濱特爾 (RNR) 2004 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the RenaissanceRe Holdings first quarter 2004 financial results conference call. At this time, all participants have been placed on a listen-only mode and the floor will be open for questions following the presentation. As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to turn the floor over to Mr. David Wooley. Sir, you may begin.

Good morning. Thank you for joining our first quarter 2004 conference call. Yesterday after the market closed we issued our quarterly release. If you have not received a copy, please call me at 212-521-4800 and we will make sure to get you one. We have reserved an hour for today's call. There will be an audio replay of the call available at 1 pm Eastern Time today through May 15th at 8 pm. The replay can be accessed by dialing 877-519-4471 or 973-341-3080. The pass code you will need for both numbers is 4709798. Today's call is also available through the investor section of www.renre.com, and will be archived on RenaissanceRe's website through midnight on June 18th.

Before we begin I am obliged to caution that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. Additional information regarding the factors shaping these outcomes can be found in RenaissanceRe's SEC filings, to which we direct you.

Here today to discuss the company's results are RenaissanceRe's Chairman and Chief Executive Officer, Jim Stanard; Bill Riker, President and Chief Operating Officer; and John Lummis Chief Financial Officer.

I would now like to turn the call over to John to begin with an overview of the financial results.

Thank you, David. I am pleased to report strong financial performance again this quarter. For the first quarter we met or exceeded our key top line and bottom line targets, resulting in an annualized ROE again over 25 percent and book value per share growth over 7 percent in the quarter. While we benefited from light cat activity, we also saw continuing growth in our specialty reinsurance and individual risk businesses.

During my commentary with our reinsurance segment, I would ask you to look at the supplemental financial data at the end of the press release. Looking at the top line for reinsurance, our gross managed cap premium in Q1 was $441m, down 5 percent from last year's first quarter, which is right on track with the guidance of 5 percent or greater that we had previously given.

Gross managed specialty reinsurance premium of $258m was up 25 percent, ahead of the 20 percent growth rate we had previously projected. Regarding our loss and expense ratios in the reinsurance segments, also shown in the supplemental data, the 28 percent loss ratio was consistent with last year, and clearly benefited from a light cat quarter, although we did have some attritional losses for the quarter. We estimate about $14m of total benefit across all of our cat activities from the low level of catastrophes this quarter.

You will see that we had a total of $17m reserve takedowns for the reinsurance segment, and that is split between cat and specialty, and there aren't any unusual aspects to this. The expense ratio also had a one-time benefit as we reversed an over accrual for incentive compensation and expect to see the expense ratio in the high teens for future periods versus the 14 percent you see for the first quarter.

Our fee income on a pro forma basis, which looks at DaVinci as though it were under the equity method and also highlights some of the fee generating structure reinsurance, that fee income was $17m for the quarter. That is down $3m versus 2003's first quarter, and that is partly due to a one-time adjustment and also partly due to normal course of variability.

Turning to the individual risk segment, this is clearly a growth story looking at $119m in 2004 Q1 premiums, the numbers are up 88 percent versus last year's first quarter. Given the rapid and recent ramp-up in the business, you should also look at sequential quarters, and there you see Q4 individual risk premium of $111m.

Regarding the underwriting results in the segment, we are on track with our expectations. The loss ratio is about where we had expected. The expense ratio is running a little high as we build infrastructure to support growth, and we are looking for that to be back in the high 30's going forward. A big component of the expense ratio is acquisition costs, given our use of program managers to originate and help us run this business, we also are ramping up our internal staff.

I would also like to comment on a couple of other income statement items. First, regarding our investment results, we are generally pleased with the quarter as the total return on our investment portfolio was over 1.5 percent, but underperforming a bit versus our benchmark, owing to our relatively shorter duration profile. Our duration was just over two years, compared to the 2.8 of our target allocation. We are maintaining our short duration profile given our projections of rising interest rates for the future.

One other item I will note on the income statement is that as required by FIN 46, we've reclassified our press (ph) preferred, so that the financing cost of that - just under $2m - is now shown in interest expense. That's a change in geography but not one that has a bottom line impact.

You will see on the balance sheet that the other investment line rose by $78m, $45m of that is new money that is going into funds holding fixed income securities with double B to triple B ratings. $25m of that is new money into hedge funds and private equities, and the balance is largely appreciation on existing hedge fund and private equity investments.

Also in the balance sheet, you will see a new presentation where we group all of our strategic investments in two lines just below the normal investment presentation. We are doing this to highlight the growing profile of these strategic investments, which are managed separately from our normal investment activities. These lines include the strategic investments you previously heard of, platinum appears in the line, equity investment and reinsurance company. Investments in other ventures include those being accounted for under the equity method, with Channel Re investments and Top Layer Re, plus one new venture that I would like to mention, which is the $27m investment in a joint venture focused on trading weather-sensitive instruments, principally commodities. Here we are partnering with a top commodities trading firm. They are providing the trading expertise and we are delivering weather modeling expertise. So far, in the first quarter of operations it's been quite a nice investment, generating $3m which you can find in the other income line of our income statement.

At this point I would like to turn the call over to Jim for his comments on the overall prospects of our company and the marketing conditions, particularly in reinsurance. After that, Bill Riker will speak to the individual risk unit which he runs. Jim.

Thank you, John. My comments are going to be fairly brief. Overall, we are - I don't think there is a lot of new news versus what we reported last quarter. I see the business as being basically on track with our expectations. Looking at market trends, the property cat market is I would say down, pricing is down in the 5 to 10 percent range and the specialty re area, prices are flattening in some classes, down in other classes and our joint venture/venture capital activities under RenaissanceRe (ph) managers, we still have a good pipeline of potential transactions, but these take a long time to complete and we are never sure that they are done until they are finally funded, so there is a lot of variability there.

Looking at those market conditions, we see ourselves on track for our previous guidance, on earnings guidance, with probably more upside than downside from previous guidance. We had the benefit of a light loss quarter, so we have one quarter of above-average experience.

On the premium side, we see the managed cat premium potentially having some downside from our previous projection of down 5 percent, it could be a little worse than that. That is offset by individual risk which we see some upside and I think those two things overall are basically putting us where we would expect to be.

On the property cat business, as I said, there is a little downside from our previous indication. We were the first cat writer to begin cutting back in 1996, soft cat market and we seem to be among the first cutting back now. We still believe we can have opportunities to grow in the specialty reinsurance market, even though that is flattening and down in some areas, because we are starting from a small base and there is a lot of opportunity in the market, it's a large market, we are starting from a small base and we are starting from some very strong advantages; our long-established relationships with clients and brokers, our high credit ratings, our reputation for quick claim payment and consistent pricing, that makes us a natural market of the first resort for that business. So even though the market conditions are not still growing upwards, we still have good growth prospects there.

My final comment on the market, and this is something that I've said in the past, is that this hard market seems to have peaked at price levels that are much less attractive than the peak levels in the 1993 property market and the 1985 casualty market. You know, what that means in terms of - you could argue that that will be bullish for the sustainability of this because some of the balance sheet repairs that the industry needed to make are not completed yet, and I think that would argue for the market to stay in reasonably responsible ranges for a period of time.

Those are all my comments, so we will open it up for questions.

Thank you, sir.

Oh I am sorry, Bill Riker.

Thanks, Jim and John. I am going to give - my comments are going to be fairly brief as well. You know, as both Jim and John have said, the first quarter was fairly uneventful, and actually a good quarter in a lot of different areas. As far as the individual risk section, our volume increase, we were happy to see that. I think John pointed out that the quarter-to-quarter volume increase was not as much as the year-to-year, but we do expect the sort of year-to-year increases to mitigate over the next three quarters so we will still end up in that approximately 30 percent up or more range.

One thing to keep in mind is our growth in this area can be lumpy as the new deals come on, depending on whether we would do an unearned premium portfolio, et cetera. But we are still seeing lots of opportunity.

In the first quarter, we added one new deal which now brings us to a total of three total program managers onshore and three program managers for our offshore entity, Glencoe Limited.

Talking a little bit about the pipeline, I can say our pipeline remains very, very full and that enables us to remain our very, very high standards on which deals we decide to pursue. It is interesting, you know, to Jim's comment about the pricing peaking at lower levels than they have in the past, we still see quite a few deals come through which are unattractive even at sort of what are considered to be very hard market terms.

Overall, we've talked in the past about a trend of our commercial property going down, and our liability portion of the portfolio going up, that has continued and we don't really see any change in that going forward.

Talking a little about our Bermuda-based - our Bermuda underwritten business, where we are doing business directly with ENS Brokers, that business is pretty much stabilized now, and actually we do see some better opportunities in our specialty liability unit written by Joe George.

A little bit on the operational side, as John mentioned we are pretty much staffed out, with very few remaining slots remaining to be filled, and our current staff, we believe is capable of doing the premium expectations and business expectations over the next 12 to 24 months without really adding a lot, so that hits us a little bit in the short run on our expense ratio, but we think that is the right decision.

Another thing, we do continue to make opportunity hires. We continue to look for good people in the business and I know from Renaissance's point of view over the years, we've never been sorry to hire a good person.

A new comment, some of you may be aware, we have a U.S. consulting business called Wyndham (ph) Partners, and we are finding that business is getting some nice traction out there. We sell certain products and services to a variety of clients out there, one being something we call our track product, which helps our clients understand the price adequacy of their business and this is still a small business, but it does provide us with a significant competitive advantage, because the products and services we offer out of our Wyndham Partners arena really differentiates us from other people in the business.

I am not going to spend a lot of time on market conditions, I am sure you all hear from many people out there what is going on in the different markets, but in the end it is probably the highest level observation is the larger accounts are getting more competition, and so if you take the very high premium account, that is where the greatest competition is, going down to the very small premium accounts is the least amount of competition. So that is just sort of an overall trend on that.

Another comment is there has been some news and information flowing out about the RMS 4.3. As far as the individual risk segment, this has created a couple of new areas of dislocation, primarily in the Northeast. Some of you may be aware there are some issues, especially in Massachusetts, on availability of catastrophe type property capacity. Then there are also some issues in California which we've seen, has made a little difference in the market. I have to say, these aren't huge dislocations and they just sort of provide opportunities at the edge.

So then finally, our theme from the individual risk side for the balance of the year is really to execute what we have in the pipeline and while doing that, we would still keep an eye out for one or two sort of larger transactions, but overall we have got our plate full and we are very optimistic about how things are going to play out over the next nine months. So I will turn it back over to Jim and John for any questions. Thank you.

Thank you. The floor is now open for questions. (Operator instructions) Our first question is from Susan Stevak; Wachovia.

Good morning. Jim, I was hoping you could expand your comments on the cat market to the retro market, and whether you are seeing prices fall there as well, and what capacity levels are? And John, if you could comment a bit on future capital management activities.

I would say at this point the retro market is not unusually - it is not behaving differently than the cat market. It is still reasonably firm because security is such a key issue that there is a relatively small number of players in the market that have high security. It is not - there is no big news on that from our perspective.

On the subject of capital management, Susan, I would say our commentary here is really consistent with what we have said in the past. For so long as we continue to deliver high returns on equity, as a practical matter, I don't see a real capital issue. The considerations that will go into our thinking around capital will be as usual, how does actual capital stand relative to our modeled required capital. We will make an assessment of new business opportunities and we will clearly be sensitive to the stock price at the time of any possible buy-back. So I would say at this point it is the same story lines as we've had in the past.

Thank you.

Thank you. Our next question is coming from Michael Lewis of UBS.

Good morning. I have two questions. A number of companies have commented on the 9/11 reserves being redundant, and taking some reserves down. Have you taken any actions in this area, and what insights do you have on the redundancy? Also, what's the size of your reserves? That's number one. Number two, on the individual risk you made some comments about commercial property, the magnitude of growth going down and liabilities going up. Can you quantify where you were at the end of last year in the mix of business and best guess with market conditions, what you think they will look like at the end of this year? Thank you.

On the World Trade Center, there is nothing that really deserves comment. That is not playing a factor in our results here. We do continue to have a meaningful net reserve position consistent with our initial reported results out of that, but nothing material to add. We do not give specific disclosure on reserves around individual events, so that is not a direction I will go in this conversation.

On the subject of mix of business in the individual risk segment, I guess a way to go at that would be to talk about the 2003 versus Q1. For 2003, property was a bit over 70 percent across the year in terms of gross written premium. In Q1, property was down to being a bit over 60 percent, so that gives you a sense of the trend. Bill, would you add anything else?

I think that's right on and we expect that to trend similarly over time. We don't want to project where it is going to be at year end, but you can infer it as well as I can.

One other quick follow-up. I think in the last conference call you compared the property cat market to year 2000 conditions. I am just curious why you - and maybe you could give me some details here - why do you believe down 5 to maybe slightly more percent is a realistic expectation? Is it that the market is down to 2000-year conditions and kind of stabilizing, or is there really any change or is it really hard to say after you go after the January renewals to see much in the months that have transpired?

Let me differentiate, two different down 5 percent numbers. The first is, I commented that the market price levels were down 5 to 10 percent, and so that is just our view that the market is seeing some gradual softening, reflecting two years of claims experience. In terms of our projected top line managed cat premium, we also had said down 5 percent or more and I am now saying that we are still there, but I think there is a little more downside on that, so it is going to be down a little more than 5 percent.

So our being down in '04 versus '03 is really driven by a few contracts that were not purchased in '04 that were purchased by the client in '03. There are some potential changes to the Florida cat fund that could have an impact on reinsurance purchasing. So our top line being down is driven really by specific cases of clients buying less rather than us cutting business.

Thanks very much.

Thank you. Our next question is coming from Terri Hugh (ph); JP Morgan.

Hi, Jim. If you can be a little more specific, both the specialty reinsurance as well as the individual risk. For instance, specialty reinsurance, you said that even though pricing is flat to down you still see opportunities. Can you be more specific as far as lines of business? And then on the individual risk side, Bill, if you can comment what types of programs? You gave the split between property and casualty, but what types of programs? Maybe a bit more detail on what types of lines and programs?

Also, Jim, you had said that you thought that the peak is nowhere near as high as it was the last time, but it is interesting to note that all the insurance companies and reinsurance companies are reporting record underwriting profitability as well as returns. I know a part of it is driven by exceptionally favorable personal lines, but across all lines the reported results, at least, seem even better. Just an observation, if you can comment on that.

I think I will take them in reverse order. I think that's -

It's interesting.

That is an interesting observation and it would be interesting to sort through, but based on my experience I am absolutely convinced that the margins, on an accident year basis, that were available in the casualty business in the '80s hard market were, at least from the business that I saw and see, were substantially larger than what is available now. And in the property market in '93, there is no doubt in my mind that the relative price adequacy (ph) was much higher than what this market has peaked at. So how that feeds into reported results is a very interesting question.

I am assuming perhaps it's because those years evolved much better. At the time, companies reserved much more conservatively and we had periods of disinflation. This time, maybe accident year loss ratios, the companies are being much less conservative. Can one draw that conclusion? Perhaps that argues, as you say, for a better downside or a more muted downside or a soft landing because companies will realize that the profitability is not quite so good? Is that one way to look at it?

I really haven't thought this issue through, but I think that is a pretty plausible explanation and prediction.

But you would concur with the observation though, right?

I wouldn't disagree with what you just said. And in terms of your first question, unfortunately we really don't like to talk about what specialties we like because we know that our friendly competitors read these analyst reports and we don't want to tip our hand to where we are really looking for business.

Okay, fair enough, but can you just talk about business that you've written so far? What is it, other than just call it specialty reinsurance? Like, what is it? I always get a little confused. That, and individual risk, what types of programs, what are you writing?

Okay. We have disclosed - I just want to get my hands on something here that discloses some of the areas that we've -

The things we've been public with are surety and medical malpractice where we've hired two underwriters, and we are quite visible around that. We don't - we have also talked about writing cat-exposed worker's comp. So those would be three areas that we've been public with. That's by no means all there is, (multiple speakers) but I guess one other comment is that the growth in this quarter is spread across several different areas, so I don't want to just say one simple story to this; it's driven by a number of different areas and a number of different deals.

Okay, and again I get confused. Can you distinguish between individual risk and specialty reinsurance? What is the difference when you call certain lines one versus the other, I get confused.

Specialty reinsurance is all done in Bermuda with a group of about six people who sit right on the same floor as the cat underwriters who are doing reinsurance - we used to call it non-cat reinsurance, but that sounded a little negative, so we now call it specialty reinsurance. It is reinsurance outside the cat business; it is through the same marketing channels that we get the cat business, the same brokers, the same kind of -

Okay.

And it is focused on a small number of specialties. We are not trying to be a broad generalist. So our value proposition to the client is not that we will provide all their product needs, our value proposition is for the areas that we have (ph) specialties that we will be the best provider to them. That is the individual risk. It is generally at (multiple speakers) - sorry, that's -

That's specialty reinsurance.

That's specialty, yes. And that'ss generally excess of loss business. Individual risk, actually I will turn it over to Bill Riker.

Right, as clear a description as you can give.

Terri, I know the definition in this business is always hard. Our individual risk business ranges from proportional reinsurance, just quota share reinsurance of a couple of people out there down to, say we are underwriting business risk by risk from ENS brokers.

Okay.

The way we look at individual risk is if we need to understand the underlying price adequacy of each individual policy we are underwriting, that is an individual risk problem. And we believe - and we are different from a lot of the market, we believe that if you are underwriting a proportional quota share of somebody you really need to understand the underlying price adequacy of each policy in that portfolio.

Versus the specialty re as Jim described, the way you -- because the bulk of it is excess of loss of or there's other types of contract conditions to limit risk, understanding the individual price adequacy of the underlying policies is not as important, because you are writing more of an excess of loss policy on top of it.

And it is all written outside of Bermuda?

No, our individual risk business, some is written in Bermuda, some is written in our U.S. operations.

So it could be written anywhere, through any broker channel.

I have to think about that answer. We get our individual risk business ranging from reinsurance brokers for some of the proportional transactions which I would say there (multiple speakers) a few of those, to we originate our business through a handful of program managers and then we also originate that business directly from ENS brokers who submit that business into our Bermuda ENS operation.

Thank you very much.

Thank you. Our next question is coming from Brian Meredith; Bank of America Securities.

Good morning. A couple of questions. John, just a quick clarification. You made some comments with respect to the expense ratio. Did you say you expected it to be above 30 percent going forward, or was that for just the individual risk segment?

For the individual risk business, I was trying to position the expense ratio that you see for the quarter, which is around 40, indicating that going forward we would expect to see that getting back into the high 30's, so that was a comment on the individual risk segment alone.

Terrific. My next question is, on the specialty reinsurance business, and maybe we can take this to the primary business also, are you writing more long tail business today than you've historically been writing?

Well, we are writing -- in the specialty reinsurance business, we are writing some long tail business, but what we are doing is not predominantly long tail, and we have a strong bias for wanting to limit exposure, both in amount and time, so our tail, we tend to favor claims made-type contracts, contracts that have some sets, contracts that have commutations, so that at some point in time we know we're done.

Similarly, we have a strong aversion to unlimited type exposures, so if we write excess business, we know how - you have a limited number of reinstatements, you have a limited limit so there is an absolute amount that you can lose.

Okay, and then one other question following along with that, I would have expected your loss ratios to start to move up, particularly since in the first quarter of '04, particularly since you are writing a lot more of the specialty reinsurance on your reinsurance side. And I would assume that carries a higher accident year loss ratio, maybe I'm wrong in that assumption. It looks like it actually dropped in the fourth quarter as well as the third quarter of '03. Is there anything behind that?

Brian, there is a fair amount of nuance but you have to look at some movements in the cat loss ratio, there are some business mix considerations and so on. I wouldn't say there's a dominant theme to point to there.

But would the business mix probably move that accident year loss ratio up?

Everything else held equal, yes I agree with that.

Okay. And the last question, we keep hearing a little bit about TRIA down in D.C., whether it is going to get renewed or not renewed. One, just maybe your comments or thoughts on whether that gets renewed; the second thing, what would the impact be on the big ticket commercial lines business, do you think, if it didn't get renewed?

I don't have any opinion on what is happening politically with it. I mean, we're watching, but I don't have any insights beyond what everybody already knows. I'd ask Bill Riker to comment on your second question.

Obviously the whole TRIA situation is uncertain, purely our opinion is that it will remain uncertain for a while to come. The effects on the large commercial property accounts really depends on (a) if it gets renewed, then there is obviously, things will stay somewhat stable. Even as the retention continues to go up, we see people's focus on the issue to sort of increase, just in the way TRIA's retention goes up, if people's net risk continues to increase, so it is focusing the mind.

If it does not renew, then the whole question comes into are insureds forced to purchase the coverage and are insurers forced to offer the coverage, and that is still a very uncertain part of the landscape. So we keep an eye on the TRIA situation, frankly we think there is still a lot of talk to be done, but we are optimistic that something workable will come out of it.

Thank you.

Thank you. Our next question is coming from Ron Frank of Smith Barney.

Two items. One, it sounds like the comments regarding the individual risk and cat expense ratios and your expectations, just doing the numbers quickly, it sounds like overall that these items might have moved the aggregate expense ratio one or two points to the good in the quarter versus what you would expect as a run rate. Is that fair?

I think it is best to think about it by segment. I don't want to lock on a consolidated expense ratio; I think that's just the wrong way to think about it because it's very sensitive, obviously, to what growth you end up seeing in the (multiple speakers) segment. For this quarter, what I would tell you is back up -- we would be in the high teens in the absence of this incentive comp accrual being reversed, and the expense ratio for the individual risk business is clearly a true and correct number, you know, with no unusual items in it for this quarter, but we expect that as that business scales up that expense ratio will tend to decline.

Okay, one for Bill if I could. Bill, we heard a few months ago at least from one company and also from some other places that the program business in particular whereas in the beginnings of the hard market it was easy to pick off good programs because companies were throwing out all their programs, good and bad, that now, the competition for the good programs is intensifying and there is some more discernment out there. Are you experiencing that in your individual risk business?

I would say, you know, a couple of buts (ph). I wouldn't say I necessarily agree with your first statement in that there was a lot of business available a couple years ago. I wouldn't necessarily say that made it good business. Because our selection criteria is so high that we still see a very nice flow of business that we at least take the time to assess. We still say no - we say no most of the time out of the box, and then if we move to the next step we still say no most of the time.

So there are definitely a few more people in this arena, but I still think the real quality partners out there are looking for a little bit more than just paper, and that is part of our strategy. What we offer is a much different program strategy than most people out there, and the quality players find our value proposition to be very attractive today as they did a year-and-a-half, two years ago.

So I would not say that, at least at this point, we've seen an issue where we've found a particular deal that we are interested in doing where we end up in a competitive situation at this point, and that's really because of the different value proposition we offer.

And finally one for Jim, just to spread it around. Jim, how productive if at all are the Chubb Re and Platinum relationships at this point, or is that cooperation still kind of on the drawing board?

I would say the Chubb Re cooperation has not been a large factor recently. We still have an excellent relationship and a high level of respect for that organization, but I think that as we have built out our own specialty reinsurance operation that from our side, the need for that relationship has declined to some extent, but I think we still find some opportunities to work together on a win/win basis.

Platinum is a very specific relationship that we established when we got involved with the company and that remains entirely intact.

I also just want to echo something that Bill Riker said. On the program businesses, I believe and our strategy is that we are an extremely attractive partner for top program managers. We don't have channel conflict in terms of a - I mean, we are focused on this business as Bill said, there are other things we offer than just paper, and so even - this is one area where even if there is some more competition I think because we can offer a superior proposition to that small set of people we want to deal with, that that would not concern me if there was more competition for this business.

Okay, thanks.

(Operator instructions). Our next question is coming from Alain Karaoglan of Deutsche Bank.

Good morning. I have a couple of questions. The first one relates to the seasonality of the business. Can you give us a little bit - what is the seasonality of the premiums written of the business on the reinsurance side, how much of the premium on average ought to be coming in the first quarter versus other quarters? Is there any on the individual risk side?

The other question relates to reserve releases. In your guidance you had said to expect $30m of reserve releases for 2004. This quarter we released 21.7. How does that compare to the $30m? Is there a seasonality to that reserve release in any way, and what should we think about going forward?

And the last question relates, Jim, to the cat market. You mentioned we are not back to the peak similar to 1993, so the business being written this year is similar to which year, you would say, in terms of the cat market?

Okay, Alain, let's see if I can keep track of all of your questions. First of all, on the subject of seasonality, it is clear in the reinsurance business generally that the first quarter is the most active one by a long shot, and that can be 50 to 60 percent of premium in the first quarter relative to the annual result.

I will say as you commented, I think fairly consistently in the past, we have the experience of lumpy premiums in the reinsurance unit so that there's not - I don't want to put too much precision around that because we could have some timing issues and some big premiums come in that could be as much as $20m coming in one quarter that can skew some of that commentary, so I don't want to suggest there is complete precision to that, but clearly Q1 is where this is weighted.

Individual risk, I would say it's on a normal run rate basis spread across the year, but again perhaps at least as much with reinsurance there is the phenomena of lumpiness as we're growing the business, so that you could see a portfolio transferred in that could generate a pop-up of $30m or $40m, which we saw in Q3 of last year.

I think that would be my commentary on seasonality. As to the question of reserve releases, one thing I would like to clarify, in our prior comments on the reserve releases that we thought might happen in '04, what we were focusing on was cat reserve releases and as to that we said we could be looking for over $30m in the year, making an assumption that payment levels and other relevant data were going to unfold in '04 consistent with '03. And obviously that is something that you learn about as experience progresses, so I think the reserve releases this quarter should be positioned correctly against that $30m, which is just a comment around cat, and you will recall that I said half - or a part of the reinsurance releases in the reinsurance segment were cat, but the balance was special. I would say we are roughly consistent with expectations, but I don't want to suggest that we've got a particularly accurate crystal ball; it is what it is as those releases unfold. So that is the comment on reserves.

Your third question I think was one for Jim.

I guess I think as you know, to answer your question I will stick with my answer from last quarter, which is the year 2000. I have trouble making precise comments about "the market", because I just view this business as a micro game. We look at individual contracts and how they are priced, and the average for the market is really not as important a kind of number for us, so that's why I don't mind being imprecise on that. Even though I said the prices are down 5 or 10 percent, I will stick with year 2000.

Thank you.

Thank you. Our next question is coming from J.F. Tremblay of Credit Suisse First Boston.

Good morning. My question is for Bill. You mentioned that now you have one new program administrator, and that is now six - can you provide some color in terms of how this new program administrator is different and similar to the other five?

Just to make sure I understand the question - how our new partner is different or similar than the ones we currently have in place?

That's right.

What we are not doing and what we really want to avoid doing going forward is being too detailed on the types of businesses we find attractive. Frankly, we just find the more we disclose to people the quicker our competitors come after it, but I would say our new manager is in a more dislocated market than our previous ones. It is a little bit more of a - it is a more homogeneous type of deal, but we do see a nice three to four year stability in that particular market which should provide some nice attraction. I don't know if that helps you.

I wish you could tell us more, but -

And I appreciate it, I do appreciate you guys wanting to do that, but it really is we just do find the more we get specific the quicker our competitors come after the business we are doing.

Sure. Thank you.

Thank you. Our next question is coming from Vinay Saqi of Morgan Stanley.

Good morning. Just two quick questions. One, if you guys could talk about the joint venture activity and what the pipeline is, and specifically, given where we are with market conditions, is it more difficult to do stuff within the property casualty arena, given that a lot of companies have recovered their capital and are not in as weak a position as they were before, or that does not play into the equation?

Second is, if you could just talk about the perpetual preferreds that you issued, and your thinking about capital there, when you guys see opportunities to raise capital and how you make those considerations? Thank you.

I will address the joint venture question. Well I wouldn't - let's see. The balance sheet's becoming somewhat healthier has some impact, but still I think it is a widely held view and one that I would certainly espouse that there's a long way - the industry has a long way to go. There is still tens of billions of dollars of losses that haven't surfaced anywhere, so we are not done with healing balance sheet. Secondly, we are not done with businesses choosing to restructure, choosing to divest of certain blocks of business, so there still is a reasonable amount of activity in the market that would call for where a joint venture structure could be a solution to a client's problem.

So we are - it is basically on track. I have said in the past I would hope to see one to two new ventures over the next 18 months and that's where I still am. We have a pipeline of discussions but the hit ratio of actually completing a transaction to the number of initial discussions may be 5 percent or something, so these are obviously very lumpy.

But I would not say that the potential for doing this is fading away with the change in the market at this point.

Would you say that competition has picked up in any way relating to joint ventures?

Well, let's see. I mean, on one level we certainly have seen some other companies do joint ventures, but the way we've done these, we are not in auctions or anything like that. These are custom transactions that really are usually generated at a high level in the client organization, and where we are providing a custom solution. So on a specific transaction, we are usually not bidding against another party. We are providing a solution that works. So in some ways, I can't say we are a unique partner, there are other organizations that can do these things, but I think we are an unusually attractive partner. We have a track record of succeeding in these things, so the key thing is that the partners get what they bargained for, that we do what we say we are going to do and we have a track record of achieving that.

So once again, similar to the program manager business, an increase in competition here would not overly concern me, because I think the deals that we do, the small number are pretty unique.

Just the capital question.

On the perpetual preferred, the theory there, frankly boil down to having a very attractive market environment to raise capital in, what we think is a very favorable format for us, so we have an extra $250m of equity with a coupon just north of 6 percent. I think that is a great security and that is a perpetual, so that is for our balance sheet forever.

We did not have a capital shortfall or a capital problem that we were looking to solve when we raised that preferred, but rather saw a unique market window and we are making the bet in the long term that it is useful to have that on our balance sheet even if there wasn't a short-term need.

Thank you very much. Helpful.

Thank you. Our next question is coming from Ron Vodman (ph) of Capital Returns.

Hi, thanks. Congrats again on another great quarter. Regularly on these calls people are asking, trying to get greater insight into the program business and the nature of the risks that are being written, and I respect your aversion for competitive reasons to provide us too much information.

What I don't understand, presumably these half or dozen or so program managers are out marketing these programs to hundreds if not thousands of sub producers, and presumably trumpeting the security of the paper and the carrier that is supporting the program.

So what I don't understand is, I assume that there is a fair bit of public and marketplace knowledge of your participation. Maybe not as far as the investment community is concerned, since we are not in the trenches, but I would think that the balance of the insurance industry, or relevant prospective competitors are awfully in tune with the risks that you are underwriting.

And I don't mean it to sort of - I don't want you to take this the wrong way, but what am I not understanding about how the marketplace operates or how these programs are being marketed that if the competitive threat is not as great as I would think? Thanks a lot, and continued success and good luck.

Yes, you know, you are absolutely correct in that if you want to dig, you can generally find out what types of businesses, et cetera, are out there. We've actually had questions in the past on that. It's purely just an ease of obtaining information. Fortunately, in our business and all our competitors, everybody is quite busy and it is just how much do you want to deliver information on a platter versus having people dig for it.

You are absolutely correct, a lot of our competitors know some of the things we are doing, but we just prefer not to deliver it on a silver platter.

This is Jim Stanard, I will turn it around. There are - as CEO of RenaissanceRe, I do not have a high level of awareness of the specific programs that company - that competitor XYZ right down the street is writing. However, one of our people in Dallas in the trenches may very well know one or two of them, but it just doesn't rise to my attention.

However, if when I am reading through the analyst reports I see that XYZ down the street is targeting bowling alleys, I will ask around and say, hey, what do we think about this? Is this an interesting area? That is just practically how we see it working.

All right. Again, continued good luck and success.

Thank you.

There are no further questions. I would like to turn the floor back over to Mr. Stanard for any closing comment.

Okay, actually John is -

I would like to make one comment correcting a statement that I made early in the call. I referred to the joint venture with the commodities trading firm as generating income going to the other income line. I misspoke in saying that and in fact that income appears in the line, "Equity and Earnings of Unconsolidated Ventures" on our P&L. So just to be clear with that. That's all that I have.

I would just summarize to say that although we are seeing some weakening in the end-market segments, and of course that is going to have an impact on us, I feel that RenaissanceRe is better positioned to deal with this softening market than virtually any organization in the business. We have been through a soft market before, and we have a track record of how we handle it and handling it successfully, both on the underwriting side and the capital management side. We are going into the soft market with an extremely strong client base, an extremely strong balance sheet. A management team that has been working together for a long time and as I answered a couple of questions, although I never would want to suggest we are immune from competition, some of the things we are doing are a little outside the normal range of what is the real competitive stuff now, so I think that some of the technology we've developed, the value-added that we bring in these specific businesses to our partners is not that easy to replicate, so I am feeling good about our ability to deal with these market conditions that we are beginning to see. So with that, I will close it. Thank you.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and have a great day. Thank you.