Prepared remarks
Good morning. My name is Tasha and I will be your conference operator today. At this time, I would like to welcome everyone to the RenaissanceRe Second Quarter 2026 Earnings Conference Call and Webcast. I will now turn the call over to Keith McCue, Senior Vice President of Finance and Investor Relations. Please go ahead.
Thank you, Tasha. Good morning, and welcome to RenaissanceRe's Second Quarter Earnings Conference Call. Joining me today to discuss our results are Kevin O'Donnell, President and Chief Executive Officer; Bob Qutub, Executive Vice President and Chief Financial Officer; and David Marra, Executive Vice President and Group Chief Underwriting Officer. To begin, some housekeeping matters. Our discussion today will include forward-looking statements, including new and updated expectations for our business and results of operations. Important to note that actual results may differ materially from the expectations shared today. Additional information regarding the factors shaping these outcomes can be found in our SEC filings and in our earnings release. During today's call, we will also present non-GAAP financial measures. Reconciliations to GAAP metrics and other information concerning non-GAAP measures may be found in our earnings release and financial supplement, which are available on our website at renre.com. And now I'd like to turn the call over to Kevin. Kevin?
Thanks, Keith. Good morning, everyone, and thank you for joining us today. For the second quarter, we reported operating income of $548 million and an annualized operating return on equity of 20%. Tangible book value per share grew approximately 6% in the quarter and 27% year-over-year. Each of our three drivers of profit—underwriting, fee, and net investment income—contributed meaningfully to these strong results. This reflects the long-term disciplined execution of our strategy that enables us to continue to grow tangible book value per share. Our strategy does not change from quarter-to-quarter. We manage the business to build efficient portfolios of risk that maximize profitability. What does change, however, are the tactics we employ to achieve that strategy as markets shift. You can see this in action at the midyear renewals. David will discuss these in more detail, with property catastrophe rates down high teens, which was consistent with our expectations. Our leadership position allowed us to grow property catastrophe limit with high-quality clients. The result is, at today's pricing, we continue to like the property catastrophe market. Recent rate decreases have come off the step change in pricing and terms that reset this market in 2023. As a result, property catastrophe rates remain broadly adequate and that is what dictates our underwriting behavior. Thinking about our business in terms of rate adequacy provides us a more nuanced strategy than having one playbook for a hard market and another for a soft market. What sets us apart is that we know how to navigate the transition between the two as well as having more tools to do so. We've been navigating the property catastrophe market for decades and know when to grow and when to exercise discipline. Rate changes tend to be asymmetric. Periods of gradual decreases are punctuated by rapid large increases, which is what occurred in 2023. We recognized the opportunity at the time and aggressively grew both organically and through the Validus acquisition. This positions us well for the current market. Ultimately, this is a margin business, not a growth business. In a declining rate environment, discipline is not about how much you write. It's about how much you keep. We start by seeing the entire market on both the inward and the outward side. This gives us an informed view of where the best risk actually sits. We exercised risk selection to concentrate on the specific accounts and layers where the economics are strongest and managed line size aggressively. We then deploy the rest of our toolset, including retrocessional buying and capital partners' vehicles, to shape what we have retained. That combination lets us grow the gross portfolio where we see opportunity while managing the net portfolio to achieve the optimal mix between risk and return that maximizes long-term growth and tangible book value. Shifting to capital management. This quarter, we repurchased $350 million of our shares at valuations rapidly accretive to tangible book value per share. We buy our own stock the way we underwrite—when the risk-adjusted return warrants it. In this market, managing the denominator in the ROE calculation through proactive capital management is as important as managing the numerator by protecting margin. It is the combination of the two that allows us to continue compounding tangible book value per share, independent of changes to our top line. Let me now shift to a few comments on reserves. Once again, we reported significant favorable development. We recognized this benefit as the business seasons and if the data supports it. This was the case for most lines this quarter, where uncertainty remains and, in casualty, it does, we remain cautious. Social inflation continues to impact casualty, and we have been proactive in recognizing trend over the last several years. You can see this in our reserving actions where we've been strengthening and you can see it in our pricing decisions, which reflected the higher initial loss picks for casualty. Focusing now on casualty and specialty results. We reported a combined ratio that was above 100% this quarter. Our results were impacted by the settlement of the Baltimore bridge collapse, which resulted in a shift of losses from property to specialty. The net effect on our bottom line was relatively small. The reason you see this as a shift between the two, whereas we review it as largely unchanged, is because we divide our reinsurance business into two reporting segments. This can sometimes lead to confusion as we manage our accounts holistically across both property and casualty and specialty, though we report them separately. Underlying casualty and specialty performance is in line with our guidance, and Dave will walk you through the mechanics. On the balance of the year, our view is positive. At this point, our underwriting portfolio is largely in place. The portfolio is well constructed and well protected as we approach the peak of the hurricane season. There has been much discussion regarding to what extent a potentially historic El Niño may influence the hurricane season. This is not how you think about underwriting risk, however. We have built a portfolio to perform across a range of outcomes rather than one that depends on a benign season. Another topic of much discussion recently has been AI. As an organization, we are highly focused on continuing to integrate AI into our operations. Our vision for AI is to amplify the impact of our people and enable better decisions. I think about this as a combination of augmentation and automation. Regarding augmentation, we have made a variety of generative AI tools broadly available to our employees. They are actively and creatively producing innovative use cases that should provide greater insight into the risk we assume. It has been satisfying to see the number of ways AI is being incorporated into our business; it's probably fair to say that it is being used in one way or another across everything that we do. We are now moving towards automation. That said, one thing we have learned is that AI is not a silver bullet. It does not automatically make everything better. Rather, especially in the case of automation, it needs to be employed carefully and thoughtfully. To maximize the benefit of AI, it is not sufficient to simply overlay it on top of existing processes. Many processes need to be reimagined from the ground up. This is progressing from humans in the loop to humans on the loop, and we are developing significant resources for this endeavor, and I expect it to impact increasing portions of our business over time. As I've discussed in the past, we are rebuilding our REMS underwriting system, and one of the updates is to include the integration of AI into underwriting. This is more augmentation as the goal is to enhance judgment and expand what is possible: new risks, new clients and new models. Before I conclude my remarks, a word on our leadership transition. We have previously announced Bob will retire at year-end and Ross Curtis, our Chief Portfolio Officer, will remain actively involved in our operations until that time and is focused on ensuring a smooth transition. In 2027, Matt Neuber will become our Chief Financial Officer, bringing a proven record of financial leadership and deep expertise in corporate finance and capital management. He played a central role in building our capital partners business and scaled our treasury function in step with the growth of our company. He has been with us for over a decade, and has been deeply involved in every acquisition, capital decision and significant change over this time. This gives him a deep appreciation for our history, culture and business, and I look forward to him meeting more of you in the coming months. To conclude my opening remarks, the goal that guides every decision we make has been consistent: to maximize long-term growth in tangible book value per share. We pursue it through underwriting choices that optimize each of our three drivers of profit, combined with capital management that optimizes our efficiency. Bob will now discuss our financial performance for the quarter, followed by David, who will provide an update on our underwriting performance.
Thanks, Kevin, and good morning, everyone. This is another strong quarter where we generated operating earnings per share of $12.92 and an annualized operating return on equity of 20.1%. Annualized return on common equity was 24% with $154 million of retained mark-to-market gains, primarily from equity. We continue to steadily grow tangible book value per share by 6% in the quarter and 27% over the last 12 months. These strong results reflect the consistency and strength of our earnings with diversified income across our three drivers of profit. There are a few numbers in the second quarter that help demonstrate this. First, 15 points, which is the continued contribution from fee and investment income to our ROE, which forms a stable base of earnings quarter-over-quarter; second, $600 million, which was our underwriting income—underwriting builds upon a stable base of income from fees and investments; and finally, $350 million was the amount of capital we returned to shareholders via share repurchases, a consistent level with the first quarter. So far in the third quarter through July 20, we repurchased an additional $83 million of our shares. I'd like to spend some more time on capital management because it is an important lever that we have been employing to create shareholder value over the last two years. Kevin spoke of our focus on managing both the numerator and the denominator in the ROE equation. On the denominator side, since the beginning of Q2 2024 through Q2 2026, we have bought back $3 billion of our shares at an average price of $258 per share. On the numerator side, over that same period of time, we generated $4.6 billion of operating earnings. Since the beginning of Q2 2024, our diligent capital management, coupled with consistently strong income from our three drivers of profit, has enabled us to grow tangible book value per share by 66% and benefited operating earnings per share by more than 20% as a result of the lower share count. Going forward, we remain focused on growing tangible book value for shareholders by optimizing our income and managing our capital. Our underwriting book remains attractive. We continue to expect a similar level of management fee income and continue to have a positive outlook for investments. We will continue to take a disciplined approach to capital management and anticipate continued share repurchases in the third quarter. Now I'd like to turn to a more detailed view of our three drivers of profit in the quarter, starting with underwriting, where our portfolio continues to perform well with an adjusted combined ratio of 72%. We reported strong accident-year results with a low level of catastrophe activity and nine percentage points of favorable development. In property catastrophe, the current accident-year loss ratio was 12%, and the adjusted combined ratio was 9%. This included 25 percentage points of favorable development from a variety of accident years. Other property had another excellent quarter with a current accident-year loss ratio of 53% and an adjusted combined ratio of 52%. We had 35 percentage points of favorable development, primarily related to the attritional book. In Casualty and Specialty, the current accident-year loss ratio was 68%, and the adjusted combined ratio was 102%. We reported 4.4 percentage points of prior-year adverse development in this segment, which included 4.1 points related to the Baltimore bridge collapse. This was a result of a shift in reserves from other property to specialty and David will talk more about this in his prepared comments, but the overall impact to the company was an increase in net negative impact related to the bridge of only $12 million in the quarter. Additionally, there were 0.4 percentage points from purchase accounting adjustments impacting the prior year. Overall, gross premiums written were $3 billion, down 12%. The largest movements were in property catastrophe, where the top line was down 14%, excluding the impact of reinstatement premiums, and casualty and specialty work was down 15%. For property catastrophe specifically, lower rates at midyear drove most of the decline. In favorable detail, we continue to find this business to be rate adequate and successfully held our lines while finding select opportunities to grow, helping to offset some of the rate decline. We chose not to deploy our collateralized vehicle Upsilon at the midyear renewal, instead renewing the business on wholly owned balance sheets. This should serve to limit the impact of the top-line decrease on the bottom line. Other property gross premiums written were up 9.5% this quarter. Last year, there were a few one-off downward adjustments, and without these adjustments the top line was roughly flat. In Casualty and Specialty, we continue to shape the book. A portion of the decline in top-line growth was driven by proactive reductions and a portion was driven by funding of deals or premium adjustments, specifically. General casualty was down 17% as we continued to reduce our general liability portfolio. Specialty was down 16% due to a combination of exposure reduction in classes like cyber, rate reductions and premium adjustments, and credit was down 19%, driven by timing of a few large deals that were not up for renewal this period. This quarter, we purchased additional ceded protection across our portfolio in property catastrophe; our purchases were at more attractive rates than last year. This resulted in ceded spend being about flat. The decline in our ceded in our financials relates to the non-deployment of Upsilon, which I previously referenced. In Casualty and Specialty, we have increased our cession rates across the portfolio, particularly in casualty lines, which you can see reflected in the growth in ceded spend and a decline in net premiums written. This quarter, between our ceded program and capital partners, we shared about 35% of casualty and specialty gross premium written compared to 25% a year ago. Looking ahead to the third quarter, we expect other property net premiums earned of around $330 million and an attritional loss ratio in the mid-50s. Casualty and Specialty net premiums earned of approximately $1.3 billion and an adjusted combined ratio in the high 90s. Turning next to fee income, where we generated $83 million in fees, including management fees of $48 million and performance fees of $35 million. Management fees remained strong, although down compared to last year. And as a reminder, in the second quarter of 2025, management fees were elevated because we recaptured da Vinci fees that had been deferred because of the California wildfires. Performance fees were particularly strong, reflecting the favorable development we discussed earlier. In the third quarter, we expect management fees of around $50 million. Performance fees are highly dependent on underwriting results, which should average around $30 million per quarter; however, this can change as a result of large loss events or prior-year development. Turning now to investments. Retained net investment income was $314 million, up 3% from the first quarter and up 10% from a year ago. This is an all-time high. Net investment income was a significant contributor to our results with fixed maturity, short-term investments and credit contributing strongly. We reported $154 million of retained mark-to-market gains. This was driven by gains in equities, partially offset by losses in fixed maturity tied to higher Treasury rates and lower commodity prices. We continue to extend duration to lock in the benefit of higher rates. In the quarter, the retained portfolio duration modestly increased from 3.4 years to 3.5 years, and this is up from 3 years at the end of 2025. For the third quarter, we expect retained net investment income to continue to trend modestly higher. Finally, a few comments on expenses and taxes. Our operating expense ratio was 4.3%, which is down from last year due to a Bermuda tax credit and higher overrides from our casualty ceded program. We continue to invest in the business and expect the expense ratio to build towards 5% as the year progresses. On tax, our overall effective tax rate on GAAP net income was 12%. But as a reminder, we are not taxed on the earnings attributable to our capital partners' investors, which sits in noncontrolling interest. The tax rate on the income applicable to RenaissanceRe shareholders was 17%, which reflects the 15% Bermuda corporate income tax as well as some tax in other jurisdictions. To wrap up, this was a strong quarter demonstrating the power of our diversified earnings model and the benefit of the actions we have taken to manage capital to continue to drive strong shareholder returns. And with that, now I'll turn it over to David.
Thanks, Bob, and good morning, everyone. In the second quarter, our underwriting team led the market at the midyear renewal and constructed an optimal portfolio of risk. We applied rigorous risk and portfolio analysis to identify attractive opportunities, and drew on the strength of our client relationships to turn those opportunities into designed lines. I couldn't be more pleased with the team's execution and with the attractive diversified portfolio we have built. Underwriting judgment at its essence is balancing margin, risk and the value of a client relationship. This is institutionalized within our underwriting culture and our integrated operating model, and we do this better than anyone. It has driven our strong underwriting results over the last several years and is central to RenaissanceRe's long-term success. As I've discussed on prior calls, at each renewal, our underwriting team has two objectives. First, to deliver our market-leading value proposition to clients and brokers. That supports a durable pipeline of renewable business, first-call status and favorable signings that are resilient to competition. Second, to construct the optimal underwriting portfolio across lines to support each of our three drivers of profit and generate capital-efficient, attractive returns, both in the current year and over the cycle. In a competitive market, you can see the benefit of the first objective, delivering our value proposition consistently year after year. Increasingly, we are seeing a two-tiered market emerge in lines like property catastrophe and specialty. Clients are coming to us first to anchor their programs because we support them through the cycle, deploy significant capacity, bring an expert view of risk and engage with them across their portfolios. This dynamic means that we can retain full lines where we choose to participate and grow where there are profitable opportunities. Excess bookings in the following markets are signed down and don't get the lines they want. This brings me to our second objective, which is what the majority of my comments are about this morning. We maintain a diversified book across property, casualty and specialty because that diversification is what fuels all three drivers. Our job is to know when to grow certain lines and when to shrink others. We then use retrocessional protection to optimize margin and capital efficiency across the portfolio. I'll step through our actions in the quarter starting with property. At the midyear renewal, our leadership position in client relationships enabled us to grow property catastrophe limit with high-quality clients. Rate decreases in our portfolio were in the high-teen percentages. This is down somewhat from the low-teen percentages we saw at January 1, but we view the rate adequacy in our portfolio to be equally strong for both sets of renewals. Rates at the midyear renewal last year held up better than January 2025 because many programs were repricing after the California wildfires. To put this in perspective, over the last two years, rates in our January 1 and June 1 U.S. property cat book are both down by about 20%. Rates increased by around 50% in 2023. Set against that increase and improved terms and conditions, we continue to believe U.S. product adequacy. At the midyear renewal, we successfully grew U.S. property catastrophe limit by $600 million. We did this by growing our nationwide accounts with key clients and California programs where adequacy is particularly strong. In addition, we held our share on Florida domestics after three years of successful growth and maintained our private pricing on 65% of this Florida premium. We also reduced on some programs where the clear price did not reach a hurdle. Year-to-date, even though rates are down in the mid-teens, our property catastrophe gross premiums written are only down 9%, excluding the impact of reinstatement. This is excellent execution and demonstrates our ability to deploy capital into high-margin opportunities. Our Florida book is a good example of how we use all the tools at our disposal to shape a position over time. We reduced this business significantly in 2020 as we found it unattractive due to inadequate rates, poor claims practices and excessive litigation. However, we maintained excellent client relationships, and over the last three years, we rebuilt our position to historical levels as rates improved, to stabilize and outperform the margin. We have a very attractive set of domestic accounts. In the second quarter, we successfully retained the business and maintained our favorable pricing above market terms. In other property, the business continues to produce strong results with low current-year losses and favorable prior-year development. We have selectively reduced risk in some areas such as South Florida, where rates are under pressure, and we see better returns in the property catastrophe book. This business benefits from our expertise in individual-location underwriting and portfolio shaping when ceded. If rates continue to deteriorate, we will reduce our exposure in a targeted way to maintain attractive expected returns. Turning now to Casualty and Specialty. We continue to successfully shape our portfolio by maintaining our positions in preferred classes, actively managing our net exposure through ceded reinsurance and supporting customers who are demonstrating the strongest underwriting and claims performance. As Kevin discussed, there are some shifts in how we reserve the Baltimore bridge loss that impacted Casualty and Specialty results this quarter. Specifically, we have shifted part of that loss from other property to specialty. This resulted in prior-year adverse development for the Casualty and Specialty segment. Excluding the Baltimore Bridge and purchase accounting adjustments, our prior-year development for this segment overall would have been modestly favorable with an adjusted combined ratio in the high 90s, consistent with our guidance. This shift between segments related to changes in the Baltimore Bridge settlement structure, which allows property insurers to recover against marine liability policies. The market's total industry loss estimate also increased, but as we reserved this event to a $3 billion industry loss from the start, the overall net negative impact to our bottom line was small. Most specialty business renews at January 1 and with the increase in the Baltimore Bridge loss, the war in the Middle East and recent energy and aviation losses, we believe rates need to stay firm. Moving to general liability. We are continuing to monitor improvements in claims handling as well as rate change to ensure it is keeping up with trend. The market has made good progress, but trend continues at an elevated level, and we remain cautious in our underwriting. We are continuing to support clients who are the most effective at managing both rate and claims and are selectively reducing on others. Credit continues to perform well and remains attractive. Profitability is resulting in increased competition, but we've been successful in holding our lines. Finally, a brief comment on the war in the Middle East. The war has returned to an active phase with impacts on shipping and infrastructure in the region. We are aware of assets that have been impacted and believe any impact will be covered in our current reserves, but we'll continue to monitor the situation closely as facts on the ground could change rapidly. Moving on to a few comments on our ceded strategy. As Kevin mentioned, our ceded purchases alongside our capital partners' balance sheets play an important role in shaping the portfolio and preserving margin. In property catastrophe, we increased ceded limit, maintained retentions and improved coverage on a larger subject portfolio, while keeping spend flat. As a result, even though we wrote more property catastrophe limit, our risk going into wind season is essentially unchanged. In Casualty and Specialty, we also used ceded reinsurance to shape the net book. As Bob said, between our ceded program and capital partners, we share about 35% of casualty and specialty gross premium written compared to 25% a year ago. This is consistent with historical levels for the segment. These ceded purchases helped preserve margin, generate fee income through overrides and manage underwriting volatility. For the casualty book, most of the cessions are proportional. Retrocessionaires pay an override, which covers our expenses plus a margin to assume a share of our book and benefit from our access to business and underwriting acumen. For Specialty lines, we purchased proportional coverage, and we also managed cat-like volatility with excess-of-loss structures. In 2026, we expect these covers in cyber, marine, energy and aviation. Looking ahead, we've already begun preparing for the January 1, 2027 renewal, and we're in active discussions with our clients about how we can support the portfolios across multiple lines. That forward engagement is central to how we manage these relationships and it is how we position ourselves well ahead of year-end. So to close, this quarter demonstrated both of our underwriting objectives working together. Our value proposition is first-call in an increasingly competitive market, and we built a diversified, well-protected portfolio, growing property catastrophe where the returns are strong, pulling back where they aren't and using our ceded protection to manage expected profitability. And with that, I'll turn it back to Kevin.
Thanks, David. In closing, this was another strong quarter. We are making underwriting and capital decisions to compound tangible book value per share for the long term. Property catastrophe business remains attractive, and we continue to find opportunities to grow the portfolio. The interest rate environment continues to improve, supporting persistent net investment income. Fees remain robust and should continue to be a capital-light diversifying source of income. In short, each of our three drivers of profit performed well, and we continue to return capital to shareholders at attractive multiples, and we remain confident in the balance of 2026. And with that, we'll open it up for questions.
Questions and answers
We will now take our first question from Elyse Greenspan with Wells Fargo.
Building upon that, if we see a lack of significant losses this hurricane season, when do you guys think the property catastrophe market might bottom? Or do you expect that we can continue to see rate declines from a pretty attractive level until there are losses? Do you think that we get to some kind of flattening in 2027 or 2028? How do you think about the market developing in the absence of any significant losses?
Elyse, I think we missed the first thing that you said earlier; there was a problem with the communication. Can you just repeat the first part?
Okay. I was just trying to ask—since you guys are talking about the property cat market remaining attractive—if we see a lack of significant losses this hurricane season, how do you guys think about the market evolving from here? Would you expect that we continue to see rate decline coming off of this attractive level until there are losses? Or at some point, do you see us getting to a bottom in '27 or '28? How are you seeing the evolution of property cat pricing in the absence of significant losses for the reinsurers?
Okay. Thanks for the question. The market moves in cycles. From a macro perspective, there's a lot of supply in the market. We're still seeing an increase in demand but at a reducing level compared to what we've seen over the last couple of years. That dynamic, I think, will set up for continued pricing pressure moving forward. That's kind of what's going on in the overall environment. From our perspective, we have a long track record of executing into changing markets. This is not a soft market; it is a changing market, which I think you've highlighted well. We like where the rates are. We are building a portfolio that uses more of the tools that are available to us, which we've done historically over time. So I would expect that there will be more rate pressure. But as the market continues to become more competitive, we will increase our output to the market, which is historically what happens in a declining rate environment. So when I look forward into 2027, I would expect competition to remain robust but I don't anticipate that it will create major obstacles for us to continue to build a great portfolio and to continue to compound tangible book value per share.
So then my second question is on the Casualty and Specialty segment. You guys saw a reduction in premium there. You guys are still booking the accident year around 100 or slightly below that, right, adjusting for the Baltimore bridge this quarter and given your conservatism in your picks. Can you give a little more color on why you're seeing such a big decline in premium there? And then, secondly, can you help us think about the comfort in the back book and the picks you have there? Because away from the bridge, you highlighted there really was not any significant movement in reserves.
Elyse, I can take that. One of the things I'll comment on is that we're always optimizing the book with the opportunities we see. What we saw this quarter, and year-to-date, was we made some portfolio-shaping decisions, mainly in the general liability space. We've been addressing trend for a couple of years now and the market has been doing a pretty good job taking action, but some clients have done better than others. So the trend is continuing and we're watching that very closely. What we did in the second quarter was we took action and reduced some of the portfolio there. The other thing that's impacting our net written premium is the ceded structures. Cessions are something we have used for years in the Casualty and Specialty segment, also in Property. We see more opportunities to cede risk on attractive terms. It has a positive effect on the portfolio of reducing volatility, turning risk income into fee income through the overrides, and it also lets us maintain an option on the upfront book. With all the uncertainty in the market, this is the way that we're confident in the portfolio to manage through an environment where trend is persistent and there's still risk in the book, and we're doing the right things to manage that.
Our next question will come from Josh Shanker with Bank of America.
Yes. I hope this works—I'm on a train and I apologize. I wanted to dig a little bit into the credit decline. Bob said it was due to the nonrenewal of some large transactions in the quarter that weren't up for renewal. Are they up for renewal in another quarter? Or has the company decided to take all that business inwards?
Josh, I can comment on that. What we see in the credit book is a lot of the transactions are multiyear and when they initiate they're more lumpy. So it's not a smooth quarter-by-quarter renewable book. Our earned premium has stayed relatively consistent there. It's just that we had some multiyear transactions that we initiated last year that weren't repeated with this year's gross written premium. Overall, we're looking for opportunities in the credit space. We found some in 2025 and we'll write more credit book. But I see our credit booking as essentially flat in the medium term.
All right. And then with the higher cessions and the general casualty—because you see pricing out of the track to trend versus combined ratio—when you see business that was formerly retained and there's almost no underwriting profit on a calendar-year basis, what is the real impact of the cessions? How should we think about that?
Josh, you were asking about the impact of cessions on general liability in the casualty and specialty business. The way it comes through the books: we've been buying more cover in 2026. That cover essentially steps in for the beginning of 2026 but covers everything that we'll write during the year. The amount will continue to ramp up and affect the books more and more over the year and into next year. It has a positive effect on the books in a couple of ways. We receive overrides, which cover our expenses and provide a margin, so that will work to improve the net margin in the book, all else equal. We also get reduced volatility because as volatility may arise in the future, we've now ceded a portion of the book and there's less exposure at risk. So all those combined are the two main effects on the overall book. The other piece is that we're able to maintain options on the inward book despite the uncertainty, and we're able to act on that when the market improves in the future.
Our next question will come from Yaron Kinar with Mizuho.
I wanted to go back to the other property book and understand what the drivers were for the roughly 5% growth in gross premiums written on an adjusted basis. It seems like it's going against the trend we've seen in recent quarters of some declines. Can you help us reconcile that?
Yaron, I'll take that. What I said in my prepared comments was that it's roughly flat because last year we had some premium adjustments that created downward pressure. So what you're seeing in terms of real risk change year-over-year is about flat. It doesn't really represent a 5% or 9% growth in underlying risk; it's largely an adjustment. The risk, in terms of limits, is flat.
Okay, that makes sense. I thought it was 9% growth and then 5% with the adjustments—maybe I was missing something.
Yes, I didn't call out the adjustment explicitly. Largely, it's flat. The risk is about flat.
Our next question will come from Meyer Shields with KBW.
Kevin, in the past you've talked about different views between the pricing and reserving actuaries for casualty lines. When you're increasing the cessions, which of those actuarial opinions is driving that decision?
Well, each of the cessions will be going to a counterparty that's doing their own analysis of the portfolio. We share with them what we believe the portfolio looks like. Right now, there's not that much of a difference between our pricing and reserving. At other times, there's been a bigger gap between the two. So it's less of an issue currently. They are doing independent assessments, and we're sharing information with them. I would say most of them are probably looking more at pricing, but it really depends on who the cession partner is. Some of these structures are more structured and complex, so it varies.
Okay, understood. And then for Bob, if we look at acquisition expenses in other property, on a year-over-year or quarter-over-quarter basis, is there anything unusual there? I thought it was around $20 million—anything we should know?
You're referring to operating expenses or acquisition expenses? I apologize, I missed the focus of the question. For acquisition expenses in other property, it's down slightly because there was a prior-year deal that boosted it up previously. There was a onetime event last year that affected the ratio by about a point. The current acquisition expense ratio in this quarter is more in line with what we expect. Roughly the acquisition expense ratio is in the high 20s to 30s, and the current quarter aligns with that after removing last year's onetime effect.
Our next question will come from Michael Zaremski with BMO.
I'm thinking about some of the opportunistic shrinking of the portfolio, especially in casualty and specialty on an exposure basis. Should we be thinking about material capital freed up as well, or not so much, because when you grew that there was a big diversification benefit? Any color would be helpful.
We are in a very strong capital position with or without the portfolio changes. You raise an important point: we actually deployed more limit into the property catastrophe space because we still find that to be attractive. As David mentioned, our exposure this year compared to last year going into wind season is relatively flat. This isn't a perfect transition, but capital consumption within the portfolio reflects the relatively flat exposure going into wind season. Casualty has a lower capital charge per dollar of premium compared to the property changes we made. So I wouldn't think of the changes in our top line as directly correlated to capital deployment. That said, we're in a very strong capital position to continue to grow the book where we find opportunities and return capital to shareholders through share repurchases.
That's helpful. Then moving to operating expenses and investments for Bob: you pulled out the Bermuda tax credit benefit this quarter, and you're guiding the OpEx ratio to around 5% for the back half. Are the tax credits cumulative through '27? Are you still expecting to spend the vast majority of the investments? Will some of these be one-time expenses that fall off in outer years? Are some of the technology costs temporary so that by 2028 they taper off?
Thanks. Yes, you have the tax credit point right. The premium tax credits came through operating expenses; roughly two-thirds come through operating and the other one-third comes through the corporate side. We continue to invest in the business—the front office systems and other capabilities—and that's going to be a surge in expense that will taper off over time. We project the operating expense ratio to build toward about 5% by the end of the year and feel comfortable in that range, roughly 5% to 5.5%, and currently trending toward the low end. Those front-office investments are somewhat one-time as we implement systems and processes, and those costs will taper. We are also investing in AI and process reengineering; there's cost upfront but a payback over time and the investments will create efficiencies down the road.
Our next question will come from Andrew Andersen with Jefferies.
Specialty and credit have become a larger percentage of that portfolio over the last several years within Casualty & Specialty. How much additional opportunity is there to increase the mix in that book? At what point are you running up against further competition or internal constraints?
Andrew, we're very focused on deploying capital into high-margin businesses. Credit is one such area—it's high margin and we will write more where we find attractive opportunities. These deals are lumpy, so it's hard to predict quarter-to-quarter, year-on-year. We have a strong market position in specialty—post-Validus we have a market-leading specialty team combining talent and scale—so we're well positioned for growth when opportunities arise. The counterbalance is competition: there's a lot of competition in the market, both in property cat and in specialty. We'll be well-positioned when growth opportunities come, but that may not result in top-line growth quarter-over-quarter.
You mentioned you chose not to deploy Upsilon at the midyear. Could you talk about how you're thinking about growing fee-bearing capital versus balance-sheet capital over the next year or so?
Upsilon is relatively small, and that was a strategic decision for this year. We continue to see interest in our vehicles; in many cases there's more investor interest than we have opportunities to include. The capital partners business continues to perform well, and we have strong capital opportunities to deploy should the market provide matching risks. We feel good about where we are; the size of the capital-partner vehicles this year is similar to last year and we expect to continue growing that channel as opportunities arise.
Our next question will come from Chris Hartwell with Autonomous Research.
First, on renewals and specifically terms and conditions: we've heard a lot of broker chatter around the balance of risk shifting between primary insurance and reinsurance. Did that have a bearing through the midyear renewals? Also, how do you think brokers may push on testing additions through next year—whether reinsurers can defend common levels, thinking about point aggregates and similar structures?
Chris, overall terms and conditions remain very strong in the property catastrophe space. Since the step change in 2023, there was a big reset in coverage, structure and level. While we've seen pressure on rate, terms and conditions have remained pretty stable. There's been discussion about companies buying down into the earnings level; generally demand has gone the opposite way—more demand at the top end and some reduction at the bottom end that might have been creeping into the earnings layer. Aggregate programs have seen some demand and growth recently; those are participating at the capital level we engage with. From our perspective, terms and conditions provide a lot of stability and support our ability to continue to take risk on the catastrophe side.
A follow-up on cyber: could you give more color on the cyber environment? I noted volume adjustments—are those environmental or related to portfolio activity? What's driving the changes?
Yes. Cyber grew rapidly in 2021–2022 when rates were increasing and claims were decreasing. As rates have come off those peaks and claims have returned toward historical norms, we've taken some cyber risk off the table. There have been reinsurance portfolio adjustments we've made proactively. Also, with reducing rates, clients end up writing smaller books, so you see premium adjustments about a year after the fact. We've also made ceded purchase decisions on cyber; we have a smaller and better-protected cyber book than at the market peak.
Our next question will come from Ryan Tunis.
First, on capital planning: year-to-date, equity has grown. I recognize only two quarters in, but given the changing market environment, would you expect to continue to grow the equity base? I'm just wondering if that's the right way to think about that.
Yes, thanks. Year-to-date we've grown through earnings by just over $900 million and repurchased close to $800 million. So it's a modest increase year-to-date. We feel really good about our position going into wind season. As I said in my prepared comments, we fully expect to continue buying shares back. We didn't give a precise number for future buybacks but repurchasing shares remains an active part of our capital plan.
Got it. And a follow-up on the Florida renewals: when you did walk away from business, what were some of the general themes involved? Was it pricing, claims practices, litigation, or something else?
Ryan, it was mostly price pressure relative to our view of the appropriate clearing price given the exposures in the ceded portfolio. We model each individual portfolio from the ground up and sometimes the market has a different view. If the client's clearing price is lower than our view of the appropriate price, that's when we walked away. There were minor attempts to broaden coverage where we would have walked away, and those attempts were largely unsuccessful. So it was primarily a pricing decision in the context of exposure and expected profitability. On the casualty side, we also made portfolio adjustments when we saw clients that were not able to keep up with trend or improve claims handling; those are the targets for reductions.
Our next question will come from Pablo Singzon with JPMorgan.
Thanks for the detail on retrocession usage. Could you provide perspective on the relative returns of business on a gross versus net basis? It sounds like returns on placements are still attractive on a gross basis—accurate?
That is accurate. We are using retrocessional coverage to position the portfolio for the future. Back in October of last year we built a pro forma portfolio envisioned for the year and what we wanted to manage towards for pricing expectations. We've achieved our objectives on the portfolio, and included in those objectives was managing the level of net risk on the casualty and specialty side and on the property side with the use of retro. We think that positions us well going into the January 1, 2027 renewal. We are still seeing gross portfolio returns that are well in excess of our cost of capital, and we're enhancing that with retrocessional purchases on the net portfolio.
Makes sense. A follow-up: many primary companies have flagged MGAs and the capital behind them—funds or reinsurers—as an area of increasing risk. Do you agree? Can you talk about your participation in that part of the market and more broadly about your approach to client selection?
Yes. As markets soften, careful monitoring of MGAs becomes increasingly important. That has been true historically and remains true now. From our perspective, we are not a very large writer of MGA-distributed business and our MGA relationships are concentrated with partners we've had for a long period of time. We are selective and hands-on.
On the underwriting side, where we deploy capacity through MGAs, the most significant pieces are on the other property side where we've written cat-exposed business via MGAs who are efficient distribution sources. In those situations, we control the underwriting and pricing and the catastrophe exposure. Our systems are tied directly into the MGAs and we remain very hands-on to ensure we are on top of changes in risk.
Our next question will come from Brian Meredith with UBS.
Curious about the new alternative capital coming into the marketplace—has it been disciplined or are we heading toward something like pre-2020 where things got very competitive with alternative capital?
We've seen some change over the last several months and year, notably interest from private credit funds and other investors seeking long-term assets that match their investment strategies. Historically, capital has come in looking for low-beta property catastrophe exposure. Capital coming in now often has existing investment strategies and is looking for assets to fund those strategies. There has been talk and some vehicles have formed, but they haven't materially moved the market at this point. We're close to many of these discussions and continue to monitor capital inflows and their potential effects. At this time, the impact has been negligible.
Helpful. Any meaningful movement in terms of conditions loosening at midyear renewals?
Terms and conditions have stayed very strong since the step change in 2023. We've seen pressure on rate, but the terms and coverage have not meaningfully broadened. We remain satisfied with the stability of terms and conditions.
Our next question will come from Tracy Benguigui with Wolfe Research.
You mentioned that you're still seeing profitable gross portfolio returns well in excess of your cost of capital, enhanced by the use of retro on the net portfolio. Can you touch on the current pricing spread between retro and reinsurance property cat pricing? And what is the profile of your retrocession partners?
We don't disclose specific spreads between products we buy and sell, but practically speaking we have a sophisticated view of the economics and much more transparency than most. We use many different structures—traditional retro, ILS, partnerships with third-party capital and capital partners. The profile of our retrocession partners is diverse: traditional reinsurers, ILS funds, and structured capital providers. We have more tools and better transparency on those terms than many participants, and as markets become more competitive and rates compress, we tend to increase our alpha by managing how much risk we retain.
A quick follow-up on the cyber discussion: did your reduced exposures reflect a lower appetite due to a specific event like Mythos? Have you seen a similar pullback from other market participants?
Mythos is one example of a changing risk landscape and we're monitoring it closely. We haven't seen an uptick in claims tied to AI or Mythos impacting our portfolio so far, but we'll continue to watch. Even without that, cyber claims have returned to more historical levels and with reduced rates and higher ceding, profit margins are not as attractive as they were a couple of years ago. That's the main reason behind our portfolio changes in cyber.
Our next question will come from Alex Scott with Barclays.
I wanted to circle back on the casualty business and particularly the pieces you weren't willing to renew. Could you talk about your assessment of the reserves and your comfort with the loss picks for the areas you walked away from? What should we think about the reserve adequacy for that business?
Alex, our approach to casualty has been data-driven and granular. We've been collecting more data from cedants and monitoring portfolios closely. Overall, the market has been getting more rate and improving claims handling, but trend remains elevated. Some clients have been more effective than others. We look at actual versus expected emergence, how portfolios have evolved, and the layers they write. A lot of social inflation impact shows up at the lower excess layers—25x25 or 50x50—through personal injury awards. Our underwriting and reserving view is that while there are signs of improvement over time, inflationary pressure will persist for a while and our reserving and pricing reflect that. We've been proactive in our reserving actions and reasonably conservative in our loss picks to account for continued trend; that's part of why we made the portfolio changes. We remain comfortable with our overall reserve position given the actions taken.
Our next question will come from David Motemaden with Evercore ISI.
Wanted to ask about property catastrophe rates: you said they remain adequate after being down mid-to-high teens at the midyear renewal. If we see similar rate declines next year, how are you thinking about rate adequacy in the market?
There are two assessments when thinking about property catastrophe because of capital consumption and correlation effects: stand-alone economics and marginal economics. Marginally, even with the same level of rate reduction and the associated increase in loss ratio for individual deals, we expect to like the portfolio because we can enhance capital efficiency through risk-sharing mechanisms we have. So from a marginal perspective, we can continue to find attractive opportunities. Looking into 2027, I do anticipate more competition and rate pressure, but we will build a property catastrophe portfolio that we like—one that is optimized for return and capital efficiency.
Understood. You noted the $600 million increase in limit deployed at midyear and that demand is increasing but at a reducing level. How are you thinking about demand into next year compared to this year?
On demand, we've seen an increase over the years but at a slower rate. Two years ago we counted about $20 billion of demand in the U.S. catastrophe side; last year it was around $15 billion, and this year it's just over $10 billion. So long-term dynamics remain strong—Florida private market participation, growth in TIVs and client demand for capacity. That said, we don't expect accelerating growth in demand next year; competition will remain and there is capital from cat bonds and other sources. It's a mixed picture but a healthy market for those who can deploy capital efficiently.
Thank you for joining today's call. We feel like we're in a great position, having built a portfolio that we targeted going into wind season, and we look forward to talking to you in a couple of months about the third quarter. Thanks very much for joining today's call.
This concludes our RenaissanceRe Second Quarter 2026 Earnings Call and Webcast. Please disconnect your line at this time, and have a wonderful day.