濱特爾 (RNR) 2010 Q3 法說會逐字稿

Good morning, my name is Brandy, and I will be your conference operator today. At this time I would like to welcome everyone to the RenaissanceRe third-quarter 2010 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). I would now like to turn the call over to Peter Hill, Kekst & Company.

Good morning and thank you for joining our third-quarter 2010 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 from approximately 12.30 p.m. Eastern Time today through midnight on November 11. The replay can be accessed by dialing 800-642-1687 or 706-645-9291. The pass code you will need for both numbers is 160-37716. Today's call is also available through the Investor Information section of www.RenRe.com, and will be archived on RenaissanceRe's website through midnight on January 5, 2011.

Before we began 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 these factors and those that shape 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 like to now turn the call over to Neill. Neill.

Good. Well, thank you, Peter, and good morning, everyone, thanks for joining us this morning. We reported an annualized ROE of over 11% this quarter with an increase in book value per share of over 6%. These results were achieved through a combination of sound performance in both of our business segments and a lack of hurricanes making landfall in the US -- this despite an active storms season, challenging market conditions and losses from the New Zealand earthquake.

The busy Atlantic hurricane season that had been predicted did indeed come about. Since 1851, as far back as the records go in the states, there have only been four other years with this many named storms. However, we have been fortunate so far this year that none have made landfall in the US. This is the only time when there have been no strikes in such an active year. The intensity of this weather activity serves to remind our clients and our competitors of the potential frequency and severity of these events.

It's easy to focus on the Atlantic hurricane season during the third quarter and to overlook the fact that we either -- that we write other kinds of major catastrophe risks in a diversified global portfolio of business. We assembled this portfolio with the same underwriting rigor that we apply to our other businesses.

Since our formation our international book of business has been an important contributor to our success. Top Layer Re, our joint venture with State Farm, experienced the first loss activity in its 11-year history as a result of the New Zealand earthquake. This event is precisely the kind of event Top Layer was formed to cover. Despite this loss we expect Top Layer's results to be about breakeven for the year.

Market conditions remain pretty consistent with those we saw early in 2010. As in past cycles, we will remain disciplined focusing on expected profit rather than the premium volume while carefully preserving our customer relationships and positioning ourselves for opportunities when the market improves. This approach has enabled us to generate superior growth in book value per share over time.

Now in the early stages of the January 1 renewal season our franchise, our relationships and our capital position are strong. In property cat we're seeing a good flow of business and adequate rates despite the prevailing challenges in the market across many lines of business. We continue to invest in our specialty reinsurance business by building out our infrastructure, cementing existing relationships and growing new ones.

Our Lloyd's operation continues to receive strong broker and client support. The appointment of Ross Curtis to lead our syndicate and become its active underwriter highlights the importance we place on building out this platform. Conditions in the insurance marketplace remain challenging, though we have produced sound results for the year thus far. Kevin and Jeff will provide more detail later in the call.

Our ventures unit led by Aditya Dutt continues to do an excellent job of building relationships with capital providers, leveraging our underwriting expertise and supporting our clients with unique capital solutions.

In summary then we had another good quarter. We remain focused on running RenRe for the long-term, prioritizing disciplined risk selection and the optimization of our overall portfolio. We never ever put pressure on our underwriters to produce premium volume. So with that I'll turn the call over to Kevin.

Thanks, Neill; good morning, everyone. Starting with our catastrophe reinsurance book, we are pleased with the overall portfolio, having built an attractive book of business that efficiently utilizes our deployed capital. Our US cat book performed well, but outside the US we were not so lucky and we did experience losses related to the earthquake in New Zealand, both on a reassurance and retro basis.

The New Zealand earthquake was a large and infrequent event whereby a powerful 7.1 magnitude quake hit close to a major city on a previously unknown fault line. In our evaluation of the loss and our performance our loss from the event is within our modeled expectation.

Like Chile, most of the loss from the private insurance market is going to re-insurers. Our exposure to New Zealand comes from several areas -- local New Zealand covers, multi-regional reinsurance contracts and our retro book. Our retro book is designed to give better spreads to our portfolio, so it tends to be more exposed outside the US and in many cases sits lower than the worldwide covers that are purchased in the market.

There is very little true price discovery occurring in the market as very little actually renews this time of year. It's our belief that we remain in a transitioning market with several factors lending us to believe that we will see price competition at year end.

We have discussed our business in simple supply and demand terms and think if we look at this year we expect to have similar dynamics as last year. We expect flattish demand for many lines and potentially increased supply due to amount of excess capital in the system.

Additionally, while 2010 has so far been a relatively active year in terms of global insured catastrophe losses, the impact of these losses on pricing has tended to be localized, so we don't expect this to materially change behavior.

Last year the market held up better than expected. Although we expect to see some additional softening we're hopeful that we will continue to see sufficient opportunities to construct an attractive portfolio. To be clear, we still believe the cat market to be reasonably healthy and the US cat market, our largest market, in particular is not what I would classify as a soft market from an historical context.

With regard to specialty, we continue to see a healthy flow of new business and are finding good opportunities within several lines of business. Our strategy is to look for dislocations and to add deals that are priced for adequate returns.

We have very good capabilities in the specialty lines and, since this risk is diversifying to our property cat exposure, our cost of capital for most of these lines is actually quite low. Our challenge to growing this book remains our belief that many classes are simply not providing enough standalone profit for the amount of risk being transferred.

Responding to the signals we are seeing from the market, we increased our exposure to some lines and reduced in others, changing the profile of the book and improving the overall profitability of the portfolio. The change in premium -- it's important to note that the structure of the portfolio is also changed.

For insurance I'll first discuss the crop business then give an overview of the primary P&C businesses. The crop insurance business had a profitable third quarter and initial indications are that the harvest season is progressing smoothly with healthy yields due to generally moderate weather. Corn and soybean prices are well above the levels set in the contracts which will have a corresponding effect on our book of business. Over the course of the year we have gradually increased our premium in zones two and three improving our spreads which we believe will help improve the risk profile of the book.

The P&C insurance market in the US remains competitive and we continue to look at ways to improve our risk-return profile. We've reduced premium in response to the market conditions and have exited several programs. Additionally, we're continuing to see challenging market conditions in our commercial property business.

We are happy with the progress we are making with our Lloyd's platform. Although we are looking to grow, we remain committed to building the syndicate methodically and carefully which we believe will serve us well for the years to come. We continue to expand our teams and are aggressively canvassing the specialty markets and looking for areas of dislocation so that we can target and build a franchise on this platform.

In the coming years we view our Lloyd's platform as being integral to our participation in the specialty arena as it provides access to business opportunities we would not ordinarily see in Bermuda. Thanks and I'll turn the call over to Jeff.

Thanks, Kevin, and good morning, everyone. On today's call I'd like to go over the third-quarter results, update our 2010 topline guidance and also provide an initial topline forecast for 2011. We reported a quarter of solid operating results despite experiencing losses from the New Zealand earthquake. Moderate favorable reserve development in cat and specialty reinsurance and the absence of hurricanes making landfall helped results.

Investment income was strong this quarter driven by improved performance of the alternative investment portfolio. Declining interest rates hurt investment income but continued to benefit growth and book value due to increased valuation of our fixed maturity investments.

We reported net income of $205 million or $3.70 per diluted share and operating income of $91 million or $1.59 per share. Net realized and unrealized losses totaled $98 million. In addition, we booked a $16 million one-time gain related to our previously announced sale of our share of ChannelRe. Our annualized operating ROE was 11.3% in the third quarter and our tangible book value per share, including change in accumulated dividends, increased 7.1%.

For the first nine months of the year we generated an annualized operating ROE of 14.5% and tangible book value per share, including change in accumulated dividends, increased 19.2%.

So I'll walk you through the operating results starting with the reinsurance segment. Managed cat gross premiums written declined 14.5% compared with the year ago period in the third quarter. The decline was closer to 20.5%, however, when adjusted for reinstatement premiums written and earned related to the New Zealand earthquake.

For the first nine months of the year managed cat gross premiums written declined 12.8% excluding the $35 million of reinstatement premiums related to the Chilean earthquake, Wind Storm Xynthia and the New Zealand earthquake. The topline decline was primarily a result of softening market conditions and our decision to exit treaties that did not meet our return hurdles. Managed cat includes cat premium written by DaVinci, Top Layer Re and our Lloyd's unit.

The third-quarter combined ratio for the cat unit came in at 64.4%. Losses from the New Zealand earthquake had a 47.4 point net impact on the cat unit's combined ratio. Reserve releases in the cat unit totaled $16 million and helped the combined ratio by 9.1 points. Of this amount $7 million related to specific large events such as the 2004 and 2005 hurricanes and $9 million was from a larger number of relatively small cats.

For the first nine months of the year cat unit combined ratio came in at 54.9%. Managed specialty gross premiums written totaled $31 million in the third quarter, which was an increase of 23.7% compared with the prior year period. The increase was largely a result of $9 million of specialty premium written at our Lloyd's unit.

For the nine months of the year managed specialty gross premiums written increased 35.9% compared with the year ago period, again due to the inclusion of the Lloyd's premium in the current year period. As we've mentioned in the past, premiums in this unit are prone to quarterly volatility since it is dominated by a relatively small number of large contracts. Managed specialty includes premiums written by DaVinci and our Lloyd's unit.

Underwriting results for specialty benefited from $18 million of favorable reserve development which was distributed across various classes of business and related to accident years 2005 through 2009. This was primarily a result of reported losses coming in below our expectations. The specialty unit combined ratio was 38.6% in the third quarter and negative 13.5% for the first nine months of 2010.

Our Lloyd's unit generated $9 million of premiums in the third quarter; specialty premiums accounted for most of this amount. The Lloyd's unit generated a combined ratio of 123.6%, primarily due to the still relatively low volumes of premiums written there.

For our insurance segment, gross premiums written declined to $16 million compared with $83 million in the year ago period. The decline was largely driven by a reduction in our crop insurance business for which premiums were a negative $16 million during the quarter.

The third quarter tends to be relatively light in terms of crop insurance premium renewals as corn and soybean crops renew in the second quarter. Crop insurance premiums in the quarter, however, were negatively impacted primarily by revised acreage reports from farmers that came in below our estimate as of the end of the second quarter.

Gross premiums written also declined across our commercial property, program and personal lines property business due to softening market conditions. Net premiums written declined 66.6% relative to a year ago. For the first nine months of the year insurance gross premiums written declined 10.8% from a year ago driven by declines in commercial property, commercial multi-line and personal lines property while crop insurance premiums were relatively flat compared with a year ago.

The insurance segment came in at a 91.7 combined ratio for the third quarter benefiting from generally moderate weather for crop insurance. The segment experienced $3 million of favorable net -- a net favorable reserve development. For the first nine months of the year the insurance combined ratio was a profitable 91.4%.

Moving away from our underwriting results, other income totaled $27 million in the third quarter. This included a one-time gain related to ChannelRe. Recall we had previously written down the value of our stake in ChannelRe to zero. With the gain related to the sale of our share we have no further obligations to ChannelRe.

Other income also included a $14 million positive mark to market adjustment in the value of the platinum warrants that the Company holds and a $5 million loss from RenRe Energy Advisors Ltd., our weather and energy risk management business. Operating expenses totaled $49 million in the current quarter compared with $45 million in the year ago period with the increase largely attributable to higher headcount and related compensation costs.

Turning to investments, recurring investment income remained under pressure due to declining yields in our fixed maturity portfolio, although alternative asset returns were higher. We reported investment income of $61 million with our other investments portfolio contributing $27 million of this amount. The total return on the portfolio was 2.4% in the quarter.

Net realized and unrealized gains totaled $98 million during the quarter, again benefiting from declining interest rates and credit spreads. Our investment portfolio remains conservatively positioned with high liquidity and modest credit exposure. During the third quarter we did reduce our allocation to US treasuries and continue to increase our allocation to investment grade corporate bonds and agency residential mortgage-backed securities. The duration of our investment portfolio increased slightly to three years.

A yield maturity on fixed income and short-term investments edged down further to 1.7%. The credit quality of our fixed income portfolio remains high with 66% of our fixed maturity securities rated AAA.

As we had indicated during the second quarter, we elected not to repurchase shares during the duration of the wind season. Depending on market conditions, our view of excess capital and the valuation of our stock we may look to increase our capital management activity in the coming months. For the first nine months of the year we repurchased 7.4 million shares for a total of $411 million.

Finally, let me give you -- let me update our guidance for 2010 and, as I said, initiate topline guidance for 2011. For 2010 we are maintaining our prior guidance for managed cat, specialty reinsurance and insurance.

For 2011 our topline guidance is as follows -- for managed cat we expect premiums to decline approximately 10% in 2011; in specialty reinsurance we're forecasting the top line to be up 10%; in our Lloyd's unit we expect premiums to be up over 50%, although this is off of a small base; and in insurance we expect premiums to increase 5%. With that I'll turn the call back over to Neill.

Thank you, Jeff. We tried to anticipate what questions you might have and tried to cover those in our opening statements. But I bet there are one or two questions out there. So, operator, let's open it up.

(Operator Instructions). Doug Mewhirter, RBC Capital Markets.

Hi, good morning. I just had two questions. First, I guess I'm just confused in your press release. You showed your diluted shares went down quite a bit sequentially and also showed diluted shares as being below your end of year common share count. I'm just wondering how to reconcile that and if that's -- how to look at for the fourth quarter and maybe the first quarter.

Let's just get you a precise answer. So, Doug, let's look that up and we'll get back to you in just a minute or two.

Okay, thanks. And as -- Kevin, as I'm under the -- seeing the Oceana area, I guess Australia and New Zealand, had always been considered a -- I guess a diversifying market and the prices were considered to be quite low because of that, because of the non-correlation with the rest of the world, I was under the impression that it was not attractive as much to you.

Was I just off by a degree? Was there some quirk in I guess the contracts or the nature of the contracts you wrote which were -- I guess had prices that were maybe better than what the market was -- the general market was giving in that region of the world?

Sure, Doug, it's Neill. You asked Kevin; I'll give you a few comments and then turn it over to Kevin. You know, beauty is in the eye of the beholder. And we've actually always thought that certain contracts in that area were very appropriately rated. So for example, I think you've heard us say many times that we thought Japanese wind was underrated, other people think that the Japanese wind programs are very adequately rated.

So, of the covers here that I've seen the pricing is quite appropriate. There is diversification, which is also helpful. But on a stand-alone basis, the contracts that we wrote I feel very comfortable with and the pricing that we have on those contracts. So, Kevin, over to you.

Yes, I think one thing to reflect back on is our retro book as well. So, having this risk in our portfolio is beneficial because it is diversifying to our tail. That can affect pricing because frankly the capital is cheaper to deploy in these areas.

A big component of our loss is coming from our retro book, which tends to be a higher rate on line book. In many areas around the world we think we get a better price to exposure ratio by writing it through retro. So although I think there is some disclosure around the fact that we have $5 million of premium from that area, a lot of that -- the loss comes from premium that's not captured in that because it comes from the retro book.

I think in general there are good deals and bad deals in many regions. I feel comfortable we've done a good job building the relationships in New Zealand and have a disproportionately good share on the better local deals.

Do you -- I guess -- I think I know the answer to this, but do you think that -- I imagine that prices would be moving up in reaction in that area of the world just because (multiple speakers) loss?

Yes, I think there are a couple things to consider -- is it going to change the models and is it a surprise? To us at this loss is not surprising; when we look at how we've modeled the book it seems like a loss of this size close to a major city is about on the right spot on the distribution. I think generally a lot of the programs are at a relatively low rate online though, and generally the market's response after an event to low rate online deals is to push prices up.

Okay, thanks. That's all my questions.

Good. And we'll answer that question here in a little while. Stay tuned, Doug.

(Operator Instructions). Ian Gutterman, Adage Capital.

I didn't expect to be so soon. I guess first, Neill, I don't know if you saw -- you're probably aware the Sarasota papers have done a lot of writing on the Florida insurance market this year. And I guess just over the weekend they decided to turn the tables and start attacking Bermuda. And it just seems their articles have gotten play politically. I don't know if you've seen that and what your concerns are about Bermuda being the new target for the next Florida legislative session?

That's a great question, Ian. Well, let me be the first one to announce that Monte Carlo, all of the meetings are going to be held in the Holiday Inn next year. The articles that took place had some pretty fancy pictures of some very opulent surroundings and frankly it's just held their traditionally; it goes back for I think 50 or 60 years. So, that's the reason it's held there. It's a great way to renew relationships with your long-term clients.

The articles were a little sensational and there have been some articles and letters written back from [Adir] here in Bermuda that have tried to approach things quite factually so that the readers down in Florida would understand how helpful the reinsurance companies have been over the years to Florida. And also there's another letter from [Mr. Hardwick] that I thought was really spot on saying how important it is to spread the risk -- that Florida with its economy can't just rely on Florida.

One of the points one of the articles made was, well, gee, look at all the premium that Florida could have saved if they're in a loss free year. Well, yes, it's a loss free year. So what would have happened had there been losses? And Mr. Hardwick I thought did a great job. He said you need to spread this around. It's like Floridians thinking that they can fill up all the theme parks with just Floridians; you have to have people from around the world come. And I thought that was a pretty good point.

So we're very empathetic with the problem in Florida. As you know, we've been very supportive. Many of our clients I think took umbrage at the article thinking that we've done a good job for them. We certainly think we've done a very good job for our clients in Florida. And we're hopeful that with legislative changes there will be a continuing push in Florida to point at the real underlying problems of over construction and buildings that can be hardened further to help mitigate the risk. So I went on at length there, Ian. But anything else I can add to that for you?

No, that's good. And I agree, the article I thought was unfair. It was also unfair the way State Farm got treated a few years ago, but hopefully with a new Governor Bermuda won't get treated the way State Farm did in the past.

My other question is just -- I wanted to ask you how you think about where returns are today given the interest rate environment as such. When I look at your -- if I take fourth-quarter consensus to project the year and I back out all the reserve development and I back out all the cats, I only get to about a 12% ROE for the year.

And obviously no cats isn't a realistic assumption, so it would be lower than that normalized. And I understand a 1.7% yield isn't normal either but -- and obviously you're carrying some capital. But how do you think about it? If you can only generate, given current yields and given your current capital situation, call it a 12 ROE in a no cat year, is that really acceptable?

Another great question, Ian. Let me mention a couple things here. You have to -- one of the things I like about RenRe is we are a very rational company. We see the hand that we're dealt and we play that hand. We don't try to arbitrarily manufacture something because we don't like the hand that we've been dealt. So I know some folks have used it as a credo that we want to return a 15% return every year.

That is not possible in our business; there will be a certain volatility. In some years we're going to have quite high returns, other years we're going to have lower returns, hopefully always acceptable returns.

So, yes, returns on expected basis now are down and a major reason for that is the low yield. We're not going to stretch on credit or duration to try to manufacture a higher yield, we're not going to go write more premium to try to get a better result. We'll just do the best we can in the environment that we're working in.

Are you at a disadvantage? I mean, other companies -- a 3 duration isn't necessarily out of line with a lot of your peers, but most of your peers at a 3 duration are getting maybe 3.5 on their money, probably because they're taking more credit risk.

So, if you're at what, 2.5 to 1 investment leverage, that difference is a good 4 or 5 points of ROE at the same price. I mean, are you at a disadvantage where you need a higher price than your peers to write a piece of business and maybe it becomes uncompetitive for you? You know what I mean? So someone else's 15 is your 10 because they have more credit risk for the same duration?

Yes. No, I think that's just up to the investment community and the holders of our stock to look at it. We are in the cat business, it's a volatile business, we have to stay very liquid and high-quality. It's just part of the game. We've done that all along.

So I would just point back to the rear view mirror and say, do you like these results over time? And these have been through hard markets and soft markets. So I wouldn't say it's a disadvantage, it's just a different philosophy. An investor looks across the street at a competitor, sees a little bit more credit risk in the portfolio, do they like that or not?

Got it. Okay, and just maybe a last follow-up and then I'll hand it off is -- when I look back historically -- and I know premium to surplus isn't the right metric especially for you guys. But as a proxy I mean historically it's been over 50% almost all years until the last two has dipped into sort of the mid to high 30%'s. Is there any reason it can't get back over 50%, especially you have more crop business, which requires less capital. Am I thinking about that the right way even though it's the wrong metric?

Listen to yourself.

I mean, (multiple speakers) is there -- basically is there a reason that you need to have a lower -- that because whatever your capital models are that you come out at a lower premium to surplus than you used to, or is it a reflection of maybe there's more excess capital than there used to be? (multiple speakers).

It's a byproduct, Ian.

Okay.

It's a very good intuitive question. But it's a byproduct. So what we look at, once again, are the deals that come across our desk. In some years we see an awful lot of really good low layer covers and in other environments we see covers where they're lower rate on line, higher up the food chain. So we try to put together a very efficient portfolio with the right risk attributes. So premium is going to fluctuate all over the place. And at various years in the future the premium will be up, so --.

Okay, that makes sense (multiple speakers).

There will be certain volatility. Frankly, it's one of the reasons we provide premium guidance. But frankly I don't like doing it so much just because our premiums can be so volatile.

Okay, great. Thank you for all the time. Appreciate the answers.

Oh, yes, thank you, Ian. Okay let's get back to Doug's question about dilutions. Jeff, if you would respond to that.

Yes. So the answer to the question on diluted shares is the weighted average common shares were down in the third quarter, which is in no small part driven by share repurchases earlier in the year and principally in the second quarter. The difference between the weighted average common and the outstanding shares is due to non-vested shares. And so for the full year I look at the nine months year-to-date and then for quarter three tend to look then for that as a proxy for the fourth quarter more than just looking at the decline versus the second quarter.

So, Doug, hopefully that answers your question. If you want to follow back with Jeff after the call we'd be happy to give more color there. Operator, more questions?

Brian Meredith, UBS.

Hey, good morning. Two questions for you. The first one more of a numbers question. I'm looking at your investment income by segment and yield to maturity is down, but as I look at your fixed maturity investment income, up nicely from the second quarter. Is there some seasonality or something unusual that I'm missing there?

Brian, this is Jeff. I think what's the principal driver there -- are you talking about the $7 million increase (multiple speakers)?

Yes, $7 million sequential increase in investment income from second quarter, yes.

Yes, the increase of $7 million there is largely attributable to some derivative income produced by both our managers and by us. So, while I wouldn't focus too much on it, essentially what -- we allow our managers some flexibility in using derivatives to reposition the portfolio a bit. And we also use an overlay accounts, if you will, to adjust the duration of the portfolio from time to time. And that indeed was the case this quarter. So, that was the principle driver of the $7 million. In fact, I think about $6 million of the $7 million was due to that.

Okay, $6 million of the $7 million, that would make sense. Okay, and then the second question, I'm just curious, in your 2011 guidance you said up 10% on specialty reinsurance. And given market conditions where is that going to come from?

Yes, I think it's -- specialty premium has been difficult to forecast because it is dominated by a small number of large deals. We've seen a couple pockets of dislocations off a pretty small base. So I think it's not that we're looking necessarily to say it's a great market, let's grow into it. I think we're optimistic we're going to find a few more opportunities in some of the places we've begun to participate with a little bit more vigor.

Okay, great. Thank you.

Josh Shanker, Deutsche Bank.

Thank you. I apologize if I repeat something here. There are a lot of calls going on, as you guys can well imagine. I'm wondering if you could color to the content of the favorable development we sold during the quarter.

I'm sorry, Josh, you got garbled there. Say the last part of your question (multiple speakers).

I'm looking for color on the content, what accident years or what storms or -- what was the favorable development comprising that you received during the quarter?

Josh, it's Jeff. In the cat unit about half of the $16 million in favorable development that we saw there was due to -- so about $8 million was due to revisions to our ultimate estimates for the 2004 and 2005 hurricanes. The other $8 million was due to adjustments in reserves on a large number of relatively small events. In specialty it was spread over a number of different business classes in accident years 2005 to 2009. So, a lot of relatively small adjustments.

Understood. And this question you may not have an answer to, but I'll try and ask anyway. How small can the balance sheet of Renaissance get without losing competitive advantage?

Well, Josh, that's not fair to ask us questions that we can't answer.

Well, you might have (multiple speakers) at least an idea to give me some way to think about it.

Oh, sure. You know, there are some sort of artificial levels, if you will. So, let me answer it in this way -- I like the way we're set up now. So we've got our own capital at risk predominately in RenaissanceRe Ltd., our US operations, and 41% ownership of DaVinci. We bring sidecars to bear for specific solutions and then we have Top Layer Re that's got the equivalent of $0.0 billion of capital.

So when you add all these things together we've got different types of retro sessions behind us, it's another form of capital. You know, we're out in the marketplace deploying capital equivalents of about $8 billion and yet our own capital is substantially smaller than that. So, we could get by with some capital less at various times based upon opportunities than we have now. But I like the way we're set up. I think it's a good combination of our own capital and third-party capital.

Do you have any thoughts on capital return in the form of regular dividends, special dividend, accelerated share repurchase or open market transactions?

We think about those things all the time, Josh. And we try to do the smartest thing for our shareholders. Frankly, it's pretty hard for me to understand a better investment than RenRe at market prices like we've got right now. But let me turn that over to Jeff for maybe a little more color.

Josh, I would say we've tended to -- as you know, tended to maintain a reasonably, reasonably low dividend yield just from the standpoint of the standard common dividend. And as you know, the practice of the Company to return capital generally has been via share repurchase. I'd say that would tend to be -- other things being equal, would tend to be our odds on bet especially given with the shares trading around book value.

This is an interesting time, though, with respect to the uncertainty around future tax rates. So, while we normally wouldn't consider a special dividend, it's something that we have to look at and we will evaluate as the quarter unfolds here. But I think traditionally the Company has returned excess capital via share repurchase and I expect that will probably continue to be the way that we do it.

Thank you very much.

At this time there are no further questions. I would now like to turn the call back to Mr. Currie.

Well, thank you, Operator. I thought we had some good questions today and I hope we did a good job answering them. Look forward to speaking with you a quarter from now.

This concludes today's RenaissanceRe third-quarter 2010 financial results conference call. You may now disconnect.