Q4 2022 Renaissancere Holdings Ltd Earnings Call

February 1, 2023

As President and Chief Financial Officer first some housekeeping matters. Our discussion today will include forward looking statements. It is important to note that actual results may differ materially from the expectations share today additional information regarding the factors shaping these outcomes can be found in our SEC filings and in our earnings release during todays call we will all.

So 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 <unk> Dot com and now I'd like to turn the call over to Kevin.

So thanks, Keith Thanks, everybody for joining the call we apologize about the technical difficulties.

Going to read my comments again to make sure that everybody has the same information.

So it should feel blessed that pleased to report the results. So it's my pleasure to random a second time I apologize for those who are about to hear him 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.

[music].

Importantly, I can now report that we accomplished all of the ambitious goals, we set for ourselves and one of the most pivotal January one renewals in our history.

Most notably this includes a step change in property reinsurance pricing.

These changes have resulted in a fundamental land necessary resetting the relationship between insurers and reinsurers.

Promising more appropriate risk adjusted returns to investors, while ensuring customers sustainable access to reliable high quality capacity.

This structural shift that the market has undergone constitutes a stabler long term equilibrium that will protect the interest 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 seeding commissions and 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'd like to review our performance by responding to two questions. The first is we.

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 GAAP 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 six 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 <unk> 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 tailwind more fulsome Lee 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 resetting underwriting at January one 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 of property cat 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 one renewals when a strategic consistency and focus on improving the bottom line enabled us to deploy significant and sustainable.

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 couldnt 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 in our search.

<unk> 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.

[music].

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.

Casualty and specialty performance remained strong in the segment has been consistently profitable every quarter for the last two years and 2022. The segment delivered a consistent mid ninety's 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 I as we look forward to 2023, we feel great about the positioning of this business and continue to expect a mid ninety's combined ratio in 2023.

Second our property segment broke even in 2022, despite a very active year, including a major Florida Hurricanes and 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 books 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 million effective January one 2023.

In 2022 management fees contributed consistent $25 million to $30 million per quarter, and we expect this to run around $35 million per quarter in 2023, reflecting an increase in capital manage primarily in da Vinci. 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 scale. These diversifying income stream 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.

<unk> five 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 specialty portfolio in 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.

<unk> 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% COVID-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 <unk>.

Winter Storm, Elliot and Hurricane Nicole and the remainder coming from aggregates.

These events impacted both property cat and other property and 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 eight percentage points from large cat events and an additional five percentage points from the 100 natural gas explosion.

In the quarter. There was also <unk> 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 in 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 drug.

Venture balance sheets.

Performance fees continued to be depressed due to the cumulative impact of cat events in 'twenty. One 'twenty two we expect these fees to start recovering by the second quarter of 'twenty three overall.

Overall, we shared $236 million of our net income with partners in our joint ventures as reflected in the 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 one we reduced our ownership.

<unk> taken da Vinci from 31% to 25% in order to make room for several long term oriented investors.

Moving now to investments 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.

Over the course of 2022 are retained annualized net investment income return.

Return has increased from one 5% to four 1% and our new money yield which is reflected as retained yield to maturity has increased from one 8% to five 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 five years, largely driven by capital increases for our joint ventures on a retained basis duration remains relatively flat at three three years and.

In the fourth quarter rebounding equity markets tighter credit spreads and bond accretion bond accretion led to retain mark to market losses of 100, excuse me retail mark to market gains of $129 million for.

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 overtime in two ways first the securities that we hold that will accrete to par over time and second through increased net investment income, where we proactively sold securities and reinvested at higher coupons retained unrealized losses.

Our fixed maturity portfolio are about $13 93 per share.

Finally, turning briefly to expenses, our operating expense ratio was up by about one four 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 costs 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 demonstrates 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 under.

Alrighty income from our casualty and specialty business or.

Our property segment to benefit from increased rates and tightened 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.

Thanks, Bob.

As usual I will divide my comments between our property and casualty segments.

And while I touched on the success of our January one renewal in my opening remarks, I will primarily focus on adding more detail given our belief this renewal marks an important inflection point for our business.

Starting with property.

The property renewal was very Lee with many deals not bound until late December even early January .

Going into their new renewal, we expected significant supply and demand imbalance for property cat reinsurance that would drive material rate increases in the range of 50% to 100%.

As the renewal progressed Stephens understood that the market would remain disciplined on rate there.

We responded by increasing Retentions.

Restricting coverage and restructuring programs in order to control premium budgets. These.

These changes benefited us in particular, as our underwriting expertise and flexible capital allowed us to execute in a structurally shifted market to increase profit reduced risk and better diversify our portfolio.

Seems reactions also meant that limits, particularly in the U S were relatively flat, albeit more remote.

The increased demand we anticipated was retained by by insurers as at the time they were.

Unwilling to pay additional rate this marginal demand would require.

Over time.

We expect this risk to return to the reinsurance market as macroeconomic forces such as inflation and climate change continued to drive overall risk in the system.

We will always have the most efficient capital to assumed property cat risk. So it should ultimately sit with us.

I am very pleased with the property portfolio that we wrote at January one.

As expected.

We renewed business had significantly increased rates and tightened terms and conditions. Additionally, we increased allocation to property cat.

As it became increasingly profitable profitable relative to other property.

Regarding topline growth.

We are seeing good opportunities and expect the reset on rates to persist through 2023.

The January one renewals is more focused on retro and international business, while the most dislocated part of the property market U S risk, mostly renewals at mid year.

Consequently, we expect many opportunities to deploy additional capacity in property over the next six months.

As Bob explained in addition to the growth we've already achieved we have ample capital to deploy into a profitable market.

As we expected the retro market was highly dislocated headed into the January one renewal with rates up materially terms and conditions very tight and an ongoing shift to occurrence from aggregates structures. This allowed us to build a strong inwards book of business.

Against this backdrop, we had.

Several successes on our ceded placements as well.

We purchased more retro protection than originally anticipated anticipated a testament to our strong relationships and consistent track record second we were able to grow with our long standing partners on our structured reinsurance products.

Finally in early January we issued our Mona Lisa Cat bond, albeit for reduced limit.

Given current market conditions, we believe we successfully executed our gross to net strategy and that it materially improved the efficiency of our portfolio.

Moving now to our casualty and specialty business similar to property January one is an important renewal for our casualty book.

At the renewal casualty and specialty reinsurance terms and conditions moved in a positive direction across many classes of business.

Dislocated markets provided the opportunity for us to quote and lead profitable business, we continue to see opportunities across casualty and specialty classes.

Rate increases are starting to slow and general liability lines and reducing in D&O. This follows several years of significant rate increases in these lines.

In most cases ceding commissions reduced and we maintained attractive margins in cases, where expected margins did not meet our hurdles we scaled back our exposure.

The market was very dislocated and some specialty classes and we were able to quote significant lead lines unprofitable business lines, such as marine and energy Terror, cyber and aviation were particularly attractive.

Demonstrated leadership and achieved increase rates and retention as well as tightened terms and conditions in these diversifying classes of business.

Our mortgage and credit and political risk business remains profitable critically due to the structure of our portfolio and our focus on risk selection. It is also resilient to any downturn in economic conditions that may occur this year.

Overall, we are confident this casualty renewal will drive sustained profitable growth.

We continue to grow this book and we have written what is likely to be our largest and most attractive portfolio to date more importantly is our casualty business matures.

It is becoming increasingly consistent delivering mid ninety's combined ratio performance.

Shifting now to the capital partners business.

We have always taken a differentiated approach to our capital partners business first and foremost. This is because we are recognized leaders in underwriting property and casualty risks and always approached this business as underwriters would.

This means.

We start with sourcing desirable risks and only then seek to match it with the most efficient capital.

Second we have a long and successful track record of managing third party capital and are always strongly aligned with our investors.

Our partners know that we always stand alongside them sharing any loss that they take.

This provides them with the confidence to reinvest with us after large events.

Finally, we offer the broadest suite of investment vehicles.

With both owned and managed balance sheets for every risk that we take this includes Montana the.

Only rated third party balance sheet dedicated to casualty and specialty risk in.

In addition to being innovative our vehicles are highly flexible from a capital perspective, and add features allowing us to call capital when it is needed and return it when it is on this allows us to navigate difficult difficult markets as we did in 2022.

And also to facilitate the liquidity needs are institutional investors demand.

This differentiated approach is highly appreciated by our partners. It also explains our success in raising capital in 2022, as both new and existing investors chose to trust us with their capital.

That we can continue to scale, our capital partners business, even under the most difficult circumstances demonstrates that it is a permanent part of our franchise.

We have every intention of continuing to grow it in the future in order to bring reliable sustainable capital to our customers.

Fully expect our capital partners business to increase England generate low volatility fee income for the benefit of our shareholders.

In closing this quarter brought a strong end to a tumultuous year, which was marked by elevated cat losses, coupled coupled with fed driven mark to market investment losses. Consequently, the January one renewal was one of the strongest in our history and investment returns should be materially higher in 2023.

Beyond growth the ongoing growth in our capital partners business should serve.

As the third financial tailwind as a result, we expect to deliver material shareholder value over the course of 2023.

As usual, we will now turn the call over to questions.

I apologize for those that have difficulty coming on the call that the beginning both Bob and myself we will.

Hey available after the close of the hour to make sure we answer all your questions. Thank you.

At this time, if you'd like to ask a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue. You may do so by pressing star two.

Mind you. The please on mute your line when introduced and then possible pick up your handset for optimal sound quality in the interest of time, we ask you. Please limit yourself to one question and one follow up we'll now take our first question from Elyse Greenspan from Wells Fargo.

Hi, Thanks.

Good morning.

The first question.

Assuming 2023 is a normal cat year.

Based on the book of business that you guys you were able to put together January one and I guess, if I can conclude some expectation for the rest of the year.

Ro.

Do you think your book of business could generate this year.

Yes.

Thanks Elyse.

This was one of the most.

Profound renewals I think Renren has ever had we went in with very aggressive targets for ourselves, including growing the property cat portfolio, reducing risk at the low end.

The risk distribution.

Holding <unk> relatively flat increasing.

Our footprint, particularly with the addition of third party capital. So all of those things will inure to the benefit of shareholders should there be a normal cat year.

Yes.

One way that might be helpful to think about it is if we just take a couple of losses last year and think of how they could affect us if we looked at hurricane in.

It occurring.

In the third quarter of this year I would expect our loss would be significantly lower for a couple of reasons one.

Primary companies will need to retain more risk at the low end of their.

Risk distribution.

Secondly, we will have more right so more reinstatement premium coming in should there be a loss. So I think from that perspective, we would have a smaller loss.

If we were to look at winter Storm Elliot.

Tween, the increased retentions tighter terms and conditions and higher rates I would expect that loss to be almost fully retained within the primary market and not be transferred to the reinsurance market, which is different than what happened last year. So it's difficult to put an exact number on it but between substantial rate increase the growth we've achieved.

The addition, additional profitability and specialty higher investment returns I would expect returns to be substantially higher should we have a repeat of 'twenty two.

For a normal year in 'twenty three.

And then my second question. So you guys said your Pms flat I believe right. So your exposure is probably consistent.

You've heard about retention going higher for primary companies right. There was a lot of rate increases and this is Tom as you put it all together.

Do you see the premium growth coming together.

Within the property cat business in 'twenty three.

Yes so.

About half.

Of our U S exposed property cat limit is yet to be renewed.

So just to kind of put it in context and I anticipate that what we achieved at one one will persist through the rest of 2000 2023.

So in thinking about the portfolio. It was our objective to hold the tail of the distribution relatively flat and increase the probability of high returns by reducing the level of risk at the low end of the distribution.

So I feel optimistic from the property cat perspective, the other thing I would say is we allocated increasing capacity to our property cat portfolio within our overall property book by <unk>.

Adding capacity from the other property portfolio to the property Cat book, So we will achieve substantial growth in the property cat portfolio, a little bit of that growth will come from us creating capacity by reducing a bit on other property.

Thank you.

Sure. Thanks Luis.

Our next question comes from Josh Shanker from Bank of America.

Yes. Thank you can we talk a little about the casualty and specialty.

Adding commissions how quickly.

Will they roll through the book and what how many hundreds of basis points might we see just on the acquisition cost ratio alone.

So on average as I mentioned, it's about one percentage point for the casualty portfolio.

Let me talk a little about casualty specialty first though we had substantial growth.

In several specialty lines, which are within that segment and that growth is based on the fact that it became dislocated because of the Ukraine War.

Elevated losses, and there's also a degree of property cat risk, particularly in the marine and energy portfolio.

Tend to earn increased ceding commissions through.

Directly so just as we earn the premium so over the next 12 to 18 months.

And what we do from a pricing equation. So it will earn through more quickly I don't have the number to drop to a GAAP number though.

$100. One I mean look everybody is just a spectator it does seem like commentary.

Is greater than a 100 basis points for the industry more broadly maybe not where you play.

Bob.

Do you think 100 basis points as typical or.

Is that specific to run rate.

I think it's pretty typical.

I could be optimistic point of deals, where we had much bigger changes, but there were deals that have been performing better and ceding commissions were a little stickier, so I use 1% as a good.

Macro benchmark for how the portfolio is and it is consistent with the way I would discuss the industry.

And where are we in terms of the commentary in that portfolio.

Understanding your own loss and your own risks and whatnot and using your own data.

Two a set new loss picks and be evaluated loss picks you said in the past.

So if you go back to 2006.

That was an important part of the discussion for rate changes understanding how the models have changed drove demand and it also drove the expected loss through the property market.

I'll speak about our view of risk is relatively consistent this year to last year I would say, it's the normal tweaks in our model, we did not run through substantial risks risks changes.

From inflation and from.

Climate change or other natural phenomenon, we had that reasonably well reflected so we went through our normal process. So the rate change that we achieved this year is much more.

Much more similar to the risk risk adjusted rate change then we would have experienced in 2006.

Well I guess, maybe I'm sort of talking about the loss picks in the casualty and specialty book.

You said your whole youre holding back sort of.

Some are being more aggressive and being conservative because you just don't have the data yet to be super confident about using your own ability to pick the losses and are we at the point in time, where now you have the full data set and the loss picks were going to see our base on your.

Yes.

Yes, the vast majority of it is based on our experience at this point, we are always looking at industry metrics to test our development of our own portfolio.

Your point about being cautious with reserves I think we've mentioned on previous calls we generally take bad news before good news.

So we wait for substantial I'll call that a third of the curve to develop before we think about it recognizing good news I'd say, that's not a typical for the industry, but that's based on our own curves and our own assessment of when it's appropriate to think about making adjustments.

Okay.

Given the short time, please take some other questions. Thank you for your answers.

Sure.

Our next question comes from Brian Smith from Adama.

Hey, Thanks, good morning.

I guess, just a relative question picking back in 2006.

In the years following that I think ran at ROE.

30% to 45% and I realize we're no doubt years Budd.

Those were normal cat years, it would have been at 20 plus percent Roe business.

I guess just in comparison.

Kevin Mike If you think about.

Like the health of the property cat business today relative to where it was in 2016.

Maybe we can just back to.

What happened at the renewal.

Concessions that you thought might have fallen a little short of your expectations.

I guess like what are the primary differences that would make it a different ROE business today versus post Katrina.

So.

I think of this one one as being less similar to <unk> and more similar to what happened in 2001 2002.

2002, I guess.

The because its broader geographically.

There are far more attractive lines and far more hardening lines.

In the market.

And so I.

<unk>.

Don't know how to answer your question with regard to comparing it to <unk>, but when I think about what we've built.

In our ability to leverage in the market.

It's stronger now than it was in O two.

The fundamentals of the market are a little different but the.

The ability for us to.

Harvest.

Profit from the casualty portfolio I think there's increasing we've got a much bigger.

Capital Partners business, which continues to contribute investment returns looks stronger and then the property portfolio at the reset level is at extremely attractive levels.

Got it.

Okay and just on the renewal.

It did seem to kind of come together at the end.

Hi.

Any idea of just I guess, whether it's terms and conditions are right.

Some aspects of that renewal.

Would have.

Potentially being a little bit more favorable than they were for the industry of Orion.

Lee renewals work to our advantage.

<unk> often because it's it's a renewal where there has been.

A dislocation that hasnt been fully absorbed by the market, which means creating options and providing alternatives.

Is.

As a skill that can reap outsized rewards.

Placed we achieved.

A significant number of private placements by helping.

Companies think about how to structure their programs the one area.

Where we are.

I think it's a delay not a miss is the capacity that we think we thought would come to the market at one one we saw more capacity come to the market in Europe and some other places the U S capacity I think buyers.

Ultimately made a wallet decision as to how much they wanted to spend.

And I don't think their appetite for how much they want to buy has diminished and I believe that what we're experiencing is a bit of a delay in that limit coming to the market, which will add to the sustainability of the price partners that we're seeing so when I look about it I would say that that's an area that I would say it was a bit of a surprise to us at one one.

But again I'm not concerned about it because I do think the capacity needs to come to the market I think if it does come to the market, we've got the capital and restructuring capability to be able to service them.

Okay, and then just lastly.

Sure.

With.

Capital going more toward the property cat business away from other property other property, obviously, there's quite a bit more premium any indication of.

I guess, what top line could look like next year from the other property perspective.

Yes.

It's quite a deliberate change and let me just because we're getting very good rate increase in the other property portfolio, but it comes in more slowly than the losses occurring nature of the property cat portfolio. So leveraging into that I think we're making a smart trade as to how to put capacity into the market. So I don't particularly worry about one being up or the other.

Our footprint in that market is exceptionally strong and when.

The opportunity there begins to emerge as accretive.

Accretive again, we will leverage back into it so but right now property cat is preferred and we're going to continue to emphasize the growth there in the long and short of it we're going to grow property cap quite a bit and we're going to shrink a bit in other property, which I think is a good trade.

Our next question comes from Meyer Shields from K B W.

Thanks, I guess to begin with.

The.

Specialty combined ratio expectation is flat on a year over year basis.

We're thinking in the mid 90% am I thinking about that correctly.

Yes in my prepared comments. Thanks for the question and our prepared comments I did say that we expect that with the growth. We should still continue to maintain mid nineties and mid 90% range. This year of mid $90 95, three and you saw us kind of move up and down in that range with events like earlier in the year you.

Crane losses pointed out this year, we had a loss on one Alex it should move up and down, but we feel very comfortable that mid 90.

Okay. No that's fair enough I guess I was expecting a little bit more improvement, but then Sam what you're thinking about the range.

If you look back at the extended one one renewal season.

How do you.

I guess compare the actual capacity deployed.

She is going in.

We did.

He is extremely well I would say.

Again, the area, where I am.

I think thats. The most relevant question as for the U S property cat limit and as I mentioned, we have about 50% of that yet to be renewed.

So I would say that yes, there is less demand that came to the market that did not change.

Anything with our strategy as to how much to deploy it just meant we needed to be a little bit more nimble on how to.

Get the limited with the customers' hands and we did that so from my perspective, I feel really good about where we traded into into the market, albeit the dynamics are a little bit different than we expected going back to December one.

Okay. That's helpful and I guess last question. If I can just continue with that you talked about expecting that demand to come back is that be higher or lower layers of coverage that you expect to come back.

Yes, that's a good question it'll be higher layers.

I think at this point companies are going to continue.

Companies larger companies will continue to make the trade that they'd rather build balance sheet protections rather than have low end to income statement protections and I think thats. The income statement is going to need to be bolstered by them getting more primary rate.

The one exception to that is in Florida.

I think there's sometimes some of them did the way people think about the Florida market as to whether limits above or below the HCS I think there will be still a need for some purchasing of limits below the FHA up which I consider to be.

Yes.

In most cases ceding commissions reduced and we maintained attractive margins in cases, where expected margins did not meet our hurdles we scaled back our exposure.

Very low.

But more broadly the new limit purchased will be at the top end of programs.

Okay fantastic. Thank you so much.

Yes.

Our next question comes from Yang from Jefferies.

Hi, good morning.

Demonstrated leadership and achieved to increase rates and retention as well as tightened terms and conditions in these diversifying classes of business.

Good morning, first question, maybe going back to <unk> question on kind of how the ROE.

Look in a normal cat year, and realizing you can't really.

Our mortgage and credit and political risk business remains profitable.

Prognosticate the precise Roe.

Critically due to the structure of our portfolio and our focus on risk selection is also resilient to any downturn in economic conditions that may occur this year.

What exactly would look like in 'twenty three but maybe you can also help us with.

Delineating how much of the improvement you see coming from NII versus underwriting would it be more weighted to underwriting more weighted to NII.

Overall, we are confident this casualty renewal will drive sustained profitable growth.

I've tried to point that is a good question I'll help me try and break that we're seeing much more improvement, let's start with net investment income you started to see that over the course of the year and it was $1 44, and giving you guidance that we're probably looking at 150 million first quarter here give or take subject to market moves.

We continue to grow this book and we have written what is likely to be our largest and most attractive portfolio to date more importantly is our casualty business matures.

It is becoming increasingly consistent delivering mid ninety's combined ratio performance.

Shifting now to the capital partners business.

Starting to see relative performance just on the management fees on coming through from our capital partners.

We have always taken a differentiated approach to our capital partners business first and foremost. This is because we are recognized leaders in underwriting property and casualty risk and always approached this business as underwriters would.

Bye.

Basically 40% from 25 million a quarter to 35 million, which is reflective of the capital that we've raised the casualty specialty business will improve based on the net earned premium that we bring through so those are things that we look at it as very stable and we look at that as something we continue to talk about in the context of our three drivers of profit.

This means.

We start with sourcing desirable risk and only then seek to match it with the most efficient capital.

Second we have a long and successful track record of managing third party capital and are always strongly aligned with our investors.

Property should do better as Kevin pointed out property should do better, but you can't control mother nature, you can only structure the book to be able to adapt to it as well as you can so that's the picture that we're trying to portray out there that there is a core stable solid earnings stream that does support our level of return that we feel is above our cost of capital.

Our partners know that we always stand alongside them sharing any loss that they take.

This provides them with the confidence to reinvest with us after large events.

Finally, we offer the broadest suite of investment vehicles.

Just to begin with.

With both owned and Maui managed balance sheets for every risk that we take this includes Fontana.

Got it Thats helpful.

Then.

And the underwriting book, maybe you can help.

Yeah.

Clarify a little bit or is it some of the noise.

Only weighted third party balance sheet dedicated to casualty and specialty risk in.

And I don't want to put words in your mouth, but it sounds to me like you're saying that maybe more of the underwriting margin improvement would come from property cat.

In addition to being innovative our vehicles are highly flexible from a capital perspective, and add features allowing us to call capital when it is needed and return it when it is on this.

But maybe more of the growth topline growth would be in the casualty and specialty.

This allows us to navigate difficult difficult markets as we did in 2022.

<unk> 23 is that a fair summary.

And also to facilitate the liquidity needs of our institutional investors demand.

Yeah.

I didn't mean to leave that impression we're growing property cat substantially.

This differentiated approach is highly appreciated by our partners. It also explains our success in raising capital in 2022, as both new and existing investors chose to trust us with their capital.

We will.

So other property as a whole will grow.

Property Cat will grow substantially we're going to reduce a bit on other property again talked a little bit about that as being kind of the trade and how to set up the.

That we can continue to scale, our capital partners business, even under the most difficult circumstances demonstrates that it is a permanent part of our franchise.

<unk>.

The portfolio, we will grow.

Casualty specialty portfolio.

A good piece of that growth within the casualty specialty portfolio will come from some dislocated specialty lines.

We have every intention of continuing to grow it in the future in order to bring reliable sustainable capital to our customers. We fully expect our capital partners business to increase easily generate low volatility fee income for the benefit of our shareholders.

The final thing I'd say is.

Just having an underwriting background I'm focused on.

Net written premium just because we have a lot of changes at the third party capital level in the managed.

Premium level that are important.

Yeah.

Okay, so even more so.

Perfect.

Absolutely.

We reduced the footprint of ups on into the market because the product that Upsilon sold was better sold into rendering and da Vinci that'll change the gross written premium, but the net economics coming to us are better reflected in net written premium because of that shift.

The on growth the ongoing growth in our capital partners business should serve.

As the third financial tailwind as a result, we expect to deliver material shareholder value over the course of 2023.

As usual, we will now turn the call over to questions.

And does this shift.

I guess the.

I apologize for those that had difficulty coming on the call that the beginning both Bob and myself will stay.

Parallel growth in casualty specialty and property cat at the same time, how does that impact access.

Stay available after the close of the hour to make sure we answer all your questions. Thank you.

Hi.

Capital.

At this time, if you'd like to ask a question. Please press star one on your telephone keypad. If you wish to remove yourself Mccue you may do so by pressing star Q, We remind you to please on mute your line when introduced and then possible pick up your handset for optimal sound quality.

So from a capital position, we are extraordinarily well situated going into the opportunity set that we're seeing within casualty within specialty.

Outside the U S capital is never an issue.

Interest of time, we ask you. Please limit yourself to one question and one follow up we'll now take our first question from Elyse Greenspan from Wells Fargo.

The peak exposure within the portfolio going into this renewal was southeast hurricane It will remain southeast hurricane and we still have significant opportunity to grow the portfolio.

Hi, Thanks, Good morning, My first question.

Roy Moore capital should we choose to.

Thank you.

Assuming 2023 is a normal cat year.

Our next question comes from Brian Meredith from UBS.

Based on the book of business that you guys were able to put together January one and I guess so this does conclude some expectation for the rest of the year what.

Great. Thank you Hey, just a couple ones here for you Kevin.

I think I just want to clarify what you just said there. So you should see some pretty substantial growth in cat premium retained net net written premium growth.

Ro.

Do you think your book of business could generate this year.

Yes.

Okay I just wanted to clarify that so it's on your balance sheet great.

Yes.

Thanks Elyse.

And then the second question I'm, just curious on Florida as we look at the six one renewals.

This was one of the most.

Profound renewals I think Renren has ever had we went in with very aggressive targets for ourselves, including growing the property cat portfolio, reducing risk at the low end.

Does any of the legislative change.

Your appetite there any better or is it purely just what's going to happen with rates and pricing in that market.

The risk distribution.

I'm pleased that they are taking steps to improve the health of the Florida market.

Holding <unk> relatively flat, increasing our footprint, particularly with the addition of third party capital. So all of those things will inure to the benefit of shareholders should there be a normal cat year.

The margin it's beneficial.

And thinking strategically as to how we're going to position. The book It will not change our appetite in Florida, specifically because of that right attachment and other opportunity. It will be the drivers are and how we structure the portfolio.

<unk>.

One way that might be helpful to think about it is if we just take a couple of losses last year and think of how they could affect us if we looked at hurricane in it.

Got you Great and then I guess just last quick question I think you kind of referred to it earlier.

<unk>.

It sounds like.

In the third quarter of this year I would expect our loss would be significantly lower for a couple of reasons one.

Europe turned out being better than expected with rate increases have you increased your allocation of business to Europe .

Primary companies will need to retain more risk at the low end of their.

Yeah.

Yes capital still driven by U S and with capital still driven by southeast.

Risk distribution.

Lee we will have more right so more reinstatement premium coming in should there be a loss.

But we saw more opportunities in Europe than we expected.

And we were able to kind of leverage into it.

As Eric office performed well seeing seeing the opportunity early and executing.

So I think from that perspective, we would have a smaller loss.

Great. Thank you.

If we were to look at winter Storm Elliot.

Thanks, Brian .

Between the increased retention tighter terms and conditions and higher rates I would expect that loss to be almost fully retained within the primary market and not be transferred to the reinsurance market, which is different than what happened last year. So it's difficult to put an exact number on it but between substantial rate increase the growth we've achieved.

Your last question comes from Mike Zaremski from BMO.

Okay great.

Follow up on the.

Florida question from from Brian .

Just curious now that you've had some time more time to go through the legislation it sounded like Kevin in your your answer that.

The addition, additional profitability and specialty higher investment returns I would expect returns to be substantially higher should we have a repeat of <unk> 22 for a normal year in 2003.

These legislative changes arent might not be that meaningful but.

Or do we just need more time to see them play out and I guess also reflecting on.

And then my second question.

Past question about this current cycle versus the two thousands.

You just said your pms.

Rod I believe right so.

<unk> parties.

Closure is probably consistent.

I have.

A much different than back then maybe maybe I'm wrong you can correct me, but is there do you expect your counter parties over time.

We've heard about retention going higher for primary companies right. There's a lot of rate increases in the system as you put it all together how do you see the premium growth coming together.

So maybe.

Improve from a capital.

Or kind of social inflationary.

Within the property cat business in 'twenty three.

Aspect over the coming years, maybe given some of the.

Yes so.

The legislative changes.

About half.

Yes, thanks for the question I think.

Our U S exposed property cat limit is yet to be renewed so just to kind of put it in context and I anticipate that what we achieved at one one will persist through the rest of 2023.

The profile of the southeast risk that we take is materially different in the early 2000 early two thousands we had a much bigger footprint with the.

With the local Florida companies participating in that market.

A big of us.

Much bigger piece of our southeast wind exposure in particular comes from large nationwide companies tend to have much higher retentions to have their own claims that they have a lot of infrastructure that they can bring to bear should there be a loss I think given our loss and having some of the changes that.

So I feel optimistic from a property cat perspective, the other thing I would say is we allocated increasing capacity to our property cat portfolio within our overall property book by adding capacity from the other property portfolio to the property Cat book, So we will achieve.

We're made legislatively it can make a bit of a difference in the uncertainty post loss, but again im just trying to be transparent that the drivers of our capacity deployment for the southeast and in particular, Florida will be driven much more around attachment point price and macro terms of the deal rather than a legislative environment.

Growth in the property cat portfolio, a little bit of that growth will come from us, creating capacity by reducing a bit on other property.

And the changes that were made.

Thank you.

Sure. Thanks Luis.

Okay.

My follow up would just be kind of on.

Our next question comes from Josh Shanker from Bank of America.

New capital.

We're clear on this.

Hearing your expectations for mid year.

Yes. Thank you can we talk a little about the casualty and specialty seeding commissions.

Seems to be favorable but curious.

How quickly.

We're seeing some headlines about new capital coming to the marketplace.

Will they roll through the book and how many hundreds of basis points might we see just on the acquisition cost ratio alone.

Are you seeing alright, and hearing about additional capital providers coming into kind of slip in and and in.

So on average as I mentioned, it's about one percentage point for the casualty portfolio.

Fill some of the supply demand dislocation.

I mean, obviously you hear all the rumors and I know people are looking for capital.

Let me talk a little bit about casualty specialty first though we had substantial growth.

We've been successful, bringing capital, it's because of the uniqueness of the offering and the expertise of the underwriting I think that will continue so should should new capital come in I think the natural place for them to want to have a conversation is here I think it's getting a little.

In several specialty lines, which are within that segment and that growth is based on the fact that it became dislocated because of Ukraine War.

Elevated losses, and there's also a degree of property cat risk, particularly in the marine and energy portfolio.

The class of 2003, which we've seen in other big dislocated years seems as if thats a little bit more on <unk>.

We tend to earn increased ceding commissions through.

Directly so just as we earn the premium so over the next 12 to 18 months.

Likely and then third party capital coming in.

And what we do from a pricing equation. So it will earn through more quickly I don't have the number to drop to a GAAP number though.

Regardless.

Look at third party capital at this point is if it's going to be something that disrupts the market is unlikely to disrupt us because of the flexibility of our platform and our ability to execute into the market. So not that concerned about it at this point, but something we're watching closely.

And you see 100 basis.

Look everybody is just a spectator it does seem like commentary.

Is greater than 100 basis points for the industry more broadly maybe not where you play.

Thank you.

Bob.

Do you think 100 basis points as typical or.

We have reached our allotted time for Q&A I will now turn the call back to Kevin O'donnell.

Is that specific to run rate.

So thanks, everybody I appreciate you staying on for a few extra minutes I appreciate the questions as well for those that had trouble getting onto the call apologize for the difficulties.

I think it's pretty typical.

I could be optimistic point of deals, where we had much bigger changes, but there are deals that have been performing better and ceding commissions were a little stickier, so I use 1% as a good.

But happy to take any follow ups.

As far as the renewal.

I've been doing this for a long time I've seen a lot of different types of markets.

Macro benchmark for how the portfolio is and it is consistent with the way I would discuss the industry.

And this was one of the most of it.

Impressive renewal performance as I've ever seen from the Renaissance team to be able to execute into this market and I couldnt be prouder of the portfolio that they build so thanks again and look forward to speaking with you next quarter.

And where are we in terms of the commentary in that portfolio.

Understanding your own loss and your own risks and whatnot and using your own data.

Two.

Okay.

We set new loss picks and be evaluate loss picks you said in the past.

This concludes the Renaissance <unk> fourth quarter and full year 2022 earnings call and webcast. Please disconnect. Your line at this time and have a wonderful.

So if you go back to 2006.

That was an important part of the discussion for rate changes understanding how the models have changed drove demand and it also drove the expected loss through the property market.

I'll speak about our view of risk is relatively consistent this year to last year I would say, it's the normal tweaks in our model, we did not run through substantial risk.

<unk> changes.

From inflation and from.

Climate change or other natural phenomenon, we had that reasonably well reflected so we went through our normal process. So the rate change that we achieved this year is much more.

Much more similar to the risk risk adjusted rate change then we would have experienced in 2006.

Well I guess, maybe I'm sort of talking about the loss picks in the casualty and specialty book.

You said your whole youre holding back sort of.

Some are being more aggressive and being conservative because you just don't have the data yet to be super confident about using your own ability to pick the losses are we at the point in time, where now you have the full data set and the loss picks were going to see our base on your.

Yes.

Yes, the vast majority of it is based on our experience at this point, we are always looking at industry metrics to test our development of our own portfolio.

We your point about being cautious with reserves I think we've mentioned on previous calls we generally take bad news before good news.

So we wait for substantial I'll call that a third of the curve to develop before we think about it recognizing good news.

That's not atypical for the industry, but that's based on our own curves and our own assessment of when it's appropriate to think about making adjustments.

Okay.

Given the short time, please take some other questions. Thank you for your answers.

Sure.

Our next question comes from Brian Smith from Adama.

Yes.

Hey, Thanks, good morning.

I guess, just a relative question picking back in 2006.

In the years following that I think granddad Roe.

30% to 45% and I realize there were no cat years, but.

That's a normal cat year.

Would have been at 20 plus percent Roe business.

Just in comparison.

And even like if you think about.

Like the health of the property cat business today relative to where it was in 2016, I mean, maybe linkages back too.

What happened at the renewal.

Sessions that you thought might have fallen a little short of your expectations.

I guess like what are the primary differences that would make it a different ROE business today versus post Katrina.

So.

I think of this one one as being less similar to <unk> and more similar to what happened in 2001 2002.

2002, I guess.

The because its broader geographically.

There are far more attractive lines and far more hardening lines.

In the market.

So I.

Don't know how to answer your question with regard to comparing it to <unk>, but when I think about what we've built in our ability to leverage in the market. It's stronger now than it was in O. Two.

The fundamentals of the market are a little different but.

The ability for us to.

Harvest.

Profit from the casualty portfolio I think is increasing we've got a much bigger.

Capital Partners business, which continues to contribute investment returns look stronger and then the property portfolio at the reset level is at extremely attractive levels.

Got it.

Okay and just on the renewal.

It did seem to kind of come together at the end.

Hi.

Any idea of just I guess, whether it's terms and conditions are right.

Some aspects of that renewal.

Would have.

Potentially being a little bit more favorable than they were for the industry or for rent.

Lee renewals work to our advantage.

<unk> often because it's it's a renewal where there has been.

A dislocation that hasnt been fully absorbed by the market, which means creating options and providing alternatives.

Is.

It's a skill that can reap outsized rewards.

Placed we achieved.

A significant number of private placements by helping.

Companies think about how to structure their programs the one area where.

Where we are.

Think it's a delay not a miss is the capacity that we think we thought would come to the market at one one we saw more capacity come to the market in Europe and some other places.

The U S capacity I think buyers.

Ultimately made a wallet decision as to how much they wanted to spend.

Don't think their appetite for how much they want to buy has diminished and I believe that what we're experiencing is a bit of a delay in that limit coming to the market, which will add to the sustainability of the price.

<unk> that we're seeing so when I look about it I would say that thats an area that I would say it was a bit of a surprise to us at one one but again I'm not concerned about it because I do think the capacity needs to come to the market I think if it does come to the market, we've got the capital and restructuring capability to be able to service them.

Got it and then just lastly.

With.

Capital going more toward the property cat business away from other property other property, obviously quite a bit more premium any indication of.

I guess, what top line could look like next year from the other property perspective.

Yeah.

It's quite a deliberate change in but let me just.

We're getting very good rate increase in the other property portfolio, but it comes in more slowly than the losses occurring nature of the property cat portfolio leveraging into that I think we're making a smart trade as to how to put capacity into the market. So I don't particularly worry about one being up or the other our footprint in that market is exceptionally strong.

And when.

The opportunity there begins to emerge is accretive again, we will leverage back into it so but right now property cat is preferred and we're going to continue to emphasize the growth there in the long and short of it we're going to grow property cap quite a bit and we're going to shrink a bit in other property, which I think is a good trade.

Our next question comes from Meyer Shields from K B W.

Thanks, I guess to begin with it sounds like the specialty combined ratio expectation.

Flat on a year over year basis.

So we're thinking in the mid Ninety's am I thinking about that correctly.

Yes in my prepared comments. Thanks for the question and our prepared comments I did say that we expect that with the growth we should still continue to maintain that.

<unk> and mid <unk> range. This year mid nineties was $95 three and you saw us.

Kind of move up and down in that range with events like earlier in the year Ukraine losses.

I'll point out this year, we had a loss on one Alex should move up and down, but we feel very comfortable that mid 90.

Okay. No that's fair enough I guess I was expecting a little bit more improvement, but then Sam what are you thinking about the range.

If you look back at the extended one one renewal season.

How do you.

I guess compare the actual capacity deployed.

And it's going in.

We.

Due to extremely well I would say.

Again, the area, where I am I think thats. The most relevant question as for the U S property cat limit and as I mentioned, we have about 50% of that yet to be renewed.

So I would say that yes, there is less demand that came to the market that did not change.

Anything with our strategy as to how much to deploy it just meant we needed to be a little bit more nimble on how to.

Get the limit into the customers' hands and we did that so from my perspective, I feel really good about where we traded into into the market, albeit the dynamics are a little bit different than we expected going back to December one.

Okay. That's helpful and I guess last question. If I can just continue with that you talked about expecting that demand to come back is that would be higher or lower layers of coverage that you expect to come back.

Yeah, It's a good question it'll be higher layers.

I think at this point companies are going to continue.

How many larger companies will continue to make the trade that they'd rather build balance sheet protections rather than have low end and income statement protections and I think thats. The income statement is going to need to be bolstered by them getting more primary rate. The one exception to that is in Florida.

I think there's sometimes some of them did the way people think about the Florida market as to whether limits above or below the FH CF I think there will be still a need for some purchasing of limits below the FHA up which I consider to be.

Very low.

But more broadly the new limit purchased will be at the top end of programs.

Okay fantastic. Thank you so much.

Yes.

Our next question comes from Yang from Jefferies.

Hi, good morning.

Good morning, first question, maybe going back to <unk> question.

Kind of how.

Ro.

In a normal cat year, and realizing you can't really.

Prognosticate the precise Roe.

What exactly would look like in 'twenty three but maybe you can also help us with delineating how much of the improvement you see coming from NII versus underwriting would it be more weighted to underwriting more weighted to NII.

I've tried to point that is a good question I'll help me try and break that we're seeing much more improvement, let's start with net investment income you started to see that over the course of the year with $1 44, and giving you guidance that we're probably looking at 150 million first quarter here give or take subject to market moves.

Starting to see relative performance just on the management fees on coming through from our capital partners.

Bye.

Property should do better as Kevin pointed out property should be better, but you can't control mother nature, you can only structure the book to be able to adapt to it as well as you can so that's the picture that we're trying to portray out there that there is a core stable solid earnings stream that does support our level of return that we feel is above our cost of capital.

Just to begin with.

Got it that's helpful and then.

And the underwriting book, maybe you can help.

Yeah.

Clarify a little bit or.

All of the noise.

And I don't want to put words in your mouth, but it sounds to me like you're saying that maybe more of the underwriting margin improvement would come from property cat, but maybe more of the growth topline growth would be in the casualty and specialty and 23 is that a fair summary.

I didn't mean to leave that impression we're growing property cat substantially.

We will.

Other property as a whole will grow.

Pretty cat will grow substantially we're going to reduce a bit on other property again, you talked a little bit about that as being kind of the trade and how to set up the.

<unk>.

The portfolio, we will grow.

The casualty specialty portfolio.

A good piece of that growth within the casualty specialty portfolio will come from some dislocated specialty lines.

The final thing I'd say is.

Just having.

Underwriting background I'm focused on on net.

Net written premium just because we have a lot of changes at the third party capital level in the managed.

Premium level that are important.

So being more competitive.

<unk>.

We reduced.

The footprint of ups on into the market because the product that Upsilon sold was better sold into rend Rahim da Vinci that'll change the gross written premium, but the net economics coming to us are better reflected in net written premium because of that shift.

And does this shift or the.

Yes.

Parallel growth in casualty specialty and property cat at the same time, how does that impact access.

Hi.

Capital.

So from a capital position, we are extraordinarily well situated going into the opportunity set that we're seeing within casualty within specialty.

And outside the U S capital is never an issue.

The peak exposure within the portfolio going into this renewal was southeast hurricane It will remain southeast hurricane and we still have significant opportunity to grow the portfolio.

And more capital should we choose to.

Thank you.

Yes.

Our next question comes from Brian Meredith from UBS.

Great. Thank you Hey, just a couple of ones here for you Kevin.

I think I just want to clarify what you just said there. So you should see some pretty substantial growth in cat premium retained net net written premium growth.

Yes.

I just want to clarify that so it's on your balance sheet great.

And then the second question I'm, just curious on Florida as we look at the six one renewals.

Does any of the legislative change is make your appetite there any better or is it purely just what's going to happen with rates and pricing that market.

Yeah.

I am pleased that they are taking steps to improve the health of the Florida market at the margin it's beneficial.

And thinking strategically as to how we're going to position. The book It will not change our appetite in Florida, specifically because of that rate attachment and other opportunity. It will be the drivers are and how we structure the portfolio.

Got you Great and then I guess just last quick question I think you kind of referred to it earlier.

It sounds like.

Europe turned out being better than expected with rate increases have you increased your allocation of business to Europe.

Yeah.

Yes capital still driven by U S and with capital still driven by southeast.

But we saw more opportunities in Europe than we expected.

And we were able to kind of leverage into it.

As Eric office performed well seeing the opportunity early and executing.

Great. Thank you.

Yes, Thanks, Brian.

Our last question comes from Mike Zaremski from BMO.

Okay great.

Follow up on the Florida question from from Brian.

Just curious now that you've had some time more time to go through the legislation it sounded like Kevin in your your answer that maybe these legislative changes arent might not be that meaningful but.

Or do we just need more time to see them play out and I guess also reflecting on.

To ask a question about this current cycle versus the two thousands.

Owner parties.

Are.

A much different than back then maybe maybe I'm wrong you can correct me, but is there do you expect your counter parties over time.

Maybe.

Improve from a capital.

<unk> kind of social inflationary.

Aspect over the coming years, maybe given some of the.

The legislative changes.

Yes, thanks for the question I think.

The profile of the southeast risk that we take is materially different in the early 2000 early two thousands we had a much bigger footprint with the with the local Florida companies participating in that market.

A big of a much bigger piece of our southeast wind exposure in particular comes from large nationwide companies tend to have much higher retentions to have their own claim staff. They have a lot of infrastructure that they can bring to bear should there be a loss I think given our loss and having some of the changes that were.

Legislatively it can make a bit of a difference in the uncertainty post loss, but again I'm just trying to be transparent that the drivers of our capacity deployment for the southeast and in particular, Florida will be driven much more around attachment point price and macro terms of the deal rather than the legislative environment and the changes.

Were made.

Okay.

My follow up would just be kind of on.

New capital.

We're clear on this.

Hearing your expectations for mid year to continue to be favorable but curious.

We're seeing some headlines about new capital coming to the marketplace. Do you are you seeing alright and hearing about.

<unk> capital providers coming into kind of slip in and.

And fill some of the supply demand dislocation.

I mean, obviously you hear all the rumors and I know people are looking for capital.

The class of 2003, which we've seen in other big dislocated years seems as if that's a little bit more on <unk>.

Likely and then third party capital coming in.

Regardless.

Thank you.

We have reached our allotted time for Q&A I will now turn the call back to Kevin O'donnell.

So thanks, everybody I appreciate you staying on for a few extra minutes I appreciate the questions as well for those that had trouble getting onto the call apologize for the difficulties.

But happy to take any follow ups.

As far as the renewal.

I've been doing this for a long time I've seen a lot of different types of markets.

And this was one of the most severe.

Yeah.

This concludes the Renaissance <unk> fourth quarter and full year 2022 earnings call and webcast. Please disconnect. Your line at this time and have a wonderful day.

[music].

Good morning, and welcome to Renaissance Reis 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 <unk> 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 release during todays call. We will also present non-GAAP financial measures reconciliations to GAAP metrics and other information concerning non-GAAP measures.

<unk> be found in our earnings release and financial supplement which are available on our website at <unk> Dot com and now I'd like to turn the call over to Kevin.

So thanks to you 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 blessed that I'm pleased to report the results. So it's my pleasure to read them, a second time I apologize for those who are not taking on the gap.

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 and one of the most pivotal January one renewals in our history. Most notably this includes a step change in property reinsurance pricing.

These changes have resulted in a fundamental and necessary resetting the relationship between insurers and reinsurers problem.

Promising more appropriate risk adjusted returns to investors, while ensuring customers sustainable access to reliable high quality capacity.

This structural shift that the market has undergone constitutes a stabler long term equilibrium that will protect the interest of both investors and customers.

The renewal in our casualty business was also successful.

Rate increases in many specialty classes.

And made good progress on reducing seeding commissions and 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'd like to review our performance by responding to two questions. The first is added 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 GAAP 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 six 6% return on common equity.

Despite a similar level of industry catastrophe losses.

We are also seeing the benefit.

Higher operating leverage from the investments we made in growing the scale of our business Bob will address these tailwind more fulsome Lee in his comments.

This quarter, we also demonstrated the benefit of our increased diversification.

As we achieved excellent results despite material net negative impact on large catastrophic events.

Given the resetting underwriting at January one 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.

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.

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 as a leading competitive position.

It has also provided us the confidence to maintain our strategy and continue being a leading writer of property cat 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 one renewal when our strategic consistency and focus on improving the bottom line enabled us to deploy significant and sustainable.

Significant and sustainable capacity to our customers.

As a result, we enter 2023 with each of our three drivers of profit poised to outperform I couldnt 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 <unk>.

At the end of the call, but first I'll turn it over to Bob to discuss.

The financial performance for the quarter.

For the year, we generated operating income of $316 million and an operating return on average common equity of just over 6%.

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.

We have been successfully growing the casualty and specialty segment into a profitable market, Kevin will talk more about the renewal because as we look forward to 2023, we feel great about the positioning of this business and continue to expect a mid ninety's combined ratio in 2023.

The improved performance is a result of the increased rate and tightening terms and conditions.

In our property book throughout 2022, but importantly, the additional underwriting actions. We took in January <unk> should continue to benefit the property books results.

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 scale. These diversified income stream very efficiently over the last five years common equity is up 15% while casualty gross premiums written have quadrupled management teams have doubled and net investment income is up.

Five times.

To par over time.

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.

Winter Storm, Elliot and Hurricane Nicole and the remainder coming from aggregates.

These events impacted both property cat and other property and property cat 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 eight percentage points from large cat events and an additional five percentage points from the one of actual gas explosion.

In the quarter. There was also a 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.

Fourth we expect premiums in our other property business to decrease as we shift our focus to property catastrophe business, but we saw the most attractive opportunities.

Moving now to fee income in 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 sheet.

Performance fees continued to be depressed due to the cumulative impact of cat events in 'twenty. One 'twenty two we expect these fees to start recovering by the second quarter of 'twenty three.

Overall, we shared $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 one we reduced our owners.

<unk> taken da Vinci from 31% to 25% in order to make room for several long term oriented investors.

Moving now to investments 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 yield as we rotate our investment portfolio higher yields on our floating rate exposure as well.

As an increase in invested assets over.

Over the course of 2022 are retained annualized net investment income return.

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 overtime in two ways first the securities that we hold nail accrete to par over time and second through increased net investment income, where we proactively sold securities and reinvested at higher coupons retained unrealized losses.

Our fixed maturity portfolio are about $13 93 per share.

Going forward, we expect to hold the operating expense ratio relatively flat.

Alrighty income from our casualty and specialty business or.

Our property segment to benefit from increased rates and tightened terms and conditions stay.

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.

Thanks, Bob.

As usual I will divide my comments between our property and casualty segments.

With property.

The property renewal was very late with many deals not bound until late December even early January.

Going into their new renewal, we expected significant supply and demand imbalance for property cat reinsurance that would drive material rate increases in the range of 50% to 100%.

As the renewal progressed Stephens understood that the market would remain disciplined on rate.

We responded by increasing Retentions.

Restricting coverage and restructuring programs in order to control premium budgets. These.

Seems reactions also meant that limits, particularly in the U S were relatively flat, albeit more remote.

The increased demand we anticipated was retained by by insurers as at the time they were.

Unwilling to pay additional rate this marginal demand would require.

Over time.

We expect this risk to return to the reinsurance market as macroeconomic forces such as inflation and climate change continued to drive overall risk in the system.

We will always have the most efficient capital to assumed property cat risk. So it should ultimately sit with us.

I am very pleased with the property portfolio that we wrote in January one.

As expected.

We renewed business that significantly increased rates and tightened terms and conditions. Additionally, we increased allocation to property cat.

As it became increasingly profitable profitable relative to other properties.

Regarding topline growth.

We are seeing good opportunities and expect the reset on rates to persist through 2023.

The January one renewals is more focused on retro and international business, while the most dislocated part of the property market U S risk, mostly renewals at mid year.

Consequently, we expect many opportunities to deploy additional capacity in property over the next six months.

As Bob explained in addition to the growth we have already achieved we have ample capital to deploy into a profitable market.

As we.

Specced at the retro market was highly dislocated heading into the January one renewal with rates up materially terms and conditions very tight and an ongoing shift to occurrence from aggregate structures. This allowed us to build a strong inwards book of business.

Against this backdrop, we had several successes on our ceded placements as well.

First we purchased more retro protection than originally anticipated anticipated a testament to our strong relationships and consistent track record second we were able to grow with our long standing partners on our structured reinsurance products.

Finally in early January we issued our Mona Lisa Cat bond, albeit for reduced limit.

Given current market conditions, we believe we successfully executed our gross to net strategy and that it materially improved the efficiency of our portfolio.

Moving now to our casualty and specialty business similar to property January one is an important renewal for our casualty book.

At the renewal casualty and specialty reinsurance terms and condition moved in a positive direction across many classes of business.

Located markets provide an opportunity for us to quote and lead profitable business, we continue to see opportunities across casualty and specialty classes.

Rate increases are starting to slow and general liability lines and reducing in D&O. This follows several years of significant rate increases in these lines and.

In most cases ceding commissions reduced and we maintained attractive margins in cases, where expected margins did not meet our hurdles we scaled back our exposure.

Demonstrated leadership and achieved to increase rates and retentions as well as tightened terms and conditions in these diversifying classes of business.

Our mortgage and <unk>.

Credit and political risk business remains profitable critically due to the structure of our portfolio and our focus on risk selection is also resilient to any downturn in economic conditions that may occur this year.

Overall, we are confident this casualty renewal will drive sustained profitable growth.

We continue to grow this book and we have written what is likely to be our largest and most attractive portfolio to date more importantly, as our casualty business matures.

It is becoming increasingly consistent delivering mid ninety's combined ratio performance.

Shifting now to the capital partners business.

This means.

We start with sourcing desirable risks and only then seek to match it with the most efficient capital.

Second we have a long and successful track record of managing third party capital and are always strongly aligned with our investors.

Our partners know that we always stand alongside them sharing any lost its 80 teams.

This provides them with the confidence to reinvest with us after large events.

Finally, we offer the broadest suite of investment vehicles.

With both owned and managed balance sheets for every risk that we take this includes Montana.

Only rated third party balance sheet dedicated to casualty and specialty risks in.

And also to facilitate the liquidity needs are institutional investors demand.

This differentiated approach is highly appreciated by our partners. It also explains our success in raising capital in 2022.

Both new and existing investors chose to trust us with their capital.

That we can continue to scale, our capital partners business, even under the most difficult circumstances demonstrates that it is a permanent part of our franchise.

We have every intention of continuing to grow it in the future in order to bring reliable sustainable capital to our customers. We fully expect our capital partners business to increase England generate low volatility fee income for the benefit of our shareholders.

The on growth the ongoing growth in our capital partners business should serve.

As the third financial tailwind as a result, we expect to deliver material shareholder value over the course of 2023.

As usual, we will now turn the call over to questions.

I apologize for those that have difficulty coming on the call at the beginning both Bob and myself will stay.

Stay available after the close of the hour to make sure we answer all your questions. Thank you.

Just of time, we ask you please limit yourself to one question and one follow up we'll now take our first question from Elyse Greenspan from Wells Fargo.

Hi, Thanks, Good morning, My first question.

Assuming 2023 is a normal cat year.

Based on the book of business that you guys you were able to put together January one and I guess so this does conclude some expectation for the rest of the year.

Ro.

Do you think your book of business could generate this year.

Yes.

Thanks Elyse.

This was one of the most.

Profound renewals I think Renren has ever had we went in with very aggressive targets for ourselves, including growing the property cat portfolio, reducing risk at the low end.

The risk distribution.

One way that might be helpful to think about it is if we just take a couple of losses last year and think of how they could affect us if we looked at hurricane in it.

<unk>.

In the third quarter of this year I would expect our loss would be significantly lower for a couple of reasons one.

Primary companies will need to retain more risk at the low end of their.

Risk distribution.

Lee we will have more right so more reinstatement premium coming in should there be a loss.

So I think from that perspective, we would have a smaller loss.

If we were to look at winter Storm Elliot.

Between the increased Retentions tighter terms and conditions and higher rates I would expect that loss to be almost fully retained within the primary market and not be transferred to the reinsurance market, which is different than what happened last year. So it's difficult to put an exact number on it but between substantial rate increase the growth we've achieved.

The addition, additional profitability and specialty higher investment returns I would expect returns to be substantially higher should we have a repeat of <unk> 22 for a normal year in 2003.

And then my second question.

You just said your Pms flat I believe right. So yes.

Closure is probably consistent.

You heard right about retention going higher for primary companies right. There was a lot of rate increases in the system as you put it all together how do you CEB premium growth coming together.

Within the property cat business in 'twenty. Please.

Yes so.

About half.

Our U S exposed property cat limit is yet to be renewed so just to kind of put it in context and I anticipate that what we achieved at one one will persist through the rest of 2000 2023.

Growth in the property cat portfolio, a little bit of that growth will come from us, creating capacity by reducing a bit on other property.

Thank you.

Sure. Thanks Luis.

Our next question comes from Josh Shanker from Bank of America.

Yes. Thank you can we talk a little about the casualty and specialty seeding commissions.

How quickly.

Will they roll through the book and how.

How many hundreds of basis points might we see just on the acquisition cost ratio alone.

So on average as I mentioned, it's about one percentage point for the casualty portfolio.

Let me talk a little about casualty specialty first though we had substantial growth in.

In several specialty lines, which are within that segment and that growth is based on the fact that it became dislocated because of the Ukraine War.

<unk> losses, and there is also a degree of property cat risk, particularly in the marine and energy portfolio.

We tend to earn increased ceding commissions through <unk>.

Directly so just as we earn the premium so over the next 12 to 18 months.

And what we do from a pricing equation. So it will earn through more quickly I don't have the number to drop to a GAAP number though.

And if you're a 100 basis.

Look everybody is just a spectator it does seem like commentary.

Is greater than 100 basis points for the industry more broadly maybe not where you play.

Bob.

Do you think 100 basis points as typical or.

Is that specific to run rate.

I think it's pretty typical.

I could be optimistic point of deals where we had much bill.

Or changes, but there are deals that have been performing better and ceding commissions are a little stickier, so I use 1% as a good.

Macro benchmark for how the portfolio is and it is consistent with the way I would discuss the industry.

And where are we in terms of the commentary in that portfolio.

Understanding your own loss and your own risks and whatnot and using your own data.

Two.

We set new loss picks and be evaluate the loss picks you said in the past.

So if you go back to 2006.

That was an important part of the discussion for rate changes understanding how the models have changed drove demand and it also drove the expected loss through the property market.

I'll speak about our view of risk is relatively consistent this year to last year I would say, it's the normal two weeks in our model, we did not run through substantial risks risks changes.

From inflation and from.

Climate change or other natural phenomenon, we had that reasonably well reflected so we went through our normal process. So the rate change that we achieved this year is much more.

Much more similar to the risk risk adjusted rate change then we would have experienced in 2006.

Well I guess, maybe I'm sort of talking about the loss picks in the casualty and specialty book.

You said your whole youre holding back sort of.

Some are being more.

Our aggressive and being conservative because you just don't have the data yet to be super confident.

Using your own ability to pick the losses in.

Are we at the point in time, where now you have the full data set and the loss picks were going to see are based on your experience.

Yes, the vast majority of it is based on our experience at this point, we are always looking at industry metrics to test our development of our own portfolio.

Your point about being cautious with reserves I think we've mentioned on previous calls we generally take bad news before good news so.

So we wait for substantial I'll call that a third of the curve to develop before we think about it recognizing good news.

That's not atypical for the industry, but that's based on our own curves and our own assessment of when it's appropriate to think about making adjustments.

Okay.

Given the short time, please take some other questions. Thank you for your answers.

Sure.

Our next question comes from Brian Smith from Adama.

Yes.

Hey, Thanks, good morning.

I guess, just a relative question picking back to 2006.

And in the years following that I think ran at ROE.

30% to 45% and I realize we're no doubt years Budd.

Even if theres a normal cat year, it would've been a 20% Roe business.

I guess just in comparison.

Kevin like if you think about.

Like the health of the property cat business today relative to where it was in 2016, I mean, maybe linking this back to.

What happened at the renewal.

Sessions that you thought might have fallen a little short of your expectations.

I guess like what are the primary differences that would make it a different ROE business today versus post Katrina.

So.

I think of this one one.

As being less similar to <unk> and more similar to what happened in 2001 2002.

2002, I guess.

The.

Does it broader geographically.

There are far more attractive lines and far more hardening lines.

In the market.

So.

Don't know how to answer your question with regard to comparing it to <unk>, but when I think about what we've built in our ability to leverage in the market.

Is stronger now than it wasn't too.

The fundamentals of the market are a little different but.

So the ability for us to.

Harvest.

Profit from the casualty portfolio I think there's increasing we've got a much bigger.

Capital Partners business, which continues to contribute investment returns looks stronger and then the property portfolio at the reset level is at extremely.

Attractive levels.

Got it.

Okay and just on the renewal.

It did it did seem to kind of come together at the end.

Hi.

Any idea of just I guess, whether it's terms and conditions are right.

Some aspects of that renewal that you wish.

Would have.

Potentially even a little bit more favorable than they were for the industry or for rent.

Lee renewals work to our advantage.

<unk> often because it's it's a renewal where there has been.

A dislocation that hasnt been fully absorbed by the market, which means creating options and providing alternatives.

Is.

It's a skill that can reap outsized rewards.

Placed we achieved.

A significant number of private placements by helping.

Companies think about how to structure their programs the one area.

Where we are.

Thank you, it's a delay not a miss is the capacity that we think we thought would come to the market at one one we saw more capacity come to the market in Europe and some other places the U S capacity I think buyers.

Ultimately made a wallet decision as to how much they wanted to spend.

So when I look about it I would say that Thats an area that I would say it was a bit of a surprise to us at one one but again I am not concerned about it because I do think the capacity needs to come to the market and I think if it does come to the market, we've got the capital and restructuring capability to be able to service them.

Got it and then just lastly.

With.

Capital going more toward the property cat business away from other property other property, obviously, there's quite a bit more premium any indication of.

I guess, what top line could look like next year from the other property perspective.

Yes.

It's quite a deliberate change in let me just we're getting very good rate increase in the other property portfolio, but it comes in more slowly than the losses occurring nature of the property cat portfolio. So leveraging into that I think we're making a smart trade as to how to put capacity into the market.

I don't particularly worry about one being up for the other our footprint in that market is exceptionally strong and when.

The opportunity there begins to emerge as.

<unk> accretive again, we will leverage back into it so but right now property cat is preferred and we're going to continue to emphasize the growth there in the long and short of it we're going to grow property cap quite a bit and we're going to shrink a bit in other property. So I think it's a good trade.

Our next question comes from Meyer Shields from K B W.

To begin with it sounds like the kind of scale.

Specialty combined ratio expectation is flat on a year over year basis.

Yes, I was thinking in the mid 90% am I thinking about that correctly.

Yes in my prepared comments. Thanks for the question and our prepared comments I did say that we expect that with the growth. We should still continue to maintain mid <unk> and mid <unk> range. This year mid nineties was 95, three and you saw us kind of move up and down in that range with events like earlier in the year.

Crane losses.

And I'll point out this year, we had the loss on one Alex it should move up and down, but we feel very comfortable that mid 90.

Okay. No that's fair enough I guess I was expecting a little bit more improvement, but then Sam what you're thinking about the range.

If you look back at the extended one one renewal season.

How do you.

I guess compare the actual capacity deployed.

<unk> is going in.

We.

He is extremely well I would say.

Again, the area, where I am.

I think thats. The most relevant question as for the U S property cat limit and as I mentioned, we have about 50% of that yet to be renewed.

So I would say that yes, there is less demand that came to the market that did not change.

Anything with our strategy as to how much to deploy it just meant we needed to be a little bit more nimble on how to.

Yes, it's a good question it'll be higher layers.

I think at this point companies are going to continue.

I think there's sometimes some of them did the way people think about the Florida market as to whether limits above or below the FHA I think there will be still a need for some purchasing of limits below the FHA up which I consider to be.

Very low.

But more broadly the new limit purchased will be at the top end of programs.

Okay fantastic. Thank you so much.

Yes.

Our next question comes from Yang from Jefferies.

Hi, good morning.

Good morning, first question, maybe going back to <unk> question on kind of how the ROE.

Look in a normal cat year.

Realizing you can't really.

Prognosticate the precise Roe.

What exactly would look like in 'twenty three but maybe you can also help us with delineating how much of the improvement you see coming from NII versus underwriting and would it be more weighted to underwriting more weighted to NII.

I've tried to point that is a good question I will humbly trying to break that we're seeing much more improvement, let's start with net investment income you started to see that over the course of the year and it was $1 44, and giving you guidance that we're probably looking at 150 million first quarter here give or take subject to market those.

Starting to see relative performance just on the management fees on coming through from our capital partners.

FY <unk>.

Just to begin with.

Got it that's helpful and then.

The underwriting book, maybe you can help.

Yes.

Clarify a little better or is it towards some of the noise.

And I don't want to put words in your mouth, but it sounds to me like you're saying that maybe more of the underwriting margin improvement would come from property cat, but maybe more of the growth top line growth would be in the casualty and specialty and 23 is that a fair summary.

I didn't mean to leave that impression we're growing property cat substantially.

We will.

Other property as a whole will grow.

Pretty cat will grow substantially we're going to reduce a bit on other property again talk a little bit about that as being kind of a trade and how to set up the.

<unk>.

The portfolio, we will grow.

Casualty specialty portfolio.

A good piece of that growth within the casualty specialty portfolio will come from some dislocated specialty lines.

<unk>.

The final thing I'd say is.

Just having.

Youre, writing background I'm focused on.

Net written premium just because we have a lot of changes at the third party capital level in the managed.

Premium level that are important.

Okay. So more typically it's up to launch.

We reduced the footprint of upsilon into the market because the product that Upsilon sold was better sold into Renren and da Vinci.

That will change the gross written premium, but the net economics coming to us are better reflected in net written premium because of that shift.

Okay.

And does this shift or the I guess the.

Parallel growth in casualty specialty and property cat at the same time.

How does that impact.

Yes.

Hi.

Capital.

So from a capital position, we are extraordinarily well situated going into the opportunity set that we're seeing within casualty within specialty.

And outside the U S capital is never an issue.

Peak exposure within the portfolio going into this renewal was southeast hurricane It will remain southeast hurricane and we still have significant opportunity to grow the portfolio.

Deploy more capital should we choose to.

Yeah.

Thank you.

Yes.

Our next question comes from Brian Meredith from UBS.

Great. Thank you Hey, just a couple ones here for you Kevin.

I think I just want to clarify what you just said there. So you should see some pretty substantial growth in cat premium retained net net written premium growth.

Yes.

I just want to clarify that so it's on your balance sheet great.

And then the second question I'm, just curious on Florida as we look at the six one renewals.

Does any of the legislative changes.

Your appetite there any better or is it purely just what's going to happen with rates and pricing that market.

I am pleased that they are taking steps to improve the health of the Florida market at the margin it's beneficial.

And thinking strategically as to how we're going to position to both it will not change our appetite in Florida, specifically because of that right attachment and other opportunity. It will be the drivers are and how we structure the portfolio.

Got you Great and then I guess just last quick question I think you kind of referred to it earlier.

It sounds like.

Europe turned out being better than expected with rate increases have you increased your allocation of business to Europe.

Yes capital is still driven by U S and with capital still driven by southeast but.

We saw more opportunities in Europe than we expected.

And we were able to kind of leverage into it.

As Eric office performed well seeing seeing the opportunity early and executing.

Great. Thank you.

Yes, Thanks, Brian.

Your last question comes from Mike Zaremski from BMO.

Okay great.

A follow up on the Florida question from from Brian.

Or do we just need more time to see them play out and I guess also reflecting on.

Past question about this current cycle versus the two thousands.

Owner parties.

That's.

So much different than back then maybe maybe I'm wrong you can correct me, but is there do you expect your counter parties over time too.

Maybe.

Improve from.

Our capital and our kind of social inflationary.

Aspect over the coming years, maybe given some of the.

The legislative changes.

Yes, thanks for the question I think.

The profile of the southeast risk that we take is materially different in the early 2000 early two thousands we had.

Much bigger footprint with.

With the local Florida companies participating in that market.

A bigger.

Much bigger piece of our southeast wind exposure in particular comes from large nationwide companies tend to have much higher retentions to have their own claims staff. They have a lot of infrastructure that they can bring to bear should there be a loss I think given our loss and having some of the changes that.

We're made legislatively it can make a bit of a difference in the uncertainty post loss, but again I'm just trying to be transparent that the drivers of our capacity deployment for the southeast and in particular, Florida will be driven much more around attachment point price and macro terms of the deal rather than a legislative environment.

And the changes that were made.

Okay.

My follow up would just be kind of on.

New capital.

We're clear on the <unk>.

Hearing your expectations for mid year.

To be favorable but curious.

We're seeing some headlines about new capital coming to the marketplace.

<unk>, alright, and hearing about.

Additional capital providers coming into kind of slip in and and.

Fill some of the supply demand dislocation.

I mean, obviously you hear all the rumors and I know people are looking for capital.

We've been successful, bringing capital, it's because of the uniqueness of the offering and the expertise of the underwriting I think that will continue associated should new capital come in I think the natural place for them to want to have a conversation is here I think it's getting a little.

The class of 2003, which we've seen in other big dislocated years seems as if thats a little bit more.

Likely and then third party capital coming in.

Regardless.

Thank you.

We have reached our allotted time for Q&A I will now turn the call back to Kevin O'donnell.

So thanks, everybody I appreciate you staying on for a few extra minutes I appreciate the questions as well for those that had trouble getting onto the call apologize for the difficulties.

But happy to take any follow ups.

As far as the renewal.

I've been doing this for a long time I've seen a lot of different types of markets.

And this was one of the most.

This concludes the Renaissance <unk> fourth quarter and full year 2022 earnings call and webcast. Please disconnect. Your line at this time and have a wonderful day.

Q4 2022 Renaissancere Holdings Ltd Earnings Call

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