Legacy-free start-ups ride hard market
Arch Capital announced strong second quarter results, booking net income of $104.3mn, or $1.42 a share, against $61.8mn, or $0.91 a share for the comparable quarter last year.
The performance took the total for the year so far to $191.7mn, or $2.69 a share, up from $114.3mn, or $1.70 a share at the same stage last year.
Profits were generated on gross premiums up 20.8 percent on the second quarter last year to $816.3mn from $676.0mn, and for the first half of the year from $1.54bn to $1.83bn.
Arch produced a combined ratio of 87.8 percent for the quarter, compared to 90.7 percent for the prior year period, and 88.4 percent for the year-to-date, improved from 90.7 percent after the first half of 2003.
Aspen Insurance Holdings announced net income of $80.9mn, or $1.13 per diluted share, for the second quarter of 2004. In its earnings release the company said its combined ratio for the quarter came to 71 percent, while its combined ratio for the first six months of the year came to a peer-beating 68 percent. Gross written premiums reached $380.4mn.
Fast growing AXIS Capital announced another set of solid quarterly figures, as it booked $140.9mn, or $0.84 a share net income, a 20 percent increase on the $117.8mn recorded in the second quarter of 2003. The strong quarter took net income for the year to date to $307.6mn, an increase of 37 percent on the $224.9mn booked at the same stage of 2003.
In a conference call to discuss the results, president and CEO John Charman hit out against ill-discipline: "There seems to be increasing pricing pressure in some lines, particularly in our insurance segments, from a limited number of major legacy businesses whose CEOs appear to be on another planet in their understanding of what their underwriters are really up to."
He added that large property and excess D&O were the lines suffering most from a lack of discipline, where "very, very dumb competitors" have become "suicidally aggressive", leading to AXIS pulling out of some of the business.
At the half-year point, AXIS sat with shareholders' equity up above the £3bn mark. And the group paved the way for a further bolstering of its war chest, registering to sell up to $750mn in stocks, bonds and other securities. AXIS also revealed that certain founding shareholders could sell up to 68.2mn shares under the filing.
Rival post-9/11 start-up Endurance reported a 72 percent surge in second quarter net income on 26 July, booking $114.8mn, or $1.69 a share, compared to $66.8mn or $0.99 a share in the second quarter of 2003.
For the year-to-date, net income stands at $215.6mn, and operating income at $216.6mn, while gross premiums rose 10 percent from $1.0bn to $1.1bn. And the group's combined ratio improved significantly quarter-on-quarter from 84.2 percent in the second quarter of 2003, to 76.9 percent.
Endurance chairman and CEO Ken LeStrange reiterated the company's focus on capital management, following its recent $64.7mn repurchase of 2mn shares held by Lightyear Capital. "We believe that our capital management strategy is a strong differentiator in this increasingly competitive market environment," he said.
On 9 August the (re)insurer announced a three-year $850mn revolving credit and letter of credit facility with a consortium of major banks.
Montpelier Re announced another strong set of quarterly results, and revealed that chairman, president and CEO Tony Taylor's tenure will be extended for a further three years to the end of 2007.
The (re)insurer reported $107.0mn net income for the second quarter, equivalent to $1.57 a share, and taking the total for the year-to-date to $216.0mn, or $3.16 a share. Net unrealised losses on investments were $47.3mn for the quarter and $21.4mn for the six months period.
Taylor said that 1 July renewals had faired well, and where rates in some classes continued to slowly slip, Montpelier had declined a significant number of risks.
Analysts from Morgan Stanley noted the performance significantly outstripped analysts' consensus, and welcomed the news on Taylor. "We believe investors will view this move very favourably, as Mr Taylor's focus on underwriting and prior experience have been cited as some of the reasons to invest in Montpelier Re stock. We applaud the move," said Vinay Saqi.
Platinum Underwriters said net profits for the second quarter of 2004 had reached $49.8mn, or $1.01 per share, against $26.6mn, or 57 cents per share for the second quarter of 2003.
The Bermudian reinsurer said its GAAP combined ratio was 85.9 percent, while net premiums written and net premiums earned came to $330.5mn and $310.9mn respectively. This represents a $23.3mn or 7.6 percent rise on the net premiums written figure for 2003.
Platinum's Property and Marine, Casualty and Finite Risk segments accounted for $110.8mn, $112.8mn and $115.9mn, respectively, representing 30.8 percent, 34.1 percent and 35.1 percent, respectively of total net premiums written.
The company said the combined ratios for these segments came to 63.1 percent, 98.8 percent and 93.4 percent respectively. The AM Best "A"-rated company was spun off in April 2002 from parent St Paul.
Bermuda's newest start-up Quanta Capital Holdings reported its maiden net profit this month, booking $1.8mn, or $0.03 net income a share for the second quarter of 2004, compared to a $4.5mn net loss in the first quarter of the year. Excluding net realised losses on investments, income was $2.6mn, or $0.05 a share.
The company, which set up last May and raised net proceeds of $505.6mn in a private offering last September, wrote $135.0mn gross premiums in the second quarter, and $114.1mn of net premiums. This was up from $118.7mn and $112.5mn respectively in the first quarter.
"It remains our intention to prudently deploy all of Quanta's capital by the end of the fiscal year. We believe our ability to allocate and deploy capital to those lines in our portfolio that offer the most attractive returns represents a real strategic advantage for Quanta, as it enables us to remain flexible in a market that is constantly changing," said Quanta CEO Tobey Russ.
Meanwhile, Allied World Assurance Holdings said operating income for the six months ending June 30, 2004 rose 30 percent to $152.6mn, partly thanks to a second year of a combined ratio at around the 86 percent mark.
Gross written premiums for the half year increased 17 percent to $982.4mn, it said, while net premiums written saw a marginal increase of 2 percent to $783.8mn. For the six-month period ended June 30, 2004, net investment income was $62.5mn compared to $51.3 million in 2003.