(248,033	)

(1)	Includes all other subsidiaries of RenaissanceRe Holdings Ltd. and eliminations.

(2)	Includes Parent Guarantor and Subsidiary Issuer consolidating adjustments.


Condensed Consolidating Statement of Operations For the three months ended March 31, 2010	RenaissanceRe Holdings Ltd. (Parent Guarantor)			RenRe North America Holdings Inc. (Subsidiary Issuer)			Other RenaissanceRe Holdings Ltd. Subsidiaries and Eliminations (Non-guarantor Subsidiaries) (1)			Consolidating Adjustments (2)		RenaissanceRe Consolidated
Revenues
Net premiums earned	$	—		$	—		$	250,653		$	—	$	250,653
Net investment income		5,644			330			59,735			—		65,709
Net foreign exchange losses		(165	)		—			(11,177	)		—		(11,342	)
Equity in earnings of other ventures		—			—			2,156			—		2,156
Other income (loss)		641			—			(6,832	)		—		(6,191	)
Net realized and unrealized gains (losses) on fixed maturity investments		4,159			(3,425	)		47,466			—		48,200
Net other-than-temporary impairments		—			—			(33	)		—		(33	)

*Total revenues*		10,279			(3,095	)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents