On January 30, 2008, the Court entered the Order signed by U.S. District Judge William H. Pauley, III, awarding attorney fees and expenses. That day, the Court entered the Order and Final Judgment. The case is now closed.
According to a press release dated January 22, 2008, a New York federal judge has approved a $13.5 million settlement of a securities class action between Renaissance Re Holdings and stockholders who sued the reinsurer for allegedly engaging in sham reinsurance transactions that artificially increased the company's earnings. Last September, U.S. District Judge William Pauley III granted a preliminary approval of the settlement but decided to render a final judgment on whether the deal was "fair, adequate and reasonable" in January (BestWire, Oct. 5, 2007). In his ruling, Pauley stated that there was no doubt the settlement was the result of arm's length negotiations. However, the judge balked at the request by class counsel, which consists of attorneys for the lead plaintiffs, to be paid $3.37 million or what amounts to 25% of the settlement. By the judge's calculation, the $3.37 million fee yields a blended hourly rate of approximately $1,640. Also, a 25% attorney's fee will leave less than $10 million, after reimbursement of expenses, to be divvied up by 52,000 plaintiffs, said the judge, who called the request unreasonable. Pauley ruled that the class counsel should instead take home $1.33 million, a recovery of about 10%.
In a press release dated October 5, 2007, the action has been certified as a class action for settlement purposes and that a Settlement for Thirteen Million Five Hundred Thousand Dollars ($13,500,000) has been reached. A hearing will be held before the Honorable William H. Pauley in the United States District Court for the Southern District of New York, at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, New York, NY 10007, at 12:00 p.m., on January 11, 2008, to determine whether: (1) the proposed Settlement and plan of allocation of Settlement proceeds should be approved by the Court as fair, reasonable and adequate; (2) Co-Lead Counsel's application for an award of attorneys' fees and reimbursement of expenses should be approved; (3) Lead Plaintiffs should be reimbursed for their reasonable costs and expenses (including lost wages) directly related to their representation of the Class in the litigation; and (4) the claims against Defendants should be dismissed with prejudice.
On December 4, 2006, a Second Amended Consolidated Class Action Complaint was filed. On April 13, 2007, a Stipulation of Settlement was filed, and on April 16, 2007, the Plaintiffs filed a motion for preliminary approval of settlement
According to the Company’s FORM 10-Q For The Quarterly Period Ended September 30, 2006, beginning in July 2005, several putative class actions were filed in the United States District Court for the Southern District of New York in respect of the Company. In December 2005, these actions were consolidated and in February 2006, the plaintiffs filed a Consolidated Amended Complaint, purportedly on behalf of all persons who purchased and/or acquired the publicly traded securities of the Company between April 22, 2003 and July 25, 2005. In June 2006, the defendants filed motions to dismiss the Consolidated Amended Complaint. On October 24, 2006, before those motions were ruled upon, counsel for the lead plaintiffs requested permission from the Court to move for leave to file a second amended complaint. On October 30, 2006, the defendants consented to that request. Once the new complaint is filed, it is expected that the defendants will file motions to dismiss the new complaint.
Several purported shareholder class action lawsuits have been filed against RenaissanceRe Holdings Ltd. and certain of its present and former executive officers
alleging that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1034 and Rule 10b-5 promulgated thereunder. Specifically, the complaint alleges that Defendants issued a series of false and misleading statements to the market regarding the Company's financial condition. The complaint further alleges that these statements were false and misleading because:
-- In 2001, RenaissanceRe entered into various contracts with Inter-Ocean, which were used by Defendants to smooth and manipulate the earnings of the Company in the years 2002 through 2004; -- RenaissanceRe failed to properly account for the timing of the recognition of reinsurance recoverables, which had the impact of misstating net income by as much as 12 percent in a given year; -- RenaissanceRe failed to properly account for the timing of the recognition of premium on multi-year ceded reinsurance contracts in the first three quarters of 2004; -- As a result, the Company's financial reports were not prepared in accordance with Generally Accepted Accounting Principles ("GAAP").
The complaint further alleges that beginning in mid 2004, numerous companies involved in the reinsurance industry began receiving subpoenas regarding their business practices, and inquiring about their use and sale of reinsurance contracts. On February 22, 2005, RenaissanceRe announced that it planned to restate its financial statements for 2001, 2002, and 2003 to correct "accounting errors associated with reinsurance ceded by the Company." In addition, RenaissanceRe announced that it "had discovered an error in the timing of the recognition of premium on multi-year ceded reinsurance contracts for the first three quarters of 2004." On July 11, 2005, the Company issued a press release announcing that it had received and accepted the resignation of Michael W. Cash, Senior Vice President of Specialty Reinsurance for the Company, after he voluntarily refused to accept the subpoenas of the SEC calling for his testimony in its investigation of the Company's restatement. On July 25, 2005, the Company announced that Defendant Standard had received a "Wells Notice" from the SEC in regard to the agency's investigation of the Company's financial statements. In reaction to this development, shares of RenaissanceRe dropped $4.25 per share to close at $42.98, from its close of $47.23 on July 22, 2005, on extraordinarily heavy volume.