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RenaissanceRe results hit by expenses from Platinum buy


RenaissanceRe Holdings Ltd.’s net income in the fourth quarter of 2015 dropped as it completed its acquisition of fellow Bermuda insurer Platinum Underwriters Holdings Ltd. in the face of abundant capacity, the reinsurer reported.

The Pembroke, Bermuda-based reinsurer’s fourth-quarter profit dropped 42.9% from the same period a year earlier to $125.87 million, the company said Tuesday in an earnings statement.

This was an important year for the company, which completed its “first major acquisition” and remained disciplined, building portfolios “designed to perform well against even the most challenging market conditions,” RenRe President and CEO Kevin J. O’Donnell said Wednesday during a conference call with analysts.

Jeffrey D. Kelly, the company’s chief operating officer and chief financial officer, noted during the call that $1.6 million, booked as a corporate expense, was associated with the March acquisition and integration of Hamilton, Bermuda-based Platinum.

As a result of the acquisition, “we now have all the tools we need to effectively execute our strategy,” Mr. O’Donnell added.

Fourth-quarter net written premiums increased to $236.7 million, more than double those in the fourth quarter of 2014, the reinsurer said. The increase was “driven by Platinum and the closing of a large mortgage-related credit reinsurance contract,” San Francisco-based Nomura Securities International Inc. analyst Cliff Gallant said in a research note.

Its fourth-quarter combined ratio deteriorated to 61.3% from 32.3% in the prior-year period.

“The overall combined ratio was a little better than our estimate at 61.3% vs. our 63.5% as lower-than-expected reserve releases of 10% were offset by a low current-period loss ratio,” Mr. Gallant said in the note.

For the year, RenRe total revenue increased 20.2% to $1.52 billion.

“While the outlook for the company’s core business is tough, we view the company’s valuation as fair and that there is possibility of the company seeking strategic alternatives,” Mr. Gallant said.

The reinsurer reported net income of $542.24 million for the year, a decrease of 21.0% from 2014, and net premiums written for the year were $1.42 billion, up 32.6% from 2014, according to the statement.

Meanwhile, net premiums written in the specialty reinsurance category were $582.91 million for the year, up 97.0% from 2014. The catastrophe reinsurance segment increased 2.9% to $557.37 million and the Lloyd’s segment increased 19.8% to $275.95 million.

Due to lower premiums earned and slightly higher operational expenses, among other things, the Lloyd’s segment combined ratio of 104.2% for the year was “disappointing,” Mr. Kelly said.

For the year, RenRe reported a combined ratio of 64.7%, up from 50.2% in 2014.

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