Q3 2025 Earnings Call: Contradictions Emerge on Reserve Developments, Reinsurance Demand, Inflation, and Catastrophe Rates

Date of Call: October 29, 2025

Financials Results

• Revenue: Gross premiums written $2.3B and net premiums written $2.0B, both slightly down YOY
• EPS: Operating income per share $15.62 (strongest operating EPS to date); operating income $734M in Q3
• Gross Margin: Adjusted combined ratio 67% in Q3; property CAT current accident year loss ratio 10% and property CAT adjusted combined ratio -8% (benefited from 44 percentage points of favorable prior-year development)
• Operating Margin: Operating return on average common equity 28% in Q3; year-to-date operating return on average equity ~17% (operating income ~ $1.3B YTD)

Guidance:

• Q4 other property net premiums earned ~ $360M; attritional loss ratio expected in the mid-50s.
• Q4 Casualty & Specialty net premiums earned ~ $1.5B; adjusted combined ratio expected in the high 90s.
• Q4 management fees ~ $50M and performance fees ~ $30M (absent large losses/favorable development).
• Jan 1, 2026: expect ~10% reduction in property CAT rates but rates remain above adequacy; priority is preserving margin over growth.
• Continue share repurchases given excess capital and attractive valuation.

Business Commentary:

* Strong Financial Performance and Profit Growth: - RenaissanceRe Holdings Ltd reported operating income of $734 million and an operating return on average common equity of 28% in Q3 2025. - The company achieved a 10% increase in tangible book value per share and almost 22% year-to-date. - This strong performance was driven by a 11% to 12% contribution from fee income and net investment income to the operating return on equity.

• Property CAT Portfolio Expansion:
• The property catastrophe (CAT) portfolio grew from $2 billion in 2022 to around $3.3 billion today.
• This growth was supported by a 50% combined ratio in property CAT since 2023, even with significant catastrophe activity.

• The expansion was strategic, aiming to capitalize on a favorable market with abundant excess margins.

• Capital Partner Fees:

• RenaissanceRe saw a nearly threefold increase in capital partner fees from $120 million in 2022 to over $300 million over the trailing four quarters.

• This growth is attributed to strong demand for these fee-generating partnerships, which provide consistent and low-volatility additions to earnings.

• Shareholder Returns and Capital Management:

• The company returned over $1 billion in capital to shareholders through share repurchases by October 24, 2025.
• This was part of their strategy to create a cash-generating engine that grows limits in their property CAT portfolio and returns capital to shareholders.
• The capital management plan focuses on sustaining earning capacity and maintaining a strong balance sheet.

Sentiment Analysis:

Overall Tone: Positive

• Management: "delivered another strong quarter with operating income of $734 million and an operating return on average common equity of 28%." They also reported tangible book value per share plus change in accumulated dividends up 10% in the quarter and ~22% YTD, and returned over $1 billion to shareholders YTD — all framing an optimistic outlook despite anticipated ~10% rate pullback for 2026.

Q&A:

• Question from Elyse Greenspan (Wells Fargo): For the 15-point contribution this year from fee income and net investment income, what are normal expectations for 2026?
  Response: Bob: Expect roughly 11%–12% from investment income and ~3% from fees as a baseline contribution to operating ROE (≈15 points total).

• Question from Elyse Greenspan (Wells Fargo): If property CAT rates fall ~10% at 1/1, what do you expect the ROE of CAT business written in 2026 to be?
  Response: Kevin/David: Hard to give a stand-alone ROE, but a ~10% rate pullback would remove some excess margin yet leave property CAT 'abundantly above' rate adequacy — returns should remain very attractive.

• Question from Joshua Shanker (BofA): Is third‑party capital likely to meaningfully affect 2026 pricing and is capital-raising activity strong?
  Response: Kevin: RenRe has strong access to third‑party capital, but pricing in 2026 will be driven more by reinsurer retained earnings and comfort with returns; third‑party capital interest is growing in longer‑tail lines but won't drive pricing.

• Question from Joshua Shanker (BofA): Could third‑party capital become larger than RenRe's proprietary capital on the balance sheet?
  Response: Kevin: In narrow strategies it's possible for third‑party balance sheets to exceed RenRe's, but not expected to occur in 2026.

• Question from Andrew Kligerman (TD Cowen): Can you color on Casualty reinsurance pricing—are reinsurers softening while primary is firm?
  Response: David: Primary insurers have secured significant rate (which benefits quota‑share reinsurers); RenRe is repositioning to take lines with better economics and claims practices, so overall market improvements feed through to our books.

• Question from Andrew Kligerman (TD Cowen): Are you increasing ceding commissions to clients?
  Response: David: Ceding commissions have been flat; most of the improved economics have come from insurers getting more rate and improving claims handling.

• Question from Andrew Kligerman (TD Cowen): Can you provide color on the slight favorable Casualty development — vintages/products?
  Response: David: Development is modestly favorable and reserves are generally stable across vintages/products; Casualty & Specialty combined ratios remain in the high‑90s and float is a key ROE contributor.

• Question from Jian Huang (Morgan Stanley): If loss volatility is lower, shouldn't that pressure long‑term pricing?
  Response: Kevin: RenRe's earnings volatility is buffered by investment income and fee businesses and by sharing risk with third‑party capital; market catastrophe volatility itself is unchanged, so pricing dynamics differ for RenRe versus peers.

• Question from Jian Huang (Morgan Stanley): Any update on gold holdings and October impact to book value?
  Response: Bob: Strategy unchanged — gold served as a hedge and contributed materially to the $258M mark‑to‑market gain in Q3; we continue to hold within strategic remit despite volatility.

• Question from Michael Zaremski (BMO): Property IBNR/ACR levels appear elevated relative to history—any conservatism or explanation?
  Response: Kevin: No deliberate added conservatism; fluctuations reflect single large events and normal anniversary reviews — reserving approach remains steady.

• Question from Michael Zaremski (BMO): Is YTD performance (9 months) better‑than‑average or about normal?
  Response: Kevin: Hard to categorize definitively due to event‑driven variability, but actual outcomes are broadly consistent with modeled expectations; one event can materially change the outcome.

• Question from Meyer Shields (KBW): How does favorable development feed into pricing models?
  Response: Bob/David: Reserving and pricing are connected — favorable development informs quantitative models and qualitative underwriting adjustments (e.g., terms/conditions durability) used in future pricing.

• Question from Meyer Shields (KBW): Is competition for incremental demand different than for renewals?
  Response: Kevin: It depends on participant appetite; where demand aligns with a firm's target layers it's similar—RenRe captured more new demand last year due to complementary vehicles and willingness to deploy into well‑rated layers.

• Question from Andrew Andersen (Jefferies): Were higher attritional losses this quarter one‑off in Specialty?
  Response: David: Elevated Casualty trend has been baked in for ~4 quarters; Q3 differences versus prior year reflect that shift rather than a one‑off Specialty event.

• Question from Andrew Andersen (Jefferies): Where are you in reducing U.S. general liability exposure and will that continue into 2026?
  Response: David/Kevin: We have actively reduced exposure and will maintain a selective appetite — continuation depends on sustained insurer rate/claims improvements; it's portfolio optimization, not full re‑underwriting.

• Question from Taylor Scott (Barclays): How are you thinking about excess capital and capital returns if growth is limited in 2026?
  Response: Bob: Earnings capacity across the three profit drivers remains strong; given continued capital generation we expect to prioritize returning capital via buybacks rather than accumulating excess capital.

• Question from Taylor Scott (Barclays): Any implications from California wildfire experience for 1/1 renewals?
  Response: Kevin: We grew in California post‑wildfires and like the market; primary insurers face more constraints — as reinsurers we set our own rates/terms and remain willing to grow where economics are attractive.

• Question from David Motemaden (Evercore): How should we think about ROE profile heading into 2026 given pricing trends?
  Response: Kevin: Fees and investment income look durable; underwriting in 2026 should resemble 2025 but with slightly less excess margin if rates decline ~10% — overall ROE profile remains strong.

• Question from David Motemaden (Evercore): How do you view increased third‑party capital interest in longer‑tail liabilities strategically?
  Response: Kevin: It's an opportunity to structure vehicles and earn fees while also competing for business; we will use it to complement proprietary deployment but it may also increase competitive supply in some lines.

• Question from Ryan Tunis (Cantor Fitzgerald): What red flags would indicate the market is becoming less disciplined ahead of renewal?
  Response: Kevin: Watch for changes in terms and conditions (less transparent than price); we expect a transparent price‑driven shift (~10% rate reduction) and would react if non‑price terms start to deteriorate.

• Question from Ryan Tunis (Cantor Fitzgerald): Is the $1.2B IBNR (2022 and prior) still solidly positive after releases this year, and any Melissa exposure?
  Response: Bob/David: Property reserves are about $6.3B now versus $6.5B a year ago — levels are relatively constant after releases; Melissa exposure is limited (couple locations), too early to quantify but not expected to be an outlier.

• Question from Tracy Benguigui (Wolfe Research): How much capital would need to exit (e.g., $800B market) to reach equilibrium?
  Response: Kevin: Can't give a dollar answer; indicators (e.g., expected ~10% rate reduction and limited overplacement) suggest the market is relatively close to balance — perception and appetite matter more than raw capital totals.

• Question from Tracy Benguigui (Wolfe Research): How does the trend of shared/layered underwriting (vs whole‑account) impact your opportunity set and pricing?
  Response: David: Shared/layered exposure (other property/large E&S accounts) is a minority of the book, terms/conditions are holding up, and we remain optimistic about performance and selective opportunity despite some increased competition.

Contradiction Point 1

Property Casualty Reserve Developments

It involves differing explanations of reserve movements and the factors influencing them, which is crucial for understanding the financial health and underwriting strategy of the company.

Can you clarify the direction of Casualty and Specialty reserve movements and product lines? - Andrew Kligerman(TD Cowen)

2025Q3: The reserves have been stable, with favorable development across many product lines. Prior-year development was slightly favorable. - David Marra(COO)

Which year contributed more to reserve releases this quarter and are these releases indicative of Florida reforms taking effect? - Elyse Beth Greenspan(Wells Fargo Securities)

2025Q2: The reserve releases are from accident periods going back to 2017, not just one specific year. About half of these losses are shared with joint ventures. - Robert Qutub(CFO)

Contradiction Point 2

Demand for Reinsurance Services

It highlights differing expectations regarding the demand for reinsurance services, which is crucial for understanding the market dynamics and potential revenue growth.

What red flags signal a less disciplined market at renewal? - Ryan Tunis(Cantor Fitzgerald & Co.)

2025Q3: We expect a transparent pricing shift with no major changes in terms and conditions. - Kevin O'Donnell(CEO)

What gives you confidence that rates won't continue to decline and that the reinsurance market won't soften? - Jamminder Singh Bhullar(JPMorgan Chase & Co.)

2025Q2: Rate adequacy remains strong, with any adjustments in the future likely to be minor. - Kevin Joseph O'Donnell(CEO)

Contradiction Point 3

Inflation and Investment Strategy

It involves differing views on the impact of inflation on the company's investment strategy and the role of gold in the portfolio, which can affect investment decisions and risk management.

What is the strategic approach to gold investments in the portfolio? - Jian Huang (Morgan Stanley, Research Division)

2025Q3: Gold has been a strategic hedge due to geopolitical factors. While there has been volatility, it continues to serve our strategy. - Robert Qutub(CFO)

How does your view on inflation affect your investment strategy, despite no recent changes? - Joshua Shanker (Bank of America)

2025Q1: Our investment strategy and our asset allocation are designed to nudge toward the higher inflationary environments, so we'll be in good shape. - David Marra(CFO)

Contradiction Point 4

Property Catastrophe Rates

It involves differing perspectives on the impact of reduced rates on Property Catastrophe profitability, which could affect investor expectations and strategic decisions.

What is the expected ROE for the 2026 property CAT business? - Elyse Greenspan(Wells Fargo Securities)

2025Q3: The 10% reduction in rates does not significantly impact property CAT's profitability due to strong rate adequacy. Rates have been above rate adequacy, and a pullback is still above the minimum required rate. - Kevin O'Donnell(CEO)

Will the loss impact non-California programs like Florida in terms of renewals? - Joshua Shanker(BofA Securities)

2024Q4: We expect the increase in demand in conjunction with the supply response will drive rates to increase. We believe that we will see firming in the second quarter. - Kevin O'Donnell(CEO)