濱特爾 (RNR) 2009 Q4 法說會逐字稿

Welcome to the RenaissanceRe fourth-quarter and full-year 2009 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you. I would now like to turn the conference over to Mr. David Lilly. Sir, you may begin your conference.

Good morning, thank you for joining our fourth-quarter and full-year 2009 financial results conference call. Yesterday after the market closed we issued our quarterly release. If you didn't get a copy, please call me at 212-521-4800 and we'll make sure to provide you with one. There will be an audio replay of the call available beginning at 2:00 p.m. Eastern Time today through February 24 at 8:00 p.m. The replay can be accessed by dialing 800-642-1687 or 706-645-9291. The pass code you will need for both numbers is 485-064-57. 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 April 21, 2010.

Before we begin I'm 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.

With me to discuss today's results are Neill Currie, Chief Executive Officer; Jeff Kelly, Executive Vice President and Chief Financial Officer; and Kevin O'Donnell, Executive Vice President and Global Chief Underwriting Officer. I'd now like to turn the call over to Neill. Neill?

Thank you, David, and good morning, everyone; thank you for joining us. I am pleased to report we had a strong fourth quarter and a great year. As you know, we focus on building tangible book value per share plus the change in accumulated dividends and this year the increase was extraordinary, 38%. That's not going to happen too often.

There were a number of factors that drove these results. While our reinsurance portfolio was quite attractive on an expected basis, our actual results were better than we anticipated due to an unusually light level of cat losses, favorable loss development and an ongoing rebound in the value of our invested assets.

While volatility is inherent to our business, our goal is to build a portfolio of risks with attractive expected returns and with the potential to achieve superior returns in good years, like we had in 2009, and keep losses within manageable levels in high tax cat years. Our success in building a great portfolio of business frankly is attributable to the terrific experienced team we have here at RenRe.

We saw continued pressure on the top line during the January renewals as several major clients elected to purchase less reinsurance. Compared to a year ago there is much less fear in the system today as improved investment performance and stronger balance sheets have increased the appetite for risk from both our clients and our competitors. In this environment we will focus on maintaining the quality of our book of business. Kevin O'Donnell is here to provide more color on that in a few minutes.

As I'm sure you are aware, we announced senior management changes in January. This was the result of two factors -- our decision to consolidate our global underwriting operations and the announcement of the retirement of Jay Nichols who headed up our ventures unit and Bill Ashley who ran our Individual Risk operation. I would like to thank Jay and Bill for their valuable contributions to our company and wish them each the very best in the future.

Kevin O'Donnell, who was running our reinsurance operations, will now have responsibility for both our reinsurance and insurance businesses. This is in line with our strategy to further enhance the consistency and effectiveness of our global underwriting in general and to boost the performance of our insurance segment in particular. Kevin has demonstrated his talent for building and managing strong disciplined underwriting teams and we are confident that our global underwriting operations will thrive under his leadership.

Jon Paradine and Ross Curtis, each with over 10 years at RenRe in reinsurance, have both stepped up into broader roles. Jon has been named Chief Underwriting Officer of RenaissanceRe Ltd. and Ross has been named Chief Underwriting Officer of our European operations which includes our Lloyd's operation. Both will continue to report to Kevin.

Aditya Dutt, who has been an integral member of our ventures unit since joining our company from a leading investment bank, has taken over from Jay as head of RenaissanceRe ventures. He has ongoing responsibilities for joint ventures and venture capital as well as responsibility for RenRe Energy Advisers Ltd. Aditya now reports to Jeff Kelly whose overall responsibility for capital management will now also encompass strategic investments and joint ventures.

These changes reflect our commitment to maximizing effectiveness and performance through the best possible alignment of businesses and responsibilities.

Looking ahead our industry faces a number of challenges. Pressure on pricing is expected to continue through 2010. We are closely monitoring legislative developments in Florida where the financial health of many primary companies remains an issue. And we're watching the evolution of the government's SRA agreement, or Standard Reinsurance Agreement, for the 2011 underwriting year and its potential impact on our multi-peril crop insurance business.

The good news is that whatever agreement is finalized we have a good book of business and an experienced capable team at Agro National. You know there are always challenges, some disappear and then new ones appear. I'm confident however that our RenRe management team will guide us through these challenges to continue our record of performance and success over the long term.

We've been through many cycles and our approach, as always, will be to remain disciplined yet nimble. We will not write business unless it is adequately priced. And we will continue to focus on generating strong returns for our shareholders. So with that I'm going to turn it over to Kevin. Kevin?

Thank you, Neill, and good morning, everyone. I'll update you on our reinsurance including cat, specialty and Lloyd's and then discuss the Individual Risk segment.

With regard to the reinsurance renewals I would describe the January renewal season as orderly with programs achieving their capacity needs. Some of the factors impacting the supply of reinsurance capacity were the strong recovery in the financial markets and the absence of meaningful loss activity during 2009 which resulted in an increased appetite for risk.

In terms of demand for reinsurance, the improvement in the balance sheet strength of insurance companies led to increased confidence and a significant reduction in limits purchased by several large buyers. Despite the more competitive landscape we are satisfied with the business we were able to write and expect healthy returns on our reinsurance portfolio in 2010 absent a significant event.

We estimate that the size of the US cat market was relatively stable and the amount paid per dollar of limit purchased declined. Adding to the pricing pressure was the impact of the introduction of the new vendor models, particularly earthquake. The simple adoption of these models would indicate increased economics as prices did not decline by as much as was implied by the changes to the model.

As we take our own view of risk rather than solely relying on the vendors, we view the economics as being less attractive but still acceptable as prices declined by more than our updated view of the risk. Our ability to continually develop and update our models remains an important differentiator for us.

Moving to international cat, the market was essentially flat. While some of the territories with recent losses experienced price increases, most territories experienced modest price reductions.

In the retro market we saw an increased underwriting appetite from existing players and the emergence of some new players. This follows a familiar pattern whereby competitors enter or reenter the market to make up for lost income on the primary cat side.

Looking purely at prices in this business may be misleading, since in some instances the softening of terms and conditions have led to a significant decrease in expected profitability. While we prefer long-term relationships we believe the willingness and discipline to increase or decrease dramatically in this line is critical to managing this book through the cycles.

With regard to specialty, the market remains competitive with ample capacity. Overall price reductions were modest and generally in the single-digit range for the lines of business that we write. We continue to focus on select opportunities in existing and new lines and premium growth was driven by the expansion into classes of business that were impacted by the credit crisis and experienced some rate hardening.

Our Bermuda specialty book remains focused on low-frequency, high severity businesses as this risk profile best fits our current pro-portfolio.

We have seen good opportunities and are continuing to build our Lloyd's platform. At 1-1 within Lloyd's we saw a good flow of business which has allowed us to add some specialty risk that would have been more difficult to write without our own syndicate. With the pricing trends that we are seeing we anticipate that growth will be modest. As we have stated, we are investing in Lloyd's for the long-term and slow and measured growth in the current market is the best strategy to achieve our long-term objectives. We remain happy with our progress there so far.

Moving over to individual risk. To begin with I'm excited about the opportunity to work more closely with our US operations. My goal is to further align our underwriting systems and processes with those of the other units around the Company. I'll divide my comments first to discuss our crop business and then give an overview of the other primary P&C businesses.

Full-year 2009 results for the crop insurance business were impacted by severe hail stones that hurt the profitability of our crop hail book during the third quarter and also by adverse development on the 2008 underwriting year that took place during the first quarter. Corn and soybean prices ended the year approximately in-line with the level set in the spring and did not materially affect the profitability of the crop insurance book.

While the vast majority of the crops we have ensured have already been harvested, there is some uncertainty regarding our results due to a small portion of our book for which harvesting was delayed. As many of you are aware, or in early December the USDA risk management agency released its initial draft of the Standard Reinsurance Agreement, or SRA, for the 2011 underwriting year. It's still early days and the SRA will be subject to meaningful negotiation in the coming weeks.

In its current form the SRA contemplates a number of changes that serve to reduce the level of profit and losses retained by private insurers. We will closely monitor the proposed changes, but it's too early in the legislative process to conclude the impact on our crop insurance business.

Finally, turning over to our P&C insurance business in the US, the market remains competitive and we remain focused on underwriting only the classes of risk that meet our underwriting criteria and return hurdles. Overall our book remains profitable but we believe it can be improved. Over the coming months we will evaluate all of our business in this segment and build a plan to optimize our current portfolio.

I am confident that focusing more of our internal resources on this business will provide us with even greater precision in shaping our portfolio, allowing us to match these risks with the right balance sheet and enhance the overall returns for the Group. Thank you and I'd like to turn the call over to Jeff.

Thanks, Kevin, and good morning, everyone. This morning I'd like to cover fourth-quarter and full-year results and also provide an update to our topline forecast for 2010. The fourth quarter was characterized by strong underwriting results from the reinsurance segment driven by a continued lack of meaningful loss events and favorable reserve development.

Investment performance was positive but was less of a factor in the fourth quarter than it was in the prior two quarters. We reported net income of $212 million or $3.38 per share and operating income of $178 million or $2.82 a share. Our annualized operating return on equity was 23% for the fourth quarter and 27% for the full year 2009. Our tangible book value per share, including accumulated dividends, increased 5.5% in the fourth quarter and was up 38% in 2009. For the full year 2009 we generated underwriting income of $697 million, a combined ratio of 45.3% and investment income of $324 million.

I'll walk you through the operating results starting with the reinsurance segment. Managed cat gross premiums written were negative $29 million compared with $25 million in the year ago period. The fourth quarter historically tends to be light in terms of cat premium volume. Impacting managed cat premium volume in the fourth quarter were a $19 million adjustment to reflect lower estimated premiums written by ceding companies in 2009, a $15 million adjustment due to credit issues for ceding companies in Florida that are facing financial difficulties, and the nonrenewal of a large program incepted a year ago.

As many of you are aware, the Florida homeowner's insurance marketplace remains troubled. For the full year managed cat gross premiums written adjusted for prior year reinstatement premiums increased by 15% compared with a year ago. The fourth-quarter combined ratio for the cat unit came in at a negative 2.3% driven by lower -- low reported losses and $57 million of favorable loss reserve development.

The favorable development was driven by reductions to estimated ultimate losses for the 2004, 2005 and 2008 hurricanes. The reduction to the loss estimates for 2004 and 2005 events relates primarily to adjustments we made to our methodology for reserving for mature large Atlantic hurricanes.

Specialty gross premiums written declined by 27% from a year ago in the fourth quarter. As we've mentioned in the past, premiums in this unit are prone to quarterly volatility since the unit is dominated by a relatively small number of large contracts. The premium decline relative to a year ago was driven by the nonrenewal and portfolio transfer out of a single personal lines quota share transaction.

For the full year specialty reinsurance gross premiums written declined 28% from a year ago. The specialty combined ratio came in at 59% for the fourth quarter, benefiting from a relatively low loss experience and $9 million of favorable loss reserve development.

Within the individual risk segment premiums declined 23% compared with the year ago period. The decrease was largely driven by a decline in multi-peril crop insurance premiums as a result of a meaningful drop in commodity prices compared with 2008. For the full year gross premiums written declined by 10%. An increased presence in crop insurance partially offset declines in commercial multi-peril commercial property and personal property books of business.

The individual risk segment came in at a 94.2% combined ratio in the fourth quarter. The sequential and year-over-year improvement was a result of lower loss experienced on our multi-apparel crop insurance book of business and $9 million of reserve releases primarily related to the 2005 hurricanes.

For full-year results for the individual risk segment -- full-year results for the individual risk segment were hurt by adverse reserve development of $27 million in the first quarter on business written in 2008 and $18 million of losses from severe hail storms in Nebraska during the third quarter.

Moving away from our underwriting results, other income totaled $7 million in the fourth quarter. This was driven by a $5 million increase in the valuation of our platinum warrants the Company holds which are mark to market. Other income also includes $12 million in pretax income from RenRe Energy Advisers Ltd., our weather and energy derivative-based risk management business. This unit provides products to protect its customers from weather- and commodity-related risks and it has grown in recent years and become a larger contributor to our overall earnings.

The increase in these two items was partially offset by a $10 million expense for assumed and ceded reinsurance contracts accounted for at fair value. The meaningful increase in operating expenses relative to a year ago relates largely to increased headcount and higher performance-related compensation expense.

Turning to investments, our performance remains solid but, as I mentioned earlier, it was much less of a contributor to overall earnings than was the case in the prior two quarters. We reported investment income of $61 million and the total return for the portfolio was 0.8% for the quarter. A slight decline in credit spreads was partially offset by an increase in interest rates. Our portfolio of other investments contributed $24 million of net investment income generating a 3% return. Performance of our hedge funds and private equity investments continued to stabilize in the quarter.

Our investment portfolio remains conservatively positioned with high liquidity and modest credit exposure. We continue to increase our allocation to US treasuries and non-US government-backed corporate bonds while reducing our exposure to US agency debt. The duration of our investment portfolio increased slightly to 2.6 years and the yield on maturity on a fixed income and short-term investments is 2.3%. The average credit quality of our fixed income portfolio remains high at AA with 72% being AAA rated.

During the fourth quarter we began designating certain fixed income securities at acquisition as trading rather than as available for sale. As a result we recorded an $11 million unrealized loss on these securities. The impact of this change will be that changes in the value of these trading securities will be reflected in net realized and unrealized gains and losses and will flow through the income statement. There will not be an impact to reported operating income or book value per share.

Given our strong capital position and what we believe is an attractive valuation for our stock, we reentered the market and repurchased 951,000 shares of our stock for a total of $51 million in the fourth quarter. As of February 9 we have repurchased an additional 1.7 million shares so far this year for an aggregate cost of $90 million and plan to opportunistically repurchase our shares in the open market.

Finally, let me provides an update to our guidance for 2010. For managed cat, which includes premiums written on behalf of DaVinci and Top Layer Re we now expect premiums to decline approximately 10% in 2010. This is down compared to the guidance for flat managed cat premiums that we provided on our last call. As Kevin mentioned in his comments, the combination of reduced demand from ceding companies and greater supply of capital led to a more competitive property cat reinsurance environment in January.

In specialty reinsurance we had good visibility and renewals were approximately in line with our expectations. As a result we are maintaining our prior guidance of up in excess of 20%. There is considerable variability around this figure depending on the level of business written through our Lloyd's platform and also because the business tends to be lumpy and characterized by a few large transactions.

In individual risk we would expect premiums to be roughly flat driven by continued expansion of our crop insurance book and somewhat offset by declining premium volumes in other lines. With that I'll turn the call back over to Neill.

Thank you, Jeff. We're happy to take questions now, operator.

(Operator Instructions). Josh Shanker, Deutsche Bank.

Good morning, everyone. I'm interested -- you glossed over it, but of course it's something on everyone's mind. You said you'll opportunistically be repurchasing shares in the marketplace. What does that say about your view of the market opportunity this year? And maybe -- I don't have any specific question (inaudible), but maybe elaborate a little further on what you see as your appetite for your own shares.

Good question, Josh. We'll try to team up on you here two to one. It's a function of two things -- opportunities out there and also the stock price. And I'll just make a blank statement, how many times do you get to buy RenRe shares at this price? So I'll turn it over to Jeff for further elaboration.

Yes, with respect to other opportunities, I think Josh, we -- and I think we said this even on our last call. By almost any measure we consider the capital position to be somewhat in excess of that which we need to support the book of business we either have or can envision building and in fact did build.

And so I think what we have been waiting on in terms of deployment of that, at least in the former repurchases, was evidence, further evidence that the US economy and world economy had stabilized somewhat and that the financial markets have stabilized. And we got more and more comfortable with that as the fourth quarter ran on and that's what moved us to begin repurchasing shares.

And the second question along those lines, to what extent is catastrophe protection economically sensitive line of business? Do people buy it -- people will probably have to buy it even in an economically stressed scenario I would imagine.

Yes, I think if you go back to last year, it's an interesting case study in that companies were suffering on the asset side because of the financial crisis. And with that they wanted to reduce the level of risk inherent in their overall business structure. One way to do that was to reduce the volatility from cat so they purchased more reinsurance.

So we saw the market grow in 2009. Most of that growth is really in the fourth quarter because they were looking to manage the overall enterprise risk that they had; seeing that their assets were more exposed they wanted to reduce the probability that they had to access the capital markets and wanted to better protect the financial stability of the Company. So I think it is tied, but not necessarily directionally, the same way as we saw in 2009.

I appreciate your commentary. Thank you very much.

Thank you, Josh.

Vinay Misquith, Credit Suisse.

Good morning. Could you elaborate on what impact that State Farm's decision to stay in Florida is having on your business and your guidance for this year?

Yes, I think -- State Farm staying in Florida I think is -- there's been a lot of development with the relationship there. I think Florida is an interesting case study generally. We have good relationships across the board in Florida. I think State Farm staying in is beneficial in that it keeps a lot more policies in the private market increasing the potential for private reinsurance. I think commenting specifically on how one relationship affects our book is not necessarily what we've historically done. But in general having more private insurers available to policyholders in Florida is a good thing.

State Farm really doesn't buy much in the form of private reinsurance, correct?

Vinay, could you speak up?

Sorry. But State Farm really doesn't provide much in the form of private reinsurance, correct?

(multiple speakers). They do buy some. I think if you look at comparing State Farm to some of the local companies in Florida, some of the local companies due to the financial structure that they employ, they're more reliant on reinsurance than a company like State Farm. But the alternatives to State Farm pulling out might be Citizens, and Citizens -- certainly State Farm buys more than citizens.

Sure. Okay, great. The second question was on the investment income. The fixed income yield fell this quarter. I'm just curious whether there were some one-time items in there or would this be the run rate, at least in the near term until short-term interest rates rise?

Yes, Vinay, I would say really that the decline in the portfolio yield is really just a function of the further decline in credit spreads that we've seen. And a bit of the restructuring that we did out of agency mortgage-backed securities and into both US treasuries and investment grade corporates as we really believe that a lot of this decline in spreads that we've seen here just don't warrant some of the risk that we had on the books.

So, I'd say that the current yield and the absence of any significant shift in the overall level of rates is probably a reasonable expectation for the future.

Sure. One last question if I may is on the debt that you acquired, when did you pay back the debt, was it at the beginning of the quarter or was it at the end of the quarter?

We paid back the revolver -- I believe that was in early November.

Okay, that's great. Thank you.

Doug Mewhirter, RBC Capital Markets.

Good morning. Just two questions. First, I guess maybe a technical question about Florida. So for your Florida -- the Florida homeowners companies right now are under a bit of pressure from these windstorm mitigation credits, which I guess have varying effectiveness and have really taken a bite out of their profitability. In your contracts, whether it's a mix of quota share and excessive loss, do any of those credits get passed on through your reinsurance contracts?

We are predominately an excessive loss player in Florida. So the way we participate in the market is pricing, putting our price on the risk that we're accepting. So the amount of price that the primary carriers are getting really is less relevant to us because we're pricing the contracts independent of the pricing they're getting on the front end.

I think it does affect the overall financial health of the market in that the mitigation credits can be quite large, there's less premium in the system so the percent for reinsurance is higher due to the fact that the mitigation credits exist. But it's not something that affects us from our pricing explicitly.

Okay. And I guess to follow up with that, have you seen any movement in the Florida Legislature recently? I know that there is some talk of trying to rationalize the system. Do you think this year there may be any kind of improvement in the way that system is administered?

I would rather bet on the direction of RenRe stock than bet on what's going to happen in the Florida legislature. It's constantly in flux. We keep a very close eye on it. Kevin, anything to add to that?

No, I think we're about as close to the legislative process in Florida as we possibly can be. I think there's a lot of time between now and 6-1 and 7-1 and to try to determine how it's going to impact the renewals is probably premature.

Okay, thanks. And I guess the last question is regarding investments. I notice your duration has been ticking up. Is that more a result of your change in asset allocation going from mortgage backs to corporates? Or is that more of a natural flow because your shorter tail business is really kind of running off and sort of leaving your slightly longer tailed business which would be backed by longer tailed assets?

Yes, well, the duration of the investment portfolio -- I mean it ticked up just a little bit. And I would say that's -- I wouldn't relate that necessarily to a fundamental change in strategy. We are a manager of managers in this investment portfolio. So to some degree the managers that we employ have some discretion over duration. But that said, I would not say that the increase in duration that you see is reflective of any significant change in investment strategy.

Okay, thanks. That's all my questions.

(Operator Instructions). Brian Meredith, UBS.

Good morning, two questions here. First one, Kevin, back onto the Florida legislation just quickly. I understand that there is a proposal out there, at least people talking about potentially lowering the deductible of the FHCF (inaudible). Have you heard that? What do you think the possibility of that is? And if that does happen, what kind of impact could that potentially have on your business and how much do you write below the fund?

Yes, I think there are a lot of things that are on the table from the legislative discussions. But as far as reducing the retention on the FHCF, I think it depends on really how that affects the overall system. We tend to bias our portfolio a little bit lower than most people just because we think there's a good risk reward there. I think our biasing on that is a little bit less than it has been in other years.

So it could have an effect on us, but it really depends if they change the -- in exchange for lowering that they may change the percent participation alongside the FHCF, which could be a benefit to us. So I think focusing on just one of the aspects that are in flux can be difficult to say if it's going to have an explicit effect on our portfolio.

Great, thanks. And then the second question -- I was wondering if you could talk a little bit more about the methodology change on reserving I guess for catastrophe losses and what impact that could potentially have here going forward with respect to reserve releases?

I think what we -- I'll talk a little bit just about one of the things that we did in the quarter is we tried to more explicitly take into account the passage of time as an input -- as an explicit input into our reserving methodology. With that we established some curves that allow us to more uniformly run off older losses based on the experience that we're having and then the experience of the industry.

So I think it's something that is an improvement in our overall process, but I wouldn't necessarily say I have a view as to directionally what it's going to do to the portfolio on a going-forward basis.

Okay. Because it looked like you had a pretty big drop in your additional case reserves in the quarter. And that's I guess where it came from, right?

A big piece of it came from that. Just -- but again, as this is implemented on the -- for the first time it can have a large effect. I'm hopeful over time it will be something with a diminishing effect as it becomes more institutionalized on the losses.

Thank you.

Ian Gutterman, Adage Capital.

Just a follow-up on that. I'm wondering how much in reserves do you have left from the '04, '05, '08 cat events.

Yes, we're getting that, Ian, for you.

Okay, maybe I can ask another one while you do that. Just about Florida, and I guess specifically on the takeouts or capital buildups, whatever you want to call them. What does it mean for the market and for how you approach the market that these companies in the last two years with no losses are losing money just because of the mitigations and the sinkholes and all the other issues that are just making the basic underwriting a problem. How do you think about the financial viability of who you're insuring and how does that change maybe who you're willing to underwrite?

Sure. Kevin, why don't I start and then you fill in behind me, if you would. That's a great question, Ian. The system is not in balance in Florida. We think it's heading in the right direction, but it's going to take a few years to get there. Our underwriters -- we make two judgments.

We realize there's credit risk inherent in the system in Florida and then in particular we take that into account when we underwrite specific transactions in Florida. But when we take it on the whole, there is still a premium after taking credit risk into account for us to write reinsurance assumed in the state of Florida. Kevin, would you like to add to that?

No, no, I think that's spot on. I think we have great relationships down there. And to the extent that it isn't affecting all companies uniformly, I think we're about as well-positioned as possible to make sure that we're participating with the right players in the right way. Again, just reflecting that, we're an excessive loss player, so it is important to separate from the beginning that we're not participating on a proportional basis with a payment [appealing] on the primary side. But it does affect us in how we're thinking about providing XOL capacity.

Right. I guess I was thinking about -- I mean, traditionally we think about payback, right? After an event prices go up you get to essentially get back your losses. But if the carrier is not around you have to find someone else essentially and you have to win over a new relationship, someone else's relationship to get that payback. So I was wondering how you think about that? I assume you want someone who you can have a lasting relationship and doesn't just give you the loss and go out of business.

Ian, that's a great point, we take that into account. It's a shame when that happens. That's one of, frankly, the wonderful aspects of our business is that when we understand the risk we're accepting we can be there the next year for our clients when they really need us. And it does exactly what you say. And if you have an artificial system going on it makes the business less attractive.

Okay, but that hasn't affected necessarily your appetite for the Florida only players this year -- going into this year?

We take it into account.

Got it.

Let me turn it back over to Jeff to answer your first question, if I might.

Thanks.

Yes, thanks. On the 2004 and 2005 hurricanes our outstanding reserves are $427 million and on the 2008 hurricanes, $250 million.

Okay. Why would the 2004 and 2005 still be so high after so much time?

Big numbers.

Yes.

Okay, I got it. Okay, makes sense. Okay, thank you.

Jay Cohen, Bank of America Merrill Lynch.

Yes, could you talk more specifically about the $15 million impact on premiums in the fourth quarter related to credit-related issues? What exactly gave rise to that?

Yes, I think it's -- again, that was something that we were looking at where there -- what we were talking about a little bit before is within Florida there is some financial stress going on with some of the players. Many of the deals that we have in Florida have quarterly payments and we were reflecting forward the potential that some of those payments may be less certain than we originally hoped due to the financial pressure that the companies are feeling.

Okay, so some of this was prospective essentially?

Yes.

Okay. Thanks a lot.

Samuel Hoffman, Lincoln Square.

Good morning. I just wanted to follow up on some of the questions earlier on excess capital. In 2006 I believe you wrote about $1.5 billion of premium on $1.8 billion of beginning of year capital for a ratio of 0.87 times. And this year you have $3.3 billion of capital and it looks like you're on the run rate of kind of $1.2 billion to $1.3 billion of premium, implying a ratio of less than half of where you were in 2006. And so my first question is, how do you guys calculate excess capital? And then I have a follow-up.

Well, why don't I start on that. It's not a particularly simple process because premium alone can be quite misleading if we had a shift to low rate on line of severity business. So it's a good starting point but you have to actually look at the entire portfolio. We do calculate on a very regular basis our capital position. And your somewhat rule of thumb outlook there is pointing you in the right direction. So, do we have more additional capital than we had before? Yes. So, Jeff, would you like to elaborate?

Yes. I'll I guess maybe expand a little bit on what Neill said. It is very much related to the composition of the portfolio and capital is calculated at the deal level and rolled up actually every night. And so, it not only reflects the composition of the individual deals in the portfolio but also the degree to which they might be correlated with one another -- or not correlated with one another.

So, I agree with what Neill said too and we've said I think consistently, we do think we have some significant amount of excess capital. We were actually comfortable with that position given the fragility of the economic environment and the financial market environment through much of 2009. And I think we are more comfortable in thinking about returning that given the improvement in both of those.

Okay. But basically what you're saying is that half of your capital is not in excess because you may have peak exposures in places like Florida, which may be maintained to a level which doesn't create as much excess capital as the premium ratio would make it appear?

Well, yes -- I mean, I wouldn't necessarily use the precise point one-half, but there is a number.

Can you --?

And actually I might -- a fair amount of the questions on the call were gravitating towards stock buybacks, etc. Just to be blunt, on the record, to be clear, buying back shares at the right price is a very smart thing to do. It is not a defensive move, it is very good management.

And can you just quantify how much capital you think is excess and then what your strategy is to redeploy it? Are there any strategies other than buybacks?

Well, first of all the answer is, no. We won't be too specific. But, yes, we look at things all the time, we have all sorts of opportunities that come our way in terms of small acquisitions, having teams come onboard, do we want to get in various lines of business, etc. So there are lots of opportunities we look at. It's just not solely buying back our shares. Jeff?

Yes. And then the only other comment I'd make in addition to that, in addition to the ways you could deploy capital in the business itself that Neill referenced. I think just from the other methods of returning capital like either increasing the regular common dividend or special dividends or retiring preferred stock or something like that, our conclusion is, and why we decided on beginning share repurchases is just, again as Neill said, the attractiveness of it as an investment at less than 110% of book value.

Okay, thank you.

Josh Smith, TIAA-CREF.

Thanks for taking the -- can you hear me? Great. Can you remind us what your share repurchase authorization is? The amount?

We have -- as of today we have remaining share repurchase authority of about $240 million.

And are there any plans to increase that? Or is that (multiple speakers)?

We will -- yes, we intend to ask the Board for a greater authorization, yes.

When's the next -- when would that happen?

Our next Board meeting is next week.

Next week, great. And I think on the last call you mentioned how much Sam was focusing on excess in the business. But I think you mentioned last quarter how much you had at the hold co which would be in excess of that -- how much cash you had at the hold co?

Yes, I think at the holding company the way -- in terms of just liquid cash as it currently stands is about -- I think about $725 million, if I remember correctly.

That's as of 12-31?

No, that's as of today.

As of today, great. Okay. And I guess to Neill's comment about how many times do you get to buy Ren at this price, I hope there are very limited times to buy Ren at this price. Thanks a lot.

Thank you.

At this time we have no further questions. I will now turn the conference back over to Neill for any closing remarks.

Thanks, we enjoyed answering those questions, there were some good ones there. I just want to close by saying the underwriting excellence that has been the foundation of our success since our inception served us well this past year and it will continue to underpin all that we undertake in the following years. I'm excited about the coming years for our company and thank you for joining us today.

Thank you. This concludes your conference. You may now disconnect.