Yeah.
Yeah, okay. I think you might have something.
Very pleased to have with us today Neill Currie , Head of RenaissanceRe. Neill was one of the original leaders of this company. Left for a while, came back. Something I think Neill has done remarkably well, and I don't think it's very easy, is to maintain a very consistent culture at this company. Culture is a tough thing to talk about. It's tough to write about. We can't model it. One thing I have learned over 20 years of watching this industry is that it's really important, and I think it's key to the success of RenaissanceRe. There's other stuff going on, too. I'll let Neill tell you about that.
Okay. Gentlemen, we got the mic going here. I like to wander around. Let me see if I got the clicker here. Let me try this out. Green means go, I bet. Want everybody to memorize this, please. There'll be a test later. Okay. This is a pretty good spot coming up after Dino's. They've got a marvelous company. Very good market value to share price, and we kind of vie for that leading spot with those guys. They're a very well-managed company. We think we're pretty well managed. The intro to RenRe, we're a leading global provider of reinsurance and insurance. We do Property Catastrophe, we do specialty reinsurance, and we have a Lloyd's syndicate. I didn't know whether I wanted to mention this or not, but why not? It's Valentine's Day, step out. One magazine had a survey.
People do these things about who's the best at this, who's the best at that. Well, we've been lucky enough to win the best Property Catastrophe reinsurer several times, maybe best Bermuda reinsurer. This last year, we won best global reinsurer. How about that? We were up against the big boys. 10 years ago, we never would have won an award like that, deserved or otherwise, because we were viewed as a Property Catastrophe company. Now it just shows the recognition of the value we're bringing to the table with our specialty reinsurance and our Lloyd's operation. With that immodest statement, it reminded me of Benjamin Franklin. Ben wanted to become as perfect as he could be, and he would keep up with certain traits, and he would focus on one at a time. He was pretty good at most of them.
Somebody told him, said, "Ben, you need to work on your modesty. You're a little bit conceited." He focused on that and became very good at it, then he started bragging about how good he'd become at modesty. I always remember that story and get a kick out of it. The rest of the stuff's pretty straightforward. We were started in 1993. This is our 20th anniversary. We were founded with two guys, and I was one of them, back June 14th, 1993. We'll have a big celebration in Bermuda in June to celebrate our 20th. Our ticker symbol on the New York Stock Exchange is RNR, which is completely ridiculous because back in the war, RNR stood for rest and relaxation. Ain't too much of that going on at Renaissance. Market capital of around $3.9.
Pretty good numbers on our ROE basis, the thing that we really focus on is tangible book value per share growth. We've been very fortunate there, the rating agencies like us, we want to keep it that way. Jay, you want to give me a fighting chance with the clock back there? Otherwise, I'll talk for an hour. Okay, good. You'll pull the hook out when it's time?
Yep.
Okay. All right. Everybody has a mission, a vision statement, you guys are well-educated. You can read that. We do strive to produce superior returns. Frankly, one of the best ways we do this is we look after our customers, both internal and external, try to always exceed our promises. We try to excel in every way that we possibly can. Our vision, we want to be a leader in financial services in the lines of business that we're involved in, I think we are. This is pretty speaking of immodesty. How about this one? Our identity. We're committed to be the world's best underwriter of high-severity, low-frequency risks. We want to be the best that we can be, we strive constantly to get better. As Jay mentioned earlier, our culture, we're fortunate we've got a good group of folks.
They're smart, they're hardworking, they get along, that's not a very easy thing. We're a pretty reasonable-sized company financially. We're not very big from a people standpoint. I think we've got 311 employees, but really very talented ones. Guess what? They work together well. The last part here on the strategy is to employ an integrated system, it matches up most desirable risk with the most efficient capital. I've seen over the years that people, they get silos. Well, we're the best actuaries. We're the best underwriters. Over here, we're the best finance guys, over here, we're the best venture guys. What makes Renaissance hum is all these folks work together well in an integrated way. It's a fancy word, integrated. Call it teamwork.
You'll see in our annual report that's going to come out, we're going to talk quite a bit about the integrated system. The other thing I find pretty humorous is back when we started the company, I was vehement that we wouldn't have any pictures in the annual report, and we didn't. Now I came back as CEO in 2005, and guess what? My mug is in the annual report. First thing you see is a picture of me. Crazy world we live in. I wouldn't focus on the pictures. I'd focus on the writing. Okay. Our competitive advantages, we say this all of the time. We refer to them as the three superiors: superior customer relationships, superior risk selection, superior capital management. To have superior customer relations, that, I think, is one of the things that is underappreciated in our business.
By having very good customer relationships, we have very good flow. We get to see virtually any deal out there, and people want to do business with us. People think we're smart, and we got a black box, and we're good at modeling, and we are all that stuff. The client relationships, we help our clients, we provide coverage for them when they need the coverage. We've always done that historically. We're there after loss to pay quickly. There's no faster payer of claims out there than we are. And when a customer comes into our office, we want them to walk out of the office feeling like they've learned more about their business, and that happens quite a bit of the time.
By having these three superiors, it enables us to have access to the most desirable risk, and we match that up with the most efficient capital through our superior capital management. That gives us a superior portfolio. Now, since we've been in business for about 20 years, it's really helpful. We have a portfolio of business that produces very good returns. Every year, we just have to modify that a little bit. We lose a piece of business here or there. We gain a piece of business here or there. We buy retro. We never buy retro because we have to. We buy it to make our book of business more efficient.
If you've got a relatively stable book of business, then when you put a pro forma out, when you look at a piece of business coming in, does it make your portfolio better or worse? It's a lot easier to do that if you've got a pretty good idea of what that portfolio is and is going to be versus being a new startup trying to put together that portfolio. Because you might find a piece of business you want, but it may be very difficult for you to get on that piece of business. Okey-doke. I guess this goes back to a Ben Franklin slide. This is rather immodest, but it's factual. We've done a pretty good job of growing tangible book value per share plus accumulated dividends. Those are the bars that you see.
You see the share price is typically a good bit higher than that. Historically, in the company, we've had one of the higher multiples of market value per share to book value, and I kind of view it, you get what you pay for. We do have a very good business and a very good number of folks that work for us. The only thing I might say, I have to be careful. Don't tout the stock. Oh, I love the stock. I love the company. I think a lot of people in our space are undervalued. I think it's pretty silly that some of our competitors who are good guys are trading at a discount to book value. I think the whole industry is rather undervalued.
If you look back at our market multiple now, it's somewhere between, what, 1.2-1.25. Historically, it's been a whole lot higher than that. I think we have a real franchise, and that deserves a market value substantially higher than the book value. Okay. I guess this is bragging again, but it's factual, again. You see the bars. This shows you RNR's operating ROE going back to, I guess, 1996. In that year, man, we did pretty good, about a 30% ROE. The bars are us. The squiggly lines are the peer group as picked by us. You've got to pick a peer group. It's pretty hard not to pick a peer group. This is the best we could come up with. How have we performed on an ROE basis since, 1996?
Might have been better if we went back to the beginning, it's hard to find other guys to compare it to, I guess. Just look at 1996 as an example. We had a 30% ROE. It looks like our peer group was about half of that. The heading here says ROE of 18% since 1996 versus 10% for peers. We don't outstrip the peers every year. We did a pretty good job in the World Trade Center. Look at that. We had a very nice return that year, and the peer group lost money, which is very understandable. One of the reasons we did so well, there were several reasons, I think we bought a pretty good retro program. This was back at the time when I was retired, so I can't take credit for this. We manage our portfolio for tail events.
We want to be the last guy standing. One of the reasons we did so well that year is we were concerned about the earthquake exposure in New York City. We didn't want to have too much aggregation of exposure in New York, which helped us out in the World Trade Center. There's no way we would have predicted an event like that. We look at tail events and are very cognizant of that. As you might imagine, in 2004, we underperformed the peer group. That was kind of the perfect storms. Once again, that was right before I came back. The guys had bought some retro in Florida, and all these events happened and weren't very big. We had paid out for retro but didn't get any recovery, so it sort of added insult to injury.
2004 was not a banner year for us. Right on the heels, welcome back, Neill. I come back the day after Independence Day in 2005 and become a dependent again. We stepped into KRW, we didn't do as well as the peer group then either. The next year, 2006, not too bad. You will see sometimes that we do worse than the peer group and sometimes we do better. Most of the time, we do better. The RenRe story is we're going to have a little bit of volatility. If you're willing to accept a little bit of volatility, we'll give you a better than average return. Disciplined underwriting. That's what we do. We're showing you some of the different cycles here, and that our premium volume goes up and down.
We got out of the U.S. insurance business a couple of years ago. We had started to write a fair amount of admitted insurance in the U.S., that's not really our forte. We are underwriters' underwriters. To do that, you have to run a very efficient, lean, low expense ratio type business. We are better at underwriting. The insurance business that we do now is actually written in Lloyd's, that's on an excess and surplus lines basis, you have more rate freedom, you have a better chance to earn a higher margin. We're still much the predominance of our business is reinsurance.
You can see the squiggles in the cat business and in the other lines, we tend to put the foot down on the accelerator in good times, we put our foot down on the brake in less good times. Some companies are good at doing one or the other. We're pretty good at doing both. Strong franchises. Here are the three main things that we do. We got reinsurance, the Lloyd's Syndicate, we've got Ventures. Some other folks are kind of following our lead in Ventures. Ventures is the special unit dedicated to managing our catastrophe joint ventures if we make strategic investments, then our energy advisory firm, REAL. As I touched on the first slide, we now do stuff other than just property cat reinsurance and do it well.
Some of the analysts out there, shareholders like looking at this graph. This is our view of the world. It's nobody else's view. We get to see virtually every cat deal out there. We look at it and say, how much of the business provides an acceptable return, which you see in the grouping on the left, how much is a low return, and what's a negative return? Negative return meaning if you actually wrote that business, we think you would lose money over time. Nothing particularly interesting going on in these charts changing year-on-year, other than I think it's interesting to note that usually about half the business is acceptable return, about 35%-ish is low return, 10%-15% is negative return.
What we do, we strive to have all of our business over on the left and none of our business on the right. Business written on the right is not a good career path at RenRe. We mentioned the superiors again on the right, and by having those superiors, it enables us to get more of the business on the left. Return on risk capital. If you look at the purple line, that's us. If you look at the aqua sort of greenish line, that is the U.S. total Cat market. You can see, for example, that the expected return went up substantially after KRW. There's typically a margin between the returns that we think we provide versus the returns of the average of the market. We want to keep it that way. Risk management is core to our culture.
I guess one of the things some people think, "RenRe's had good numbers. They are lucky. They've been pretty lucky for 20 years. If the big one happens in Florida, they're toast." I mean, people kind of look and say, it must be like, I'm sure there's some luck in there. One of the things that I look at if you want to see how we run our business is look at the history and see what our losses have been compared to what one might think those losses would be. This is on a percent of equity. If you look on the top, the more recent events going down on the left. In Sandy, our peer average lost, it's hard to see from this angle. Around 4%-4.5% of equity, we lost a little bit less than that.
You look at the Thai flooding, our peers lost a higher percentage of equity than we did. You look at the Japanese earthquake in 2011, the same thing. New Zealand earthquake, we lost a little bit more than our peers. Chilean earthquake, did better than our peers. In the U.S. hurricanes, Ike and Gustav, we did a little bit better. Another chart we could have shown you, but it was harder to get the information together and to actually have a fair comparison, would be we're one of the biggest Property Cat writers in the world. If you did this on a percentage of Cat premium, we would look far better. Other people take risk in Sandy in the form of facultative reinsurance. That might not be fair, but just think about it.
This is not a bad track record for guys that specialize in writing Property Cat and write a bunch of it. Another bragging point as I look at the bullets over here. We are one of the few companies that still has an excellent enterprise risk management rating from S&P. Specialty, a disciplined approach. We've had some evolution on the specialty business, maybe I'll use a slide to kind of plug the people and the culture here a little bit again. I'll come back to that in a second. You see how much specialty business we wrote going back after 9/11. It got up over $400 million at its apogee. Before 9/11, you could buy reinsurance for workers' compensation catastrophe for pennies. People just didn't think it would happen.
You have a lot of employees together in one place, and as a result of an event, you would have a lot of losses. Well, after 9/11, that changed, and a lot of people ran away from it. Then we said, "Well, that's probably a pretty good time to write this." We wrote, I think, I know over $100 million worth of that business, but I think maybe up closer to $110 million, $120 million of that business. I don't think we ever paid any losses. As time went on, people said, "Well, let's diversify from property cat. Let's write some workers' comp business." Well, it is catastrophe exposed. The cause would be from a catastrophe. Rates went down, and now I think we've probably got about $3 million of workers' comp cat. We're very disciplined in our approach.
The other thing that we've changed is the team. We had one very strong underwriter in the specialty area going back to this period. Now we have a lot of very strong underwriters. When you talk about rocket scientists and guys that graduated with honors at MIT, et cetera, and then get their actuarial degree for fun. We got some really smart people. I think I'm probably the stupidest person in the company, and I'd like to keep it that way. You have everybody else smarter than you are, you don't have to work as hard. We've got some very bright people underwriting this business. As I talked about earlier, the recognition of us being a true global reinsurer, that expertise is being recognized by the marketplace.
This has been a real surprisingly large source of profits for us over the years and may it long continue. Lloyd's, long-term growth opportunity. When we started at Lloyd's, we said we didn't really want to go out and buy a syndicate. People bought syndicates, and the cost was substantial. We bought a managing agency, and then we started our own. We were very proud of our culture, and we want to have our folks over there. A fella named Ross Curtis, who's one of our top underwriters, and by the way, if you look at the pedigree of our underwriters, Ross' claim to fame was a philosophy degree from Edinburgh. John Paradine, who's one of our top underwriters, who's now down in Singapore, used to be a rock performer in Dubai.
We felt like if he was good at music, he could certainly handle reinsurance. One common thread is they're all bright, but not everybody came through the actuarial ranks. At Lloyd's, we said, look, we're going to just start off, do it our way, go slow and steady. I mean, slow and steady. You can see pretty rapid growth there, but that's a huge fishing pond over there. The question comes up, when do we think we're going to make some money? Well, we're getting pretty close to that. I mean, right at breakeven-ish. Over the coming decades, this will be a significant source of income for the company. I'm very pleased with the team that we have over there.
Another thing that we like doing, we like having offices in different parts of the world because not everybody that's smart is in Bermuda or North Carolina or even New York. There are actually some smart people in London or Dublin. We're going to find out there's some smart people in Singapore. It gives us an opportunity to throw a wider net to attract talent. I'm real pleased with the team that we've got there. Ventures, expanding the franchise. Aditya Dutt carries 4 cell phones with him now. He doesn't, but he probably should. Everybody's talking about third-party capital, we've been at third-party capital going back to 1999. The main thing that Ventures does is it sells the RenRe soap, he's got good soap to sell, I think he's got a pretty easy job.
I say that it is hard to match up capital with risk. For example, the State Farm relationship at TLRE, that's been a marvelous relationship. They are terrific partners, that is a long-term marriage. We write international reinsurance on behalf of Top Layer Re. We own the company 50/50 with State Farm, they provide an aggregate stop-loss for about $3.9 billion above that. That capital, we match that capital with large buyers of reinsurance that need top layers where they can be certain of recovery. That's a great way that we match up good long-term capital with very meaningful long-term needs of the clients. We typically can get above-market terms on that because somewhat our reputation the reputation of State Farm the certainty of collection of claims.
We also, if we have strategic investments, we would do that through Ventures. An example of that would be down in Florida, we own 25% of the Tower Hill Group, for example. Or if we decide we want to make an investment. Occasionally, we will invest to help a startup company get started, hoping that they will develop and be a meaningful client for us in the future and that we'll make a couple of bucks. Then we have RenaissanceRe Advisors that we have that help solve complex problems for people, primarily in the energy and public utility sector. These guys are highly regarded, they win a bunch of awards, too. Managed risk capital. Right risk, right capital, right time. Yeah, staying on that theme a little bit. A fair amount of people have started these sidecars.
What we'll do, you have DaVinci Re and Top Layer Re that are very long-term players. There might be a specific need in, say, Florida, typically, where Florida just chews up capital. It's a high-risk area, we have matched up several times now with Starbound and Tim Re III, where we've matched up more short-term capital. Year at a time, the client knows that capital's only going to be there for one year may or may not be there next year. We may dissolve it. The capital that's providing the capital knows it's short-term. You don't ever want to get short-term capital matched up with a long-term need, you need to make sure that everybody understands what the other party is interested in doing here. RenRe, you got public investors that invest in us.
You take DaVinci Re, that could be pension funds, endowments, financial investors. It could be clients that invest in DaVinci Re. You might have noticed that our ownership with DaVinci Re has gone down a little bit over the last 18 months. The reason for that is we've just had some terrific investors come along, people that have come to us, also people that we've sourced that we think are very good long-term players. Then we have Top Layer Re on the right, where there are only two parties. So we call that a bilateral agreement. Then the sidecars are typically the two types of capital in the middle.
We also have something called CPPs, which are clients of ours that have enjoyed doing business with us but think we have a pretty good business and they said, "Gee, I wouldn't mind being on your side of the deal." And those are people that provide the CPPs. They're kind of like a quota share. They're notional quota shares where people say, "This is how much I'm willing to place a bet." And that's very helpful for us and has become a pretty significant source of capital. Okay, history of our joint ventures. So you can see with Top Layer Re, we started that back in 1999. We also did some work with OP Cat, which was a sub of UPS back in the year 2000. You can just see these march along.
Recently, we've had Upsilon Re One and Two that have worked out quite nicely for us that's specializing in writing property cat retrocession. Capital and investments. On the left, this is our capital structure, and when we say capital structure, what capital are we bringing to bear to solve problems for our clients? The part of DaVinci that we don't own is the redeemable part. You come down, we have an undrawn revolver, we have debt, we have preferred equity, we have common of a little over $3 billion. So we have total capitalization of about $5 billion. But as I mentioned to you before with the backing of State Farm and Top Layer Re, that's roughly another $4 billion. And this doesn't take into account the value of our property cat retro over the CPPs.
We play ball as if we've got about $10 billion of capital, when in fact we only have $3 billion of common equity. We've historically done a good job on reserving. I was very pleased. We were put in an awkward position after Sandy because we had an earnings call pretty soon after that. We put out a notice. We told folks that we would have a significant loss. We wanted to put them on notice. But we didn't say material. There's this finance lingo about what these different things mean. 'Oh my gosh, how big was your loss?' So we got the troops together and looked at it and said, "Do you think it'll be contained in the fourth quarter?" Everybody crossed their heart, hoped to die. "Yeah, we think we can." We had a little bit of margin in there.
We stuck our neck out and said, "It'll be contained in the fourth quarter." We found out later that some people got telephone calls like, "How can they know that so quick? Man, they're going to blow through it." Somebody very kindly said, "This is RenRe, and if they say that, you can take it to the bank." I remember my friend here, Mr. Jay Cohen, on the call said, "I think it'll be contained in the fourth quarter." Jay said, "Neill, to be clear, will this loss be contained in the fourth quarter?" I said, "Yes, Jay. It will be contained in the fourth quarter." I said, "Boy, I sure hope it's contained in the fourth quarter." So far so good.
It has been, I think we've done a good job reserving on that as we've done on others. Now if you look at these two blocks, we've got case reserves, which is basically the reserves we have up that's based upon what our clients tell us those losses will be. Then on top of that, we have additional case reserves where we think maybe our clients are being a little bit too optimistic and also IBNR. It really doesn't matter too much how you break those out. We don't have just big bulk IBNR. We go down, we look at individual deals, we model them. We go back to the individual case and figure it out. We think we're adequately reserved, and fortunately, historically, we have been. Active capital management over time.
You can see when I was on vacation, the guys went out and diluted shareholders by raising capital. When I was here, we bought shares back. I like buying shares back since I've been back in 2005. Look at all the bars down here. I think we had somewhere around 75 million shares when I got back, and now we're down to what, 42, 43 million, something like that. Now all of our shareholders own more of RenRe, we have bought those shares back, I think, at an attractive price. You can issue shares. I mean, the guys did a good job. They had so many opportunities to issue shares, but I am very loathe to do that. I don't like giving away part of our company.
This has been part of our strategy since we started the company way back when in 1993. This will continue over time, I would imagine. Investment portfolio, pretty boring stuff for the most part. We do have other investments that include some private equity and some cat bonds, et cetera. For the most part, we need to be liquid and short term and highly rated because you never know when we're going to have to pony up some money. Nothing terribly exciting about that slide, fortunately. This looks like we're coming to the conclusion. Read those. I don't know if we have to say that again, that again, that again, that again, that again. I think that's all I need to say. I think we've got a great company. We're in a great position, terrific employees. With that, I'll open up for questions.
Question about if you look out over the next five or 10 years, I think right now your fee income is roughly $140 million, $150 million a year. If you were to say in a most likely scenario, five or 10 years from now, do you think that number will be meaningfully higher? If so, do you think it will come from the permanent sidecars, temporary sidecars, or ceding?
That's the best question I've heard in a long time. It's a good one. You've done your homework. I can't legitimize your number there. It doesn't sound wildly off, and I guess a few years ago, we made that number public. We don't make a habit of doing that, but it is meaningful to the returns of the company. I would guess that it will be higher over the next five or 10 years. As to the mix between the near and the long term versus the one-year sidecar sort of thing, my hope that it would be more along the lines of permanent type arrangements, like a Top Layer Re and DaVinci Re. I think that's more valuable to our clients. It's harder.
The ramp-up time for those relationships take a while, but if I had to guess, I would guess that it would be more meaningful and it would be more of the permanent type partnerships.
Neill, I did have a question. You talked about this trend of alternative capital coming in. It feels as if it could be a big opportunity for you guys to use some of this capital that might have a lower cost of capital than you would, freeing up capital for you to do other things, like buy back stock.
Right.
Have you increased your use of third-party capital as far as ceding risk to those parties?
Yes. It sounds like the Martians are landing here. I guess I'll have to answer that question. Yeah, it's according to what time period you look at. First of all, another good question, Jay. You always have good questions. I would say a quick digression is one of the things that sets us apart is we get questions like, well, what do you wish? Don't you wish this, or wish that? We don't wish anything. What I wish is that no matter what comes along, we can handle it. We play the hand that we're dealt. We could sit here and say, "Oh my gosh, third-party capital's coming here. They're going to take our business away. Woe is me," which is not going to happen. We say, here's third-party capital. It's interested. How can we be involved?
Well, we can be involved by having them come in and be investors in our various relationships, or we can buy reinsurance from these folks. Or another area that I think we'll be doing more of is being a transformer. People like doing business with RenRe. They know we pay the claims. If there's new capital that comes along, it looks like good capital, but how do we know? They're new. They might drag their heels in terms of paying their claims or pull out some technicality. A lot of the third-party capital, because underwriting is very difficult to do, to underwrite indemnity protection is hard, and the clients like it because there's no basis risk. You've got the seller or the new capital says, "Well, I'd like to provide industry loss warranties because I can get my head around that.
I can guess how often I think a $20 billion Florida event's going to happen, but I can't guess how often that deal's going to get hit." We can, and we can be a transformer for that. What you got third-party capital comes in, and they might offer $100 million of capital on an ILW basis. The client wants to buy indemnity. We'll sell indemnity and out the back door use this as our collateral, and we'll get a margin for our expertise in taking the additional risk. We will see more of this, and we will utilize more of this third-party capital. Our retrocession buying is not finished for the year. We've done some. My guess is there will be some opportunities that will come up to help us make our book more efficient over the coming months.
yes, I still think Hurricane Sandy is going to be contained in the forecast.
Great. We got about a 10-15-minute break. Grab some lunch. We have MetLife coming up in about 15 minutes. Thanks.
Thank you.