Fitch Affirms RenaissanceRe's Ratings; Outlook Stable

Fitch Ratings has affirmed the ratings of RenaissanceRe Holdings Ltd. (NYSE: RNR) and its subsidiaries, including the Issuer Default Rating (IDR) for RNR at 'A', and the Insurer Financial Strength (IFS) rating of Renaissance Reinsurance Ltd at 'A+'. A full rating list is shown below. The Rating Outlook is Stable.

Fitch's rationale for the affirmation of RNR's ratings reflects the company's continued strong leadership position in the property/catastrophe reinsurance market, RNR's reasonable operating and financial leverage and overall high quality and liquid portfolio of fixed-income and short-term investments. The ratings also reflect anticipated challenges in the competitive property/casualty market, potential volatility from the company's alternative investments and poor underwriting results in the first half of 2011.

Following favorable results posted by RNR in 2010, the company recorded a net loss of $223 million for the first six months of 2011 due to sizable catastrophe losses from the Japanese and New Zealand earthquakes, large U.S. tornadoes and Australian flooding. As a result, RNR's consolidated GAAP combined ratio increased to 174.1% for the first six months of 2011 compared to a 45.8% combined ratio for the first six months of 2010. Excluding the impact of catastrophes (143.2 points) and favorable reserve development (17 points), RNR's combined ratio for the first six months of 2011 was 47.9%, up only slightly from 46.5% for the comparable prior year period.

Fitch views RNR's year-to-year underwriting profitability as volatile, but the effect of this volatility on the company's ratings is mitigated somewhat by RNR's low combined ratios over extended periods of time. Fitch views this as an important factor supporting the company's ratings and as evidence of RNR's underwriting skills.

Fitch believes that RNR has a leading position in the property/catastrophe reinsurance market derived largely from the company's ability to provide consistent capacity in the marketplace and its ability to effectively underwrite and price catastrophe-related risks. RNR uses a proprietary model in conjunction with vendor models in its underwriting and risk evaluation process and Fitch views RNR's property/catastrophe underwriters as having a demonstrated record of expertise. Fitch's ratings also consider RNR's modeled losses from simulated catastrophe events.

Fitch believes that RNR's capital position provides an adequate cushion against the operational and financial risks the company faces. RNR utilizes a reasonable amount of operating leverage with a ratio of net premiums written to shareholders' equity of 0.2 times (x)-0.3x in recent periods, which is low compared to the overall reinsurance industry, but in line with those of other reinsurers with property/catastrophe concentrations. Furthermore, Fitch considers RNR to use a moderate amount of financial leverage in its capital structure, with an equity-credit adjusted debt-to-total capital ratio of 13.9% at June 30, 2011, down from 15.7% at Dec. 31, 2010.

Fitch also stress tests RNR's reported underwriting results and operating leverage ratios to include a modeled probable maximum loss (PML) for 100-year and 250-year return periods. Based on this analysis, Fitch views the company's risk adjusted capitalization to be strong.

Key rating drivers that could lead to a downgrade include significant deterioration in RNR's historically strong profitability, as demonstrated by sustained underwriting losses or adverse investment portfolio results, material weakening in the company's current balance sheet strength and a catastrophe event loss that is 25% or more of shareholders' equity. Fitch's rating rationale anticipates operating leverage as measured by net premiums written to shareholders' equity to remain below 0.5x and equity-credit-adjusted financial leverage to remain below a range of 20%-25%.

Fitch considers a rating upgrade to be unlikely in the near term due to the earnings and capital volatility inherent in the company's property/catastrophe reinsurance focus. Key rating drivers that could lead to an upgrade over the long term include continued favorable underwriting results relative to other property/catastrophe reinsurers and comparably rated property/casualty (re)insurer peers, improvement in RNR's competitive position in profitable market segments outside of property/catastrophe reinsurance, including its specialty reinsurance and Lloyd's business, and material risk adjusted capital growth.

Fitch affirms the following ratings with a Stable Outlook:

RenaissanceRe Holdings Ltd.

--Issuer Default Rating (IDR) at 'A';

--$100 million 5.875% senior notes due 2013 at 'A-';

--$250 million 6.08% series C preferred stock at 'BBB';

--$300 million 6.6% series D preferred stock at 'BBB'.

RenRe North America Holdings, Inc.

--$250 million 5.75% senior notes due 2020 at 'A-'.

Renaissance Reinsurance Ltd.

--IFS at 'A+'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (March 31, 2011);

--'Non-Life Insurance Rating Methodology' (March 31, 2011);

--'Rating Hybrid Securities' (July 28, 2011);

--'Insurance Industry: Global Notching Methodology and Recovery Analysis' (March 31, 2011).

Applicable Criteria and Related Research:

Non-Life Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=604366

Rating Hybrid Securities

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647091

Insurance Industry: Global Notching Methodology and Recovery Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=614265

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=614266

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