<PAGE>
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
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: September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------ --------------------
Commission file number: 34-0-26512
RENAISSANCERE HOLDINGS LTD.
---------------------------
(Exact name of registrant as specified in its charter)
BERMUDA 98-013-8020
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
RENAISSANCE HOUSE
8-12 EAST BROADWAY
PEMBROKE, BERMUDA HM 19
(Address of principal executive offices) (Zip Code)
(441) 295-4513
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
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
--- ---
The number of outstanding shares of RenaissanceRe Holding Ltd.'s common stock,
par value US $1.00 per share, as of September 30, 2000 was 19,341,788
Total number of pages in this report: 24
-1-
<PAGE>
RenaissanceRe Holdings Ltd.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
<S> <C>
PART I -- Financial Information
ITEM 1 -- Financial Statements
Consolidated Balance Sheets as of September 30, 2000
(Unaudited) and December 31, 1999 3
Unaudited Consolidated Statements of Operations for
the three and nine month periods ended September 30, 2000 and 1999 4
Unaudited Consolidated Statements of Changes in Shareholders'
Equity for the nine month periods ended September 30, 2000 and 1999 5
Unaudited Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 2000 and 1999 6
Notes to Unaudited Consolidated Financial Statements 7
ITEM 2 -- Management's Discussion and Analysis of Results of
Operations and Financial Condition 12
ITEM 3 -- Quantitative and Qualitative Disclosures About Market Risk 22
PART II -- Other Information 23
ITEM 1 -- Legal Proceedings
ITEM 2 -- Changes in Securities
ITEM 3 -- Defaults Upon Senior Securities
ITEM 4 -- Submission of Matters to a Vote of Security Holders
ITEM 5 -- Other Information
ITEM 6 -- Exhibits and Reports on Form 8-K
Signature - RenaissanceRe Holdings Ltd. 24
</TABLE>
-2-
<PAGE>
Part I - Financial information
Item 1 - Financial statements
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of United States Dollars, except per share amounts)
<TABLE>
<CAPTION>
AS AT
-----------------------------------------
SEPTEMBER 30, 2000 DECEMBER 31, 1999
-------------------- ------------------
(Unaudited)
<S> <C> <C>
ASSETS
Fixed maturity investments available for sale, at fair value
(Amortized cost $968,909 and $926,176 at September 30, 2000
and December 31, 1999, respectively) $ 965,931 $ 907,706
Short term investments, at cost 12,351 12,759
Other investments 44,986 22,204
Cash and cash equivalents 203,065 132,112
-------------------- ------------------
Total investments and cash 1,226,333 1,074,781
Premiums receivable 164,786 80,455
Ceded reinsurance balances 58,566 50,237
Losses and premiums recoverable 205,394 328,627
Accrued investment income 13,249 13,456
Deferred acquisition costs 13,013 14,221
Other assets 42,084 55,466
-------------------- ------------------
TOTAL ASSETS $ 1,723,425 $ 1,617,243
==================== ==================
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
LIABILITIES
Reserve for claims and claim expenses $ 422,013 $ 478,601
Reserve for unearned premiums 173,089 98,386
Bank loans 250,000 250,000
Reinsurance balances payable 76,020 50,157
Other 48,636 50,140
-------------------- ------------------
TOTAL LIABILITIES 969,758 927,284
-------------------- ------------------
Minority Interest - Company obligated mandatorily
redeemable Capital Securities of a subsidiary trust holding
solely junior subordinated debentures of the Company 89,630 89,630
SHAREHOLDERS' EQUITY
Common shares and additional paid-in capital 27,802 19,686
Unearned stock grant compensation (13,061) (10,026)
Accumulated other comprehensive income (2,978) (18,470)
Retained earnings 652,274 609,139
-------------------- ------------------
TOTAL SHAREHOLDERS' EQUITY 664,037 600,329
-------------------- ------------------
TOTAL LIABILITIES, MINORITY INTEREST, AND
SHAREHOLDERS' EQUITY $ 1,723,425 $ 1,617,243
==================== ==================
BOOK VALUE PER COMMON SHARE $ 34.33 $ 30.50
==================== ==================
COMMON SHARES OUTSTANDING 19,342 19,686
==================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
-3-
<PAGE>
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine month periods ended September 30, 2000 and 1999
(in thousands of United States Dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED YEAR TO DATE
----------------------------------- ----------------------------------
SEPT. 30, 2000 SEPT. 30, 1999 SEPT. 30, 2000 SEPT. 30, 1999
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES
Gross Premiums Written $ 122,470 $ 97,582 $ 380,591 $ 320,051
================= ================ ================ ================
Net premiums written $ 85,564 $ 58,238 $ 253,693 $ 209,451
Increase in unearned premiums (12,280) (4,115) (65,125) (39,672)
----------------- ---------------- ---------------- ----------------
Net premiums earned 73,284 54,123 188,568 169,779
Net investment income 21,236 15,714 58,663 42,859
Net foreign exchange gains (losses) 447 107 141 (165)
Other income 2,960 882 6,352 1,073
Net realized gains (losses) on investments 1,482 (6,020) (8,899) (11,547)
----------------- ---------------- ---------------- ----------------
TOTAL REVENUES 99,409 64,806 244,825 201,999
----------------- ---------------- ---------------- ----------------
EXPENSES
Claims and claim expenses incurred 29,953 19,420 72,544 56,120
Acquisition expenses 11,074 7,540 25,918 20,349
Operational expenses 11,050 8,771 27,922 27,379
Corporate expenses 196 693 5,070 8,590
Interest expense 4,639 2,675 13,249 5,793
----------------- ---------------- ---------------- ----------------
Total expenses 56,912 39,099 144,703 118,231
----------------- ---------------- ---------------- ----------------
Income before minority interest and taxes 42,497 25,707 100,122 83,768
Minority interest - Company obligated
mandatorily redeemable Capital Securities
of a subsidiary trust holding solely
junior subordinated debentures of the
Company 1,866 1,861 5,663 6,100
----------------- ---------------- ---------------- ----------------
Income before taxes 40,631 23,846 94,459 77,668
Income tax expense (benefit) 4,986 (128) 5,018 (373)
----------------- ---------------- ---------------- ----------------
NET INCOME $ 35,645 $ 23,974 $ 89,441 $ 78,041
================= ================ ================ ================
Earnings per Common Share - basic $ 1.89 $ 1.18 $ 4.71 $ 3.78
Earnings per Common Share - diluted $ 1.83 $ 1.17 $ 4.61 $ 3.74
Operating earnings per Common Share - diluted $ 1.75 $ 1.46 $ 5.07 $ 4.30
Average shares outstanding - basis 18,877 20,356 18,998 20,673
Average shares outstanding - diluted 19,520 20,536 19,381 20,854
Claims and claim expense ratio 40.9% 35.9% 38.4% 33.1%
Expense ratio 30.2% 30.1% 28.6% 28.1%
----------------- ---------------- ---------------- ----------------
Combined ratio 71.1% 66.0% 67.0% 61.2%
================= ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
<PAGE>
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
(in thousands of United States Dollars)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------------- --------------
<S> <C> <C>
Common Stock & additional paid-in capital
Balance -- January 1 $ 19,686 $ 39,035
Exercise of options, and issuance of stock and restricted
stock awards 8,789 6,422
Repurchase of capital securities - 885
Repurchase of shares (673) (25,858)
----------------- --------------
Balance -- September 30 27,802 20,484
----------------- --------------
Unearned stock grant compensation
Balance -- January 1 (10,026) (8,183)
Restricted stock grants awarded, net (7,141) (5,387)
Amortization 4,106 2,573
----------------- --------------
Balance -- September 30 (13,061) (10,997)
----------------- --------------
Accumulated other comprehensive income (1)
Balance -- January 1 (18,470) (5,144)
Net unrealized gains (losses) on securities, net of
adjustment (see disclosure) 15,492 (11,672)
----------------- --------------
Balance -- September 30 (2,978) (16,816)
----------------- --------------
Retained earnings
Balance -- January 1 609,139 586,524
Net income 89,441 78,041
Dividends paid (21,871) (22,001)
Repurchase of shares (24,435) (22,761)
Exercise of options - 354
----------------- --------------
Balance -- September 30 652,274 620,157
----------------- --------------
Total Shareholders' Equity $ 664,037 $ 612,828
================= ==============
Comprehensive income
Net income $ 89,441 $ 78,041
Other comprehensive income 15,492 (11,672)
----------------- --------------
Comprehensive income $ 104,933 $ 66,369
================= ==============
Disclosure regarding net unrealized gains (losses)
Net unrealized holding gains (losses) arising during period $ 6,593 $ (23,219)
Net realized losses (gains) included in net income 8,899 11,547
----------------- --------------
Change in net unrealized gains (losses) on securities $ 15,492 $ (11,672)
================= ==============
</TABLE>
(1) Note - comprehensive income (loss) for the quarters ended September 30,
2000 and 1999 were $8.8 million and $(0.6) million, respectively.
The accompanying notes are an integral part of these financial statements
-5-
<PAGE>
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
(in thousands of United States Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
YEAR TO DATE
--------------------------------------
SEPT. 30, 2000 SEPT. 30, 1999
----------------- -----------------
<S> <C> <C>
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES
Net income $ 89,441 $ 78,041
ADJUSTMENTS TO RECONCILE NET INCOME TO
CASH PROVIDED BY OPERATING ACTIVITIES
Amortization and depreciation (1,260) 2,082
Net realized investment losses 8,899 11,547
Amortization/ writeoff of goodwill 1,654 6,888
Change in:
Reinsurance balances, net (58,468) (111,102)
Ceded reinsurance balances (8,329) (27,823)
Deferred acquisition costs 1,208 (7,693)
Reserve for claims and claim expenses, net 66,645 77,157
Reserve for unearned premiums 74,703 68,762
Other 25,228 (13,351)
----------------- -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 199,721 84,508
----------------- -----------------
CASH FLOWS USED IN INVESTING ACTIVITIES
Proceeds from sale of investments 1,592,633 1,571,937
Purchase of investments available for sale (1,674,422) (1,676,875)
----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES (81,789) (104,938)
----------------- -----------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Proceeds from bank loan - 150,000
Purchase of capital securities - (5,015)
Dividends paid (21,871) (22,001)
Purchase of Common Shares (25,108) (48,619)
----------------- -----------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (46,979) 74,365
----------------- -----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 70,953 53,935
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 132,112 115,701
----------------- -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 203,065 $ 169,636
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements
-6-
<PAGE>
RenaissanceRe Holdings Ltd., and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(Unaudited)
1. The consolidated financial statements have been prepared on the basis of
United States generally accepted accounting principles ("GAAP") for interim
financial information and 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. The
consolidated financial statements include the accounts of RenaissanceRe
Holdings Ltd. ("RenaissanceRe") and its wholly owned subsidiaries,
including Renaissance Reinsurance Ltd. ("Renaissance Reinsurance"), Glencoe
Insurance Ltd. ("Glencoe"), Renaissance U.S. Holdings, Inc. ("Renaissance
U.S."), RenaissanceRe Capital Trust (the "Trust") and Renaissance
Underwriting Managers, Ltd. ("Renaissance Managers"). Renaissance Managers
acts as underwriting manager and underwrites worldwide property catastrophe
reinsurance programs on behalf of Overseas Partners Cat Ltd. ("OPCat"), a
subsidiary of Overseas Partners Ltd., a Bermuda Company. Other consolidated
entities include DeSoto Insurance Company ("DeSoto"), a wholly owned
subsidiary of Glencoe; Nobel Insurance Company ("Nobel"), a wholly owned
subsidiary of Renaissance U.S.; and Renaissance Reinsurance of Europe
("Renaissance Europe"), a subsidiary of Renaissance Reinsurance.
RenaissanceRe and its subsidiaries are collectively referred to herein as
the "Company". All intercompany transactions and balances have been
eliminated on consolidation.
Renaissance Reinsurance has also entered into a joint venture, Top Layer
Reinsurance Ltd. ("Top Layer Re") with State Farm Automobile Insurance
Company.
Minority interests represent the interests of external parties in respect
of net income and shareholders' equity of the Trust. 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 for any interim period will not necessarily be indicative of
results of operations for the full fiscal year.
2. Significant Accounting Policies
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133 is effective for all fiscal
years beginning after June 15, 2000. At this time, the Company expects that
the adoption of SFAS No. 133 will have no impact on the Company's financial
statements.
3. The Company utilizes reinsurance 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 claims expenses from reinsurers in excess of
various retentions and loss warranties. The Company would remain liable to
the extent that any third party reinsurance company fails to meet its
obligations. The earned reinsurance premiums ceded were $116.2 million and
$89.7 million for the nine months ended September 30, 2000 and 1999,
respectively. Other than loss recoveries, certain of the Company's ceded
reinsurance contracts provide for recoveries of additional premiums,
reinstatement premiums and coverage for lost no claims bonuses which are
incurred when losses are ceded to those reinsurance contracts.
-7-
<PAGE>
Total recoveries (reductions) netted against premiums and claims and claim
expenses incurred for the nine months ended September 30, 2000 were $4.8
million compared to $85.9 million for the nine months ended September 30,
1999.
Included in losses and premiums recoverable are recoverables of $18.8
million which are related to retroactive reinsurance agreements. In
accordance with SFAS No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts," losses related to retroactive
reinsurance agreements are required to be included in claims and claim
expenses incurred as they become known. However, offsetting recoverables,
if any, are deferred and reflected in the statement of operations in future
periods, based on the recovery method. As of September 30, 2000, the
Company has deferred $10.3 million of recoveries related to a retroactive
reinsurance contract. This has been included in other liabilities on the
consolidated balance sheet. As the amounts are recovered, the recoveries
will offset claims and claim expenses incurred in the consolidated
statement of operations.
4. The Company paid interest on its outstanding loans of $13.3 million for the
nine month period ended September 30, 2000 and $5.8 million for the same
period in the previous year. The increase in interest expense is due to
additional borrowings of $150.0 million in 1999. See "Financial Condition -
Capital Resources and Shareholders' Equity" for further discussion.
On each of March 1 and September 1, 2000, the Company paid a semi-annual
dividend of $4.3 million on the Company obligated mandatorily redeemable
capital securities of a subsidiary trust holding solely junior subordinated
debentures of the Company ("Capital Securities").
5. Basic earnings per share is based on weighted average common shares and
excludes any dilutive effects of options and restricted stock. Diluted
earnings per share assumes the exercise of all dilutive stock options and
restricted stock grants. The following table sets forth the computation of
basic and diluted earnings per share:
-8-
<PAGE>
<TABLE>
<CAPTION>
Quarter ended September 30,
2000 1999
----------- -----------
(in thousands of U.S. dollars except share and per share data)
<S> <C> <C>
Numerator:
Net income $ 35,645 $ 23,974
=========== ===========
Denominator:
Denominator for basic earnings per share -
Weighted average shares 18,877,496 20,356,231
Per share equivalents of employee stock
Options and restricted shares 642,598 179,507
----------- -----------
Denominator for diluted earnings per share -
Adjusted weighted average shares and
Assumed conversions 19,520,094 20,535,737
=========== ===========
Basic earnings per share $1.89 $1.18
Diluted earnings per share $1.83 $1.17
</TABLE>
<TABLE>
<CAPTION>
Nine months to September 30,
2000 1999
----------- -----------
(in thousands of U.S. dollars except share and per share data)
<S> <C> <C>
Numerator:
Net income $ 89,441 $ 78,041
=========== ===========
Denominator:
Denominator for basic earnings per share -
Weighted average shares 18,998,201 20,672,528
Per share equivalents of employee stock
Options and restricted shares 382,595 181,186
----------- -----------
Denominator for diluted earnings per share -
Adjusted weighted average shares and
Assumed conversions 19,380,796 20,853,714
=========== ===========
Basic earnings per share $4.71 $3.78
Diluted earnings per share $4.61 $3.74
</TABLE>
6. The Board of Directors of the Company declared, and the Company paid, a
dividend of $0.375 per share to shareholders of record on each of August
17, February 17 and May 18, 2000. On November 2, 2000, the Board of
Directors declared a dividend of $0.375 per share payable on November 30,
2000 to shareholders of record on November 16, 2000.
7. Through September 30, 2000 the Company repurchased 671,900 shares at an
aggregate cost of $25.1 million. No shares were repurchased during the
third quarter of 2000.
8. The Company has two reportable segments: reinsurance operations and primary
operations. The reinsurance segment provides property catastrophe
reinsurance as well as other reinsurance to selected insurers and
reinsurers on a worldwide basis. The primary segment provides insurance
both on a direct and on a surplus lines basis for commercial and homeowners
catastrophe-exposed property business. Data for the three and nine month
periods ended September 30, 2000 and 1999 are as follows:
-9-
<PAGE>
(IN THOUSANDS OF U.S. DOLLARS)
QUARTER ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross premiums written $ 113,522 $ 8,948 $ - $ 122,470
-----------------------------------------------------------------------------------------------
Total revenues 92,046 3,414 3,949 99,409
-----------------------------------------------------------------------------------------------
Income (loss) before taxes 40,416 494 (279) 40,631
-----------------------------------------------------------------------------------------------
ASSETS 1,255,515 240,795 227,115 1,723,425
-----------------------------------------------------------------------------------------------
Claims and claim expense ratio 43.2% -90.6% - 40.9%
-----------------------------------------------------------------------------------------------
Expense ratio 28.5% 126.2% - 30.2%
-----------------------------------------------------------------------------------------------
Combined ratio 71.7% 35.6% - 71.1%
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
QUARTER ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------------------------------
REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross premiums written $ 79,465 $ 18,117 $ - $ 97,582
-----------------------------------------------------------------------------------------------
Total revenues 54,247 9,176 1,383 64,806
-----------------------------------------------------------------------------------------------
Income (loss) before taxes 27,885 (2,465) (1,574) 23,846
-----------------------------------------------------------------------------------------------
ASSETS 1,090,097 321,888 187,586 1,599,571
-----------------------------------------------------------------------------------------------
Claims and claim expense ratio 29.4% 75.9% - 35.9%
-----------------------------------------------------------------------------------------------
Expense ratio 27.2% 48.4% - 30.1%
-----------------------------------------------------------------------------------------------
Combined ratio 56.6% 124.3% - 66.0%
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
QUARTER ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------------------------------
REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross premiums written $ 344,940 $ 35,651 $ - $ 380,591
-----------------------------------------------------------------------------------------------
Total revenues 225,764 9,705 9,356 244,825
-----------------------------------------------------------------------------------------------
Income (loss) before taxes 102,037 1,491 (9,069) 94,459
-----------------------------------------------------------------------------------------------
Assets 1,255,515 240,795 227,115 1,723,425
-----------------------------------------------------------------------------------------------
Claims and claim expense ratio 40.0% -13.3% - 38.4%
-----------------------------------------------------------------------------------------------
Expense ratio 27.5% 59.4% - 28.6%
-----------------------------------------------------------------------------------------------
Combined ratio 67.5% 46.1% - 67.0%
-----------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
NINE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------------------------------
REINSURANCE PRIMARY OTHER TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross premiums written $ 269,687 $ 50,364 $ - $ 320,051
-----------------------------------------------------------------------------------------------
Total revenues 166,614 32,193 3,192 201,999
-----------------------------------------------------------------------------------------------
Income (loss) before taxes 86,619 201 (9,152) 77,668
-----------------------------------------------------------------------------------------------
Assets 1,090,097 321,888 187,586 1,599,571
-----------------------------------------------------------------------------------------------
Claims and claim expense ratio 29.5% 52.0% - 33.1%
-----------------------------------------------------------------------------------------------
Expense ratio 26.5% 22.0% - 28.1%
-----------------------------------------------------------------------------------------------
Combined ratio 56.0% 74.0% - 61.2%
-----------------------------------------------------------------------------------------------
</TABLE>
The Company's Bermuda holding company is the primary contributor to the
results reflected in the "Other" category. The pre-tax loss of the holding
company primarily consisted of interest expense on bank loans, the minority
interest on the Capital Securities, and realized investment losses on the
sales of investments, partially offset by investment income on the assets
of the holding company.
9. The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences
between financial and tax reporting. Deferred tax assets and liabilities
are determined based on the difference between the financial statement
bases and tax bases of assets and liabilities using enacted tax rates.
The Company's U.S. subsidiaries are subject to U.S. tax. Included in other
assets is a net deferred tax asset of $18.2 million. Net operating loss
carryforwards and future tax deductions will be available to offset regular
taxable U.S. income during the carryforward period (through 2018), subject
to certain limitations.
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is a discussion and analysis of the Company's results of
operations for the three months and nine months ended September 30, 2000 and
1999 and financial condition as of September 30, 2000. This discussion and
analysis should be read in conjunction with the attached unaudited consolidated
financial statements and notes thereto and the audited consolidated financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
GENERAL
The Company provides reinsurance and insurance where risk of natural catastrophe
represents a significant component of the overall exposure. The Company's
results depend to a large extent on the frequency and severity of catastrophic
events, and the concentration and coverage offered to clients impacted thereby.
The Company's catastrophe reinsurance business includes 1) writing reinsurance
on its own behalf and 2) writing reinsurance on behalf of two joint ventures,
Top Layer Re and OPCat. The Company receives income based on the performance of
these joint ventures which is reflected in other income.
The Company also writes reinsurance with respect to various other lines,
including accident and health, aviation, satellite and finite reinsurance. The
Company may write other lines of reinsurance in the future although there can be
no assurance that any such premiums will be material to the Company. From time
to time, the Company may consider opportunistic diversification into new
ventures, either through organic growth or the acquisition of other companies or
books of business. In evaluating such new ventures, the Company seeks an
attractive return on equity, the ability to develop or capitalize on a
competitive advantage and opportunities that will not detract from its core
reinsurance operations. Accordingly, the Company regularly reviews strategic
opportunities and periodically engages in discussions regarding possible
transactions.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO THE QUARTER ENDED
SEPTEMBER 30, 1999
For the quarter ended September 30, 2000, net income available to common
shareholders was $35.6 million or $1.75 per share, compared to $24.0 million or
$1.17 per share for the same quarter in 1999.
Gross premiums written for the third quarter of 2000 and 1999 were as follows:
------------------------------------------------------------------
Quarter ended
------------------------------------------------------------------
(in thousands of U.S. dollars) 30-Sep-00 30-Sep-99
------------------------------------------------------------------
Reinsurance $113,522 $79,466
------------------------------------------------------------------
Primary 8,948 18,116
------------------------------------------------------------------
$122,470 $97,582
------------------------------------------------------------------
The majority of the increase in reinsurance premiums written by the Company
during the third quarter was due to three items: 1) increase in finite and
non-cat premiums written from $0.3
-12-
<PAGE>
million in the third quarter of 1999 compared to $17.2 million in the third
quarter 2000; 2) a $14 million increase in property catastrophe premiums written
due to increased business opportunities; and 3) a $3.2 million increase in
reinstatement premiums received during the quarter.
For the quarter ended September 30, 2000, total managed catastrophe premiums
were $113.8 million, $26.1 million of which derived from the OPCat and Top Layer
Re joint ventures, compared with $79.1 million for the same quarter of 1999,
none of which derived from the OPCat and Top Layer Re joint ventures. Total
managed catastrophe premiums represents gross catastrophe premiums written by
Renaissance Reinsurance and written on behalf of the OPCat Ltd. and Top Layer Re
Ltd. joint ventures and used by the Company to measure the Company's penetration
into the catastrophe insurance market.
During the third quarter of 2000, ceded premiums written were $36.3 million,
compared with $39.3 million for the same quarter in 1999. Premiums ceded by the
reinsurance company were $29.7 million for the quarter ended September 30, 2000
compared with $20.5 million for the same period in the prior year. Ceded
reinsurance for the primary companies was $6.6 million for the quarter ended
September 30, 2000 compared with $15.1 million for the same period of the
previous year.
The table below sets forth the Company's combined ratio and components thereof,
split by segment for the quarters ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
REINSURANCE PRIMARY TOTAL
QUARTER ENDED: 30-Sep-00 30-Sep-99 30-Sep-00 30-Sep-99 30-Sep-00 30-Sep-99
-------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Loss ratio 43.2% 29.4% -90.6% 75.9% 40.9% 35.9%
Expense ratio 28.5% 27.2% 126.2% 48.4% 30.2% 30.1%
----- ----- ------ ----- ----- -----
Combined ratio 71.7% 56.6% 35.6% 124.3% 71.1% 66.0%
==== ==== ==== ===== ==== ====
</TABLE>
The loss ratio on the reinsurance business increased primarily due to the
Company's increase in non-cat and finite premiums which normally will produce a
higher loss and combined ratio than the property catastrophe business written by
the reinsurance company. Since the Company expects to continue to write
additional non-cat and finite premiums, it is expected that the Company's
combined ratio will modestly increase in the future.
The majority of the premiums written by the primary operations are currently
ceded to other reinsurers and as a result, the net earned premiums from the
primary operations were $1.3 million for the third quarter ended September 30,
2000. Based on this reduced level of net earned premiums, small dollar amounts
of one time adjustments to net written premiums, claim and claim expenses
incurred, acquisition expenses or operating expenses can cause unusual
fluctuations in the insurance ratios of the primary operations. Accordingly, a
decrease in the prior year loss reserves, and a one-time adjustment to the
operating expenses of DeSoto caused the unusual fluctuations in the primary
company loss and expense ratios above. Net earned premium of the primary
companies was $7.5 million for the third quarter of 1999.
Other income increased from $0.9 million for the third quarter ended September
30, 1999 to $3.0 million for the quarter ended September 30, 2000. The primary
reason for the increase was increased income from the Company's joint ventures
Top Layer Re and OPCat.
-13-
<PAGE>
Net investment income, excluding realized investment gains and losses, for the
third quarter of 2000 was $21.2 million, compared to $15.7 million for the same
period in 1999. The increase in investment income primarily relates to an
increase in invested assets from additional drawings under the Company's line of
credit facility of $150.0 million during 1999 and an increase in investment
yields during the third quarter of 2000 as compared with the third quarter of
1999.
Interest expense and minority interest for the quarter ended September 30, 2000
increased to $6.5 million from $4.5 million for the same period in 1999. The
increase was primarily related to increased borrowings in 1999 under the
Company's revolving credit facility and higher interest rates.
During the quarter ended September 30, 2000, the Company evaluated the
recoverability of its deferred tax asset. As of June 30, 2000, the balance of
the deferred tax asset was $23.6 million and the associated net operating loss
was available to offset regular taxable U.S. income through 2018. However, after
assessing the financial results of the Company's U.S. entities, the Company
decided to record a valuation allowance of $5.0 million against the deferred tax
asset. Accordingly, the balance remaining as of September 30, 2000 is $18.2
million.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
For the nine months ended September 30, 2000, net income available to common
shareholders was $89.4 million or $4.61 per share, compared to $78.0 million or
$3.74 per share for the same period in 1999. Gross premiums written for the nine
months ended September 30, 2000 and 1999 were as follows:
------------------------------------------------------------------
Nine months ended
------------------------------------------------------------------
(in thousands of U.S. dollars) 30-Sep-00 30-Sep-99
------------------------------------------------------------------
Reinsurance $344,940 $269,688
------------------------------------------------------------------
Primary 35,651 50,363
------------------------------------------------------------------
$380,591 $320,051
------------------------------------------------------------------
The increase in premiums written by the reinsurance company during the nine
months ended September 30, 2000 compared with the nine months ended September
30, 1999 was due to three items: 1) a $23.2 million increase in finite and
non-cat premiums written; 2) an $8.4 million increase in reinstatement premiums;
and 3) a $44.3 million increase in property catastrophe premiums written due to
increased business opportunities.
For the nine months ended September 30, 2000, total managed catastrophe premiums
were $372.4 million, $78.1 million of which derived from the OPCat and Top Layer
Re joint ventures compared with $270.4 for the same period of 1999, $4.1 million
of which derived from the
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<PAGE>
OPCat and Top Layer Re joint ventures. Total managed catastrophe premium
represents gross catastrophe premiums written by Renaissance Reinsurance and
written on behalf of the OPCat Ltd. and Top Layer Re Ltd. joint ventures and is
used by the Company to measure the Company's penetration into the catastrophe
insurance market.
The table below sets forth the Company's combined ratio and components thereof,
split by segment for the nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
REINSURANCE PRIMARY TOTAL
NINE MONTHS ENDED: 30-Sep-00 30-Sep-99 30-Sep-00 30-Sep-99 30-Sep-00 30-Sep-99
------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Loss ratio 40.0% 29.5% -13.3% 52.0% 38.4% 33.1%
Expense ratio 27.5% 26.5% 59.4% 22.0% 28.6% 28.1%
---- ---- ---- ---- ---- ----
Combined ratio 67.5% 56.0% 46.1% 74.0% 67.0% 61.2%
==== ==== ==== ==== ==== ====
</TABLE>
The loss ratio on the reinsurance business increased primarily due to the
Company's increase in non-cat and finite premiums which normally will produce a
higher loss and combined ratio than the property catastrophe business written by
the reinsurance company. Since the Company expects to continue to write
additional non-cat and finite premiums, it is expected that the Company's
combined ratio will modestly increase in the future.
The majority of the premiums written by the primary operations are currently
ceded to other reinsurers and as a result, the net earned premiums from the
primary operations were $5.2 million for the nine months ended September 30,
2000, compared with $26.9 million for the nine months ended September 30, 1999.
Based on this reduced level of net earned premiums, small dollar amounts of one
time adjustments to net written premiums, claim and claim adjustment expenses
incurred, acquisition expenses or operating expenses can cause unusual
fluctuations in the insurance ratios of the primary operations. Accordingly, a
decrease in the prior year loss reserves, and a one-time adjustment to the
operating expenses of DeSoto caused the unusual fluctuations in the primary
company loss and expense ratios above.
Net investment income, excluding realized investment gains and losses, for the
nine months ended September 30, 2000 was $58.7 million, compared to $42.9
million for the same period in 1999. The increase in investment income relates
to an increase in invested assets from additional drawings under the Company's
line of credit facility of $150.0 million during 1999 and an increase in
investment yields during the first nine months of 2000 as compared with the
first nine months of 1999.
Other income increased from $1.1 million for the third quarter ended September
30, 1999 to $6.4 million for the quarter ended September 30, 2000. The primary
reason for the increase was increased income from the Company's joint ventures,
Top Layer Re and OPCat.
Interest expense and minority interest for the nine months ended September 30,
2000 increased to $18.9 million from $11.9 million for the same period in 1999.
The increase was primarily related to increased borrowings in 1999 under the
Company's revolving credit facility and higher interest rates.
During the quarter ended September 30, 2000, the Company evaluated the
recoverability of its deferred tax asset. As of June 30, 2000, the balance of
the deferred tax asset was $23.6 million
-15-
<PAGE>
and the net operating loss was available to offset regular taxable U.S. income
through 2018. However, after assessing the financial results of the Company's
U.S. entities, the Company decided to record a valuation allowance of $5.0
million against the deferred tax asset. Accordingly, the balance remaining as of
September 30, 2000 is $18.2 million.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL REQUIREMENTS
As a holding company, RenaissanceRe relies on investment income and cash
dividends and permitted payments from its subsidiaries to make principal
payments, interest payments, cash distributions on outstanding obligations and
quarterly dividend payments, if any, to its shareholders. The payment of
dividends by the Company's Bermuda subsidiaries to RenaissanceRe is, under
certain circumstances, limited under Bermuda insurance law. The Bermuda
Insurance Act of 1978, amendments thereto (the "Act") and related regulations of
Bermuda require the Company's Bermuda subsidiaries to maintain certain measures
of solvency and liquidity. As at September 30, 2000 the statutory capital and
surplus of the Company's Bermuda subsidiaries was $733.3 million, and the amount
required to be maintained was $101.0 million. Through September 30, 2000,
Renaissance Reinsurance paid aggregate cash dividends of $57.6 million compared
to $64.4 for the same period in 1999. Glencoe is eligible as an excess and
surplus lines insurer in a number of states in the U.S. There are various
capital and surplus requirements in these states, with the most onerous
requiring Glencoe to maintain a minimum of $15.0 million in capital and surplus.
In this regard, the declaration of dividends from retained earnings and
distributions from additional paid-in capital are limited to the extent that the
above requirements are met. The Company's U.S. insurance subsidiaries are
subject to various statutory and regulatory restrictions regarding the payment
of dividends. The restrictions are primarily based upon statutory surplus and
statutory net income. The U.S. insurance subsidiaries' combined statutory
surplus amounted to $33.6 million at September 30, 2000 and the amount required
to be maintained was $25.2 million.
CASH FLOWS
The Company's operating subsidiaries have historically produced sufficient cash
flows to meet expected claims payments and operational expenses and to provide
dividend payments to RenaissanceRe. RenaissanceRe's subsidiaries also maintain a
concentration of investments in high quality liquid securities, which management
believes will provide sufficient liquidity to meet extraordinary claims payments
should the need arise. Additionally, the Company maintains a $310.0 million
credit facility which is available to the holding company, RenaissanceRe, to
meet the liquidity needs of the Company's subsidiaries should the need arise.
$208.0 million was outstanding under the credit facility as of September 30,
2000.
Cash flows from operations in the first nine months of 2000 were $199.7 million,
compared to $84.5 million for the same period in 1999. The significant increase
arose partly due to paid loss recoveries received from the Company's reinsurers.
The Company has produced cash flows from operations for the full years of 2000
and 1999 significantly in excess of its commitments. To the extent that capital
is not utilized in the Company's reinsurance business, the Company will consider
using such capital to invest in new opportunities or will consider returning
such capital
-16-
<PAGE>
to its shareholders. The Company currently expects that improving business
opportunities will call for the Company to increase the capital allocated to its
reinsurance business.
Because of the potential high severity and low frequency of losses on the
coverages written by the Company, and the seasonality of the Company's business,
it is not possible to accurately predict the Company's future cash flows from
operating activities. As a consequence, cash flows from operating activities may
fluctuate, perhaps significantly, between individual quarters and years.
RESERVES
During the nine months ended September 30, 2000 the Company incurred net claims
of $72.5 million and paid net losses of $14.0 million. The Company's policy of
purchasing reinsurance coverage continues to have a favorable impact on net
incurred claims. Due to the high severity and low frequency of losses related to
the property catastrophe insurance and reinsurance business, there can be no
assurance that the Company will continue to experience this level of losses
and/or recoveries.
For the Company's reinsurance operations, estimates of claims and claim expenses
and the related recoveries are based in part upon estimation of claims resulting
from catastrophic events. Estimation by the Company of claims resulting from
catastrophic events based upon its own historical claim experience is inherently
difficult because of the potential severity of property catastrophe claims.
Therefore, the Company utilizes both proprietary and commercially available
models, as well as historical reinsurance industry property catastrophe claims
experience, for purposes of evaluating future trends and providing an estimate
of ultimate claims costs.
On both the Company's reinsurance and primary operations, the Company uses
statistical and actuarial methods to reasonably estimate ultimate expected
claims and claim expenses and the related recoveries. The period of time between
the reporting of a loss to the Company and the settlement of the Company's
liability may be several years. During this period, additional facts and trends
may be revealed. As these factors become apparent, case reserves may be
adjusted, sometimes requiring an increase in the overall reserves of the
Company, and at other times requiring a reallocation of IBNR reserves to
specific case reserves. These estimates are reviewed regularly and adjustments
which affect net income, if any, are reflected in results of operations in the
period in which they become known and are accounted for as changes in estimates.
-17-
<PAGE>
CAPITAL RESOURCES AND SHAREHOLDERS' EQUITY
The total capital resources of the Company as at September 30, 2000 and
December 31, 1999 was as follows:
<TABLE>
<CAPTION>
September 30, December 31,
(in thousands of U.S. dollars) 2000 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Term loan payable $ 42,000 $ 50,000
Revolving Credit Facility - borrowed 208,000 200,000
Revolving Credit Facility - unborrowed 102,000 100,000
Minority interest - Company obligated
mandatorily redeemable capital securities
of a subsidiary trust 89,630 89,630
Shareholders' Equity 664,037 600,329
------------------------------------------------------------------------------------
TOTAL CAPITAL RESOURCES $1,105,667 $1,039,959
</TABLE>
The Company has a $310.0 million committed revolving credit and term loan
agreement with a syndicate of commercial banks. Interest rates on the facility
are based on a spread above LIBOR, and averaged approximately 6.9 percent during
the first nine months of 2000 (5.6 percent for the same period in 1999). The
credit agreement contains certain financial covenants including requirements
that the ratio of consolidated debt to capital does not exceed 0.35:1;
consolidated net worth must exceed the greater of $100.0 million or 125 percent
of consolidated debt; and 80 percent of invested assets must be rated BBB- by
S&P or Baa3 by Moody's Investor Service or better. The Company was in compliance
with all the covenants of this revolving credit and term loan agreement as at
September 30, 2000.
Renaissance U.S. has a $27 million term loan and $15 million revolving loan
facility with a syndicate of commercial banks. Interest rates on the facility
are based upon a spread above LIBOR, and averaged 6.9 percent during the first
nine months of 2000 (5.8 percent for the first nine months of 1999). The Credit
Agreement contains certain financial covenants, the primary one being that
RenaissanceRe, being its principal guarantor, maintain a ratio of liquid assets
to debt service of 4:1. This five year term loan has mandatory repayment
provisions approximating 25 percent in each of years 2000 through 2003. Under
the terms, the Company repaid $8.0 million of the loan in June 2000. The Company
was in compliance with all the covenants of this term loan and revolving loan
facility as at September 30, 2000.
The Capital Securities pay cumulative cash distributions at an annual rate of
8.54 percent, payable semi-annually. The Indenture relating to the Capital
Securities contains certain covenants, including a covenant prohibiting the
payment of dividends by the Company if the Company shall be in default under the
Indenture. The Company was in compliance with all of
-18-
<PAGE>
the covenants of the Indenture at September 30, 2000. From time to time, the
Company may opportunistically repurchase portions of the Capital Securities.
During the first nine months of 2000, shareholders' equity increased by $63.7
million, from $600.3 million at December 31, 1999 to $664.0 million at September
30, 2000. The significant components of the change included, the payment of
dividends of $21.9 million and the repurchase of common shares of $25.1 million,
offset by net income from continuing operations of $89.4 million and a decrease
in the unrealized depreciation on investments of $15.5 million.
INVESTMENTS
The table below shows the aggregate amounts of investments available for sale,
equity securities and cash and cash equivalents comprising the Company's
portfolio of invested assets:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
September 30, December 31,
(in thousands of U.S. dollars) 2000 1999
-------------------------------------------------------------------------------------
<S> <C> <C>
Investments available for sale, at fair value $ 965,931 $ 907,706
Short term investments 12,351 12,759
Other investments 44,986 22,204
Cash and cash equivalents 203,065 132,112
-------------------------------------------------------------------------------------
TOTAL INVESTED ASSETS $1,226,333 $1,074,781
-------------------------------------------------------------------------------------
</TABLE>
At September 30, 2000, the invested asset portfolio had a dollar weighted
average rating of AA, an average duration of 2.6 years and an average yield to
maturity of 7.4 percent, net of investment expenses.
As at September 30, 2000 the Company held investments and cash totaling $1.2
billion with a net unrealized depreciation balance of $2.9 million. The
Company's investment portfolio is subject to the risks of declines in realizable
value. The Company attempts to mitigate this risk through the diversification
and active management of its portfolio.
At September 30, 2000, $9.3 million of cash and cash equivalents were invested
in currencies other than the U.S. dollar, which represented less than 1.0
percent of the Company's invested assets.
The Company has entered into forward purchase agreements allowing it to acquire
certain foreign currencies to fund the payment of non-dollar losses.
EFFECTS OF INFLATION
The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local or regional economy. The anticipated effects
on the Company are implicitly considered in
-19-
<PAGE>
the Company's catastrophe loss models. The effects of inflation are also
considered in pricing and in estimating reserves for unpaid claims and claim
expenses. The actual effects of this post event inflation on the results of the
Company cannot be accurately known until claims are ultimately settled.
CURRENT OUTLOOK
Due to industry losses in 1999, and the related contraction of capacity in the
market, the Company anticipates that there will be price increases on all of its
reinsurance business during the upcoming renewal season. However, even after
these price increases, the Company believes that there will continue to be
numerous transactions in the market that will be under-priced relative to
expected losses. The Company believes that because of its competitive
advantages, including its technological capabilities and its relationships with
leading brokers and ceding companies, it is able to identify contracts that are
adequately priced and will continue to find opportunities in the property
catastrophe reinsurance markets.
Because of prior year loss activity, the Company's aggregate cost for
reinsurance protection has increased during the current year and accordingly, in
certain geographic regions the Company has retained a greater level of net risk
in the current year as compared with the previous year.
The Company's financial strength has enabled it to pursue opportunities outside
of the property catastrophe reinsurance market, including various lines of
reinsurance and the catastrophe exposed primary insurance market. The Company
believes that its financial strength will enable it to continue to pursue other
opportunities in the future. There can be no assurance that the Company's
pursuit of such opportunities will materially impact the Company's financial
condition and results of operations.
SAFE HARBOUR DISCLOSURE
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward-looking statements contained
in this report. Forward-looking statements are necessarily based on estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which, with respect to
future business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. In particular, statements using verbs such as "expect",
"anticipate", "intends", "believe" or words of similar impact generally involve
forward-looking statements. In light of the risks and uncertainties inherent in
all future projections, the inclusion of forward-looking statements in this
report should not be considered as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved.
Numerous factors could cause the Company's actual results to differ materially
from those in the forward-looking statements, including the following: (i) the
occurrence of catastrophic events with a frequency or severity exceeding the
Company's estimates; (ii) a decrease in the level of demand for the Company's
reinsurance or insurance business, or increased competition in the
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<PAGE>
industry; (iii) the lowering or loss of one of the financial or claims-paying
ratings of the Company or one or more of its subsidiaries; (iv) risks associated
with implementing business strategies of the Company; (v) uncertainties in the
Company's reserving process; (vi) failure of the Company's reinsurers to honor
their obligations; (vii) actions of competitors including industry
consolidation; (viii) loss of services of any one of the Company's key executive
officers; (ix) the passage of federal or state legislation subjecting
Renaissance Reinsurance to supervision or regulation, including additional tax
regulation, in the United States or other jurisdictions in which the Company
operates; (x) challenges by insurance regulators in the United States to
Renaissance Reinsurance's claim of exemption from insurance regulation under the
current laws; (xi) changes in economic conditions, including currency rate
conditions which could affect the Company's investment portfolio; (xii) a
contention by the United States Internal Revenue Service that Renaissance
Reinsurance is engaged in the conduct of a trade or business within the U.S.; or
(xiii) slower than anticipated growth in the Company's fee-based operations. The
foregoing review of important factors should not be construed as exhaustive; the
Company undertakes no obligation to release publicly the results of any future
revisions it may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
-21-
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
MARKET SENSITIVE INSTRUMENTS
The Company's investment portfolio includes investments which are available for
trading purposes and which are subject to changes in market values with changes
in interest rates. The aggregate hypothetical loss generated from an immediate
adverse parallel shift in the treasury yield curve of 100 basis points would
cause a decrease in total return of 2.6 percent, which equates to a decrease in
market value of approximately $31.9 million on a portfolio valued at $1,226.3
million at September 30, 2000. An immediate time horizon was used, as this
presents the worst-case scenario.
-22-
<PAGE>
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings
None
Item 2 -- Changes in Securities and Use of Proceeds
None
Item 3 -- Defaults Upon Senior Securities
None
Item 4 -- Submission of Matters to a Vote of Security Holders
None
Item 5 -- Other Information
None
Item 6 -- Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit 27 - Financial Data Schedule.
b. Current Reports on Form 8-K:
The Registrant did not file any reports on Form 8-K during the
period beginning July 1, 2000 and ending September 30, 2000.
-23-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
RENAISSANCERE HOLDINGS LTD.
By: /s/ John M. Lummis
---------------------------
John M. Lummis
Senior Vice President and
Chief Financial Officer
Date: November 14, 2000
-24-
