RenaissanceRe 2007 fourth-quarter net income dropped by 65percent, in part because of the drop in subprime mortgage values,the company said.

Net income at the Pembroke, Bermuda-based carrier was down to$72.8 million from $210.6 million the same period in 2006, adifference of $138 million, or about 65 percent. This numberreflects charges totaling $181.7 million in the fourth quarter of2007, reflecting:

o A charge resulting in a full reduction of the company'scarried value in ChannelRe, which was $126.7 million on Sept. 30,2007.

o A $55 million charge to increase IBNR [incurred but notreported] reserves for subprime-related exposures in the casualtyclash reinsurance book of business.

Ratings agencies A.M. Best Co. and Standard & Poor's said inJanuary that the announcement would not affect the company'sratings.

RenaissanceRe reported fourth-quarter net realized investmentgains of $7.2 million and $2.5 million in the fourth quarters of2007 and 2006, respectively.

For the full year, net income fell 23 percent, down $184.6million to $612.4 million.

RenaissanceRe said in a statement that while it benefited from ahard market for property-catastrophe reinsurance and a low level ofinsured catastrophe losses in 2006, its results in 2007 werenegatively impacted by a reduced level of gross premiumswritten.

Premiums were off due primarily to declining prices as well as$56.7 million and $45.2 million in net negative impact related tothe flooding in the United Kingdom and European windstorm Kyrill,respectively.

Operating income per diluted common share was $2.64 in thefourth quarter of 2007, compared to $2.74 in the fourth quarter of2006. Net income available to common shareholders was $62.2million, or 88 cents per diluted common share in the fourth quarterof 2007, compared to net income available to common shareholders of$201.1 million, or $2.78 per diluted common share for the samequarter of 2006.

The company's book value per common share increased 19.3 percentin 2007, compared to a 40.2 percent increase in 2006.

Fourth quarter highlights:

o Gross premiums written for fourth-quarter 2007 were $122.2million, a $72.7 million decrease from fourth quarter 2006.

o The company said it generated $177.3 million of underwritingincome and had a combined ratio of 47.3 percent in the fourthquarter of 2007, compared to $177.3 million of underwriting incomeand a combined ratio of 53.4 percent in the fourth quarter of2006.

o The company also said it experienced $106.8 million offavorable development on prior-year reserves in the fourth quarterof 2007, compared to $29.9 million in the fourth quarter of2006.

Neill A. Currie, chief executive officer, commented: "I ampleased to report strong full-year earnings, resulting in anincrease in book value per common share of over 19 percent and anoperating return on equity of 27 percent. These earnings are aresult of a relatively low level of insured catastrophe losses forthe full year, solid investment income and strong performance byour team."

He continued, "Although our premium volume is down, we arepleased with the results of our Jan.1 renewals and have constructedan attractive portfolio of business for 2008." He said the companyplans to maintain underwriting discipline and focus on profitrather than premium volume.

The company's fourth-quarter 2007 results include a previouslyannounced $131.2 million loss related to ChannelRe which, whencombined with a $4.5 million reversal of the company's share ofChannelRe's accumulated other comprehensive loss, results in thefull reduction in the company's carried value of ChannelRe from$126.7 million on Sept. 30, 2007 to zero as of Dec. 31, 2007.

The reduction in carried value principally arises fromChannelRe's estimate of its fourth-quarter unrealizedmark-to-market losses from financial guaranty contracts accountedfor as derivatives.