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| 8-K - TRANSATLANTIC HOLDINGS, INC. 8-K - TRANSATLANTIC HOLDINGS INC | a6696311.htm |
Exhibit 99.1
Transatlantic Holdings, Inc. Reports First Quarter Results
NEW YORK--(BUSINESS WIRE)--April 26, 2011--Transatlantic Holdings, Inc. (NYSE: TRH) today reported a net loss of ($190) million, or ($3.05) per common share (diluted), for the first quarter of 2011 compared to net income of $16 million, or $0.24 per common share (diluted), for the first quarter of 2010. Net operating loss for the first quarter of 2011 was ($225) million, or ($3.61) per common share (diluted), compared to net operating income of $17 million, or $0.26 per common share (diluted), in the first quarter of 2010.
First quarter 2011 net loss and net operating loss include $545 million of pre-tax net catastrophe costs (net of reinsurance and net reinstatement premiums) offset by related tax benefits of $191 million. The pre-tax net catastrophe costs include $365 million related to the Tohoku Earthquake in Japan and ensuing tsunami and $180 million related to the February earthquake in Christchurch, New Zealand and events in Australia. Catastrophe costs for the events in Japan contemplate an industry loss of between $25 billion and $30 billion.
First quarter 2010 net income and net operating income include pre-tax net catastrophe costs of $130 million, $105 million of which is related to the earthquake in Chile. Tax benefits associated with such catastrophe costs totaling $27 million were recorded in the first quarter of 2010.
Robert F. Orlich, President and Chief Executive Officer, commented, “Results in the first quarter were affected by an extremely high level of catastrophes, including what is likely to be the costliest earthquake loss in history. Despite the magnitude of these events, Transatlantic’s catastrophe costs fell within our risk tolerances. Our core operations remain sound and, excluding the impact of catastrophes, performed well.
“The last 15 months have witnessed extraordinary catastrophe activity, with rising frequency and severity. While property catastrophe rates have begun to rise, additional increases are needed, particularly in regions that have experienced significant losses.
“As this environment unfolds, Transatlantic remains financially strong and well-positioned to capitalize on opportunities. Our strong risk management culture enables us to plan for and manage through periods such as the first quarter, as we continue to execute a successful business model that stresses underwriting discipline and diversification geographically and across classes of property and casualty business worldwide.”
Other highlights in the first quarter of 2011 include:
- Net premiums written of $1.04 billion, level with the prior year quarter excluding the impact of foreign exchange.
- Net investment income of $107 million, 5% less than a year ago due to the performance of alternative investments.
- Realized net capital gains of $55 million. The higher level of capital gains compared to a year ago resulted from a shift in allocations within the equities portfolio in the current period.
- Combined ratio of 147.8%, which includes 57.2 percentage points related to pre-tax net catastrophe costs. In the 2010 first quarter, net catastrophe costs increased the combined ratio by 13.2 percentage points. Net favorable loss reserve development related to prior accident years totaled $15 million in the 2011 quarter compared to $7 million a year ago.
- Net operating cash inflows of $183 million.
- Net loss and loss adjustment expense reserves of $8.91 billion at quarter-end, an increase of $698 million in the quarter, reflecting the impact of catastrophe losses and an increase of $107 million due to foreign exchange.
- Consolidated investments and assets of $13.15 billion and $16.34 billion, respectively, at quarter-end.
- Stockholders’ equity of $4.04 billion at quarter-end. TRH did not repurchase any of its outstanding common shares during the quarter and has $145 million remaining under its current share repurchase program authorization.
- Book value per common share of $64.69 at March 31, 2011, a 6% decline since year-end 2010.
The determination of catastrophe costs recorded in the quarter involves a significant amount of judgment and is based on information available at the time of estimation. These estimates are heavily reliant on industry loss predictions, preliminary data from cedants, output from catastrophe modeling software and market share analysis. As significant amounts of time pass subsequent to an event, cost estimates become more refined but still subject to material adjustment as further information becomes available. Due to the preliminary nature of information used to prepare these estimates, among other factors, the ultimate costs that TRH will incur related to catastrophe events may differ materially from these estimates.
Caution concerning forward-looking statements:
This press release contains forward-looking statements, including management’s beliefs about financial, credit and industry market conditions and expectations regarding the aggregate net impact on TRH from recent catastrophe losses, within the meaning of the U.S. federal securities laws. These forward-looking statements are based on assumptions and opinions concerning a variety of known and unknown risks. Please refer to TRH’s Annual Report on Form 10-K for the year ended December 31, 2010 as well as its other and future filings and reports filed with or furnished to the Securities and Exchange Commission for a description of the business environment in which TRH operates and the important factors, risks and uncertainties that may affect its business and financial results. If any assumptions or opinions prove incorrect, any forward-looking statements made on that basis may also prove materially incorrect. TRH is not under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
TRH will host a conference call on Wednesday, April 27, 2011 at 11:00 a.m. Eastern Time to discuss first quarter 2011 results. The call will be webcast live on the Internet ― available through the Investor Information–News–Webcasts section of TRH’s website at www.transre.com. The live conference call can also be accessed by dialing 866-843-0890 (in the U.S.) or 412-317-9250 (International). The passcode for the conference call is 1528852.
Please refer to the Investor Information–News–Earnings Information section of TRH’s website at www.transre.com for a copy of the first quarter 2011 Financial Supplement which includes additional information on TRH’s financial performance.
After the completion of the call, an archived webcast will be available in the Investor Information section of TRH’s website. Until May 4, 2011, a replay of the call will be available by dialing 877-344-7529 (in the U.S.) or 412-317-0088 (International). The passcode to access the replay is 449062.
Transatlantic Holdings, Inc. (TRH) is a leading international reinsurance organization headquartered in New York, with operations on six continents. Its subsidiaries, Transatlantic Reinsurance Company®, Trans Re Zurich Reinsurance Company Ltd. and Putnam Reinsurance Company, offer reinsurance capacity on both a treaty and facultative basis ― structuring programs for a full range of property and casualty products, with an emphasis on specialty risks.
The performance of TRH is commonly assessed by analysts and others based on performance measures which are not defined under GAAP. Those measures include net operating income (loss) (“NOI”), NOI Per Common Share (diluted) and annualized operating return on equity (“Annualized Operating ROE”). NOI is defined as GAAP net income (loss) excluding realized net capital gains (losses) and the gain (loss) on early extinguishment of debt, net of taxes. NOI Per Common Share (diluted) represents NOI divided by average common shares outstanding on a diluted basis. Annualized Operating ROE is defined as NOI divided by the average of beginning and ending stockholders’ equity, multiplied by four. In addition, GAAP annualized return on equity (“GAAP Annualized ROE”) is defined as GAAP net income (loss) divided by the average of beginning and ending stockholders’ equity, multiplied by four. TRH uses these measures in analyzing its performance as these measures focus on the core fundamentals of TRH’s operations. While TRH considers realized net capital gains (losses) and the gain (loss) on early extinguishment of debt as integral parts of its business and results, such items are not indicative of the core fundamentals of TRH’s operations. TRH believes these measures are of interest to the investment community because they provide additional meaningful methods of evaluating certain aspects of TRH’s operating performance from period to period on bases that are not otherwise apparent under GAAP. These non-GAAP measures, namely, NOI, NOI Per Common Share (diluted) and Annualized Operating ROE should not be viewed as substitutes for GAAP net income (loss), GAAP net income (loss) per common share on a diluted basis and GAAP Annualized ROE, respectively. Reconciliations of NOI, NOI Per Common Share (diluted) and Annualized Operating ROE to GAAP net income (loss), GAAP net income (loss) per common share on a diluted basis and GAAP Annualized ROE, respectively, the most directly comparable GAAP measures, are included later in this press release.
TRH’s GAAP combined ratio and its components are presented in accordance with the methodology commonly used by insurance industry analysts and TRH's peers. The property and casualty insurance and reinsurance industries use the combined ratio as a measure of underwriting profitability. The combined ratio represents the sum of the loss ratio and the underwriting expense ratio. The loss ratio represents net losses and loss adjustment expenses incurred expressed as a percentage of net premiums earned. The underwriting expense ratio represents the sum of the commission ratio and the other underwriting expense ratio. The commission ratio represents the sum of net commissions and the decrease (increase) in deferred policy acquisition costs expressed as a percentage of net premiums earned. The other underwriting expense ratio represents other underwriting expenses expressed as a percentage of net premiums earned.
Net loss and loss adjustment expense reserves represent unpaid losses and loss adjustment expenses net of related reinsurance recoverable, and are presented in accordance with principles prescribed or permitted by insurance regulatory authorities.
In addition, book value per common share is defined as stockholders’ equity divided by common shares outstanding.
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Transatlantic Holdings, Inc. and Subsidiaries |
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Consolidated Financial Data |
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| Statement of Operations Data: | |||||||||||
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
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2011 |
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2010 |
Change | |||||||
| (in thousands, except per share data) | |||||||||||
| Revenues: | |||||||||||
| Net premiums written | $ | 1,043,824 | $ | 1,026,299 | 1.7 | % | |||||
| Increase in net unearned premiums | (86,995) | (33,704) | |||||||||
| Net premiums earned | 956,829 | 992,595 | (3.6) | ||||||||
| Net investment income | 106,840 | 112,610 | (5.1) | ||||||||
| Realized net capital gains (losses): | |||||||||||
| Total other-than-temporary impairments | (1,500) | (13,045) | |||||||||
| Less: other-than-temporary impairments recognized | |||||||||||
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in other comprehensive (loss) income |
- | 6,713 | |||||||||
| Other-than-temporary impairments charged to | |||||||||||
| earnings | (1,500) | (6,332) | |||||||||
| Other realized net capital gains | 56,912 | 4,443 | |||||||||
| Total realized net capital gains (losses) | 55,412 | (1,889) | |||||||||
| Loss on early extinguishment of debt | (1,179) | - | |||||||||
| Total revenues | 1,117,902 | 1,103,316 | 1.3 | ||||||||
| Expenses: | |||||||||||
| Net losses and loss adjustment expenses | 1,169,052 | 786,324 | |||||||||
| Net commissions | 241,001 | 234,512 | |||||||||
| Increase in deferred policy acquisition costs | (32,160) | (5,500) | |||||||||
| Other underwriting expenses | 36,725 | 44,129 | |||||||||
| Interest on senior notes | 16,894 | 17,086 | |||||||||
| Other expenses, net | 7,152 | 7,685 | |||||||||
| Total expenses | 1,438,664 | 1,084,236 | |||||||||
| (Loss) income before income taxes | (320,762) | 19,080 | - | ||||||||
| Income taxes (benefits) | (130,610) | 3,205 | |||||||||
| Net (loss) income | $ | (190,152) | $ | 15,875 | - | ||||||
| Net (loss) income per common share: | |||||||||||
| Basic | $ | (3.05) | $ | 0.24 | - | % | |||||
| Diluted | (3.05) | 0.24 | - | ||||||||
| Cash dividends declared per common share | $ | 0.21 | $ | 0.20 | 5.0 | ||||||
| Weighted average common shares outstanding: | |||||||||||
| Basic | 62,365 | 65,879 | |||||||||
| Diluted | 62,365 | 66,551 | |||||||||
| GAAP underwriting ratios: | |||||||||||
| Loss | 122.2 | % | 79.2 | % | |||||||
| Commission | 21.8 | 23.1 | |||||||||
| Other underwriting expense | 3.8 | 4.4 | |||||||||
| Underwriting expense | 25.6 | 27.5 | |||||||||
| Combined | 147.8 | % | 106.7 | % | |||||||
| Transatlantic Holdings, Inc. and Subsidiaries | ||||||||
| Consolidated Financial Data | ||||||||
| As of March 31, 2011 and December 31, 2010 | ||||||||
| Balance Sheet Data: | ||||||||
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2011 |
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2010 |
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| (in thousands, except share data) | ||||||||
| ASSETS | ||||||||
| Investments: | ||||||||
| Fixed maturities: | ||||||||
| Held to maturity, at amortized cost (fair value: 2011-$1,235,817; 2010-$1,240,678) | $ | 1,188,705 | $ | 1,189,801 | ||||
| Available for sale, at fair value (amortized cost: 2011-$10,833,128; 2010-$10,727,717) | 10,893,804 | 10,822,336 | ||||||
| Equities, available for sale, at fair value (cost: 2011-$546,503; 2010-$476,516) | 600,113 | 564,530 | ||||||
| Other invested assets | 256,193 | 275,977 | ||||||
| Short-term investments, at cost (approximates fair value) | 213,235 | 120,095 | ||||||
| Total investments | 13,152,050 | 12,972,739 | ||||||
| Cash and cash equivalents | 331,307 | 284,491 | ||||||
| Accrued investment income receivable | 147,838 | 150,695 | ||||||
| Premium balances receivable, net | 784,260 | 605,094 | ||||||
| Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses | 882,007 | 819,734 | ||||||
| Deferred policy acquisition costs | 268,484 | 238,296 | ||||||
| Prepaid reinsurance premiums | 81,800 | 75,291 | ||||||
| Deferred tax assets, net | 460,134 | 463,808 | ||||||
| Other assets | 227,502 | 95,206 | ||||||
| Total assets | $ | 16,335,382 | $ | 15,705,354 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Unpaid losses and loss adjustment expenses | $ | 9,773,978 | $ | 9,020,610 | ||||
| Unearned premiums | 1,321,276 | 1,212,535 | ||||||
| Senior notes | 1,005,683 | 1,030,511 | ||||||
| Other liabilities | 193,072 | 157,239 | ||||||
| Total liabilities | 12,294,009 | 11,420,895 | ||||||
| Preferred stock, $1.00 par value; shares authorized: 10,000,000; none issued | - | - | ||||||
| Common stock, $1.00 par value; shares authorized: 200,000,000; shares issued: | ||||||||
| 2011-67,838,313; 2010-67,611,341 | 67,838 | 67,611 | ||||||
| Additional paid-in capital | 317,731 | 318,064 | ||||||
| Accumulated other comprehensive income | 114,790 | 154,615 | ||||||
| Retained earnings | 3,785,736 | 3,988,891 | ||||||
| Treasury stock, at cost: 5,362,800 shares of common stock | (244,722) | (244,722) | ||||||
| Total stockholders' equity | 4,041,373 | 4,284,459 | ||||||
| Total liabilities and stockholders' equity | $ | 16,335,382 | $ | 15,705,354 | ||||
| Transatlantic Holdings, Inc. and Subsidiaries | ||||||||
| Consolidated Financial Data | ||||||||
| Condensed Cash Flow Data: | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
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2011 |
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2010 |
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| (in thousands) | ||||||||
| Net cash provided by operating activities | $ | 183,453 | $ | 220,460 | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds of fixed maturities available for sale sold | 255,344 | 192,086 | ||||||
| Proceeds of fixed maturities available for sale redeemed or matured | 270,543 | 215,414 | ||||||
| Proceeds of equities available for sale sold | 257,511 | 88,080 | ||||||
| Purchase of fixed maturities available for sale | (544,225) | (834,647) | ||||||
| Purchase of equities available for sale | (263,623) | (69,173) | ||||||
| Net sale of other invested assets | 13,572 | 1,961 | ||||||
| Net (purchase) sale of short-term investments | (93,100) | 492,339 | ||||||
| Change in other liabilities for securities in course of settlement | 4,483 | 58,808 | ||||||
| Net cash (used in) provided by investing activities | (99,495) | 144,868 | ||||||
| Cash flows from financing activities: | ||||||||
| Dividends to stockholders | (13,103) | (13,294) | ||||||
| Common stock issued | (6,390) | (2,408) | ||||||
| Acquisition of treasury stock | - | (113,478) | ||||||
| Repurchase of senior notes | (26,110) | - | ||||||
| Other, net | 1,281 | (1,014) | ||||||
| Net cash used in financing activities | (44,322) | (130,194) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 7,180 | (7,073) | ||||||
| Change in cash and cash equivalents | 46,816 | 228,061 | ||||||
| Cash and cash equivalents, beginning of period | 284,491 | 195,723 | ||||||
| Cash and cash equivalents, end of period | $ | 331,307 | $ | 423,784 | ||||
| Supplemental cash flow information: | ||||||||
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Income taxes (paid), net |
$ | (10,636) | $ | (10,047) | ||||
| Interest (paid) on senior notes | (220) | - | ||||||
| Transatlantic Holdings, Inc. and Subsidiaries | ||||||||
| Consolidated Financial Data | ||||||||
| Comprehensive (Loss) Income Data: | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
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2011 |
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2010 |
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| (in thousands) | ||||||||
| Net (loss) income | $ | (190,152) | $ | 15,875 | ||||
| Other comprehensive (loss) income: | ||||||||
| Net unrealized depreciation of investments, net of tax: | ||||||||
| Net unrealized holding losses of fixed maturities on which | ||||||||
| other-than-temporary impairments were taken | - | (6,713) | ||||||
| Net unrealized holding losses on all other securities | (10,313) | (14,273) | ||||||
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Reclassification adjustment for gains included in net (loss) income |
(58,110) | (13,112) | ||||||
| Deferred income tax benefit on above | 23,948 | 11,934 | ||||||
| (44,475) | (22,164) | |||||||
| Change in retirement plan liabilities, net of tax: | ||||||||
| Change in retirement plan liabilities | (852) | - | ||||||
| Deferred income tax benefit on above | 298 | - | ||||||
| (554) | - | |||||||
| Net unrealized currency translation gain (loss), net of tax: | ||||||||
| Net unrealized currency translation gain (loss) | 8,006 | 118,198 | ||||||
| Deferred income tax charge on above | (2,802) | (41,370) | ||||||
| 5,204 | 76,828 | |||||||
| Other comprehensive (loss) income | (39,825) | 54,664 | ||||||
| Comprehensive (loss) income | $ | (229,977) | $ | 70,539 | ||||
| Transatlantic Holdings, Inc. and Subsidiaries | |||||||||
| Consolidated Financial Data | |||||||||
| Reconciliation of Non-GAAP Measures: | |||||||||
| Three Months Ended | |||||||||
| March 31, | |||||||||
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2011 |
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2010 |
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| (dollars in thousands, except per share amounts) | |||||||||
| Net (loss) income | $ | (190,152) | $ | 15,875 |
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| Total realized net capital (gains) losses, net of tax(1) | (36,018) | 1,228 | |||||||
| Loss on early extinguishment of debt, net of tax(1) | 767 | - | |||||||
| Net operating (loss) income | $ | (225,403) | $ | 17,103 | |||||
| Net (loss) income per common share (diluted) | $ | (3.05) | $ | 0.24 | |||||
| Total realized net capital (gains) losses, net of tax(1) | (0.57) | 0.02 | |||||||
| Loss on early extinguishment of debt, net of tax(1) | 0.01 | - | |||||||
| Net operating (loss) income per common share (diluted) | $ | (3.61) | $ | 0.26 | |||||
| GAAP annualized return on equity | (18.3) | % | 1.6 | % | |||||
| Total realized net capital (gains) losses, net of tax(1) | (3.5) | 0.1 | |||||||
| Loss on early extinguishment of debt, net of tax(1) | 0.1 | - | |||||||
| Annualized operating return on equity | (21.7) | % | 1.7 | % | |||||
| (1) | Assumes a tax rate of 35%. |
CONTACT:
Transatlantic Holdings, Inc.
Thomas V. Cholnoky,
212-365-2292