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+'. The Rating Outlook is Stable. KEY RATING DRIVERS Fitch's rationale for the affirmation of RNR's ratings reflects the company's continued strong leadership position in the property catastrophe traditional and alternative reinsurance market, RNR's reasonable operating leverage and low financial leverage, and overall high-quality and liquid portfolio of fixed-income and short- term investments. The ratings also reflect the competitive property catastrophe market rate environment, volatile underwriting results, and potential volatility from the company's alternative investments. 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 low average combined ratios over an extended time period that includes periods of light and heavy catastrophe-related losses and incorporates different cyclical market conditions. Fitch views this as an important factor supporting the company's ratings and evidence of RNR's underwriting prowess and catastrophe modeling skills. RNR's average GAAP calendar year combined ratio over the most recent 10-year period (2003 -- 2012) was favorable at 76.0 percent, including an average combined ratio of 65.3 percent for the reinsurance segment. RNR posted a calendar year combined ratio of 49.0 percent for the first nine months of 2013, which includes 6.1 points of catastrophe losses for European floods (3.2 points) and May 2013 U.S. tornadoes (2.9 points). This compares to 57.8 percent for full year 2012, which included 19.0 points for catastrophe losses from Hurricane Sandy (16.0 points) and Hurricane Isaac (2.8 points). 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 0.2x - 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. In the event that the premium rate environment improves, Fitch expects RNR's operating leverage to increase somewhat, although it is not expected to exceed 0.5x. Fitch believes that RNR's financial leverage ratio (adjusted for equity credit and excluding unrealized net gains on available-for- sale fixed maturity investments) continues to be very modest at 6.4 percent as of Sept. 30 , down from 11.4 percent at Dec. 31, 2012 . This drop is the result of the company's repayment of its $100 million senior notes upon maturity in February 2013 and $275 million issuance of non-cumulative preferred shares (assigned 100 percent equity credit under Fitch's hybrid securities rating methodology) in May 2013 to redeem cumulative preference shares (50 percent equity credit). RNR's GAAP operating earnings-based interest and preferred dividend coverage has been strong, averaging 8.2x from 2008 -- 2012, which included negative earnings coverage in 2011 due to the increased catastrophe losses. Coverage improved to 16.7x thus far in 2013, due to reduced catastrophe losses, lower interest expense with the debt repayment and less dividends on preference shares following the refinancing. RATING SENSITIVITIES Key rating triggers 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, as measured by net premiums written to shareholders' equity above 0.5x or equity- credit adjusted financial leverage above 25 percent, and a catastrophe event loss that is 25 percent or more of shareholders' equity. 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 triggers 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. --IDR at 'A'; -- $125 million 6.08 percent series C preferred stock at 'BBB'; -- $275 million 5.375 percent series E preference shares at 'BBB'. RenRe North America Holdings, Inc. -- $250 million 5.75 percent senior notes due 2020 at 'A-'. Renaissance Reinsurance Ltd. --IFS at 'A+'. Additional information is available at 'fitchratings.com '. Applicable Criteria and Related Research : --'Insurance Rating Methodology' (Nov. 13,). Applicable Criteria and Related Research : Insurance Rating Methodology - Effective Sept. 19, 2012 to Oct. 18, 2012 http://fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=688011 Additional Disclosure Solicitation Status http://fitchratings.com/gws/en/disclosure/ solicitation?pr_id=812102 ((Comments on this story may be sent to firstname.lastname@example.org ))
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