Earnings Call Transcript - RNR Q2 2025

Operator, Operator

Good morning. My name is Angela, and I will be your conference operator today. I would like to welcome everyone to the RenaissanceRe Second 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 Alfred McCue, Senior Vice President of Finance and Investor Relations

Thank you, Angela. Good morning, and welcome to RenaissanceRe's Second 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. First, 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 Joseph O'Donnell, President and CEO

Thanks, Keith. Good morning, everyone, and thank you for joining today's call. As you'd expect, I review numerous reports detailing our risk, return, liquidity, capital utilization, and numerous other metrics. I've been doing this at RenRe for almost 30 years. In all these years, I have never been more pleased as I am today when I look at these reports and evaluate the state of our business. At the most fundamental level, our objective is to grow tangible book value per share over the long term. This quarter is an excellent example of our ability to do just that. Even with the impact of the California wildfires last quarter and substantial share repurchases, we have grown tangible book value per share by 10% year-to-date and over 20% over the past 12 months. We also delivered a 24% operating return on equity this quarter. These financial results demonstrate the strength of our income diversification and ability to absorb volatility. They also demonstrate that we are well compensated for the risk we choose to take. This manifests through a combination of underwriting income, investment income, and fee income. Each of these drivers of profit are performing well and are positioned for long-term success. Starting with underwriting. Over the last several years, we have grown and diversified our underwriting portfolio substantially. This has benefited our business in numerous ways. As one of the largest P&C reinsurers in the world, we have built a company designed to solve any risk problem in any class of business for any client. We augment this powerful platform with people and technology that are industry-leading and client-focused. This incentivizes customers to come to us first because we can design better solutions for their biggest problems and back it with significant capacity. This ability to do these things enables us to secure better-than-market terms. A good example of this is the recent Florida renewal. 80% of the premium we wrote was at private terms above market rates. While we have been doing this for years in property catastrophe, our increased scale allows us to do so more broadly across classes. Obviously, this makes a substantial difference in the quality of our underwriting portfolios, and it bolsters our ability to continue to produce strong returns. The second driver of profit we focus on is investments. Given the nature of cat business as well as continuing macroeconomic uncertainty, our investment approach remains relatively cautious. That said, over the last year, we have structured our investment portfolio to be strongly accretive in the current environment. As you can see from our investment results year-to-date, this approach has been successful. Ultimately, our investment portfolio is designed to support our underwriting book. At the same time, the growth and diversification in our underwriting book provides benefits to our investments. Because we are writing a larger portfolio of long-tail casualty and specialty lines, our overall net reserve position has grown to $19 billion. This results in significant investment leverage against a common equity position of $10 billion. At today's yields, this leverage is highly valuable and generates consistent and significant net investment income, which we expect to persist. Equally, if not more important, the growth in reserves has lengthened the duration of our liabilities. This gives us greater flexibility in the allocation and duration of assets. All of these factors benefit our shareholders in a higher-for-longer interest rate environment. Of course, this investment approach in and of itself does not differentiate us from other diversified reinsurers. But it is different for us, and it should benefit you in a much bigger way than at any previous time in our history. This is one of the key reasons we are more profitable and less volatile than we were five years ago. Our third driver of profit is the fee income we earn in our capital partners business. Our integrated model allows us to deploy more than $10 billion of partner capital to benefit our customers in addition to our own capital. At the same time, our third-party investors value the low beta returns generated from well-underwritten and expertly sourced risk. For our shareholders, the fees we generate through this business are also highly accretive. Just one quarter after the California wildfires, fees have reset to normal levels, and we have already recaptured management fees deferred from last quarter. The volatility in fee income generally averages out over several quarters, making it a stable and very profitable business for us that we have grown steadily over time. In fact, since the beginning of 2023, fees have totaled almost $700 million. This is more than double the amount we generated over the same period prior to 2023. I should note that we manage third-party capital differently than others, typically in rated balance sheets in which we co-invest. By structuring our platform this way, we can optimize utility to customers and profitability to investors. While we recognize this structure creates certain modeling challenges for the investment community, we are continually working to enhance shareholder disclosures to provide a deeper understanding of the earnings power and competitive moat of our capital. Shifting now to a discussion of the midyear renewals and overall business environment. Looking forward, we are positioned to continue to deliver shareholder value. The underwriting market remains attractive with healthy returns across property catastrophe and specialty lines. David will discuss the midyear renewal in detail with you later on the call, but we successfully met all of our objectives, growing property catastrophe in the U.S. while continuing to optimize our casualty and specialty portfolio. For property cat specifically, we constructed our largest net retained portfolio to date. It is also one of our most profitable on an expected basis, both in terms of percentage return and also in absolute dollars. With regards to casualty and specialty, we have a strong portfolio. Most lines in this segment are performing well. Overall, our casualty and specialty book continues to provide strong returns, primarily from investment income on the considerable float it generates. As we have previously discussed, we are keeping a close eye on casualty lines, including general liability, where we are holding reserve ratios high as we monitor elevated trend. So far, we are encouraged by the rate and claims management improvements we are seeing, which we believe are keeping rates above this elevated trend. At this point in the year, our portfolio is largely set as very little business renews in the second half. Consequently, we are already planning for next year and approach 2026 from a position of continuing rate adequacy, which provides us confidence that our strong returns will persist. This concludes my opening comments. Bob will now discuss our financial performance for the quarter, followed by David, who will provide an update on our segment performance. Thanks. Bob?

Robert Qutub, Executive Vice President and CFO

Thanks, Kevin, and good morning, everyone. We delivered outstanding results this quarter with an annualized return on equity of 34% and an operating return on equity of 24%. Operating income per share was $12.29, our second-best result ever exceeded only by this quarter last year. Performance was strong across each of our three drivers of profit, with underwriting income of $602 million, up 26% from last year; fees of $95 million, which fully recovered from losses last quarter; and retained net investment income of $286 million, which remains a consistent and significant contributor to our bottom line. We are proud of our leading returns and have strong conviction in our ability to continue delivering at this level going forward. There are four numbers that help illustrate this. First, 15 points, which is the aggregate contribution from net investment income and fees to our overall return on average common equity. We expect both of these drivers to remain stable over time, and therefore, we begin each quarter with a consistently strong earnings base. Second, $600 million, which was our underwriting profit this quarter. Underwriting leadership is the strategic core of our business, and it typically brings significant upside to the 15 points of the stable base I just described. Third, $1.5 billion, the value of shares we have repurchased since we began buying back in April of 2024. This equates to 6 million shares or about 70% of what we issued in connection with the Validus acquisition. This demonstrates the robust efficiency of our platform, the strength of our earnings, and most importantly, our conviction in the value of our stock and earnings sustainability going forward. And finally, 20%, this is the amount we have grown our primary metric, tangible book value per share plus change in accumulated dividends over the last year. This is particularly notable given both the significant volume of shares we have repurchased along with the impact we have absorbed from multiple large loss events, including Hurricanes Helene and Milton and the California wildfires. Year-to-date, we have grown this metric by 10.4%. Now I'd like to turn to a more detailed discussion of our results, starting with our first driver of profit, underwriting, where we had an excellent quarter. We delivered an overall adjusted combined ratio of 73%. This reflected a low level of catastrophe losses and favorable development within both segments. Across our underwriting portfolio, overall gross premiums written were $3.4 billion, flat to the comparable quarter, and net premiums written were $2.7 billion, also flat to last year. However, there was a greater movement at a class of business level as we continue to shape the portfolio. Specifically, in property catastrophe, we grew gross premiums written by $98 million or 8%. This reflects our highly successful June 1 renewal where we grew premium in the U.S. by 13% across nationwide and Florida-specific carriers. In credit, professional liability, and specialty, gross premiums were also up at a class level compared to last year, although this primarily related to premium adjustments in Q2 of last year. In other property, gross premiums written were down by $119 million or 24%. This reflects premium adjustments due to the rate decreases of around 10% to 15% in the E&S business as well as an adjustment to a large contract. Similarly, General Casualty was down $118 million or 19%. About half of this relates to actions we are taking to reduce general liability exposure. We're also seeing double-digit rate increases in this class, which is partially offsetting the impact of this exposure reduction. As I mentioned previously, we reported more than $600 million of underwriting income. Most of this came from the Property segment, where we reported an adjusted combined ratio of 26%, current accident year loss ratio of 30%, and favorable development of 31 percentage points. Other property, in particular, had its strongest quarter yet with an adjusted combined ratio of 43%. This was driven by solid current year results and significant favorable development. Casualty and Specialty underwriting performance was within our expectations, with an adjusted combined ratio of 99.5%. This included 1.6 points from large specialty events in the quarter, primarily from the Air India tragedy. For the third quarter of 2025, we expect the following metrics in our underwriting book. Within other property, net premiums earned of about $360 million and an attritional loss ratio in the mid-50s. And within 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 fees were $95 million for the quarter, up 13% and remain a powerful driver of shareholder value. This consisted of management fees of $57 million and performance fees of $39 million. Given our strong underwriting results and significant favorable development this quarter, we recaptured the majority of management fees that were deferred as a result of the California wildfires in the first quarter. This also resulted in earning performance fees earlier in the quarter than expected. In the third quarter, we expect fees to be about $80 million, which includes $50 million in management fees and $30 million in performance fees, absent any large loss events. This is a unique business that leverages our existing infrastructure to generate persistent and substantial fees for our shareholders. Its operation requires no shareholder capital, few direct employees, increases our value proposition to customers, and adds roughly three points to our ROE annually. We believe that this is an underappreciated aspect of our business given its high-value generation and high marginal return. Moving now to our third driver, investments, where retained net investment income was $286 million, up slightly from the first quarter driven by growth in invested assets. As we discussed on our last call, early in the quarter, we acted on market volatility, increasing our allocation to equities as well as high yield and investment-grade credit. We reported $343 million of retained mark-to-market gains in the quarter, primarily driven by a rally in shorter-term treasuries in addition to tightening credit spreads and rising equities, a substantial portion of which we access through investment-related derivative strategies. Our retained yield to maturity stayed relatively flat at 5%, and retained duration was also flat at three years. Looking forward, we expect retained net investment income to remain equally strong in the third quarter. Our investment portfolio is intended to complement our underwriting portfolio. As we have grown and diversified our business, we have greater flexibility in duration and asset mix while also increasing investment leverage. These factors have allowed us to shape the investment portfolio and evolve the asset mix to increasingly include classes such as private credit, private and public equity, and higher-yielding assets. Over time, this should enable us to increase investment income. Our investment portfolio remains well positioned. So as the interest rate environment evolves over the cycle, we have the tools and flexibility to maintain our investment portfolio's strong contribution to our bottom line. Moving now to expenses, where interest expense was somewhat elevated due to an overlap between some maturing debt in the quarter and the new issuances from Q1. Our operating expense ratio was 5.2%, up about one point from the second quarter of last year. This is in line with our expectations and reflects our continued investment in the business after a period of significant growth. Looking ahead, we expect our operating expense ratio to stay around 5% for the remainder of the year. Now I'd like to share an update on capital management. We continue to return capital to shareholders this quarter, repurchasing 1.6 million shares for $376 million at an average price of $242 per share. And so far this quarter, we have repurchased 294,000 shares for $70 million at an average price of $239 per share. Year-to-date, that brings total repurchases to 3.3 million shares for $808 million. We remain in a substantial excess capital and robust liquidity position and have demonstrated our ability to generate consistent, strong returns for our shareholders. As we move through the hurricane season, we will continue to look for opportunities to deploy capital into the business while repurchasing shares at attractive valuations. And finishing now with tax. And as a reminder, the new 15% Bermuda corporate income tax went into effect this year, and our results this quarter include a tax expense of $177 million. The effective tax rate on our GAAP net income was 13% this quarter, although the effective tax rate on income attributable to RenaissanceRe shareholders is a few points higher. The difference relates to noncontrolling interest, which is subject to a minimal amount of income tax. Given the new tax environment, our results this quarter are not directly comparable to last year. On a like-for-like basis, our ability to generate an after-tax 24% operating return on equity indicates that our earnings power is persistently strong. And finally, we delivered excellent results this quarter across each of our three drivers of profit, deploying capital to grow our property cat class of business while continuing to return significant capital through accretive share repurchases. We have the conviction in our ability to continue to deliver superior returns throughout the year. And with that, I'll now turn it over to David.

David Edward Marra, Executive Vice President and Group Chief Underwriting Officer

Thanks, Bob, and good morning, everyone. Our second quarter underwriting performance was excellent. We reported an adjusted combined ratio of 73% and significantly grew our U.S. property catastrophe portfolio at the midyear renewal, outperforming the market with risk-adjusted rates in our book down low single digits. Our strong results this quarter are directly connected to our unique competitive advantages, including our integrated operating model, deep risk expertise, and customer-centric approach. Our REMS underwriting system enables us to quickly deliver lead quotes and capacity in an integrated way across geographies and classes of business. This allows us to transact seamlessly with our clients across multiple lines. In fact, the majority of our premium comes from clients who buy products across Property, Casualty, and Specialty. Our approach is unique and differentiated, and clients reward us with strong signings and preferential terms. This benefits RenaissanceRe shareholders through an attractive combination of underwriting, fee, and investment income, as Kevin and Bob have just discussed. With respect to underwriting income, our margins across the portfolio remain very attractive. Since the reinsurance step change in rates and terms and conditions in 2023, we have generated $3 billion in underwriting profit and industry-leading combined ratios. During this time period, we have reported consistent favorable development, averaging 7 points. This has contributed to our underwriting profitability and is due to the strength of our previous underwriting decisions and our robust reserving process, both of which are key strengths of our business. We manage risk from the time of binding a treaty to the time claims settle, ultimately supporting strong financial results across our underwriting portfolio. We believe that risk is appropriately distributed across the insurance value chain with reinsurers largely providing balance sheet protection and being paid adequately for doing so. This is why we find the current underwriting market attractive, and it is also why we expect its current terms and conditions to persist. Rate is likely to fluctuate around current levels depending primarily on shifting supply and demand, but should remain attractive. In short, the dynamics that have driven our strong results this quarter and since 2023 are still in effect and will support us in generating sustainable superior returns in the future. Now moving to a discussion of our underwriting actions in the quarter. This renewal highlighted RenaissanceRe's underwriting culture at its best as we shaped our portfolio at scale in property, casualty, and specialty markets. Across the midyear renewals, we chose to grow property catastrophe exposure in an attractive environment, deploying leading capacity at rates and terms that outperform the broader market, maintaining our exposure in other property, shaping our specialty portfolio, and continuing to reduce exposure in select casualty lines where we believe caution is warranted. Our highest marginal return business is currently U.S. property catastrophe, where we grew premiums by 13% in the quarter, deploying capital at attractive expected returns. Loss experience and rate changes varied widely across clients and layers. Loss-impacted layers were flat to up 15%, although in California, rate increases were much higher. Conversely, loss-free layers were down 5% to 15%. Our ability to understand each program, quote early, and select the most profitable layers gave us a competitive advantage. As a result, we constructed a portfolio with rate down low single digits, which is a strong outcome given that we estimate the market was down around 10%. Our key areas of growth where flat to up rates were flat to up were Florida, California, and loss-impacted nationwide carriers. In Florida, we believe the pricing environment, terms and conditions, and tort reform have helped stabilize the market. In addition, growth in demand created an opportunity for us to deploy significant capital at private terms as buyers look to secure increased capacity. As Kevin mentioned, we wrote 80% of our Florida premium at private terms above the market. We have been underweight in Florida, but our position as a market leader enabled us to grow with rates roughly flat. We also grew in California, where most businesses had been impacted by the catastrophic L.A. wildfires last quarter. RenaissanceRe Risk Sciences provided us with a competitive advantage by rapidly updating our California wildfire models to reflect an updated view of risk. We provided lead market quotes and grew into an increasing rate environment, achieving premium rate increases of more than 50% on some loss-impacted programs. And finally, we also grew selectively with loss-impacted nationwide carriers using our risk selection capabilities to target growth and our customer relationships to secure bigger lines at rates up in the high single digits. Year-to-date, we have deployed $1.7 billion of new limit into property cat with $1 billion of this in the second quarter. Our property catastrophe book is the largest we have ever written and among the most profitable on an expected absolute dollar basis. Before moving on to other classes of business, there are three points I would like to highlight about how we have shaped our risk going into this wind season. First, due to our growth in property catastrophe at the midyear renewals, risk is up on an absolute basis for U.S. perils, although more heavily weighted toward the tail. Second, on a percentage of equity basis, risk is also up, but generally in line or below the levels prior to the Validus acquisition. And finally, we purchased additional ceded protection, including products that provide increased resilience against multiple large events, such as second event covers and the issuance of a cat bond, providing aggregate protection. I will now briefly touch on themes we have observed across other classes of business, which broadly aligned with what we have seen earlier in the year. Starting with other property. We have been optimizing the mix of this book and are now seeing profit materialize following consecutive years of rate increases beginning in late 2017 through mid-2024. We are pleased with the strong returns we have generated both on a current and prior year basis. Going forward, we are seeing increased competition and lower rates for E&S property business. We are monitoring this closely and will adjust our portfolio with respect to business that does not meet our hurdles. In casualty, rates in U.S. general liability continue to increase at approximately 15%. This is ahead of, but we remain cautious and will continue to take a conservative approach. Casualty business is mostly quota share, and due to the long tail, we manage it over a 10-year cycle. During the last year, we have worked closely with our clients with a partnership lens, enhancing our underwriting and claims information flow and structuring our lines to create the optimal portfolio for the next cycle. This data-driven underwriting approach will result in additional improvements in the business over and above the rate and claims improvements made by our clients. Over the last year, we have scaled back where exposure was greatest and reduced our general liability exposure in the U.S. by approximately 30%, although significant rate increases have helped moderate the top line impact. Moving to Specialty. Our diversified book remains highly attractive and profitable. Some lines like aviation have seen increased loss activity and are responding with additional rate. Others like energy and cyber have remained profitable despite recent loss events. We have expert teams in each class and constantly evaluate our positions to optimize the portfolio based on risk and reward in the business. Finally, in credit, performance continues to be strong, and we remain prudently positioned to navigate uncertainty in the current geopolitical environment with a diversified risk profile and conservatively managed portfolios across the spectrum of mortgage, trade credit, political risk, surety, and structured credit. In closing, just as each program's pricing reflects its unique risk profile, each reinsurer’s experience at the midyear renewal reflected the expertise and leadership they brought to the market. For companies like RenaissanceRe with preferential access and deep client trust, we were able to build a portfolio with highly accretive economics that positions us for continued strong performance. And with that, I'll turn it back to Kevin.

Kevin Joseph O'Donnell, President and CEO

Thanks, David. Our business is exceptionally healthy. All three drivers of profit outperformed expectations, and the current environment remains favorable. We had a strong renewal and constructed our largest and one of our most profitable net retained property cat portfolios. Our Capital Partners business has recovered to its full fee-generating potential and continues to contribute substantial low volatility earnings to our bottom line. Finally, the interest rate environment remains attractive, and we took advantage of market weakness to increase our allocation to equities and high yield, which should help increase returns. And with that, I'll open it up for questions.

Operator, Operator

We'll take our first question from Elyse Greenspan with Wells Fargo.

Elyse Beth Greenspan, Analyst

My first question is on the reserve releases in the quarter. I think it was around $132 million. I'm focusing on the property cat piece. And I know you guys called out from '21, '22 and '23. I'm just curious, was one of those years like the bigger driver of the releases? And I guess the second part of that question is, I'm just curious if the releases just stem from Milton or Florida events that would just be reflective of just the reforms working in the state.

Robert Qutub, Executive Vice President and CFO

Elyse, thanks. This is Bob. It comes from across all the accident periods going all the way back to 2017. And we share some of those losses with our joint ventures; about half of that sticks to us.

Elyse Beth Greenspan, Analyst

Okay. And then I guess just it seems like the renewals at the midyear on the property cat side played out well relative to your expectations. I guess, Kevin, as you think forward, I guess, obviously, a lot depends on what happens with this hurricane season. But how are you thinking about things going into 2026, both January 1 and then even with the Florida renewals heading into the midyears next year?

Kevin Joseph O'Donnell, President and CEO

Yes. Great. Thanks. Yes, you're right. This year has gone exceptionally well. And I think it's important to kind of remind ourselves as to where we are as we're thinking about planning for 2026. We've grown our portfolios where we've chosen to grow them. We've had good opportunities, and we continue to execute our strategy well. So, as I look at where we are heading into 2026, really at this point, as I mentioned in my comments, not much business comes up between now and year-end. So one of the bigger variables will be what happens in wind season. But if you break wind season down, all wind season does is if it's an inactive year, it gives buyers pricing power. And if it's an active year, it gives reinsurers pricing power. What we've talked about before is since 2023, we think the market has reset and will trade around this new level. And that is really what we've seen. And we have proven that we can execute to produce better than market returns in that environment. So regardless of what happens between now and year-end, really, the way we're looking at it is we'll continue to execute our strategy. We believe we can continue to preserve our margin. We have no change in our ability to find opportunities to deploy capital. We have a strong capital and liquidity position. So, we believe we can continue to manage capital through share repurchases. So, as we're really beginning to shift our focus from writing our book for 2025 to planning for 2026, nothing has changed with our strategy. Between now and year-end, we'll have great conversations, have price discovery. We'll sharpen our tools and tactics. But I think at the end of the day, '26 is going to look a lot like '25 for us.

Operator, Operator

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

Joshua David Shanker, Analyst

I just want to talk about management fees a little bit. I think at the last quarter call, you were pretty sure that management fees would be a little weaker and they bounced back real fast. What's changed in the past few months? And also, how does the AlphaCat, OmegaCat book and that winding down play into the numbers here?

Kevin Joseph O'Donnell, President and CEO

Yes. I'll just make a couple of comments, and I'll turn it over to Bob. No, you're absolutely right. I think we had a strong second quarter. It tends to be a light cat quarter that is not necessarily what's budgeted. So we had greater earnings or greater catch-up on our fees because of that. And then, obviously, favorable development benefited our third-party capital vehicles as well. So that pushed us to recover some of the deferred fees more quickly. AlphaCat, OmegaCat were not a big contributor, but I'll turn it over to Bob for more specifics.

Robert Qutub, Executive Vice President and CFO

That said, I mean, as my prepared comments, Josh, the management fee, we expected the deferral to be a little bit longer. We got it all back, which is why the $56 million, but we're guiding you back to $50 million for the third quarter in my prepared comments for the management fee. And as Kevin pointed out, the favorable development in the property cat side accelerated the ability to earn the performance fees, but we're still guiding it to $30 million for the next quarter. So $80 million all in for Q3. And that's kind of what I referred to as the more stable area, kind of sort of neutral.

Joshua David Shanker, Analyst

When I review the DaVinci income statement, it appears that premium growth is quite strong at DaVinci. Have you been successful in persuading AlphaCat investors to invest in your proprietary vehicles? What accounts for the difference between the firm-wide property results and what we observe at DaVinci?

Kevin Joseph O'Donnell, President and CEO

Yes. AlphaCat is a vehicle we acquired with Validus and are currently managing down. We have strong interest from investors in DaVinci. The shift of investors is not part of the story; it’s really about our ability to engage with the market and continue to grow both RenRe and DaVinci.

Joshua David Shanker, Analyst

And just bear with me. The fact that DaVinci, was there more opportunity to deploy capital into DaVinci? Or is there more capital in DaVinci so the risk-adjusted returns are the same? I'm looking at the strong growth there, it says to me that you leaned into DaVinci in the quarter or maybe just had more capital.

Robert Qutub, Executive Vice President and CFO

This is Bob, Josh. The way I look at it is that all of our property cat is going to our own account and DaVinci. We're not cultivating in the AlphaCat space. That's kind of a multi-risk strategy that doesn't fit our purpose-built balance sheet.

Kevin Joseph O'Donnell, President and CEO

Yes. Just to remind everyone, DaVinci is not exactly this, but it behaves a bit like a quota share of RenRe Limited. There's no risk in DaVinci that's not in RenRe Limited. One of the benefits was some of the favorable development. There was a little bit less ceded in DaVinci than in RenRe Limited. But I would think of there's no shift in earnings and no shift in strategy between RenRe and DaVinci going forward. But in any given quarter, there'll be a little bit of noise.

Operator, Operator

We'll take our next question from Jimmy Bhullar with JPMorgan.

Jamminder Singh Bhullar, Analyst

I had a couple of questions. First, just on pricing. Obviously, prices have been coming down the last couple of years, but returns are still very attractive for you guys and for your peers as well. So what gives you the confidence that rates won't continue to decline and we're not facing a soft reinsurance market?

Kevin Joseph O'Donnell, President and CEO

Yes. Kind of back to the comments we've made on previous calls and a little bit earlier is you're absolutely right. There are price changes, but I think the real focus should be rate adequacy. Rates went up 50% in 2023. And over the last two quarters, we're talking about rate changes in the 10-ish percentage change, obviously, less for us because of our portfolio construction and access to business. So we believe that the market will continue to trade both on terms and conditions and rates at the levels that were reset in 2023. As with any financial market, there'll be times where buyers have a bit more to push on price and there are times where sellers have a bit more to push on price. But we don't see a downward trend to rate inadequacy in the near term. We continue to believe that rates will trade at highly adequate levels, whether they're up or down a little bit is something the market will decide as we move forward.

Jamminder Singh Bhullar, Analyst

And then on buybacks, it seems like you've been more active the last few quarters than you had in the past. I think the last three quarters combined, you've taken out almost 10% of your shares. So assuming a similar level of profitability, should we assume that buybacks continue at this pace? Or is the current level inflated either to minimize the Validus dilution or like some other factors?

Robert Qutub, Executive Vice President and CFO

I think thanks for the question. You're taking us back to fourth quarter. We consolidated some of the balance sheets, and we freed up an enormous amount of trapped capital. That would account for a lot of the accelerated share repurchases that we did in Q4, Q1. We saw great opportunities this quarter here, this past quarter in Q2 that carry over into 3. So, we've gotten $800 million. I mean, mindful of the fact we're going into the wind season, which may provide opportunities in and of itself. We are looking to deploy capital and return capital at attractive prices if it presents itself.

Operator, Operator

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

Taylor Alexander Scott, Analyst

I would like to follow up on the comments made regarding the additional outward reinsurance that you purchased. I recall there was a cap on the aggregate mentioned as well. Could you provide more details about that and help us understand the implications, especially considering what may arise from the hurricane season?

David Edward Marra, Executive Vice President and Group Chief Underwriting Officer

Alex, this is David. I'll share some additional insights. As we build our inward portfolio, we have many options for shaping it with ceded reinsurance. We acquire reinsurance and purchase catastrophe bonds. We also have joint venture vehicles that help share some of the risk. Specifically, since last year's wind season and into this year, we have continued to buy more ceded reinsurance. This ceded coverage has become more efficient. Additionally, we have purchased a catastrophe bond that is aggregate in nature, and we also have another catastrophe bond that is based on occurrences. We have ceded reinsurance that addresses second events to safeguard against the accumulation of large events. All of this is aimed at optimizing our net portfolio, achieving the highest return on equity possible, and protecting against scenarios that could impact our earnings.

Taylor Alexander Scott, Analyst

Got it. Okay. That's helpful. And then I just wanted to ask about the casualty business. You guys pulled back a little more than I would have guessed in some of the general liability. And is that something that changes your view at all in terms of reserve adequacy? Is that something you've already done a deeper review on and this is sort of the action on the other side of it? Or is there new information that you're still sort of implementing in the balance sheet?

Kevin Joseph O'Donnell, President and CEO

Yes. I'll start, and then I'll pass it to Dave. There haven't been any changes regarding reserves or anything else. This discussion is more about how we want to structure the portfolio. As David mentioned, looking ahead to 2025, it appears to be a significantly better year for casualty compared to 2024. However, we want to see more consistent improvement before we incorporate that into our results to ensure we fully benefit from improved claims management and the higher rates relative to the trend. Therefore, my focus is mainly on the written portfolio and how it complements the overall portfolio we are managing, rather than it being indicative of the health of the legacy portfolio previously written. I don't know if you have anything to add.

David Edward Marra, Executive Vice President and Group Chief Underwriting Officer

Yes. I can address some of the portfolio movements that we've made. With the Casualty and Specialty segment, we're always looking to how to optimize the portfolio. If you go back several years, we were overweight credit, and we grew general liability and professional liability into 2021 when rates were increasing. And now we have a more emphasis on the specialty book following the Validus acquisition. The reductions in GL were really just part of that normal process. And we've been talking about for about the last year, and that's enough for all of the renewals to be touched once. There's not one common renewal date. So that's what you're seeing there.

Operator, Operator

We'll take our next question from Wes Carmichael with Autonomous Research.

Wesley Collin Carmichael, Analyst

Kevin, in your prepared remarks, I think you talked about Florida renewals and getting rates and terms above the market. I know you don't typically disclose P&Ls, but is there any color qualitatively you can share with us on how your Florida cat exposure has changed since renewals?

Kevin Joseph O'Donnell, President and CEO

Yes. I think it's a combination of both something that I said and Dave said is we did grow into the Florida renewal this year. We did it significantly above market terms. So we feel really good about the economics. If you break it down, I think it puts us from a market share perspective for Southeast Wind about where we were on a percentage of equity before to the levels we were prior to the acquisition of Validus. So last year, a lot of our growth into Florida came not from expanding lines that we were on, but making sure we executed the Validus lines. This year, we were able to bring an underweight market share for Southeast Wind back up to our market share on a relative basis at the same percent of equity that we had prior to Validus.

Wesley Collin Carmichael, Analyst

Got you. That's helpful. And maybe as a follow-up, it's probably a little bit of a tough one to quantify, but a question we get often from investors. And you mentioned the Prop cat book is the largest it's been. But is there any level of industry loss this year in wind season that you think might recatalyze pricing in the Prop cat market for January?

Kevin Joseph O'Donnell, President and CEO

I think it's important to reflect on our current situation. This year is shaping up to be a significant cat year overall. A lot of the impact from an event is determined by the location it affects. For instance, an event in Florida will have a different impact on nationwide accounts compared to one in the Northeast. Generally, larger events are likely to have more significant effects. The reinsurance market is also seeing higher attachment points, which suggests we may need to consider larger events than those we dealt with before 2023. However, it's difficult to specify exactly. If we look back at events like Helene or Milton, their impacts were not as intense as what we might expect this year, indicating we might need to be prepared for something above that level.

Operator, Operator

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

Michael David Zaremski, Analyst

I think you provided good insights on why your midyear portfolio is better constructed than the market average. Do you believe this is sustainable? You mentioned that it was due to scale and noted that 80% of the premium you wrote was at private market terms above market rates. I'm curious if there’s evidence to support such a significant difference over time. I would need to review your midyear renewals against the market to be sure, but do you think this new scale can maintain its advantage in terms of pricing compared to the market?

Kevin Joseph O'Donnell, President and CEO

Yes. I would say, I'm enormously proud of the team's execution. 80% is a great number to achieve with private terms. We always have a high percentage of private terms within our portfolio. I think there's two things that we tried to highlight. One is this was exceptionally good and great execution. And secondly, because we're so broadly integrated with the largest buyers, our conversations begin earlier and more broadly. And the size of our capacity and the expertise we bring allows us to have an increasing percentage of private terms in different areas of our business. So I would say it's not something that's new. I would say 80% is on the high end of our execution. I'm very proud of that, but hard to quantify more specifically, Dave?

David Edward Marra, Executive Vice President and Group Chief Underwriting Officer

Yes. I would say it was a great renewal for us for a couple of reasons in my mind on that is really just our risk selection capabilities and our access to business. And those two things, I believe, are sustainable. The market was not uniform. It was an underwriter's market. You had to pick and choose risks. Our underwriters know that business better than anyone, and we think we have the best access there. So that was a differentiator, not just in Florida, which allowed us to get the 80% of the book on private terms and deliver flat rates but also in understanding and being able to execute on the other key areas there. We talked about California. The key there was understanding the wildfire peril and being able to figure out how to execute into a post-loss market quicker than anyone else. And then the loss impacted nationwide, that was really about risk selection and then our ability to get those lines. So, the team really did that. That's what they do best. They showed leadership and delivered a great portfolio.

Michael David Zaremski, Analyst

Got it. My follow-up is on Florida tort reform. Kevin, you mentioned in your prepared remarks that it is beneficial. I'm curious if you have a way to quantify how beneficial it is, though you don't have to share proprietary information. Are the reforms significant in terms of the impact RenRe expects on the loss ratio? If they are, have those positive impacts already been diminished by competition? Are they fully understood by the market, or does that require more time to unfold?

Kevin Joseph O'Donnell, President and CEO

Yes. So it's a more meaningful impact for the domestic carriers or for any carrier in Florida because it affects all their claims. For us, we're excess of loss on the cat side predominantly. We're still an owner of Tower Hill, and we've seen the benefit there. Your question about is it some of it being competed away. We have seen some rate reductions in Florida, which I think are appropriate. And we're still seeing strong profitability and strong health in the primary market there. So from our standpoint, it's something that we reflect in our underwriting, but it's a significantly lower effect than the benefit that the insurers are receiving within the market. But again, there is price competition being introduced to manage that and put some of the benefit back to policyholders. Dave?

David Edward Marra, Executive Vice President and Group Chief Underwriting Officer

Yes. I would just add that the situation where public markets are declining and private markets are more willing to take on risk is influenced by tort reform and how insurers are adapting to it. This is advantageous for us as well because as private markets increase their exposure, they require more reinsurance, and this growing demand contributed positively to our opportunities in Q2.

Operator, Operator

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

Meyer Shields, Analyst

Coming to Florida, I'm trying to understand, you talked about growth at flat rates. And I was wondering if there's a way of breaking that down into increasing confidence in the reforms on the one hand or increasing demand from clients on the other hand in terms of which of those different components impacted your willingness to grow.

David Edward Marra, Executive Vice President and Group Chief Underwriting Officer

Yes, this is David. One of the key takeaways from the reform is the stability it provides, which helps both the market and our execution in it. We have been involved in Florida for many years, but we were underweight for a long time due to the negative impacts of the legal system. Fortunately, the situation has significantly improved, leading to better profitability. This year, we found opportunities as businesses were affected by losses, alongside increased demand, particularly in private markets. Additionally, the Florida Hurricane Cat fund increased its attachment point, allowing us to target lower layers that offer high risk-return potential. This overall scenario enabled us to act swiftly. When buyers seek new capacity, they often prefer to secure private deals with companies like ours. Our capability to quote large capacities and set our terms instead of waiting for the market to establish the clearing price gave us an advantage in executing these private deals in the second quarter.

Meyer Shields, Analyst

That's really positive. Kevin, I don't know if I'm over interpreting things, but you mentioned having to write any class of business. And I know in the past, you've talked about a lot of caution with regards to commercial auto. Should we interpret this as a change? Or am I trying too hard?

Kevin Joseph O'Donnell, President and CEO

I had a bit of poetic license there. Our appetite with regard to commercial auto hasn't changed. We're also not a large writer of workers' comp. Neither of those two things have changed.

Meyer Shields, Analyst

Okay. I appreciate the clarification. And then this is, I guess, a question for Bob, and I'm happy to take this offline if that's helpful. But Kevin mentioned increased transparency. Is it a ton of work for us to get an income statement on a retained basis rather than consolidated and then working down?

Robert Qutub, Executive Vice President and CFO

That's a good question, Meyer. The challenge we face involves GAAP accounting rules and how we break down the information. We try to provide the breakdown, particularly for retained investment income, which represents about 70% of the total managed amount, and that figure remains quite stable. We have shared some insights regarding the retained portion, especially concerning favorable development, like what I mentioned about property cat. Approximately half of it remains with us. However, we don't have an adequate external disclosure. Internally, we analyze it, but obtaining external figures would require significant reconciliations that our legal department would likely complicate. I'm open to discussing this further offline. I know you've had numerous conversations with Keith about our approach. We've indicated that about half of the property cat amount is allocated to DaVinci at the top line, and we mention the 15% sessions on Fontana. However, consolidating everything is quite a demanding task given our structure. Nonetheless, we are always looking to improve transparency.

Operator, Operator

We'll take our last question from Brian Meredith with UBS.

Brian Robert Meredith, Analyst

Bob, first one for you. I know there's continued to be some discussion about Bermuda tax credits potentially coming through. Can you give us an update on kind of where that stands and what the potential benefit for you all may be?

Robert Qutub, Executive Vice President and CFO

Thanks, Brian. I touched upon it in my prepared comments that nothing's changed, okay? They haven't come out with what they have is the tax reform commission is working with the Ministry of Finance to give them some recommendations. They're still working on that. And the Premier is committed to give us an ability to give our perspective on it before it gets legislated. But what this does is the ETA, as we call it, the economic tax adjustment, gives us the ability to offset cash payments on our taxes as opposed to effective rate relief. It doesn't change the effective tax. I talked about that being 13% in my prepared comments, but the noncontrolling interest pays a very nominal amount of tax. So that reduces it. But the tax to RenRe shareholders is just slightly above 15%.

Brian Robert Meredith, Analyst

And I guess just a follow-up on that. I was under the impression that maybe it could be an offset to G&A expenses. No?

Robert Qutub, Executive Vice President and CFO

It's a cash credit.

Operator, Operator

This does conclude today's question-and-answer session. I will now turn the program back over to Kevin O'Donnell for any additional or closing remarks.

Kevin Joseph O'Donnell, President and CEO

Thank you, everybody, for joining today's call. We're proud of where the company is going into the second half of the year, and we remain optimistic about 2026. So I look forward to speaking to you in a couple of months. Thank you.

Operator, Operator

This concludes the RenaissanceRe Second Quarter 2025 Earnings Call and Webcast. Please disconnect your line at this time, and have a wonderful day.