RenaissanceRe Holdings Ltd. (RNR) Q1 2026 Earnings Report, Transcript and Summary

Good morning. My name is Madison, and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe First Quarter 2026 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, Madison. Good morning, and welcome to RenaissanceRe's First 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 Group 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 is 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. We are proud of the quarter's results, which reflect the strength of RenaissanceRe's business model and the value of our 3 drivers of profit. Once again, this quarter, underwriting, fee and investment income all contributed meaningfully to strong operating income. This is gratifying as the balanced contribution is central to the resilience we have been building and advances our strategy of reducing earnings dependency on any single market condition or source of volatility. Before discussing the quarter in more detail, let me start with the broader backdrop. Geopolitical risk is elevated. Markets continue to adjust to higher for longer rate environment and the macro environment remains increasingly fragmented, highly volatile and less predictable. Last year, I said that our business is anti-correlated to this kind of environment, and our results demonstrate that this remains true today. As the world becomes more uncertain and risk-averse, the value of the protection we provide increases. Our business is [indiscernible] the volatility others seek to avoid. We manage it to reduce our customers' risk in exchange for strong returns to our shareholders. Ultimately, our strategy is to absorb volatility, manage it efficiently in the ordinary course and produce results over time, recognizing occasional losses will occur. For the first quarter of 2026, we reported operating income of $591 million, a 22% annualized operating return on equity and operating earnings per share of $13.75. Tangible book value per share increased by 1.5% to $233.49. This reflects 2 influences, retained mark-to-market losses of $357 million and share repurchases of $353 million at a premium to book value. I will address the mark-to-market losses and share repurchases in a few minutes, but we view these as temporary drags on book value per share and believe they help create the conditions for continuing strong overall performance. Turning to our 3 drivers of profit, I will start with underwriting. We reported strong underwriting income of $589 million, driven by excellent current accident year performance and favorable prior year development. We benefited from approximately $160 million of favorable reserve development with proportionately larger contribution from other property. This reflects our proactive portfolio positioning and superior underwriting over the last several years, I want to highlight one accomplishment from the January 1 renewals that we alluded to last quarter. While rates were down low teen percentages, our team did an excellent job positioning into a more competitive environment. As a result, top line and property cat this quarter stayed relatively flat, excluding reinstatement premiums. Rates remain adequate, and we took an above market share of new business, which demonstrates the strength of our franchise. As I wrote in our most recent shareholder letter, when rates are adequate, underwriters should be taking more risk, and we are. Meanwhile, our Casualty and Specialty adjusted combined ratio was 99.4%. This was consistent with our guidance of high 90s and supports our view that the portfolio performed as expected. David, will provide more detail on our exposure to the war in the Middle East. In summary, we have limited exposure through lines narrowly designed to cover these risks, including war on land and marine war. I would not characterize our share in either of these markets as being outsized. Moving now to fee income, which performed equally well this quarter. We reported total fee income of approximately $94 million. Performance fees were the main driver of the upside reflecting strong current year underwriting results and favorable prior year development. Capital Partners continues to be an important source of persistent and diversified earnings. It allows us to leverage our industry-leading underwriting franchise to generate capital [indiscernible]. This complements the income we earn on our balance sheet, creating an additional value from our underwriting business. That is another important source of resilience and remains a clear differentiator for RenaissanceRe, especially in markets where clients value scale, reliability and flexibility. Moving to retained net investment income, which was $304 million for the quarter. We have executed well into difficult investment markets, and as a result, net investment income remains robust. This reflects the scale of our invested assets, the quality of the portfolio and a rate environment that remains favorable. Fixed maturity, short-term and private credit rates remained steady to higher during the quarter, which supported net investment income. Recent market moves allow us just to extend duration and lock in at higher yields, which should continue to support earnings power over time. We reduced our gold position during the quarter by about half. We originally put that hedge in place to protect the portfolio against inflation and geopolitical risk and it served that purpose well. As markets evolve, we chose to reduce the position, lock in gains and lower potential future volatility in the portfolio. Importantly, the position remains profitable both in the quarter and since inception. Let me spend a moment on the mark-to-market losses. The same market movements that pressure current period valuations also improve reinvestment yields and support future earnings power. So while book value takes a modest mark today, prospective earnings improve tomorrow, we view that trade-off as economically constructive. In addition, these losses largely unrealized, so this is more of an issue of timing reflecting the quarter shift in the yield curve. The investment portfolio remains high quality and its underlying earnings capacity remains strong. Consequently, we remain comfortable with the overall credit quality of the underwriting securities. That is also true of our private credit portfolio. About 5% of our investment portfolio is in private credit. Our exceptional capital strength and high liquidity are the foundation for this measured allocation to private credit, which enhances our book yield due to the associated illiquidity premium. Bob will provide more color on our credit book in his comments. Shifting now to capital management, where our approach remains unchanged. We have a consistent track record of strong earnings performance, excess capital and ample liquidity. That positions us to continue returning substantial capital to shareholders. In this quarter, we repurchased $353 million of our shares. We did so in a disciplined manner, allocating capital where we see favorable risk-adjusted returns. This includes allocating to our own shares when they trade at levels we consider compelling relative to intrinsic value and future earnings power. Since 2024, we have repurchased over 20% of our outstanding shares. This total is almost 11 million shares or $2.7 billion up until April 24. We did this at very attractive valuations very close to current book value, which should boost returns to shareholders with minimal dilution. At the same time, we remain well capitalized to support our underwriting portfolio, our partners and future growth opportunities. Ultimately, capital management should support long-term growth and tangible book value per share and long-term value creation for shareholders. That remains the standard we apply. Looking ahead, the message is continuity, not change. The underwriting environment remains competitive, but rates remain adequate. Ultimately, our objective is to maximize long-term growth in tangible book value per share and operating earnings by preserving margin, constructing the right portfolio and allocating capital with discipline. That has been our approach through the cycle, and it remains our approach today. When we think about the balance of 2026, our outlook remains constructive. The underwriting portfolio is performing well and our earnings model continues to benefit from multiple diversified sources of income. With that, I'll turn it over to Bob to discuss the financials in more detail and then to David to provide additional color on underwriting and renewals.

Thanks, Kevin, and good morning to everyone. We delivered a strong start to 2026 in a quarter with both geopolitical and economic volatility. Our diversified earnings model continued to produce superior returns for shareholders. We generated operating earnings per share of $13.75 an annualized operating return on equity of 22%. Annualized return on equity was 10.5%, which included $357 million of retained mark-to-market losses. Importantly, each of our drivers of profit contributed meaningfully in the quarter, providing a diversified and resilient earnings profile. There are a few numbers that will help demonstrate this. First, 15 points, which is the contribution from fee income and retained net investment income to our overall return on average common equity in the quarter. This provides a solid foundation of earnings each quarter, which we then build upon with income from our underwriting business. Second, $589 million, which is the underwriting income we generated this quarter. This reflects disciplined risk selection and cycle management. And third, $353 million, which is the capital we returned to shareholders through share repurchases during the quarter. We continue to view our shares as attractive at current valuations and share repurchases remain an important part of our capital management strategy. Taking a step back, this performance is a continuation of the strong results we have been delivering over the last 3 years. In the last 4 quarters alone, we've delivered $2.5 billion of operating income with an operating return on average common equity of 24%. With such a strong base of earnings, we are better able to absorb volatility from a large event in any 1 quarter while continuing to grow shareholder value over time. Now I'd like to turn to a more detailed view of our 3 drivers of profit, starting with underwriting. Let me begin with the key point. Even as rates decline in some parts of the reinsurance market, our underwriting book remains highly profitable. In the first quarter, we delivered an adjusted combined ratio of 72%, reflecting disciplined underwriting and portfolio construction. We reported favorable development across both segments, with most of it coming from other property where we fully retain in our bottom line results. Property Catastrophe, we reported a current accident year loss ratio of 10.2% and an adjusted combined ratio of 19.2%. This reflected 11 percentage points of favorable development across a range of accident years. In other property, we had another excellent quarter with a current accident year loss ratio of 55.5% and adjusted combined ratio of 56.1%. This included 29 percentage points of favorable development, primarily from our non-cat attritional book. Casualty and Specialty remained in line with our expectations with an adjusted combined ratio of 99.4%. Shifting to overall gross premiums written, which were $3.4 billion, down 16% from the comparable quarter or 9% without reinstatement premiums. It is important to remember that our results last year included the California wildfires, which increased loss activity and drove most of the $340 million of reinstatement premiums in Q1 2025. After accounting for reinstatement premiums, property catastrophe gross written premiums were nearly flat. Other Property was down 7% and Casualty and Specialty was down 13%. David will discuss this in more detail, but these movements reflect deliberate portfolio shaping towards the most attractive classes of business. Property Catastrophe is generally our highest margin business, and we have successfully found opportunities to deploy capital to grow selectively, which help offset the impact of downward rate pressure. In Casualty and Specialty, we have continued to trim back exposure in general casualty. We have also reduced on certain specialty classes like cyber, where rates have been under more pressure. Professional liability premiums were up in the quarter. However, this is not reflective of growth in the portfolio. It was driven by lower premium adjustments last year related to -- lower premiums last year related to negative premium adjustments and a reclassification from professional liability to general casualty. Looking ahead, in the second quarter, we expect other property net premiums earned of around $350 million and attritional loss ratio in the mid-50s, and Casualty and Specialty net premiums earned of approximately $1.3 billion and an adjusted combined ratio in the high 90s. Turning now to fee income, where we generated $94 million of fees with management fees of $48 million and performance fees of $46 million. Performance fees were higher than our expectations due to a combination of strong underwriting results, favorable development and a onetime recognition of deferred performance fees related to a return of capital by DaVinci. Looking ahead to the second quarter, we expect management fees to be around $50 million and performance fees will vary by quarter, but should come in around $120 million for the year, absent any large loss events or favorable development. Turning now to investments where retained net investment income was $304 million. This was down about 3% from the fourth quarter due to lower average interest rates in the first 2 months of the quarter. We recorded $350 million of retained mark-to-market losses in the quarter. About half of these are related to our fixed maturity portfolio and the other half related to equity losses, which were consistent with the volatility experienced in the broader market. While increased treasury yields have a short-term negative impact, they also improved reinvestment yields, which support our longer-term earnings power. During the quarter, we took advantage of financial market volatility to adjust the composition of our portfolio. First, we reduced our retained investment portfolio's exposure to gold from 5% to 2%. In doing so, we realized gains from a hedge that has performed well for us and has been profitable both in the quarter and since inception. Second, we increased our exposure to high-quality investment-grade corporate credit, where spreads and all-in yields offered attractive risk-adjusted returns. At the same time, we reduced our exposure to shorter-term treasuries. And third, through these allocation changes, we extended duration on the retained portfolio to 3.4 years from 3 years and increase the yield on the portfolio. In the second quarter, we expect retained net investment income to trend slightly up. Finally, I want to briefly address the private credit investments. The private credit assets are diversified across managers, sub-strategies, sectors, geographies and vintage years. We invest through institutional closed-in structures run by high-quality managers. We emphasize senior secured lending and other areas where structure, collateral, and manager selectivity provide downside protection. Further, we have limited exposure to currently strained areas such as software or through [ BDCs. ] We believe current volatility provides opportunities to selectively increase our exposure to private credit. In summary, our investment portfolio performed well, and we took advantage of market volatility to incrementally improve the investment portfolio composition. We believe these changes will improve expected net income on a growing invested asset base. Moving now to a few comments on tax and expenses where our overall effective tax rate for our GAAP net income was 6%. We had a few one-off items, which benefited the tax rate, and we expect it will return to low double digits next quarter. As a reminder, although noncontrolling interest results are included in pretax income, we are not taxed on the earnings that belong to our capital partner investors, which reduces our GAAP effective tax rate. This quarter, we also benefited from the Bermuda substance-based tax credits. As you will recall, last year, we were able to realize 50% of the value. In 2026, we're able to recognize 75%. About 2/3 of the value is reflected in underwriting and had a 90 basis point impact on the combined ratio with the remainder in corporate expenses. Inclusive of the credits are -- inclusive of the credits, our operating expense ratio for the quarter was 4.1%, up from 3.7% in the comparable quarter or flat when you factor in the impact of reinstatement premiums in the first quarter of 2025. There are a few onetime reductions in the quarter, which pushed this ratio down. But looking ahead, we continue to expect our operating expense ratio to grow to 5% to 5.5% over the year as we continue to invest in the business. Let me close now with capital management, where our earnings strength and consistency continued to generate substantial capital. During the quarter, we repurchased 1.2 million shares for $353 million at an average price of $289 per share. And through April 24, we repurchased an additional $105 million of our shares for a year-to-date total of $458 million. We expect to continue our disciplined approach to capital management in 2026, first, by seeking to deploy capital into desirable underwriting opportunities; and second, by returning excess capital to our shareholders at attractive prices. So in summary, I'm pleased with our performance in the quarter. Each of our 3 drivers of profit continue to deliver strong results and demonstrate the benefits of our diversified earnings model. And with that, I'll now turn the call over to David.

Thanks, Bob, and good morning, everyone. In the first quarter, we delivered strong financial results across each of our drivers of profit and differentiated RenaissanceRe in the market through superior underwriting execution. I couldn't be more pleased with the underwriters performance. The team retained profitable business, grew selectively and maintained underwriting discipline with a focus on preserving margin. Great adequacy across the portfolio remains attractive and should continue to support strong shareholder returns. At each renewal, our underwriting team has 2 objectives. First, deliver our market-leading value proposition to clients and brokers. That supports a durable pipeline of renewable business, first call status and favorable signings that are resilient to competition. Second, construct the optimal underwriting portfolio across business segments to support each of our 3 drivers of profit and generate capital efficient, attractive returns both in the current year and over the cycle. Our underwriting team's excellent execution on both objectives continues to differentiate RenaissanceRe. We combine underwriting expertise, portfolio management and capital flexibility to identify the best opportunities, and we are able to convert those opportunities into signed business because of the value we bring to our clients. We support through consistently over the years, offered large lines and lead market quotes, often when others will not. We transact with them holistically across products, geographies and balance sheets. And when they have claims, we differentiate with speed of payment and claims insights. This is why we are successful in securing the lines we target even when programs are oversubscribed. It is also why we have been able to capture more than our market share of new demand and continue to shape the portfolio towards more attractive risks. Our first quarter results demonstrate the continued efficacy of these actions. Our portfolio drove underwriting income of over $580 million, supported by a strong current accident year loss ratio of 53% and favorable prior year development across both segments. Let me cover our segments in more detail, starting with Property. As we discussed last quarter, the January 1 book saw property cat reinsurance rates down on average in the low teens for our portfolio. U.S. accounts were down closer to 10% and international and global accounts closer to 15%. At today's rates and favorable terms and conditions, property cat is still highly accretive with strong rate adequacy. We successfully deployed capital into this attractive market. We retained the majority of our portfolio and deployed $1 billion of new limit. This was a strong team effort and it demonstrates our ability to access high-quality opportunities in a competitive but still very profitable market. As a result, gross written premiums in property catastrophe, our highest margin business, were roughly flat, down only 3% from Q1 2025, excluding reinstatement premiums. Specifically, we deployed additional limit by focusing on 2 main areas. First, we grew on accounts and layers with the most attractive margins, such as select California deals impacted by the wildfires and certain nationwide accounts. Second, we grew with several large U.S. clients where we captured new demand on business, which remains highly rate accurate. Global accounts and international business experienced more rate pressure than the U.S. portfolio. These accounts remain attractive due to the diversified portfolios we maintain with them and the pipeline of renewable business they represent. We also saw opportunities in the retro market to purchase additional protection at attractive terms. Ceded rates were down high teens across our portfolio. We are a significant buyer of retrocessional protection and our first call for purchasing opportunities, similar to our position in the inwards book. In addition, we upsized our Mona Lisa cat bond at significantly more attractive terms and conditions. Looking ahead, we are making good progress on the U.S. midyear renewals. We've already bound about half of our U.S. midyear portfolio and roughly half of that has been on private terms. The Florida market continues to benefit from strong pricing, reduced social inflation due to [ tort ] reform and robust terms and conditions. As a result of this improved environment, policies at Citizens are at a record low. The shift from public to private markets benefits the entire distribution chain, including increasing demand for reinsurance. We grew in Florida through the Validus acquisition and organically in 2025. I feel confident in the current positioning of our portfolio and our ability to access profitable business from existing programs and new demand in Q2. In other property, we continue to shape the book to reduce peak exposure while preserving attractive margins. The business is performing well with strong current and prior year loss ratios, reflecting the quality of our underwriting decisions and our disciplined management of the book. Terms and conditions remain strong, but pricing is under more pressure. We have trimming exposure in the most pressured areas and improving expected net profitability through ceded reinsurance. Turning to Casualty and Specialty. Market conditions are a continuation of what we experienced at 1/1. We see ongoing rate increases in general liability, which are necessary in order to keep pace with loss trend, and we see increased competition in specialty and credit lines in response to recent profitability. We've been optimizing the Casualty and Specialty book through risk selection, portfolio mix and greater use of ceded reinsurance. Our team has done a fantastic job of underwriting our clients' business across the various classes they purchase. This is especially important for the Casualty and Specialty business as it allows us to pick the best deals within each class and construct a more diversified portfolio. In general liability, we have reduced on deals, which are most exposed to social inflation. Our exposure to this class is down 40% over the last 2 years, but premiums are down significantly less because of rate increases. In addition, we have been proactively shifting the portfolio mix to wait the best returning business with specialty and credit now making up more than half of the portfolio. We've consistently used ceded reinsurance in the segment to manage risk and optimize returns. And at 1/1, we found new attractive opportunities to increase these protections on long tail lines of general and professional liability and specialty classes such as marine and energy. Today, we see 20% of Casualty and Specialty premiums compared to 13% a year ago. As in Property, we see the entire market from an inwards and outwards perspective and are uniquely positioned to construct the optimal net portfolio. These actions are important examples of how we shape the portfolio. They allow us to stay on the right panels, preserve valuable options and enhance the overall quality of the book. Improved margins will take time to emerge, but at the same time, we continue to benefit from the investment income generated by float on casualty reserves. So even in a period when underwriting margins in casualty remain tight, the business continued to support book value growth and shareholder returns. Before I close, I want to address the war in the Middle East. Based on what we know today, we do not believe the war will have a significant impact on our book for several reasons. First, we have low underwriting exposure to the region. Second, war is excluded from standard property policies. Finally, our potential exposure would come primarily from our specialty portfolio, specifically war on land and marine war, and we purchased retrocessional protection on these portfolios. War on land is a line where property damage from war is explicitly covered, modeled and priced for. Some of the damaged hotels and refineries in the region have purchased this cover, but take-up rates and coverage limits are relatively small compared to property policies. Marine war coverage is included in most marine policies, but can be canceled and repriced on 72 hours notice. We have detailed information on locations and vessels that have been hit, and we'll continue to monitor developments closely as the war evolves. Stepping back, we continue to manage our underwriting portfolio to generate attractive returns even in a competitive market. We are growing where economics are attractive and reducing where they are not. That discipline supports all 3 of our drivers of profit. Property is contributing mostly through underwriting income and fee income, while Casualty and Specialty is contributing mostly through fee income and investment income. All of these factors support strong shareholder returns and sustainable earnings power. And with that, I'll turn it back to Kevin.

Thanks, David. In closing, this was a strong quarter and another good example of the earnings power and resilience of our business. Each driver of profit performed well. Underwriting was especially strong, including excellent current accident year performance and significant favorable development. Fee income exceeded expectations. Net investment income remained robust with stronger reinvestment economics supporting future earnings power, and we repurchased shares in a disciplined way while maintaining a strong capital and liquidity position. Taken together, this quarter demonstrates what RenaissanceRe was built to do, generating attractive returns across environments by combining underwriting expertise, third-party capital management and investment capability. Three diversified drivers of profit rather than any single one allow us to deliver more consistent earnings through the cycle than we could have produced even 3 years ago. The market remains competitive, but opportunities remain attractive. Most importantly, we remain focused on the same objective that guides our decisions every quarter, grow earnings, compounding book value over term, and creating long-term value for our shareholders. And with that, we'll open it up for questions. Thank you.

[Operator Instructions] And we'll take our first question from Elyse Greenspan with Wells Fargo.

My first question is on the midyear renewals. I was hoping, I guess, it's a couple of parts, right? You guys said, I think you bound around half of the U.S. book already. So I was hoping to get a sense of the pricing you saw on what's been bound expectations right on the remainder that will be bound between now, right, and the midyears? And then are you guys observing any changes in demand across that renewal?

Elyse, this is David. So I think the Q2 deals that we've seen so far is pretty much a continuation of what we saw in Q1. In Q1, our rates were down mid-teens in the portfolio, but that was split between closer to 10% for U.S. cat and closer to 15% for international and global. So we've seen that mostly continue. Into Q2, we were still seeing a lot of opportunities for private terms. If you recall, last year Q2, there was a lot of Florida business that we were able to access a lot of private terms. What we're able to do with these early renewals is lock up our capacity early at terms better than the market and the clients are able to fill up the placement from there. So we're really encouraged by how the team has been able to engage in that. New demand is actually higher than we thought at 1/1. If you go back a little bit, we were saying $20 billion of new demand in 2024, $15 billion in 2025, and we thought $10 billion is our estimate for 2026. That's looking closer to $15 billion now, but we won't know until all the Q2s are done. So we're seeing really good opportunities across the normal Q2s and the Florida book. That growth in demand, I'd also add, is from a lot of core personal lines clients, which are buying new reinsurance because they have growth in [ TIV ] and keeping up their programs with inflation. So really good combination for us to deploy capital into that.

And then my second question, can you just give us a sense of how much losses you booked for Iran in the quarter? And I'm assuming that all stays within the Specialty Casualty segment within the combined ratio there. And then would you expect to book additional losses in the Q2?

So let me start there. As David had mentioned, we're generally somewhat underexposed to the lines that are most exposed to the Iran war. We have good transparency on the ships that were hit and the other on land targeted properties as well. And those are all reserved within our portfolio. Additionally, we are being cautious in thinking about the uncertainty from the ongoing war and being cautious about releasing IBNR within the Casualty and Specialty segment. The losses are within Specialty. They are within marine and marine energy. But it is fully reflected. If more happens in the second quarter, we'll have to reflect that in the second quarter, but we feel good about where we are. It's really just a couple of points into the Casualty and Specialty segment, but it doesn't foreshadow what could be happening going forward.

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

So in Bob's prepared remarks, he spoke about the operating expense ratio moving to somewhere around 5.5%. You said on the last conference call that you said you were targeting 5%, 5.5%. You did 4.1% this quarter. I guess a few questions. Number one, that's a lot of money, 150 basis points in annual expenses. What are you investing in? And two, don't you get the offsetting tax benefit from the payroll tax adjustment? And isn't that pushing that down at the same time you're guiding investors think it's going to rise?

Josh, thanks for the question. I did address in the prepared comments, but let me expand a little bit more. The 4.1% that you saw in the first quarter was down because of some onetime items that came through, typically nonrecurring in the first quarter. The core is probably closer to mid-4%, maybe mid 4-plus, maybe mid 4.6% that we have out there. Yes, we are investing in the business. Here's how I see it, 4.5%, 5% is relatively -- has a very relatively low expense ratio relative to the industry. So we feel good about that. That gives us the opportunity to invest in people in our platform to be able to operate at scale, and we will continue to operate at scale. Specifically, we're building out a new front office system for REMS that we've talked about before. So these are significant investments and we expect to continue over time to grow so we need that operational expense base to be there. And yes, we do get -- for expenses that we incur in Bermuda, we will get that tax credit relative to the people and what we invest in nonpeople. So we did reflect whatever we're investing will come in as a small offset to it. And I did also say, we expect to grow into this over the course of the year, okay? So it's a gradual...

Okay. So 5.5% is not your targeted 2026 expense ratio? You expect it to creep towards 5.5% through year-end?

5% to 5.5%. We have control over that in terms of how we spend it, but it will grow.

And are these onetime expenses? Or are these -- is this like an investment in capabilities that will moderate in '27? Or do you think that's going to be the new normal?

People are part of our run rate. When we build out a system in REMS, that's a nonrecurring over time.

And we'll take our next question from Mike Zaremski with BMO.

Okay. Great. Going back to the commentary about the Specialty segment, the net gross kind of changing. It sounds like that's a permanent change. But there was no guidance change on the kind of combined ratio in that segment. So just curious how we should think about it? Are you laying off just more tail risk? I know that segment, especially on the marine side had some cats in recent years, even though I don't know if cats are embedded within that high 90s guidance for that segment, too.

Mike, this is David. I can address what we're doing from an underwriting perspective on that. So first of all, in the Casualty and Specialty segment, we've used ceded for many years. If you go back about 10 years, we ceded about 28%, 30% of the book. So this is in the normal course of how we use ceded to shape the portfolio. We see the whole market inwards and outwards. So we're able to make those trades and construct the portfolio with all that in mind. The types of ceded that we've grown into has been more quota share on the long tail book and on the marine and energy book, we've bought more excess of loss with broader coverage. So those are the 2 things. They performed distinctly different roles. The quota share provides risk income in the short term, but it also provides protection if losses deteriorate. And on the energy side, it would provide some protection for events such as the Iran war to the extent that those might grow. So it's a really effective way to position the portfolio. And that's what we're accomplishing now on it, and we'll continue to -- we expect to continue to see opportunities throughout the year as capacity comes into the market and that the year develops.

Got it. That's helpful. And then switching to the investment portfolio. Bob, you talked about some fairly material changes, some of the -- I think, well, I have to kind of go through the transcript, but I guess at a high level, I just want to confirm, moving gold -- or sorry, taking profits in gold puts a good chunk of additional assets into the fixed income bucket, which probably extended duration, so we should add an additional bump to the fixed income run rate from that reallocation? Or are there other -- more moving parts that we should be thinking about?

I think -- thanks for the question. I did try. There was a lot going on in the portfolio, but when you really break it down, it comes in probably 3 kind of distinct buckets. One is the goal we reduced. I mean, as Kevin pointed out in his prepared comments, we knew that was going to be a good hedge. The value just accreted to us faster, so we reduced the exposure, and we still have a small piece of gold in our portfolio, which we think that's a prudent allocation across our investment guidelines that we have internally. Second is we focused on the structure of the portfolio, kind of holding in a higher rate for longer. My comment about reducing short-term treasuries that had a high yield and moving that out to investment-grade credit in a significant way allowed us to extend that and lock it in, hence, the duration increased. And therefore, we have a higher credit quality and gave us an impact to our new money yield that went from 4.8% to 5.1%. So that, we saw, was a good structure and a long-term position. And then we wanted to clarify the importance of private credit to our investment portfolio. We feel good about it. And I think that's what I was trying to share in the comments. So if you break it down, it's really those 3 areas with an outcome of a little bit longer duration and overall a higher yield that you'll start to see trending in next quarter.

And Bob, just quickly, if you move further into private credit, opportunistically, what -- just roughly, what type of yields are there?

We don't really share, we are capturing the liquidity premium that we get above the investment-grade positions out there, which can range from 200 to 300 basis points. And then we have -- because it's hard to look at it because when you think about it, we've got direct lending. We've got distressed and we've got secondary, and they have different return profiles over time. So they're all performing within our expectations, in some cases, exceeding it.

And our next question comes from Andrew Andersen with Jefferies.

On the new demand at June, is that skewing towards more traditional layers versus aggregate covers? And of the aggregate business, what is the appetite to write that?

So the new demand has been -- I think the most important thing from our perspective is the quality of the pricing, the quality of the overall risk and the quality of the buyer. So we've seen demand come from sustained buyers, the nationwide personal lines companies, which are a big -- a core client base for us. There are some aggregate programs in there. I think our view on aggregate is that there is good -- good aggregates and bad aggregates. The aggregates that are placed in the market now and the ones that we write as part of our portfolio are well structured. They're attaching at the capital level, not the earnings level. They're obviously either well priced. And the level of attritional losses is really well understood by the market at this point. So they do make an attractive piece of the overall tower. But our approach to that new demand. We're a go-to-market on that middle and bottom end regardless of whether there's an aggregate program in there. So we can secure our line there and then use efficient capital sources to play on the top end as well and provide that one-stop shop across the board and then have really attractive returns on that, that meet the program for RenRe shareholders.

And on other property, can you maybe just talk about how durable the mid-50s attritional loss ratio there is as competition increases on that line?

This is David. I can talk about what we're seeing in the market. So we've -- the other property has had really good performance. It's had several years of sustained rate increases and improvements in terms and conditions. The rate is coming under pressure, but terms and conditions are still holding, and we've seen favorable claims trends. With the current pressure on rates, we have shifted some of the capacity there and taking some risk off the table, finding it better priced in the cat book, and mainly some [ floor ] risk there. So we have confidence in continued sustained returns on the other property book. We have options to manage through some of the softening. But I'll let Bob comment on going forward.

Yes, this is Bob. As I said in my prepared comments, mid-50s is where we feel comfortable given the mix of the portfolio. And it will have some ups and downs based on large events that come through. But right now, mid-50s, I think I said 55, plus or minus, is kind of where I'd think about it.

And our next question comes from Meyer Shields with KBW.

When we think about this year's pricing for Florida at midyear, is there any reduction in maybe the provision for initial skepticism over how well the reforms were going to work? In other words, besides risk-adjusted pricing, is there another discount working its way into pricing? Or is that not relevant?

Yes. So I think, often, we talk in terms of risk-adjusted pricing. So I would say that if we look back at our credit for the reforms when they're originally put into place, we have seen more tangible benefit from the reforms, which is coming into pricing. But I would say that the overall economics within Florida are reducing on a comparable level to what we saw at 1/1, and the portfolio is extremely well rated. I think we've got good flexibility to leverage into the market. We're finding new opportunities to growing in Florida to give you some sense as to how much we like it. David's comment between other property and property cat. Right now, property cat is returning, particularly in the Tri-County area, stronger returns than some of the other properties, and we've made some shifts there. So we like the portfolio. We have begun to give more recognition for the reforms, which I think is warranted and continue to think the market is highly accretive.

Okay. That's very helpful. And then a question for Bob. So you gave guidance for fees in the second quarter. But the press release also noted some funds returned to some of your partners. Does that have an impact in future quarters management fees?

Just to make sure I got the question, Meyer, correctly. You're talking about the capital return we had this year for the joint ventures to the $730 million. That's really a distribution that would be out there. Does it affect this year's performance? No. We'll keep in each of the vehicles, the capital we need to deploy versus currently in our expectations. I mean, we had a good year. I mean, they had a good year in 2025. You can see the [ NCI ] was $900 million plus that we earned. We're returning some of that back to our -- the investors in those funds. So I think that's a good thing. That was the bulk of it, the [ $700 million ] and we're positioned well for -- as we underwrite in '26.

Yes. One thing I'd add to it. The vehicles are about the same size as this year as last year. So this is really just returning earnings. And it's our normal process. We do it every year.

And our next question comes from Pablo Singzon with JPMorgan.

Most of my questions have been answered already. Sorry about that. I'll drop off.

And we'll move next to Ryan Tunis with Cantor.

Just one from me for Kevin. Kevin, I was hoping that you could just remind us of the history of Ren in terms of appetite for writing Florida domestic companies. I feel like at one point, they were a good number and then there were almost none. And then maybe put in perspective, given where the health of the market is today, how you compare that road in the history in terms of your willingness, not just to write in terms of size, but just breadth of [ cedes. ]

Yes. I've been here almost 30 years, and I've seen us participate in lots of different ways in the Florida market. We remain highly influential in the Florida market even today, although it is a much smaller percent of our overall premium. I can reflect back into early 2000s, probably late '90s where that was about 30% of our premium coming from Florida broadly participating, highly structured over the years, and I think we've talked probably starting 5 to 7 years ago that we decided to take more of our Florida risk coming through nationwide programs. We always had good participation on some of the larger programs in Florida, larger riders in Florida, and then it kind of selected more aggressively as we went through the stack of domestic companies. Right now, our participation remains split between some of the larger Florida companies, probably a little bit more breadth into the mid-tier companies and a lot of exposure still coming from the nationwide. So a smaller percent of the portfolio, still large enough to drive the tail in the -- our tail capital for the property cat portfolio for Southeast hurricane. So it's a constantly evolving strategy in Florida, but it's one in which we know extremely well, and we have all the levers to be able to think about where best to take it other property nationwide, large domestics small domestics.

Our next question comes from Tracy Benguigui with Wolfe Research.

Most of my questions were asked. Let's just have one for me. I was going through your proxy in your 2025 ROE target of 10.27% in the STI plan. It stood out given how far above you've been operating. And it naturally raises questions about potentially being in the long haul of pricing decreases, given it will take a lot for your ROE to fall to that level. You convinced me very well that you can land at 15% just from NII and fees. So could you help us understand how you want investors to interpret this ROE target?

It's not a target. It's simply something that is used formulaically to produce a change in the slope of the curve in our compensation program. So we are -- we try to be careful not to put it out there as a target. It's simply a formulaic input to a formula for long-term compensation. There's no perfect way for compensation to work for the types of risk we're taking, where casualty risks are stretching 7 years and volatility from property cat doesn't always reflect the performance of the quality of the underwriting. So it is simply, I think, a good way for us to think about how to compensate employees over the long term. If you look at me, my compensation varies with the performance of the company. But more importantly, I am deeply invested in the company with a large holding, and I put myself very much aligned with shareholders in the way I think about the performance of the company. One product for that is you can think about it as closer to cost of capital than a target for ROE, but it's not exactly that. It is really simply a mechanism for us to think about changing the slope in the curve of a compensation scheme.

Our next question comes from Matthew Heimermann with Citi.

Two quick questions. First was just thinking about all having fewer opportunities than you to deploy your capital than you do quantum of capital and recognizing you've repurchased all the shares you issued with Validus. I'm just curious whether or not inorganic corporate development is on the table for you as you think about the outlook? And how that -- if so, just like at this point, given what you've grown into, what would be additive?

Thanks. Firstly, obviously, we're well positioned to think about inorganic growth, having fully integrated our last acquisition being Validus. Nothing's changed. If we see something that advances our strategy and is financially actionable, we would take a look and be able to execute. We are not looking -- we're looking to advance the strategy that we have. We feel like we're a complete company with each of the components for us to continue to be successful. So if something becomes available, I think we'd be on the list for people to call. But we're focused very much on executing the strategy that we have, and we see inorganic growth as an accelerant, not as a change.

Is it with -- just following up on the complete platform comment, is it unreasonable to think about perhaps business development that might have historically we would have thought about in traditional M&A terms may be taking place more in dedicated third-party capital solutions?

Yes. I think we're always looking at adding different capital to our franchise if it serves our customers. So I don't think of that necessarily as inorganic growth if we start a vehicle or bring a new structure online. But that's something that is kind of, I would say, fundamental to our strategy, not something that I would think of as inorganic, even if it is a strategy that we don't otherwise have today.

No, that's fair. Just for clarification, I was thinking about it more in terms of like maybe there's a book of business at a subscale participant and buying an entity doesn't make sense, but solving for both parties on a -- with third-party -- with additional capital and off-balance sheet way could make the difference.

We can do that. I think, again, I think of that, not to get too technical, often that type of structure is a renewal right structure, if it's a take out from an existing, and that's something we're pretty comfortable in knowing how to do. So all of that stuff are things that we look at. It's really some of the more production-focused stuff, the multiples still remain quite high, though.

Yes. And then one clarifier was just with respect to the $15 billion of potential incremental demand at midyear, can you just remind us, relative to what just to put it in kind of like underlying exposure growth terms?

Yes. The $15 billion that we referenced was $10 billion going to $15 billion, and that is for U.S. cat limit. So limited expenses exposed to primarily from U.S. cat buyers and U.S. cat exposure. We had $20 billion couple of years ago, $15 billion last year, and it's going to be between $10 billion to $15 billion this year.

If I -- and I can just use a rate online, similar rate online for that relative to the rest to kind of think about what the incremental exposure growth is then?

Yes, that will be a good start.

Our next question comes from Alex Scott with Barclays.

First one I had is on some of the comments you're making around the reduced exposure or I guess, over 40% exposure reduction to social inflation impact to -- the most social inflation impact to parts of casualty. Could you just extrapolate on what are you seeing there? What's preventing enough rate coming through that, that doesn't become attractive at some point? Like how far away are we from that? Are any of the initiatives in states other than Florida who's already adopted some tort reform, is any of that working? I would just love to hear the thoughts behind the reduction and whether at some point, that could become a growth area again.

Yes. I can give you a more detailed update as to what's going on there. Yes. So about the last 24 months, the market has recognized that social inflation and inflation in general and claims has accelerated. And that's when rates started going up. And 10 to 12 is our estimated range for loss trend, but that will vary by class, it will vary by subclass. And insurers are getting rate. Sometimes it's above that, sometimes it's around that. The key is trend is cumulative, and that rate has to keep going or we'll see slippage in combined ratios and loss ratios in the casualty space. So we're happy with where the business is headed. The insurers are doing the right things. Rate is the most easy way to measure that. The other areas that are important to the future success of the business is how insurers are investing in claims handling. And the [indiscernible] is highly successful in combating insurers and winning increasing awards. Insurers are now investing in the right data and technology, they're coordinating through the towers better. It's a C-suite issue all the way from the top down. That gets a lot of focus with insurance companies. The flip side of that is that it will take a long time for the investments they're making to start coming through the numbers because of the way these claims get processed. So we're watching that really closely, too. But the third area that we have in order to optimize our own portfolio is figure out an inflationary environment, which deals we want to be on, which deals we do not want to be on. And so that's where we've been saying, we've been reducing on the deals that are most exposed to claims inflation and social inflation, that would be deal structures where there's a lower layer excess of loss or covering the parts of the business that are most at risk for social inflation or if an insurance company isn't making the right adjustments in claims handling. And that's been the primary area of focus for us. I think going forward, like I said, the business is on the right track. We have a substantial position in that market. We have a leadership position. We're well positioned to grow if we see those margins turning around. But with the length of time it takes for margins to come through, we're going to be cautious there for now.

Got it. That all makes sense. And then the growth opportunity with some of the large ceding on nationwide contracts. Could you give a little more color there on like what's the opportunity? Why are you finding that more rate adequate? And do we need to think at all about just -- like is it enough mix shift for us to think about convective storm versus hurricane risk and having a little more exposure to some of the convective storm?

Yes. That's a great question. And if we just step back a little bit. So first of all, we've been able to deploy $1 billion of limit in Q1 into the market. That's the easiest metric for us to measure that there have been some rate decreases, so rates are roughly flat rather than showing the decreases that are going on in the market. But the rate adequacy overall in U.S. cat is still highly adequate, coming off the highs of the best markets we've seen in the generation. So we're really comfortable with the returns in the U.S. cat space. Now -- but not every cat deal is created equal. So not every layer, not every client. Our goal is to underwrite each deal, each client, make sure we have our temp confidence and our independent view of risk. And once we get that, we see a wide dispersion in terms of where the best deals and the worst deals are. And while there's overall strong level of rate adequacy, the team has done a great job in not only recognizing where the best deals are, but also having their client relationships to lock up the lines in those deals early. And that's another differentiator. So that's how we're approaching it and how that growth in deploying capital into a high-margin business is going to continue to impact returns going forward.

And our next question comes from David Motemaden with Evercore.

Just a quick one on Casualty and Specialty, just on the accident year loss ratio. If I back out the Iran losses, it looks like the loss ratio deteriorated by on 120 basis points year-on-year, and that's definitely above the sort of where it's been running recently. I was hoping you could elaborate on what was driving that underlying movement there.

I think if you go back and compare it to last year in the first quarter, again, comparisons to last year are difficult because of the wildfires. And we did take some -- we did take some specialty losses there, which would have elevated the current accident year loss rate. As Kevin said, we printed a current accident year. [indiscernible] Yes, but that included a couple of points related to the Iran war going on right now. So that's kind of a better starting point when you think about it in terms of where we are before you get events that will come through and drive that up.

We are not seeing an uptick on our loss ratio other than we've added a couple of points for Iran. So I'm not sure about the reconciliation you're doing, but that's not something that is part of our dialogue in managing the book right now.

Got it. And then maybe just quickly, just I know you guys don't disclose PMLs, but maybe just an update on how you think that will shape up just as we go through the midyear renewals here. I think you had talked about that being flat for Southeast wind. So I'm just wondering, is that still the case? Is it going to be a little higher now just because of -- it sounds like there might be more opportunities and more demand coming? Just hoping for an update there.

Yes, I'd say that David had mentioned, we're deploying a little bit more capacity into the market. That will push up the exposure we have for Southeast hurricane a bit. I would say if I was giving 10,000-foot guidance, I would say, relatively flat, biased a little bit, more exposure, but it's not really going to change the overall profile of the risk that we're taking as an organization.

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

Thank you for joining the call. We're proud of the results we achieved this quarter. We feel like the book is in a great position, and we look forward to talking to you next quarter. Thank you.

This concludes the RenaissanceRe First Quarter 2026 Earnings Call and Webcast. Please disconnect your line at this time, and have a wonderful day.