RenRe delivers significant income to third-party investors in Q3, as fees earned rise 27%

Reflecting strong performance across the RenaissanceRe business and its platform of reinsurance joint-venture vehicles and insurance-linked securities (ILS) funds, the company has reported delivering a significant $450.2 million to third-party investors in the third-quarter, while the fee income it earned was up more than 27%.

Capital return is perhaps the storm of RenaissanceRe’s (RenRe) third-quarter 2024 reporting, as the company announced an increase in share repurchases and a spike in income delivered to its ILS investors and third-party capital partners.

All this despite the more elevated level of natural catastrophes experienced in the period, including hurricane Helene, which truly underscores the profitability of the reinsurance sector at this time.

No new capital raises were specifically disclosed for the third-quarter by RenRe, although there are signs certain investors may have increased commitments somewhat in the specifics of the noncontrolling interests reported.

Recall that, RenaissanceRe’s Capital Partners division had already grown to $7.15 billion in third-party investor assets under management at the mid-way point of 2024.

The company had put that to work profitably at mid-year renewals, it seems, with the results suggesting strong performance across the range of third-party capitalised joint-venture and ILS funds in the third-quarter, considering events like hurricane Helene.

For Q3 2024, RenRe said that net income attributable to its redeemable noncontrolling interests, which is technically a measure of returns distributed to third-party capital investors in the period, reached $450.2 million.

That’s more than double the amount delivered in the second-quarter of the year, reflecting strong returns and likely seasonal effects as well.

A combination of factors drove the strong income for third-party investors in the third-quarter, RenRe explained.

Strong underwriting results in its DaVinci sidecar like JV structure and the PGGM supported Vermeer Re rated reinsurer, as well as strong net investment income and higher invested assets across the joint ventures and managed ILS funds, as well as the overall investment performance of the reinsurance joint ventures and managed ILS funds.

With strong returns being generated from the reinsurance and catastrophe bond investments across the RenRe Capital Partners offering, you’d also expect strong fee income for the company as well.

For Q3 2024, fee income reached $82.1 million, which was up 27.1% from Q3 2023, the company reported.

Management fee income reached almost $55 million for the period, while performance fees were over $27 million, both well up on the prior year.

In fact, management fees have risen 23% year-on-year, while performance fees were up an impressive 35%.

Management fees rose thanks to growth in RenRe’s joint ventures and managed ILS funds, with DaVinciRe, the casualty and specialty focused Fontana Holdings both standouts, while there was also some additional fees earned by AlphaCat Managers Ltd., which was acquired as part of the Validus acquisition.

On the performance fee side, income increased thanks to the strong underwriting results and prior year favorable development of strategies, primarily seen in DaVinci and the Upsilon RFO Re Ltd. structure, RenRe explained.

Impressively, RenRe reported net favorable development of $184.4 million from large catastrophes that occurred through the 2017 to 2022 accident years, $108.1 million of which was from 2022 Weather-Related Large Losses, as well as further favorable development for attritional property losses.

This favorable development may have also assisted RenRe in unlocking some more of the trapped capital linked to the Upsilon strategy, a process that has been ongoing over the last few years.

During the third-quarter, hurricane Helene is estimated to have resulted in just over $181 million in incurred net claims and claims expenses, but of RenRe’s net negative impact of almost $147.85 million, it seems roughly $22.6 million of this loss event was shared with noncontrolling interests, so third-party investors in the JV’s and ILS strategies.

From across all the Q3 large loss events, roughly $67.5 million of the total $370 million of claims and expenses reported was attributable to these investor sources.

Which clearly was not sufficient to dent performance, given the very strong income returns and the fees RenRe has continued to enjoy in the period.

For Q4, hurricane Milton is estimated to have a net negative impact of $275 million, RenRe reported. A portion of this will again be shared with the JV and ILS investors, but again it won’t be anywhere near significant enough on its own to halt another strong quarter of returns, it currently seems.

For Renaissance Re, the third-party capital and ILS management business of its Capital Partners division continues to deliver income, protection and a diversifying pool of capital for the company, with fee income remaining around record levels and significant earnings continuing to be delivered to investors.

RenRe’s results remain a good bellwether for the performance of ILS strategies in general, suggesting again that other ILS managers will have continued to be profitable and deliver returns in the third-quarter of this year.

View information on many dedicated ILS fund managers, as well as reinsurers offering ILS style investment opportunities, such as RenaissanceRe, in our Insurance-Linked Securities Investment Managers & Funds Directory.