濱特爾 (RNR) 2010 Q4 法說會逐字稿

Good afternoon. My name is Felicia and I will be your conference operator today. At this time, I would like to welcome everyone to the Renaissance fourth-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).

Thank you. Mr. Hill, you may begin your conference.

This is Neill Currie. Peter Hill is supposed to be on the call, so I am assuming that all of our listeners are on the call. I'll apologize on behalf of -- well, I'll just apologize. I'm pretty upset by the fact that we had a technical difficulty with the call provider this morning.

So, apologies for the late start, and I will kick off our earnings call now.

Neill, just to add a couple of things before we get started. Again, to apologize for the issues with the call provider. Hopefully, everyone is on at this point, and certainly can access the replay after the call.

Thank you for joining us today. If you didn't get a copy of the quarterly release, please give me a call. My name is Peter Hill, and you can reach me at 212-521-4800, and we will be sure to get you a copy.

There is an audio replay of the call that will be available from approximately 2 p.m. Eastern Time today through midnight on February 23. The replay can be accessed by dialing 800-642-1687 or 706-645-9291. The pass code you will need for both numbers is 36834688.

Today's call will also be available through the Investor Information section of RenRe.com, and will be archived on RenaissanceRe's website through midnight on April 20.

Before we begin, we are advised 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 us to discuss today's results are Neill Currie, Chief Executive Officer, whom you've already heard; Jeff Kelly, Executive Vice President and Chief Financial Officer; and Kevin O'Donnell, Executive Vice President and Global Chief Underwriting Officer. And now to turn the call over to Neill.

Okay. Thank you, Peter. Well, here we go. I am pleased to report a good fourth quarter and another good year for RenaissanceRe. The annualized operating ROE was 22.5% for the quarter and 16.5% for the full year. Book value per share increased 3.3% during the quarter and ended up 21% for the year. Although our investment returns were disappointing for the quarter, they were strong for the year. Favorable loss reserve development also contributed to our results.

2010 was really an interesting year. There were no US landfall and hurricanes despite the fact that it was one of the busiest storm seasons on record. There was a disaster in the Gulf of Mexico, but not as the result of the wind. It was Deepwater Horizon oil spill that we are all well aware of. And we experienced a number of significant catastrophes outside of the US -- major earthquakes in Chile and New Zealand, a European windstorm and cyclones and floods in Australia.

So while 2010 was somewhat unusual, in our business, we expect the unexpected. We prepare ourselves for all sorts of different outcomes during any given year. The aggregation of losses from events in 2010 were pretty much business as usual for us. These events also serve to remind our clients around the world of the need for our product and remind our investors that we have a worldwide portfolio business.

The way we handle our claims and renewal discussions will once again enable us to further strengthen our relationships with clients and brokers. This is the first year that Top Layer Re has had a loss, so it will give us the opportunity to exhibit the same excellent service on behalf of Top Layer as we are known for at RenRe.

In specialty, we saw an increasing volume of business, but we remained highly selective given the state of the market for many lines of business. We continue to lay the foundation for when the market improves. We are doing the same thing at Lloyd's, where we have been successful increasing the awareness of our syndicate and are writing business there that we would not have been shown in Bermuda.

Our weather and energy risk management team at REAL achieved their third consecutive profitable year in 2010. During the year, they significantly expanded their customer base and ended the year with a great fourth quarter.

We resumed our share repurchase activity during the quarter. This continues to be a key element of our capital management strategy, particularly given the ongoing prospect of challenging market conditions ahead. As in the past, when we cannot deploy capital for underwriting opportunities, we will return it to our shareholders through share repurchases if we find the valuation of our stock attractive.

In November, we announced our decision to sell our US-based insurance operations. I really like the way we look after this transaction. We are more nimble, less complex, and we are more focused on the high-severity, low-frequency risks that we prefer to write. And we will continue to have access to the insurance business we want to write in the US on a non-admitted basis through our Lloyd's platform.

While the market continued to be challenging in many lines of business at the January 1 renewals, I am pleased that we were able to construct an attractive book of business with good expected returns. Whatever the environment, we will remain disciplined, focusing on long-term profitability for our shareholders, rather than on the top line. We will continue to reinforce our strong franchise with customers and brokers and effectively manage our capital.

We will only focus on business opportunities that meet our return hurdle criteria, a strategy that has enabled us to generate superior growth in book value per share over the long term. Now I would turn the call over to Kevin O'Donnell. Kevin?

Thanks, Neill. I'll update everyone on the reinsurance and the Lloyd businesses, but in reinsurance, let me start with the cat book and then I'll move over to specialty. First, the US primary cat market behaved well, with rates dropping a modest 5% to 8% on a risk-adjusted basis. Overall, the market behaved rationally on most deals, and as with any renewal, there were a few outliers, but they really were exceptions.

Our premium is down for two reasons. From rate reductions beginning to flow through our book of business; so although we are pleased with the returns, the book is producing lower returns because of these rate reductions. Secondly, we actively reduced on some business due to the reduced margins.

The market was pretty well-balanced with respect to capacity. We did see some increased demand in the Gulf, and specifically Texas, but balancing this increase we saw several large companies increase their rententions, leaving the market about the same size as last year. Although there have been much discussion about excess capital in the market, reinsurance supply was also consistent with last year. Overall, I would say the US property cat market is more competitive, but it's still a good environment for us.

The international primary cat renewal was largely uneventful. Rates were down about the same as last year, around 5%. Going into the renewal, we had some optimism we would see a flat international renewal, as we thought the market may have hit bottom last year. But it seems that most reinsurers are willing to accept a 5% reduction without too much pushback. The one exception is that we saw some rate improvement with deals with losses, but it wasn't enough to move the overall market.

We are seeing ample capacity, which is not a surprise. The industry predominantly builds capital around peak exposures and promotes this as US hurricane. So international deals, which add a degree of diversification, looked attractive against that base.

As we discussed before, we take a fair amount of international exposure through our retro, as we think we achieve higher margins in international retro than we do on international primary in many regions. We believe the retro market is the most complicated cat book that we write, and once again, had to change the book dramatically in response to market pressure. We saw increased competition both in terms of price and terms, with rates generally being down in excess of 10% and about flat for properties with losses on a risk-adjusted basis. The retro market is relatively small, and we did see a few new players enter, which would add to the softening in pricing.

Changing gears on the retro side, let me talk to you about our ceded portfolio. We did see a few opportunities in the quarter to purchase some additional ceded, and will continue to look for opportunities that complement our overall book of business.

The last few months were busy with regards to losses, particularly in the southern hemisphere. I would like to give a little color on the New Zealand quake and on the Australia losses.

We increased our reserves for the New Zealand quake. It is often difficult to estimate quake losses soon after an event, as much of the damage to individual structures is not visible and you need to send an engineer to assess the damage. Unlike the US, our exposure in New Zealand is heavily concentrated with one client, making our loss estimate very sensitive to their assumptions. Much of our loss estimate is based on publicly-available claim counts, and our increase in reserves is a result of the increase in this publicly-reported data.

Quite simply, we are keeping all of our original assumptions constant and have increased our reserves due to more claims being reported. We are surprised that a quake of this magnitude has affected such a large percentage of the building stock in the affected area and has produced more claims than we originally expected.

As with any loss, we will learn and we will improve. Just last week, we had one of our underwriters and our lead seismologist in New Zealand, and we are currently analyzing the findings in more detail.

Now, looking at Australia, there is still quite a bit of uncertainty about the Australian losses. There is a fair amount of discussion and individual companies may report things differently, as they have different event definitions and coverages. For instance, some cover stormwater only, some cover flash flood only, others give full flood coverage.

Additionally, there is uncertainty in how the losses will be aggregated. In our analysis, we focused on there being two events of concern, one in 2010 and one in 2011, and obviously kept Cyclone Yasi separate.

We were lucky with the recent cyclone which was threatening Cairns and Townsville. It appears that the cyclone largely missed the most heavily populated areas, reducing the overall impact of the storm. A loss of this size would not have much of an impact on the reinsurance market, but Australian companies purchase a lot of reinsurance, often attaching at much lower levels than the US counterparties. So a fair amount of this loss will be transferred to the reinsurance market.

Moving over to specialty, we continue to be pleased in this area. Our overall book is flat with 1/1, where we scaled back on some business that came under the most competitive pressure and wrote several new accounts, which continues our strategy of increasing market penetration in areas where we have been underrepresented. So though still relatively small, we've increased our footprint in aviation, excess casualty and trade credit, as a few examples.

While we do not have significant exposure to traditional casualty business, we have quite a bit of casualty event risk and some catastrophic casualty aggregate, which could have a material impact in any one quarter.

So overall, the combined reinsurance book, the short summary really is our expected profit is down, which we would expect at this point in the cycle. The good news is we were using less capital, so the book is slightly more efficient. We have reduced our writings due to the softening market and we've increased our percentage of the book shared through retro.

Moving over to our new syndicate at Lloyd's, due to the composition of 1458's book of business, less of a percentage renews at 1/1, so the January renewal was relatively quiet. We are seeing a good flow of business and we are seeing business that would not normally make its way to Bermuda, which was one of the original goals in us starting it.

The Syndicate is still quite small, so we are finding opportunities to grow, even though many of the markets we are looking at are not particularly strong. And we continue to build out our team there.

The final thing I want to touch on is the new RMS hurricane model, which is due out later this month. As best we can tell, it really was not a factor at renewal. Most people expect to see some increase in losses, but it's really a wait-and-see mentality right now. We're looking forward to the release of the new model so we can better evaluate the changes that they've made.

So far, we've pulled what we can from the information RMS has put out and our own research from the source materials. Using this high-level data, we estimate the changes and developed a prototype model to help us test some of the enhancements to see how the book responds.

It is our experience that in general, when new models are released, we see improvements, and as we go through the changes in this model, we expect to see the same. With that said, we would not expect to adopt all the changes that are in the new model. We use our own proprietary modeling, and we will continue to do so. Incorporating our independent view and the best of what these enhancements are from the new model, we believe that we will continue to extend our technological edge.

Thanks, and I'll turn the call over to Jeff.

Thanks, Kevin and good morning, everyone. On today's call, I would like to go over the fourth-quarter and full-year 2010 results and give you an update to our 2011 top-line forecast.

As Neill mentioned, we reported another solid quarter of operating results, despite experiencing an upward revision to our loss estimates for the New Zealand earthquake and moderate loss activity related to the Australian floods near the end of the year. Meaningful favorable reserve development across cat, specialty reinsurance and strong results in our discontinued insurance operations helped those results.

Investment income remained under pressure and the sharp spike upward in yields during the fourth quarter resulted in net realized and unrealized investment losses.

We reported net income of $123 million or $2.23 per diluted share, and operating income of $189 million or $3.47 per diluted share for the fourth quarter. Net realized and unrealized losses in our fixed maturity portfolio totaled $66 million.

Our annualized operating ROE was 22.5% for the fourth quarter, and our tangible book value per share, including change in accumulated dividends, increased 3.9%.

For the full year 2010, we reported operating income of $536 million or $9.32 per share, and net income of $703 million or $12.31 per share. This translated into an annualized operating ROE of 16.5% for the year and growth in tangible book value per share, including change in accumulated dividends, of 23.8%.

Let me shift to walking you through the operating results. But before doing so, note that in conjunction with our decision to sell our US-based insurance operations to QBE in the fourth quarter, we have begun to report the results of this business as discontinued operations, and have accordingly changed our prior-year period disclosures. In addition, we have changed our disclosures to include three reportable segments, which are reinsurance, which now includes cat and specialty, each being as previously reported; Lloyds, which was previously included under our reinsurance segment; and insurance, which consists of businesses not included as a part of the sale of our US operations.

In the reinsurance segment, managed cat gross premiums written in the fourth quarter totaled negative $4 million compared with negative $29 million in the year-ago period. The negative premium volume was primarily a result of a downward revision in reinstatement premiums earned from large events, such as the Chilean earthquake and Windstorm Xynthia and some negative premium adjustments.

For the full year 2010, managed cat gross premiums written declined 10%, excluding the $28 million of reinstatement premiums related to the Chilean earthquake and the New Zealand earthquake. The top-line decline during the year was primarily a result of softening market conditions and our decision to exit treaties that did not meet our return hurdles. In addition to the business written on RenRe Ltd.'s balance sheet, managed cat includes cat premium written by DaVinci, Top Layer Re and our Lloyd's unit.

The fourth-quarter combined ratio for the cat unit came in at 8%. During the quarter, we revised upwards our loss estimate from the New Zealand earthquake, which had a $58 million negative impact on underwriting results. The downward revision to our loss estimates for the Chilean earthquake and Windstorm Xynthia from the first quarter helped the results by a total of $50 million.

The revision to the Chilean earthquake loss estimate was mainly a result of updated information received from one large primary insurance client. We booked a $15 million loss provision for flood losses incurred as a result of Tropical Storm Tasha during the fourth quarter in this unit.

Prior-year favorable reserve development for the cat unit totaled $49 million in the fourth quarter, approximately half of which was related to a reduced loss estimate for the Buncefield explosion from 2005. For the full year of 2010, the cat unit combined ratio came in at 44.6%. The full-year results benefited from $157 million of favorable reserve development, which accounted for 21.9 points on the cat combined ratio.

Managed specialty gross premiums written totaled $37 million in the fourth quarter, which was an increase of $16 million compared with the prior-year period. The increase was largely a result of $11 million of specialty premium written at our Lloyd's unit.

For the full year, managed specialty gross premiums written increased 43% compared with the year-ago period, again due to the inclusion of Lloyd's premium in the current-year period. This compares with our 2010 forecast of up over 20%. In addition to the business written on RenRe Ltd.'s balance sheet, managed specialty includes premiums written by DaVinci and our Lloyd's unit.

The combined ratio for the fourth quarter came in at 33.4%. Underwriting results for this segment benefited from $17 million of favorable reserve development and relatively benign current-year loss experience. The specialty unit combined ratio was 0.0% for the full year 2010, benefiting from $129 million of prior-year favorable reserve development.

Our Lloyd's segment generated $9 million of premiums in the fourth quarter. Specialty premiums accounted for most of this amount. The Lloyd's unit generated a combined ratio of 145%, primarily due to higher expenses and the still low volume of premiums written.

For the full year, our Lloyd's segment generated $66 million of gross premiums written, and the combined ratio for this unit for the year was 122.1%. The expense ratio for the year was 71%, given the low premium volume and startup costs. As we grow this book of business, we would expect the combined ratio to begin to trend lower over time.

In our insurance segment, results now include those of our Bermuda platform. The Company is currently not actively writing business in the insurance segment, but may choose to do so from time to time in the future. Gross premiums written totaled $1.3 million. This segment incurred an $11 million underwriting loss due to a decrease in net premiums earned, resulting from a nonrenewal of a previously in-force book of business. On a go-forward basis, our expectation is for roughly breakeven results from this segment.

For the full year 2010, insurance gross premiums written totaled $3 million and we incurred a $31 million underwriting loss.

As is well known, 2011 began with a series of storm and flood events in Australia. We booked a provision for the fourth quarter for events deemed to be incurred in 2010, but anticipate the majority of losses from these events will be borne during the first quarter of 2011.

Our current estimate of losses for the Australian floods that have occurred in 2011 and Cyclone Yasi is that the net impact will be less than $50 million. As Kevin mentioned in his comments, there is a significant amount of uncertainty surrounding the ultimate losses associated with these events. Obviously, they are very recent and we will continue to evaluate information regarding them as it becomes available.

Moving away from our underwriting results, other income totaled $26 million in the fourth quarter. Drivers of other income during the quarter was $15 million from REAL and $8 million from assumed and ceded reinsurance contracts accounted at fair value or as deposits.

Operating expenses totaled $46 million in the current quarter compared with $44 million in the year-ago period, with the increase attributable to higher headcount and related compensation costs.

For the full year 2010, our operating expenses totaled $166 million, which was up from $153 million in the year-ago period. The principal driver of that increase is our investment in our Lloyd's unit.

Turning to investments, we reported net investment income of $53 million, with our other investments portfolio contributing $38 million of this amount. Recurring investment income remained under pressure due to declining yields on our fixed maturity portfolio.

Private equity had a strong quarter. The total return on the overall portfolio was negative 0.3% for the quarter. Net realized and unrealized losses totaled $66 million during the quarter, again, largely the result of higher interest rates.

For the full year 2010, our portfolio generated a 5.1% total rate of return, benefiting from an overall environment of declining interest rates and credit risk spreads. Our investment portfolio remains conservatively positioned, with a high degree of liquidity and modest credit exposure.

During the fourth quarter, we reduced our allocation to US Treasuries and increased our allocation to short-term investments. The duration of our investment portfolio increased slightly to 3.2 years. The yield-to-maturity on fixed income and short-term investments increased to 2.1% from 1.7% at the end of the third quarter. The credit quality of our fixed income portfolio remains high, with 62% of our fixed maturity securities rated AAA.

In the area of capital management, during the fourth quarter, we repurchased 782,000 shares of our stock for a total of $49 million. Our ability to manage capital through share repurchases during the fourth quarter was to some degree constrained by the announcement related to the sale of our insurance unit in mid-November.

For the full year, we repurchased 8.2 million shares for a total of $460 million, which equated to 13% of the beginning share count. So far in the first quarter, we have repurchased 1.2 million shares for a total of approximately $75 million. During the fourth quarter, we redeemed all of our $100 million Series B preference shares outstanding.

In January, we entered into an agreement with Platinum to sell the 2.5 million warrants we had held since their IPO, for a total cash consideration of $48 million. As we noted in our press release, approximately $3 million of that amount will be booked as a gain in the first quarter.

Finally, as an update to our top-line forecast for 2011, we are maintaining our forecast for each of our segments, which, as a reminder, for managed cat is down approximately 10%; specialty reinsurance up 10%; and Lloyd's up over 50%, although off a small base.

With that, I will now turn to call back over to Neill.

Good. Thank you, Jeff. Operator, we are happy to answer questions now.

(Operator Instructions) Vinay Misquith, Credit Suisse.

The first question is on the excess capital that was generated from the sale of the primary insurance operations. Do you feel that you are going to be able to buy back stock with the entire amount and what is the timeframe for that?

I think the way we'd view the capital generated by the sale of the US subsidiaries is the same that we would with any capital that comes in. Our first goal is to employ it in the business, if possible. If that's not possible, then we would look to return it to shareholders, as Neill said.

I think our ability to return capital via share repurchases will be somewhat more rapid in the first half of the year than it certainly was in the fourth quarter, just because of not only the lateness that we got started in the fourth quarter, but also just the seasonal low trading activity that occurs then. So I am reasonably optimistic we can return it appropriately -- at an appropriate pace.

It is an appropriate amount of money for the sale of the operations, but it's not a huge amount of money. We had to deal with earnings for a quarter of that magnitude.

Fair enough. And were you getting any diversification of credit which would not enable you to sort of pay back the entire amount, if you wanted to?

I'm not sure I understood your question there. Can you phrase it another way?

Sure. The question is as far as the primary insurance operation giving you some sort of diversification credit, and so with the sale of the operation, you would not get that credit. So that may not free up the entire $283 million of capital.

I see. Thanks. Jeff.

The way we look at diversification is it is essentially profit that is diversifying. And that number is a relatively small -- has been and is -- and has been recently a relatively small amount. So whatever diversification benefit there was from that, it was pretty small in the context of that sale proceeds.

Okay, thanks. The second question is on the fixed income portfolio. The yield on the investment income was just $16 million this quarter. [It was] a run rate of around $28 million in prior quarters. Can you help us understand what happened?

Yes, I can. Actually, there was a similar question to this last quarter, and the answer is the same. So on -- I think the page you are referring to is 15 in our supplement. Last quarter, we had -- in the third quarter of 2010, we had put a derivatives position in that slightly increased the duration of the overall portfolio. That had contributed a profit of a little over $3 million in the third quarter of 2010. So that number was a little bit overstated, just in terms of kind of a rough -- looking at it on a run rate basis.

The same derivatives overlay position had a negative mark to market in the fourth quarter of about $14 million, and that was associated with the sharp spike-up we saw in yields in the fourth quarter.

So I think if you took out the $3 million in the third quarter and you added back the $14 million in the fourth quarter, you would see a trend that was pretty consistent with, I think, what you would expect to see.

Otherwise, had we not had the derivative overlay and just the derivative -- or the derivatives been more or less baked into the durations of the portfolio managed by our managers, it would have come through down below in unrealized losses. So I think that is the effect you are seeing there. Hopefully, that is clear.

Yes, that's very helpful. And the assets that you plan to sell with QBE, do they run the same portfolio yield as your other assets?

It is just we allocate the portfolio to various subsidiaries, so it is roughly the same portfolio, yes.

That's great. Thank you very much.

Doug Mewhirter, RBC Capital Markets.

My first question about Lloyd's is what is your -- I guess your approved capacity for your Lloyd's syndicate for 2011?

I'm just trying to reflect that -- what we put in. It is GBP72 million. It is right around there.

Okay, thanks. The other question is more of I guess an admin question. But would it be possible to put up later like restated segment data, maybe for the last four or five quarters, just to see where the trends were on the book that you didn't end up selling. And also how the Lloyd's business gets broken out from their -- from (multiple speakers) business?

We will have a fuller disclosure of that in our 10-K, which should be out in a couple of weeks.

Okay. My last question, a pretty good explanation to why you took down the Chile losses, because it was -- basically, it's one large cedent. But it seems that the losses overall on an industry basis had been, I guess, drifting in the other direction, and it is still fairly recent.

I was just wondering are you sort of seeing that in your general book. I would think that you would want to be -- it seems a little bit less conservative than you are used to being in terms of treating losses, where you kind of sit on them for a little longer and then take them down later.

We try to be correct in our loss reserve and we don't try to be conservative. And as information comes to us, then we take appropriate action to. And because we got information from this one large client, there wasn't any other information to take into account, so we thought it appropriate to draw down that loss reserve.

Okay, thanks. That's all my questions.

Greg Locraft, Morgan Stanley.

Wanted to just understand on the Australia, the $50 million that you sort of cited. How do you -- I understand it is preliminary; I'm just curious your thought process behind how you even got to a $50 million. Could you give us some thoughts there?

I think we said it'll be less than that.

Yes, less than $50 million. I'm sorry. Right.

The way we looked at it is there is a lot of just discussion in the market as to how these losses are going to be treated. I think a lot of the -- it's going to really come down to what does the individual contract say, to determine how they are ceded back to us.

Our loss, what we anticipate our exposure to be, is from our retro book, which adds another degree of complication. So when we talk about focusing on two events, I'm not sure whether it will actually come to the market as two events or something other than that.

But the two events we focused on are the ones that are most likely to come into the retro market. And in looking at our retro book, I think we -- our retro begins exposure at about $1.5 billion. And kind of our core retro probably kicks in probably about $2.5 billion. And that is kind of the basis in which we are looking at it.

The publicly-available information -- so just taking the 2011 event that I referenced, which is really the Brisbane flood -- the Insurance Council of Australia has come out with a number of claims and also an industry estimate of about $1.5 billion, $1.6 billion on that. So we believe that number will develop. So that is one of the primary drivers in how we think the loss is coming through.

And then taking Cyclone Yasi and kind of taking that benchmark, seeing it against some of the other events we've seen, whether it be Melbourne, very similar size event, or Larry, and trying to flow that through the retro book. So it is very much a high-level analysis without really any specific client data. We just kind of pull in different pieces of information and then determining how it is likely to flow into the retro market.

Okay. That's helpful. So basically, because Brisbane is in and around the $1.5 billion, which just begins to hit the retro market, that is why your loss is so, quote, unquote, small. And then the same would be true of Yasi as well? In other words, it seems like there are billions, but they are just not hitting the layers in which you guys play.

Again, just to emphasize -- we are coming in kind of the second derivative on this one, where we are not that big on the primary reassurance to the local Australia companies. We are going to have the kind of nonpeak retro exposure. So I think a lot of it will come through the reinsurance market eventually, but it is on (inaudible) probably be about $1.5 billion.

Okay, perfect.

I would put a sort of overlay on it too, Greg, is that I think sometimes people think -- like they ask what kind of losses we are going to have on our portfolio. Our portfolio changes, so don't think just because we didn't have much in the primary Australian market this year, things may be different one or two years from now. So don't jump to that conclusion.

Right, right. Okay, great. And then just on the transaction -- and you may have actually covered some of this, but I just want to be sure I have it. Have you said when this thing is going to close? It sounds like it might be sooner rather than later. I had been thinking 2Q.

And then what are the major kind of accounting items that we should be thinking about in our models with regard to the transaction when it closes?

Greg, I am looking at my General Counsel as I sit here, so I can't respond directly. But we don't think it will be too long before we close that transaction. It will be in the next month or two, I think.

So having said that, if I turn it over to my CFO for the admin question.

I would just say on the financials, I think the financials, how you see them are really not going to be affected by the closing of the sale of the deal, given that we've included all of what is in the combined sale in our discontinued operations. So I think going forward, it will be pretty consistent with what you see right now.

Okay, great. It seemed straightforward. I just wanted to make sure there wasn't anything that you wanted to call out. But it sounds good. Okay, thanks. Great quarter.

Josh Shanker, Deutsche Bank.

In your commentary, you mentioned that you are very happy post-transaction about what the current breadth of the RenRe business is. Is it possible -- I know, Neill, you weren't there for all the transformations -- but to sort of go through the thought process behind diversification, the thought process about why the units that you have today are the right units, and what you think the core competencies are that spread through Lloyd's catastrophe and specialty and whatnot are.

Josh, I think that's a great question. You know, when we started off writing business in the US after 9/11, part of that strategy was to take on more catastrophe risk in that environment, on the primary insurance side versus just through the reinsurance side. And things evolved in that business over time where we started diversifying more and we got into businesses that looked pretty good.

And so, for example, on the (inaudible) side of things, you will recall that the SRA has changed a couple times in the last three or four years, and it is -- we think that business will become one where size is important. We have never really thought size was all that important. We've always tried to be pretty lean and nimble. But we do feel like it is going to -- that business is going to be more process-oriented and you need to get bigger versus being small. And we didn't want to go the acquisitive route in that business, with some of the pressures on the margins there.

On the program side of things, we had rented down that book. And we are in a softening market, and once again, we either had to grow that business or to do something with it. And instead of growing that book, we decided the best thing to do was to sell.

So we have a platform now that we can take the vast majority of our catastrophic risk in the reinsurance company, which I think is the right place for that to be. We've given up our ability to write admitted insurance business, but that typically is more process-oriented, more low-expense-ratio oriented.

Our forte is underwriting complex risk, solving complex problems for our clients in a high-touch environment. So that is more akin to writing reinsurance business and excess and surplus lines insurance business. So I think the platform we've got now is very appropriate for our strengths.

In terms of the underwriting at Lloyd's versus the underwriting at Bermuda, are the teams going to co-mingle information, or how does that exactly work in terms of the underwriting talent?

I'll start and let Kevin add to that. We took one of our most experienced and best underwriters, Ross Curtis, and put him over there, so the culturally we would have the same approach and take the same underwriting approach. We've got an excellent team in Lloyd's and I'm very enthusiastic about long-term prospects for that platform. Kevin?

I think the one other thing I would add to that is the coordination between Lloyd's and Bermuda is very strong. The other thing is the Lloyd's is more of a trading market, more of a trading mentality, in how you think about underwriting risks, which is more akin to the reinsurance way of thinking than it would be on a US admitted basis. So some of the skills in which we've developed in thinking about the transactions, particularly in Bermuda, it is my belief are more easily transportable to the Lloyd's market than they are to the US admitted market.

I think the other thing I would say is we've got more people from Bermuda in London than we did from Bermuda into the US. And I think, again, that is just increasing the amount of communication. And even -- not only just model coordination, but underwriting coordination as well.

Okay. Thank you very much. Great quarter.

Jay Cohen, Bank of America Merrill Lynch.

Just one quick question. The other income on your income statement was a bit higher than it had been. I'm wondering what is behind that.

I think the primary forces there were the quarter that REAL had. They had a 15 -- they made a little over $15 million in the quarter. And then we also had a specialty reinsurance contract that's accounted for at fair value, which we changed some loss assumptions on. And that was -- we marked that contract up in value. The combination of those two things was the principal contributor to the strong quarter.

That number has really jumped all over the place. I'm looking at the supplement going back five quarters. Any sort of guidance on where you think that number should be in a normalized quarter?

Well, I think a couple of comments. One of the reasons it has jumped around a bit is because of the mark to market that we had on our Platinum warrants, and those have been sold back to the company. So that is -- that line won't be there anymore.

I think -- the answer is I think you will continue to see a bit of volatility in this. Our principal, the strongest quarters that we have for REAL are typically the first and fourth quarters. So I think you will tend to see strong profitability in those quarters -- stronger profitability in those quarters coming from REAL. So you will see some continued volatility in that number.

Got it. Okay, thank you.

You have to look at it over the course of a year and just kind of average it out. I don't think you are going to get kind of a run rate per quarter.

Fair enough. Thanks.

There are no further questions at this time. Are there any closing remarks?

Sure. Thanks, everybody, for joining us today. You know, we're saying you never know what to expect from day to day. We certainly didn't expect starting late today, but I will bet we will start on time next quarter, and hope you tune in. Thanks a lot.

Thank you. This concludes today's Renaissance fourth-quarter 2010 financial results conference call. You may now disconnect.