Good morning. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe fourth quarter 2017 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Peter Hill, you may begin your conference.

Good morning and thank you all for joining our fourth quarter 2017 financial results conference call. Yesterday, after the market closed, we issued our quarterly release. If you didn't get a copy, please call me at (212)-521-4800 and we will be sure to provide you with one. There will be an audio replay of the call available from about 1:00 p.m. Eastern Time today through midnight on March 1. The replay can be accessed by dialing (855)-859-2056 or +1-(404)-537-3406. The passcode you will need for both numbers is 18690170. Today's call is available through the Investor Information sector of www.renre.com and will be archived on RenaissanceRe's website through midnight on April 18. Before we begin, I am obliged to caution that today's discussion may contain forward-looking statements and actual results may differ materially from those discussed. Additional information regarding the factors shaping these outcomes can be found in RenaissanceRe's SEC filings to which we direct you. With us to discuss today's results are Kevin O'Donnell, President and Chief Executive Officer and Bob Qutub, Executive Vice President and Chief Financial Officer. I would now like to turn the call over to Kevin. Kevin?

Thanks Peter. Good morning and thank you for joining today's call. In 2017, RenaissanceRe executed well and strengthened our franchise against the backdrop of a difficult market that was impacted by significant natural catastrophes. For the year, our book value per share decreased by 8% and our tangible book value per share plus change in accumulated dividends decreased by 7.2%. Also for the year, our return on equity was negative 5.7% and our operating return on equity was negative 7.7%. In this business, it is not a question of if but when catastrophic losses occur. While we cannot control when these losses happen, we can plan for them. In 2017, I am proud with how we executed on things we could control such as our gross to net strategy, paying our customers' claims rapidly and being a first call market for new business. In 2018, I believe that rather than facing the strong headwinds of the last few years, we will have the breeze at our backs for the first time in a long time. Due to the cat events in the second half of the year, the reinsurance market at January 1 was improved over prior renewals and our structure and access to the right capital allowed us to execute well and grow into the better terms. We saw the reversal of several years of declining rates in our property segment with across the board increases and material opportunities to grow both our property catastrophe and other property portfolios. The casualty and specialty renewals were also positive with better pricing and improving reinsurance terms and conditions, particularly on programs with elevated loss emergence. I will address the January 1 renewals in greater detail after Bob speaks. But suffice it to say that our underwriting portfolios in force at January…

Thanks Kevin and good morning everyone. As we reflect on 2017, we are proud of the hard work and dedication we displayed in executing our strategy while navigating the challenging market conditions and loss events during the year. We remain committed to growing our underwriting platforms and joint ventures in a disciplined manner matching the right risk with the most efficient capital available. We grew our consolidated gross premiums written to $2.8 billion in 2017, split roughly 50-50 between our property and casualty specialty segment. We achieved this measured growth while maintaining a strong focus on expense management through a concerted effort across the organization. As Kevin noted, we believe the underlying market conditions of our business are showing improvement and we are excited about the opportunity that lie ahead in 2018. At this time, I would like to take you through an overview of our financial performance for the quarter and full year. I will then discuss our segment results, investment portfolio and capital activities. For the quarter ended December 31, 2017, we reported a net loss of $3 million or $0.09 per diluted common share and operating income of $41 million or $1.05 per diluted common share. Our annualized ROE for the quarter was negative 0.3% and our annualized operating ROE was positive 4.2%. During the quarter, our book value per share decreased 0.3% and our tangible book value per share including accumulated dividends increased by 0.1%. Underwriting loss for the quarter was $10 million and we reported a combined ratio of 102%. On a full-year basis, we reported a net loss of $245 million or $6.15 per diluted common share and an operating loss of $332 million or $8.35 per diluted common share. Our full year ROE was negative 5.7% and our operating ROE was negative 7.7%.…

Thanks Bob. I will take a few minutes to talk about each of our segments and then move to the 1/1 renewals and finally we will open it up for questions. For the full year 2017, we grew gross written premiums in our property segment by 16%. More specifically, we grew catastrophe by 80% and other property by about 48%, albeit from a relatively small base. These numbers exclude reinstatement premiums from the cat events. We continue to assess our loss estimates for the Q3 catastrophic events. As Bob discussed, we have recognized a reduction in our net negative impact of $30 million on these events during the fourth quarter. As the year progresses, we will receive additional customer renewal information related to the events, engineering reports and other proprietary research from our WeatherPredict subsidiary, including first hand on-location assessments that will assist us in fine-tuning our loss estimate. Once we have sufficient data, we plan to perform a deep dive on the Q3 cat events which should occur around midyear. As we preannounced, we suffered losses from the wildfires affecting Northern California in October. Similar drought conditions led to separate wildfires in Southern California in December. As I mentioned, with respect to the cat events, when customers in perils are similar, it can be difficult to split out particular events. Consistent with that approach, we are reporting the combined negative impact from the Q4 California wildfires of 4104 million. I should point out, also consistent with my prior discussions that the net negative impact from the 2017 aggregate losses includes wildfire loss. The increase in the aggregate contracts in the fourth quarter is attributable to the California wildfires. As I noted on our last call, each loss has unique characteristics and develops differently. And this applies to the California…

[Operator Instructions]. Your first question comes from the line of Kai Pan with Morgan Stanley. Kai, your line is open.

Thank you and good morning. The first question is on the Jan 1 renewal. What percentage of your account renew at Jan 1 is loss-impact account versus loss-free account? I am just wondering if that proportion would change in the upcoming midyear renewals?

I actually don't have that split, but let me talk to it qualitatively. What's coming up later this year is really two big renewals, Japan, but more importantly, Florida. Most of the Florida renewal is obviously loss impacted. So I think that percentage for the midyear June, July renewals will be greater than what we saw at 1/1. At 1/1, we have the international book, which had some very small participation in the losses. We had the retro book, which had large participation in the losses. And then we had the nationwide book, which was mixed. Some at the low-end of the program had losses, further up in the program didn't. So without a specific split, I would say we are going into the 6/1, 7/1, with an expectation that there will be a greater percentage of loss affected accounts than what we had at 1/1.

Okay. Great. Kevin, you mentioned that you believe that rate momentum will carry forward at midyear renewals. What gives you that confidence? And also, as the retro rate is increasing faster than the reinsurance rate, how will that change your gross to net strategy? Are you buying less retro coverage?

Sure. I think I will start with the retro part of your question first. I think it could seem as a conflicted message in that we grew retro, but we are saying we had better-than-expected access to purchasing retro. The reason for that is, what we are selling through Upsilon is a very different product than what we are buying. So what we sell through Upsilon is a heavily loss affected program, mostly worldwide and some aggregate. In addition to the retro that's in Upsilon, as I mentioned, we also have some enterprise coverage in some larger nationwides. That mix is actually because some of the retro pricing wasn't as high as what we needed for us to commit our partner capital. Our purchasing is done on a different basis. So as we talked in previous calls, we have a significant amount of our retro coverage, which I consider with partners, whether that would be third-party capital partners or long-term partners participating on the programs that we have through our CPP facility, those largely renewed and they will participate in the better market alongside of us. We have a trading account retro, which often is on a more specific basis of coverage than what we are selling within Upsilon and the rate movement within that book was different than the rate movement we saw for Upsilon, Upsilon getting better rates. Your second question was, why do I think rate increases will persist through the rest of the year? One is, there's a lot of loss affected business that has not been renewed yet, both for what I mentioned previously, for the 7/1 and 6/1 Florida renewals, but also there's a significant portion of our book that's multiyear. So part of that has renewed, but there's other parts that have suffered losses, but has not been touched. And finally, we have had a long period of rate decline, which has persisted for many years. So there is need for rate enhancement. So I think the overall discipline in the market recognizing that more rate is needed for reinsurance protections is going to be a backbone for discipline as we approach the midyear renewals.

That's very helpful. One last one, if I may, is on the recent investment in two runoff business. I was wondering, in addition to the strategic value of this investment, how significant are the financial impact in terms of both investment and potential fee income or investment returns from these two joint ventures?

First, just from the financial standpoint, Kai, the minority interest that we have in Catalina is small, but that doesn't withstand the strategic value we are trying to get out of it, but it's less than 10%.

And I think of these as very consistent with what we have done on other vehicles. If you take Langhorne, we are 50-50 joint venture partners with RGA on the management vehicle, but we have a small investment in the third-party capital pool, the $780 million that was raised by Langhorne to fund the transactions that are ultimately underwritten by Langhorne. That's kind of consistent with the way we think about DaVinci and other vehicles and we are delighted to have RGA as a recognized leader in the life reinsurance space as the partner there. Catalina is a little different. As Bob mentioned, it's a small investment that we have in Catalina. I think the benefit strategically to us is that increasingly, our customers are seeing runoff solutions as a viable capital management tool. So if we can sit down with a trusted partner with a great reputation like Catalina with our customers and provide both life coverage or ongoing coverage for books of business through our reinsurance vehicles and runoff solutions through Catalina to those customers, I think it's a win-win for everybody.

Thank you very much for the answers. Good luck with 2018

Thank you very much.

Thanks Kai.

Your next question comes from the line of Elyse Greenspan with Wells Fargo. Elyse, your line is open.

Thank you. My first question is probably just picking off on that last question. In the past, you guys have really focused these investments in other vehicles, I think, on your core cat expertise, I guess. When you guys thought about making these two investments in Langhorne and Catalina, what gave you comfort in moving away from the cat area? I mean, I know you mentioned Essent and Trupanion, which have been successful investments. You guys also had investment in ChannelRe, which was not as successful. So as you thought about going and putting capital here, I guess, what was the thought process and the idea that now is the time to put capital in more longer tail vehicles than shorter tail, which you have historically done?

Sure. Thanks. Let me start with Langhorne. So when I think of Langhorne, I think you are right that we are each contributing. RGA is contributing a lot of underwriting expertise. We are contributing a lot of third-party capital and structure management expertise to the vehicle. In collaboration, I think those two sets of skills will be a tremendously powerful platform for us to be successful in block runoff business. I think there's some benefits that we are seeing for some European solvency requirements with an increased level of pipeline potentially coming to that market. So in thinking about it, what we looked for was an industry recognized leader from an underwriting expertise and I think what we bring to the table is industry leading expertise with regard to capital structure and third-party capital management for that vehicle. So I feel very confident about where we are and how we have set that up for future success. Catalina is a little bit further afield, with it being a minority investment, equity investment in them. We have known the team for a long time. They have got a great track record and they have got a strong reputation within the market. So I see us, again that's a business in some ways we are familiar with. It's going to be more P&C. The way in which they ultimately participate in the risk is different than what we do. But I think we can help them think about risk from a live transaction perspective and they will give us perspective as to how to think about the legacy issues of long tail business. So I think everybody is contributing something to each of these joint ventures and I think the combined effort of the partnerships will produce great returns for everyone.

Okay. Thank you. And then going back to some of the market commentary. Kevin, you pointed to June and July potentially being better than Jan 1 as more loss impacted business renews. We have obviously seen a lot of alternative capital reload in the market. As that continues, as we get closer to June and July, how does that factor into your thinking on the pricing dynamic? And do you have a view on the potential when you put all your comments together, what type of premium growth Ren could see in cat in 2018?

Sure. Looking forward into the June, July renewals, there's a lot that can happen. It's February and there's a lot of air to cover between now and then. But when I look forward with what we see coming, I think it's reasonable to expect a reasonably flat demand coming out of Florida. Your comments about third-party capital, whether there's more looking for risk in Florida, I am not sure. But I think the thing to focus on is the incumbency priority given to reinsurers on placements. So without growth, I think it's going to be difficult to dislocate well-behaving traditional markets. So I am not sure what role third-party capital will have, but I think, given opportunities for growth, I think we are about as well positioned to achieve that growth as anyone possibly can be in the Florida market. With regard to rates, I tried to indicate that I think the rate, having the wind at our back from a rating environment, I think that will persist. I don't mean to indicate that I think 7/1 or 6/1 will be better than what we saw at 1/1. But I think the momentum for a positive rate and more economics coming to reinsurers will persist as we go into those renewals.

Okay. And then Bob, maybe this is a question for you. It seems like you guys saw a benefit on expenses in the quarter. Maybe it seems like lower bonuses potentially due to the high level of losses in 2017. Can you quantify the benefit that we saw going to your expenses just as we think about modeling the expense level going forward?

Yes. That's right, Elyse. As I pointed out in some of my prepared comments, both property and casualty segments saw a benefit in the fourth quarter as we did take down, one, our compensation expenses for the obvious reasons of lower profitability for the year. We don't typically show the number, but you can probably comparatively figure it out. But it was around $10 million, give or take. But that's reflective of the performance. But we have also, which you can't really see in there is the efficiencies that we gained by leveraging our operating expenses, not only the operational expenses, but the corporate costs. Corporate costs are down quite a bit year-over-year as a result of some executive exits last year, which is, you are seeing a more normalized run rate in the corporate costs this year.

Okay. Great. Thank you very much. I appreciate the color.

Thank you.

Your next question comes from the line of Amit Kumar with Buckingham Research Group. Amit, your line is open.

Hi. It's Amit Kumar. Two quick questions, then I will requeue. Going back to the discussion on 6/1, if you look at the JLT rate online index and if you go back to KRW, in 2006 versus 2005, the rate online index jumped by 25%. And then if you fast forward to, let's say, 2012 to 2017, it fell by, let's say, 40% or so. I was hoping if you could tie in your comments regarding the pricing equilibrium to the past versus where we could be? I guess, what I am trying to figure out is, we get some rate momentum. Do we get to the point where you said equilibrium is needed? Or is there still a gap based on your perception?

Let me try to answer your question with regard, I think what you are asking is, is rate adequacy expected after this renewal? I look at, just take 1/1. What was needed to be successful at 1/1 might be the model for what's needed to be successful at 6/1. Knowing that all the placements were completed should rationally lead one to believe that rates were adequate, otherwise there would have been shortfalls. So when I think about that, I think that what's required for success in this market is finding the most efficient capital and then making sure that where there is desirable risk, you have access to it. So in looking at what we did at 1/1, we were able to grow on our own balance sheet because we had access to risk and we have structured our balance sheets efficiently, both on a gross and net basis. And secondly, we were able to scale Upsilon as we have done every year since 2012 to meet the opportunity that our customers present and that capital is efficient for the type of risk that we are writing on to it. So it's a very capital consumptive on a rated balance sheet and very efficient on the Upsilon structure. So in order to be successful in that market, it's not whether rates are adequate or not because that has to be put in context of what capital you are using to match that risk to. As I look at 6/1, I think the same set of variables lines up, which means the same set of tools are required for success. So as I look at our ability to execute into 6/1 and 7/1, I think we will look very carefully at how much of our capital we are going to expose, both on a gross and net basis and as to whether we are going to initiate some of the vehicles we have had in the past or a new vehicle that best meets our customers' needs.

Got it. Fair point. The other question goes back to the discussion on Catalina and Langhorne. If you were to step back, I guess I should ask, is there like a level of capital that you would like to dedicate to these, if I can call it, noncore or non-P&C core businesses? Is there a number in your mind? Or is this more opportunistic for 2018?

It's somewhere between. I think when we think about what we are going, so we have been working on these deals for close to a year. So it's not as if they popped up in the quarter and we closed on them. It took a long time to come up with the structure and the overall parameters of the partnership. So when I think about it, we think about liquidity in these transactions, knowing that they can be very long tail in nature. We think about the value of the partnership and then because of the way we are structured, we can very easily collaborate, as I mentioned, between the ventures team and the underwriting team to come up with an enterprise value for the overall partnership. So it's not opportunistic because strategically, this is what we do. But it's also not one in which we have finite dollars allocated to these types of relationships. If there was another relationship from a joint venture perspective that emerged tomorrow, we would actively engage in it as long as it made sense for us strategically and we are able to get both partnership economics and capital economics.

Got it. I will stop here and requeue. Thanks for the answers and good luck for the future.

Thanks Amit.

Thanks Amit.

Your next question comes from the line of Brian Meredith with UBS. Brian, your line is open.

Yes. Thanks. A couple of quick questions here for you. The first one, just curious, Bob, I noticed a big increase in cash on your balance sheet at December and also a big jump in other liabilities. Was there something unusual going on?

That's the prefunding for Upsilon that comes in there goes into cash. Recall my comment about the short durations and that's just the liability that will flip into premium on the liability side at 1/1.

Got you. So that's where it turns. Great. Thanks. And then secondly, just thinking about your investment income right now, what are new money yields look like relative to kind of with the current kind of book yield that's on your portfolio? And should we expect a benefit this year from the higher interest rates we are seeing?

I will give you a couple of perspectives, Brian. The new money yield, I would say, our yield at the end of the year was 2.5%. You will see that in the supplemental. I mentioned in my prepared comments. The duration is 2.5, so it's relatively short. We are in fixed maturity securities and the interest rates have really started to take up over the course of the last month. So as we expect and as Kevin said, we do think we have rates kind of having a general uptick. I would say, given the short duration and where we are at right now, we are looking at potentially higher yields in 2018, as I think a lot of other participants are.

Got you. And just quickly another, just quick from accounting perspective to Langhorne Re. Are you going to book the fee income through your other income line where you have got Top Layer and Tower Hill? Is that where we are going to see it?

You are going to see, the Langhorne is a joint venture 50-50. So you are going to see [indiscernible] pickup side of it coming through there. That's where our investment in our limited partnership will be in that piece. But it's a minority noncontrolling interest. But given the JV nature of it, you will see it come through there.

Great. Thank you.

Thank you.

Next question comes from the line of Meyer Shields with KBW. Meyer, your line is open.

Great. Thanks. Kevin, one basic question. When you talk about constructing a more attractive portfolio at 1/1, can you break that down between expected return? In other words, the improvement in expected return versus the improvement in overall risk?

Let me try. What I would say is, from a net perspective, we have increased our risk on our owned balance sheets. And that risk shift has been reasonably uniform. So it's almost like a jump up in the curve. It's not as if we are hotter down low or hotter up high. It's below the one in a 100, it's a reasonably uniform shift. So from an expected return perspective, we are getting really two bumps. Then we are using our capital a little bit more efficiently and we are getting more rate per dollar of risk that we are taking. So I kind of highlighted the rate changes we are seeing by major segment. I think that could be a proxy for what you are seeing in the change in expected returns and then adding that we are taking a nominal amount more risk on our owned balance sheets.

Okay. That's very helpful. Second question, I guess. I don't want to confuse your experience with broader industry, but it does seem a little odd to me that we are seeing loss estimates for the third quarter catastrophe kind of drift down rather than up, which has been the normal practice. Can you talk to that that a little bit?

I can talk about us. I think from our perspective, we are going to have movements on these losses. There's a lot of moving pieces. When I think about it, there's a lot of events that came in, in close proximity and we have a shared retro program. So as the wildfires happened, we had to go back and not just think about what retro is protecting the wildfires, we had to go back from time zero and look at each of the events and then begin to allocate the retro across all the events again, making sure that there was an optimal set of recovery assumptions made against the gross losses we are incurring. So I think we are going to see some movement on them. If you look at it relative to the overall gross loss over the overall net loss, the movements that we had weren't particularly large. And more importantly, I wouldn't point to a trend specifically in any one of the events. There's a little bit of movement here, a little bit of movement there. As time passes from our process, we move from having kind of the dual approach, which is the top down, what's the industrial loss and starting very macro with market shares to increasingly more precision from our customers and understanding what they believe their losses to be. So I think the migration to more definitive information from customers will also mean that the loss numbers will be moving around a bit.

Perfect. Thanks so much.

Sure.

And your final question comes from the line of Jay Cohen with Bank of America. Jay, your line is open.

Yes. Thank you. Kevin or Bob, from a capital standpoint, there are seemingly more moving pieces at your company than we have had in probably years. Looking forward, given all those moving pieces, can you give us any insight on the potential for buybacks? I mean, should we just expect potentially no buybacks for this year, given everything going on?

That's a good question, Jay and thanks for asking it. Nothing's changed, first on our deployment of capital and how we look at our capital management out there. We feel very comfortable. All our balance sheets are very well capitalized. And as we went into the 1/1 renewals like we talked about, our focus was on looking to deploy capital, which we did. As Kevin talked about on the 1/1 renewals, we were successful there. We also deployed it through other means through our ventures unit. So we felt very good about that and that's something we kind of told you about. My comments are, we are still looking to see what the opportunities are as we go into 2018. And again, our priority is to deploy capital, put our money to work. Regarding share buybacks, those are things that will come as part of our overall considerations and we are not going to get beholden to one quarter or one single metric, but rather looking at it over a period of time. And Jay, you have seen us over the last few years, we have been very good about returning capital as well as balancing that with capital deployment. Kevin, if you want to offer anything else? Or is that, I think that covers it.

Yes. That's absolutely right. We will deploy capital into the market first and then look to manage it in alternative ways if we can't deploy it.

That makes sense. Thanks guys.

Thank you Jay.

Thanks Jay.

This concludes our question-and-answer session. I will now turn the call back over to CEO Kevin O'Donnell for closing remarks.

Thank you everybody for participating on today's call. We look forward to speaking to you in a couple months time. Thanks again. Bye.