Edgar Filing: RENAISSANCERE HOLDINGS LTD

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2007

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. 34-0-26512

RENAISSANCERE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)


Bermuda			98-014-1974
(State or Other Jurisdiction of			(I.R.S. Employer
Incorporation or Organization)			Identification Number)

Renaissance House, 8-20 East Broadway, 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 No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).


Large accelerated filer ,			Accelerated filer ,			Non-accelerated filer .

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

The number of outstanding shares of RenaissanceRe Holdings Ltd.’s common shares, par value US $1.00 per share, as of July 23, 2007 was 72,250,449.

Total number of pages in this report: 53

RenaissanceRe Holdings Ltd.

INDEX TO FORM 10-Q

Part I – FINANCIAL INFORMATION

Item 1

–

Financial Statements

Consolidated Balance Sheets at June 30, 2007 (Unaudited)
and December 31, 2006

Unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006

Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the
six months ended June 30, 2007 and 2006

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006

Notes to Unaudited Consolidated Financial Statements

Item 2

–

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3

–

Quantitative and Qualitative Disclosures About Market Risk

Item 4

–

Controls and Procedures

Part II – OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3

–

Defaults Upon Senior Securities

Item 4

–

Submission of Matters to a Vote of Security Holders

RenaissanceRe Holdings Ltd.

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PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Balance Sheets
(in thousands of U.S. dollars)


	June 30, 2007			December 31, 2006
	(Unaudited)			(Audited)
Assets
Fixed maturity investments available for sale, at fair value (Amortized cost $3,161,218 and $3,078,416 at June 30, 2007 and December 31, 2006, respectively)		$	3,179,189		$	3,111,930
Short term investments, at cost			2,268,172			2,410,971
Other investments, at fair value			661,709			592,829
Investments in other ventures, under equity method			235,371			227,075
Total investments			6,344,441			6,342,805
Cash and cash equivalents			266,455			214,399
Premiums receivable			927,657			419,150
Ceded reinsurance balances			241,488			133,971
Losses recoverable			236,990			301,854
Accrued investment income			41,824			41,234
Deferred acquisition costs			171,931			106,918
Receivable for investments sold			193,387			61,061
Other assets			134,190			147,634
Total assets		$	8,558,363		$	7,769,026
Liabilities, Minority Interest and Shareholders’ Equity
Liabilities
Reserve for claims and claim expenses		$	2,128,216		$	2,098,155
Reserve for unearned premiums			1,145,739			578,424
Debt			450,000			450,000
Subordinated obligation to capital trust			—			103,093
Reinsurance balances payable			344,945			395,083
Payable for investments purchased			200,833			88,089
Other liabilities			114,406			125,401
Total liabilities			4,384,139			3,838,245
Minority Interest – DaVinciRe			714,186			650,284
Shareholders’ Equity
Preference shares			650,000			800,000
Common shares			72,266			72,140
Additional paid-in capital			283,693			284,123
Accumulated other comprehensive income			12,939			25,217
Retained earnings			2,441,140			2,099,017
Total shareholders’ equity			3,460,038			3,280,497
Total liabilities, minority interest and shareholders’ equity		$	8,558,363		$	7,769,026

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Operations
For the three and six months ended June 30, 2007 and 2006
(in thousands of U.S dollars, except per share amounts)
(Unaudited)


	Three months ended								Six months ended
	June 30, 2007				June 30, 2006				June 30, 2007				June 30, 2006
Revenues
Gross premiums written		$	845,860			$	742,551			$	1,478,589			$	1,490,943
Net premiums written		$	609,842			$	512,244			$	1,180,869			$	1,210,079
Increase in unearned premiums			(251,388	)			(81,303	)			(459,797	)			(427,466	)
Net premiums earned			358,454				430,941				721,072				782,613
Net investment income			118,140				74,012				226,155				154,446
Net foreign exchange (losses) gains			(373	)			(2,441	)			4,794				582
Equity in earnings of other ventures			9,675				9,221				20,376				15,773
Other loss			(5,498	)			(84	)			(7,701	)			(1,763	)
Net realized losses on investments			(11,566	)			(24,348	)			(7,481	)			(41,104	)
Total revenues			468,832				487,301				957,215				910,547
Expenses
Net claims and claim expenses incurred			138,854				207,336				284,846				306,514
Acquisition expenses			59,509				74,597				123,238				143,411
Operational expenses			26,527				29,056				55,051				49,987
Corporate expenses			4,927				5,571				11,931				11,310
Interest expense			7,195				10,370				19,174				19,671
Total expenses			237,012				326,930				494,240				530,893
Income before minority interest and taxes			231,820				160,371				462,975				379,654
Minority interest – DaVinciRe			(37,399	)			(21,207	)			(66,506	)			(52,664	)
Income before taxes			194,421				139,164				396,469				326,990
Income tax expense			(680	)			(94	)			(787	)			(277	)
Net income			193,741				139,070				395,682				326,713
Dividends on preference shares			(10,575	)			(8,662	)			(21,711	)			(17,325	)
Net income available to common shareholders		$	183,166			$	130,408			$	373,971			$	309,388
Net income available to common shareholders per Common Share – basic		$	2.57			$	1.84			$	5.25			$	4.36
Net income available to common shareholders per Common Share – diluted		$	2.53			$	1.81			$	5.16			$	4.31
Dividends declared per common share		$	0.22			$	0.21			$	0.44			$	0.42

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
For the six months ended June 30, 2007 and 2006
(in thousands of U.S. dollars)
(Unaudited)


	Six months ended
	June 30, 2007				June 30, 2006
Preference shares
Balance – January 1		$	800,000			$	500,000
Redemption of Preference Shares			(150,000	)			—
Balance – June 30			650,000				500,000
Common stock
Balance – January 1			72,140				71,523
Exercise of options, and issuance of restricted stock and awards			349				326
Repurchase of shares			(223	)			—
Balance – June 30			72,266				71,849
Additional paid-in capital
Balance – January 1			284,123				279,762
Exercise of options, and issuance of restricted stock and awards			10,466				4,851
Repurchase of shares			(10,896	)			—
Balance – June 30			283,693				284,613
Accumulated other comprehensive income
Balance – January 1			25,217				4,760
Net unrealized (losses) gains on securities, net of adjustment (see disclosure below)			(12,278	)			233
Balance – June 30			12,939				4,993
Retained earnings
Balance – January 1			2,099,017				1,397,795
Net income			395,682				326,713
Dividends on Common Shares			(31,848	)			(30,119	)
Dividends on Preference Shares			(21,711	)			(17,325	)
Balance – June 30			2,441,140				1,677,064
Total Shareholders’ Equity		$	3,460,038			$	2,538,519
Comprehensive income (1)
Net income		$	395,682			$	326,713
Other comprehensive (loss) gain			(12,278	)			233
Comprehensive income		$	383,404			$	326,946
Disclosure regarding net unrealized (losses) gains
Net unrealized holding losses arising during period		$	(19,759	)		$	(40,871	)
Net realized losses included in net income			7,481				41,104
Change in net unrealized (losses) gains on securities		$	(12,278	)		$	233

(1)	Comprehensive income was $179.3 million and $142.0 million for the three months ended June 30, 2007 and 2006, respectively.

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the six months ended June 30, 2007 and 2006
(in thousands of U.S. dollars)
(Unaudited)


	Six months ended
	June 30, 2007				June 30, 2006
Cash flows provided by operating activities
Net income		$	395,682			$	326,713
Adjustments to reconcile net income to net cash provided by operating activities
Amortization and depreciation			(6,984	)			(3,963	)
Net realized losses on investments			7,481				41,104
Equity in undistributed earnings of other ventures			(7,615	)			(3,307	)
Net unrealized gains included in investment income			(48,231	)			(25,544	)
Net unrealized (gains) losses included in other loss			(8,478	)			5,527
Minority interest in undistributed net income of DaVinciRe			66,506				52,664
Change in:
Premiums receivable			(508,507	)			(494,582	)
Ceded reinsurance balances			(107,517	)			(184,181	)
Deferred acquisition costs			(65,013	)			(50,649	)
Reserve for claims and claim expenses, net			94,925				(58,392	)
Reserve for unearned premiums			567,315				611,647
Reinsurance balances payable			(50,138	)			185,170
Other			11,946				(18,753	)
Net cash provided by operating activities			341,372				383,454
Cash flows provided by (used in) investing activities
Proceeds from sales and maturities of investments available for sale			1,322,606				2,813,652
Purchases of investments available for sale			(1,422,001	)			(2,979,108	)
Net sales (purchases) of short term investments			142,799				(258,075	)
Net (purchases) sales of other investments			(17,211	)			85,167
Net sales (purchases) of investments in other ventures			2,262				(7,500	)
Net cash provided by (used in) investing activities			28,455				(345,864	)
Cash flows used in financing activities
Dividends paid – common shares			(31,848	)			(30,119	)
Dividends paid – preference shares			(21,711	)			(17,325	)
Net increase in minority interest			—				38,193
RenaissanceRe common share repurchase			(11,119	)			—
Redemption of Series A preference shares			(150,000	)			—
Redemption of capital securities			(103,093	)			—
Net repayment of debt			—				(15,000	)
Net cash used in financing activities			(317,771	)			(24,251	)
Net increase in cash and cash equivalents			52,056				13,339
Cash and cash equivalents, beginning of period			214,399				174,001
Cash and cash equivalents, end of period		$	266,455			$	187,340

The accompanying notes are an integral part of these financial statements.

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RenaissanceRe Holdings Ltd. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Expressed in U.S. Dollars)

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. The preparation of unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported 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 from these 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, losses recoverable, including allowances for losses recoverable deemed uncollectible, estimates of written and earned premiums, the fair value of other investments and financial instruments and the Company’s deferred tax asset valuation allowance. 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, 2006. RenaissanceRe Holdings Ltd. and Subsidiaries include the following principal entities:


	•	RenaissanceRe Holdings Ltd. (‘‘RenaissanceRe’’ or the ‘‘Company’’) was formed under the laws of Bermuda on June 7, 1993. Through its subsidiaries, the Company provides reinsurance and insurance to a broad range of customers.


	•	Renaissance Reinsurance Ltd. (‘‘Renaissance Reinsurance’’) is the Company’s principal subsidiary and 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, such as Top Layer Reinsurance Ltd. (‘‘Top Layer Re’’), Starbound Holdings Ltd. (‘‘Starbound’’) and Starbound Reinsurance II Limited (‘‘Starbound II’’), all recorded under the equity method of accounting, and DaVinci Reinsurance Ltd. (‘‘DaVinci’’). Because the Company owns a minority 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. Minority interest represents the interests of external parties with respect to the net income and shareholders’ equity of DaVinciRe. Renaissance Underwriting Managers Ltd., a wholly owned subsidiary, acts as exclusive underwriting manager for these joint ventures in return for fee-based income and profit participation.


	•	The Company’s Individual Risk operations include direct insurance and quota share reinsurance written through the operating subsidiaries of Glencoe Group Holdings Ltd. (‘‘Glencoe Group’’). These operating subsidiaries principally include Stonington Insurance Company (‘‘Stonington’’), which writes business on an admitted basis, and Glencoe Insurance Ltd. (‘‘Glencoe’’) and Lantana Insurance Ltd. (‘‘Lantana’’), which write business on an excess and surplus lines basis, and also provide reinsurance coverage, principally through quota share contracts, which are analyzed on an individual risk basis.

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.

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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 from reinsurers of a portion of certain claims and claim expenses in excess of various retentions. The Company remains liable to the extent that any third-party reinsurer or other obligor fails to meet its obligations. The earned reinsurance premiums ceded were $190.2 million and $96.7 million for the six months ended June 30, 2007 and 2006, respectively. 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. Total reinsurance recoveries netted against claims and claim expenses incurred for the six months ended June 30, 2007 were $62.4 million compared to $12.5 million for the six months ended June 30, 2006.

Basic income per common share is based on weighted average common shares and excludes any dilutive effects of stock options and restricted stock. Diluted income per common share assumes the exercise of all dilutive stock options and restricted stock grants. The following tables set forth the computation of basic and diluted income per common share for the three and six months ended June 30, 2007 and 2006:


Three months ended June 30,	2007			2006
(in thousands of U.S. dollars, except share and per share data)
Numerator:
Net income available to common shareholders		$	183,166		$	130,408
Denominator:
Denominator for basic income per common share –
Weighted average common shares			71,258,606			71,048,845
Per common share equivalents of employee stock options and restricted shares			1,171,024			876,678
Denominator for diluted income per common share – Adjusted weighted average common shares and assumed conversions			72,429,630			71,925,523
Basic income per common share		$	2.57		$	1.84
Diluted income per common share		$	2.53		$	1.81


Six months ended June 30,	2007			2006
(in thousands of U.S. dollars, except share and per share data)
Numerator:
Net income attributable to common shareholders		$	373,971		$	309,388
Denominator:
Denominator for basic income per common share –
Weighted average common shares			71,269,626			70,991,781
Per common share equivalents of employee stock options and restricted shares			1,201,970			864,193
Denominator for diluted income per common share – Adjusted weighted average common shares and assumed conversions			72,471,596			71,855,974
Basic income per common share		$	5.25		$	4.36
Diluted income per common share		$	5.16		$	4.31

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4.	The Board of Directors of RenaissanceRe declared, and RenaissanceRe paid, a dividend of $0.22 per share to shareholders of record on each of March 15 and June 15, 2007.

The Board of Directors has authorized a share repurchase program of $150.0 million, of which $138.2 million remained available at July 23, 2007. The Company repurchased $11.1 million of shares during the six months ended June 30, 2007. Future repurchases of common shares will depend on, among other matters, the market price of the common shares and the capital requirements of RenaissanceRe. See ‘‘Part II – Other Information – Item 2.’’

The Company conducts its business through two reportable segments, Reinsurance and Individual Risk. The Company’s Reinsurance segment provides reinsurance through its property catastrophe reinsurance and specialty reinsurance business units and through joint ventures and other activities managed by its Ventures unit. Only Ventures’ business activities that appear in the Company’s consolidated underwriting results, such as DaVinci and certain reinsurance transactions, are included in the Company’s Reinsurance segment results.

The Company’s financial results relating to Top Layer Re, Starbound, Starbound II, ChannelRe Holdings Ltd. (‘‘ChannelRe’’) and Platinum Underwriters Holdings Ltd. (‘‘Platinum’’) 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 its weather-related operating subsidiaries including Weather Predict Inc., Weather Predict Consulting Inc., RenRe Investment Managers Ltd. and Renaissance Trading Ltd.

The Company’s Individual Risk segment provides primary insurance and quota share reinsurance.

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

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A summary of the significant components of the Company’s revenues and expenses for the three and six months ended June 30, 2007 and 2006 is as follows:


Three months ended June 30, 2007	Reinsurance				Individual Risk				Eliminations (1)			Other				Total
(in thousands of U.S. dollars, except ratios)
Gross premiums written		$	606,215			$	238,391			$	1,254		$	—			$	845,860
Net premiums written		$	428,355			$	181,487							—			$	609,842
Net premiums earned		$	225,987			$	132,467							—			$	358,454
Net claims and claim expenses incurred			62,528				76,326							—				138,854
Acquisition expenses			25,927				33,582							—				59,509
Operational expenses			16,451				10,076							—				26,527
Underwriting income		$	121,081			$	12,483							—				133,564
Net investment income														118,140				118,140
Equity in earnings of other ventures														9,675				9,675
Other loss														(5,498	)			(5,498	)
Interest and preference share dividends														(17,770	)			(17,770	)
Minority interest – DaVinciRe														(37,399	)			(37,399	)
Other items, net														(5,980	)			(5,980	)
Net realized losses on investments														(11,566	)			(11,566	)
Net income available to common shareholders													$	49,602			$	183,166
Net claims and claim expenses incurred – current accident year		$	112,208			$	85,793										$	198,001
Net claims and claim expenses incurred – prior accident years			(49,680	)			(9,467	)										(59,147	)
Net claims and claim expenses incurred – total		$	62,528			$	76,326										$	138,854
Net claims and claim expense ratio – current accident year			49.7	%			64.8	%										55.2	%
Net claims and claim expense ratio – prior accident years			(22.0	%)			(7.1	%)										(16.5	%)
Net claims and claim expense ratio – calendar year			27.7	%			57.7	%										38.7	%
Underwriting expense ratio			18.8	%			33.0	%										24.0	%
Combined ratio			46.5	%			90.7	%										62.7	%

(1)	Represents gross premiums ceded from the Individual Risk segment to the Reinsurance segment.

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Three months ended June 30, 2006	Reinsurance				Individual Risk				Eliminations (1)				Other				Total
(in thousands of U.S. dollars, except ratios)
Gross premiums written		$	562,325			$	210,829			$	(30,603	)		$	—			$	742,551
Net premiums written		$	361,558			$	150,686								—			$	512,244
Net premiums earned		$	278,061			$	152,880								—			$	430,941
Net claims and claim expenses incurred			97,945				109,391								—				207,336
Acquisition expenses			31,091				43,506								—				74,597
Operational expenses			19,763				9,293								—				29,056
Underwriting income (loss)		$	129,262			$	(9,310	)							—				119,952
Net investment income															74,012				74,012
Equity in earnings of other ventures															9,221				9,221
Other loss															(84	)			(84	)
Interest and preference share dividends															(19,032	)			(19,032	)
Minority interest – DaVinciRe															(21,207	)			(21,207	)
Other items, net															(8,106	)			(8,106	)
Net realized losses on investments															(24,348	)			(24,348	)
Net income available to common shareholders														$	10,456			$	130,408
Net claims and claim expenses incurred – current accident year		$	100,776			$	117,892											$	218,668
Net claims and claim expenses incurred – prior accident years			(2,831	)			(8,501	)											(11,332	)
Net claims and claim expenses incurred – total		$	97,945			$	109,391											$	207,336
Net claims and claim expense ratio – current accident year			36.2	%			77.1	%											50.7	%
Net claims and claim expense ratio – prior accident years			(1.0	%)			(5.5	%)											(2.6	%)
Net claims and claim expense ratio – calendar year			35.2	%			71.6	%											48.1	%
Underwriting expense ratio			18.3	%			34.5	%											24.1	%
Combined ratio			53.5	%			106.1	%											72.2	%

(1)	Represents gross premiums ceded from the Individual Risk segment to the Reinsurance segment.

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Six months ended June 30, 2007	Reinsurance			Individual Risk			Eliminations (1)				Other				Total
(in thousands of U.S. dollars, except ratios)
Gross premiums written		$	1,122,182		$	361,707		$	(5,300	)		$	—			$	1,478,589
Net premiums written		$	904,574		$	276,295							—			$	1,180,869
Net premiums earned		$	480,766		$	240,306							—			$	721,072
Net claims and claim expenses incurred			154,655			130,191							—				284,846
Acquisition expenses			54,289			68,949							—				123,238
Operational expenses			34,642			20,409							—				55,051
Underwriting income		$	237,180		$	20,757							—				257,937
Net investment income													226,155				226,155
Equity in earnings of other ventures													20,376				20,376
Other loss													(7,701	)			(7,701	)
Interest and preference share dividends													(40,885	)			(40,885	)
Minority interest – DaVinciRe													(66,506	)			(66,506	)
Other items, net