When you come to these conferences, certainly when I listen to people present, I am always looking for a company that sounds a little different than the others, that presents themselves in a unique way. I frankly think Selective falls into that category, and I think the next company does too. RenaissanceRe just sounds and feels different than other reinsurance companies. Neill Currie, the CEO, is going to present, and you could blame him for this because he was one of the founding members of this company that goes back almost 20 years now. To talk about what makes them different and to give us a glimpse into the future, I will turn it over to Neill Currie.
Great. Jay, thank you. How is the volume? Can you hear me? I want to look and sound different. I got cowboy boots on, so maybe that is a little different. Many people would say I sound different, a little bit of a Southern accent going on there. Okay, here is our story. Fascinating slide about Safe Harbor. An overview. As Jay mentioned, our company was formed in 1993 in Bermuda, as a result, frankly, of Hurricane Andrew and the catastrophes that had happened in recent years. There was a huge supply and demand imbalance. We have become, over the years, a leading global provider of reinsurance, insurance, and related services. Our market cap is about $3.7 billion as of February 10th, 2012. Crazy world we live in, isn't it, in terms of how market caps can bounce around so much.
We had an earnings call the other morning, we popped up to $79.11 for a brief moment, flirting with 80 bucks. I look forward to going north of 80 at some future date. When we started back in 1993, I look at that market cap figure, we started with $141,200,000 of capital. I was the number two guy. The CEO put in $1 million bucks. I put in $200,000, which for me was a fortune to put in, and we got the ball rolling. Since that time, we have been fortunate. Our operating ROE has averaged 22%, and tangible book value per common share plus change in accumulated dividends has grown at a compounded annual rate of 20% since we got started. The next line there says total shareholder return has been good compared to the S&P and the S&P P&C Index. We have got good financial ratings.
We want to keep them that way. We have got a double A-minus from S&P, A+ from AM Best, we have had an excellent ERM rating from S&P, I think since they started doing those ratings. I look back at this slide, I think if you fall asleep later, that will be all right, but I will catch you. I will maybe ask you a question if I see you nodding off. This, I think, is the most important slide we have. It sort of captures what we do, and frankly, I think what any insurance operation should do. If you can execute properly in these three areas, superior customer relations, superior risk selection, and superior capital management, you have got a really good operation. If you only do well on one or two of these, you are not going to do that well.
We've got a young fellow that's been with us for about two to three years now and helps us on strategic planning. He's an ex-consultant with Bain, I think. Smart young man. He's termed these the three superiors, and I like that. It's got kind of that sort of religious gravitas about it, and they really are important. Superior customer relationships. I think when people think of RenRe, they think of a bunch of smart guys and ladies. We've got a bunch of quants, bunch of Ph.D.s. We got brains all over the place. People think of us as good underwriters, thank goodness. Really, superior customer relationships, it's the first thing you need to do. You need to get the business coming in the door.
You need to keep the business coming in the door. I think this is one of the least appreciated advantages we have at RenRe. One of the things that we do is, well, let's go back to inception. Here we were after Hurricane Andrew, huge supply and demand imbalance. If there was a program that came out and it was a four-layer program and the first layer was the best layer, you could say, "I want 50% of that layer," and you'd get it. The customers really were in dire need of help then. From the very beginning, we tried to be helpful to our customers, and it's evolved to helping them understand their risk. Certainly in the early days, basically to be there with capacity that would pay. We would underwrite.
We would say, "All right, we really like the first layer, but we'll take some of the second, some of the third," because they were great layers as well. We really wanted to be helpful. I think we've been seen over the years as being helpful to our clients. When we come in and have a meeting, we try to help them understand the risk. You've heard about these model changes like RMS v11. We have a whole team of people that will go and look at these model changes. We have our own models and spend thousands of man-hours trying to understand these model changes. When our clients come in for a visit, we try to help them understand their catastrophe risk, maybe some things they could do to improve their book of business, help them understand the modeling change, help them put together a program.
If a broker and their client come to RenRe to put a program together, we will give them as many options as they want. We try to be the first one back with a program quoted for them. They can rest assured if we quote a program for them, it's going to get done in the marketplace. We have a historically very high rate of our programs being filled out. In fact, I don't recall ever having a program not filled out that we led. Over the years, we've paid claims extremely quickly. We work very hard at the customer relationship, and it pays off. We get a lot of one-off covers that are placed with us 100%. People come to us very early in the placement of their program. Superior risk selection is we've got our own model. We call it the REMS model.
We use all the publicly traded, publicly accessible models, but we have our own. We have, I think, a really terrific team of underwriters that have worked together for a long period of time. We have analyst modelers. They work together. In some organizations, they'll put the modeling folks sort of over in a silo where the modelers and the analysts and the underwriters won't interact that often. If I were to blind 10 folks up here on the stage and you could ask them all questions, I would defy you to pick which one was the modeler, which one was the underwriter, which one was the analyst except maybe the underwriter's a little bit older than some of the rest of them. They all have the same mindset. They work together. We always have a second pair of eyes rule.
We have two underwriters work on a deal together, not as a policeman, but they'll actually help make the deal a better deal. We have a big underwriting trading floor. When we first started the company, Jim Stanard and I took an old conference room table, cut it in half. He had one half, I had the other half. We sat five feet from each other, and we started off in that trading room environment thinking not a lot of offices is a good idea. In our operation headquarter in Bermuda, pretty big space. We have two offices. We have mine, which both doors are open most of the time, and the HR person. Everything else is an open floor environment and a trading environment for the sharing of information. The third one, superior capital management.
That's not just being able to borrow funds at an inexpensive or a competitive rate, but it's a lot of different things. It's having multiple channels, multiple levers, in terms of access of capital. We view retrocession buying as another form of capital. We have something called CPPs, which are quota shares with other insurance or reinsurance companies. Over the years, we've had many of our clients say, "We like the way you operate. We wouldn't mind being on your side of the transaction." We invite them to come in with us as reinsurers of ours, and we've got a stable group of people that have offered us capacity over the years on a proportional basis. I've got a slide I'll show you a little bit later in more detail of accessing third-party capital through joint ventures and what's known as vernacular sidecars. The three superiors.
Strong franchises. Reinsurance, pretty innovative company. We named Top Layer Re I'll tell you about. Very innovative name. They write top layers of coverage. Here we've got in the reinsurance operation, cat reinsurance, and things that aren't cat are called specialty. More innovation. We have a Lloyd's syndicate, 1458. We decided to go grow our own syndicate instead of buying another syndicate. We like the idea of having our own folks growing from within where we can do that where possible. We bought a small Lloyd's managing agency, and we started off on our own about two and a half years ago, and we've hired some great people there that have become part of RenRe. Some of them are childhood friends of some of the RenRe folks, people have known each other for a long time.
We took one of our top underwriters from Bermuda and put him in charge of our syndicate at Lloyd's. Ventures does three things. It manages our joint ventures on the cat side. We have some strategic investments, and also we have an energy advisory firm called REAL. Ventures is the company, as we put it, that sells the RenRe soap, and there are other organizations that have joint ventures, but they don't have the RenRe soap. We think the Ventures guys have it made because they get to sell the RenRe soap versus something else. Okay. We've done pretty well over the various market cycles.
If you look at this bar chart down on the left here was 1993 when we first got started, this is the growth in tangible book value per share over the years, as you can see, it's grown substantially over the years. Had a couple little blips along the way. 2005 our tangible book value per share and accumulated dividends went down. KRW was in that year. Oddly enough, look back at 2001. When we had 9/11, horrible event, I think people were a little surprised that a company like RenaissanceRe just didn't have a really bad year like everybody else. Well, this gives you a little bit of insight into our company. The reason we did so well compared to some other folks back as a result of 9/11 is our underwriters, we were concerned of an accumulation of earthquake risk in New York City.
We said, "We don't want to write any more business than this in New York in case there's an earthquake." Now, most of you in this room, I'm sure quite a few of you live in the New York environs. I don't think you wake up every morning worried about the earthquake risk in New York. Maybe you worried last year about the hurricane risk in the New York area, but you weren't worried about earthquake. We really pay attention to tail events. Even though we're in a risky, volatile business, we want to make sure that when really bad stuff happens, that we're one of the companies still standing to be able to continue to trade. In fact, this year I feel good.
It's been the first or second largest year in cat that people can think of, it's according to who you ask as well it's the worst or the second worst. For the year, our tangible book value per share, plus accumulated dividends, was down less than 2%. I think that's pretty good for a property cat specialist when you have all this bad stuff happening around the world. Again, our tangible book value per share went down in 2008 as a result of some of the hurricane activity and the financial crisis, we were down just a little bit for 2011 for reasons just mentioned. Okay, this takes a minute. This is kind of a busy chart. This is a track record of our financial performance or outperformance, if you will.
The green bars show the ROEs that we had in a given year. For example, it looks like 1996, we had a little bit over 30% ROE for that year. If you look at the blue line with the diamonds on it, that's the peer group results. Our peer group returned, it looks like about 15%. If you look year by year across this timeframe from 1996 to 2011, we go along, it looks like in virtually all the good years we outperformed. We, as I say, did pretty well in the World Trade Center year compared to the industry. 2004 was a tough year for us. We had all the hurricanes that hit Florida. We are pretty large in Florida, have been for many years.
To add insult to injury that year, we had bought a fair amount of retrocession cover, but we bought it at a level where none of these losses triggered our retro. We paid the money out for the retro and then were not able to recover. We still made money for the year. It just wasn't a terrific year. Of course, in 2005, KRW, the peer group did a little bit better than we did in 2005. I think one of the years, I took over in 2005. It's an interesting time period. Welcome to the club. Here comes KRW and some other things coming your way. We had done a lot of work on models, I think, and understanding risk.
We had come to the view in 2004 that we thought we were entering a period due to the warmer waters in the Atlantic, that we were entering a period of where there was going to be more frequency of severe events. We didn't know that we could charge as much as we thought we would like to have in that market environment. As a result of the losses in 2004 and 2005, a lot of people said, "Wait a minute." This was almost similar going back to Hurricane Andrew. We don't understand this game. Where'd all these losses come from? To us, the loss activity in 2004 and 2005, those losses were pretty much what we would expected to us from losses of that size.
It really hardened the market, and a lot of our competitors either put the brakes on or went looking for the exit door, we said, "No, we understand the risk. We're not surprised by this loss activity. We understand. We have our own model." We wrote quite a bit of premium in 2006, and also, we were fortunate to have a good return in 2006. Going back to the strong customer relationships, we typically are the go-to market after bad stuff happens. We don't get surprised. We've been fortunate not to be surprised, and we're ready to stand up. Sometimes stand up and renew a cedent's contracts. Sometimes the market gets soft. If the market's soft, if it goes below our pricing, we reduce and sometimes get off of accounts.
By definition, when that happens, our clients have somebody else willing to take the coverage. We're not leaving them when they need us, but we're there in the harder markets when they need us, and usually there's, well, in our view, there's pricing adequacy. Another bar chart. This shows you the various businesses that we are in and have been in. The blue-colored squares are our cat business. The green is specialty. Black is Lloyd's. The yellow is joint venture business, and the red is the U.S. insurance business. You'll note that in 2011, 2012, we're not in the insurance business in the U.S. anymore. We are in the insurance business in Lloyd's on an excess and surplus lines basis.
We decided after the years of being in that business that it was best to focus on some different lines of business, our core property cat business, and we like to solve complex problems. We like to go after business that's got some volatility, but we have rate freedom. A lot of the business we were writing in the U.S. insurance business was written on an admitted basis where there wasn't rate flexibility. Also, we wrote a lot of crop hail business in the U.S., and we thought that over time, that the profit margins on that would be diminished and that the people that would do the best in that business would be the people that had become large and were very good at managing their expenses and their operations. More of an operational skill versus an underwriting skill.
We sold that business in 2010, and I think that was a really good move for us. Everybody in the room here, we don't pretend to be Berkshire Hathaway, to be the one stock that you can just say, "Okay, we'll buy Berkshire Hathaway. Forget about it all. They're diversified enough." We know that most of you are trying to put together a portfolio of business. If you're going to look into our business, you might say, "Well, I want to find somebody that's in the property cat space or takes a low frequency, high severity business. I might want to invest in an auto carrier. Maybe I'll buy Progressive or 21st Century." You get to put your own portfolio together.
We found that by selling the U.S. insurance operations, it helped you understand better where we could fit into your portfolio. I think it's one of the reasons that we enjoy one of the higher multiples in our industry of market value to book, because we're understandable and some people think we're best in class, and I'm certainly very biased. I think we do a good job. Now looking at the green portions of those bars, you'll see that back in 2004 and 2005, the green part got pretty big. That was the specialty reinsurance operations. We had a good team then. We've got, I think, an even better, broader-based team. In fact, if I were to say, well, what are some of the things that people may not understand about RenRe? They may not understand the value of the customer relationships.
They may not understand how good a specialty team and Lloyd's team that we have. They are really bright, smart folks, and at the right time, they will contribute significantly to the bottom line of RenRe. We tend to be a little bit more opportunistic in that area. You have to wait until the prices get up where you need to be. If you look back at 2005, for example, we wrote about $120 million of workers' comp catastrophe business. Some people would say, "Okay, gee, workers' comp, that's casualty," but it was driven by a catastrophe event. The prices went way up after 9/11, and we have a very large book. Some people got involved and found that business to be attractive.
Some people, oddly enough, thought they were diversifying because it was a workers' comp, but the proximate cause would've been earthquake or hurricane or something like that most times. We reduced that business. We're very good at putting the accelerator down in good times and putting the brakes on in bad times. We reduced a book of business, $120 million book of business, I think, at a zero loss ratio. I think we have about $5 million of that particular line of business now. We will remain disciplined based upon the pricing dynamics of the business out there. I think we have another slide where we can talk about ventures a little bit better than this one. This is a slide that over the years we've found people are interested in.
If you look on the left, we get to see virtually every property cat deal in the world, and we bucket them and we keep up with all the information, whether we're on the business or not. Roughly half of the property cat business out there, you'll see on the left with the various bars, roughly half is an acceptable return. About 35% or 40% is a lower return, and 10% or 15% is a negative return. Guess what we encourage our underwriters to do? The good news is, because we've been around, we're a lead, we've got these good relationships, we get to play ball in that left-hand part of this graph. That's where we play. I think that's the thought I want to leave you with. You can see that recently in 2011, the acceptable return went down.
It was a little bit softer market. Acceptable went down, low return went up, negative return about the same. You can see in 2012, acceptable is up a little bit, and low return is down a little bit due to pricing changes and terms and conditions. Specialty reinsurance, I think I've already bragged about specialty enough earlier. This is just a graph that focuses a little bit more, gives you an idea of how much premium volume we did have back in 2004 and 2005. Disciplined approach, now we're starting to slowly grow that book again. We think we're starting to see some good opportunities. Nothing to write home about yet, but making some good inroads there, and we think the next couple of years could be interesting for us. The Lloyd's opportunity, about 75% of our Lloyd's operation is specialty insurance and reinsurance and about 25% catastrophe.
I said, culturally, it's the same type folks. We have people going back and forth between the Lloyd's operation and Bermuda and a lot of cross-pollinization there. Risk management, tools, and culture. On the left, we see our Ren system. Every time we get a piece of business, we get the business in and we say, "Do we like it or not?" We put it into our portfolio, and our underwriters in real time can see, has this piece of business made our portfolio better, more efficient, or worse? It's a very robust operation. We have all the external models that we look at as well, but we have our own models. We've got the culture, as I say. We've got the people in our organization understand how to use the models.
Frankly, I would rather have one of our experienced underwriters with a napkin and a pencil and not even a calculator than having an inexperienced underwriter with the fancy models. Experience and knowledge just goes such a long way and is so important. I think the other parts of this slide I have touched on already. What this combination of the culture capabilities with the modeling enables you to be proactive and move very quickly. In fact, this renewal period this last year was one of the most interesting ones I've been through, and I've been through renewals. I was a broker for 17 years before helping to start RenaissanceRe in 1993. This particular renewal cycle was one of the most interesting ones, and it was just all over the place.
Once we had all the information in our system, we could respond very quickly, and it turned out on the retrocessional side, for example, we had a lot of good opportunities come along just in the last week, and we also saw shortfalls. It's tough if you're an underwriter. You put out a price, and a customer says, "Well, okay. We'll think about it." It's very easy for that underwriter to say, "Well, maybe I ought to cut my price by 5% or 10%," even though it's the wrong thing to do. Our guys don't do that. We put out the price. We don't change the price. If we get new information, we would look at that. Price is the price, you're sitting there and you're waiting. Day goes by, you haven't heard back. Day goes by, you haven't heard back.
Things started happening. People started coming back to us because we were in the market that we hoped that we'd be in. The last couple of days of the renewal season, we did quite a few, what we call shortfalls, where people thought they could get coverage placed, and they couldn't. We already had the data in the machine, and our underwriters could move very quickly to fill out programs for folks at the right price for us. This is a slide I wanted to talk about ventures and the soap. On the left there, RenaissanceRe presently has $1.6 billion of capital. We can ratchet that up as need be for future opportunities. We've got plenty of extra capital up in the holding company. We have DaVinci Re.
When we posted this at the end of the year 12/31, we owned 43% of DaVinci Re. We had three top-quality investors come along, so we let three new investors come into DaVinci Re, and it took our share down to 35% in the first quarter of this year. Our ventures group spends a lot of time trying to cultivate third-party capital, and what we like to do is get long-term investors in DaVinci. This is a long-term vehicle. It's been around 10 or 11 years, and we don't want hot money coming in.
We're willing to take money that will move quickly. We want that in a If we set up a true sidecar where we see a one-year opportunity and somebody thinks they only want to be involved for one year, we'll bring that type of capital in to a specific rifle shot approach versus DaVinci is a longer-term vehicle. Very proud and pleased with the shareholder group we've got there. I mentioned earlier the CPPs. Sidecars are truly a one-shot, maybe they could be a second year. We started another sidecar this year called Upsilon Re to underwrite property catastrophe retrocession. We'll see how that goes. Good so far. Whether it'll be there for one, two, or three years, we'll see. Top Layer Re, I love this operation. Love State Farm. They're a partner of ours, both in DaVinci and in Top Layer Re.
They're our sole partner in Top Layer Re. They provide aggregate stop loss protection to Top Layer of $3.9 billion. We do all the underwriting, and that is to write Top Layer's high level of coverage internationally. State Farm doesn't have any international exposure, it's a great partnership and great marriage, and we've been at it for over 10 years now. I'm looking at the clock here. I'm going to have to speed up here. You want to have a little bit of Q&A time, don't you, Jay? Okay. Touching briefly on REAL. This is our Houston-based award-winning. They're considered to be tops in the field. What they do is they help out clients. They're not just a trading operation trying to do commodities trading.
They try to solve complex problems for people in the energy business, such as public utilities or heating oil distributors, and to help take the risk away from them in terms of extreme weather events. They will often have dual trigger policies where if the weather's particularly warm or particularly cold in the summer and there are fluctuations in commodity prices, they help out. They hedge out the commodity aspect, and we keep the risk on the weather side. This year we grew that operation some, and as you might have heard early in the earnings call, we lost $41 million pre-tax, $31 after tax in REAL this year. It's just due to the extreme warm weather that we've had. You've seen it in the northern part of the U.S.
In the U.K., where we had a lot of exposure, it was the warmest winter in 52 years in the U.K. They had a big loss, but we're happy with that. It came in the distribution where we thought it would. We look forward to having a little bit better luck this next year. Capital investments. I can go through this pretty quickly. On the left, what you see is what you see, common equity, preferred, debt, undrawn revolver. This is just the non-controlling interest that we have in DaVinci to show you the additional capital we bring to bear there. On the right, a year ago, this wouldn't have looked quite the same. It was smaller. We had smaller reserves, case reserves, and IBNR and additional case reserves. I think this is kind of interesting to spend one minute on.
Now as a result of all the events that we've had in the past year, plus some historical events, we've got case reserves of $853 million. On top of that, we have IBNR and additional ACR or additional case reserves of $1.1 billion. Case reserves, that's what our clients have told us. We love you clients, but we don't think you're always right. We put some on additionally because we go in ground up and we look at the losses ourselves irrespective of the information they give us to try to estimate what the total loss will be. The punchline on this is we like to buy our shares back. Since I've been back as CEO, we've bought back 25% of our shares. Other shareholders and I now own 25% more of the company. I think that's a good plan.
We like to buy our shares back. We haven't bought many shares back of late because we think there are good opportunities out there. We'll try to deploy our capital first. If we have excess capital, we like to have a little cushion in there for future opportunities, we'll buy shares back. We have a very conservative asset portfolio. It needs to be short and liquid for the most part. It's mainly in highly rated securities. It's short duration. We don't rely on investment income quite as much as some other folks because of the nature of our business. Our leverage of our assets to our equity is about 2 to 1, so investment income is not as important to us as some other folks. We focus on underwriting. We might have one minute and 11 seconds for questions here.
I think I've told you all this. I'm not going to go into it anymore. We think we're well-positioned in a good market with good pricing. Jay, anybody have any questions?
Right over here.
Thanks. Could you please explain why you have $4 billion of capital in Top Layer Re and $55 million of written premiums?
Leverage. No, I'm just kidding.
You mean inverse?
No.
Like an ETF, an inverse?
I was being flippant there. What happens is top layers, by definition, generally go at a relatively low rate on line. They're usually in the 3%-4% range because they're usually very high up in the program. The true capitalization of Top Layer Re is $50 million. When you get on top, State Farm provides an aggregate stop loss of $3.9 billion excess of $100, and we take part of the premium we get and pay State Farm for the risk that they take by providing the stop loss.
Got it.
Good. Thanks. Yeah, it's a little counterintuitive, isn't it? Got one over here.
We'll do one more, and we'll take one.
Okay.
On the same subject, is the rate that State Farm is charging for 2012 any different than the rate they're charging for 2011 on that tall tower of excess coverage? Is it sort of in the same ballpark?
Well, what we do is we help them in that endeavor, and we pay them what we think is the appropriate amount now. I don't want to get ahead of the game too much, as you know, the rate environment on the front end is different in 2011 than it is in 2012. There's some good opportunities out there internationally as a result of all the loss activity. What we do is we pay them the appropriate share in whatever market that we're in for that coverage. They feel comfortable. It's a partnership. We both feel comfortable with the amount of premium that's paid for that. They own 50% of Top Layer. We own 50%.
Great.
Good. Thank you, Jay. It's a pleasure.