Thank you for standing by, and welcome to the RenaissanceRe Fourth Quarter and Year End 2019 Financial Results Conference Call. [Operator Instructions]. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Keith McCue, Senior Vice President, Finance and Investor Relations. Thank you. Please go ahead.

Good morning. Thank you for joining our fourth quarter and year end 2019 financial results conference call. Yesterday, after the market closed, we issued our quarterly release. If you didn't receive 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 1:15 p.m. Eastern time today through midnight on March 5th. The replay can be accessed by dialing (855) 859-2056 US toll-free or 1 (404) 537-3406 internationally. The passcode you will need for both numbers is 6725958. 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 March 5th, 2020. 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 today to discuss 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 thank you for joining today's call. We began 2020 looking and feeling very different as a Company from where we started one year ago. This journey chartered a very intentional path designed to make RenRe not only more resilient, but also a broader, deeper and better partner to our customers. It has been a long and deliberate track, one that is not yet complete, but successfully under way. It has taken us to where we now have a diversified book evenly divided between Property and Casualty and Specialty business. This change was at the behest of our customers who asked us to deepen and broaden our relationship with them, but also because we saw a path to greater efficiency. I am pleased with where we currently are and excited about our future course. Last year, I started the call in January by asking two questions. One year on, I think we should ask ourselves the same two questions. The first is, how is -- how is our financial performance, and the second is, have we achieved the year's goals and effectively executed our strategy? Starting with question one, how is our financial performance. We grew book value per share by 15.7% and tangible book value per share, plus accumulated dividends by 17.9%. For the year, our return on equity was 14.1% and our operating return on equity was 8%. In our Casualty segment, we generated a consistent diversifying underwriting profit. Bob will discuss our financial results in more detail later. But I believe we performed well especially against a difficult background. In 2019, our industry experienced approximately $75 billion of insured catastrophe losses, including Typhoons Faxai and Hagibis in Japan and Hurricane Dorian in the Caribbean. In addition, loss creep on prior year events continue…

Thanks Kevin, and good morning everyone. I'd like to start off with saying we had a good year. We executed strongly, both financially and operationally during the quarter and the year. Today, I will divide my remarks between our fourth quarter and year-end 2019 results. I'll first discuss our consolidated financial performance before moving on to our segment results, investment portfolio returns and finally capital activities. Starting with our consolidated results and beginning with the fourth quarter where our annualized return on average common equity was 2.5% and our annualized operating return on average common equity was 1.7%. Gross premiums written for the quarter were $905 million, up $358 million or 65% from the comparable quarter last year. About two-thirds of this was organic growth. We reported net income for the quarter of $34 million or $0.77 per diluted common share. Our operating income was $23 million or $0.52 per diluted common share. Operating income excludes $18 million of net realized and unrealized gains on investments and $5.7 million of transaction, integration and compensation expenses associated with the TMR integration. We had an underwriting loss for the quarter of $65 million and reported an overall combined ratio of 106.7%. Now, before moving on to our full year results, I'd like to provide more clarity on how the non-controlling interest from our joint ventures impact our financial statements. Each quarter, we fully consolidate the results of DaVinci, Medici and Vermeer, and since we do not own 100% of these entities, we removed a portion of their returns that we do not own. For example, a 100% of DaVinci's results are included in our underwriting and investment income. However, because we only own 22% of DaVinci, we removed 78% of the DaVinci's returns from our net income. This elimination is reflected in…

Thanks, Bob. I'll divide my comments between our Property segment and our Casualty Specialty segment starting with the discussion of 2019 results, and then moving to January 1 renewal and opportunities for 2020. After that, we'll take your questions. For the full year in 2019, we grew gross written premiums in our Property segment by $670 million or 38% to $2.4 billion of -- a substantial portion was organic. Particularly, the 103% growth in other Property reflects the opportunity we've seen in E&S property markets. We experienced a number of large natural catastrophes in the quarter. Last quarter we pre-announced and continue to hold a $175 million net negative impact from Typhoon Hagibis which was based on a $15 billion industry loss. We are monitoring the reports on Hagibis and expect to learn more as we approach the 4/1 renewal and if the facts change, so will our estimate. Last year, I discussed the impact of Hurricane Irma's loss creep and noted it would be by itself one of the largest events in 2018. Fast forward one year and we continue to experience billions of dollars of loss creep in Florida and not only from Hurricane Irma which made a landfall 2.5 years ago, but now also from Hurricane Michael which struck almost 1.5 year ago. Suffice it to say, we have not yet realized the benefits of last year's AOB reforms. This is deeply disappointing. Several Florida domestics are now close to exhausting their 2017 private market reinsurance. This is yet another indicator of the deep structural problems afflicting Florida. In addition, as I discussed last quarter, Florida is increasingly exposed to the effects of climate change such as rising sea levels, increased rainfall and flooding and intensifying hurricanes. Although it is easy to talk about the June renewal,…

Thank you. [Operator Instructions]. Your first question comes from Ryan Tunis with Autonomous. Your line is open.

Hey, thanks. Yeah. Had a couple. The first one is just thinking about, I guess the cat loss activity in 2019. It seems like Ren's market share of that on a net basis was a little bit higher than it was in '17 and '18 if we think about maybe like a $60 billion industry cat year. I'm wondering how much of that growth, do you think was attributable to the actual growth in the size of your book or the nature of the type of loss events we experienced?

Yes. I think that's a good question, and I think sometimes thinking about what's an average cat year from an industry perspective, it is difficult to relate it to what happens with the reinsurance portfolio. What happened last was we had several large events we had Hagibis, Faxai, Dorian, all of which has -- tends to become larger, there is going to be a disproportionate effect on reinsurance. I think the things affecting us on 2019 are, we had a different retro protections in 2019 than we had in 2018 and where the storms hit were places where we had a little bit less retro. So we had -- tend to protect Southeast wind pretty aggressively. And we had the losses in Japan, which is a little bit more of a netbook. The size of the book, which is the second part of your question, played a role, but that was not the biggest component of it. It was much more around the size of the retro we have protecting the portfolio.

Understood. And then on the specialty casualty side, I guess, obviously you talked about how you're being vigilant about the port trends and all that. I'm just curious, you know, did -- has any of that had an impact on your loss picks, here in 2019 or is it one of those things where you're kind of monitoring it and maybe not releasing reserves quite as fast, I'm just curious if the actual port environment has put any upward pressure on your loss ratio in casualty, specialty?

Let me start with pricing, and then I'll move to reserving. From a pricing perspective, what I mentioned is I think the rate change that we're seeing is above the loss trend that we're observing. So our pricing curves or pricing picks are actually dropping. We are not moving that to our reserving ratios though. So, our reserving ratios are consistent with what they've been historically, but where we are observing trend, we are making adjustments and pushing the ultimate expected up. So we are reflecting the change in trend in our -- in our legacy book, but then we are not recognizing the improved pricing terms in the -- in the current renewals.

Thank you.

Yeah.

[Operator Instructions]. Your next question comes from Jimmy Bhullar with J.P. Morgan. Your line is open.

Hi, good morning. I just had a question on the Casualty business. How -- like, as you reserve, are you -- be -- have you been overly conservative in your reserves given these social inflation issues that you've observed, or are you basically assuming that the trends will be consistent with how they've been, but not get worse.

Reserving is always an area of focus for any any risk taking Company in this business and it's something that we put a lot of attention to. We believe that our picks are appropriate and we take in all factors that we think will affect the ultimate dates. So we are looking at loss trend, we are looking at rate environments, we have historic rate monitoring tools, all of that is resident within the picks that we have, but we feel like they are appropriate, and we stand by them is our best estimate.

You know, I think the reason I was asking is in response to the previous question, you sort of implied that you've been adjusting your pricing for it, but you're not building in an extra cushion in your reserves if trends continue to deteriorate.

Yeah. So, there's always -- looking at our book, there historically is a difference between reserving and what reserving actuaries will reserve and what pricing actuaries will expect. We do as a general rule, we wait for development of about 30% of the curve before we take any measure that would be considered to be a positive trend in pricing. So even if there -- even if our pricing actuaries are accurate in their assessment of today's risk, it will take a couple of years before that would be reflected by our actuaries. It's just the nature of the reserving process.

Okay. And then on your cat business in terms of premiums, fourth quarter is obviously not a good, big quarter, your premiums were down, but it's usually not a big quarter anyway seasonally. What are you seeing in terms of primary company behavior in terms of purchase of cat insurance just -- are companies buying more or less, given how much prices have gone up?

It's -- if I have to put a blanket statement out, I would say it's the demand for reinsurance is relatively flat, there are some new purchases from some larger players that have come into the market. I think we have great relationships and great access. So we tend to have opportunities where there is even limited growth, but if you ask for a blanket statement, I would say relatively flat.

Okay. And then just lastly if I could ask one more, you seem fairly positive on pricing and it seems like you're confident that 4/1 and midyear renewals, you'll continue to see upward moves and pricing. What gives you that comfort, given that some of the issues that have caused the soft pricing over the past few years like excess capital in the industry. Those are still out there, so, just if you could share some insights on why you're optimistic about pricing.

Yeah. The comments that you're referring to are -- have to do with the property cat renewals at 4/1 and…

Yeah, yeah.

So I'll comment on that. At 4/1, we have -- had ongoing discussions with our partners in Japan. They recognize that the change that was put through the market for Jebi was inadequate based on the development that we've seen since 4/1 on Jebi. In addition, the size of Hagibis and the size of Faxai, I think will become more clear as we approach the 4/1 renewal and historically the Japanese market has responded as good partners when there is losses to recognize, there is a need for additional rate. Within Florida, I think there is substantial structural issue in Florida. We've seen loss creep, we've seen ineffective legislation change with regard to AOB and as we look at that market, our view is it goes up or we reduce. So I'm not going to forecast what the change will be, but I will say unless we see changes that meet our return expectations, we will reduce in 2020 like we did in 2019.

[Operator Instructions]. There are no further questions at this time.

Well, we appreciate you joining today's call. Thank you for tuning in and we look forward to speaking to you next quarter. Thank you.

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