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UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number: 34-0-26512
RENAISSANCERE HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
BERMUDA 98-013-8020
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
RENAISSANCE HOUSE HM 19
8-12 EAST BROADWAY (Zip Code)
PEMBROKE, BERMUDA
(Address of principal executive offices)
(441) 295-4513
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Exchange Act). Yes x No
----- -----
The number of outstanding shares of RenaissanceRe Holding Ltd.'s common
stock, par value US $1.00 per share, as of November 8, 2002 was 69,483,735.
Total number of pages in this report: 35
RENAISSANCERE HOLDINGS LTD.
INDEX TO FORM 10-Q
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Consolidated Balance Sheets as at September 30, 2002 3
(Unaudited) and December 31, 2001
Unaudited Consolidated Statements of Operations for 4
the three and nine month periods ended September 30, 2002 and 2001
Unaudited Consolidated Statements of Changes in Shareholders'
Equity for the nine month periods ended September 30, 2002 and 2001 5
Unaudited Consolidated Statements of Cash Flows
for the nine month periods ended September 30, 2002 and 2001 6
Notes to Unaudited Consolidated Financial Statements 7
ITEM 2 -- Management's Discussion and Analysis of Results of Operations 14
and Financial Condition
ITEM 3 -- Quantitative and Qualitative Disclosures About Market Risk 29
ITEM 4 -- Disclosure Controls and Procedures 29
PART II -- OTHER INFORMATION 30
ITEM 1 -- Legal Proceedings
ITEM 2 -- Changes in Securities and Use of Proceeds
ITEM 3 -- Defaults Upon Senior Securities
ITEM 4 -- Submission of Matters to a Vote of Security Holders
ITEM 5 -- Other Information
ITEM 6 -- Exhibits and Reports on Form 8-K
Signature -- RenaissanceRe Holdings Ltd. 31
Certification -- Chief Executive Officer, RenaissanceRe Holdings Ltd. 32
Certification -- Chief Financial Officer, RenaissanceRe Holdings Ltd. 34
2
PART I - FINANCIAL INFORMATION
Item 1 - Financial statements
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of United States Dollars, except per share amounts)
AS AT
---------------------------------------
SEPT. 30, 2002 DEC. 31, 2001
------------------ ------------------
(Unaudited) (Audited)
ASSETS
Fixed maturity investments available for sale, at fair value
(Amortized cost of $2,211,608 and $1,266,188 at Sept. 30, 2002
and December 31, 2001, respectively) $ 2,254,919 $ 1,282,483
Short term investments, at cost 397,552 733,925
Other investments 96,920 38,307
Cash and cash equivalents 86,451 139,715
----------- -----------
Total investments and cash 2,835,842 2,194,430
Premiums receivable 318,978 102,202
Ceded reinsurance balances 126,660 41,690
Losses and premiums recoverable 219,614 217,556
Accrued investment income 20,708 17,696
Deferred acquisition costs 59,444 12,814
Other assets 59,967 57,264
----------- -----------
TOTAL ASSETS $ 3,641,213 $ 2,643,652
=========== ===========
LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
LIABILITIES
Reserve for claims and claim expenses $ 754,215 $ 572,877
Reserve for unearned premiums 464,393 125,053
Debt 275,000 183,500
Reinsurance balances payable 164,950 115,967
Other 56,656 58,650
----------- -----------
TOTAL LIABILITIES 1,715,214 1,056,047
----------- -----------
MINORITY INTEREST - Company obligated mandatorily
redeemable Capital Securities of a subsidiary
trust holding solely junior subordinated
debentures of the Company 84,630 87,630
MINORITY INTEREST - DaVinci 348,301 274,951
SHAREHOLDERS' EQUITY
Series A Preference Shares 150,000 150,000
Common shares and additional paid-in capital 323,071 264,623
Unearned stock grant compensation (20,470) (20,163)
Accumulated other comprehensive income 38,509 16,295
Retained earnings 1,001,958 814,269
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,493,068 1,225,024
----------- -----------
TOTAL LIABILITIES, MINORITY INTEREST, AND
SHAREHOLDERS' EQUITY $ 3,641,213 $ 2,643,652
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(in thousands of United States Dollars, except per share amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPT. 30, 2002 SEPT. 30, 2001 SEPT. 30, 2002 SEPT. 30, 2001
-------------- -------------- -------------- ---------------
REVENUES
Gross Premiums Written $ 282,597 $ 123,571 $ 1,013,725 $ 443,791
=========== =========== =========== ===========
Net premiums written $ 192,687 $ 79,030 $ 770,300 $ 293,208
Decrease (increase) in unearned premiums (1,377) 903 (243,940) (53,844)
----------- ----------- ----------- -----------
Net premiums earned 191,310 79,933 526,360 239,364
Net investment income 26,065 18,738 75,212 54,892
Net foreign exchange gains (losses) 888 (1,051) 2,588 (1,113)
Other income 7,951 1,070 24,227 8,840
Net realized gains on investments 7,891 4,978 11,545 15,474
----------- ----------- ----------- -----------
TOTAL REVENUES 234,105 103,668 639,932 317,457
----------- ----------- ----------- -----------
EXPENSES
Claims and claim expenses incurred 82,931 46,986 199,198 121,196
Acquisition expenses 23,802 11,461 62,719 34,614
Operational expenses 9,616 9,408 30,241 27,814
Corporate expenses 3,466 1,366 10,844 7,674
Interest expense 3,499 2,699 9,646 4,246
----------- ----------- ----------- -----------
TOTAL EXPENSES 123,314 71,920 312,648 195,544
----------- ----------- ----------- -----------
Income before minority interest, taxes and change in
accounting principle 110,791 31,748 327,284 121,913
Minority interest - Company obligated mandatorily
redeemable Capital Securities of a subsidiary
trust holding solely junior subordinated
debentures of the Company 1,759 1,823 5,423 5,565
Minority interest - DaVinci 17,689 -- 40,636 --
----------- ----------- ----------- -----------
Income before taxes and change in accounting
principle 91,343 29,925 281,225 116,348
Income tax expense (benefit) 59 (3) 382 1,175
Cumulative effect of a change in accounting
principle -- -- (9,187) --
----------- ----------- ----------- -----------
NET INCOME 91,284 29,928 271,656 115,173
Dividends on Series A Preference Shares 3,038 -- 9,079 --
----------- ----------- ----------- -----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 88,246 $ 29,928 $ 262,577 $ 115,173
=========== =========== =========== ===========
Earnings per Common Share - basic $ 1.30 $ 0.51 $ 3.90 $ 1.99
Earnings per Common Share - diluted $ 1.26 $ 0.49 $ 3.75 $ 1.90
The accompanying notes are an integral part of these financial statements.
4
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(in thousands of United States Dollars)
(Unaudited)
2002 2001
----------- -----------
Series A preference shares
Balance -- beginning and end of period $ 150,000 $ --
----------- -----------
Common stock & additonal paid-in capital
Balance -- January 1 264,623 22,999
Exercise of options, and issuance of stock
and restricted stock awards 12,780 13,807
Offering expenses (73) (558)
Stock dividend 45,711 --
Repurchase of Capital Securities 30 --
----------- -----------
Balance -- September 30 323,071 36,248
----------- -----------
Unearned stock grant compensation
Balance -- January 1 (20,163) (11,716)
Restricted stock grants awarded, net (7,710) (13,047)
Amortization 7,403 5,639
----------- -----------
Balance -- September 30 (20,470) (19,124)
----------- -----------
Accumulated other comprehensive income
Balance -- January 1 16,295 6,831
Net unrealized gains on securities, net of
adjustment (see disclosure below) 22,214 18,810
----------- -----------
Balance -- September 30 38,509 25,641
----------- -----------
Retained earnings
Balance -- January 1 814,269 682,704
Net income 271,656 115,173
Dividends paid - common shares (29,177) (23,749)
Dividends paid - preference shares (9,079) --
Stock dividend (45,711) --
----------- -----------
Balance -- September 30 1,001,958 774,128
----------- -----------
Total Shareholders' Equity $ 1,493,068 $ 816,893
=========== ===========
COMPREHENSIVE INCOME
Net income $ 271,656 $ 115,173
Other comprehensive income 22,214 18,810
----------- -----------
Comprehensive income $ 293,870 $ 133,983
=========== ===========
DISCLOSURE REGARDING NET UNREALIZED GAINS
Net unrealized holding gains arising during period $ 33,759 $ 34,284
Net realized gains included in net income (11,545) (15,474)
----------- -----------
Change in net unrealized gains on securities $ 22,214 $ 18,810
=========== ===========
(1) Comprehensive income for the quarters ended September 30, 2002 and 2001
were $112.4 million and $49.2 million, respectively.
The accompanying notes are an integral part of these financial statements.
5
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(in thousands of United States Dollars)
(Unaudited)
---------------------------------
2002 2001
----------- -----------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income $ 271,656 $ 115,173
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Amortization and depreciation 15,435 (755)
Net realized investment gains (11,545) (15,474)
Minority interest in undistributed net income of DaVinci 40,636 --
Change in:
Reinsurance balances, net (159,122) (41,778)
Ceded reinsurance balances (76,937) (36,308)
Deferred acquisition costs (43,104) (9,687)
Reserve for claims and claim expenses, net 157,520 109,078
Reserve for unearned premiums 318,532 91,857
Other 39,098 (5,680)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 552,169 206,426
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Proceeds from sale of investments 4,722,476 2,367,148
Purchase of investments available for sale (5,719,031) (2,579,701)
Net sales (purchases) of short term investments 339,373 (105,591)
Acquisition of subsidiary, net of cash acquired (23,495) --
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (680,677) (318,144)
----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Issuance of debt 100,000 150,000
Payment of bank loan (8,500) (16,500)
Dividends paid - common shares (29,177) (23,749)
Dividends paid - Series A preference shares (9,079) --
Secondary offering expenses -- (558)
Minority interests 22,000 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 75,244 109,193
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (53,264) (2,525)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 139,715 59,559
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 86,451 $ 57,034
=========== ===========
The accompanying notes are an integral part of these financial statements.
6
RenaissanceRe Holdings Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
1. The consolidated financial statements have been prepared on the basis of
U.S. generally accepted accounting principles ("GAAP") for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. This
report on Form 10-Q should be read in conjuction with the Company's Annual
Report on Form 10-K. The consolidated financial statements include the
accounts of RenaissanceRe Holdings Ltd. ("RenaissanceRe") and its
wholly-owned subsidiaries, including Renaissance Reinsurance Ltd.
("Renaissance Reinsurance"), Glencoe Insurance Ltd. ("Glencoe"),
Renaissance U.S. Holdings, Inc. ("Renaissance U.S."), RenaissanceRe Capital
Trust (the "Trust") and Renaissance Underwriting Managers, Ltd.
("Renaissance Managers"). The consolidated statements also include the
accounts of the Company's partially-owned subsidiary, DaVinciRe Holdings
Ltd. ("DaVinciRe").
Also included in the consolidated financial statements is Overseas Partners
Cat Ltd. ("OP Cat"), formerly a subsidiary of Overseas Partners Ltd.
("OPL"). The Company purchased OP Cat at book value, which equated to $25
million, on May 10, 2002, the date of the purchase.
RenaissanceRe and its subsidiaries are collectively referred to herein as
the "Company," and references herein to "our", "we", or "us" refer to the
Company. All intercompany transactions and balances have been eliminated on
consolidation.
The Company's principal products are property catastrophe reinsurance and
specialty reinsurance, principally provided through Renaissance Reinsurance
and primary insurance, principally provided by Glencoe, through individual
risk selection and by providing coverage to insurance companies on a quota
share basis. The Company acts as underwriting manager and underwrites
worldwide property catastrophe reinsurance programs on behalf of joint
ventures, including Top Layer Reinsurance Ltd. ("Top Layer Re") and DaVinci
Reinsurance Ltd. ("DaVinci"). DaVinciRe and DaVinci were formed in October
2001 with other equity investors. The Company owns a minority equity
interest in, but controls a majority of the outstanding voting shares of,
DaVinciRe.
Minority interests represent the interests of external parties with respect
to net income and shareholders' equity of the Trust and DaVinci. The
Company has also established a wholly-owned subsidiary, RenaissanceRe
Capital Trust II ("Capital Trust II"), which is a financing subsidiary
available to issue certain types of securities on behalf of the Company. As
of September 30, 2002, no such securities have been issued by Capital Trust
II. The Trust is the issuer of $84.6 million of outstanding mandatorily
redeemable preferred capital securities ("Capital Securities") and holds a
like amount of junior subordinated debentures issued by RenaissanceRe.
RenaissanceRe's guarantee of the distributions on the preferred securities
issued by the Trust (and, if issued, those of Capital Trust II), when taken
together with RenaissanceRe's obligations under the expense reimbursement
agreement with the Trust, provides a full and unconditional guarantee of
amounts due on the Capital Securities issued by the Trust.
Certain comparative information has been reclassified to conform to the
current presentation. Because of the seasonality of the Company's business,
the results of operations and cash
7
flows for any interim period will not necessarily be indicative of results
of operations and cash flows for the full fiscal year or subsequent
quarters.
2. The Company purchases reinsurance to reduce its exposure to large losses.
The Company currently has in place contracts that provide for recovery of a
portion of certain claims and claims expenses from reinsurers in excess of
various retentions and loss warranties. The Company would remain liable to
the extent that any third-party reinsurance company fails to meet its
obligations. The earned reinsurance premiums ceded were $160.8 million and
$112.0 million for the nine month periods ended September 30, 2002 and
2001, respectively. Other than loss recoveries, certain of the Company's
ceded reinsurance contracts provide for recoveries of additional premiums,
reinstatement premiums and for unrecovered no claims bonuses which are
unrecoverable when losses are ceded to other reinsurance contracts.
Total recoveries netted against premiums and claims and claim expenses
incurred for the nine months ended September 30, 2002 were $73.2 million
compared to $165.7 million for the nine months ended September 30, 2001.
3. Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"). As a result, the Company's goodwill existing at December 31, 2001 is
no longer being amortized and is subject to an annual impairment review. In
the second quarter of 2002, the Company completed its initial impairment
review in compliance with the transition provisions of SFAS 142 and, as a
result, the Company decided to reflect goodwill at zero value, the low end
of an estimated range of values. Accordingly, during the second quarter of
2002, the Company wrote-off the balance of its goodwill, or $9.2 million.
As required by SFAS 142, this charge has been reflected in the statement of
operations as a cumulative effect of a change in accounting principle. The
following tables set forth the effects of adopting SFAS 142 on the
comparative period income:
- ----------------------------------------------------------------------------------------------
(in thousands of U.S. dollars except share and per share data)
Three months ended
September 30, 2001
---------------------
Net income available to common shareholders, as reported $ 29,928
Add back: goodwill amortization expense 230
---------------------
Adjusted net income available to common shareholders $ 30,158
=====================
Average common shares outstanding - basic 58,130
Average common shares outstanding - diluted 60,863
Adjusted per common share data
Earnings per common share - basic $ 0.52
Earnings per common share - diluted $ 0.50
- ----------------------------------------------------------------------------------------------
8
- ----------------------------------------------------------------------------------------------
(in thousands of U.S. dollars except share and per share data)
Nine months ended
September 30, 2001
---------------------
Net income available to common shareholders, as reported $ 115,173
Add back: goodwill amortization expense 418
---------------------
Adjusted net income available to common shareholders $ 115,591
=====================
Average common shares outstanding - basic 57,883
Average common shares outstanding - diluted 60,669
Adjusted per common share data
Earnings per common share - basic $ 2.00
Earnings per common share - diluted $ 1.91
- ----------------------------------------------------------------------------------------------
4. During the second quarter, the Company changed its policy regarding the
classification of certain investments previously reflected as cash and cash
equivalents. These investments were reclassified to short-term investments
to more appropriately reflect the Company's investment strategy regarding
those assets. Prior period comparatives have been reclassified to reflect
this change in policy.
5. For the nine month period ended September 30, 2002, the Company paid
interest of $9.6 million on its outstanding loans and 7% Senior Notes. For
the same period in the previous year the Company paid interest of $4.2
million on its outstanding loans. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition -- Capital Resources and
Shareholders' Equity" for further discussion.
6. Basic earnings per share is based on weighted average common shares and
excludes any dilutive effects of options and restricted stock. Diluted
earnings per share assumes the exercise of all dilutive stock options and
restricted stock grants. The following tables set forth the computation of
basic and diluted earnings per share (see Note 7 below):
- ----------------------------------------------------------------------------------------------------------------------
Three months ended September 30,
- ----------------------------------------------------------------------------------------------------------------------
2002 2001
- ----------------------------------------------------------------------------------------------------------------------
(in thousands of U.S. dollars except share and per share data)
- ----------------------------------------------------------------------------------------------------------------------
Numerator:
Net income available to common shareholders $ 88,246 $ 29,928
============= =============
Denominator:
Denominator for basic earnings per common share -
Weighted average common shares 67,865,217 58,130,061
Per common share equivalents of employee stock
Options and restricted shares 2,406,866 2,732,607
------------- -------------
Denominator for diluted earnings per common share -
Adjusted weighted average common shares and
assumed conversions 70,272,083 60,862,668
============= =============
Basic earnings per common share $ 1.30 $ 0.51
Diluted earnings per common share $ 1.26 $ 0.49
- ----------------------------------------------------------------------------------------------------------------------
9
- ----------------------------------------------------------------------------------------------------------------------
Nine months ended September 30,
- ----------------------------------------------------------------------------------------------------------------------
2002 2001
- ----------------------------------------------------------------------------------------------------------------------
(in thousands of U.S. dollars except share and per share data)
- ----------------------------------------------------------------------------------------------------------------------
Numerator:
Net income available to common shareholders $ 262,577 $ 115,173
============= =============
Denominator:
Denominator for basic earnings per common share -
Weighted average shares 67,326,314 57,883,068
Per common share equivalents of employee stock
Options and restricted shares 2,763,304 2,785,686
------------- -------------
Denominator for diluted earnings per common share -
Adjusted weighted average shares and
assumed conversions 70,089,618 60,668,754
============= =============
Basic earnings per common share $ 3.90 $ 1.99
Diluted earnings per common share $ 3.75 $ 1.90
- ----------------------------------------------------------------------------------------------------------------------
7. The Board of Directors of RenaissanceRe declared the following dividends
during 2002:
- ----------------------------------------------------------------------------------------------
Amount per Share Declaration Date Record Date Payment Date
- ----------------------- ----------------------- -------------------- ---------------------
$ 0.142 February 5, 2002 February 19, 2002 March 5, 2002
$ 0.142 May 2, 2002 May 16, 2002 May 30, 2002
$ 0.142 August 8, 2002 September 2, 2002 September 16, 2002
$ 0.142 November 7, 2002 December 2, 2002 December 16, 2002
- ----------------------------------------------------------------------------------------------
During the second quarter of 2002, RenaissanceRe effected a three-for-one
stock split through a stock dividend of two additional common shares for
each common share owned. All of the share and per share information
provided in this 10-Q is presented as if the stock dividend had occurred
for all periods presented.
8. The Company has two reportable segments: reinsurance operations and
individual risk operations. The reinsurance segment, which includes the
results of DaVinci in 2002, primarily provides property catastrophe
reinsurance and specialty reinsurance to selected insurers and reinsurers
on a worldwide basis. During the quarter, we renamed our primary segment
"individual risk" to more accurately describe the risk characteristics of
this business. We define the individual risk segment to include
underwriting that involves understanding the characteristics of the
original underlying insurance policy. The individual risk segment currently
provides insurance both on a direct and on a surplus lines basis for
commercial and homeowners catastrophe-exposed property business, and also
provides reinsurance to other insureds on a quota share basis. Data for the
three and nine month periods ended September 30, 2002 and 2001 are as
follows:
10
- -----------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED SEPTEMBER 30, 2002
(IN THOUSANDS OF U.S. DOLLARS)
REINSURANCE (1) INDIVIDUAL RISK (1) OTHER (2) TOTAL
--------------------------------------------------------------------------------
Gross premiums written $ 201,351 $ 81,246 $ - $ 282,597
Income 66,316 8,645 13,285 88,246
Assets 2,860,047 501,309 279,857 3,641,213
--------------------------------------------------------------------------------
Claims and claim expense ratio 44.4% 38.0% - 43.3%
Expense ratio 14.3% 33.9% - 17.5%
--------------------------------------------------------------------------------
Combined ratio 58.7% 71.9% - 60.8%
================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
QUARTER ENDED SEPTEMBER 30, 2001
(IN THOUSANDS OF U.S. DOLLARS)
REINSURANCE (1) INDIVIDUAL RISK (1) OTHER (2) TOTAL
--------------------------------------------------------------------------------
Gross premiums written $ 112,872 $ 10,699 $ - $ 123,571
Income (loss) 14,590 (2,512) 17,850 29,928
Assets 1,599,378 285,212 106,664 1,991,254
--------------------------------------------------------------------------------
Claims and claim expense ratio 58.3% 78.0% - 58.8%
Expense ratio 21.7% 159.7% - 26.1%
--------------------------------------------------------------------------------
Combined ratio 80.0% 237.7% - 84.9%
================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 2002
(IN THOUSANDS OF U.S. DOLLARS)
REINSURANCE (1) INDIVIDUAL RISK (1) OTHER (2) TOTAL
--------------------------------------------------------------------------------
Gross premiums written $ 828,716 $ 185,009 $ - $ 1,013,725
Income 223,352 10,850 28,375 262,577
Assets 2,860,047 501,309 279,857 3,641,213
--------------------------------------------------------------------------------
Claims and claim expense ratio 37.3% 42.5% - 37.8%
Expense ratio 15.4% 37.5% - 17.7%
--------------------------------------------------------------------------------
Combined ratio 52.7% 80.0% - 55.5%
================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
11
- -----------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN THOUSANDS OF U.S. DOLLARS)
REINSURANCE (1) INDIVIDUAL RISK (1) OTHER (2) TOTAL
--------------------------------------------------------------------------------
Gross premiums written $ 407,899 $ 35,892 $ - $ 443,791
Income (loss) 56,145 (405) 59,433 115,173
Assets 1,599,378 285,212 106,664 1,991,254
--------------------------------------------------------------------------------
Claims and claim expense ratio 52.4% -25.7% - 50.6%
Expense ratio 23.1% 133.2% - 26.1%
--------------------------------------------------------------------------------
Combined ratio 75.5% 107.5% - 76.7%
================================================================================
- -----------------------------------------------------------------------------------------------------------------------------
(1) - Income (loss) for the Reinsurance and individual risk segments
represents net underwriting income. Net underwriting income consists of net
premiums earned less claims and claims expenses incurred, acquisition
costs, and operational expenses.
(2) - Income for the Other segment consists of net investment income, net
foreign exchange gains (losses), other income and net realized gains on
investments, partially offset by corporate expenses, interest expense,
minority interest expenses, cumulative effect of change in accounting
principle and income tax expense (benefit).
9. The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences
between financial and tax reporting. Deferred tax assets and liabilities
are determined based on the difference between the financial statement
bases and tax bases of assets and liabilities using enacted tax rates.
RenaissanceRe's U.S. subsidiaries are subject to U.S. tax. The net deferred
tax asset of $3.9 million is net of a $26.6 million valuation allowance.
Net operating loss carryforwards and future tax deductions will be
available to offset regular taxable U.S. income during the carryforward
period (which expires during the period ranging from 2018 through 2020),
subject to certain limitations.
10. Subsequent Events
On November 1, 2002, RenaissanceRe purchased 3,960,000 common shares, par
value $.01 per share (the "Shares") of Platinum Underwriters Holdings, Ltd.
("Platinum"), in a private placement transaction. RenaissanceRe purchased
these Shares at a price of $21.2625 per share for an aggregate purchase
price of $84.2 million. The closing of RenaissanceRe's investment in
Platinum occurred concurrent with the closing of Platinum's initial public
offering, and of a concurrent private placement of 6,000,000 Common Shares
to The St. Paul Companies, Inc. Immediately after consummation of these
transactions, RenaissanceRe owned 9.2% of Platinum's outstanding Common
Shares.
In connection with its investment in Platinum, RenaissanceRe also received
a ten-year option to purchase up to 2,500,000 additional Shares of Platinum
at a per share price of $27.00 pursuant to the RenaissanceRe Option
Agreement between RenaissanceRe and Platinum dated as of November 1, 2002.
12
In addition, concurrent with the closing of RenaissanceRe's investment in
Platinum, RenaissanceRe entered into a Services and Capacity Reservation
Agreement with Platinum, dated as of November 1, 2002 (the "Services
Agreement"), pursuant to which RenaissanceRe will provide certain services
to Platinum in connection with Platinum's property catastrophe insurance
book of business, and will reserve $100 million of retrocessional capacity.
In exchange for these services, during the term of the Services Agreement
RenaissanceRe is entitled to receive an annual fee equal to the greater of
(i) $4,000,000 and (ii) 3.5% of Platinum's aggregate gross written
non-marine non-finite property catastrophe premium (including
reinstatements), adjusted annually thirty days after each anninversary.
13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is a discussion and analysis of our results of operations for the
three and nine month periods ended September 30, 2002 and 2001 and financial
condition as of September 30, 2002. This discussion and analysis should be read
in conjunction with the attached unaudited consolidated financial statements and
notes thereto and the audited consolidated financial statements and notes
thereto contained in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.
GENERAL
We provide reinsurance that is subject to the risk of natural and man-made
catastrophes. Our results depend to a large extent on the frequency and severity
of catastrophic events, and the concentration and coverage offered to clients
impacted thereby. Our catastrophe reinsurance business includes 1) writing
reinsurance on our own behalf and 2) writing reinsurance on behalf of our joint
ventures, principally Top Layer Re and DaVinci. We receive fee income based on
the performance of these joint ventures, however, as the results of operations
of DaVinci are consolidated in our financial statements, no fee income from
DaVinci is recognized in the consolidated financial statements. Our individual
risk operations principally provide coverage with respect to risks that are also
exposed to natural catastrophes based on an understanding of the original
underlying insurance policies.
Recently, we have increased our premiums from specialty lines of reinsurance,
including such lines as catastrophe-exposed workers compensation coverage,
property per risk, aviation and finite reinsurance. We have also increased our
individual risk business. We define the individual risk segment to include
underwriting that involves understanding the characteristics of the original
underlying insurance policy. The individual risk segment currently provides
insurance both on a direct and on a surplus lines basis for commercial and
homeowners catastrophe-exposed property business, and also provides reinsurance
to other insureds on a quota share basis.
We may write other lines of business in the future although there can be no
assurance that any such premiums will be material to us. From time to time, we
may consider opportunistic diversification into new ventures, either through
organic growth or the acquisition of other companies or books of business. In
evaluating such new ventures, we seek an attractive return on equity, the
ability to develop or capitalize on a competitive advantage and opportunities
that will not detract from our core reinsurance operations. Accordingly, we
regularly review strategic opportunities and periodically engage in discussions
regarding possible transactions.
CRITICAL ACCOUNTING POLICIES
For most insurance and reinsurance companies, the most significant judgment made
by management is the estimation of the claims and claim expense reserves.
Because of the variability and uncertainty associated with loss estimation, it
is possible that our individual case reserves for any loss event will vary from
our ultimate loss results, possibly materially. Also, the Company has recently
increased its specialty reinsurance and individual risk premiums, but does not
have the benefit of a significant amount of its own historical experience in
these lines of business. Accordingly, the setting and reserving for incurred
losses for these lines of business could be subject to greater variability.
The period of time from the reporting of a loss to us through the settlement of
our liability may be several years. During this period, additional facts and
trends may be revealed and as these factors become apparent, reserves will be
adjusted. Therefore, adjustments to our loss reserves can impact our current net
income by 1) increasing our net income if our estimated reserves prove to be
redundant or 2) reducing our net income if our estimated reserves prove to be
insufficient. The
14
impact on net income from changes in prior years loss reserves for the nine
month period ended September 30, 2002 was a decrease to net income of $4.9
million, compared to an increase to net income of $2.3 million for the same
period in 2001.
Unlike the loss reserves of U.S. insurers, the loss reserves established by
Bermuda companies are not regularly examined by insurance regulators. However,
we subject the loss reserves of our Bermuda insurance companies to an annual
review by an independent third party who we have identified as our loss reserve
specialist under Bermuda law.
For our insurance and reinsurance operations, our estimates of claims reserves
are based on 1) claims reports from insureds, 2) our underwriters' experience in
setting claims reserves, 3) the use of computer models where applicable and 4)
historical industry claims experience. Where necessary, we will also use
statistical and actuarial methods to estimate ultimate expected claims and claim
expenses. We review our reserves on a regular basis.
As we continue to write additional premiums in our specialty reinsurance
business and in our individual risk insurance business, both of which normally
have higher loss ratios and longer delays in reporting losses and in the
development of losses, we expect that our claims reserves and our incurred but
not reported ("IBNR") reserves will continue to increase.
Other material judgments made by us include the estimates of potential
impairments in asset valuations, particularly:
1) potential uncollectible reinsurance recoverables and;
2) impairments in our deferred tax asset.
To estimate reinsurance recoverables which might be uncollectible, our senior
managers evaluate the financial condition of our reinsurers, on a reinsurer by
reinsurer basis, both before purchasing the reinsurance protection from them and
after the occurrence of a significant catastrophic event. As of September 30,
2002 and December 31, 2001, we have recorded a valuation allowance of $8.0
million relating to reinsurance recoverables, based on specific facts and
circumstances evaluated by management.
In estimating impairments to our deferred tax asset, we analyze the businesses
which generated the deferred tax asset, and the businesses that will potentially
utilize the deferred tax asset. Our deferred tax asset relates primarily to net
operating loss carryforwards that are available to offset future taxes payable
by our U.S. operating subsidiaries. However, due to the limited opportunities we
perceive in the U.S. primary insurance market, the U.S. insurance operations
have not generated taxable income. This calls into question the certainty of the
recoverability of the deferred tax asset. Although we retain the benefit of this
asset through 2020, as of September 30, 2002 we have recorded a valuation
allowance of $26.6 million compared to $22.5 million for the year ended December
31, 2001. As of September 30, 2002 and December 31, 2001, the net balance of the
deferred tax asset was $3.9 million and $4.2 million, respectively.
15
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30, 2002 COMPARED TO THE QUARTER ENDED SEPTEMBER
30, 2001
A summary of the significant components of our revenues and expenses are as
follows:
- ------------------------------------------------------------------------------------------------------------------------
Quarter ended September 30, 2002 2001
- ------------------------------------------------------------------------------------------------------------------------
Net underwriting income - Reinsurance (1) $ 66,316 $ 14,590
Net underwriting income (loss) - Individual Risk (1) 8,645 (2,512)
Other income 7,951 1,070
Net investment income 26,065 18,738
Interest and fixed charges (8,296) (4,522)
Corporate expenses, taxes & other (2,637) (2,414)
Minority interest - DaVinci (17,689) -
------------------------------------
Net operating income available to common shareholders (2) 80,355 24,950
Net realized gains on investments 7,891 4,978
------------------------------------
Net income available to common shareholders $ 88,246 $ 29,928
====================================
Operating income per common share - diluted $ 1.14 $ 0.41
Net income per common share - diluted $ 1.26 $ 0.49
(1) Net underwriting income consists of net premiums earned less claims and
claim expenses incurred, acquisition costs and operational expenses.
(2) Net operating income excludes realized gains and losses on investments.
- ------------------------------------------------------------------------------------------------------------------------
The $55.4 million increase in operating income in the quarter ended September
30, 2002 compared to the quarter ended September 30, 2001 was primarily the
result of the following items:
o A $51.7 million increase in underwriting income from our reinsurance
operations and an increase of $11.2 million in underwriting income
from our individual risk operations, which was primarily due to the
significant growth in written premium, as noted below, and a
corresponding growth in earned premium. The increased underwriting
income from the reinsurance operations is partially offset by the
$17.7 million of minority interest related to DaVinci. Also, our third
quarter 2001 reinsurance results were negatively impacted by $48
million of net losses from the World Trade Center tragedy; plus
o A $6.9 million increase in other income caused primarily by an
increase in our equity participation in our joint venture, Top Layer
Re and an increase in miscellaneous other items; plus
o A $3.6 million increase in net investment income (net of interest and
fixed charges) which was primarily due to the growth in our investment
portfolio resulting from financing activities in the fourth quarter of
2001, and our strong cash flows from operations during the nine months
of 2002.
16
Gross premiums written for the third quarter of 2002 and 2001 were as follows:
- -------------------------------------------------------------------------------
Quarter ended September 30, 2002 2001
----------------------------------
Cat Premium
Renaissance $ 114,756 $ 92,099
DaVinci 38,491 -
----------------------------------
Total Cat Premium 153,247 92,099
Specialty Reinsurance 48,104 20,773
----------------------------------
Total Reinsurance 201,351 112,872
Individual Risk Premium 81,246 10,699
----------------------------------
Total gross written premiums $ 282,597 $ 123,571
==================================
- -------------------------------------------------------------------------------
The increase in gross premiums written during the quarter ended September 30,
2002, as compared to the quarter ended September 30, 2001, was primarily the
result of the hardening market environment which arose following the large
losses incurred by many insurance and reinsurance companies from the World Trade
Center tragedy. We believe that as a result of this event many insurers and
reinsurers have 1) withdrawn from certain segments of the insurance or
reinsurance market and/or 2) increased prices for coverages offered to insureds.
Both of these factors, withdrawal of capacity and increasing prices, have
provided opportunities for us to substantially grow our written premiums.
Our property catastrophe premiums have increased primarily due to increased
prices across our markets which has resulted in 1) an increase in our unit
volume due to an increased number of contracts which are being marketed on terms
which meet both our exposure and return criteria and 2) higher prices on our
renewing business.
The market conditions described above have also contributed to our expansion in
1) the specialty reinsurance market, which includes coverages such as
catastrophe exposed workers compensation and aviation risks and 2) the
individual risk market, where we provide catastrophe exposed property coverage
on an excess and surplus lines basis and through quota share reinsurance of
primary insurance companies based on an understanding of the underlying
insurance policies, primarily through our subsidiary Glencoe Insurance.
Following the World Trade Center tragedy, we have increased our penetration into
the property catastrophe reinsurance market, which we measure based on the
amount of managed catastrophe premiums we write. For the quarter ended September
30, 2002, our total managed catastrophe premiums, representing catastrophe
premiums we write on behalf of Renaissance Reinsurance and our joint ventures,
were $165.9 million, $51.2 million of which were derived from DaVinci and Top
Layer Re. For the quarter ended September 30, 2001, total managed catastrophe
premiums were $107.4 million, $21.4 million of which were derived from our joint
ventures.
The underwriting results of an insurance or reinsurance company are often
measured by reference to its loss ratio, expense ratio, and combined ratio. The
loss ratio is the result of dividing claims and claim expenses incurred by net
premiums earned. The expense ratio is the result of dividing underwriting
expenses (acquisition and operational expenses) by net premiums earned. The
combined ratio is the sum of the loss ratio and the expense ratio.
17
The table below sets forth our combined ratio and components thereof, by
segment, for the quarters ended September 30, 2002 and 2001:
-------------------------------------------------------------------------
REINSURANCE INDIVIDUAL RISK TOTAL
--------------------------------------------------------------------------
QUARTER ENDED: 30-Sep-02 30-Sep-01 30-Sep-02 30-Sep-01 30-Sep-02 30-Sep-01
--------------------------------------------------------------------------
Loss ratio 44.4% 58.3% 38.0% 78.0% 43.3% 58.8%
Expense ratio 14.3% 21.7% 33.9% 159.7% 17.5% 26.1%
--------------------------------------------------------------------------
Combined ratio 58.7% 80.0% 71.9% 237.7% 60.8% 84.9%
--------------------------------------------------------------------------
We benefited from a reduction in the loss ratio of our reinsurance business to
44.4% for the quarter ended September 30, 2002, compared to 58.3% for the same
quarter in 2001. The reduction in the loss ratio during 2002 resulted from a
lower level of catastrophe losses during the third quarter of 2002 as compared
to the third quarter of 2001, partially offset by the losses incurred from our
specialty reinsurance premiums written which typically produce a higher loss
ratio. Also, the 2001 loss ratio includes $48 million of net losses related to
the World Trade Center tragedy. We have also benefited from a decline in our
expense ratio for our reinsurance business to 14.3% for the quarter ended
September 30, 2002 from 21.7% for the same quarter in 2001. Although acquisition
and operational costs in the aggregate are increasing, the substantial increase
in our net earned premium has caused the expense ratio to decrease accordingly.
We expect similar trends in the future.
With the low level of net earned premiums for our individual risk operations of
$1.8 million in the third quarter of 2001, relatively modest adjustments to
claims and claim expenses incurred and to operating expenses caused unusual
fluctuations in the claims and claim expense ratio and the underwriting expense
ratio of our individual risk operations.
Net investment income, excluding realized investment gains and losses, for the
third quarter of 2002 was $26.1 million, compared to $18.7 million for the same
period in 2001. The increase in investment income primarily relates to the
growth in our investment portfolio as a result of our capital raising activities
during the fourth quarter of 2001 and our strong cash flows from operations,
offset partially by decreases in investment yields during the third quarter of
2002, as compared to the third quarter of 2001.
18
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
A summary of the significant components of our revenues and expenses are as
follows:
- ------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 2002 2001
- ------------------------------------------------------------------------------------------------------------------------
Net underwriting income - Reinsurance (1) $ 223,352 $ 56,145
Net underwriting income (loss) - Individual Risk (1) 10,850 (405)
Other income 24,227 8,840
Net Investment income 75,212 54,892
Interest and fixed charges (24,148) (9,811)
Corporate expenses, taxes & other (8,638) (9,962)
Minority interest - DaVinci (40,636) -
------------------------------------
Net operating income available to common shareholders (2) 260,219 99,699
Net realized gains on investments 11,545 15,474
Cumulative effect of a change in accounting principle (9,187) -
------------------------------------
Net income available to common shareholders $ 262,577 $ 115,173
====================================
Operating income per common share - diluted $ 3.71 $ 1.64
Net income per common share - diluted $ 3.75 $ 1.90
(1) Net underwriting income consists of net premiums earned less claims and
claim expenses incurred, acquisition costs and operational expenses.
(2) Net operating income excludes realized gains and losses on investments
and the cumulative effect of a change in accounting principle
- ------------------------------------------------------------------------------------------------------------------------
The $160.5 million increase in operating income in the nine months ended
September 30, 2002, compared to the nine months ended September 30, 2001, was
primarily the result of the following items:
o A $167.2 million increase in underwriting income from our reinsurance
operations and an increase of $11.3 million in underwriting income
from our individual risk operations, which was primarily due to the
significant growth in written premium, as noted below, and a
corresponding growth in earned premium. The increased underwriting
income from the reinsurance operations is partially offset by the
$40.6 million of minority interest related to DaVinci. Also, during
the nine months ended September 30, 2002, the relatively low level of
property catastrophe losses increased our underwriting income from the
reinsurance operations; plus
o A $15.4 million increase in other income caused primarily by an
increase in our equity participation in our joint venture, Top Layer
Re and an increase in miscellaneous other items; plus
o A $6.0 million increase in net investment income (net of interest and
fixed charges) which was primarily due to the growth in our investment
portfolio resulting from financing activities in the fourth quarter of
2001, and our strong cash flows from operations during the nine months
ended September 30, 2002.
19
Gross premiums written for the nine months ending September 30, 2002 and 2001
were as follows:
- -------------------------------------------------------------------------------
Nine months ended September 30, 2002 2001
----------------------------------
Cat Premium
Renaissance $ 404,530 $ 349,372
DaVinci 168,554 -
Assumed from OP Cat 34,873 -
----------------------------------
Total Cat Premium 607,957 349,372
Specialty Reinsurance 220,759 58,527
----------------------------------
Total Reinsurance 828,716 407,899
Individual Risk Premium 185,009 35,892
----------------------------------
Total gross written premiums $ 1,013,725 $ 443,791
==================================
- -------------------------------------------------------------------------------
Consistent with the increase in gross premiums written for the quarter ended
September 30, 2002 as compared to the quarter ended September 30, 2001, the
increase in gross premiums written during the nine months ended September 30,
2002 as compared to the nine months ended September 30, 2001 was primarily due
to the hardening market environment as discussed previously.
For the nine months ended September 30, 2002, our total managed catastrophe
premiums, representing catastrophe premiums we write on behalf of Renaissance
Reinsurance and our joint ventures, were $681.1 million, $241.7 million of which
were derived from DaVinci and Top Layer Re. For the nine months ended September
30, 2001, total managed catastrophe premiums were $414.7 million, $93.2 million
of which were derived from our joint ventures.
The table below sets forth our combined ratio and components thereof, by
segment, for the nine months ended September 30, 2002 and 2001:
--------------------------------------------------------------------------
REINSURANCE INDIVIDUAL RISK TOTAL
--------------------------------------------------------------------------
NINE MONTHS ENDED: 30-Sep-02 30-Sep-01 30-Sep-02 30-Sep-01 30-Sep-02 30-Sep-01
--------------------------------------------------------------------------
Loss ratio 37.3% 52.4% 42.5% -25.7% 37.8% 50.6%
Expense ratio 15.4% 23.1% 37.5% 133.2% 17.7% 26.1%
--------------------------------------------------------------------------
Combined ratio 52.7% 75.5% 80.0% 107.5% 55.5% 76.7%
--------------------------------------------------------------------------
We have benefited from a decrease in the loss ratio of our reinsurance business
to 37.3% for the nine months ended September 30, 2002, compared to 52.4% for the
same period in 2001. The reduction in the loss ratio during 2002 resulted from
the relatively low level of catastrophe losses during 2002 as compared to 2001,
partially offset by an increase in specialty reinsurance premiums written which
typically produce a higher loss ratio. Additionally, the 2001 loss ratio
includes $48 million of net losses related to the World Trade Center tragedy. We
have also benefited from a decline in our expense ratio for our reinsurance
business to 15.4% for the nine months ended September 30, 2002 from 23.1% for
the same period in 2001. Although acquisition and operational costs in the
aggregate are increasing, the substantial increase in our net earned premium has
caused the expense ratio to decrease accordingly. We expect similar trends in
the future.
With the decreased level of net earned premiums for our individual risk
operations of $5.4 million in the first nine months of 2001, relatively modest
adjustments to claims and claim expenses incurred
20
and to operating expenses caused unusual fluctuations in the claims and claim
expense ratio and the underwriting expense ratio of the individual risk
operations.
Net investment income, excluding realized investment gains and losses, for the
first nine months of 2002 was $75.2 million, compared to $54.9 million for the
same period in 2001. The increase in investment income primarily relates to the
growth in our investment portfolio as a result of our capital raising activities
during the fourth quarter of 2001 and our strong cash flows from operations,
offset partially by decreases in investment yields during the first nine months
of 2002 as compared to the same period of 2001.
Interest expense (including interest expense on the Capital Securities which is
reflected as minority interest) for the nine months ended September 30, 2002
increased to $24.1 million from $9.8 million for the same period in 2001. The
increase in interest expense was primarily due to interest paid on the 7% Senior
Notes (which were issued in July 2001) during the first nine months of 2002 and
on the DaVinci $100 million bank credit facility during the second and third
quarters of 2002 and dividends paid on the Series A Preference Shares during
2002.
21
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL REQUIREMENTS
RenaissanceRe relies on investment income, cash dividends and permitted payments
from its subsidiaries to make principal payments, interest payments, cash
distributions on outstanding obligations and quarterly dividend payments, if
any, to its shareholders. The payment of dividends by our Bermuda subsidiaries
to RenaissanceRe is, under certain circumstances, limited under Bermuda
insurance law. The Bermuda Insurance Act of 1978, as amended (the "Act"), and
related regulations of Bermuda require our Bermuda subsidiaries to maintain
certain measures of solvency and liquidity. As at September 30, 2002 the
statutory capital and surplus of our Bermuda subsidiaries was $1,743.7 million,
which includes $559.7 million related to DaVinci prior to minority interests.
The amount required to be maintained was $379.3 million. Our U.S. insurance
subsidiaries are also required to maintain certain measures of solvency and
liquidity. As at September 30, 2002 the statutory capital and surplus of our
U.S. subsidiaries was $32.6 million, and the amount required to be maintained
was $26.3 million. During the nine months ended September 30, 2002, our
subsidiary, Renaissance Reinsurance, declared dividends of $224.3 million
compared to $141.9 million for the same period in 2001.
CASH FLOWS
Our operating subsidiaries have historically produced sufficient cash flows to
meet expected claims payments and operational expenses and to provide dividend
payments to our holding company, RenaissanceRe. Our subsidiaries also maintain a
concentration of investments in high quality liquid securities, which we believe
will provide sufficient liquidity to meet extraordinary claims payments should
the need arise. Additionally, we maintain a $310.0 million credit facility which
is available to meet the liquidity needs of our subsidiaries should the need
arise. No amount was outstanding under this credit facility as of September 30,
2002.
Cash flows from operations in the first nine months of 2002 were $552.2 million,
compared to $206.4 million for the same period in 2001. Of the $552.2 million,
$99.6 million was from DaVinci. Cash flows exceeded operating income in this
period largely because our provision for loss reserves was in excess of paid
losses, which is partially due to our growth in written premiums in our
specialty reinsurance and individual risk business for which we are recording
provisions for loss reserves which will normally be paid out over a number of
years in the future.
Because of the nature of the coverages we provide, which typically can produce
infrequent losses of high severity, it is not possible to predict our future
cash flows from operating activities with precision. As a consequence, cash
flows from operating activities may fluctuate, perhaps significantly, between
individual quarters and years.
To the extent that capital is not utilized in our reinsurance business, we will
consider using such capital to invest in new opportunities or will consider
returning such capital to our shareholders.
RESERVES
Our principal business is property catastrophe reinsurance, which subjects us to
potential losses that are generally infrequent, but can be significant, such as
losses from hurricanes and earthquakes. Because the loss events to which we are
exposed are generally characterized by low frequency but high severity, our
claims and claim expense reserves will normally fluctuate, sometimes materially,
based upon the occurrence of a significant natural or man-made catastrophic loss
for which we provide reinsurance.
22
The table below sets out our gross and net claims and claim expense reserves as
at September 30, 2002 and December 31, 2001, compared to the balance of our
shareholders' equity:
- --------------------------------------------------------------------------------------
As at September 30, As at December 31,
2002 2001
--------------------------------------------
Gross reserves $ 754,215 $ 572,877
Recoverables 219,614 217,556
--------------------------------------------
Net reserves $ 534,601 $ 355,321
============================================
Shareholders' equity 1,493,068 1,225,024
Gross reserves as a % of equity 50.5% 46.8%
Net reserves as a % of equity 35.8% 29.0%
- --------------------------------------------------------------------------------------
During the nine months ended September 30, 2002 we incurred net claims of $199.2
million and paid net losses of $53.5 million. Due to the high severity and low
frequency of losses related to the property catastrophe insurance and
reinsurance business, there can be no assurance that we will continue to
experience this level of losses and/or recoveries. IBNR reserves at September
30, 2002 were $424.2 million compared with $286.7 million at December 31, 2001.
As we continue to write additional premiums in our specialty reinsurance
business and in our individual risk business, both of which normally have higher
loss ratios and longer delays in reporting losses and in the development of
losses, we expect that our claims reserves and our IBNR reserves will continue
to increase.
See also discussion of reserves under Critical Accounting Policies.
23
CAPITAL RESOURCES AND SHAREHOLDERS' EQUITY
Our total capital resources as at September 30, 2002 and December 31, 2001 were
as follows:
- -------------------------------------------------------------------------------------------------------------
September 30, December 31,
(in thousands of U.S. dollars) 2002 2001
- -------------------------------------------------------------------------------------------------------------
Common shareholders' equity $ 1,343,068 $ 1,075,024
Series A preference shares 150,000 150,000
---------------- ----------------
Total shareholders' equity 1,493,068 1,225,024
7% senior notes - due 2008 150,000 150,000
Term loan and borrowed revolving credit facility payable (Renaissance U.S.) 25,000 33,500
Revolving credit facility - DaVinci 100,000 -
Revolving credit facility - unborrowed (RenaissanceRe) 310,000 310,000
Minority interest - mandatorily redeemable capital securities
of a subsidiary trust 84,630 87,630
- -------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL RESOURCES $ 2,162,698 $ 1,806,154
================ ================
- -------------------------------------------------------------------------------------------------------------
We have a $310.0 million committed revolving credit and term loan agreement with
a syndicate of commercial banks. As of September 30, 2002, we had no borrowings
outstanding against this facility.
Our subsidiary, Renaissance U.S., has fully-borrowed against its $10 million
term loan and $15 million revolving loan facility with a syndicate of commercial
banks. Interest rates on the facility are based upon a spread above LIBOR, and
averaged 2.4 percent during the first nine months of 2002 (compared to 5.3
percent for the first nine months of 2001). The related agreements contain
certain financial covenants, the primary one being that RenaissanceRe, the
principal guarantor, maintain a ratio of liquid assets to debt service of 4:1.
The term loan and revolving loan facility have mandatory repayment provisions of
$25 million in 2003. We were in compliance with all the covenants of this term
loan and revolving loan facility as at September 30, 2002.
On April 19, 2002, DaVinci entered into a credit agreement with a syndicate of
commercial banks providing for a $100 million revolving credit facility. On May
10, 2002, DaVinci borrowed the full $100 million available under this facility
to repay $100 million bridge financing provided by RenaissanceRe. Neither
RenaissanceRe nor Renaissance Reinsurance is a guarantor of this facility and
the lenders have no recourse against our affiliates other than DaVinci under
this facility. Pursuant to the terms of the $310.0 million facility maintained
by RenaissanceRe, a default by DaVinci in its obligations will not result in a
default under the RenaissanceRe facility. Although the Company only owns a
minority of the outstanding common shares of DaVinci, the Company controls a
majority of its outstanding voting power and, accordingly, DaVinci is included
in the Company's consolidated financial statements; as a result, the replacement
of $100 million debt from RenaissanceRe with $100 million of debt from
24
a third party has caused the Company's reported consolidated debt to increase by
$100 million. As of September 30, 2002, the full amount was outstanding under
this facility. Interest rates on the facility are based on a spread above LIBOR,
and averaged approximately 2.7 percent during the first nine months of 2002.
Our subsidiary, RenaissanceRe Capital Trust, has issued Capital Securities which
pay cumulative cash distributions at an annual rate of 8.54 percent, payable
semi-annually. The Indenture relating to the Capital Securities contains certain
covenants, including a covenant prohibiting the payment of dividends by us if we
are in default under the Indenture. We were in compliance with all of the
covenants of the Indenture at September 30, 2002. From time to time, we may
opportunistically repurchase outstanding Capital Securities. RenaissanceRe's
guarantee of the distributions on the preferred securities issued by the Trust,
when taken together with RenaissanceRe's obligations under the expense
reimbursement agreement with the Trust, provides a full and unconditional
guarantee of amounts due on the Capital Securities.
We are party to other arrangements including retrocessional reinsurance
arrangements which provide us with the right to obtain additional funds, which
would supplement our capital resources, following certain losses or other
events.
During the first nine months of 2002, shareholders' equity increased by $268.0
million, from $1,225.0 million at December 31, 2001 to $1,493.1 million at
September 30, 2002. Shareholders' equity attributable to common shareholders was
$1,343.1 million at September 30, 2002 and $1,075.0 million at December 31,
2001. The significant components of the change in shareholders' equity were net
income of $271.7 million, partially offset by dividends to common shareholders
and Series A Preference shareholders of $38.3 million.
INVESTMENTS
The table below shows the aggregate amounts of investments and cash and cash
equivalents comprising our portfolio of invested assets:
- ------------------------------------------------ ------------------------ ----------------------
September 30, December 31,
(in thousands of U.S. dollars) 2002 2001
- ------------------------------------------------ ------------------------ ----------------------
Investments available for sale, at fair value $ 2,254,919 $ 1,282,483
Other investments 96,920 38,307
Short term investments 397,552 733,925
Cash and cash equivalents 86,451 139,715
- ------------------------------------------------ ------------------------ ----------------------
TOTAL INVESTED ASSETS $2,835,842 $2,194,430
- ------------------------------------------------ ------------------------ ----------------------
At September 30, 2002, our invested asset portfolio, which includes investments
available for sale and short term investments, had a weighted average rating of
AA, an average duration of 2.16 years and an average yield to maturity of 3.25
percent, net of investment expenses.
At September 30, 2002, we held investments and cash totaling $2.8 billion with a
net unrealized appreciation balance of $38.5 million. Our investment portfolio
is subject to the risks of declines in
25
realizable value. We attempt to mitigate this risk through diversification and
active management of our portfolio.
At September 30, 2002, $32.2 million of cash and cash equivalents were invested
in currencies other than the U.S. dollar, which represented 1.1% of our invested
assets.
CATASTROPHE LINKED AND DERIVATIVE INSTRUMENTS
We have assumed risk through catastrophe linked and derivative instruments under
which losses could be triggered by an industry loss index or geological or
physical variables. During the first nine months of 2002 and 2001, we recorded
profits on these contracts of $3.2 million and none, respectively. We report
these profits in other income.
EFFECTS OF INFLATION
The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local or regional economy. The anticipated effects
on us are considered in our catastrophe loss models. The effects of inflation
are also considered in pricing and in estimating reserves for unpaid claims and
claim expenses. The actual effects of this post-event inflation on our results
cannot be accurately known until claims are ultimately settled.
OFF BALANCE SHEET AND SPECIAL PURPOSE ENTITY ARRANGEMENTS
As of September 30, 2002, we have not guaranteed the liabilities of any
non-consolidated affiliates or subsidiaries or other non-related parties.
CURRENT OUTLOOK
The changes to the market environment caused by the World Trade Center tragedy
and other developments in the industry in 2002 are expected to continue to be
factors during 2003. We believe that prices for risks assumed by insurance and
reinsurance companies are continuing to increase, and that there is generally an
improved understanding of the correlation between various lines of business,
which some participants may previously have seen to be independent. In addition,
the sensitivity to credit quality of insurers and reinsurers continues to be a
factor in the industry.
Because RenaissanceRe experienced relatively limited losses from the World Trade
Center tragedy and from events during 2002, and continues to have stable, high
credit ratings, we believe that we are well positioned to continue to grow our
gross managed premiums in 2003, particularly in the specialty reinsurance and
individual risk areas.
During the nine months ended September 30, 2002, we wrote $220.8 million of
premium related to specialty reinsurance coverages, as compared to $58.5 million
for the first nine months of 2001. We anticipate that in 2003 our strong ratings
will position us to attract more business as the flight to quality companies
accelerates and we will be able to expand our presence in specialty reinsurance.
We believe that the individual risk market, particularly the commercial property
market, remains a market with significant inefficiencies and that, as a result,
we will be able to continue to substantially increase the premiums written by
our individual risk segment, through 2003. This segment, which primarily
provides catastrophe exposed property coverage, wrote $185.0 million of gross
written premiums for the first nine months of 2002, as compared to $50.0 million
for the full year ended December 31, 2001.
26
We are continuing to expand and enhance our underwriting, risk management and
operational capabilities in specialty reinsurance and individual risk. We cannot
assure you that we will succeed in the execution of our growth plans for
individual risk or our specialty reinsurance business, or that these businesses
will sustain their current premium levels if market conditions change.
Our structured products business has become an important contributor to our
growth in 2002. We anticipate that structured products will continue to produce
significant fee and other income during 2003 and we will pursue new investments
and joint ventures within this area should the opportunity arise. We cannot
assure you that new ventures within structured products will succeed.
The cost of our reinsurance protection may increase during 2003. If prices rise
to levels at which we believe the purchase of reinsurance protection would
become uneconomical, we may retain a greater level of net risk in certain
geographic regions or for certain classes of risk. In order to obtain
longer-term retrocessional capacity, we have entered into multi-year contracts
with respect to a portion of our portfolio. We have also begun to enter into
quota share type reinsurance relationships from which we retain fees and profit
commissions.
The World Trade Center tragedy has caused insurers and reinsurers to seek to
limit their potential exposures to losses from terrorism attacks. We often
exclude losses from terrorism in the reinsurance and insurance that we write,
but do have potential exposures to this risk. We continue to monitor our
aggregate exposure to terrorist attacks.
Subsequent to the World Trade Center tragedy, a substantial amount of capital
entered the insurance and reinsurance markets both through investments in
established companies and through start-up ventures. Currently, we do not
believe that the new capital has resulted in significant adverse changes to the
prevailing pricing structure in the property catastrophe reinsurance market.
However, it is possible that the combination of the addition of new capital in
the marketplace, and an environment with continued light catastrophe losses,
could cause a reduction in prices of our products and may shorten the time
horizon of the current price increases. To the extent that industry pricing of
our products does not meet our hurdle rate, then we would reduce our future
underwriting activities (thus resulting in reduced premiums).
SAFE HARBOR DISCLOSURE
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, we
caution readers regarding certain forward-looking statements contained in this
report.
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements are necessarily based on estimates and
assumptions that are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which, with respect to
future business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, us.
In particular, statements using words such as "expect", "anticipate", "intends",
"believe" or words of similar import generally involve forward-looking
statements. In light of the risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this report should
not be considered as a representation by us or any other person that its
objectives or plans will be achieved. Numerous factors could cause our actual
results to differ materially from those addressed by the forward-looking
statements, including the following:
27
(1) the occurrence of large natural or man-made catastrophic events;
(2) a decrease in the level of demand for our reinsurance or insurance
business, or increased competition in the industry;
(3) the lowering or loss of one of the financial or claims-paying ratings
of RenaissanceRe or one or more of our subsidiaries;
(4) risks associated with implementing our business strategies and
initiatives for organic growth, including operational risks relating
to managing that growth;
(5) acts of terrorism or acts of war;
(6) slower than anticipated growth in our fee-based operations;
(7) changes in economic conditions, including interest and currency rate
conditions which should affect our investment portfolio;
(8) uncertainties in our reserving process;
(9) failure of our reinsurers to honor their obligations;
(10) extraordinary events affecting our clients, such as bankruptcies and
liquidations;
(11) loss of services of any one of our key executive officers;
(12) the passage of federal or state legislation subjecting Renaissance
Reinsurance to supervision or regulation, including additional tax
regulation, in the United States or other jurisdictions in which we
operate;
(13) challenges by insurance regulators in the United States to Renaissance
Reinsurance's claim of exemption from insurance regulation under
current laws;
(14) a contention by the United States Internal Revenue Service that our
Bermuda subsidiaries, including Renaissance Reinsurance, are subject
to U.S. taxation; and
(15) actions of competitors, including industry consolidation, the launch
of new entrants and the development of competing financial products.
The factors listed above should not be construed as exhaustive. Certain of these
factors may be described in more detail from time to time in our filings with
the Securities and Exchange Commission. We undertake no obligation to release
publicly the results of any future revisions we may make to forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's invested asset portfolio includes investments available for sale
and short term investments which are subject to changes in market values with
changes in interest rates. The aggregate hypothetical loss generated from an
immediate adverse parallel shift in the treasury yield curve of 100 basis points
would cause a decrease in total return of 2.16 percent, which equates to a
28
decrease in market value of approximately $57.3 million on a portfolio valued at
$2,652.5 million at September 30, 2002. An immediate time horizon was used, as
this presents the worst-case scenario.
Item 4. DISCLOSURE CONTROLS AND PROCEDURES
Disclosure Controls and Internal Controls: We have designed various controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934, the "Exchange Act") to help ensure that information required to be
disclosed in our periodic Exchange Act reports, such as this quarterly report,
is captured, processed, summarized and reported on a timely and accurate basis.
Our disclosure controls are also designed with the objective of ensuring that
such information is accumulated and communicated to our senior management,
including our Chief Executive Officer and the Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. Our
internal controls and procedures for financial reporting are likewise designed
with the objective of providing reasonable assurance that (1) transactions are
properly authorized; (2) our corporate assets are safeguarded against
unauthorized or improper use; and (3) transactions are properly recorded and
reported.
Limitations on the effectiveness of controls: Our Board of Directors and
management, including the Chief Executive Officer and the Chief Financial
Officer, do not expect that our disclosure controls or internal controls will
prevent all error and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, we believe that the design of
any prudent control system must reflect appropriate resource constraints, such
that the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, there can be no
absolute assurance that all control issues and instances of fraud, if any,
applicable to us have been or will be detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple errors or mistakes. Additionally,
controls can be circumvented by the individual acts of some individuals, by
collusion of more than one person, or by management override of the control. The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions; over time, control may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
An evaluation was performed under the supervision and with the participation of
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934. Based upon that evaluation, the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
concluded, subject to the limitations noted above, that the Company's disclosure
controls and procedures are effective in ensuring that all material information
required to be filed in this quarterly report has been made known to them in a
timely fashion. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to the date the management, including the Chief Executive Officer and
Chief Financial Officer, completed their evaluation.
29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, a party to litigation and arbitration that
arises in the normal course of its business operations. While any
proceeding contains an element of uncertainty, we believe that we are not
presently a party to any such litigation or arbitration that is likely to
have a material adverse effect on our business or operations.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
10.1 Investment Agreement, dated September 20, 2002, by and among
RenaissanceRe Holdings Ltd., Platinum Underwriters Holdings, Ltd. and
The St. Paul Companies, Inc. (incorporated herein by reference to
Exhibit 10.44 of Amendment No. 8 to the Registration Statement on Form
S-1 (Registration Statement 333-99019-01) dated October 23, 2002)
99.1 Certification of James N. Stanard, Chief Executive Officer of
RenaissanceRe Holdings Ltd., pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification of John M. Lummis, Chief Financial Officer of
RenaissanceRe Holdings Ltd., pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
b. Current Reports on Form 8-K:
The Registrant filed a report on Form 8-K on September 24, 2002.
30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
RENAISSANCERE HOLDINGS LTD.
By: /s/ John M. Lummis
------------------------------
John M. Lummis
Executive Vice President and
Chief Financial Officer
Date: November 14, 2002
31
CERTIFICATION
I, James N. Stanard, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RenaissanceRe
Holdings Ltd. (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and
report financial data and have identified for the
Registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
32
6. The Registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 14, 2002
---------------------------------
/s/ James N. Stanard
-------------------------
James N. Stanard
Chief Executive Officer
33
CERTIFICATION
I, John M. Lummis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RenaissanceRe
Holdings Ltd. (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
and we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and
report financial data and have identified for the
Registrant's auditors any material weaknesses in internal
controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
34
6. The Registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 14, 2002
-------------------------
/s/ John M. Lummis
---------------------------
John M. Lummis
Chief Financial Officer
35