RenaissanceRe Holdings Ltd. (RNR) Q3 2025 Earnings Report, Transcript and Summary

Good morning. My name is Stephanie, and I'll be your conference operator today. At this time, I would like to welcome everybody to RenaissanceRe's Third Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] I will now turn the call over to Keith McCue, Senior Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Stephanie. Good morning, and welcome to RenaissanceRe's third quarter earnings conference call. Joining me today to discuss our results are Kevin O'Donnell, President and Chief Executive Officer; Bob Qutub, Executive Vice President and Chief Financial Officer; and David Marra, Executive Vice President and Chief Underwriting Officer. To begin, some housekeeping matters. Our discussion today will include forward-looking statements, including new and updated expectations for our business and results of operations. It's important to note that actual results may differ materially from the expectations shared today. Additional information regarding the factors shaping these outcomes can be found in our SEC filings and in our earnings release. During today's call, we will also present non-GAAP financial measures. Reconciliations to GAAP metrics and other information concerning non-GAAP measures may be found in our earnings release and financial supplement, which are available on our website at renre.com. And now I'd like to turn the call over to Kevin. Kevin?

Thanks, Keith. Good morning, everyone, and thank you for joining today's call. Before we begin, I want to take a moment to acknowledge the devastating impact of Hurricane Melissa. Being in Bermuda, we are familiar with the challenges of hurricanes, but the scale of this storm is unprecedented, and our thoughts are with the people of Jamaica, Haiti and Cuba at this difficult time. Shifting now to RenaissanceRe's third quarter performance. We delivered another strong quarter with operating income of $734 million and an operating return on average common equity of 28%. In aggregate, year-to-date, we have earned almost $1.3 billion in operating income and delivered about a 17% operating return on average equity. Finally, we grew our primary metric, tangible book value per share plus change in accumulated dividends by 10% in the quarter and almost 22% year-to-date. These results are consistent with our track record of strong returns over the last 3 years. In fact, since Q4 2022, the quarter after Hurricane Ian and just prior to the step change in property CAT, and we have delivered operating return on equities above 20% in 10 of the 12 -- in 10 out of 12 quarters with an average return of 24%. As a consequence, we more than doubled tangible book value per share during this period. As strong as our performance has been over the last 3 years, I believe we can continue growing tangible book value per share in the future at an attractive pace. This is because many of the factors that have contributed to our success since 2023 should persist into 2026 and beyond. Looking back over our achievements. First, we grew into an attractive property CAT market, increasing our property CAT portfolio from $2 billion of gross written premium in 2022 to around $3.3 billion today, which creates a strong base of profit in our portfolio going forward. Second, we focused on preserving our underwriting margin. Our average combined ratio in property CAT since 2023 has been about 50%. David will explain the many tools we have to preserve this margin going forward. Third, we nearly tripled our capital partner fees from $120 million in 2022 to just over $300 million over the trailing 4 quarters. As we have discussed, these fees are consistent, low volatility addition to our earnings stream that should continue to grow in 2026. Fourth, we grew retained net investment income from $392 million in 2022 to almost $1.2 billion over the trailing 4 quarters. Despite declining interest rates, we expect investment income to persist and potentially grow over time as our asset base continues to increase. Finally, we returned over $1 billion in capital to shareholders so far this year. We continue to have considerable excess capital and believe our shares represent exceptional value making share repurchases highly accretive to our bottom line. Looking forward to 2026, while we are facing decreasing property CAT rates and falling short-term interest rates, these are challenges we successfully overcame in 2025. We will continue to do so in 2026 by executing on the 5 factors I just enumerated and building upon the foundation that we have established. Our success starts with strong underwriting. In 2026, we will continue to prioritize margin over growth. Strong returns have resulted in reinsurers increasing supply through retained earnings. Demand, however, is expected to grow at a slower rate than what we have seen over the last few years. This dynamic will likely put pressure on rates, resulting in some reduction in excess margin. That said, given the strong profitability of this business, we are confident in our ability to construct an attractive property portfolio. To be clear, we will always pursue top line growth when it makes sense. That said, reinsurance is a risk business where jointly managing the bottom line is more important than consistently growing the top line. Over emphasizing top line growth is the surest way to fail to grow tangible book value per share over the long term. Managing this business is knowing where and when to expand, and where and when to hold. In the current environment, the best move is to focus on margin. By doing so, I'm confident that our growth in tangible book value per share will significantly exceed our cost of capital. In our Casualty business, you can see our strong underwriting reflected in how we pulled back on several lines this year, such as general casualty and professional liability. We did this in a way that was sensitive to the needs of our customers, which will help preserve future options. While we believe rate is outpacing trend in general liability, we will not reflect this in our reserves until we have more confidence in sustainability of the improved results. Having maintained good relationships with our customers opens opportunities for future growth if conditions improve. Moving now to a few comments on the upcoming January 1 renewal, which David will elaborate on later in the call. We begin with a very profitable property CAT book. While we expect some market reductions return levels should remain very attractive. I expect the market to remain disciplined with reinsurers holding on retentions and terms and conditions. Consequently, in 2026, property catastrophe rates should remain strong and should produce returns significantly in excess of our cost of capital. In other property, this book is performing very well. As you saw this quarter, and we believe this momentum will carry into 2026. We are seeing increased competition in the CAT-exposed pro rata delegated book and are keeping a close eye on it. Ultimately, we will manage our exposure based on the expected profitability and the opportunities in the market. Moving now to our Casualty and Specialty segment, where January 1 is a significant renewal. We expect increased competition in some lines but are confident that our customer relationships and risk expertise will enable us to select the best risk and to construct an attractive portfolio. Ending now with some comments on capital management. Consistent an execution of the 5 factors I mentioned earlier has created a cash-generating engine. On a GAAP basis, we have earned $1.9 billion so far this year, while generating $3.2 billion in operating cash flow. This facilitated growing limits in our property CAT portfolio by over $1.7 billion during 2025. Adding new business and strong expected returns for all of our capital providers. It has also allowed us to share our success with our shareholders through repurchases. Despite significant capital return, we have grown tangible book value by $1 billion year-to-date. So we have grown assets, grown capital, deployed significantly into a high-margin business and returned capital to shareholders. Bob will address our future capital management plans in greater detail shortly. But for all the reasons I just gave, we expect to continue generating profits and cash at an attractive rate. And one of the best uses for that cash right now is repurchasing our shares because we believe they represent exceptional value. That concludes my opening comments. And as discussed, Bob will cover our financial performance for the quarter, followed by David who will provide an update on our segment performance.

Thank you, Kevin, and good morning, everyone. We delivered excellent results this quarter with annualized return on equity of 35% and operating return on equity of 28%. Year-to-date, annualized return on equity is 25% and operating return on equity of 17%. As Kevin mentioned, this is the 10th quarter out of 12 where we have delivered an operating return on equity over 20%. Operating income per share was $15.62 in the quarter. This is our strongest operating EPS to date, driven by continued growth in all 3 drivers of profit. Specifically, we reported underwriting income of $770 million, nearly double from Q3 2024. Retained net investment income of $305 million, up 4% and fee income of $102 million, up 24%. One of the key messages you should take away from this call is that our earnings has improved significantly over the last 3 years. Our underwriting and fee businesses as well as our investment portfolio have reached a scale where earnings are consistently higher and large individual loss events are having a smaller impact on our financial outcomes. As a result, we are better able to deliver strong annual returns with less volatility now than we could 10 or even 5 years ago. Last quarter, I shared 4 numbers that demonstrated this strong earnings profile. I would like to highlight these numbers again on a year-to-date basis, which means they include the impact of the California wildfires. Reviewing our financials through this lens shows the improved returns and lower volatility of our business. The first number is 15 points, which is the aggregate contribution from fee income and net investment income to our overall return on average common equity so far this year. This is consistent with last year. And together, these 2 drivers of profit created a stable base of earnings quarter-over-quarter. The second number is $600 million, which is our underwriting profit so far this year, including the impact of California wildfires. This profit complements the stable earnings base we generate from fees and investments each quarter. The third number is 22%, which is the amount we have grown tangible book value per share plus change in accumulated dividends so far this year. Ultimately, we measure our ability to deliver enduring value to our shareholders through growth in tangible book value per share plus change in accumulated dividends. This metric reflects the aggregation of our past successes and most directly comparable to our peers. The final number is $1 billion, which is the amount of capital this year we have returned to our shareholders through repurchases as of October 24. As you can see, we are consistently generating substantial capital. Consequently, capital management will continue to play an important role in creating value for shareholders going forward. We pride ourselves in being good stewards of your capital and sharing our successes with you, our shareholders. Since Q2 2024, we have returned over $1.7 billion of capital through share buybacks. This represents about half of the net income during this period or alternatively over 80% of the shares we issued to support the Validus acquisition. In the third quarter specifically, we bought back over 850,000 shares for $205 million. We continued repurchasing post quarter end, buying back another $100 million as of October 24, 2025. Repurchasing over $300 million in the wind season demonstrates confidence in our sustainable earnings, our strong capital position and our conviction in the compelling value of our stock. For all these reasons, we anticipate continuing share buybacks, consistent with our long-term track record of being good stewards of our shareholders' capital. Now I'd like to provide a detailed view of our third quarter results, starting with our first driver of profit underwriting. In the third quarter, our adjusted combined ratio was 67%. This result reflects disciplined underwriting, coupled with a low level of catastrophic losses and favorable prior year development. Specifically, property catastrophe, we reported a current accident year loss ratio of 10% and an adjusted combined ratio of negative 8%. This benefited from 44 percentage points of favorable development on prior years, primarily from large catastrophes in 2022 and small events across accident years. Other property results were exceptional again this quarter with a 50% current accident year loss ratio and an adjusted combined ratio of 44%. Reported significant prior year favorable development, which was related to large catastrophes as well as attritional losses. Our Casualty and Specialty adjusted combined ratio was 99% this quarter consistent with our expectations. Prior year development in Casualty and Specialty was slightly favorable -- slightly unfavorable, however -- was slightly favorable, excuse me, however, noncash purchase accounting adjustments of 50 basis points pushed the segment's prior year to adverse. We remain comfortable with reserve development in this book and have not experienced heightened trend this quarter. Across our underwriting portfolio, gross premiums written were $2.3 billion and net premiums written were $2 billion, both slightly down to the comparable quarter. Within both these segments, we continue to shape the portfolio. Specifically, in property, we grew property catastrophe at the midyear renewal while keeping other property flat. As you can see on Page 12 of the financial supplement, underlying growth in property catastrophe was 22%, excluding the $116 million year-over-year change in reinstatement premiums. These reinstatement premiums were negative $50 million this quarter due to reversals of reinstatement premiums from accident years that have developed more favorably than expected. Conversely, gross reinstatement premiums were positive $66 million in Q3 2024 related to Hurricane Helene. In Casualty and Specialty, gross premiums written were roughly flat to the comparable quarter, but there was movement at a class of business level as we manage the cycle, specifically in general Casualty, we have been reducing our exposure to U.S. general liability. As a result, gross premiums written in general Casualty were down 7% this quarter with continuing rate increases helping to offset exposure reductions. In credit, gross premiums written increased by 19%, largely driven by additional premium on seasoned mortgage deals from older underwriting years. And finally, we held Specialty largely flat as we continued to retain our share in this attractive market. Looking ahead, in the fourth quarter, we expect other property net premiums earned of around $360 million and an attritional loss ratio in the mid-50s. Casualty and Specialty net premiums earned of about $1.5 billion and an adjusted combined ratio in the high 90s. Moving now to fee income on our Capital Partners business, where fee income continues to be a strong contributor to our results with $102 million in fees in the third quarter. As you can see on Page 17 of our financial supplement, only $13 million of these fees are included in underwriting income. The remaining $89 million of these fees are incremental to our earnings as they flow through noncontrolling interest. This quarter, management fees were $53 million, and performance fees were $49 million. Performance fees were particularly strong due to the impact of favorable development on prior years. Looking ahead to the fourth quarter, we expect management fees to be around $50 million and performance fees to be around $30 million, absent the impact of large losses or favorable development. Once again, we expect the significant majority of these fees to flow through noncontrolling interest, which means they are incremental to our underwriting income. Moving to our third driver of profit investments where retained net investment income was $305 million, up 6.5% from the previous quarter, driven by continued growth in our investment assets. In addition, we reported significant retained mark-to-market gains of $258 million, primarily from equity and gold futures. As I've discussed in the past, we have increased our allocations to derivatives over time, including equity, interest rate, credit and commodity futures. We use these derivative positions to shape our portfolio, and as part of this, we carry cash collateral to support the positions. Looking ahead, we anticipate our investment income to persist at similar levels and potentially grow over time as our asset base increases. Next, I'd like to provide an additional update on expenses, where our operating expense ratio was in line with expectations at 5.1%, flat from the comparable quarter. In the fourth quarter, we expect our run rate and operating expense ratio to be about flat. That said, we typically make accruals for performance-based compensation expenses at the end of the year, which may impact the ratio. In conclusion, each of our 3 drivers of profit outperformed this quarter and contributed meaningfully to our results. We deployed significant capital through share repurchases while also growing into opportunities in property catastrophe business. We believe the strong earnings engine that we have built will continue to generate enduring value for our shareholders in the fourth quarter and beyond. And with that, I'll now turn the call over to David.

Thanks, Bob, and good morning, everyone. We're pleased to deliver another excellent underwriting quarter, both financially and strategically. Financially, we grew underwriting income to $770 million with strong current and prior year loss ratios and low catastrophe activity. These results reflect our disciplined underwriting approach in addition to our market-leading access to business. Strategically, this preferential access enabled us to continue deploying capacity into an attractive market in 2025. We closed out a highly successful midyear renewal and began planning for January 1. Looking across the reinsurance market, we believe it remains highly attractive for underwriters with deep expertise and strong access to risk like RenaissanceRe. Our vision is to be the best underwriter. Our integrated systems and our underwriting culture are aligned around this goal. Our 2025 portfolio is largely underwritten, and I'm proud of the book we built. This is not a market where all risks are equally attractive. In fact, returns vary significantly between classes of business and between deals within each class, which presents opportunities for us. We've been successful in 2025 because we applied our deep underwriting expertise to differentiate the best deals and deployed our strong customer value proposition to secure these lines. This combination is a differentiator and enables us to build a portfolio that is accretive to shareholders year after year. You saw this benefit when we were able to bring on the full Validus portfolio in 2024. You saw it again in 2025 when we were able to shape our larger portfolio by growing property CAT, holding lines in other property and Specialty and reducing risk in Casualty. In 2026, we will follow the same disciplined playbook, engaging early with customers on how we can solve their risk challenges across lines, leveraging our underwriting excellence to identify the best opportunities and deploying our owned and partner capital balance sheets to construct an attractive portfolio. Moving now to a discussion of our segments and outlook for January 1 renewal in more detail. Starting with property, focusing on property catastrophe first. Over the last 3 years, we have grown this business by about 60% in one of the most attractive rate environments in history. It has been highly profitable with an average margin of 50% over this period, even with significant catastrophe activity. In 2025, we grew U.S. property CAT, which is our highest margin business by 13%. We did this by selecting the most attractive risks in areas like Florida, California and loss-impacted nationwide accounts and securing these lines with our strong access to business. As a result, we captured more than our share -- market share of the $15 billion in new demand this year. Looking ahead to 2026, we expect continued growth in demand. Supply will likely exceed this demand, which will result in some rate pressure at January 1. The market anticipates rates could be down about 10%. As we have seen in 2025, however, this will not be uniform across all accounts. There are some [Technical Difficulty] renewals, which are impacted by California wildfires, and some of our accounts are already secured on a multiyear basis. Our experienced team has a fantastic track record of underwriting and dynamic markets like this as we demonstrated at the midyear renewal, where we grew faster and at better rates than the market average. Let me provide some more context on our view of the market and our underwriting approach to deliver superior risk-adjusted returns. Since the 2023 step change, the market has appropriately balanced risk between reinsurers and insurers with reinsurers largely providing balance sheet protection. Interests are appropriately aligned. Insurers have adjusted their business to support current retention levels, and the level of expected attritional losses is well understood in the market. We do not expect insurers -- reinsurers to sell new bottom layers below expected cost, and we do not expect clients to pay high rates for these layers. Therefore, we expect new demand to be mostly at the top end of programs and most of the competition to be focused on rate rather than terms and conditions and retentions, which will help insulate our bottom-line profitability if rates decline. In addition, our gross-to-net strategy is a key differentiator and supports sustained attractive returns. We retain approximately 50% of our assumed property catastrophe premiums making our returns less elastic to rate change. To achieve this, we typically share about 1/3 of our property CAT business with partners in our joint venture vehicles, which produces fee income that is less sensitive to movements in rate. We also protect and shape our portfolio with ceded reinsurance. As we look 2026, I'm confident in our ability to deliver underwriting results that are substantially accretive to the guidance Bob gave on our other 2 drivers of profit. Following several years of strong growth, our focus is on preserving margin, enabling us to continue delivering market-leading returns on equity. Shifting now to other property, where we continued our disciplined approach through 2025 renewals and to deliver excellent returns. This book includes a combination and non-CAT business, and we adjust its composition based on market opportunities. Following years of rate increases, we are seeing pressure on rates in the most profitable areas. Similar to property CAT, terms and conditions such as deductibles and policy supplements remain attractive. This combination of rate and terms and conditions has led to profitable returns since 2023. We have seen positive development on our initial loss estimates from prior years, which has benefited our results in 2025. This consistent prior year favorable development, combined with strong current year underwriting results and solid terms and conditions favorably impacts our view of the sustained profitability of the other property business, despite pressure on rates. Moving now to Casualty and Specialty. Over the last year, we have seen positive progress in the Casualty market as clients have acted with determination to combat social inflation trends in U.S. general liability. Rates have nearly tripled since 2018. In early 2024, rates further accelerated and have been covering loss trend. In addition, clients are implementing increasingly sophisticated claims management practices. As we have discussed with you, we reduced our exposure to general liability business significantly through 2025. We did this carefully and thoughtfully taking the data-driven approach and working to understand our customer portfolio actions in order to position our portfolio with the best programs for the next cycle. At January 1, we will continue to stay closely connected with our clients to understand the trends they are seeing, and how they are managing claims. Actions of our clients and our portfolio repositioning will take time to show up in the claims data. Until this happens, we will not reflect the benefit in our reserving. As Bob discussed, we expect the Casualty and Specialty segment to deliver a high 90s combined ratio. This segment remains highly accretive due to the substantial float that it generates in an attractive interest rate environment. In addition, it is strategically important to our goal of being the best underwriter, allowing us to trade with clients across classes and access the most attractive lines across Property, Casualty and Specialty. In closing, through 2025, we built an attractive portfolio by focusing on our clients, identifying accretive growth opportunities in the market and preserving margin through disciplined execution. This market is one where underwriting excellence will produce a more attractive portfolio. We believe that this will continue to be true in 2026. Our underwriting expertise and access to risk will enable us to deliver superior underwriting returns in the short term and value creation for our shareholders over the long term. And with that, I'll turn it back to Kevin.

Thanks, David. In closing, we had another strong quarter in which all 3 drivers of profit performed well. We delivered excellent underwriting income as well as strong fee and investment income. Together with robust share repurchases, we delivered record-high operating EPS results. This outcome is especially impressive given our status this year as a Bermuda taxpayer. Looking forward, even with anticipated market dynamics, we are confident that our underwriting excellence, investment management capabilities and gross to net strategy will continue providing us with significant competitive advantages. Consequently, we are very optimistic regarding our potential for future performance and ability to continue delivering superior shareholder value. Thanks. And with that, I'll turn it over for questions.

[Operator Instructions] We will now take our first question from Elyse Greenspan with Wells Fargo.

For my first question, I wanted to start with something Bob said, right? So we said there was 15 points this year on your return from the aggregate contribution from fee income and net investment income. So obviously, this year, right fee income, I think, would have been higher than normal, right, just because it's been a pretty low CAT year. So for that 15-point contribution from those 2 pieces, what is, I guess, normal expectations? Like what would you be expecting from fee income and net investment income on your return going for 2026?

Thanks, Elyse. I'll take that. This is Bob. My context was the full year, 15 points. So we look at around 11% to 12% from investment income and around 3-plus percent that comes in from the fees. That's our starting point. And that when you look back over the last 3 quarters and even back into last year, that's been what has been the absolute contribution to our operating return on equity. And that's how we think about it. We think about that as our starting point. And David goes, and I've said this on the past calls as builds his book of business, that is and will be accretive to that number, which is telling you that we have an outlook of a strong financial performance and giving you a foundation from where we start from. To be honest, I also want to point out I did say for the full year. So this isn't a low CAT year. Remember, we took a $750 million charge on a $50 billion event in the first quarter, and that was the point I was trying to emphasize on that for the full year.

Okay. I appreciate that color. And then for my second question, just thinking about the market dynamics that you laid out on the property CAT side, right, it sounds like baseline expectation 10% decline in price at 1/1. Obviously, it will vary depending upon where you are in programs and maybe some incremental demand higher up, I think, is what you said. But as you guys' kind of think about the factors impacting the renewal, if it comes together based on how you expect today, what do you think the expected ROE on CAT business written in 2026 will be?

That's a tough question to answer because it's part of our portfolio. So they're stand-alone and kind of the marginal. But what I would say is Dave's comments, I think, are important and twofold. One is rate change, which is a benchmark is -- what is '25 and '26, relatively look like together. But more importantly, the bigger comment we're trying to make is rate adequacy. So if we -- maybe one way to frame it is, if we go back to when things changed, and the property CAT was rerated at 1/1/23, if it was rerated 10% less, which is where we ultimately expect '26 to look relative to '25, we would have done exactly the same thing over the last 3 years that we have done. So having the rates pull back a little bit is simply pulling some of the excess margin that we've been enjoying in property CAT. It is not bringing property CAT anywhere close to -- and it's still abundantly above rate adequacy. So we still have very strong rate adequacy even with some reduction in rate change. I don't know if anything you'd add, Dave?

That's true. We still remain very positive on the business. It's been very profitable over the last few years. We expect the terms and conditions to largely persist and some pressure on rate. Our team is well positioned to figure out how to underwrite around that. Not all risks will be equal. So we'll be able to pick the best risks based on what happens on each individual program and construct an attractive portfolio.

We'll take our next question from Josh Shanker with Bank of America.

Typically, when people see pricing going down, there's an assumption that too much capital is chasing too little risk or something to that effect. I'm curious to the extent that your third-party investors or potential new third-party investors are showing interest such that 2026 might be a strong or maybe a weak year for capital raising. Can you sort of speak to that a little bit?

Yes, I'll start there. That's a -- it's a broad question. So we -- because of the structures we have and because of the reputation we have in managing third-party capital, we have very good access to third-party capital, and that has been true even when it's been more constrained for others. Right now, I don't think third-party capital is going to be the driving influence on pricing in 2026. I think it's more about comfort with return levels within property CAT, and I think reinsurers having a little bit more confidence and a little bit more capital. Good news is we expect that the demand side, so there'll be more -- will grow. So more property CAT demand, although that level of increase is smaller than what we saw in '26. So that said, the market will be slightly more favorable for buyers than for sellers, where I would say '25 was a little bit better balanced. And that's the reason we're projecting about a 10% reduction in rate. The other thing I want to mention is there is more third-party capital that is becoming interested in longer-tail liabilities. So basically looking at that to fund their investment strategies, I think that will continue through 2026. So I think there'll be a little bit more third-party capital coming into perhaps longer tail Casualty or Specialty lines. So all in all, it's going to be driven by traditional reinsurers, third-party capital will continue to be available but not driving the show. I don't know if anything you'd add?

Yes, yes, we're definitely -- the competition we're seeing, especially on the CAT side is from retained earnings on traditional reinsurers more so than new capital projections.

Thanks, Dave.

And given that situation, I mean, there's a lot of expectation that you'll be in the market for your own stock given where it's trading and how much capital you have. But in this third-party business, a part of the reason why it's been so successful is because you eat your own cooking and your investors know that whatever risks they're taking, giving you money, you're also taking yourself. When we look at the minority interest on our balance sheet and we look at your own shareholders' equity, there's obviously some off-balance sheet third-party capital as well. They're -- somewhere close to the same amount. If you're returning capital, do we ever think there could be a situation where third-party capital is a bigger balance sheet for RenRe than the proprietary capital of the company?

It's a good question. One of the things we look at each year is what is the right balance between what we're retaining and what we're sharing. And I think Dave mentioned, we share about 50% of our property CAT and anywhere, depending on the line of business, 15% to 30% on the Casualty, Specialty lines. There are scenarios where even -- we can make this narrow enough that within a certain target strategy, we are larger in third-party capital than we are with our own deployment of risk into that narrow strategy. So there are scenarios where we could have larger third-party balance sheets than our own balance sheets. I don't see that occurring in '26.

We'll take our next question from Andrew Kligerman with TD Cowen.

I was a little curious shifting over to the Casualty line or the Casualty and Specialty area. It looked like you talked on the call about pricing being very firm, but you're still pulling back a bit on the U.S. general liability. Yet, when I've talked to others in reinsurance, I've been hearing that there's certainly upward movement in pricing at the primary level, but a lot of reinsurers are kind of softening their pricing a little bit. So I was wondering if you could share some color on what you're seeing in the Casualty reinsurance line and how pricing is coming along?

Thanks, Andrew. This is David. So we're seeing a continuation of what we've seen for the last several quarters as overall, the market is responding to elevated loss trend. And we're seeing the market respond in a couple of different ways. Most of the pricing increase has happened at the insurer level. And if reinsurance is normally quota share of an insurer, so we're taking a share of every policy they write every loss they pay. And as they get additional rate, that inures to our benefit. So that's what's going on in the market. They've been getting rate, which has been exceeding trend. They're also investing in better claims management practices. So the third angle that we have to improve our own portfolio is to take action and reposition our reinsurance lines to those that we think that are doing that the best. And that's what we've been doing over the last year. It's just a standard part of how we would always optimize our Casualty and Specialty segment within a class like we're doing in general liability and then also the overall balance between classes.

I see. So Ren is not increasing their ceding commissions at all. It's sort of steady as she goes.

So the ceding commissions that we pay to our clients have been pretty flat. Most of the improvements in the economics have been insurers getting more rate and improving claims handling.

Got it. And then just one last thing on Casualty. So you talked about a slight favorable development. And I was wondering if you could provide some color around the vintages, the product lines that it played out. Were there any big movements in one direction or another with a specific product or vintage?

Yes. So the way I think about the overall Casualty and Specialty segment, like Bob described, there was slight favorable development. That -- our view is that was flat. That was stable reserves. And we think just from the top down, we've shown a lot of favorable development as a group, a lot of those products, our reinsurance book. A lot of those clients buy products across Property, Casualty and Specialty. Within Casualty and Specialty, reserves have been stable. Combined ratios are in the high 90s, and that -- the main contribution we get is from the float, which is an attractive piece of the ROE contribution with stable reserves and growing float.

We'll take our next question from Bob Huang with Morgan Stanley.

My first question is a little bit of a follow-up on what Josh was asking earlier. If we look at -- so one of the things you've said was that you talked about loss volatilities are smaller now. And so consequently, earnings are more steady despite catastrophe risk. If this trend continues longer term, doesn't that also imply that longer-term pricing should be pressured by stable earnings, less volatility to me feels like it should have less pricing volatility as well? Like theoretically, how do you think about that? Like should we see less pricing increase going forward if we have medium-sized hurricanes running through Florida here and there?

Yes. So thank you for the question. I'm hearing 2 things in the question. What's going on in the market and what's going on at RenRe. What -- the volatility from catastrophes is relatively consistent from an exposure perspective and how it represents -- thinking -- you mentioned Florida -- in Florida. RenRe is different. We have much greater investment leverage with that, we have more stability coming from the investment earnings in our portfolio. We have a much bigger fee platform, which provides stability and buffers volatility. And then our property CAT has been touched on a few different points is shared between third-party capital and our own capital. Third-party capital represents the stability of fees. Our own capital represents the return for risk. So it's -- what we're trying to say is the representation of volatility from catastrophes is buffered because of who we are today compared to who we were 5 years ago. Within the market itself, it is about unchanged.

Okay. That's very helpful. My second question is on gold. Just given the volatility that we've seen -- and obviously, it was a strong quarter for gold in the third quarter. But just given the volatility in gold in October. Curious if you have any updates on holdings? Or have you have any strategy or change in strategy or change in view about the investments in gold? And then what is the impact of gold on the book value for October?

Thank you for the question. Our view on gold from a strategic standpoint hasn't changed. We've been in gold for all of '25 and a good bit in '24, and we went into it as more of a hedge against our portfolio with the geopolitical environment and a lot of change going on and the shifting of the central governments and how they approach their base currency. This has proven to be a good strategy. I mentioned in my comments that part of our mark-to-market gain, the $258 million, a large chunk of that came from the gold position that we have out there. There's been some volatility up and down here in there, but we still see that within our strategic remit for the foreseeable future.

We'll move next to Mike Zaremski with BMO.

I was curious on the Property segment, if we look at property, IBNR reserves and additional case reserves, those levels are hovering currently in the 70%-plus range. We all have the historical levels, they bob around a lot, but still above like the long-term historical levels. I'm just curious, do you -- is there a way for you guys to frame whether the reserves for those 2 buckets are kind of higher than historical levels for a certain reason, or is there any color you could add to try to frame whether there's some of just maybe some added conservatism here, how you guys think about it?

Yes. There's no added conservativism or any shift in the way that we've built our reserves. The property side, it can be difficult because any movement in any single large event can have a meaningful impact on whether we have adverse or favorable development within the Property segment. The -- I spend less time when I look at our reserves differentiating between ACR and IBNR for the property CAT portfolio, and I look at it as relative -- the normal process for us is looking at each large event on the anniversary of the event. So what you saw some third quarter events coming through with some favorable development from older years. I would say there's no story to tell with regard to the numbers or the way that you're looking at the reserves there, it's pretty much steady as she goes from a reserving perspective.

Okay. Got it, got it. Well, it's been a good thing you guys have been releasing a lot more than expected. So I'll keep trying to figure out how to develop that. Maybe just pivoting, you've made the point, and I think we got it that this year, because 1Q isn't a benign year for large losses, for example, would you be willing to frame kind of if you look at the year-to-date 9 months combined ratios, you could either use calendar year or accident year or both. Would you still describe this year, 9 months year-to-date as being below average, better-than-average year or about normal? Any help there?

It's a question because there's so many moving parts and we can get to this taking 20 different journeys. This journey began with a large wildfire loss and then light wind season and then some favorable developments and strong pricing. If I look at the economic balance sheet and our modeled loss ratios and then I look at the actual loss ratios that produce, they're not wildly apart. So it's hard to say because this is an event-driven book. So one change in the fourth quarter with the earthquake somewhere can change things dramatically. But this year doesn't look wildly dissimilar than our modeled portfolio.

We'll take our next question from Meyer Shields with KBW.

I don't know if there's a question for Kevin or for Bob. But when you have the sort of favorable development that we've seen in recent quarters in either the catastrophe segment or in property. How does that flow through to the models that you're using for pricing?

It's all part of the information [ because there ] that we have out there. We look at our pricing. We look at our reserving, we do actual versus observed and what we do in terms of the pricing model. As we go into the 1/1 seasons, and David can talk about this, as we look at 1/1, whether it's Casualty or whether it's Property with an emphasis on loss ratios on property. As we look at the experience that we've had and over the years, we've seen that converge become closer, but that's based on the information and the data sets that we have. So they are connected, and we do observe that, and it does play into roles. But with reserving it's historical with pricing, it's forecasting in the future based on that information. I don't know if you want to add anything to that, David?

Yes. I think from an underwriting perspective, we take into account both qualitative and quantitative part of the risk when we think about future underwriting and rate change trend, that goes into the quantitative side. But some of the things that have driven favorable development will go into the qualitative side and take other property, for example, a lot of the terms and conditions like the supplements and deductibles have held up as claims have settled out. So something like that will go into our qualitative view, and that will have a positive impact on our expectations in future years.

Okay. That's helpful. And the second question, and I'm not really sure how to ask this, but Kevin, you talked about an increase in demand, which makes sense, I guess. When that materializes in the marketplace, is competition for that increased demand different from the renewing demand?

You're right. It was a difficult one to ask. It's also difficult to answer. So what's happened last year, just to frame and maybe as a real example is a lot of the demand came in at the top of programs. Not every reinsurer is equally hungry for high layers as they are for low layers. But those that traditionally write high layers will have probably a pretty consistent targeting for the new demand if it's within their target appetite already. One of the things that David mentioned is we took a greater market share of the increased demand last year. That was partially because we have vehicles that complement our own targeted demand. And secondly, we recognize that the rate adequacy is at such attractive levels we should deploy into that because we'll be able to retain it for several years and continue to produce attractive returns. So I would say it's generally consistent if it's already within their appetite. And it doesn't -- then it could be that it's between the traditional market and the CAT bonds, but it's not as if it's binary between third-party capital and reinsurers. It's really whether it's consistent with appetite.

We'll take our next question from Andrew Andersen with Jefferies.

Just on the Casualty and Specialty segment, I think you called out some higher attritional losses in the quarter. Was that on the Specialty side and more one-off in nature?

Andrew, this is David. I'll take it from an underwriting perspective. So it's been about 4 quarters now that we've had a higher view of Casualty trend. And so that has been baked in for the last 4 quarters, and there's no change there. And if you look at the comparable quarter, if you're comparing now to Q3 2024, that would be a difference. But that's been stable in the last 4 quarters.

Okay. And then just on the reducing some of the exposures to U.S. general liability, I think this kind of started the back half of '24. But maybe where are you in the reduction cycle here? Should we see this continuing throughout '26? And is it just ceding commissions that we need to see change here to get a bit more positive?

I think the thing with general liability is that the momentum in the market is very strong. It just needs to be continued momentum. So we'll be watching to make sure that clients are continuing to get rate above trend, continuing to vest in the claims. And with that, our appetite will be largely stable. If we see that slip, then we'll still be always optimizing the portfolio based on how we see the risk.

Yes. And one thing I'd add to Dave's comments is this isn't a re-underwriting of the Casualty portfolio. This is simply recognizing that certain companies are doing a better job changing claims behavior, underwriting and rating to address the elevated trend more effectively than others. So we just are continuing to optimize our portfolio into the best performers.

We'll take our next question from Alex Scott with Barclays.

I wanted to ask one on the capital. Maybe if you could frame for us the way you're thinking about the amount of excess capital you have based on the PMLs and all the things' you guys look at internally today. And maybe just help us think as well about if growth ends up being more limited next year or maybe more flattish, what would your approach to capital management and capital return be? How aggressive would you be in terms of taking the operating earnings and funneling it back?

This is Bob. Thanks for the question. There's a lot packed into the question. Let me see if I can open it up a little bit. In my prepared comments, I did talk about a couple of things, probably more than a couple of things. One is that the earnings capacity in the foreseeable future, we do feel strong. As we've talked about, all 3 drivers of profit, a couple of times on the call, and we pointed it out in our prepared comments. So we feel that the earnings, the numerator, if you will, is performing quite well, and we're expecting that to continue. We're focused on margins. We're focused on protection. Growth is challenging, but we'll continue to find it and deploy it where we can, like what we did in property CAT in the third quarter where we grew that. A lot of our comments were based on managing the denominator, which would be the capital aspect. And $1 billion this year. We expect the earnings trend to continue. We expect the capital generation to continue. And rather than accumulate capital, we're looking to give back -- return that capital in the form of buybacks as we've done and we're expecting that return to continue.

Got it. And second one I had is just if you could talk about an ongoing situation in California. And as we move into 2026, if there's anything we should be considering, particularly around 1/1 renewals that would be impacted by maybe moving out of some of those areas of California that you're impacted by?

Yes. Actually, we grew in California after the wildfires. I think the re-rating was in excess of what was required from the learnings from the wildfires that occurred. So from our perspective, we continue to like the California market. A lot of the issues that you're -- I think, that are resident within the market are affecting the primary companies more than they're affecting us as reinsurers because we're setting our own rate and our own terms for taking the wildfire risk out of California. So I would say our -- if everything continues as it is in California, our appetite is to continue to grow.

We'll move next to David Motemaden with Evercore.

Kevin, you had said, I guess, this year, which sounds like not far off from what you had expected from a model basis, 17% operating ROE year-to-date, including that $50 billion event. I guess just given sort of everything that you're seeing as we get into 1/1, do you think that -- how should we think about that ROE profile as we head into 2026, just given everything that you're seeing from a pricing standpoint?

Yes. So to be clear, the question was is this year an outlier from an average year with regards specifically to property CAT. So my comment was really on what is the modeled loss ratio for property CAT and to what's our actual. If rates are down 10%, you can assume loss ratios are up. So I would say the important thing is within property CAT, it's going to be a well-rated book of business in '26. It is just going to be slightly less well rated than it was in '25. So the guidance we're trying to give or the directional information we're trying to give is fees look strong, investments look strong. And the underwriting in '26 is largely going to look like the underwriting in '25.

Got it. And then I think, David, you had mentioned just more interest from third-party capital and some of the longer-tail liabilities. So I'm just wondering how you're thinking about that dynamic strategically, sort of how it can impact your business, the opportunities, the risks? I'd be just interested in your thoughts there.

Yes. We have a long history of finding efficient capital and matching a desirable risk. This is an opportunity for us. So we will look -- we know the capital that's interested in property CAT. We know the capital is interested in other property, and we know the capital that is coming in, a lot of it to the longer-tail casualty lines. A lot of it is capital that's already been active in Bermuda, many of which have been in the life sector. So these are -- it's a different strategy where they're looking at the reserves as funding their investment strategy, not looking for low beta risk, which has been the traditional third-party capital appetite for property CAT risk. We're well positioned to produce that risk. We're well positioned to structure vehicles that allow them to share that risk that we have. The other side of that is its capital that's coming in that we'll compete with. So we're just trying to figure out how it's going to move the market, if it's going to move the market and then how it can be a tool for us to service it and to bring fee income to our shareholders.

We'll take our next question from Ryan Tunis with Cantor.

I guess just for Kevin. So we're talking down 10% as sort of a base case. But I'm just curious, in a marketplace like this, as we move toward the renewal, what are the type -- for someone in your seat, what are the types of, I don't know, red flags that you'd be looking for that might suggest that the market is being a little bit less disciplined?

So it can be on any number of things. I am going into this renewal with optimism. It's going to be a pricing shift, not a terms and conditions shift, which I think is likely to be the case. Sometimes terms and conditions changing have material impact on economics and it's less transparent to see in the portfolio. I don't think that's what we're going to see this 1/1. So from my perspective, I think it will be a relatively transparent shift in economics, and we think it's in the ballpark of a 10% rate reduction. So there are numerous other things we'll monitor. We've got great underwriting capabilities. We have great tools to see changes in the portfolio. So we do see other ships. And economics that are less transparent than price, we'll react accordingly, but it's not my expectation.

Got it. And then I'll just end here with a couple of separate ones. First one is just for Bob. So in the 2024 10-K, the Property segment shows about $1.2 billion of IBNR for 2022 and prior years. I'm wondering after all the releases this year, if that's still a solidly positive number. And then just separately, just curious if there's anything you guys want to say at this juncture on Melissa exposure?

I'll handle the first, and I'll give exposure to Melissa to David. Generally speaking, that's a question the way I would look at that and approach it. Period -- our point in time reserves in property right now are about $6.3 billion now. And a year ago, they were $6.5 billion. So we've continued to build reserves. We've had some reserve releases, and they're mutually exclusive of one another. The reserve releases are based on information that we get over time and we act accordingly. We've got independent advisers that look at this and test it. One of them is PricewaterhouseCoopers. So as far as absolute levels, they're relatively constant.

Yes. And then -- Ryan, this is David. I'll take the Melissa question. First of all, it is a CAT 5, a very powerful Cat 5 directed on Jamaica. So our sympathies are with the people in Jamaica as they work through this. It's too soon to put any number on it. We have a couple of locations and not a lot of exposure in the Cat book, but a couple of locations in the other property book. So we don't think it will be that anything of an outlier financial event, but too early to put a number on it. And it is still a live event that's going to the Bahamas next. So we'll be continuing that. We also -- in the Cat book, particularly, we don't write any of the local Jamaica companies. So we've already looked into that part of it.

We'll take our final question from Tracy Benguigui with Wolfe Research.

Interesting comments on demand, but you also mentioned that supply outweighs demand looking ahead into 2026. So this is more of a macro question rather than a run rate question specifically, but if you had to take an educated guess, how much of the $800 billion-ish reinsurance dedicated capital need to leave the industry, whether it be from like CAT losses or capital returns to get to a state of equilibrium?

That's a -- I don't know how to answer your question. I would say what we look at is what is the over placement programs, and maybe that is a barometer as to kind of what level of capitalization brings us back to a balanced market. I don't anticipate substantial over placement. So that would indicate that we're relatively close to balance. The fact that rates or forecast or our expectation is down 10%, would suggest we're relatively close to balance. So I think there's a bit of -- sometimes bringing together the amount of capital and then the appetite for risk. I think the appetite of risk is unlikely to be wildly disconnected from the increase in demand, which will be less than what it was last year, but still there. So I don't think we're far out of balance from a willingness to deploy into the market. So I don't think it's a matter of X billion dollars leaving the market, and then we're back in. It's really about the perception of risk, and what is the comfort level for deployment into peak zone, particularly property CAT.

Okay. That was interesting. I understand the lot of property business that used to be underwritten by an insurer as a whole account backed by facultative reinsurance, and now that risk is being underwritten as shared and layered. So as a reinsurer, how is this trend impacting your opportunity set and relative pricing? Like I heard that some of the layers have different terms and conditions.

Yes, this is David. I think what you're referring to is a business that would go into our other Property segment or subsegment, you're right. CAT-exposed E&S business, a lot of that shared and layered, that's coming under competition. It's performed very well, but that competition for the large account E&S Fortune 1000 is where some of that is going on. That's a minority portion of our book. We also have positions in middle market, small commercial and homeowners. Overall, the book has performed really well. And like I think I said earlier, the favorable development we're seeing is a good example of how the terms and conditions that are on our portfolio are holding up really well. So there'll be some additional competition, but still optimistic with how that book is performing.

And this does conclude the time we have for questions today. I would like to now turn the call back to Kevin O'Donnell for any additional or closing remarks.

Thank you for joining today's call. We hope the comments were helpful. We look forward to the renewal and talking to you after year-end. Thanks again for joining.

Thank you. This concludes today's RenaissanceRe Third Quarter 2025 Earnings Call and Webcast. Please disconnect your line at this time and have a wonderful day.