Though it is early to assess the catastrophe losses from natural disasters, RenaissanceRe Holdings Ltd. (RNR) expects initial losses for the first quarter of 2011.
RenaissanceRe was hit by the heavy flooding in Australia in January as well as the New Zealand earthquake that hit Christchurch in February 2011. In addition, RenaissanceRe has also been impacted by the recent earthquake and tsunami in Japan.
The first quarter of 2011 earnings of RenaissanceRe will therefore be reduced by the net negative impact of approximately $30 million due to the Australian flooding and $190 million due to the New Zealand earthquake.
Additionally, RenaissanceRe is bracing for a significant impact of the Japan earthquake on its results. The Tohoku quake and tsunami struck the northeastern coast of Japan on March 11, and is expected to have killed about 10,000 people.
RenaissanceRe, as a global provider of property catastrophe reinsurance, has provided meaningful reinsurance and retrocessional excess of loss reinsurance coverage for earthquake and tsunami risk in Japan, and is currently assessing its exposures to the Tohoku earthquake. However, according to initial estimates, it could cost the global insurance industry up to $35 billion.
In the fourth quarter of 2010, RenaissanceRe’s equity in losses of other ventures decreased $9.9 million to a loss of $10.4 million, primarily due to the equity in losses of Top Layer Re of $9.4 million, as a result of increased estimated ultimate net claims and claim expenses related to the New Zealand earthquake recorded by Top Layer Re.
Other than RenaissanceRe, another reinsurance company XL Group plc (XL) expects its preliminary net loss to range from $70 million to $85 million, pretax and net of reinsurance and reinstatement premium, attributable to the earthquake in New Zealand in February 2011.
The company also stated these preliminary loss estimates could translate into insured market losses for the New Zealand Earthquake in the range of $8 billion to $12 billion.
ACE Limited (ACE) also guided its first quarter 2011 preliminary net after-tax losses from natural catastrophes to be $210 million, including reinstatement premiums.
The total amount comprises $115 million attributable to the New Zealand earthquake, $80 million for the Australian floods and Cyclone Yasi, and $15 million for the U.S. winter storms. Besides, the company estimates net after-tax losses from the recent Japanese earthquake to range between $200 million and $250 million.
Apart from the losses, the earthquake and tsunami in Japan may impact the share repurchases of a majority of reinsurance companies, which could in turn bring down their share price.
Insurers and reinsurers have been returning capital to shareholders through dividends and stock repurchases as the prices businesses pay for coverage decline.
RenaissanceRe also recently announced a dividend increment by a penny to 26 cents, which will be paid on March 31, 2011 to shareholders of record as on March 15, 2011. Simultaneously, RenaissanceRe expanded its stock repurchase program to deploy its excess capital to enhance shareholders’ wealth. Therefore, decline in buybacks may prove a negative catalyst for RenaissanceRe’s shares.