Lower rates hit reinsurer's revenue

Falling catastrophe reinsurance rates led to lower first-quarter 2015 revenue for RenaissanceRe Holdings Ltd., but the reinsurer's senior executives see a bright future resulting from its March acquisition of Platinum Underwriters Holdings Ltd.

RenaissanceRe on Tuesday reported gross written premiums of $643.6 million for the first quarter of 2015, an 8.7% drop from the same period last year. Net written premiums declined 10.3% to $404.0 million. And the reinsurer reported net income attributable to shareholders of $167.8 million, an 11.1% increase over 2014.

The Pembroke, Bermuda-based reinsurer reported a 55.9% combined ratio compared with 47.2% in the first quarter of 2014, and a $22.1 million favorable development in prior-year claims and expenses.

The fall in revenue was largely attributable to falling reinsurance rates, according to a RenaissanceRe statement announcing the results. Catastrophe reinsurance rates have been falling for months as reinsurers have seen low loss levels and increased competition from nontraditional reinsurance providers, such as pension funds and hedge funds, that have invested in catastrophe bonds and other vehicles.

RenaissanceRe's purchase of Platinum has been seen as an effort to reduce its reliance on catastrophe reinsurance business as Platinum writes a significant amount of casualty business.

RenaissanceRe Holdings Ltd. President and CEO Kevin J. O'Donnell said the integration of Platinum is going well.

“We're working well as a team and everyone is clear about their role in the group,” Mr. O'Donnell said during a Wednesday conference call with analysts.

RenaissanceRe recorded $40.4 million in corporate expenses during the quarter as a result of the acquisition of Platinum, now known as Renaissance Reinsurance U.S. Inc., Chief Operating Officer and Chief Financial Officer Jeffrey D. Kelly said during the call. Expenses included $11.5 million in transaction-related costs, $900,000 in integration-related costs, and $28 million in compensation-related costs and consulting fees.

The company has “begun to renew business from both entities as a single platform with a common brand,” Mr. Kelly said, adding that, “at a high level, we like their book and we expect to renew the vast majority of it.”