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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File No. 34-0-26512
RENAISSANCERE HOLDINGS LTD.
(Exact name of Registrant as specified in its charter)
Bermuda 98-013-8020
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification Number)
Organization)
Renaissance House, 8-12 East Broadway, Pembroke HM 19 Bermuda
(Address of Principal Executive Offices)
(441) 295-4513
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: Common Shares, par
value $1.00 per share
Securities registered pursuant to Section 12 (g) of the Act: None
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
The aggregate market value of Common Shares held by nonaffiliates of the
Registrant as of March 27, 1998 was $611,117,643, based on the closing sale
price of the Common Shares on the New York Stock Exchange on that date.
The number of Common Shares outstanding as of March 27, 1998 was
22,535,809.
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DOCUMENTS INCORPORATED BY REFERENCE
Sections of the Registrant's Annual Report to Shareholders mailed to
shareholders on or about March 24, 1998 (the "Annual Report") are incorporated
by reference into Part II of this Form 10-K. With the exception of the sections
of the Annual Report specifically incorporated by reference herein, the Annual
Report is not deemed to be filed as part of this Form 10-K.
Sections of the Registrant's definitive proxy statement to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to Regulation
14A under the Securities Exchange Act of 1934 relating to the Registrant's
Annual General Meeting of Shareholders to be held on May 5, 1998 (the "Proxy
Statement") are incorporated by reference into Part III of this Form 10-K. With
the exception of the sections of the Proxy Statement specifically incorporated
by reference herein, the Proxy Statement is not deemed to be filed as part of
this Form 10-K.
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RENAISSANCERE HOLDINGS LTD.
TABLE OF CONTENTS
Page
PART I
Item 1. Business...................................................................1
Item 2. Properties................................................................23
Item 3. Legal Proceedings.........................................................23
Item 4. Submission of Matters to a Vote of Security Holders.......................23
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.....23
Item 6. Selected Consolidated Financial Data......................................23
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................23
Item 8. Financial Statements and Supplementary Data...............................23
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.....................................24
PART III
Item 10. Directors and Executive Officers of the Company.........................24
Item 11. Executive Compensation.................................................24
Item 12. Security Ownership of Certain Beneficial Owners and Management.........24
Item 13. Certain Relationships and Related Transactions.........................24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......24
SIGNATURES........................................................................27
(i)
PART I
Unless the context otherwise requires, references herein to the
"Company" include RenaissanceRe Holdings Ltd. and its subsidiaries, Renaissance
Reinsurance Ltd. ("Renaissance Reinsurance"), Glencoe Insurance Ltd. ("Glencoe")
and Renaissance U.S. Holdings, Inc. ("Renaissance US"). Certain terms used below
are defined in the "Glossary of Selected Insurance Terms" appearing on pages
20-22 of this Report.
Note on Forward-Looking Statements
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. Forward-looking statements are statements other than
historical information or statements of current condition. Some forward-looking
statements may be identified by use of terms such as "believes," "anticipates,"
"intends," or "expects." These forward-looking statements relate, among other
things, to the plans and objectives of the Company for future operations. In
light of the risks and uncertainties inherent in all future projections, the
inclusion of forward-looking statements in this report should not be considered
as a representation by the Company or any other person that the objectives or
plans of the Company will be achieved. Numerous factors could cause the
Company's actual results to differ materially from those in the forward-looking
statements, including the following: (i) the occurrence of catastrophic events
with a frequency or severity exceeding the Company's estimates; (ii) a decrease
in the level of demand for property catastrophe reinsurance, or increased
competition owing to increased capacity of property catastrophe reinsurers;
(iii) any lowering or loss of one of the financial or claims-paying ratings of
the Company or one or more of its subsidiaries; (iv) actions of competitors; (v)
loss of services of any one of the Company's key executive officers; (vi) the
passage of federal or state legislation subjecting Renaissance Reinsurance to
supervision or regulation in the United States; (vii) challenges by insurance
regulators in the United States to Renaissance Reinsurance's claim of exemption
from insurance regulation under the current laws; (viii) changes in economic
conditions, including currency rate conditions; or (ix) a contention by the
United States Internal Revenue Service that the Company or Renaissance
Reinsurance is engaged in the conduct of a trade or business within the U.S. The
foregoing review of important factors should not be construed as exhaustive; the
Company undertakes no obligation to release publicly the results of any future
revisions it may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Item 1. Business
General
The Company provides reinsurance and insurance where risk of natural
catastrophe represents a significant component of the overall exposure. The
Company's results depend to a large extent on the frequency and severity of
catastrophic events, and the concentration and coverage offered to clients
impacted thereby. In addition, the Company writes other lines of insurance and
reinsurance on a limited basis, and is actively exploring new opportunities. The
Company's principal business is property catastrophe reinsurance, written on a
worldwide basis through Renaissance Reinsurance. Based on property catastrophe
gross premiums written, the Company is the largest Bermuda-based provider of
property catastrophe reinsurance and one of the largest providers of this
coverage in the world. The Company provides property catastrophe reinsurance
coverage to insurance companies and other reinsurers primarily on an excess of
loss basis. Excess of loss catastrophe coverage generally provides coverage for
claims arising from large natural catastrophes, such as earthquakes and
hurricanes, in excess of a specified loss. The Company is also exposed to claims
arising from other natural and manmade catastrophes such as winter storms,
freezes, floods, fires and tornadoes in connection with the coverages it
provides.
The Company's principal operating objective is to utilize its capital
efficiently by focusing on the writing of property catastrophe reinsurance and
other insurance and reinsurance coverages with superior risk/return
characteristics, while maintaining a low cost operating structure in the
favorable regulatory and tax environment of Bermuda. The Company's primary
underwriting goal is to construct a portfolio of insurance and reinsurance
contracts that maximizes the return on shareholders' equity subject to prudent
risk constraints. The Company seeks
to moderate the volatility inherent in the property catastrophe reinsurance
market through the use of contract terms, portfolio selection methodology,
diversification criteria and probability analyses. While property catastrophe
reinsurance represented approximately 91% of the Company's gross premiums
written in 1997 and 95% in each of 1996 and 1995 and continues to be the
Company's primary focus, the Company has recently increased its commitment to
the primary insurance business.
The Company is continuing to expand its primary insurance business
through internal growth and acquisition. The Company capitalized Glencoe in
January 1996 with a $50.0 million capital contribution and subsequently sold a
29.9% interest in Glencoe for an aggregate of $15.1 million in cash to two
strategic investors, one of whom sold its 9.9% interest to the Company in August
1997 for $5.2 million in cash. During the fourth quarter of 1997, the Company
contributed an additional $12 million to Glencoe, pro rata with Glencoe's
remaining minority investor, maintaining the Company's ownership in Glencoe at
80%. Glencoe seeks to employ in the primary insurance market the modeling,
underwriting, customer service and capital management approaches that
Renaissance Reinsurance employs with respect to its reinsurance policies.
Glencoe primarily writes property insurance on properties that are exposed to
natural catastrophes. Glencoe operates as a Bermuda-domiciled company and is
eligible to write business on an excess and surplus lines basis in 27 states,
including California, where it has primarily written earthquake exposure
insurance. Glencoe will also consider submissions from insureds located in other
international jurisdictions where it has been approved with respect to exposures
for which it has underwriting expertise. As of December 31, 1997, the Company's
equity in Glencoe was $54.7 million. For the year ended December 31, 1997,
Glencoe generated gross premiums written of $7.0 million and net income of $2.4
million. For the year ended December 31, 1996, Glencoe generated gross premiums
written of $1.6 million and net income of $.9 million.
In January 1998, the Company began to provide personal lines homeowners
coverages through DeSoto Insurance Company ("DeSoto"), a wholly owned subsidiary
of Glencoe. DeSoto is a special purpose Florida homeowners insurance company
that is licensed to assume and renew homeowner policies from the Florida Joint
Underwriting Association (the "JUA"), a state sponsored insurance company.
DeSoto initially assumed approximately 12,000 policies with an in-force premium
of approximately $10 million.
On December 19, 1997, the Company announced it had executed a definitive
agreement to acquire the U.S. operating subsidiaries of Nobel Insurance Limited,
a Bermuda company ("Nobel") through Renaissance US (the "Nobel Acquisition").
The principal business being acquired from Nobel is the servicing and
underwriting of commercial property, casualty and surety risks for specialized
industries and personal lines coverage for low-value dwellings. The casualty
business is expected to be substantially reinsured by American Reinsurance
Company and/or Inter-Ocean Reinsurance Company Ltd., who will provide
comprehensive prospective and retrospective reinsurance coverage. Nobel's
principal operating unit, Nobel Insurance Company ("Nobel Insurance"), is a
Texas insurance company licensed in all 50 states and the District of Columbia.
Under the terms of the agreement in respect of the Nobel Acquisition, the
Company has agreed to pay $54.1 million in cash for the operating subsidiaries
of Nobel, and to provide approximately $8.9 million of limited recourse
financing, in exchange for a limited recourse participating promissory note from
Nobel (the "Note"), to enable Nobel to support certain of its obligations in the
liquidation of its remaining operations. It is expected that the transaction
will be financed with debt and cash at a 2:1 ratio of debt to cash. The purchase
of the operating subsidiaries of Nobel is presently expected to close in the
second quarter of 1998; however, there can be no assurance that the Nobel
Acquisition, which is subject to customary conditions (including shareholder and
regulatory approvals), will be consummated.
For the years ended December 31, 1997, 1996, and 1995, the Company
achieved returns on average shareholders' equity of 24.3%, 30.2%, and 43.3%,
respectively, and combined ratios of 47.5%, 51.3% and 52.0%, respectively. The
year ended December 31, 1997 was a relatively light year for natural
catastrophes worldwide, compared to historical averages. Accordingly, the
reduced level of catastrophe losses resulted in a significantly lower loss ratio
in 1997 compared to 1996 and therefore positively affected the Company's results
from operations. Because of the high severity and low frequency of losses
related to the property catastrophe insurance and reinsurance business, there
can be no assurance that the Company will experience this reduced level of
losses in future years, or that the Company will achieve similar financial
results in the future.
-2-
The 1996 and 1995 results of the Company were achieved despite the
occurrence of several major catastrophes in 1996 and 1995 (which, according to
industry trade sources, had the fifth and third highest level of U.S. property
catastrophe insured losses on record, respectively). The major catastrophes
which occurred in 1996 were Hurricane Fran in September, which produced an
estimated $1.6 billion of insurance industry losses, the Northeastern United
States winter storms in January and the Northwestern United States floods in
December. The major catastrophes which occurred in 1995 were Hurricanes Luis,
Marilyn and Opal.
Ratings
Renaissance Reinsurance has been assigned an "A" claims-paying ability
rating from each of Standard & Poor's Insurance Ratings Services ("S&P") and
A.M. Best Company, Inc. ("AM Best"), and Glencoe has been assigned an "A-"
claims-paying ability rating from A.M. Best, representing independent opinions
of the financial strength and ability of Renaissance Reinsurance and Glencoe to
meet their respective obligations to their policyholders. Such ratings may not
reflect the considerations applicable to an investment in the Company.
The "A" range ("A+," "A" and "A-") is the third highest of four ratings
ranges within what S&P considers the "secure" category. Insurance companies
assigned a claims-paying ability rating in the "A" range are believed by S&P to
provide good financial security, but their capacity to meet policyholder
obligations is somewhat susceptible to adverse economic and underwriting
conditions.
"A (Excellent)" and "A- (Excellent)" are the third and fourth highest of
A.M. Best's fifteen ratings designations. Insurance companies assigned an "A" or
"A-" rating by A.M. Best are companies which, in A.M. Best's opinion, have
demonstrated excellent overall performance when compared to the standards
established by A.M. Best and have a strong ability to meet their obligations to
policyholders over a long period of time.
Strategy
The principal components of the Company's business strategy are to:
o Focus on the property catastrophe reinsurance business. The Company's
primary focus is property catastrophe reinsurance, which represented
approximately 91% of the Company's gross premiums written in 1997 and
95% in each of 1996 and 1995.
o Build a superior portfolio of property catastrophe reinsurance by
utilizing proprietary modeling capabilities. The Company assesses
underwriting decisions on the basis of the expected incremental return
on equity of each new reinsurance contract in relation to the Company's
overall portfolio of reinsurance contracts. To facilitate this, the
Company has developed REMS(C), a proprietary, computer-based pricing and
exposure management system. The Company utilizes REMS(C) to assess
property catastrophe risks, price treaties and limit aggregate exposure.
The Company combines the analyses generated by REMS(C) with its own
knowledge of the client submitting the proposed program to assess the
premium offered against the risk of loss that such program presents. See
"Underwriting."
o Utilize the Company's capital base efficiently while maintaining
prudent risk levels in the Company's reinsurance portfolio. The Company
manages its risks through a variety of means, including the use of
contract terms, portfolio selection methodology, diversification
criteria and probability analyses. By using such measures and by
employing its proprietary modeling capabilities, the Company attempts to
construct a portfolio of reinsurance contracts which maximizes the use
of its capital while optimizing the risk-reward characteristics of its
portfolio. The Company relies less on traditional ratios, such as net
premiums written to surplus, because the Company believes that such
statistics do not adequately reflect the risk in the property
catastrophe reinsurance business. Management believes the level of net
premiums written relative to surplus does not reflect the composition of
a reinsurer's attachment points, aggregate limits,
-3-
o geographic diversification, and other material elements of the risk
exposures embodied in a reinsurer's book of business.
o Capitalize on the experience and skill of management. The Company's
senior management team has extensive experience in the reinsurance
and/or insurance industries, with an average of approximately 20 years
of experience for each of the five senior executives of the Company.
Additionally, senior management is supported by an officer group with an
average of approximately ten years of experience in the reinsurance
and/or insurance industries.
o Build and maintain long-term relationships with brokers and clients.
The Company markets its reinsurance products worldwide exclusively
through reinsurance brokers. The Company believes that its existing
portfolio of reinsurance business is a valuable asset given the renewal
practices of the reinsurance industry. The Company believes that it has
established a reputation with its brokers and clients for prompt
response on underwriting submissions, for fast claims payments and for
the development of customized reinsurance programs. See "--Marketing."
o Maintain a low cost structure. Management believes that as a result of
its ability to maintain a small staff and by basing operations in the
favorable regulatory and tax environment of Bermuda, the Company is able
to maintain low operating costs relative to its capital base and net
premiums earned. As of March 18, 1998, the Company had 34 employees.
After consummation of the Nobel Acquisition, the Company expects to
employ approximately 250 additional employees, and will be subject to an
increased level of U.S. regulation through the businesses purchased from
Nobel. See "Regulation."
o Leverage the Company's modeling expertise by expanding into primary
insurance markets with significant natural catastrophe exposures. The
Company is pursuing opportunities in the United States to write an
increased level of catastrophe-exposed primary insurance. The Company is
exploring opportunities to write both personal and commercial coverages,
on a primary basis, where natural catastrophe exposures represent a
significant component of the overall exposure. In addition to Glencoe,
these opportunities may be pursued through the development of new
operations, such as DeSoto, or through acquisitions, such as the
purchase of the operating subsidiaries of Nobel.
Industry Trends
The high level of worldwide property catastrophe losses in terms of both
frequency and severity from 1987 to 1993 had a significant effect on the results
of property insurers and property catastrophe reinsurers and on the worldwide
property catastrophe reinsurance market, causing certain property catastrophe
reinsurers and certain underwriting syndicates at Lloyd's to withdraw from the
market or reduce their underwriting commitments while also causing a substantial
increase in market demand, particularly in the United States, Japan and the
United Kingdom. In particular, these events included Hurricane Hugo
(U.S.--1989), Hurricane Andrew (U.S.--1992), Typhoon Mireille (No. 19)
(Japan--1991) and Winter Storm Daria (90A) (Northern Europe--1990).
The increase in demand for property catastrophe reinsurance was
attributable to several factors. The significant property catastrophe losses
occurring during 1987 through 1993 caused many insurers and reinsurers to
reexamine their assumptions regarding their need for reinsurance protection from
catastrophe exposures. In addition, rating agencies, such as S&P, and regulators
increased their scrutiny of insurers and reinsurers with respect to their
catastrophe exposure. For example, Typhoon Mireille (No. 19) resulted in greater
scrutiny by the Ministry of Finance of Japan of insurers and reinsurers with
respect to catastrophe exposure, thereby increasing demand for property
catastrophe reinsurance in Japan. In addition, A.M. Best began to require
completion of a catastrophe loss analysis questionnaire dealing with expected
claims resulting from potential catastrophic events. Finally, a general increase
in insured property values in catastrophe-exposed areas contributed to increased
demand for property catastrophe insurance and reinsurance. This supply/demand
imbalance caused a significant increase in prevailing premium rates for property
catastrophe reinsurance worldwide in 1993.
-4-
In response to this imbalance, approximately $4.0 billion of capital
entered the Bermuda-based property catastrophe reinsurance market in 1992 and
1993. The Bermuda property catastrophe reinsurance market has subsequently grown
markedly, having aggregate capital of approximately $6.6 billion at December 31,
1997, and accounting for approximately 25% of the worldwide property catastrophe
gross premiums written in 1997, according to industry trade reports. The
increased property catastrophe reinsurance capacity represented by the Bermuda
market helped balance supply and demand in the property catastrophe reinsurance
market and, as a result thereof, premium rates and other terms of trade in the
property catastrophe reinsurance market stabilized in 1994-1995. In each of 1996
and 1997, according to industry trade sources, worldwide price levels decreased
by an average of 10% to 15%, although prices remained more stable in the United
States, where the level of property catastrophe losses in recent years has been
generally higher than in other markets. Based on publicly available industry
trade data, price levels are expected to decline at a similar pace in 1998. In
particular, rates have declined significantly in areas outside the United
States, where there has been favorable loss experience, while in the United
States, where the level of property catastrophe losses has generally been higher
than in international markets in recent years, rates have decreased to a lesser
degree. However, current premium rates and retention levels have remained, and
Management believes are likely to remain, higher than those that existed in
1992.
Premium rates or other terms or conditions of trade may vary in the
future, the present level of demand may not continue and the present level of
supply may increase as a result of capital provided by recent or future market
entrants or by existing property catastrophe reinsurers. Some of the property
catastrophe reinsurers who have entered the worldwide reinsurance markets (or
may enter them in the future) have or could have more capital than the Company.
The full effect of this additional capital on the property catastrophe
reinsurance market may not be known for some time.
Management is aware of a number of new, proposed or potential
legislative or industry changes that may impact the worldwide demand for
property catastrophe reinsurance and other products offered by the Company. In
the United States, the states of Hawaii and Florida have implemented
arrangements whereby property insurance in catastrophe prone areas is provided
through state-sponsored entities. The California Earthquake Authority, the first
privately financed, publicly operated residential earthquake insurance pool,
provides earthquake insurance to California homeowners. Currently before the
U.S. Congress are two draft bills, the Homeowners' Insurance Availability Act of
1997 and the Natural Disaster Protection and Insurance Act of 1997, which would
establish a federal program to provide reinsurance for state disaster insurance
programs and ensure the availability and affordability of insurance against
catastrophic natural disasters, respectively, and could impact upon the demand
for, and availability of, traditional reinsurance. In the United Kingdom, the
government has enacted a bill to allow insurers to build claim equalization
reserves which might reduce the amount of property reinsurance necessary in the
marketplace. Management is also aware of many potential initiatives by capital
market participants to produce alternative products that may compete with the
existing catastrophe reinsurance markets. Management is unable to predict the
extent to which the foregoing new, proposed or potential initiatives may affect
the demand for the Company's products or the risks which may be available for
the Company to consider underwriting.
Reinsurance Products
The Company's property catastrophe reinsurance contracts are generally
"all risk" in nature. The Company's most significant exposure is to losses from
earthquakes and hurricanes, although the Company is also exposed to claims
arising from other natural and man-made catastrophes, such as winter storms,
freezes, floods, fires and tornadoes in connection with the coverages it
provides. The Company's predominant exposure under such coverage is to property
damage. However, other risks, including business interruption and other
non-property losses, may also be covered under the property reinsurance contract
when arising from a covered peril. In accordance with market practice, the
Company's property reinsurance contracts generally exclude certain risks such as
war, nuclear contamination or radiation.
Catastrophic events of significant magnitude have historically been
relatively infrequent, although the property catastrophe reinsurance market
experienced a high level of worldwide catastrophe losses in terms of both
frequency and severity during the period from 1987 to 1996 as compared to prior
years. However, because of the
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wide range of the possible catastrophic events to which the Company is exposed,
and because of the potential for multiple events to occur in the same time
period, the Company's business is volatile, and its results of operations may
reflect such volatility. Further, the Company's financial condition may be
impacted by this volatility over time or at any point in time. The effects of
claims from one or a number of severe catastrophic events could have a material
adverse effect on the Company. The Company expects that increases in the values
and concentrations of insured property and the effects of inflation will
increase the severity of such occurrences per year in the future.
The Company seeks to moderate the volatility described in the preceding
paragraph through the use of contract terms, portfolio selection methodology,
diversification criteria and probability analyses. Also, consistent with its
risk management practices, the Company purchases property catastrophe coverage
for its own account to seek to further reduce the potential volatility of its
results.
Type of Reinsurance
The following table sets forth the Company's gross premiums written and
number of programs written by type of reinsurance.
Years Ended December 31,
--------------------------------------------------------
1997 1996 1995
------------------ ---------------- ------------------
Gross Number Gross Number Gross Number
Premiums of Premiums of Premiums of
Type of Reinsurance Written Programs Written Programs Written Programs
------------------- ------- -------- ------- ------- ------- --------
(dollars in millions)
Catastrophe excess of
loss................ $150.8 311 $157.6 293 $146.8 271
Excess of loss
retrocession........ 37.6 74 70.4 105 73.8 105
Proportional
retrocession
of catastrophe
excess of loss.... 21.9 11 33.3 11 56.7 12
Marine, aviation and
other............... 18.0 25 8.6 25 15.3 35
------ --- ------ --- ------ ---
Total Reinsurance.. $228.3 421 $269.9 434 $292.6 423
====== === ====== === ====== ===
Catastrophe Excess of Loss Reinsurance. Catastrophe excess of loss
reinsurance provides coverage when aggregate claims and claim adjustment
expenses from a single occurrence of a covered peril exceed the attachment point
specified in a particular contract. A portion of the Company's property
catastrophe excess of loss contracts limit coverage to one occurrence in a
contract year, but most such contracts provide for coverage of a second
occurrence after the payment of a reinstatement premium. The coverage provided
under excess of loss retrocessional contracts may be on a worldwide basis or
limited in scope to selected geographic areas. Coverage can also vary from "all
property" perils to limited coverage on selected perils, such as "earthquake
only" coverage.
Excess of Loss Retrocessional Reinsurance. The Company also enters into
retrocessional contracts pursuant to which it provides property catastrophe
coverage to other reinsurers or retrocedents. In providing retrocessional
reinsurance, the Company focuses on property catastrophe retrocessional
reinsurance which covers the retrocedent on an excess of loss basis when
aggregate claims and claim adjustment expenses from a single occurrence of a
covered peril and from a multiple number of reinsureds exceed a specified
attachment point. The coverage provided under excess of loss retrocessional
contracts may be on a worldwide basis or limited in scope to selected geographic
areas. Coverage can also vary from "all property" perils to limited coverage on
selected perils, such as "earthquake only" coverage. In general, excess of loss
retrocessional contracts are for a term of one year. Retrocessional coverage is
characterized by high volatility, principally because retrocessional contracts
expose a reinsurer to an aggregation of losses from a single catastrophic event.
In addition, the information available to retrocessional underwriters concerning
the original primary risk can be less precise than the information received from
primary companies directly. Moreover, exposures from retrocessional business can
change within a contract term as the underwriters of a retrocedent alter their
book of business after retrocessional coverage has been bound.
-6-
Proportional Retrocessional Reinsurance. The Company writes proportional
retrocessions of catastrophe excess of loss reinsurance treaties when it
believes that premium rates and volume are attractive. In such proportional
retrocessional reinsurance, the Company assumes a specified proportion of the
risk on a specified coverage and receives an equal proportion of the premium.
The ceding insurer receives a commission, based upon the premiums ceded to the
reinsurer, and may also be entitled to receive a profit commission based on the
ratio of losses, loss adjustment expense and the reinsurer's expenses to
premiums ceded. A proportional retrocessional catastrophe reinsurer is dependent
upon the ceding insurer's underwriting, pricing and claims administration to
yield an underwriting profit, although the Company generally obtains detailed
underwriting information concerning the exposures underlying the proportional
retrocessions of catastrophe excess of loss reinsurance treaties written by the
Company. In addition, all of the Company's proportional retrocessions of
catastrophe excess of loss reinsurance contracts have aggregate per event risk
exposure limits.
Marine, Aviation and Other Reinsurance. The Company has also written
short-tail marine and aviation reinsurance and retrocessional reinsurance for
selected domestic and foreign insurers and reinsurers. Marine and aviation risks
involve primarily property damage, although certain marine and aviation risks
may involve casualty coverage arising from the same event causing the property
claim. Coverage is generally written in excess of a substantial attachment
point, so events likely to cause a claim will occur infrequently, such as the
destruction of a drilling platform, the loss of a satellite or the loss of a
sizable vessel and its contents. Although the Company focuses on writing
catastrophe excess of loss reinsurance, the Company also writes risk excess of
loss reinsurance and retrocessions. The risk excess of loss treaties in which
the Company participates generally contain limited reinstatement provisions. In
selected cases, the Company also writes customized financial reinsurance
contracts when the expected returns are particularly attractive.
Primary Insurance Operations; Glencoe and DeSoto; Nobel
The Company is pursuing opportunities in the United States to write an
increased amount of catastrophe-exposed primary insurance. The Company expects
to write both personal and commercial coverages, on a primary basis, where
natural catastrophe exposures represent a significant component of the overall
exposure. In September 1997, the Company promoted Keith S. Hynes, formerly the
Company's Chief Financial Officer, to the position of President and Chief
Executive Officer of Glencoe, to manage all aspects of the Company's initiatives
in the primary insurance business.
In January 1996 the Company incorporated Glencoe in Bermuda as an excess
and surplus lines insurance company. Glencoe is pursuing opportunities in the
catastrophe-exposed primary insurance business in the United States, and is
writing policies that primarily are exposed to earthquake and wind perils.
Glencoe is eligible to do business in the United States on an excess and surplus
lines basis in 26 states. For the year ended December 31, 1997, Glencoe
generated gross premiums written of $7.0 million and net income of $2.4 million.
For the year ended December 31, 1996, Glencoe generated gross premiums written
of $1.6 million and net income of $0.9 million.
In September 1997, Glencoe organized DeSoto in Florida to pursue the
assumption of policies from the Florida Residential Property and Casualty Joint
Underwriting Association (the "JUA"). In January 1998, the Company began to
provide personal lines coverages through DeSoto with an initial assumption of
approximately 12,000 policies with an in-force premium of approximately $10
million.
On December 19, 1997, the Company announced it had executed a definitive
agreement in respect of the Nobel Acquisition to acquire the operating
subsidiaries of Nobel, through Renaissance U.S. The principal business of Nobel
is the servicing and underwriting of commercial property, casualty and surety
risks for specialized industries and personal lines coverage for low-value
dwellings. The casualty business is expected to be substantially reinsured by
American Reinsurance Company and/or Inter-Ocean Reinsurance Company Ltd., who
will provide comprehensive prospective and retrospective reinsurance coverage.
Nobel's principal operating unit,
-7-
Nobel Insurance, is a Texas insurance company, licensed in all 50 states and the
District of Columbia. In the years ended December 31, 1997 and 1996, the
businesses being acquired from Nobel generated unaudited gross premiums written
of approximately $76.5 million and $83.7 million, respectively, and unaudited
net income (loss) of approximately $3.2 million and $(1.6) million,
respectively. The purchase of the operating subsidiaries of Nobel is presently
expected to close in the second quarter of 1998; however, there can be no
assurance that the Nobel transaction, which is subject to customary conditions
(including regulatory and shareholder approvals) will be consummated.
Potential Diversification
From time to time, the Company may consider opportunistic
diversification into new ventures, either through organic growth or the
acquisition of other companies or books of business. In evaluating such new
ventures, the Company seeks an attractive return on equity and the ability to
develop or capitalize on a competitive advantage. Accordingly, the Company
regularly reviews strategic transaction opportunities and periodically engages
in discussions regarding possible transactions. However, other than with respect
to the Nobel Acquisition, the Company has no definitive agreements with respect
to any material transaction and there can be no assurance that the Company will
enter into any such agreement in the future, or that any consummated transaction
would contribute materially to the Company's results.
Geographic Diversification
The Company seeks to diversify its exposure across geographic zones. The
Company writes the majority of its business within the United States because the
returns obtained relative to the risks involved are currently most attractive in
the United States and because it is able to obtain the most detailed
underwriting information on U.S. risks. Within the United States, the Company's
zones of highest exposure are Southern California, Northern California,
metropolitan New York, New Madrid (midwestern United States) and Southern
Florida.
The following table sets forth the percentage of the Company's gross
reinsurance premiums written allocated to the territory of coverage exposure.
Years Ended December 31,
--------------------------------------------------------------
1997 1996 1995
------------------ ---------------- ------------------
Percentage Percentage Percentage
Gross of Gross Gross of Gross Gross of Gross
Premiums Premiums Premiums Premiums Premiums Premiums
Geographic Area Written Written Written Written Written Written
- --------------- ------- ------- ------- ------- ------- -------
(dollars in millions)
United States....... $123.7 54.2% $126.6 46.9% $144.1 49.2%
Worldwide........... 27.9 12.2 44.5 16.5 59.1 20.2
Worldwide
(excluding 32.0 14.0 38.7 14.3 41.3 14.1
U.S.)(1) ..........
Europe 9.2
(including U.K.)... 21.0 31.5 11.7 25.4 8.7
Other 16.8 7.4 19.0 7.0 11.7 4.0
Australia and New
Zealand............ 6.9 3.0 9.6 3.6 11.0 3.8
------ ------ ------ ------ ------ -----
Total Reinsurance. $228.3 100.0% $269.9 100.0% $292.6 100.0%
====== ====== ====== ====== ====== =====
- ---------------
(1) The category "Worldwide (excluding U.S.)" consists of contracts that cover
more than one geographic zone (other than the U.S.). The exposure in this
category for gross premiums written to date is predominantly from Europe.
See Note 13 to Consolidated Financial Statements.
-8-
Program Limits
The following table sets forth the number of the Company's programs in force
at December 31, 1997 by aggregate program limits.
Aggregate
Program Number of
Limit Programs
----------- --------
$50-60 million...................................... 2
$40-50 million...................................... 1
$30-40 million...................................... 5
$20-30 million...................................... 13
$10-20 million...................................... 39
Less than $10 million............................... 361
---
Total............................................ 421
===
Underwriting
The Company's primary underwriting goal is to construct a portfolio of
reinsurance and insurance contracts that maximizes the return on shareholders'
equity subject to prudent risk constraints.
Management assesses underwriting decisions on the basis of the expected
incremental return on equity of each new reinsurance contract in relation to the
Company's overall portfolio of reinsurance contracts. To facilitate this,
Management has developed REMS(C), a proprietary, computer-based pricing and
exposure management system. Management utilizes REMS(C) to assess property
catastrophe risks, price treaties and limit aggregate exposure. REMS was
developed with consulting assistance from Tillinghast, an actuarial consulting
unit of Towers, Perrin, Forster & Crosby, Inc., and AIR, the developer of the
CATMAP(TM) system. REMS(C) has analytic and modeling capabilities that assist
the Company's underwriters in assessing the catastrophe exposure risk and return
of each incremental reinsurance contract in relation to the Company's overall
portfolio of reinsurance contracts. The Company has licensed and integrated into
REMS(C) six commercially available catastrophe computer models in addition to
the Company's base model. The Company uses these models to validate and stress
test its base REMS(C) results. In addition, the Company stress tests its
exposures and potential future results by increasing the frequency and severity
of catastrophic events above the levels embedded in the models purchased from
the outside consultants. Management combines the analyses generated by REMS(C)
with its own knowledge of the client submitting the proposed program to assess
the premium offered against the risk of loss which such program presents.
REMS(C) provides more precise exposure information than is generally
analyzed currently throughout the property catastrophe reinsurance industry.
REMS(C) combines computer-generated, statistical simulations that estimate
catastrophic event probabilities with exposure and coverage information on each
client's reinsurance contract to produce expected claims for reinsurance
programs submitted to the Company. REMS(C) then uses simulation techniques to
generate 40,000 years of catastrophic event activity, including events causing
in excess of $250 billion in insured industry losses. From this 40,000 year
simulation, the Company is able to obtain expected claims, expected profits and
a probability distribution of potential outcomes for each program in its
portfolio and for its total portfolio.
Management believes that REMS(C) provides the Company's underwriters
with several competitive advantages which are not generally available. These
include (i) the ability to simulate 40,000 years of catastrophic event activity
compared to a much smaller sample in generally available models, allowing the
Company to analyze its exposure to a greater number and combination of potential
events, (ii) the ability to analyze the incremental impact of an individual
reinsurance contract on the Company's overall portfolio, and (iii) the ability
to collect
-9-
detailed data from a wide variety of sources which allows the Company to measure
geographic exposure at a detailed level.
For its property catastrophe reinsurance business, the Company has
developed underwriting guidelines that limit the amount of exposure it will
underwrite directly for any one cedent, the exposure to claims from any single
catastrophic event and the exposure to losses from a series of catastrophic
events. The Company also attempts to distribute its exposure across a range of
attachment points.
As part of its pricing and underwriting process, the Company also
assesses a variety of factors, including the reputation of the proposed cedent
and the likelihood of establishing a long-term relationship with the cedent; the
geographic area in which the cedent does business and its market share;
historical loss data for the cedent and, where available, for the industry as a
whole in the relevant regions, in order to compare the cedent's historical
catastrophe loss experience to industry averages; the cedent's pricing
strategies; and the perceived financial strength of the cedent.
Marketing
The Company markets its reinsurance products worldwide exclusively
through reinsurance brokers. The Company focuses its marketing efforts on
targeted brokers and insurance and reinsurance companies, placing primary
emphasis on existing clients. Management believes that its existing portfolio of
business is a valuable asset given the renewal nature of the reinsurance
industry and, therefore, attempts to continually strengthen relationships with
its existing brokers and clients. The Company also targets prospects that are
deemed likely to enhance the risk/return composition of its portfolio, that are
capable of supplying detailed and accurate underwriting data and that
potentially add further diversification to the Company's book of business.
Management believes that primary insurers' and brokers' willingness to
use a particular reinsurer is based not just on pricing terms, but on the
financial security of the reinsurer, its claim paying ability ratings,
perceptions of the quality of a reinsurer's service, the reinsurer's willingness
to design customized programs, its long-term stability and its commitment to
provide reinsurance capacity. Management believes that the Company has
established a reputation with its brokers and clients for prompt response on
underwriting submissions and for fast claims payments. Since the Company
selectively writes large lines on a limited number of property catastrophe
reinsurance contracts, it can establish reinsurance terms and conditions on
these contracts that are attractive in its judgment, make large commitments to
the most attractive programs and provide superior client responsiveness. In
addition, the Company acts as sole reinsurer on certain property catastrophe
reinsurance contracts, which allows the Company to take advantage of its ability
to develop customized reinsurance programs. Management believes that such
customized programs help the Company to develop long-term relationships with
brokers and clients.
The reinsurance brokers perform data collection, contract preparation
and other administrative tasks, enabling the Company to market its reinsurance
products cost effectively by maintaining a smaller staff. The Company believes
that by maintaining close relationships with brokers, it is able to obtain
access to a broad range of potential reinsureds. Subsidiaries and affiliates of
J&H Marsh & McLennan, Inc., E.W. Blanch & Co., Benfield Greig Ltd., AON Re Group
and Bates Turner, L.L.C. (a GE Capital Services Company, an affiliate of GE
Investments) accounted for approximately 23.5%, 21.2%, 13.1%, 7.9% and 4.4%,
respectively, of the Company's net premiums written in 1997. During such period,
the Company issued authorization for coverage on programs submitted by 73
brokers worldwide. The Company received approximately 1,630 program submissions
during 1997. The Company is highly selective and, from such submissions, the
Company issued authorizations for coverage for only 421 programs, or 25.8% of
the program submissions received.
Reserves
The Company's policy is to establish claim reserves for the settlement
costs of all claims and claim adjustment expenses incurred by the Company when
an event occurs. The Company incurred claims of
-10-
$50.0 million, $86.9 million and $110.6 million for the years ended December 31,
1997, 1996 and 1995, respectively.
Under generally accepted accounting principles (GAAP), the Company is
not permitted to establish claim reserves with respect to its property
catastrophe reinsurance policies until an event which gives rise to a claim
occurs. Generally, reserves will be established without regard to whether any
future claim may subsequently be contested by the Company. Any reserve for
claims and claim expenses may also include reserves for unpaid reported claims
and claim expenses and reserves for estimated losses that have been incurred but
not reported to the Company. Such reserves are estimated by Management based
upon reports received from ceding companies, as supplemented by the Company's
own estimates of reserves on such reported losses as well as reserves for losses
that are incurred but not reported. The Company utilizes both proprietary and
commercially available models as well as historical reinsurance industry loss
development patterns to assist in the establishment of appropriate claim
reserves. In addition, when reviewing a proposed reinsurance contract, the
Company typically receives and evaluates the insured's historical and projected
loss experience with respect to certain events. The Company's reserve estimates
are continually reviewed and, in accordance with GAAP, as adjustments to these
reserves become necessary, such adjustments are reflected in current operations.
Claim reserves represent estimates, including actuarial and statistical
projections at a given point in time, of an insurer's or reinsurer's
expectations of the ultimate settlement and administration costs of claims
incurred, and it is possible that the ultimate liability may exceed or be less
than such estimates. Such estimates are not precise in that, among other things,
they are based on predictions of future developments and estimates of future
trends in claim severity and frequency and other variable factors such as
inflation. During the claim settlement period, it often becomes necessary to
refine and adjust the estimates of liability on a claim either upward or
downward. Even after such adjustments, ultimate liability may exceed or be less
than the revised estimates.
Investments
The Company's strategy is to maximize its underwriting profitability and
fully deploy its capital through its underwriting activities; consequently, the
Company has established an investment policy which it considers to be
conservative. The Company's investment guidelines, which are established by
Management and approved by the Company's Board of Directors, stress
diversification of risk, preservation of capital and market liquidity.
Notwithstanding the foregoing, the Company's investments are subject to
market-wide risks and fluctuations, as well as to risks inherent in particular
securities. The primary objective of the portfolio, as set forth in such
guidelines, is to maximize investment returns consistent with these policies. To
achieve this objective, the Company's current fixed income investment guidelines
call for an average credit quality of AA and a target duration of two years. In
1997, the Company reallocated $50.0 million of its fixed maturity investments to
non-U.S. equity securities.
Primarily because of the potential for large claims payments, the
Company's investment portfolio is structured to provide a high level of
liquidity. The table below shows the aggregate amounts of investments available
for sale, equity securities and cash and cash equivalents comprising the
Company's portfolio of invested assets.
At December 31,
------------------------------------------
1997 1996 1995
---------- ---------- --------
(in thousands)
Investments available for sale at fair value.......... $710.2 $603.5 $528.8
Equity securities, at fair value...................... 26.4 -- --
Cash and cash equivalents............................. 122.9 199.0 139.2
------ ------ ------
Total invested assets................................. $859.5 $802.5 $681.8
====== ====== ======
-11-
The growth in the Company's portfolio of invested assets for the year
ended December 31, 1997 resulted from net cash provided by operating activities
of $153.3 million offset by net cash used in financing activities of $72.0
million and net unrealized depreciation of investments of $11.7 million.
At December 31, 1997, the fixed income invested asset portfolio had a
dollar weighted average rating of AA, an average duration of 2.8 years and an
average yield to maturity of 6.61%, before investment expenses.
All fixed income securities in the Company's investment portfolio are
classified as securities available for sale and are carried at fair value. Any
unrealized gains or losses as a result of changes in fair value over the period
such investments are held are not reflected in the Company's statement of
operations, but rather are reflected in shareholders' equity.
The Company periodically evaluates the creditworthiness of each issuer
whose securities it holds. Special attention is paid to those securities whose
market values have declined materially, for reasons other than changes in
interest rates, to evaluate the realizable value of the investment, the specific
condition of the issuer, and the issuer's ability to comply with the material
terms of the security. Information reviewed may include the recent operational
results and financial position of the issuer, information about its industry,
recent press releases and other information as deemed necessary. If evidence
does not exist to support a realizable value equal to or greater than the
carrying value of the investment, and such decline in market value is determined
to be other than temporary, the Company reduces the carrying amount to its net
realizable value, which becomes the new cost basis. The amount of the reduction
is reported as a realized loss. The Company recognizes any recovery of such
reductions in the cost basis of an investment only upon the sale of the
investment.
At December 31, 1997, the Company held investments and cash totaling
$859.5 million with a net unrealized depreciation balance of $10.2 million. Of
the $859.5 million, the Company had dollar denominated fixed income investments
in Korea, Thailand and Indonesia totaling $66.2 million with a net unrealized
depreciation balance of $12.7 million. During the fourth quarter, the Company
recognized $3.8 million in realized losses from the writedown of investments
with an exposure to the financial conditions in Asia. The primary reasons for
the writedown in the investments were the declines in the financial condition of
the issuer and the related reduction in credit ratings by rating agencies. These
changes caused the Company to conclude that the decline in fair value of certain
investments was other-than-temporary. The Company's investment portfolio,
specifically the remaining securities of Asian issuers, is subject to the risks
of further declines in realizable value. The Company attempts to mitigate this
risk through the active management of its portfolio.
At December 31, 1997, the Company's $26.4 million of equity securities,
which were sold in January of 1998, were invested in currencies other than the
U.S. dollar. Also at December 31, 1997, $9.6 million of cash and cash
equivalents were invested in currencies other than the U.S. dollar. The combined
$36.0 million represented approximately 4.2% of the Company's invested assets.
The Company's portfolio does not contain any investments in derivative
securities. Also, the Company's investment portfolio does not contain any direct
investments in real estate, mortgage loans or similar securities.
Under the terms of certain reinsurance contracts, the Company may be
required to provide letters of credit to reinsureds in respect of reported
claims and/or unearned premiums. The Company has obtained a facility providing
for the issuance of letters of credit. This facility is secured by a lien on a
portion of the Company's investment portfolio. At December 31, 1997 the Company
had outstanding letters of credit aggregating $24.7 million.
Investment Advisers
During 1997, each of Warburg, Pincus Investments International
(Bermuda), Ltd. ("WPII"), an affiliate of Warburg, Pincus Investors, L.P.; GE
Investments (U.S.) Limited ("GE Investments"), an affiliate of PT Investments,
Inc. and GE Investment Private Placement Partners I - Insurance, Limited
Partnership; the Bank of
-12-
N.T. Butterfield & Son Limited ("Butterfield Bank") and Falcon Asset Management
(Bermuda) ("Falcon"), an affiliate of USF&G, performed investment advisory
services on behalf of the Company. The terms of such services were determined in
arms' length negotiations, subject to the Company's investment guidelines. The
performance of, and the fees paid to, the Company's investment advisors, are
reviewed periodically by the Investment Committee of the Board of Directors.
The following table summarizes the fair value of the investments and
cash and cash equivalents of the Company as of the dates indicated.
December 31,
Type of Investment ----------------------------------------
------------------ 1997 1996 1995
------------ ------------ ------------
(dollars in millions)
Fixed Maturities Available for Sale:
U.S. Government debt securities......... 257.8 -- --
Non-U.S. government debt securities..... 256.9 239.4 201.9
Non-U.S. corporate debt securities...... 188.6 329.6 299.5
Non-U.S. mortgage backed securities..... 6.9 34.5 22.4
------ ----- ------
Subtotal............................ 710.2 603.5 523.8
Equity Securities....................... 26.4 -- --
Short-term investments...................... -- -- 5.0
Cash and cash equivalents................... 122.9 199.0 139.2
------ ----- ------
Total fixed maturity investments, equity
securities, short-term investments and
cash and cash equivalents............ $859.5 $802.5 $668.0
====== ====== ======
The following table summarizes the fair value by contractual maturities
of the Company's fixed maturity investment portfolio as of the dates indicated.
All mortgage-backed securities mature within five years.
December 31,
----------------------------------------
1997 1996 1995
----------------------------------------
(dollars in millions)
Due in less than one year $84.1 $56.1 75.1
Due after one through five years 473.0 457.1 $358.3
Due after five through ten years 90.9 90.3 90.4
Due after ten years 62.2 -- --
------ ------ ------
Total $710.2 $603.5 $523.8
====== ====== ======
Maturity and Duration of Fixed Maturity Portfolio
Currently, the Company maintains a target duration of two years on a
weighted average basis, reflecting Management's belief that it is important to
maintain a liquid, shorter-duration portfolio to better assure the Company's
ability to pay claims on a timely basis. The actual portfolio duration may not
exceed the target duration by more than two years. The Company expects to
reevaluate the target duration in light of estimates of the duration of its
liabilities and market conditions, including the level of interest rates, from
time to time.
-13-
Quality of Debt Securities in Portfolio
The Company's investment guidelines stipulate that the minimum credit
rating for securities purchased for the Company's portfolio is B, that a maximum
of 15% of the portfolio be rated BB or below and that the overall average rating
of the portfolio, including cash and cash equivalents, be at least AA.
The following table summarizes the composition of the fair value of the
fixed maturity portfolio as of the dates indicated by rating as assigned by S&P
or, with respect to non-rated issues, as estimated by the Company's investment
managers.
December 31,
------------------------------------------------
Rating 1997 1996 1995
------ ------ ------ ------
AAA........................ 56.9% 28.1% 39.5%
AA......................... 12.2 50.1 41.6
A.......................... 14.9 20.2 15.3
BBB........................ 5.0 1.6 3.6
BB......................... 4.9 -- --
B ........................ 6.1 -- --
------ ------ ------
100.0% 100.0% 100.0%
===== ===== =====
Equity Securities
At December 31, 1997, the Company's investments in equity securities,
managed by GE Investments, consisted entirely of common stock, preferred stock
or other forms of non-U.S. securities of established companies listed on foreign
exchanges. The portfolio also included American Depositary Receipts of non-U.S.
issuers. This portfolio was liquidated in January 1998.
Derivatives
The Company's portfolio does not contain any direct investments in
derivative securities.
Real Estate
The Company's portfolio does not contain any direct investments in real
estate or mortgage loans.
Foreign Currency Exposures
All of the Company's fixed maturities are currently invested in
securities denominated in U.S. dollars. The Company's investments in equity
securities are primarily invested in securities which are denominated in
currencies other than the U.S. dollar. The Company's fixed maturity portfolio is
generally not invested so as to hedge exposures to various currencies. The
Company maintains a portion of its foreign currency premiums in the original
currency as cash investments in anticipation of known claims or other foreign
currency liabilities.
Diversification and Liquidity
Pursuant to the investment guidelines of the Company, there is no limit
on the percentage of the Company's fixed income portfolio that may be invested
in the securities of the U.S. Government, up to 15% of the portfolio may be
invested in the countries of Canada, France, Germany, Japan and the United
Kingdom, and all other countries are limited to a maximum limit of 3% of the
portfolio. No more than 10% of the portfolio may be invested in securities
issued by any single issuer, maturing in one year or less or in obligations of
any single issuer that is rated AA or AAA by S&P, or Aa or Aaa by Moody's and is
either (i) a sovereign (or guaranteed by a sovereign) issuing in a currency
other than its own, (ii) a local government entity or (iii) a supranational
entity. Each investment adviser has limitations as follows: up to 10% of the
portfolio may be invested in obligations of any
-14-
individual issuer not described above, but with ratings of AA or AAA by S&P, or
Aa or Aaa by Moody's; up to 7% of the portfolio may be invested in obligations
of any individual A issuer, as rated by S&P or by Moody's; up to 5% of the
portfolio may be invested in obligations of any individual BBB issuer as rated
by S&P or Baa issuer as rated by Moody's; and up to 3% of the portfolio may be
invested in obligations of any individual BB issuer as rated by S&P or Ba as
rated by Moody's. In addition, no more than 15% of each investment advisor's
portfolio may be rated lower than BB by S&P or Ba3 by Moody's.
The Company is currently evaluating its investment guidelines, and as a
consequence the revised guidelines may permit the Company to increase the
average duration and credit risk of the portfolio.
Competition
The property catastrophe reinsurance industry is highly competitive and
is undergoing a variety of challenging developments, including a marked trend
toward greater consolidation. The Company competes, and will continue to
compete, with major U.S. and non-U.S. property catastrophe insurers, reinsurers,
and certain underwriting syndicates. Many of these competitors have greater
financial, marketing and management resources than the Company. In addition, new
companies may enter the property catastrophe reinsurance market or existing
reinsurers may deploy additional capital in the property catastrophe reinsurance
market. The Company cannot predict what effect any of these developments may
have on the Company and its business.
Competition in the types of reinsurance business that the Company
underwrites is based on many factors, including premium charges and other terms
and conditions offered, services provided, speed of claims payment, ratings
assigned by independent rating agencies, the perceived financial strength and
the experience of the reinsurer in the line of reinsurance to be written. The
number of jurisdictions in which a reinsurer is licensed or authorized to do
business is also a factor. Some of the reinsurers who have entered the Bermuda
and London-based reinsurance markets have or could have greater financial,
marketing or managerial resources than the Company. Ultimately, increasing
competition could affect the Company's ability to attract business on terms
having the potential to yield an attractive return on equity.
Management is also aware of many potential initiatives by capital market
participants to produce alternative products that may compete with the existing
catastrophe reinsurance markets. Management is unable to predict the extent to
which the foregoing new, proposed or potential initiatives may affect the demand
for the Company's products or the risks which may be available for the Company
to consider underwriting.
Employees
As of March 27, 1998, the Company employed 34 people, all of whom are
either shareholders or optionholders of the Company. The Company believes that
its employee relations are satisfactory. None of the Company's employees are
subject to collective bargaining agreements, and the Company knows of no current
efforts to implement such agreements at the Company.
After consummation of the Nobel Acquisition, the Company expects to
employ approximately 250 additional employees. None of such employees are
subject to collective bargaining agreements, and the Company knows of no current
efforts to implement such agreements.
-15-
Regulation
Bermuda
The Insurance Act 1978, as amended, and Related Regulations. The
Insurance Act, which regulates the business of Renaissance Reinsurance and
Glencoe, provides that no person shall carry on an insurance business in or from
within Bermuda unless registered as an insurer under the Act by the Minister.
Renaissance Reinsurance and Glencoe are registered as a Class 4 and a Class 3
insurer under the Insurance Act, respectively. The Minister, in deciding whether
to grant registration, has broad discretion to act as he thinks fit in the
public interest. The Minister is required by the Insurance Act to determine
whether the applicant is a fit and proper body to be engaged in the insurance
business and, in particular, whether it has, or has available to it, adequate
knowledge and expertise. In connection with the applicant's registration, the
Minister may impose conditions relating to the writing of certain types of
insurance.
An Insurance Advisory Committee appointed by the Minister advises him on
matters connected with the discharge of his functions and sub-committees thereof
supervise and review the law and practice of insurance in Bermuda, including
reviews of accounting and administrative procedures.
The Insurance Act imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
Minister powers to supervise, investigate and intervene in the affairs of
insurance companies. Significant aspects of the Bermuda insurance regulatory
framework are set forth below.
Cancellation of Insurer's Registration. An insurer's registration may be
canceled by the Minister on certain grounds specified in the Insurance Act,
including failure of the insurer to comply with a requirement made of it under
the Insurance Act or, if in the opinion of the Minister after consultation with
the Insurance Advisory Committee, the insurer has not been carrying on business
in accordance with sound insurance principles.
Independent Approved Auditor. Every registered insurer must appoint an
independent auditor who will annually audit and report on the Statutory
Financial Statements and the Statutory Financial Return of the insurer, the
latter of which is required to be filed annually with the Registrar of Companies
(the "Registrar"), who is the chief administrative officer under the Insurance
Act. The auditor must be approved by the Minister as the independent auditor of
the insurer. The approved auditor may be the same person or firm which audits
the insurer's financial statements and reports for presentation to its
shareholders.
Loss Reserve Specialist. Every Registered Class 3 and Class 4 insurer is
required to submit an annual loss reserve opinion when filing the Annual
Statutory Financial Return. This opinion must be issued by a Loss Reserve
Specialist. The Loss Reserve Specialist, who will normally be a qualified
casualty actuary, must be approved by the Minister.
Statutory Financial Statements. An insurer must prepare annual Statutory
Financial Statements. The Insurance Act prescribes rules for the preparation and
substance of such Statutory Financial Statements (which include, in statutory
form, a balance sheet, income statement, and a statement of capital and surplus,
and detailed notes thereto). The insurer is required to give detailed
information and analyses regarding premiums, claims, reinsurance and
investments. The Statutory Financial Statements are not prepared in accordance
with GAAP and are distinct from the financial statements prepared for
presentation to the insurer's shareholders under the Companies Act 1981 of
Bermuda, which financial statements may be prepared in accordance with GAAP. The
insurer is required to submit the Annual Statutory Financial Statements as part
of the Annual Statutory Financial Return.
Minimum Solvency Margin. The Insurance Act provides that the statutory
assets of an insurer must exceed its statutory liabilities by an amount greater
than the prescribed minimum solvency margin which varies with the type of
business of the insurer and the insurer's net premiums written and loss reserve
level. The
-16-
minimum solvency margin for a Class 4 insurer is the greatest of $100.0 million,
50% of net premiums written (with a credit for reinsurance ceded not exceeding
25% of gross premiums) and 15% of loss and loss expense provisions and other
insurance reserves. The minimum solvency margin for a Class 3 insurer is the
greatest of $1.0 million, 20% of the first $6.0 million of net premiums written
plus 15% of net premiums written in excess of $6.0 million, and 15% of loss and
loss expense provisions and other insurance reserves.
Minimum Liquidity Ratio. The Insurance Act provides a minimum liquidity
ratio for general business. An insurer engaged in general business is required
to maintain the value of its relevant assets at not less than 75% of the amount
of its relevant liabilities. Relevant assets include cash and time deposits,
quoted investments, unquoted bonds and debentures, first liens on real estate,
investment income due and accrued, accounts and premiums receivable and
reinsurance balances receivable. There are certain categories of assets which,
unless specifically permitted by the Minister, do not automatically qualify as
relevant assets, such as unquoted equity securities, investments in and advances
to affiliates, real estate and collateral loans. The relevant liabilities are
total general business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities (by interpretation, those not
specifically defined).
Annual Statutory Financial Return. An insurer is required to file with
the Registrar a Statutory Financial Return no later than four months from the
insurer's financial year end (unless specifically extended). The Statutory
Financial Return includes, among other matters, a report of the approved
independent auditor on the Statutory Financial Statements of the insurer; a
declaration of the statutory ratios; a solvency certificate; the Statutory
Financial Statements themselves; the opinion of the approved Loss Reserve
Specialist and certain details concerning ceded reinsurance. The solvency
certificate and the declaration of the statutory ratios must be signed by the
principal representative and at least two directors of the insurer who are
required to state whether the Minimum Solvency Margin and, in the case of the
solvency certificate, the Minimum Liquidity Ratio, have been met, and the
independent approved auditor is required to state whether in its opinion it was
reasonable for them to so state and whether the declaration of the statutory
ratios complies with the requirements of the Insurance Act. The Statutory
Financial Return must include the opinion of a Loss Reserve Specialist in
respect of the loss and loss expense provisions of the insurer. Where an
insurer's accounts have been audited for any purpose other than compliance with
the Insurance Act, a statement to that effect must be filed with the Statutory
Financial Return.
Supervision, Investigation and Intervention. The Minister may appoint an
inspector with extensive powers to investigate the affairs of an insurer if the
Minister believes that an investigation is required in the interest of the
insurer's policyholders or persons who may become policyholders. In order to
verify or supplement information otherwise provided to him, the Minister may
direct an insurer to produce documents or information relating to matters
connected with the insurer's business.
If it appears to the Minister that there is a risk of the insurer
becoming insolvent, the Minister may direct the insurer not to take on any new
insurance business; not to vary any insurance contract if the effect would be to
increase the insurer's liabilities; not to make certain investments; to realize
certain investments; to maintain in Bermuda, or transfer to the custody of a
Bermuda bank, certain assets; not to declare or pay any dividends or other
distributions or to restrict the making of such payments and/or to limit its
premium income.
An insurer is required to maintain a principal office in Bermuda and to
appoint and maintain a principal representative in Bermuda. For the purpose of
the Insurance Act, the principal office of the Company and its Subsidiaries is
at the Company's offices at Renaissance House, 8-12 East Broadway, Pembroke HM
19 Bermuda and Mr. Keith S. Hynes, the Company's Senior Vice President, and Mr.
John D. Nichols, Jr., the Company's Vice President, Treasurer and Secretary, are
the principal representatives of Renaissance Reinsurance and Glencoe,
respectively. Without a reason acceptable to the Minister, an insurer may not
terminate the appointment of its principal representative, and the principal
representative may not cease to act as such, unless thirty days' notice in
writing to the Minister is given of the intention to do so. It is the duty of
the principal representative, within thirty days of his reaching the view that
there is a likelihood of the insurer for which he acts becoming insolvent or its
coming to his knowledge, or his having reason to believe, that an event has
occurred, to make a report in writing to the Minister setting out all the
particulars of the case that are available to him. Examples of such an event
include
-17-
failure by the insurer to comply substantially with a condition imposed upon the
insurer by the Minister relating to a solvency margin or a liquidity or other
ratio.
United States and Other
Renaissance Reinsurance is not admitted to do business in any
jurisdiction except Bermuda. The insurance laws of each state of the United
States and of many other countries regulate the sale of insurance and
reinsurance within their jurisdictions by alien insurers, such as Renaissance
Reinsurance, which are not admitted to do business within such jurisdiction.
With some exceptions, such sale of insurance or reinsurance within a
jurisdiction where the insurer is not admitted to do business is prohibited.
Renaissance Reinsurance does not intend to maintain an office or to solicit,
advertise, settle claims or conduct other insurance activities in any
jurisdiction other than Bermuda where the conduct of such activities would
require that Renaissance Reinsurance be so admitted. Glencoe is eligible to
write insurance in 26 states and is subject to the regulation and reporting
requirements of these states. In accordance with certain requirements of the
National Association of Insurance Commissioners (the "NAIC"), Glencoe has
established, and is required to maintain, a trust funded with a minimum of $15.0
million as a condition of its status as a licensed, non-admitted insurer in the
U.S.
DeSoto is a licensed insurer in Florida and the businesses being
acquired from Nobel are subject to regulation in all 50 U.S. states and the
District of Columbia. The Company's U.S. operations, which will expand
significantly after the contemplated acquisition of the operating subsidiaries
of Nobel, are subject to extensive regulation under statutes which delegate
regulatory, supervisory and administrative powers to state insurance
commissioners. Such regulation generally is designed to protect policyholders
rather than investors and relates to such matters as the standard of solvency
which must be met and maintained; the licensing of insurers and their agents;
the nature of and extermination of the affairs of insurance companies, which
includes periodic market conduct examinations by the regulatory authorities;
annual and other reports, prepared on a statutory accounting basis, required to
be filed on the financial condition of insurers or for other purposes;
establishment and maintenance of reserves for unearned premiums and losses; and
requirements regarding numerous other matters. In general, regulated insurers
must file all rates for insurance directly underwritten with the insurance
department of each state in which they operate on an admitted basis; reinsurance
generally is not subject to rate regulation. Further, state insurance statutes
typically place limitations on the amount of dividends or other distributions
payable by insurance companies in order to protect their solvency. Florida, the
jurisdiction of incorporation of DeSoto, requires that dividends be paid only
out of earned surplus and limits the annual amount payable without the prior
approval of the Florida Insurance Department to the greater of 10% of
policyholders' surplus adjusted for unrealized gains or 100% of prior year
statutory net income. Texas, the jurisdiction of incorporation of Nobel
Insurance, currently requires that dividends be paid only out of earned
statutory surplus and limits the annual amount of dividends payable without the
prior approval of the Texas Insurance Department to the greater of 10% of
statutory capital and surplus at the end of the previous calendar year or 100%
of statutory net income from operations for the previous calendar year. These
laws also impose prior approval requirements for certain transactions with
affiliates.
Further, as a result of the Company's ownership of DeSoto and
prospective ownership of Nobel Insurance Company, under the terms of applicable
state statutes, any person or entity desiring to purchase more than 10 percent
of the Company's outstanding voting securities is required to obtain prior
regulatory approval for the purchase.
The NAIC has established eleven financial ratios to assist state
insurance departments in their oversight of the financial condition of insurance
companies operating in their respective states. The NAIC calculates these ratios
based on information submitted by insurers on an annual basis and shares the
information with the applicable state insurance departments. The failure of the
Company's U.S. insurance subsidiaries to comply with the acceptable range of
such ratios could have an adverse effect on the Company.
-18-
In their ongoing effort to improve solvency regulations, the NAIC and
individual states have enacted certain laws and statutory financial statement
reporting requirements. For example, NAIC rules require audited statutory
financial statements as well as actuarial certification of loss and loss
adjustment expense reserves therein. Other activities are focused on greater
disclosure of an insurer's reliance on reinsurance and changes in its
reinsurance programs and tighter rules on accounting for certain overdue
reinsurance. In addition, the NAIC has implemented risk-based capital
requirements for property and casualty insurance companies (see below). These
regulatory initiatives and the overall focus on solvency may intensify the
restructuring and consolidation of the insurance industry. It is also possible
that the U.S. Congress may enact legislation regulating the insurance industry.
While the impact of these regulatory efforts on the Company's operations cannot
be quantified until enacted, the Company believes it will be adequately
positioned to compete in an environment of more stringent regulation.
The NAIC has implemented a risk-based capital measurement formula to be
applied to all property/casualty insurance companies, which formula calculates a
minimum required statutory net worth based on the underwriting, investment,
credit loss reserve and other business risks applicable to the insurance
company's operations. An insurance company that does not meet threshold
risk-based capital measurement standards could be required to reduce the scope
of its operations and ultimately could become subject to statutory receivership
proceedings.
The Company's U.S. insurance subsidiaries are subject to guaranty fund
laws which can result in assessments, up to prescribed limits, for losses
incurred by policyholders as a result of the impairment or insolvency of
unaffiliated insurance companies. Typically, an insurance company is subject to
the guaranty fund laws of the states in which it conducts insurance business;
however, companies which conduct business on a surplus lines basis in a
particular state are generally exempt from that state's guaranty fund laws. The
Company does not expect the amount of any such guaranty fund assessments to be
paid by the Company in 1998 to be material.
The expansion of the Company's operations through Glencoe and DeSoto and
the contemplated purchase of the operating subsidiaries of Nobel, and the
potential further expansion of the Company into additional insurance markets,
could expose the Company or subsidiaries of the Company to increasing regulatory
oversight. However, the Company intends to continue to conduct its operations so
as to minimize the likelihood that RenaissanceRe Holdings Ltd. or Renaissance
Reinsurance will become subject to U.S. regulation.
Other Available Information
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. For further information regarding the Company,
reference is made to such reports, proxy statements and other information which
are available as described under "Available Information" and "Incorporation of
Certain Documents by Reference."
-19-
GLOSSARY OF SELECTED INSURANCE TERMS
Attachment point The amount of loss (per occurrence or in the
aggregate, as the case may be) above which
excess of loss reinsurance becomes operative.
Broker One who negotiates contracts of insurance
or reinsurance, receiving a commission for
placement and other services rendered, between
(1) a policy holder and a primary insurer, on
behalf of the insured party, (2) a primary
insurer and reinsurer, on behalf of the primary
insurer, or (3) a reinsurer and a
retrocessionaire, on behalf of the reinsurer.
Catastrophe excess of loss A form of excess of loss reinsurance that,
reinsurance subject to a specified limit, indemnifies the
ceding company for the amount of loss in excess
of a specified retention with respect to an
accumulation of losses resulting from a
"catastrophe cover."
Cede; Cedent; Ceding company When a party reinsures its liability with
another, it "cedes" business and is referred to
as the "cedent" or "ceding company."
Claim adjustment expenses The expenses of settling claims, including
legal and other fees and the portion of general
expenses allocated to claim settlement costs.
Claim reserves Liabilities established by insurers and
reinsurers to reflect the estimated cost of
claims payments and the related expenses that
the insurer or reinsurer will ultimately be
required to pay in respect of insurance or
reinsurance it has written. Reserves are
established for losses and for claim adjustment
expenses.
Excess of loss reinsurance A generic term describing reinsurance that
indemnifies the reinsured against all or a
specified portion of losses on underlying
insurance policies in excess of a specified
amount, which is called a "level" or
"retention." Also known as non-proportional
reinsurance. Excess of loss reinsurance is
written in layers. A reinsurer or group of
reinsurers accepts a band of coverage up to a
specified amount. The total coverage purchased
by the cedent is referred to as a "program" and
will typically be placed with predetermined
reinsurers in prenegotiated layers. Any
liability exceeding the outer limit of the
program reverts to the ceding company, which
also bears the credit risk of a reinsurer's
insolvency.
Funded cover A form of insurance where the insured pays
premiums to a reinsurer to serve essentially as
a deposit in order to offset future losses. On
a funded cover, there is generally limited or
no transfer of risk for catastrophe losses from
the insured to the reinsurer.
-20-
Generally accepted accounting Accounting principles as set forth in opinions
principles of the Accounting Principles Board of the
American Institute of Certified Public
Accountants and/or statements of the Financial
Accounting Standards Board and/or their
respective successors and which are applicable
in the circumstances as of the date in
question.
Incurred but not reported Reserves for estimated losses that have been
incurred by insureds and reinsureds but not yet
reported to the insurer or reinsurer including
unknown future developments on losses which are
known to the insurer or reinsurer.
Layer The interval between the retention or
attachment point and the maximum limit of
indemnity for which a reinsurer is responsible.
Net premiums written Gross premiums written for a given period less
premiums ceded to reinsurers and
retrocessionaires during such period.
Proportional reinsurance A generic term describing all forms of
reinsurance in which the reinsurer shares a
proportional part of the original premiums and
losses of the reinsured. (Also known as pro
rata reinsurance, quota share reinsurance or
participating reinsurance.) In proportional
reinsurance the reinsurer generally pays the
ceding company a ceding commission. The ceding
commission generally is based on the ceding
company's cost of acquiring the business being
reinsured (including commissions, premium
taxes, assessments and miscellaneous
administrative expense) and also may include a
profit factor.
Reinstatement premium The premium charged for the restoration of the
reinsurance limit of a catastrophe contract to
its full amount after payment by the reinsurer
of losses as a result of an occurrence.
Reinsurance An arrangement in which an insurance company,
the reinsurer, agrees to indemnify another
insurance or reinsurance company, the ceding
company, against all or a portion of the
insurance or reinsurance risks underwritten by
the ceding company under one or more policies.
Reinsurance can provide a ceding company with
several benefits, including a reduction in net
liability on individual risks and catastrophe
protection from large or multiple losses.
Reinsurance also provides a ceding company with
additional underwriting capacity by permitting
it to accept larger risks and write more
business than would be possible without a
concomitant increase in capital and surplus,
and facilitates the maintenance of acceptable
financial ratios by the ceding company.
Reinsurance does not legally discharge the
primary insurer from its liability with respect
to its obligations to the insured.
-21-
Retention The amount or portion of risk that an insurer
retains for its own account. Losses in excess
of the retention level are paid by the
reinsurer. In proportional treaties, the
retention may be a percentage of the original
policy's limit. In excess of loss business, the
retention is a dollar amount of loss, a loss
ratio or a percentage.
Retrocessional Reinsurance; A transaction whereby a reinsurer cedes to
Retrocessionaire another reinsurer, the retrocessionaire, all or
part of the reinsurance that the first
reinsurer has assumed. Retrocessional
reinsurance does not legally discharge the
ceding reinsurer from its liability with
respect to its obligations to the reinsured.
Reinsurance companies cede risks to
retrocessionaires for reasons similar to those
that cause primary insurers to purchase
reinsurance: to reduce net liability on
individual risks, to protect against
catastrophic losses, to stabilize financial
ratios and to obtain additional underwriting
capacity.
Risk excess of loss reinsurance A form of excess of loss reinsurance that
covers a loss of the reinsured on a single
"risk" in excess of its retention level of the
type reinsured, rather than to aggregate losses
for all covered risks, as does catastrophe
excess of loss reinsurance. A "risk" in this
context might mean the insurance coverage on
one building or a group of buildings or the
insurance coverage under a single policy, which
the reinsured treats as a single risk.
Statutory accounting principles Recording transactions and preparing financial
("SAP") statements in accordance with the rules and
procedures prescribed or permitted by United
States state insurance regulatory authorities
including the NAIC, which in general reflect
a liquidating, rather than going concern,
concept of accounting.
Underwriting The insurer's or reinsurer's process
of reviewing applications submitted
for insurance coverage, deciding
whether to accept all or part of the
coverage requested and determining
the applicable premiums.
Underwriting capacity The maximum amount that an insurance company
can underwrite. The limit is generally
determined by the company's retained
earnings and investment capital. Reinsurance
serves to increase a company's
underwriting capacity by reducing its
exposure from particular risks.
Underwriting expenses The aggregate of policy acquisition costs,
including commissions, and the portion of
administrative, general and other expenses
attributable to underwriting operations.
-22-
Item 2. Properties
The Company leases office space in Bermuda, where its executive offices
are located.
Item 3. Legal Proceedings
The Company is, 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, the Company believes that it is
not presently a party to any such litigation or arbitration that would have a
material adverse effect on its business or operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The information with respect to the market for the Common Shares and
related shareholder matters is contained under the caption "Financial and
Investor Information" on the inside back cover of the Company's Annual Report to
Shareholders for the year ended December 31, 1997 (the "Annual Report") and is
incorporated herein by reference thereto in response to this item.
Item 6. Selected Consolidated Financial Data
Selected Consolidated Financial Data is listed on page 12 of the Annual
Report and is incorporated herein by reference thereto in response to this item.
The selected financial data of the Company should be read in conjunction with
the Consolidated Financial Statements of the Company and related Notes thereto
contained in the Annual Report and incorporated herein by reference thereto.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information with respect to Management's discussion and analysis of
financial condition and results of operations, is contained under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 13 through 24 of the Annual Report and is incorporated
herein by reference thereto in response to this item.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of the Company are contained on
pages 26 through 43 of the Annual Report and are incorporated herein by
reference thereto in response to this item. Reference is made to Item 14(a) of
this Report for the Schedules to the Consolidated Financial Statements.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
-23-
PART III
Item 10. Directors and Executive Officers of the Company.
This information with respect to directors and officers of the Company
is contained under the captions "Directors and Executive Officers of the
Company" on pages 6 through 8 of the Company's Definitive Proxy Statement in
respect of the Annual General Meeting of Shareholders to be held on May 5, 1998
(the "Proxy Statement") and "Proposal 1" on pages 27-28 of the Proxy Statement,
and is incorporated herein by reference thereto in response to this item.
Item 11. Executive Compensation
The information with respect to executive compensation is contained
under the subcaption "Executive Officer and Director Compensation" on pages 16
through 26 of the Proxy Statement, and is incorporated herein by reference
thereto in response to this item.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information with respect to security ownership of certain beneficial
owners and Management is contained under the caption "Security Ownership of
Certain Beneficial Owners, Management and Directors" on pages 9 through 11 of
the Proxy Statement, and is incorporated herein by reference thereto in response
to this item.
Item 13. Certain Relationships and Related Transactions
The information with respect to certain relationships and related
transactions is contained under the caption "Certain Relationships and Related
Transactions" on pages 12 through 14 of the Proxy Statement, and is incorporated
herein by reference thereto in response to this item.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements and Exhibits.
1. The Consolidated Financial Statements of the Company and related Notes
thereto are contained on pages 26 through 43 of the Company's 1997
Annual Report to Shareholders are incorporated herein by reference
thereto.
2. The Schedules to the Consolidated Financial Statements of the Company
are listed in the accompanying Index to Schedules to Consolidated
Financial Statements and are filed as part of this Report.
3. The following exhibits are included in this Report:
3.1 Memorandum of Association.*
3.3 Amended and Restated Bye-Laws.@
4.1 Specimen Common Share certificate.*
-24-
10.1 Discretionary Investment Advisory Agreement, dated June 9, 1993, between
Renaissance Reinsurance Ltd. and Warburg, Pincus Counsellors, Inc.*
10.2 Investment Management Agreement, dated as of November 1, 1993, between
GE Investment Management Incorporated and Renaissance Reinsurance Ltd.*
10.3 RenaissanceRe Holdings Ltd. Restricted Stock Plan.*
10.4 Agreement and Plan of Recapitalization, dated as of March 26, 1995, by
and among RenaissanceRe Holdings Ltd., Renaissance Reinsurance Ltd. and
Investors named therein.*
10.5 Amended and Restated Employment Agreement, dated as of July 1, 1997,
between Renaissance Reinsurance Ltd. and James N. Stanard.+
10.6 Form of Employment Agreement, dated as of June 23, 1997, between
Renaissance Reinsurance Ltd. and certain executive officers.#
10.7 Employment Agreement, dated as of February 4, 1998, between Renaissance
Reinsurance Ltd. and William I. Riker.
10.8 Third Amended and Restated Credit Agreement, dated as of December 12,
1996, among RenaissanceRe Holdings Ltd., various financial institutions
which are, or may become, parties thereto (the "Lenders"), Fleet
National Bank of Connecticut and Mellon Bank, N.A., as Co-Agents, and
Bank of America National Trust and Savings Association, as
Administrative Agent for the Lenders.+++
10.9 First Amendment to Amended and Restated Credit Agreement, dated as of
September 8, 1997, among RenaissanceRe Holdings Ltd., the Lenders named
therein, and Bank of America National Trust and Savings Association as
Administrative Agent.+
10.10 Equity Purchase Agreement, dated as of December 13, 1996, by and among
RenaissanceRe Holdings Ltd., Warburg, Pincus Investors, L.P., Trustees
of General Electric Pension Trust, GE Private Placement Partners I,
Limited Partnership and United States Fidelity and Guaranty Company. @@
10.11 RenaissanceRe Holdings Ltd. Second Amended and Restated 1993 Stock
Incentive Plan.
10.12 RenaissanceRe Holdings Ltd. Amended and Restated Non-Employee Director
Stock Plan (subject to shareholder approval).
10.13 Stock Purchase Agreement, dated December 19, 1997, by and among
RenaissanceRe Holdings Ltd. and Renaissance U.S. Holdings, Inc. and
Nobel Insurance Limited and Nobel Holdings, Inc.++
10.14 Guaranty Agreement, dated June 23, 1997, between RenaissanceRe Holdings
Ltd. and The Bank of America.+
10.15 Amended and Restated Shareholders Agreement, dated as of March 23, 1996,
by and among Warburg, Pincus Investors, L.P., Trustees of General
Electric Pension Trust, GE Private Placement Partners I, Limited
Partnership and United States Fidelity and Guaranty Company.
10.16 Amended and Restated Registration Rights Agreement, dated as of March
23, 1996, by and among Warburg, Pincus Investors, L.P., PT Investments
Inc., GE Private Placement Partners I-Insurance, Limited Partnership
and United States Fidelity and Guaranty Company.
10.17 Amended and Restated Declaration of Trust of RenaissanceRe Capital
Trust, dated as of March 7, 1997, among the Company, as Sponsor, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware),
as Delaware Trustee, and the Administrative Trustees named therein. @@@
10.18 Indenture, dated as of March 7, 1997, among the Company, as Sponsor, and
The Bank of New York, as Debenture Trustee. @@@
10.19 Series A Capital Securities Guarantee Agreement, dated as of March 7,
1997, between the Company and The Bank of New York, as Trustee. @@@
10.20 Registration Rights Agreement, dated March 7, 1997, among the Company,
the Trust, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc. @@@
13.1 Annual Report to Shareholders of RenaissanceRe Holdings Ltd. for the
year ended December 31, 1997 (with the exception of the information
incorporated by reference into Items 5, 7, 8 and 14 of this Report, such
Annual Report to Shareholders is furnished for the information of the
Commission and is not deemed "filed" as part of this Report).
-25-
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young.
27.1 Financial Data Schedule for the Year ended December 31, 1997
27.2 Restated Financial Data Schedule for the Year ended December 31, 1996
(b) Reports on Form 8-K:
The Company filed no Current Reports on Form 8-K with the Commission
during the fourth quarter of 1997.
- -----------------------
* Incorporated by reference to the Registration Statement on Form S-1 of
the Company (Registration No. 33-70008) which was declared effective by
the Commission on July 26, 1995.
** Incorporated by reference to the Registration Statement on Form S-1 of
the Company (Registration No. 333-00802) which was declared effective by
the Commission on February 27, 1996.
@ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on January 7, 1997, relating to certain events
which occurred on December 23, 1996.
@@ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on December 16, 1996, relating to an event
which occurred on December 13, 1996.
@@@ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on March 19, 1997, relating to certain events
which occurred on March 7, 1997.
+ Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, filed with the Commission on
October 22, 1997.
++ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on January 6, 1998, relating to certain events
which occurred on December 19, 1997.
+++ Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, filed with the Commission on March
21, 1997.
# A substantially similar form of Employment Agreement has been entered
into with each of Messrs. Hynes, Lummis and Eklund.
-26-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Hamilton, Bermuda
on March 27, 1998.
RENAISSANCERE HOLDINGS LTD.
/s/ James N. Stanard
-------------------------
James N. Stanard
President, Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ James N. Stanard President and Chief Executive Officer March 27, 1998
- --------------------- and Chairman of the Board of Directors
James N. Stanard
/s/ John M. Lummis Senior Vice President and Chief March 27, 1998
- ------------------ Financial Officer (Principal
John M. Lummis Accounting Officer)
/s/ Arthur S. Bahr Director March 27, 1998
- ------------------
Arthur S. Bahr
/s/ Thomas A. Cooper Director March 27, 1998
- --------------------
Thomas A. Cooper
/s/ Edmund B. Greene Director March 27, 1998
- --------------------
Edmund B. Greene
/s/ Gerald L. Igou Director March 27, 1998
- ------------------
Gerald L. Igou
/s/ Kewsong Lee Director March 27, 1998
- ------------------
Kewsong Lee
/s/ Dan L. Hale Director March 27, 1998
- ---------------
Dan L. Hale
/s/ Howard H. Newman Director March 27, 1998
- --------------------
Howard H. Newman
/s/ Scott E. Pardee Director March 27, 1998
- -------------------
Scott E. Pardee
/s/ John C. Sweeney Director March 27, 1998
- -------------------
John C. Sweeney
-27-
Signature Title Date
- --------- ----- ----
/s/ David A. Tanner Director March 27, 1998
- -------------------
David A. Tanner
-28-
RENAISSANCERE HOLDINGS LTD AND SUBSIDIARIES.
INDEX TO SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
Report of Independent Auditors on Schedules........................................................S-2
I Summary of Investments other than Investments in Related Parties at December 31, 1997......S-3
III Condensed Financial Information of the Registrant......................................... S-4
V Supplementary Insurance Information for the years ended December 31, 1997, 1996 and 1995...S-7
VI Reinsurance for the years ended December 31, 1997, 1996 and 1995...........................S-8
X Supplementary Information Concerning Property-Casualty Insurance Operations................S-9
Schedules other than those listed above are omitted for the reason that they are not applicable.
S-1
REPORT OF INDEPENDENT AUDITORS ON SCHEDULES
To the Board of Directors and Shareholders
of RenaissanceRe Holdings Ltd.
We have audited the consolidated financial statements of RenaissanceRe
Holdings Ltd. and Subsidiaries as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997, and have issued our
report thereon dated January 14, 1998; such financial statements and our report
thereon are incorporated by reference elsewhere in this Annual Report on Form
10-K. Our audits also included the financial statement schedules listed in item
14(a)(2) of this Annual Report on Form 10-K for the year ended December 31,
1997. These schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young
Hamilton, Bermuda
January 14, 1998
S-2
SCHEDULE I
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(Expressed in United States Dollars)
(dollars in thousands)
Year Ended
December 31, 1997
------------------ Amount at
Amortized Market which shown in
Type of Investment: Cost Value the Balance Sheet
---- ----- -----------------
Fixed Maturities Available for Sale:
U.S. Government bonds............... $ 257.8 $ 257.8 $ 257.8
Non U.S. sovereign government bonds 263.5 256.9 256.9
Non U.S. corporate debt securities.. 194.3 188.6 188.6
Non U.S. mortgage-backed securities. 6.9 6.9 6.9
---------- --------- ----------
Subtotal......................... 722.5 710.2 710.2
Equity Securities....................... 24.2 26.4 26.4
Cash and cash equivalents............... 122.9 122.9 122.9
Total investments, short-term ---------- --------- ----------
investments, cash and cash
equivalents.................. $ 869.6 $ 859.5 $ 859.5
========== ========= ==========
S-3
SCHEDULE III
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RENAISSANCERE HOLDINGS LTD.
BALANCE SHEETS
(Parent Company)
(Expressed in United States Dollars)
(dollars in thousands, except per share amounts)
December 31,
---------------------------
1997 1996
------ ------
ASSETS
Cash...................................................... $ 41,593 $ 50,212
Investments available for sale............................ 50,753 23,106
Investment in subsidiaries................................ 657,227 598,220
Dividend receivable....................................... 7,261 26,300
Due from subsidiary....................................... -- --
Other assets.............................................. 1,749 421
-------- --------
Total assets...................................... $758,583 $698,259
-------- --------
LIABILITIES
Loan payable.............................................. $ 50,000 $150,000
Minority interest - Company obligated, mandatorily
redeemablecapital ecurities of a subsidiary trust holding
solely junior subordinated debentures of the Company...... 100,000 --
Other liabilities......................................... 9,880 2,056
-------- --------
Total liabilities................................. $159,880 $152,056
-------- --------
Commitments and contingencies.............................
SHAREHOLDERS' EQUITY
Common Shares: $1 par value-authorized 100,000,000 shares.
Issued and outstanding at December 31, 1997-22,440,901
(1996-23,530,616) ........................................ $ 22,441 $23,531
Additional paid-in capital................................ 52,481 102,902
Loans to officers and employees........................... -- (3,868)
Unearned Stock Grant Compensation......................... (4,731) --
Net unrealized depreciation on investments................ (10,155) 1,577
Retained earnings......................................... 538,667 422,061
-------- --------
Total shareholders' equity........................ 598,703 546,203
-------- --------
Total liabilities and shareholders' equity..... $758,583 $698,259
-------- --------
S-4
SCHEDULE III (Cont'd.)
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RENAISSANCERE HOLDINGS LTD.
STATEMENTS OF INCOME
(Parent Company)
(Expressed in United States Dollars)
(dollars in thousands)
Year Ended Year Ended Year Ended
December 31, 1997 December 31,1996 December 31, 1995
----------------- ----------------- -----------------
Income:
Investment income........................... $ 5,723 $ 2,534 $ 92
--------- ---------- ----------
Total income................................ 5,723 2,534 92
--------- ---------- ----------
Expenses:
Amortization of organizational expenses..... - 168 1,439
Interest expense............................ 4,271 6,553 6,424
Corporate expenses.......................... 3,218 2,298 3,092
--------- ---------- ----------
Total expenses.............................. 7,489 9,019 10,955
--------- ---------- ----------
Loss before equity in net income of (1,766) (6,485) (10,863)
subsidiaries & taxes........................
Equity in net income of Reinsurance......... 146,209 161,855 176,185
Equity in net income of Glencoe............. 2,421 900 --
--------- ---------- ----------
Income before minority interests & taxes.... 146,864 156,270 165,322
Minority interest - Company obligated,
mandatorily redeemable capital securities
of a subsidiary trust holding solely junior
subordinated debentures of the Company...... (6,998) -- --
Minority interest - Glencoe.................. (617) (110) --
--------- ---------- ----------
Net income before taxes 139,249 156,160 165,322
Income tax expense -- -- --
--------- ---------- ----------
Net income 139,249 156,160 165,322
Net income allocable to Series B
Preference Shares........................... -- -- 2,536
--------- ---------- ----------
Net income available to Common Shareholders. $ 139,249 $ 156,160 $ 162,786
========= ========== ==========
S-5
SCHEDULE III (Cont'd.)
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT-(Continued)
RENAISSANCERE HOLDINGS LTD.
STATEMENTS OF CASH FLOWS
(Parent Company)
(Expressed in United States Dollars)
(dollars in thousands)
Year Ended Year Ended Year Ended
December 31, 1997 December 31,1996 December 31, 1995
----------------- ----------------- -----------------
Cash flows from operating activities
Net income................................. $ 139,249 156,160 $ 165,322
Less equity in net income of subsidiaries.. 148,013 162,755 176,185
--------- ---------- ----------
(8,764) (6,595) (10,863)
Adjustments to reconcile net income to net
cash provided by operating activities
Other...................................... (4,013) 3,630 1,020
--------- ---------- ----------
Net cash applied to operating activities... (12,777) (2,965) (9,843)
--------- ---------- ----------
Cash flows applied to investing activities
Contributions to subsidiary........ (12,000) (50,000) --
Proceeds from sales of investments......... 73,793 40,624 --
Purchases of investments................... (105,223) (63,440) --
Dividends from subsidiary.................. 124,770 135,629 --
Purchase of minority interest in subsidiary (5,185) -- --
Proceeds from sale of minority interest in
subsidiary.............................. -- 15,126 --
Net cash provided by (applied to) --------- ---------- ----------
investing activities.................... 76,155 77,939 --
--------- ---------- ----------
Cash flows from financing activities
Proceeds from issuance of Common Shares.... -- -- 54,496
Proceeds from issuance of Capital
Securities................................ 100,000 -- --
Repurchase of Common Shares................ (53,458) (73,460) --
Dividend to Common Shareholders............ (22,643) (20,489) (4,096)
Net proceeds from (repayment of) bank loan. (100,000) 50,000 40,000
Redemption of Series B 15% Cumulative
Redeemable Voting Preference Shares...... -- -- (57,874)
Repayments from (loans to) officers........ 4,104 (868) (2,628)
--------- ---------- ----------
Net cash provided by financing activities.. (71,997) (44,817) 29,898
--------- ---------- ----------
Net increase in cash and cash equivalents.. $ (8,619) $ 30,157 $ 20,055
Balance at beginning of year............... 50,212 20,055 --
--------- ---------- ----------
Balance at end of year..................... $ 41,593 $ 50,212 $ 20,055
--------- ---------- ----------
S-6
SCHEDULE V
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(Expressed in United States Dollars)
(dollars in thousands)
December 31, 1997 Year Ended December 31, 1997
-------------------------------- ------------------------------------------------------------------
Future
Policy
Benefits, Benefits,
Losses, Claims, Amortization
Deferred Claims Losses of Deferred
Policy and Net and Policy Other Net
Acquisition Claims Unearned Premium Investment Settlement Acquisition Operating Premiums
Costs Expenses Premiums Revenue Income Expenses Costs Expenses Written
------- --------- -------- --------- -------- -------- -------- -------- ---------
Property.. $ 5,739 $ 110,037 $ 57,008 $ 211,490 $ 49,573 $ 50,015 $ 25,227 $ 25,131 $ 195,752
------- --------- -------- --------- -------- -------- -------- -------- ---------
December 31, 1996 Year Ended December 31, 1996
-------------------------------- ------------------------------------------------------------------
Future
Policy
Benefits, Benefits,
Losses, Claims, Amortization
Deferred Claims Losses of Deferred
Policy and Net and Policy Other Net
Acquisition Claims Unearned Premium Investment Settlement Acquisition Operating Premiums
Costs Expenses Premiums Revenue Income Expenses Costs Expenses Written
------- --------- -------- --------- -------- -------- -------- -------- ---------
Property.. $6,819 $105,421 $65,617 $252,828 $44,280 $86,945 $26,162 $16,731 $251,564
====== ======== ======= ======== ======= ======= ======= ======= ========
December 31, 1995 Year Ended December 31, 1995
-------------------------------- ------------------------------------------------------------------
Future
Policy
Benefits, Benefits,
Losses, Claims, Amortization
Deferred Claims Losses of Deferred
Policy and Net and Policy Other Net
Acquisition Claims Unearned Premium Investment Settlement Acquisition Operating Premiums
Costs Expenses Premiums Revenue Income Expenses Costs Expenses Written
------- --------- -------- --------- -------- -------- -------- -------- ---------
Property.. $6,163 $100,445 $60,444 $288,886 $32,320 $110,555 $29,286 $10,448 $289,928
====== ======== ======= ======== -------- ======== ======= ======= ========
S-7
SCHEDULE VI
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
REINSURANCE
(Expressed in United States Dollars)
(dollars in thousands)
Percentage
Ceeded to Assumed of Amount
Gross Other from Other Net Assumed
Amount Companies Companies Amount to Net
------ --------- --------- ------ ------
Year ended December 31, 1997
Property Premiums Written $ 7,041 $ 32,535 $221,246 $195,752 113%
========= ========= ======== ======== ====
Year ended December 31, 1996
Property Premiums Written $ 1,552 $ 18,349 $268,361 $251,564 107%
======== ======== ======== ======== ====
Year ended December 31, 1995
Property Premiums Written $ -- $ 2,866 $292,794 $289,928 101%
======== ======== ======== ======== ====
SCHEDULE X
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION CONCERNING
PROPERTY/CASUALTY INSURANCE OPERATIONS
(Expressed in United States Dollars)
(dollars in thousands)
Reserve for
Deferred Unpaid
Policy Claims and Discount Net
Acquisition Claims if any, Unearned Earned Investment
Affiliation with Registrant Costs Expenses Deducted Premiums Premiums Income
--------------------------- ----- -------- -------- -------- -------- ------
Consolidated Subsidiaries
Year ended December 31, 1997. $5,739 $110,037 $ -- $57,008 $211,490 $49,573
====== ======== ======= ======= ======== =======
Year ended December 31, 1996. $6,819 $105,421 $ -- $65,617 $252,828 $44,280
====== ======== ======= ======= ======== =======
Year ended December 31, 1995. $6,163 $100,445 $ -- $60,444 $288,886 $32,320
====== ======== ======= ======= ======== =======
Claims and Claims
Expense Insured Amortization
Related to of Deferred
------------- Policy Paid Claims Net
Current Prior Acquisition and Claims Premiums
Affiliation with Registrant Year Years Costs Expenses Written
--------------------------- ---- ----- ----- -------- -------
Consolidated Subsidiaries
Year ended December 31, 1997. $50,015 $ 0 $25,227 $45,399 $195,752
======= ======= ======= ======= ========
Year ended December 31, 1996. $ 75,118 $11,827 $26,162 $81,969 $251,564
======== ======= ======= ======= ========
Year ended December 31, 1995. $ 80,939 $29,616 $29,286 $73,378 $289,928
======== ======= ======= ======= ========
S-9
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
EXHIBITS
to
FORM 10-K
Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1997
RenaissanceRe Holdings Ltd.
----------------------------------------
EXHIBIT INDEX
Exhibit
No. Description Page
3.1 Memorandum of Association.*
3.2 Amended and Restated Bye-Laws.@
4.1 Specimen Common Share certificate.*
10.1 Discretionary Investment Advisory Agreement, dated June 9, 1993, between
Renaissance Reinsurance Ltd. and Warburg, Pincus Counsellors, Inc.*
10.2 Investment Management Agreement, dated as of November 1, 1993, between
GE Investment Management Incorporated and Renaissance Reinsurance Ltd.*
10.3 RenaissanceRe Holdings Ltd. Restricted Stock Plan.*
10.4 Agreement and Plan of Recapitalization, dated as of March 26, 1995, by
and among RenaissanceRe Holdings Ltd., Renaissance Reinsurance Ltd. and
Investors named therein.*
10.5 Amended and Restated Employment Agreement, dated as of July 1, 1997,
between Renaissance Reinsurance Ltd. and James N. Stanard.+
10.6 Form of Employment Agreement, dated as of June 23, 1997, between
Renaissance Reinsurance Ltd. and certain executive officers.#
10.7 Employment Agreement, dated as of February 4, 1998, between Renaissance
Reinsurance Ltd. and William I. Riker.
10.8 Third Amended and Restated Credit Agreement, dated as of December 12,
1996, among RenaissanceRe Holdings Ltd., various financial institutions
which are, or may become, parties thereto (the "Lenders"), Fleet
National Bank of Connecticut and Mellon Bank, N.A., as Co-Agents, and
Bank of America National Trust and Savings Association, as
Administrative Agent for the Lenders.+++
10.9 First Amendment to Amended and Restated Credit Agreement, dated as of
September 8, 1997, among RenaissanceRe Holdings Ltd., the Lenders named
therein, and Bank of America National Trust and Savings Association as
Administrative Agent.+
Exhibit
No. Description Page
10.10 Equity Purchase Agreement, dated as of December 13, 1996, by and among
RenaissanceRe Holdings Ltd., Warburg, Pincus Investors, L.P., Trustees
of General Electric Pension Trust, GE Private Placement Partners I,
Limited Partnership and United States Fidelity and Guaranty Company. @@
10.11 RenaissanceRe Holdings Ltd. Second Amended and Restated 1993 Stock
Incentive Plan.
10.12 RenaissanceRe Holdings Ltd. Amended and Restated Non-Employee Director
Stock Plan (subject to shareholder approval).
10.13 Stock Purchase Agreement, dated December 19, 1997, by and among
RenaissanceRe Holdings Ltd. and Renaissance U.S. Holdings, Inc. and
Nobel Insurance Limited and Nobel Holdings, Inc.++
10.14 Guaranty Agreement, dated June 23, 1997, between RenaissanceRe Holdings
Ltd. and The Bank of America.+
10.15 Amended and Restated Shareholders Agreement, dated as of March 23, 1996,
by and among Warburg, Pincus Investors, L.P., Trustees of General
Electric Pension Trust, GE Private Placement Partners I, Limited
Partnership and United States Fidelity and Guaranty Company.
10.16 Amended and Restated Registration Rights Agreement, dated as of March
23, 1996, by and among Warburg, Pincus Investors, L.P., PT Investments
Inc., GE Private Placement Partners I-Insurance, Limited Partnership
and United States Fidelity and Guaranty Company.
10.17 Amended and Restated Declaration of Trust of RenaissanceRe Capital
Trust, dated as of March 7, 1997, among the Company, as Sponsor, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware),
as Delaware Trustee, and the Administrative Trustees named therein. @@@
10.18 Indenture, dated as of March 7, 1997, among the Company, as Sponsor, and
The Bank of New York, as Debenture Trustee. @@@
10.19 Series A Capital Securities Guarantee Agreement, dated as of March 7,
1997, between the Company and The Bank of New York, as Trustee. @@@
10.20 Registration Rights Agreement, dated March 7, 1997, among the Company,
the Trust, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Salomon Brothers Inc. @@@
13.1 Annual Report to Shareholders of RenaissanceRe Holdings Ltd. for the
year ended December 31, 1997 (with the exception of the information
incorporated by reference into Items 5, 7, 8 and 14 of this Report, such
Annual Report to Shareholders is furnished for the information of the
Commission and is not deemed "filed" as part of this Report).
21.1 List of Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young.
27.1 Financial Data Schedule for the Year ended December 31, 1997.
27.2 Restated Financial Data Schedule for the Year ended December 31, 1996.
- -----------------------
* Incorporated by reference to the Registration Statement on Form S-1 of
the Company (Registration No. 33-70008) which was declared effective by
the Commission on July 26, 1995.
** Incorporated by reference to the Registration Statement on Form S-1 of
the Company (Registration No. 333-00802) which was declared effective by
the Commission on February 27, 1996.
@ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on January 7, 1997, relating to certain events
which occurred on December 23, 1996.
@@ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on December 16, 1996, relating to an event
which occurred on December 13, 1996.
@@@ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on March 19, 1997, relating to certain events
which occurred on March 7, 1997.
+ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, filed with the Commission
on October 22, 1997.
++ Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on January 6, 1998, relating to certain events
which occurred on December 19, 1997.
+++ Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, filed with the Commission on March
21, 1997.
# A substantially similar form of Employment Agreement has been entered
into with each of Messrs. Hynes, Lummis and Eklund.