Good morning. My name is Scott, and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe First Quarter 2019 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. Keith McCue, Senior Vice President, Finance and Investor Relations, you may begin your call.

Good morning. Thank you for joining our first quarter 2019 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 441-239-4830, and we'll make 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 June 8. The replay can be accessed by dialing 855-859-2056 U.S. toll-free or 1404-537-3406 internationally. The passcode you will need for both numbers is 9009829. Today's call is also available through the Investor Information section of www.renre.com, and will be archived on RenaissanceRe's website through midnight on June 8, 2019. Before we begin, I'm 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'd now like to turn the call over to Kevin. Kevin?

Thanks, Keith. Good morning and thanks for joining today's call. I'll open with an overview of our performance. And then Bob will go over financials. And finally, I'll come back on to talk a little bit more about our segments before taking questions. Last night, we released our first quarter earnings, and I'm pleased to report that once again, we had a strong quarter with growth in book value per share of 6.6% and growth in tangible book value per share plus accumulated dividends of 7%. I should clarify that these numbers are not annualized, but rather represent an absolute growth from the previous quarter. We also reported an annualized return on average common equity of 23.5% and an annualized operating return on common equity of 13.3%. The strong results were driven by high net earned premiums following a successful January 1 renewal, significant gains in our investment portfolio and a low level of catastrophe activity. Overall, I am pleased with both the growth and profitability of our business this quarter. This growth came across our segments and platforms and has resulted in the largest and the most profitable underwriting portfolio in our history on an expected basis. This success was the culmination of a well-planned and aggressively executed strategy that uniquely positioned us to recognize and benefit from positive rate trends in the market. Part of this strategy was the methodical cultivation of our Casualty business as part of our larger multiline offering to our customers. We thoughtfully and patiently developed our value proposition and strategic positioning with brokers and customers, building positions with them on the most desirable programs. Once these positions were established, we were preferentially positioned to grow profitably as rates began rising above trend. In our Property business, where we pioneered the hybrid approach to…

Thanks, Kevin, and good morning, everyone. We had a strong first quarter. And today, I would like to highlight a few of our key financial results. But first, I would like to update you on the TMR transaction and the progress we have been making. And finally, I'll turn it back over to Kevin. We closed the transaction on March 22, paying consideration of $1.56 billion, which was comprised of $814 million in cash and a closing dividend of $500 million and 1.74 million common shares worth $250 million. We reported nearly $26 million of corporate expenses this quarter related to the TMR acquisition, which breaks down into $13 million of transaction cost; $6 million of integration cost; and $7 million of compensation cost. We also booked $18 million of identifiable intangible assets and $13 million of goodwill. Now that TMR is closed, we have shifted from integration planning to execution. Thanks to extensive preparation. Day 1 went smoothly, and we are optimistic, the integration will be quick and successful. To date, we have reduced the TMR expense base by approximately 40% and have identified continued synergies, the majority of which, we will action in the first year. The TMR transaction was immediately accretive, and I remain confident that it will make a significant contribution to shareholder value this year. We continue to estimate retaining over $700 million of TMR's gross premiums written and anticipate the TMR will contribute $100 million to net income. From a financial reporting perspective, as Kevin pointed out, we have not included any of TMR's earnings in our reported Q1 results. However, our balance sheet is now reflective of the combined entities. And consistent with SEC regulations, we have filed a Form 8-K pro forma financials for both companies as of year-end 2018. I would…

Thanks, Bob. I'll divide my comments between our Casualty segment and our Property segment. As a reminder, my comments do not include the impact of TMR unless otherwise stated. Starting with our Casualty segment. Gross written premiums were up $79 million or about 18% versus the comparable quarter. This growth came predominantly from our financial lines and other specialty major classes of business. In financial lines, for example, we continued to demonstrate market leadership in the U.S. mortgage space, which has afforded us growth opportunities. While our casualty book has not grown as much as our specialty, our team has shown strong leadership, and we have used our market-leading monitoring tools to stay ahead of trends and began evolving the portfolio to where it is today. Top line growth, however, does not adequately quantify the amount of change in our casualty book this quarter. So while overall gross premiums written were up $79 million, we wrote $158 million of gross premiums that represent either new deals or growth on existing deals. At the same time, we non-renewed or reduced $81 million of premiums on deals that, in fact, no longer met our return hurdles. We're always shaping the portfolio to maximize efficiency and return, and top line net changes do not always tell the full story of the underlying portfolio or it's visions. Overall, we remain satisfied with the financial lines results of the Casualty segment in terms of overall profit and the stability of the core business. After adjusting for the opportunistic Wildfire deals in the fourth quarter of 2018, we have been experiencing a stable trend, with each of the last 6 quarters being profitable with an overall average combined ratio of 96%. For certain Casualty and Specialty lines, we are seeing moderate rate increases and capacity withdrawals,…

[Operator Instructions] Your first question comes from the line of Josh Shanker with Deutsche Bank. Your line is open.

Yes. Thank you. Kevin, you said in your prepared remarks that the portfolio you built to date is the most profitable portfolio you think you've ever built on an expected basis. RenRe spent the first 18 years of its existence as a public company, delivering a cumulative compound ROE of around 25%. Is there a reason to say that the expected returns of the portfolio today is higher than the first 2 decades of your existence?

So we were a very different company back then, and that type of company, I don't think, would be producing those types of returns in today's market. That's a reason we have structurally shifted to become a more diversified reinsurer and built the third-party capital platform that we had. So my comments are about pure scale, your comments are about return. So the portfolio between the scale that we brought, the diversity that we've bought and the dollar value of the expected profit is greater. The overall returns that we've achieved in our early years, I don't think are achievable in today's market.

All right. That makes sense. And then I just want you to give a little clarification on your Jebi comments. What do you think the industry loss is today? And how close is that to the -- of a buffer is there before they start digging into your retro sessional coverage more aggressively?

So I think, I have to go back and look. I think previously we said that Jebi and Trami were north of $10 billion or north of $11 billion, something like that. I would think that Jebi alone is north of $10 billion. Wouldn't surprise me if it's in the $12 billion range. So we were significantly higher than market, but we probably got it, a little on the lighter side as well. We -- let me just skip some context for our positioning in Japan. So within Japan, we do write some wind covers, but we're not known to be a particularly large domestic wind writer. So my comments that -- for 2 reasons: One is we have more reinsurance protection on that; and secondly, we're not as big a participant in that market. I think we're better insulated to further development. As far as additional accrete through the retro, that's a little trickier. We have substantial IBNR book against the retro contracts that we have, but I feel that we are approaching the upper limit as to probably where many reinsurers thought this loss was. So it would be hard for me to put a dollar value on it, but I think we are exposed to some accrete there because of -- because it's been as much bigger loss than we expected, which was already much bigger than where the market was. But I don't have a specific number for you.

Okay. Then for...

This is already a correct -- as we -- the one comment I'd make, I think sometimes it's voluntary to whether it gets into the retros or not. It's already into retros. It's just a matter of whether it's beyond the level of reserve within the retros that we're protecting.

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

Well, thanks and good morning. Got few questions. Maybe, starting with the TMR acquisition. If you look at the TMR addressable portfolio, 50% was -- is in Casualty and Specialty. I'm curious, just based on the pricing comments you made in the opening remarks, why wouldn't there be an upside to the $100 million earnings and the $700 million GPW you mentioned? I would've imagined that probably some upside exist versus when this deal was announced. Is there reiteration of the initial guidance factoring in the better pricing environment today versus when the deal was announced?

Amit, this is Bob. Thanks for the question. We remain comfortable with the $100 million contribution to the run rate and net income. And it comes from the part you mentioned, the addressable premium that we have out there, the $700 million. We have range of $700 million to $1 billion, but we want to be disciplined. And what Kevin is focused on is not getting ahead of the pricing. We're focused on the technical ratios through the synergies and obviously, there's an investment portfolio. There's a number of different variables going to it. Yes, we hope there is upside and that's how we're looking at it.

Okay, that helps. The second question, again, this is switching to, I guess, the rents portfolio discussion. I think in the opening remarks, you talked about how things have changed, you talked about the changes in the marketplace. I was curious, when you plug in some of the changes, the AOB legislation, et cetera, a better understanding of the risks after 2 active hurricane seasons. Did the expected returns change? What was spit out of the model after you went and tweaked it? How did it vary versus your initial look?

So let me rephrase the question, and see, if I answer it the way you asked it is, if we took the adjusted loss curve after our learnings from 2017 and '18 and imply them to the book of business we wrote prior to those learnings, would we have lower returns?

Yes, sir.

Yes.

Yes. The answer to that is yes. And the reason for that is that we -- one is a learning and one is an outcome. The learning is that we've increased the impact of social inflation on the loss curves within Florida. It's not a parallel shift, it's different at the lower end and on the upper end. We've walked through that change with each of our customers. That is a new learning, which, after events, is exactly the process we do. What did we do well, and what did we learn that we can incorporate into our model. The second element of the pricing is an outcome, which is the -- our cost of capital is higher for deployment in Florida than it was prior to these events and that is on the numerator. It's because we have more loss cost for each dollar of premium, but on the denominator, we anticipate that the gross-to-net strategy that was employed will be more expensive, and we need to recoup some of that expense or not write the business. So that's kind of an outcome. So when I think about the overall portfolio, I feel good about where we picked those storms against the return periods in our risk framework. And it's part of any normal process that we adjust things up or down based on our observations for the loss. We are doing the same work for Jebi.

Got it. The third and final question, I'll requeue when you answer this. Just going back to the discussion on that -- those risk losses. Could you refresh us, what would be examples of some of those risk losses, which resulted in the adverse movement?

Yes, let me think back, I mentioned the Columbia dam. There would be things like there is -- these are large risk losses that may not have made it to the investor community, but are known within the reinsurance community. At not just one -- there was a fire -- a couple of fires in factories in -- of Lennox warehouses over mere fire, things like that, which were the primary drivers for it. So again, this is kind of a cluster of very large risk losses that, one, have been -- have hit us in 2 ways: One, they were reported in the first quarter of prior year event, so that's my comment about sometimes hard to know that these things have happened; and secondly, the size of some of these as more work has been done by the engineers to estimate the damage has grown.

Your next question comes from the line of Meyer Shields with KBW. Your line is open.

Thanks. Two quick questions. First, when we look at the other property segment, was there any, what I would call, underlying reserve developments that offset the large individual losses?

So let me break your question into 2, and see if that's the right way to answer it. One is, from -- is there attritional and then there was -- was there development from kind of what, I'll call, very large events? The attritional piece seems to be running pretty well. So one of Bob's comments was this was really from the XOL, the excess of loss per risk book. The promotional stuff from the attritional side seems to be doing pretty well. So this is really more of a clustering of very large risk losses, which, again, we intend to protect. The clustering is unfortunate because it affects us uniquely in 1 quarter. The adverse development is really from the 2 things that I mentioned for prior quarters. It's late reporting of events that happened in the fourth quarter, that were reported in the first quarter; and then secondly, events that were known but as engineers look at arising. So that's the 2 elements of adverse. But the underlying attritional piece seems to be behaving.

Okay, yes, that's perfect. Second question, we've seen, obviously, a few examples of cat RE with significant reserve developments. Do you have any sense in terms of how long it takes until we actually know what the actual industry loss is?

Are you speaking about Irma and Michael and Jebi? Or just in general?

I'm Andrew. I'm asking about Jebi, but I'm wondering whether that pricing is shrinking or extending?

That's a good question. Florida seems to be extending to be honest, and a part of it is from some of the social inflation reasons, which are difficult to know where they begin and end. I think Jebi is a bit of -- honestly, we have more to learn on Jebi because the damage caused is greater than where we expected. I think we were already well above the industry. And some of the growth does seem to be inconsistent with how previous storms in Japan have performed. So I don't have a good answer for you on Jebi, but I think it's one that we will have a good answer once we get more information, which we are currently working on.

Okay that's perfect thank you so much.

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

Hi. Good morning. My first question on -- Kevin, if I put all of your market remarks together, it seems like you're optimistic yet also understanding relative to what could and could not happen during the upcoming start of renewals. Given all the headwinds that you outlined, and you did mention conversations that you've been having with some of your insurers about pushing for rate, how's the dialogue going? How does it feel this year relative to conversations you were having last year? Or even relative to past seasons in Florida when the market was really pushing for more price?

So thank's for the question. Looking back last year on, I think, it was probably on this call, we set a more muted expectation for Florida. I think some of the variables that I outlined in my prepared comments point to kind of the opposite side of that. We don't have a lot of price discovery in Florida yet. Most of our quotes will be going out this week, but I will say as we do -- all of those things that I said doesn't change the fact that we look at our Florida customers as partners, and in the conversations, we've been transparent with each of them about sharing how they stack up in the market with regard to the loss adjustment expense and loss development. And I believe that each of them deserve recognition in the rate that we quote for their performance against the losses. Yes, we have to think that we need to price forward, which is a changing view of risk or cost of capital and working toward a better long-term rate adequacy, but I think that it's going to be a very different story for those that we think performed best to those that performed worst. And I wouldn't think that there's a specific kind of clearing hurdle for Florida. And our conversations this year have been collaborative, probably a bit tense, and it's a changing market momentum from a seller -- from a buyer's market to a seller's market, but I think we're in a pretty good shape. And again, we've done a great job building our portfolio, and our success in Florida is not as important to the overall portfolio construction as it used to be.

Okay, that's helpful. And then in terms of the California utilities. Are you guys planning on continuing to write that business this year? And then on the flip side if you do write that business, would your retro coverage there be similar to -- for fire losses this year as you had last year?

So I think there's 2 pieces of that question, one is wildfire and one is utility. So let me start with wildfires, then I'll talk about utility. We like wildfire risk. We will continue to write it. Your question about retro, I think, traditional property retro for wildfire, I believe, will be available, but more expensive, and we may choose to retain more of it. I think adding the utility business specifically into property retros is going to be more difficult in 2019 compared to what it was in 2018. From our perspective, we will write the utilities, we will write wildfire, and we are prepared to retain more of that risk if it's priced appropriately. So we've got a lot of flexibility as to how we structure it, but I think from a retro perspective, the opportunity to push utilities into property is diminished.

Okay, that's helpful. And then lastly on the Casualty, Specialty segment, the margin just a little bit above 99% this quarter. Doesn't sound like you guys really called out any onetime items. Would you expect that segment to run at a profitable level for the full year?

Yes, and nothing's changed in our Casualty and Specialty segment. We're going to have for the [Technical Difficulty] but I think what we try to do is -- in these calls is draw a line between kind of one-off drivers and where we're seeing positive trend. Hopefully, identified in more often than not within that book, we're seeing positive trend. The one amplifying comment I'll make to that is, when we bring on the TMR portfolio as that renews on to our platform, there's a greater weight to Casualty business and Specialty business, and the Casualty business has a higher run rate loss ratio than the Specialty. So you may see some organic rise in our run rate there, but that's simply a mix of business outcome. Overall trends we're seeing are generally positive, and what you're seeing is just quarterly noise.

Okay that's helpful. Thanks for the color.

Sure. Thanks.

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

Yes. Thanks, a couple questions here for you. One just a quick numbers question. Bob, I noticed there's this new line as miscellaneous investment line. What is that?

In the investment portfolio?

Yes, $41 million of miscellaneous other investments.

Those are -- this reflects the integration of the TMR portfolio. These are some of the smaller assets that came through that they had out there. So really not much to say about it other than bits and bobs that are out there.

Okay, great. And then my another -- second one is more of a numbers question also here. If I look at the pro formas that you provided with your debt offering on Tim Re. The accretion is actually quite substantial from last year is actually more than $100 million. The big chunk of that -- the big chunk or part of that was actually purchase accounting. Will the purchase accounting on this transactions be favorable, i.e. they're going to write-off the different acquisition cost versus the amortization above it?

So purchase accounting really kind of cluttered up. There's 2 things in there, the comparability of the pro forma versus what we would have had the impact on purchase accounting. I tried to outline in the comments that there is a few variables that will make the 2018 results, not very comparable to what we intend to do with the book and our reunderwriting. The centered things that we expect to achieve, which will help improve the technical ratios. Those pieces have may also within that and what -- they did have some rather significant favorable development in 2018. Having said that, we're very comfortable with the reserve levels that we brought across. And the purchase accounting gap, these things rise all over the place. We're very comfortable with these. It will be mildly accretive. And so it may tapper some of the effects that are out there, but that would be within the first year that you would see on the earned premiums roll forward.

Your next question comes from line of Ryan Tunis with Autonomous Research. Your line is open.

Thanks. I guess, Kevin, I just wanted to come back to the question about the potential for Jebi development in the retro market. Just how do you feel for potential order of magnitude, I mean, if Jebi strengthen in another $2 billion or $3 billion, could that be $100 million of additional losses to RenRe shareholders? Or are we stalking 10s? I'm just trying to understand the sense of urgency and potential size we could be thinking about.

Well, that would be substantial loss development there, but I'd -- in my -- it's kind of an unanswerable because the information we have now is represented in the numbers that we have, which means we're adequately reserved. I think if that was to grow by 20% if it's -- we're not anywhere -- we're in the -- at the very lower end of your expectations. It's -- I raised it only in that. There's a high degree of uncertainty with Jebi because it is growing at a fast pace, and a lot of that has been only reported through the renewal. So I think we would not be the leader in development if the loss scenario that you put forward for the gross loss was to occur.

Got it, that's helpful. And then thinking about some of the competitive dynamics in Florida, you talked about the 2 legislative actions. Had you seen those legislative actions have an impact on the pricing conversation at all? Or are those just kind of in the background, they took place? Or everything just keeps going on as it had?

It's dynamic in Florida right now. One thing we are seeing is an increase in AOB activity ahead of the implementation of the legislative changes. But I think there's pieces that are being advocated on both sides of the pricing discussion. Of course, clients and brokers are saying, this is a material change that needs to be recognized in price. I would say, of course, it's part of the dialogue and it should be. I've been clear on where we are as we're going to take a wait-and-see approach. Others may have a different view. And you know, that's what makes the market. But we hope it makes the difference, but at this point in time, I think we're better off only making the assessment and the judgment for credit when we actually see a change in loss development.

[Operator Instructions] Your next question comes from the line of Jay Cohen with BoA Merrill Lynch. Your line is open.

Yes thanks. Just numbers questions. First, Bob, could you just tell us what the quarterly interest expense is going to look like for the balance of this year given all the changes?

It's effectively -- you are going to see about $11.5 million roughly, give or take on a quarterly basis. You're going to see that uptick basically the 3.6% on the $400 million. You can do the quick math on that. That's what extends out. The revolver will be down. That was low cost, so I'm not really worried about that, that's a small number. So that will carried through this year and then, again, March of next year is when the $250 million retires.

Exactly. The second question, should we assume that the calling of the TMR premiums down to the north of $700 million occurs in 1 year? Or will the premium base be a little bit bigger this year, I think, to get down to that level next year?

You'll see a carryover. There will be some carryover obviously in the calendar year. We'll capture and make new renewals. We will capture the 1/1 and the 4/1s, so those will come in. So you'll see that over the course of the rolling 12-month, most of it.

And then the seasonality of that premium, is it similar to RenaissanceRe's?

It's similar to RenaissanceRe by book. But their Casualty book is similar to ours and the Property book similar to ours, but features are little bit different. They're probably a little bit more 1/1 Property than we are, but I wouldn't -- it's a high correlation, not perfectly. Not perfect. We're confident.

That's great. Then one last quick one. On the other property business, you talked about a deal that you wrote this quarter that had incepted midyear last year. What quarter did that occur in? And can you tell us the amount of that?

Yes, we think Q2. The amount -- yes, I don't think we actually said what the amount was. We did say it was a significant transaction and that it reflected our ability to really help clients solve large bespoke challenges and that earned out this year. And so we then had a chance to come back at it through the beginning of the year. So that's what I meant about timing on rates.

So -- got it. So from a written standpoint, is it a bit of headwind in that line of business in the 2Q?

It was -- I don't know if I call that a headwind. It was opportunistic transaction with the client and the cat book that allowed us to help them solve the challenges they were looking to work through. We didn't disclose it, but it was something that we've demonstrated a long track record of doing.

Now just from a modeling standpoint, the 2Q of this year, I guess it's a tough comp because you're renewing that same contract. It's already in the first quarter from a written standpoint.

I think what we were trying to say is we put it into the -- we now renewed it into the first quarter.

You -- way you're highlighting is absolutely right. There's a timing difference. That timing difference is going to reconciled by the end of the year, but it will all be in the second quarter.

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

Hey, Just a quick follow-up on, I guess, Ryan's question on Jebi. Two of the reasons we've called out the development is March closing for this deep cedence and the 2020 Olympics. I'm still struggling to understand what could change from here going forward for the loss to continue to develop. And I get the sense that your '20 is different in Jebi versus some of the other companies, and I'm just trying to understand, is it the usual cautiousness? Or is there something going on here?

It's cautiousness. There's nothing going on, otherwise I've told you what it is. I think the -- my concern is the growth, the -- it appears to be behaving differently than other wind losses, albeit there hasn't been the one this big in quite a long time Japan. The size of the increase is larger than -- we thought it was larger, it's larger than we thought, so we have work to do to understand that. It is in retro contracts. We have less protection on retro than we do in reinsurance, so just wanted to flag that. And then I think your comment is that there is -- what -- often what happens in Japan is after the fiscal year closes, there's an exchange of Cole Re information, which can lead to further development. I don't know if that is happening or has happened, but just being cautious, we've got great reserves on Jebi. We have IBNR and Jebi, but just kind of highlighting where we potentially could have risk at this thing continues to be a surprise, I think, as it has been.

There are no further questions at this time. I would turn the call back over to Kevin O'Donnell for closing remarks.

Thanks for tuning into today's call, and we look forward to speaking to you next quarter. Thanks, again. Bye.

This concludes today's conference. You may now disconnect.