Earnings Call Transcript - RNR Q3 2025

Operator, Operator

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. I will now turn the call over to Keith McCue, Senior Vice President of Finance and Investor Relations. Please go ahead.

Keith McCue, Senior Vice President of Finance and Investor Relations

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?

Kevin O'Donnell, President and Chief Executive Officer

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 catastrophe, we have delivered operating return on equity above 20% 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 contributed to our success since 2023 should persist into 2026 and beyond. Looking back over our achievements. First, we grew into an attractive property catastrophe market, increasing our property catastrophe 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 catastrophe 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 a 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 catastrophe 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. Overemphasizing 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 the 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 catastrophe 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 catastrophe-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 risks and construct an attractive portfolio. Ending now with some comments on capital management. Consistent 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 catastrophe 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.

Robert Qutub, Executive Vice President and Chief Financial Officer

Thank you, Kevin, and good morning, everyone. We delivered excellent results this quarter with an 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 have 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 have 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. 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 is 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, for 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 unfavorable, however, was slightly favorable. 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 compared to the comparable quarter. Within both these segments, we continue to shape the portfolio. Specifically, in property, we grew property catastrophe at the mid-year 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 compared 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. 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 in 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 non-controlling 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 non-controlling 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 the 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.

David Marra, Executive Vice President and Chief Underwriting Officer

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 mid-year 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 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 renewals which are impacted by California wildfires, and some of our accounts are already secured on a multi-year basis. Our experienced team has a fantastic track record of underwriting 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 or 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 changes. To achieve this, we typically share about one-third 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 to 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 to deliver excellent returns. This book includes a combination of 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. 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 trends. 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 a 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.

Kevin O'Donnell, President and Chief Executive Officer

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 our ability to continue delivering superior shareholder value. Thanks. And with that, I'll turn it over for questions.

Operator, Operator

We will now take our first question from Elyse Greenspan with Wells Fargo.

Elyse Greenspan, Analyst

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?

Robert Qutub, Executive Vice President and Chief Financial Officer

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 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 past calls as he builds his book of business, that is and will be accretive to that number, which is telling you that we have an outlook of 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 for the full year.

Elyse Greenspan, Analyst

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 is a 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 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?

Kevin O'Donnell, President and Chief Executive Officer

That's a challenging question because it relates to our overall portfolio. They are independent but somewhat marginal. However, I believe Dave's comments are significant and can be viewed from two angles. Firstly, regarding rate changes as benchmarks for 2025 and 2026 together. More critically, we want to emphasize rate adequacy. One way to illustrate this is by considering the recent changes: if the property catastrophe rates had been reduced by 10% at the start of 2023, which aligns with where we anticipate 2026 to be in comparison to 2025, our actions over the past three years would have remained unchanged. A slight pullback in rates is simply retracting some of the excess margins we've been experiencing in property catastrophe. We still maintain a strong rate adequacy, even with some decrease in rate changes. Dave, do you have anything else to add?

David Marra, Executive Vice President and Chief Underwriting Officer

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.

Operator, Operator

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

Joshua Shanker, Analyst

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?

Kevin O'Donnell, President and Chief Executive Officer

Yes, I'll start there. It's a broad question. Due to our established structures and reputation in managing third-party capital, we have excellent access to it, even when others face constraints. Currently, I don't believe third-party capital will significantly influence pricing in 2026. The focus will be more on comfort with return levels within property catastrophe risks, along with reinsurers having greater confidence and more capital. The positive aspect is that we anticipate an increase in demand for property catastrophe insurance, although this growth will be less than what we observed in 2026. Thus, the market is expected to be slightly more favorable for buyers than for sellers, while 2025 was somewhat better balanced. This leads us to project about a 10% reduction in rates. Additionally, more third-party capital is becoming interested in longer-tail liabilities, which aligns with their investment strategies. I expect this trend to continue through 2026, potentially bringing more third-party capital into longer-tail Casualty or Specialty lines. Overall, the market will be primarily driven by traditional reinsurers, with third-party capital remaining available but not as a primary influence. Is there anything you'd like to add?

David Marra, Executive Vice President and Chief Underwriting Officer

Yes, we are definitely seeing competition, particularly on the CAT side, from the retained earnings of traditional reinsurers more than from new capital projections.

Kevin O'Donnell, President and Chief Executive Officer

Thanks, Dave.

Joshua Shanker, Analyst

Given the current market situation, there is significant expectation that you will buy back your own stock due to its trading level and your available capital. The success of your third-party business is largely because you practice what you preach, and your investors are aware that the risks they are taking by investing in you are also risks you are taking yourself. When we examine the minority interest on our balance sheet alongside your own shareholders' equity, it is clear there is also some off-balance sheet third-party capital present, roughly equating to the same amount. If you are returning capital, is there a chance that third-party capital could eventually surpass the proprietary capital of RenRe on the balance sheet?

Kevin O'Donnell, President and Chief Executive Officer

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 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.

Operator, Operator

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

Andrew Kligerman, Analyst

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?

David Marra, Executive Vice President and Chief Underwriting Officer

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 and every loss they pay. 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.

Andrew Kligerman, Analyst

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

David Marra, Executive Vice President and Chief Underwriting Officer

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.

Andrew Kligerman, Analyst

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?

David Marra, Executive Vice President and Chief Underwriting Officer

The overall Casualty and Specialty segment showed slight favorable development, which we view as stable reserves. From a broader perspective, we've experienced considerable positive development across the group, especially within our reinsurance book. Many of our clients engage with us for various products in Property, Casualty, and Specialty. Within Casualty and Specialty, reserves have remained stable, and combined ratios are in the high 90s. The significant contribution we receive comes from the float, which enhances our return on equity alongside stable reserves and a growing float.

Operator, Operator

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

Jian Huang, Analyst

My first question is a follow-up on what Josh was asking earlier. One of the points you mentioned is that loss volatilities are smaller now, resulting in more stable earnings despite catastrophe risk. If this trend continues in the long term, does that suggest that longer-term pricing might be under pressure from steady earnings? It seems to me that less volatility should also lead to less pricing volatility. How do you view this theoretically? Should we expect to see reduced pricing increases in the future if we experience medium-sized hurricanes in Florida occasionally?

Kevin O'Donnell, President and Chief Executive Officer

Thank you for the question. I hear two main points: what's happening in the market and what's happening at RenRe. The volatility from catastrophes remains fairly consistent in terms of exposure, particularly in Florida. However, RenRe is different; we have a greater investment leverage and more stability from the earnings in our portfolio. Additionally, our larger fee platform provides further stability and buffers against volatility. Our property catastrophe exposure is supported by both third-party and our own capital. The third-party capital offers stability through fees, while our own capital reflects the return for the risk taken. Overall, the impact of catastrophic volatility is mitigated due to our current standing compared to five years ago. In terms of the market, it remains relatively unchanged.

Jian Huang, Analyst

Okay. That's very helpful. My second question is regarding gold. Given the volatility we've experienced, especially since it was a strong quarter for gold in the third quarter, I'm curious if you have any updates on holdings. Have you changed your strategy or view about investments in gold? Additionally, what is the impact of gold on the book value for October?

Robert Qutub, Executive Vice President and Chief Financial Officer

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 and there, but we still see that within our strategic remit for the foreseeable future.

Operator, Operator

We'll move next to Mike Zaremski with BMO.

Michael Zaremski, Analyst

I wanted to ask about the Property segment. If we examine property, the Incurred But Not Reported reserves and additional case reserves are currently around 70% or higher. Historically, these levels fluctuate significantly, but they remain above long-term historical averages. Is there a way for you to explain whether the reserves in these two categories are elevated above historical levels for specific reasons, or could you provide any insight into whether this is simply a measure of added conservatism in your approach?

Kevin O'Donnell, President and Chief Executive Officer

Yes, there’s no additional conservatism or change in how we have established our reserves. The property side can be challenging because any fluctuation from a significant event can greatly influence whether we experience adverse or favorable development in the Property segment. I focus less on differentiating between actuarial case reserves and IBNR for the property CAT portfolio, and instead view it more holistically. Our usual approach involves assessing each significant event on its anniversary. As you can see, some third quarter events have shown favorable development from previous years. I would say there’s no particular narrative regarding the numbers or our reserve evaluation; it’s fairly consistent from a reserving standpoint.

Operator, Operator

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

Tracy Benguigui, Analyst

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 CAT losses or capital returns to get to a state of equilibrium?

Kevin O'Donnell, President and Chief Executive Officer

I’m not sure how to respond to your question. What we focus on is the overplacement programs, which might serve as a gauge for the level of capitalization needed to return to a balanced market. I don't expect significant overplacement, which suggests we are relatively close to balance. The projected 10% decrease in rates or expectations also indicates we might be nearing balance. There's often a connection between the amount of capital and the appetite for risk. I believe the appetite for risk is unlikely to diverge significantly from the demand increase, which will be lower than last year but still present. Therefore, I don't see us being far out of balance in terms of willingness to invest in the market. It's not simply about a certain amount of capital exiting the market and then returning; it's really about the perception of risk and comfort level for deploying into peak zones, especially in property CAT.

David Marra, Executive Vice President and Chief Underwriting Officer

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.

Kevin O'Donnell, President and Chief Executive Officer

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.

Operator, Operator

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.