Okay, everyone. Thanks for coming and soldiering on as the day progresses. We've got our last insurance company of the day, RenaissanceRe, and we've got two members of the senior management team here. Jeff Kelly, CFO, who's to my left in the orange tie, and then Aditya Dutt, who is in charge of RenaissanceRe Ventures, which is all of the sidecars, the energy portfolio, and some other things which I'm sure he'll elaborate on. Without further ado, I'll hand it off to them, and we'll follow up with some Q&A down here if there's time. There's also time for a breakout up in the Holmes Room on the fourth floor afterwards. Jeff?
Thanks, Greg, and good afternoon, everybody. I think the way we're going to divide up this presentation between Aditya and me is that I'll give a high-level overview of the company as well as a general description of our business strategy, and then Aditya will give you a bit more detail on our ventures business, which I think as you'll see is a key component of our company and our business strategy. Before I do, please take note of the safe harbor statement covering forward-looking statements on the screen here, and the fact that the presentation does include some non-GAAP financial measures.
Okay, just in terms of introduction for those of you who are not familiar with RenaissanceRe, either not at all familiar or are not as familiar as you'd like to be, RenaissanceRe is a leading and global provider of reinsurance and insurance coverages through essentially three main underwriting units of the company, our Property Cat unit, our Specialty Reinsurance unit, and then our Lloyd's Syndicate in London. RenRe was established in 1993 in Bermuda after Hurricane Andrew. Although we fluctuate a bit from time to time, the current market cap is about $3.9 billion. The company has achieved an operating ROE that's averaged 22% since our inception, and our tangible book value per share plus accumulated dividends, which is the primary financial metric upon which we focus, has grown at a compound annual rate of 20% since inception of the company.
The company possesses very high financial strength ratings from S&P, Moody's, and AM Best with stable outlooks and also importantly, an excellent ERM rating from S&P. These are very important to our business and business strategy. Just looking at our business model at the highest level, our mission is to produce superior returns for our shareholders over the long term. We are not at all confused who we work for. Our vision is to be a leader in select financial services where areas where we believe we understand risk extremely well. We intend to fulfill our mission and vision by pursuing an identity of being and being recognized as the best underwriter in the world. Admittedly, that's a pretty presumptuous statement. It's not meant to sound arrogant or to be full of hubris.
It's really meant to reflect an aspirational goal for ourselves. We can't rely on past successes to achieve success in the future. Our competitors are getting better all the time. We have to constantly build and hone the skills that allow us to underwrite risk better than our peers. To keep us focused on what we're good at and what we're not good at. Businesses and activities where underwriting is the differentiator. We are not looking to be in businesses that are heavily process-oriented or that require large-scale management of direct sales forces or of claims personnel. We are a small company that is focused on bringing very complex risk solutions to our clients. Our strategy to achieve the mission, vision, and identity is to employ an integrated system of competitive advantages to match risk and capital.
When we say we aspire to be the best underwriter, that implies a broad-based expertise in nearly everything we do. You can't be the best underwriter without a consummate expertise in risk analytics, modeling, finance, marketing, and so on. This is how we think about our business and our competitive advantages. In each annual report, we try to write down our thoughts on a particular subject we think should be of interest to our shareholders. In our last 3 annual reports, we've focused on what we believe are 3 key competitive advantages, superior customer relationships, superior risk selection, and superior capital management. I suspect we're probably best known for the second, superior risk selection and portfolio construction. I think in a sense, one of the ones that is least well understood is the importance of superior customer relationships.
In pursuit of being the best underwriter, we believe the only way to do that is by operating these competitive advantages as an integrated system. Having the best cat models or underwriters in the world doesn't matter if you can't source the business that you want to underwrite. Similarly, our reputation as a firm where we can share risk, weather, and underwriter insights to our clients, as well as our ability to bring efficient capital to bear enhances our ability to source business. Capital providers want to be aligned with the folks that can construct the best portfolio. All of these work together in harmony. Deploying them as an integrated system is really the way we achieve superior financial results over time. As I mentioned earlier, by premium volume, we're primarily a property cat specialist.
We're specialized. We've always been specialized because we feel we need to understand risk better than anyone else in order to deliver superior financial returns over time. We write most of our reinsurance business through our reinsurance subsidiary in Bermuda, RenRe Limited, where we underwrite cat and specialty business. We got involved in Lloyd's in 2009. This is a small but growing area for us. While we have strong expectations for our Lloyd's unit, we're still building our foundations in this business. We've moved one of our senior-most underwriters in the company there to build the team and run that unit so its growth reflects the strategy of the company.
I'll let Aditya talk about our Ventures unit in more detail, but the principal role of our Ventures unit is maintaining ties with third-party capital providers so that we can optimize risk and capital over time. As I said, our mission is to provide superior returns to our shareholders over the long term. This chart shows growth in tangible book value plus accumulated dividends since our inception. The bars, and particularly the green bars, show the growth in tangible book value per share, the gray accumulated dividends, and then the solid line is our share price. Although we can't control the share price much as we'd like to, we feel we've delivered strong returns to our investors since our inception.
Our business is a volatile one, we think as long as investors understand that and are willing to experience some volatility from time to time, and they do, they will be handsomely rewarded over time. I think if you looked at our shareholder base over time, we've tended to have a very stable institutional shareholder base over a relatively long period of time. We think our investors understand this. This chart shows the operating return on equity for RenRe and some of our peers. In the bars, it shows our own operating returns on equity since 1996, I guess here, and it shows our peers on the solid line. We frequently say that on average, reinsurance isn't a great business. I think the peer group average here probably conveys that adequately.
The trick, as we always say, is not to be average. Again, that's why we feel we need to pursue the identity of being the best underwriter of the risks we write. We've generated a superior ROE versus our peers since inception. In high cat loss years, such as 2004, 2005, 2008, and 2011, we have tended to underperform the group, and that's because our book tends to be concentrated in property cat risk. However, we manage our book to limit the downside in bad years, which I think you can see also, but really outperform when conditions improve after big events.
That was the case in the years after big events such as 2002, 2003, 2006, and 2007, we're hopeful that that's the case in 2012. I think the other thing to take away from this chart is that we rarely have an average year. We expect some type and level of cat activity based every year based on long-term averages, but it rarely works out that way. In the recent years, 2009, we saw virtually no cats, then obviously a mere two years later, 2011 was full of them. Let me shift. That's our high-level overview of our strategy and how we think about our business broadly.
Let me spend a few minutes talking about our three underwriting businesses here in the next few slides. The key to our business and underwriting, we believe, is to be disciplined about it over time. I know a lot of people say that, we certainly do, but we believe that is the key to our success over the long term. Our underwriters don't have premium goals. We write as much good business as we possibly can. Our risk-taking philosophy is to play the hand we're dealt as well as we possibly can. We can't make a soft market into an attractive one. We take our foot off the accelerator when conditions soften, and we put it on our foot on the accelerator hard when conditions improve. That sounds really simple, it's not, and it's been a cornerstone of our success at RenRe for many years.
At times when there are large or numerous cats, some reinsurers tend to pull back on their exposures a bit. I think to some extent, that's just plain human nature. At RenRe, when a market hardens post-event, we generally write strongly into it because it's the only way and our key to recovering the book value that we lost. In fact, as an example, in the first quarter of 2012, we made all of the book value that we lost in 2011. From the chart here, you can see that after 2001, we increased our activity and increased our capacity in our joint ventures and grew our cat and specialty books rather strongly. In 2010, we made the decision to sell our insurance business here in the U.S. when it didn't appear to us that we'd be able to generate adequate returns in that business.
As I said earlier, reinsurance is a tough business. The trick is not to be average. We're fortunate to see almost every property cat deal that comes to market, and we underwrite each one of them. We think about them in this way. We bucket them in three groups. The first group is those that we believe have an acceptable return over and above our internal return thresholds. The second group is above zero but below our return thresholds. In the bottom bucket, we think flat out have negative expected returns. Obviously, we focus our origination efforts and our portfolio construction on the bucket with acceptable returns, and we want as much of this business as we can possibly get. Admittedly, this reflects how we look at the business.
Other people may look at the business differently, and indeed they do because this business all finds its way onto somebody's books. Firms can underwrite these deals differently or look at these deals differently from several different aspects. One could be that they just don't share the same view of risk that we do. That doesn't make us right and them wrong, but they have a different view of risk. They may also have a different engaging in one of these deals may be because they have a different portfolio construction on a marginal basis. This may look attractive to them and not to us because we're so focused on the cat business. People tend, and I think probably not surprisingly, to think of us as a property cat specialist, and in some instances, nothing more.
We've actually done quite well as a firm over the years, writing various classes of specialty reinsurance. At RenRe, specialty reinsurance is everything that's not property cat. Because we write such a large property cat book, it's very capital efficient for us to write specialty business that's not correlated to that book. We look at that as capital creating to support our cat book, and it tends to score very well from a marginal return standpoint. Our specialty book targets lines that tend to have high severity, low frequency loss profiles very similar to our cat book and leverages our expertise at loss modeling and risk management. For example, we wrote over $400 million of premium at the peak in 2005 and pulled back to just under $100 million in 2009 when competition increased in that sector.
Overall, this book's generated $2.5 billion of premium since inception and over $1 billion of underwriting income. As I said, although we're not known for this, it's been a very good business for us. We have several core partners here that know we are ready to meet their capacity needs when circumstances warrant, but when it doesn't, we reduce our exposure in this area. We have a great team and a great platform in place, and I think that allows us to ramp up our activity significantly should conditions warrant. Finally, we entered the Lloyd's market in the second half of 2009 by establishing Syndicate 1458 and acquiring Spectrum Syndicate Management. As I said earlier, our goal is to be the best underwriter in the world, but not all of the business in the world flows through Bermuda.
We thought this was a natural expansion of our access to business. Lloyd's allows us to see business that we were not seeing in Bermuda, and indeed, we have seen business in Lloyd's that we weren't seeing in Bermuda. Also, Lloyd's has licenses to operate worldwide to allow us to enter markets that we wouldn't otherwise have the capability to enter. We believe it's been a disciplined expansion of our franchise, and given the importance of underwriting culture in our company, we chose to build our team from the ground up. As I said, we moved Ross Curtis, one of our senior most underwriters in the company there, to build that team literally from the ground up. At this point, we're satisfied with our progress where we are, and we expect to continue to find selected opportunities to take advantage of there.
That's a description of our strategy in a nutshell. A key component of that strategy is matching risk and capital and maintaining access to it over time. It's a primary role of our ventures unit. With that, I'll turn it over to Aditya to describe that activity.
Thank you, Jeff. I don't see a lot of coffee refills here, so I'll try to be quick. Ventures includes three main activities, and I'll go through each one. One is our managed risk capital business, which is really our, as Jeff was saying, our joint venture business, where we manage capital on behalf of third parties in order to write reinsurance. That's our core activity. That's where we spend most of our time day to day. I'll go through that in some more detail. That is our core activity. We started it in 1999. We started a company called Top Layer Re, which was a joint venture with State Farm. That was sort of the genesis of the business. We've built it up over the last 12 to 13 years to include many more ways to manage outside capital.
The second thing we do is strategic investments. The biggest part of this portfolio is really, think of it as almost as a portfolio of private investments plus cat bonds, where we provide capital to our customers in forms other than reinsurance. One example of that is investing in the debt or equity of our customers and forming a strategic relationship with them. Some of you might have seen in 2003, we invested in Platinum pre-IPO, held those shares really until 2011. That's one example of some of the activities we do. There's no bucket to fill. That's purely opportunistic. The third thing we do in our group is RenRe Energy Advisors, or REAL. Really what this unit does, it's Houston based, it provides weather and energy risk management solutions to the energy industry, energy and utility companies worldwide.
I'll spend some time talking about our core business, the joint venture business. You'll see on this chart, I'll introduce you to a couple of companies we manage. The way to think of us is we've got a public company, which has an operating subsidiary underneath it called RenaissanceRe Limited. I'll just stick with Cat for now. Around it, we've got a series of companies that either write alongside or reinsure RenRe Limited or DaVinci. Our evergreen or long-standing franchise plays, the first one all the way on the left is DaVinci. We started DaVinci in 2001. It was us and State Farm. It was right after 9/11 when we felt our clients needed the capacity, but they didn't want to concentrate on one counterparty.
We created a separately rated company so the client could deal with us, but they got two separate pieces of paper. DaVinci always goes side by side with RenaissanceRe on property cat business. We own a substantial stake in it, but really it's funded by outside capital. I'll review what kind of outside capital invests with us. This is a balance sheet we partially own and manage 100%, and that's $1.4 billion. Top Layer Re, I spoke briefly about. This is, to me, one of the most innovative structures in the cat market today. It writes only non-U.S., high-layer non-U.S. business. As I said, it was formed as a joint venture with State Farm. The capitalization of this company is a small sliver of funded capital, and above that, a $3.9 billion reinsurance contract from State Farm.
We can write $4 billion of cover for international clients, but with a small funded equity piece. It's very capital efficient and very ratings efficient for us and State Farm. It allows us to really punch above our weight in the international market. Top Layer Re is Double A plus rated, one of six or seven carriers in the world with that kind of rating and the ability to write huge line sizes for our international clients. The third thing we do under the other vehicles bucket is respond to certain market dislocations. A good example is after Katrina, when the Atlantic hurricane exposed market improved, we took as much as we could onto our own balance sheet, onto DaVinci.
Because our clients still needed capacity, we formed another vehicle, which reinsured us so that we could have more capacity to offer on an outwards basis. We've done six of these deals since 2005. The latest iteration was announced about two weeks ago. That's Tim Re III, which is a Florida-only deal. I think we're pretty unique in, you look at the entity called Renaissance Underwriting Managers, which is the dedicated unit that manages all of these companies. One of the principles that we operate on is right risk, right capital, right time. Jeff spent some time on this. You'll see our various balance sheets down the left and what types of investors have partnered with us on the right. The point of this is not all capital is appropriate for all risk.
What we try and do is segment that pretty carefully. You'll see, for instance, pensions and endowments like DaVinci. A hedge fund may like a sidecar, and a client may like CPPs, for instance. Really the overriding principle here is not all capital is suitable for all types of risk. What we try to do is source the right type of capital to finance the right type of risk. I won't spend too much time on this page. This is just our track record of forming joint ventures over time. What you'll see if you were to map market losses, and following on some of Jeff's comments, if you were to map market losses and market-changing events on top of when we formed these vehicles, you'll see they track pretty closely.
1999, Top Layer Re was after a very busy season of storms in Europe. 2001, obviously post 9/11, 2006, 2007, obviously after KRW, 2012 after the events of last year. To give you a flavor for sort of what's our perspective on the market, there's been a lot of chatter in our market about alternative capital, and a lot of people are talking about it. From our point of view, we've been at it for about 10 years. A couple of observations on the market. Capital is coming in faster than we've ever seen it come in. It's got more options. Underwriters, risk-takers like us are becoming increasingly savvy, and clients are becoming increasingly savvy. We shouldn't expect that whatever we did yesterday or 10 years ago is going to apply in the future.
I've put up a graph and I encourage, everyone should not get hooked on the numbers, but what it's meant to show is that alternative capital or capacity from non-traditional sources, non-public company sources, is increasing in size. The comment last week by one of our largest producers, Guy Carpenter, $35 billion of worldwide cat limit was placed in non-traditional reinsurance form. About $250 billion is the total cat limit placed in the world. That gives you a sense of the size. How do we look at that? We certainly don't ignore it. As Jeff said, we have a healthy respect for our competition. We have a healthy respect for innovation in the market. What we are focused on is serving our clients.
If our client needs capacity in a certain form, it's our job to try and provide it, and to do it in a pretty capital efficient way. That's really what the focus of this business is. How do we make our capital sourcing as efficient as possible? We don't have any strategic directive that we must grow in alternative capital. All we care about is how could we best serve our customer and how can we create the best return for our shareholders. That's really the genesis of all the vehicles that we've created over the years. Go through the other major business that we run out of our group, which is RenRe Energy Advisors. Just on the slide, there's a brief overview of the structure. What we do out of this unit is really provide help our energy and utility clients worldwide.
That's really U.S., Europe, Japan, Australia manage their exposure to weather. Commodity producers or energy companies are sensitive to weather to the extent they need to manage that exposure over the summer or the winter. We help them do that. We help them do that in derivative form. Like the reinsurance business, we want to accept weather risk onto our books. We don't speculate on commodities in this unit. We take risk against weather. This is an entity that's based in Houston, as I said. It's got a staff of about 30, which includes traders, marketers, risk managers, finance, accounting, et cetera. The distribution is direct to our customers, so we have a lot of relationships directly with our clients, unlike the reinsurance business, which is really broker market for us. Guarantees are provided by RenRe Holdings, which is the A+ entity.
What I'll say about this is, it is a fairly tight box that we operate in for REAL. We've got a limit on the VaR, both on a daily basis and a seasonal basis. We've got a limit on the guarantees that can be deployed against our obligations to our counterparties, and everything is managed on a nightly basis, monitored and managed on a nightly basis. This is not an unlimited exposure that our balance sheet has to this particular unit. It's still growing. We've had it about five years from startup, and it's still a growing business for us. Just to wrap up, I think Jeff's touched on a lot of these points. We seek to be a leader in the businesses that we operate in, which are not far and wide. It's property cat specialty, Lloyd's, and our Ventures business.
We operate on pretty simple principles. We've got to see all the risk that's out there. We have to have an ability to select it. We have to have the ability to finance it efficiently. That's really what the architecture of our company is designed to do. We manage our assets efficiently, and as Jeff said, our culture of risk-taking is paramount within the company. With that, Greg, do we have time for questions, or should we go?
I think we should press on and go out to the Holmes Room. We're out of time.
Okay.
It's on the fourth floor. We'll all go up there now.
Okay. Thank you everyone. Thanks a lot.