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Bermuda 1Q results

ACE sees slight deterioration on higher revenues

Bermudian giant (re)insurer ACE reported first quarter net profits marginally down last Monday, making $433mn or $1.46 a share compared to the $447mn or $1.53 a share it recorded in the first three months of 2004.

Combined ratio for the quarter also showed a slight deterioration, from 88.4 percent to 89.2 percent, while the group wrote $4.54bn gross premium, up from $4.42bn in the prior-year period.

ACE CEO and president Evan Greenberg commented: “This was a very good quarter for ACE.  We had record operating income, led by substantial increases in earned premiums and net investment income, and excellent P&C underwriting results as reflected in a combined ratio of 89.2 percent.  Our written premium growth rate is naturally slowing in line with a softening rate environment and our determination to maintain underwriting discipline.”

Net premiums earned were up 15 percent on the first quarter of 2004 from $2.60bn to $2.88bn. Net written premiums increased in the group’s North American primary division by 18 percent, but net written premiums from its global reinsurance sector dropped by 7 percent. The figure was flat in ACE’s overseas insurance business.

Net investment income rose 19 percent to $284mn compared to the prior-year period, while return on equity was also up, by 18.4 percent.

Analysts from investment bank Morgan Stanley were complimentary of ACE’s performance.

“So long as the company's actions follow management's words, ACE appears to be managing a rapidly softening market environment rather well. Management provided an update on their internal investigations (business practices complete with no new news and finite reinsurance around one month from completion) and the proposed sale of Brandywine units (perhaps a 3Q05 event),” said analyst William Wilt.

 

Partner Re struck by Q1 losses

Bermuda’s Partner Re reported first quarter net income of $111.4mn or $1.84 a share, down from the $145.6mn or $2.59 a share it made in the first three months of 2003.

The reinsurer announced operating earnings of $67.6mn or $1.21 a share, compared to $109.7mn or $2.02 a share in the same period last year.

Partner Re’s president and CEO Patrick Thiele said the results were again hit by a high level of catastrophe loss activity, with a $63mn loss from Winterstorm Erwin which hit Northern Europe in January, and $20mn from the Suncor energy loss in Canada.

“Our GAAP book value per share was negatively impacted by rising interest rates as we mark our assets to market, but not our liabilities,” Thiele added. “Nevertheless, we continue to build economic shareholder value.”

Net premium written by the company fell from $1.52bn to $1.41bn, but net premium earned rose marginally from $0.89bn to $0.90bn.

The quarter’s losses hit the combined ratio by 6.3 percent, raising it to 97 percent.

At the end of March, the company’s total assets were $13.1bn, with shareholders’ equity of $3.3bn and total capitalization of $3.7bn, compared to $12.5bn, $3.4bn and $3.8bn respectively at the start of the quarter.

Thiele noted mixed conditions in the marketplace. “The decline in premiums written in the first quarter reflects an increasingly competitive marketplace and primary carriers retaining more business. In the April 1 renewal, we saw a continuation of a weakening marketplace, but again at a gradual pace.

“Notwithstanding the normal volatility that we expect as a result of large losses, PartnerRe remains well-placed to succeed in this more difficult market, and we are committed to continuing to build shareholder value throughout the remainder of 2005 and over the long term,” he commented.

IPC Re profits down on Q1 cats

Property catastrophe specialist IPC Re last week (26 April) reported net profits down almost 60 percent from $73.63mn or $1.52 a share to $43.96mn or $0.91 a share for the first quarter of 2005, as its figures were dented by losses from Windstorm Erwin in Northern Europe, and developing losses from the Asian Tsunami.

IPC Re president and CEO Jim Bryce noted that the impact of Erwin – combined with the Suncor energy loss in Canada during the first quarter – has had a stabilising influence on catastrophe reinsurance rates.

He also highlighted Erwin as the second so-called “one-in-a-hundred-year” event to hit Scandinavia in the last six years, compounding the impact of last Autumn’s hurricanes and the Boxing Day Tsunami.

“While these events are tragic in terms of injury and loss of life, and also have a short-term negative impact on earnings, reinsuring such events is our business, in terms of bringing financial relief and rebuilding, and is beneficial to terms and conditions of reinsurance in the longer term,” said Bryce.

Bryce cited increased estimates of industry Tsunami losses from Swiss Re, which put the figure at $5bn, an increase of 100-150 percent.

IPC Re took net losses and loss adjustment expenses of $37.9mn in the quarter, compared to just $13.5mn in the prior-year period. This included $20mn from Erwin and an $8mn increase to Tsunami losses.

Bryce added that “common sense prevailed” at April renewals with the market in line with expectations.

Net operating profit came in at $47.17mn or $0.97 a share, compared to $67.97mn or $1.40 a share in the three months ended 31 March 2004, while gross written premiums of $205.8mn were marginally down on the $210.2mn booked in the comparable period last year.

IPC Re wrote new business of $16.2mn in the quarter, partially offset by $12.7mn of business it chose not to renew.

Net investment income increased from $11.6mn to $17.5mn quarter on quarter.

 

XL shows strength despite wind loss

Bermuda-based XL Capital last week (26 April) reported first quarter results revealing net profits fractionally down on the same period last year from $452.2mn or $3.25 a share to $442.9mn or $3.18 a share, as it took a $50mn after-tax hit from European windstorm Erwin.

Excluding unrealised gains and losses, profits were up from $332.5mn or $2.39 a share to $346.5mn or $2.49 a share.

Earnings were generated from net premiums written that rose by 2 percent to $2.8bn in the quarter, while combined ratio from the company’s general operations was 89.7 percent.

XL president and CEO Brian O’Hara commented: “I am pleased to report XL delivered one of its highest levels of net income ever this quarter and record net income excluding net realised gains and losses.

These results are a testament to the strength of our diversified growth strategy, with solid underwriting profitability in our insurance and reinsurance general operations, complimented by strong performances in our financial products and investment affiliates businesses.

Underwriting profits generated from insurance operations were $82.0mn, down from $89.9mn in the prior-year period. The performance included $6.6mn pre tax losses from Erwin, as well as $48.0mn prior-year loss deterioration from professional lines business.

The company’s reinsurance operations took a $45.3mn hit from Erwin, which was partially offset by $18.0mn favourable prior-year loss development as the division contributed a $93.4mn underwriting profit compared with $101.3mn in the first quarter of 2004.

Arguably the most successful quarter belonged to XL’s financial products and services division, which increased its contribution by $39.1mn to $77.7mn, driven by increases in fee income from its financial guaranty and financial solutions businesses, along with improved performance from its derivatives business.

 

Fixed income losses hit Montpelier profits

Post-9/11 start-up Montpelier Re saw net profits drop from $109.0mn to $74.5mn for the first quarter of 2005, while its comprehensive income fell from $134.9mn to $36.0mn as the company was hit by unrealised losses on its fixed income portfolio.

Montpelier Re also strengthened net reserves for prior-year accident years by $3.5mn in the quarter.

Tony Taylor, the reinsurer’s president and CEO, noted that although property catastrophe losses were low, the market was hit by a large number of sizeable property risk excess events.

“Losses from the storms in the third quarter of 2004 continued to develop, notably in the case of the Japanese typhoons. Given the increased level of market loss activity, we are pleased to have generated a combined ratio of 73 percent,” he said.

“The April renewal season saw some modest rate improvements, particularly on Japan windstorm risks. There are early signs that Florida renewals may show improvement in pricing but the overall market continues to soften. We still expect that gross written premiums for 2005 will be lower than 2004 by at least 10 percent,” he added.

The company returned a further $390mn in capital to investors in the first quarter, and CFO Kip Oberting stated that, given current underwriting opportunities, Montpelier Re was happy with its total capital base of $1.63bn.

 

Max Re life change continues

Bermudian (re)insurer Max Re last week (29 April) reported first quarter net income of $36.8mn or $0.74 a share, a fall on the $43.0mn or $0.87 a share it made in the first three months of 2004.

Net operating income was $36.4mn or $0.73 a share, marginally down on the $37.2mn or $0.75 a share booked in the comparable period last year.

The company’s chairman, president and CEO Bob Cooney commented: “Our gross premiums written grew in the first quarter largely attributable to increased volume in our life and annuity business. Our property and casualty underwriting produced excellent results with a combined ratio of 87.6 percent for the period. The strong underwriting performance allowed us to achieve reasonable net operating income for the quarter.”

First quarter gross premiums from property casualty underwriting were $312.5mn, considerably down on the $439.5mn written in the first three months of 2004, with the balance made up of $143.2mn from life and annuity underwriting – business not written by the company at the start of last year.

The mix of property casualty premiums has also shifted, with 79.4 percent derived from reinsurance and 30.6 percent from insurance, compared to 90.5 percent and 9.5 percent in the same quarter of 2004.

The fall in property casualty premiums is almost entirely down to the non-renewal of three reinsurance contracts accounting for $164.5mn of gross premiums, said Max Re.

With the shift to life and annuity business came a decrease in acquisition costs, which were down 32.3 percent to $21.5mn for the period.

 

AXIS continues on growth path

Bermudian post-9/11 powerhouse Axis Capital yesterday (2 May) reported operating earnings slightly below expectations with solid underwriting performance offset by foreign exchange losses, and revealed growth – particularly in reinsurance – that surprised some analysts.

The company posted net income of $151.8mn or $0.95 a share, compared to $166.8mn or $1.00 a share in the first quarter of 2004.

Excluding net realised gains and losses on investments, net income was $152.7mn or $0.95 a share, down from $157.6mn or $0.94 a share. If the foreign exchange losses are factored out, the situation improves to a $175.7mn or $1.10 a share profit, compared to $$158.8mn or $0.95 a share in the first quarter of 2004.

The (re)insurer’s CEO and president John Charman commented: “We continue to build a strong global specialty insurance and reinsurance business while at the same time creating healthy shareholder returns.

We expect that the numerous fundamental issues facing the market will not deflect us from reaching that goal. Profitability, diversity of products and location, efficiency of operations, expertise – these are the foundations of AXIS.

Overall gross premiums written rose by 14.8 percent to $1.2bn and net premiums by 18.1 percent to $1.1bn.

The increase was driven by a remarkable 29.3 percent increase in gross premiums reported in AXIS’ reinsurance operations, taking the total for the quarter to $769.5mn. Net premiums rose by 31.0 percent to $767.4mn.

This rapid rise was down to increased penetration in the markets of Continental Europe, said AXIS, particularly in property, motor and catastrophe lines.

The division’s combined ratio also headed upwards in the quarter however, as Windstorm Erwin losses contributed 10.1 points to a figure that went from 68.0 percent in the first quarter of 2004 to 90.8 percent in the current year period.

In contrast, gross premiums written in the insurance sector were off 4.3 percent to $429.2mn in the first quarter, with the fall concentrated in AXIS global business. Indeed increased penetration into US markets led to a 19.3 percent increase in gross premiums written in that sector.

Combined ratio from AXIS’ insurance operations improved from 72.4 percent to 63.1 percent.

William Wilt, equity analyst at Morgan Stanley, described AXIS as growing premiums “in places other (re)insurers didn’t know they had”.

“The growth dynamics were very interesting, and we acknowledge before commenting that the company’s ongoing build-out (geographically and by product) can distort growth rates by quarter.  Still, we were surprised by the company’s 29 percent growth in reinsurance in a quarter when most reinsurers were struggling to show positive premiums,” he continued.

In its earnings release, AXIS added that it is close to concluding an internal investigation in connection with the ongoing inquiries into industry business practices pioneered by New York attorney general Eliot Spitzer.

AXIS said that, to date, the investigation has uncovered “no evidence indicating that we engaged in bid rigging, fictitious or inflated quotes or related matters or conditioning direct insurance on the placement of reinsurance”.

 

Quanta returns to profit

Bermuda’s youngest post-9/11 start-up Quanta yesterday (2 May) reported a return to profitability, after enduring a difficult first full year blighted by the heavy natural catastrophe losses that struck the industry.

Quanta posted first quarter net income of $1.4mn or $0.02 a share, compared to a net loss of $4.5mn or $0.08 a share in the first quarter of 2004. Excluding realised losses on investments income was $1.9mn or $0.03 a share, compared to a net loss of $5.7mn or $0.10 a share in the prior-year period.

The company’s CEO Tobey Russ commented: “Our first quarter results represent another milestone for the Company, as we have returned to profitability after experiencing an unprecedented amount of catastrophe losses during 2004.

Premium growth continues to be robust, and strong underwriting cash flow growth during the first quarter of 2005 resulted in a $82mn increase in total invested assets to $757mn relative to year-end.

Gross written premiums were up from $118.7mn to $172.7mn, with net written premiums rising from $112.5mn to $142.9mn. The (re)insurer’s Lloyd’s operation contributed $12.7mn of net written premiums for the quarter.

Total revenues were $105mn for the quarter, almost trebling the $38.6mn for the first three months of 2003.

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