RenRe raised $495m of third-party capital for 1/1, fee income doubled in 2023

RenaissanceRe, the Bermuda based reinsurance and third-party capital management specialist, has successfully added almost $495 million in new third-party capital across some of its joint-venture and insurance-linked securities (ILS) structures in time for January 1st 2024.

The company reported that the total raised of $494.8 million in third-party capital from investors is effective January 1st 2024, and includes $300 million for the DaVinci Re equity backed sidecar-like reinsurer, while the remaining was raised for catastrophe bond fund Medici, casualty and specialty investment joint-venture Fontana and managed account NOC1.

It eclipses the capital raise at January 2023, when RenaissanceRe (RenRe) had reported raising $403 million from investors a year ago.

Once again, the capital is flowing to aligned quota share type vehicles, where investors share in the underwriting risks and returns, or to RenRe’s Medici catastrophe bond fund.

Overall, in full-year 2023, RenRe has reported raising an impressive $1.2 billion in capital from third-party investors through its Capital Partners unit.

In the final quarter of 2023, RenRe added $193.9 million in new third-party capital raised.

Interestingly and perhaps in a positive sign for the ILS market in general, RenRe primarily raised the Q4 2023 funds in Medici, Fontana and its collateralized reinsurance and retrocession focused Upsilon RFO Re Ltd.

That is the first assets raised for the Upsilon collateralized structure in some time, at least which has been disclosed, which likely reflects improving investor sentiment on the ILS asset class and these collateralized reinsurance and retro focused structures.

That reads across to successful capital raises at other collateralized players and ILS funds, which are all positive signals for recovering investor interest.

For RenRe, like many other ILS managers and third-party reinsurance capital managers, 2023 was a story of redemptions, as well as new capital raising.

In part this has been a result of some investor churn in the ILS space, as well as some investors exiting, but it’s also a sign of managers of ILS capital making progress in realising losses, unlocking trapped collateral and finalising contracts from prior year events.

In the last quarter of 2023, RenRe reports that it saw $364.5 million redeemed across its vehicles, which included the return of $300.3 million from the collateralized reinsurance and retro focused RenaissanceRe Upsilon Diversified Fund, a segregated account of Upsilon Fund, due to the release of collateral associated with prior underwriting years contracts.

Upsilon has been releasing collateral consistently for some quarters now, as the RenRe Capital Partners and other teams finalise any losses and unlock capital that no longer needs to be held against prior year catastrophe events.

For full-year 2023, the amount of redemptions reported by RenRe is actually higher than fresh third-party capital raised, but the unlocking of trapped collateral was a significant component of this.

RenRe said that redemptions of third-party capital in 2023 reached $1.3 billion, of which $842.8 million was related to collateral release from the Upsilon vehicle’s exposure to prior year loss events, and the remainder from DaVinci, Vermeer and Medici.

So that was higher than fresh capital coming in, which reached $1.2 billion for the full-year 2023, with this third-party capital raising split as DaVinci ($377.2 million), Medici ($482.1 million), Fontana ($51.3 million), Upsilon ($111.4 million), and separately managed account NOC1 ($159.9 million).

Perhaps the most impressive figure of relevance to insurance-linked securities (ILS) and third-party capital management in RenRe’s fourth-quarter and full-year results report though, is the soaring of fee income earned by the RenRe Capital Partners business.

In Q4, management fee income was up to almost $47.8 million for the quarter, well up on the $26 million earned a year prior, while performance fee income soared to just over £23 million, up from $4.36 million.

That put total fourth-quarter 2023 third-party capital fee income at nearly $70.8 million, more than double the $30.35 million earned in Q4 2022.

Management fees were driven by growth of DaVinciRe, Fontana, Vermeer and Medici, the company said, while deferred fees from prior years where high weather losses had been recorded have also come through to boost the pile.

Performance fees rose by increased $18.7 million in Q4 2023, which RenRe said was driven by improved current year underwriting results, primarily in DaVinci.

For the full-year 2023, overall fee income earned by the third-party capital business at RenRe almost doubled to $236.8 million, up 99.5% from 2022’s $118.7 million, a very impressive result.

It’s approaching the 10% of total net income level for RenRe, which reported annual net income available to shareholders reached $2.5 billion for full-year 2023.

It breaks down as $176.6 million of management fee income and $60.2 million of income from performance fees, for last year.

Again, growth of the main third-party capital reinsurance joint-ventures and ILS funds was a key driver of the increased management fees, as well as deferred fees coming through from prior years, partially offset by a decrease in fees because of the decrease in capital managed at Upsilon, RenRe said.

The increase in performance fees were driven by improved current year underwriting results, primarily in DaVinci, RenRe further explained.

For the fourth-quarter, RenRe reported that net income attributable to redeemable noncontrolling interests, so third-party investors, reached $403 million, which is well up on the $236.4 million shared with investors in the prior year comparable quarter. For the full-year, it was over $1 billion.

In relation to the buoyant year for the catastrophe bond market, RenRe reported that net realized and unrealized gains on catastrophe bonds reached $101.9 million in 2023, compared to net realized and unrealized losses of $130.3 million in 2022.

We don’t have RenRe’s latest third-party capital managed figures as yet, but there is a signal of the growth experienced in the results reported, as RenRe said that its redeemable noncontrolling interests reached over $6.1 billion at the end of the year, up from nearly $4.54 billion a year earlier.

It will be interesting to see if there are any signs of AlphaCat assets flowing to any of RenRe’s third-party capital vehicles and ILS funds, once we have that data.

View information on many dedicated ILS fund managers, as well as reinsurers offering ILS style investment opportunities, such as RenaissanceRe, in our Insurance-Linked Securities Investment Managers & Funds Directory.