RenaissanceRe Holdings Ltd.

Good morning and welcome to Renaissance Re's fourth quarter and year-end conference call. Joining me today to discuss our results are Kevin O'Donnell, President and Chief Executive Officer, and Bob Qutub, Executive Vice President and Chief Financial Officer. First, some housekeeping matters. Our discussion today will include forward-looking statements. It's important to note that actual results may differ materially from the expectations shared today. Additional information regarding the factors shaping these outcomes can be found in our SEC filings and in our earnings relief. During today's call, we will also present non-GAAP financial measures. Reconciliations to GAAP metrics and other information concerning non-GAAP measures may be found in our earnings release and financial supplement, which are available on our website at renry.com. And now I'd like to turn the call over to Kevin.

Thanks, Keith. Thanks, everybody, for joining the call. We apologize about the technical difficulties. I'm going to read my comments again to make sure that everybody has the same information. I guess I should feel pleased to report the results, so it's my pleasure to read them a second time. I apologize for those who have had to hear them again. Good morning, everybody, and thank you for joining today's call. We closed 2022 on a strong note with excellent Q4 financial results reflecting solid performance across segments, favorable development, and a rapidly growing contribution from investments. However, I'd like to begin today with a follow-up to my remarks last quarter. I discussed a series of changes we were seeking to ensure an increased margin of safety for investors in the face of mounting catastrophe losses, which exceeded $130 billion in 2022, as well as the continued effects of climate change, inflation, and the increasing occurrence of secondary perils. Importantly, I can now report that we accomplished all of the ambitious goals we set for ourselves in one of the most pivotal January 1 renewals in our history. Most notably, this includes a step change in property reinsurance pricing. These changes have resulted in a fundamental and necessary reset in the relationship between insurers and reinsurers, promising more appropriate risk-adjusted returns to investors while ensuring customers sustainable access to reliable, high-quality capacity. The structural shift that the market has undergone constitutes a stabler, long-term equilibrium that will protect the interests of both investors and customers. The renewal in our casualty business was also successful. We saw rate increases in many specialty classes and made good progress on reducing seating commissions in traditional casualty lines, which on average reduced by about one percentage point. I will discuss the casualty segment in greater detail in part two of my comments. Turning to our 22 results, At the end of each year, I like to review our performance by responding to two questions. The first is, how did we do financially? And the second is, have we executed our strategy effectively? Starting with the first question, we had an excellent fourth quarter from both a gap and operating perspective with an operating ROE of 30%. For the year, we reported a little more than $300 million of operating income, which represents a 6% return on common equity. To be clear, I do not think a 6% return on equity is acceptable. Quite the opposite. I've said multiple times that our business needs to have superior long-term returns to justify the volatility that we take. That said, this 6% return is materially better than our results in 2021 when we roughly broke even despite a similar level of industry catastrophe losses. This improving performance reflects the many accelerating tailwinds our business is benefiting from. including the higher reinsurance rates, increased investment income, and growing capital partners' business. We are also seeing the benefit of higher operating leverage from the investments we made in growing the scale of our business. Bob will address these tailwinds more fulsomely in his comments. This quarter, we also demonstrated the benefit of our increased diversification. As we achieved excellent results despite material net negative impact from large catastrophic events, Given the reset in underwriting at January 1st, we would expect a significantly smaller loss if similar events occur this year. In 2023, we believe that this upward trajectory on financial performance will continue, as we will be paid more for the risk that we take, earn substantially more on the investments that we make, and continue to grow our fee-generating capital partner business. Which leads to my second question, have we executed our strategy effectively? If there's one word to define our strategy in 2022, it was consistent. We remain committed to being a global P&C reinsurance company at scale and a leading underwriter of property catastrophe risk. We have chosen to occupy this position because it is a critical link in the insurance value chain where we have a competitive advantage. Surveying the insurance landscape, We have chosen this position because it is the most effective means for us to deliver superior profitability to shareholders over the long term. Over the past decade, we have emphasized building sustainable platforms that would support long-term profitable growth. We have added scale to our business by growing our top line, bottom line, and capital, and have diversified our business by adding new products, platforms, customers, and capabilities. These actions have diversified our earnings, increased our leverage, and secured us a leading competitive position. It has also provided us the confidence to maintain our strategy and continue being a leading writer for PropertyCat Reinsurance. That said, in 2022, we challenged our underwriters to optimize our property portfolio, and throughout the year, we target improved profitability. This culminated in the most recent January 1 renewal, when our strategic consistency and focus on improving the bottom line enabled us to deploy significant and sustainable capacity to our customers. As a result, we entered 2023 with each of our three drivers of profit poised to outperform. I couldn't be more excited about the current environment and our positioning in it and the potential to create material value for our shareholders. That concludes my initial comments. I'll provide more detailed update on the renewal and our segments at the end of the call. But first, I'll turn it over to Bob to discuss the financial performance for the quarter.

Thanks, Kevin. And good morning again, everyone. We finished 22 with a very strong quarter, reporting operating income of $322 million and an annualized operating return on average common equity of 30%. For the year, we generated operating income of $316 million and an operating return on average common equity of just over 6%. Our performance this year demonstrates that our three drivers of profit, underwriting, fees, and investments, are increasingly benefiting our financial results and making them more resilient to volatility. I will discuss our fourth quarter results in more detail in a moment, but here are a few points from 2022 that I'd like to highlight. First, casualty and specialty performance remains strong. and the segment has been consistently profitable every quarter for the last two years. In 2022, the segment delivered a consistent mid-90s combined ratio and grew net written premiums by 42%. We have been successfully growing the casualty and specialty segment into a profitable market. Kevin will talk more about the renewal, but as we look forward to 2023, we feel great about the positioning of this business and continue to expect a mid-90s combined ratio in 2023. Second, our property segment broke even in 2022, despite a very active year, including a major Florida hurricane. There's a seven percentage point improvement from 2021, which had a similar magnitude of industry losses. The improved performance is a result of the increased rate and tightening terms and conditions we achieved in our property book throughout 2022. But importantly, the additional underwriting actions we took in January 1st should continue to benefit the property book's results. Third, our capital partners business continues to lead the industry in the third-party capital management. In 2022, we raised a total of $1.4 billion in third-party capital with an additional $400 billion effective January 1, 2023. In 2022, management fees contributed a consistent $25 to $30 million per quarter, and we expect this to run around $35 million per quarter in 2023. reflecting an increase in capital managed primarily in DaVinci. We also expect to see performance fees start to recover mid-year absent any significant catastrophe events. And finally, retained net investment income grew considerably in the second half of the year to $144 million in the fourth quarter. Over the past few quarters, we have rotated the book into more current yields. Subject to market changes, we expect retained net investment income to continue to increase, although at a milder pace. Importantly, as part of our strategic positioning as a global P&C insurer, we have scaled these diversifying income streams very efficiently. Over the last five years, common equity is up 15%, while casualty gross premiums written have quadrupled, management fees have doubled, and net investment income is up 2.5 times. As we look towards 2023, we feel we are in an excellent position with all three drivers of profit poised for continued improvement and outperformance. In addition, we organically grew shareholder equity this quarter by $440 million and have over $600 million of unrealized losses on our fixed maturity investments that will accrete to par over time. All of this puts us in an excellent capital position. We are in a very attractive market and are excited about the many capital deployment opportunities in 2023 and beyond that should result in strong financial performance. Moving now to our fourth quarter results and our first driver of profit underwriting. Beginning with casualty and specialty portfolio, the segment results were strong again this quarter, and we reported a combined ratio of 94% for the quarter and 95% for the year. Gross and net premiums written were up 31%, continuing to reflect the growth and underlying rate improvements from prior year renewal periods during the year. Net premiums earned for the casualty and specialty segment were $936 million, up 31%. In the first quarter of 2023, we're expecting net earned premiums to be about $975 million. Turning now to our property segment, where we had a solid quarter. This segment reported a combined ratio of 63%. The current accident year loss ratio of 54% contained 19 percentage points from large CAT events. which had a net negative impact on our financial results of $84 million, about one half of which came from Winter Storm Elliot and Hurricane Nicole, and the remainder coming from aggregates. These events impacted both property cap and other property. And for property cap, the current accident-year loss ratio was 42%, and included 34 percentage points from large CAT events. For other property, the current accident-year loss ratio was 63%, and included 8 percentage points from large CAT events and an additional 5 percentage points from the One Oak natural gas explosion. In the quarter, there was also 19 percentage points of favorable development for the property segment, primarily driven by releases on 2017 through 2021 large CAT events in the property catastrophe class of business. Net premiums earned for other property were $393 million for the quarter. Going forward, we expect premiums in our other property business to decrease as we shift our focus to property catastrophe business where we saw the most attractive opportunities. Moving now to fee income and our capital partners business, where overall fees were $30 million. Management fees were $26 million, continuing to provide a steady source of income in the quarter. Starting in the first quarter of 2023, we expect management fees to increase to around $35 million per quarter, reflecting increased capital managed on our joint venture balance sheets. Performance fees continue to be depressed due to the cumulative impact of CAD events in 21 and 22. We expect these fees to start recovering by the second quarter of 23. Overall, we share $236 million of our net income with partners in our joint ventures as reflected in our redeemable non-controlling interest. $207 million of this amount was operating income and the remainder being mark-to-market gains. Finally, on capital partners, as of January 1st, we reduced our ownership stake in DaVinci from 31% to 25% in order to make room for several long-term oriented investors. Moving now to investments, where net investment income continues to have a growing impact on our financial statements. In the fourth quarter, retained net investment income was $144 million. The higher net investment income was driven by higher coupon yields as we rotate our investment portfolio, higher yields on our floating rate exposure, as well as an increase in invested assets. Over the course of 2022, a retained annualized net investment income return has increased from 1.5% to 4.1%, and our new money yield, which is reflected as retained yield to maturity, has increased from 1.8% to 5.6%. As a result, in the first quarter of 2023, we expect quarterly net investment income to be about $150 million. Overall, duration has declined on a managed basis to 2.5 years, largely driven by capital increases for our joint ventures. On a retained basis, duration remains relatively flat at 3.3 years. In the fourth quarter, rebounding equity markets, tighter credit spreads, and bond accretion led to retained mark-to-market losses of 100, excuse me, retained mark-to-market gains of $129 million. For the year, we reported total retained mark-to-market losses of $1.5 billion, principally in our fixed maturity portfolio. As I discussed last quarter, these are high-quality assets, and we expect to earn these losses back over time in two ways. First, the securities that we hold, they will creep to par over time. And second, through increased net investment income, where we proactively sold the securities and reinvested at higher coupons. Retained unrealized losses in our fixed maturity portfolio are about $13.93 per share. Finally, turning briefly to expenses, our operating expense ratio was up by about 1.4 percentage points in the quarter, and for the year, the operating expense ratio was relatively flat. The increase in absolute operating expenses reflects investments in people, and the increased cost as we return to a more normal operating environment. Going forward, we expect to hold the operating expense ratio relatively flat. In conclusion, we finished the year with a very strong fourth quarter. This demonstrated the growing strength of each of our three drivers of profit. Even with significant catastrophe activity in the year, we generated a 6% operating return on equity. As we look forward to 2023, We expect continued stable underwriting income from our casualty and specialty business, our property segment to benefit from increased rate and tightening terms and conditions, stable and increasing management income with upside from performance fees, and significant retained net investment income. And with that, I'll now turn the call back to Kevin.