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EX-99.1 - EX-99.1 - ALTERRA CAPITAL HOLDINGS Ltdd477384dex991.htm
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Exhibit 99.2

 

LOGO

ALTERRA CAPITAL HOLDINGS LIMITED

Investor Financial Supplement

Fourth Quarter 2012

(Unaudited)

This supplement is for information purposes only. It should be read in conjunction with documents filed by Alterra Capital Holdings Limited with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act 1934.

Alterra Capital Holdings Limited

Investors:

Susan Spivak Bernstein, +1-212-898-6640

or

Media:

Kekst and Company

Peter Hill, +1-212-521-4800


ALTERRA CAPITAL HOLDINGS LIMITED

Cautionary note regarding forward-looking information

This supplement includes statements about future economic performance, finances, expectations, plans and prospects of Alterra and Markel, both individually and on a combined basis, that are forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are risks and uncertainties that could cause actual results to differ materially from those expressed in or suggested by such statements. For further information regarding factors affecting future results of Alterra and Markel, please refer to their respective Annual Report on Form 10-K for the year ended December 31, 2011 and Quarterly Reports on Form 10-Q and other documents filed by Alterra and Markel since March 1, 2012 with the Securities Exchange Commission (“SEC”). These documents are also available free of charge, in the case of Alterra, by directing a request to Alterra through Joe Roberts, Chief Financial Officer, or Susan Spivak Bernstein, Senior Vice President, Investor Relations, at 441-295-8800 and, in the case of Markel, by directing a request to Bruce Kay, Investor Relations, at 804-747-0136. Neither Alterra nor Markel undertakes any obligation to update or revise publicly any forward-looking statement whether as a result of new information, future developments or otherwise.

This supplement contains certain forward-looking statements within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about Alterra’s and Markel’s beliefs, plans or expectations, are forward-looking statements. These statements are based on Alterra’s or Markel’s current plans, estimates and expectations. Some forward-looking statements may be identified by use of terms such as “believe,” “anticipate,” “intend,” “expect,” “project,” “plan,” “may,” “should,” “could,” “will,” “estimate,” “predict,” “potential,” “continue,” and similar words, terms or statements of a future or forward-looking nature. In light of the inherent risks and uncertainties in all forward-looking statements, the inclusion of such statements in this supplement should not be considered as a representation by Alterra, Markel or any other person that Alterra’s or Markel’s objectives or plans, both individually and on a combined basis, will be achieved. A non-exclusive list of important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) the occurrence of natural or man-made catastrophic events with a frequency or severity exceeding expectations; (b) the adequacy of loss reserves and the need to adjust such reserves as claims develop over time; (c) the failure of any of the loss limitation methods the parties employ; (d) any adverse change in financial ratings of either company or their subsidiaries; (e) the effect of competition on market trends and pricing; (f) cyclical trends, including with respect to demand and pricing in the insurance and reinsurance markets; (g) changes in general economic conditions, including changes in interest rates and/or equity values in the United States of America and elsewhere; and (h) other factors set forth in Alterra’s and Markel’s recent reports on Form 10-K, Form 10-Q and other documents filed with the SEC by Alterra and Markel.

Risks and uncertainties relating to the proposed transaction include the risks that: (1) the parties will not obtain the requisite shareholder or regulatory approvals for the transaction; (2) the anticipated benefits of the transaction will not be realized or the parties may experience difficulties in successfully integrating the two companies; (3) the parties may not be able to retain key personnel; (4) the conditions to the closing of the proposed merger may not be satisfied or waived; (5) the outcome of any legal proceedings to the extent initiated against Alterra or Markel or its respective directors and officers following the announcement of the proposed merger is uncertain; (6) the acquisition may involve unexpected costs; and (7) the businesses may suffer as a result of uncertainty surrounding the acquisition. These risks, as well as other risks of the combined company and its subsidiaries may be different from what the companies expect, or have previously experienced, and each party’s management may respond differently to any of the aforementioned factors. These risks, as well as other risks associated with the merger, are more fully discussed in the joint proxy statement/prospectus of Markel and Alterra that has been filed with the SEC. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made.

Additional information about the proposed merger and where to find it:

This supplement relates to a proposed merger between Alterra and Markel. On December 27, 2012, Markel filed with the SEC a registration statement on Form S-4, and on January 18, 2013, Markel and Alterra each filed the definitive joint proxy statement/prospectus. This supplement is not a substitute for the definitive joint proxy statement/prospectus or any other document that Markel or Alterra filed or may file with the SEC or send to its shareholders in connection with the proposed merger. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT MAY BE FILED WITH THE SEC OR SENT TO SHAREHOLDERS AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. All documents, when filed, will be available free of charge at the SEC’s website (www.sec.gov) or, in the case of Alterra, by directing a request to Joe Roberts, Chief Financial Officer, or Susan Spivak Bernstein, Senior Vice President, Investor Relations, at 441-295-8800 and, in the case of Markel, by directing a request to Bruce Kay, Investor Relations, at 804-747-0136.

Participants in the solicitation:

Alterra and Markel and their respective directors and executive officers may be deemed to be participants in any solicitation of proxies from both Alterra’s and Markel’s shareholders in favor of the proposed transaction. Information about Alterra’s directors and executive officers and their ownership in Alterra common stock is available in the proxy statement dated March 26, 2012 for Alterra’s 2012 annual general meeting of shareholders. Information about Markel’s directors and executive officers and their ownership of Markel common stock is available in the proxy statement dated March 16, 2012 for Markel’s 2012 annual meeting of shareholders.


ALTERRA CAPITAL HOLDINGS LIMITED

FINANCIAL SUPPLEMENT TABLE OF CONTENTS

 

     Page  

Financial Highlights

     4   

Consolidated Balance Sheets

     5   

Consolidated Statements of Operations - Quarterly

     6   

Consolidated Statements of Operations - Year to date

     7   

Segment Data and Ratios - Quarterly

     8   

Gross Premiums Written by Line of Business - Quarterly

     15   

Segment Data and Ratios - Year to date

     16   

Gross Premiums Written by Line of Business - Year to date

     23   

Investment Portfolio

     24   

New Point IV Summary

     29   

Shareholder Return Analysis

     30   

Earnings Per Share Information

     31   

Operating Income Reconciliation

     32   

Book Value per Share

     33   

Regulation G

     34   


ALTERRA CAPITAL HOLDINGS LIMITED

FINANCIAL HIGHLIGHTS

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     For The Quarters Ended     For The Years Ended              
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2012     Dec. 31, 2011     Previous
Year
Quarter
Change
    Previous
Year to
Date
Change
 

HIGHLIGHTS

            

Net income (loss)

   $ (51,810   $ 30,948      $ 143,806      $ 65,282        (267.4 %)      120.3

Net operating income (loss) [a]

     (49,713     31,685        119,103        96,600        (256.9 %)      23.3

Operating cashflow

     55,875        (39,908     313,113        235,567        (240.0 %)      32.9

Gross premiums written

     357,043        325,983        1,971,458        1,904,066        9.5     3.5

Net premiums earned

     343,632        349,104        1,365,223        1,424,974        (1.6 %)      (4.2 %) 

Total assets

     10,658,250        10,185,847        10,658,250        10,185,847        4.6     4.6

Total shareholders’ equity

     2,839,722        2,809,235        2,839,722        2,809,235        1.1     1.1

PER SHARE

            

Basic earnings per share

            

Net income (loss)

   $ (0.54   $ 0.30      $ 1.47      $ 0.62       

Net operating income (loss) [a]

     (0.52     0.31        1.22        0.92       

Diluted earnings per share

            

Net income (loss)

   $ (0.54   $ 0.30      $ 1.43      $ 0.61       

Net operating income (loss) [a]

     (0.52     0.30        1.18        0.91       

Weighted average shares outstanding - basic

     95,691,699        103,323,377        98,012,424        105,249,683       

Weighted average shares outstanding - diluted

     95,691,699        104,672,891        100,557,352        106,502,893       

Book value per common share [b]

   $ 29.56      $ 27.51      $ 29.56      $ 27.51        7.4     7.4

Diluted book value per share (treasury stock method) [b]

     28.34        26.91        28.34        26.91        5.3     5.3

Diluted tangible book value per share (treasury stock method) [b]

     27.79        26.37        27.79        26.37        5.4     5.4

RATIOS

            

Annualized return on average shareholders’ equity [c]

     (7.2 %)      4.4     5.0     2.3    

Annualized net operating return on average shareholders’ equity [c]

     (6.9 %)      4.5     4.2     3.4    

Loss ratio [d]

     86.0     66.5     68.0     66.5    

Acquisition cost ratio [d]

     19.4     18.5     18.4     18.3    

General and administrative expense ratio [d]

     13.5     12.4     13.1     13.4    

Combined ratio [d]

     119.0     97.4     99.5     98.2    

 

[a] Non-GAAP financial measure. For definition and calculation see page 32.
[b] For calculations see page 33.
[c] Non-GAAP financial measure. For calculations see page 30.
[d] For property and casualty business only.

 

4


ALTERRA CAPITAL HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012     Dec. 31, 2011  
     (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)        

ASSETS

          

Cash and cash equivalents

   $ 440,298      $ 405,809      $ 427,704      $ 394,514      $ 469,477   

Fixed maturities, trading at fair value

     429,246        376,498        211,796        223,592        229,206   

Fixed maturities, available for sale at fair value

     5,647,303        5,728,640        5,709,850        5,518,102        5,501,925   

Fixed maturities, held to maturity at amortized cost

     852,266        837,348        833,990        885,214        874,259   

Equity method investments

     92,050        86,797        90,323        80,430        13,670   

Other investments, at fair value

     316,955        290,073        276,081        252,454        272,845   

Restricted cash and cash equivalents

     254,458        245,747        336,253        450,229        453,367   

Accrued interest income

     65,361        65,236        65,252        64,295        71,322   

Premiums receivable

     729,877        872,948        991,927        869,800        715,154   

Losses and benefits recoverable from reinsurers

     1,289,577        1,149,684        1,083,840        1,108,036        1,068,119   

Deferred acquisition costs

     146,328        166,128        170,904        176,199        145,850   

Prepaid reinsurance premiums

     247,740        303,171        326,014        299,163        212,238   

Trades pending settlement

     27,768        77,802        31,925        111,194        22,887   

Goodwill and intangible assets

     54,751        55,371        55,431        55,771        56,111   

Other assets

     64,272        72,758        85,296        86,785        79,417   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 10,658,250      $ 10,734,010      $ 10,696,586      $ 10,575,778      $ 10,185,847   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES

          

Property and casualty losses

   $ 4,690,344      $ 4,460,045      $ 4,308,316      $ 4,322,847      $ 4,216,538   

Life and annuity benefits

     1,159,545        1,148,317        1,148,304        1,203,752        1,190,697   

Deposit liabilities

     132,910        139,518        158,412        151,058        151,035   

Funds withheld from reinsurers

     92,733        93,190        93,510        92,793        112,469   

Unearned property and casualty premiums

     1,031,633        1,192,203        1,281,406        1,221,788        1,020,639   

Reinsurance balances payable

     157,199        214,202        260,351        201,409        134,354   

Accounts payable and accrued expenses

     107,742        93,810        116,575        90,359        110,380   

Trades pending settlement

     5,890        29,022        37,455        —          —     

Senior notes

     440,532        440,527        440,521        440,510        440,500   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     7,818,528        7,810,834        7,844,850        7,724,516        7,376,612   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SHAREHOLDERS’ EQUITY

          

Common shares (par value $1.00) 96,059,645 shares issued and outstanding

     96,060        95,985        96,853        100,707        102,102   

Additional paid-in capital

     1,721,241        1,715,748        1,729,311        1,807,287        1,847,034   

Accumulated other comprehensive income

     244,172        265,232        202,229        185,146        166,957   

Retained earnings

     778,249        846,211        823,343        758,122        693,142   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     2,839,722        2,923,176        2,851,736        2,851,262        2,809,235   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 10,658,250      $ 10,734,010      $ 10,696,586      $ 10,575,778      $ 10,185,847   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value per share

   $ 29.56      $ 30.45      $ 29.44      $ 28.31      $ 27.51   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted book value per share (treasury stock method)

   $ 28.34      $ 29.57      $ 28.68      $ 27.67      $ 26.91   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted tangible book value per share (treasury stock method) [a]

   $ 27.79      $ 29.01      $ 28.12      $ 27.13      $ 26.37   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Debt-to-capital ratio [b]

     13.4     13.1     13.4     13.4     13.6

 

[a] Non-GAAP financial measure. For calculations see page 33.
[b] Calculated as debt, being senior notes divided by shareholders’ equity plus debt.

 

5


ALTERRA CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - QUARTERLY (Unaudited)

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     FOR THE QUARTERS ENDED  
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

REVENUES

            

Gross premiums written

   $ 357,043      $ 386,228      $ 566,857      $ 661,330      $ 325,983      $ 315,398   

Reinsurance premiums ceded

     (113,881     (123,477     (189,879     (224,462     (107,203     (77,617
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 243,162      $ 262,751      $ 376,978      $ 436,868      $ 218,780      $ 237,781   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 504,757      $ 483,222      $ 496,839      $ 477,867      $ 460,636      $ 445,683   

Earned premiums ceded

     (161,125     (150,584     (146,061     (139,692     (111,532     (103,129
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     343,632        332,638        350,778        338,175        349,104        342,554   

Net investment income

     52,039        53,518        54,729        58,678        57,080        61,080   

Net realized and unrealized gains (losses) on investments

     11,476        20,436        13,481        25,493        (5,775     9,825   

Total other-than-temporary impairment losses

     (3,143     (522     (420     (5,467     (703     (3,918

Portion of loss recognized in other comprehensive income (loss) before taxes

     2,766        (70     (150     98        1        2,144   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net impairment losses recognized in earnings

     (377     (592     (570     (5,369     (702     (1,774

Other income

     1,425        1,586        1,928        5,362        2,017        2,862   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     408,195        407,586        420,346        422,339        401,724        414,547   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LOSSES AND EXPENSES

            

Net losses and loss expenses

     295,123        228,529        196,764        206,029        231,533        179,047   

Claims and policy benefits

     17,006        11,838        13,272        13,466        14,564        18,551   

Acquisition costs

     66,595        61,923        62,171        59,724        64,380        53,563   

Interest expense

     8,355        9,026        9,635        8,628        13,296        7,866   

Net foreign exchange (gains) losses

     (71     (82     25        (32     (753     (382

Merger and acquisition expenses

     3,289        —          —          —          —          500   

General and administrative expenses

     55,188        57,515        58,777        60,082        54,657        76,759   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total losses and expenses

     445,485        368,749        340,644        347,897        377,677        335,904   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE TAXES

     (37,290     38,837        79,702        74,442        24,047        78,643   

Income tax expense (benefit)

     14,520        1,185        762        (4,582     (6,901     (1,027
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

     (51,810     37,652        78,940        79,024        30,948        79,670   

Change in net unrealized gains and losses on fixed maturities, net of tax

     (11,752     54,301        23,444        16,819        (3,670     (87,633

Foreign currency translation adjustment

     (9,308     8,702        (6,361     1,370        (2,398     (3,746
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME (LOSS)

   $ (72,870   $ 100,655      $ 96,023      $ 97,213      $ 24,880      $ (11,709
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

KEY RATIOS/PER SHARE DATA

            

Loss ratio [a]

     86.0     68.8     56.2     61.0     66.5     52.5

Acquisition cost ratio [b]

     19.4     18.6     17.7     17.6     18.5     15.7

General and administrative expense ratio [c]

     13.5     12.4     12.6     14.0     12.4     16.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio [d]

     119.0     99.9     86.6     92.6     97.4     84.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share

   $ (0.54   $ 0.39      $ 0.79      $ 0.78      $ 0.30      $ 0.70   

Net income (loss) per diluted share

   $ (0.54   $ 0.38      $ 0.77      $ 0.77      $ 0.30      $ 0.69   

Net operating income (loss) per share - diluted [e]

   $ (0.52   $ 0.33      $ 0.68      $ 0.66      $ 0.30      $ 0.66   

Annualized ROAE [f]

     (7.2 %)      5.2     11.1     11.2     4.4     10.7

Annualized net operating ROAE [f]

     (6.9 %)      4.5     9.7     9.6     4.5     10.2

 

[a] The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned for the property & casualty business.
[b] The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned for the property & casualty business.
[c] The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned for the property & casualty business.
[d] The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned for the property & casualty business.
[e] Non-GAAP financial measure. See page 32 for calculation of net operating income per share - diluted.
[f] Non-GAAP financial measure. See page 30 for calculation of annualized return on average shareholders’ equity (ROAE) and annualized net operating ROAE.

Percentage totals may not add due to rounding.

 

6


ALTERRA CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - YEAR TO DATE AND PRIOR YEARS (Unaudited)

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2010 [g]  

REVENUES

      

Gross premiums written

   $ 1,971,458      $ 1,904,066      $ 1,410,731   

Reinsurance premiums ceded

     (651,699     (472,077     (371,163
  

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 1,319,759      $ 1,431,989      $ 1,039,568   
  

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 1,962,685      $ 1,845,837      $ 1,578,647   

Earned premiums ceded

     (597,462     (420,863     (406,161
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     1,365,223        1,424,974        1,172,486   

Net investment income

     218,964        234,846        222,458   

Net realized and unrealized gains (losses) on investments

     70,886        (38,339     16,872   

Total other-than-temporary impairment losses

     (9,552     (2,706     (5,873

Portion of loss recognized in other comprehensive income (loss) before taxes

     2,644        (239     3,228   
  

 

 

   

 

 

   

 

 

 

Net impairment losses recognized in earnings

     (6,908     (2,945     (2,645

Other income

     10,301        5,396        4,808   
  

 

 

   

 

 

   

 

 

 

Total revenues

     1,658,466        1,623,932        1,413,979   
  

 

 

   

 

 

   

 

 

 

LOSSES AND EXPENSES

      

Net losses and loss expenses

     926,445        945,593        654,841   

Claims and policy benefits

     55,582        59,382        65,213   

Acquisition costs

     250,413        261,102        187,464   

Interest expense

     35,644        43,688        28,275   

Net foreign exchange (gains) losses

     (160     1,312        (115

Merger and acquisition expenses

     3,289        —          (48,776

General and administrative expenses

     231,562        257,074        220,586   
  

 

 

   

 

 

   

 

 

 

Total losses and expenses

     1,502,775        1,568,151        1,107,488   
  

 

 

   

 

 

   

 

 

 

INCOME BEFORE TAXES

     155,691        55,781        306,491   

Income tax expense (benefit)

     11,885        (9,501     4,156   
  

 

 

   

 

 

   

 

 

 

NET INCOME

     143,806        65,282        302,335   

Change in net unrealized gains and losses on fixed maturities, net of tax

     82,812        86,104        81,406   

Foreign currency translation adjustment

     (5,597     (18,093     (7,891
  

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME

   $ 221,021      $ 133,293      $ 375,850   
  

 

 

   

 

 

   

 

 

 

KEY RATIOS/PER SHARE DATA

      

Loss ratio [a]

     68.0     66.5     56.1

Acquisition cost ratio [b]

     18.4     18.3     16.0

General and administrative expense ratio [c]

     13.1     13.4     13.6
  

 

 

   

 

 

   

 

 

 

Combined ratio [d]

     99.5     98.2     85.7
  

 

 

   

 

 

   

 

 

 

Net income per share - basic

   $ 1.47      $ 0.62      $ 3.19   

Net income per share - diluted

   $ 1.43      $ 0.61      $ 3.17   

Net operating income per share - diluted [e]

   $ 1.18      $ 0.91      $ 2.64   

Annualized ROAE [f]

     5.0     2.3     12.3

Annualized Net Operating ROAE [f]

     4.2     3.4     10.2

 

[a] The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned for the property & casualty business.
[b] The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned for the property & casualty business.
[c] The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned for the property & casualty business.
[d] The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned for the property & casualty business.
[e] Non-GAAP financial measure. See page 32 for calculation of net operating income per share - diluted.
[f] Non-GAAP financial measure. See page 30 for calculation of annualized return on average shareholders’ equity (ROAE) and annualized net operating ROAE.
[g] Includes the results for Harbor Point from May 12, 2010.

Percentage totals may not add due to rounding.

 

7


ALTERRA CAPITAL HOLDINGS LIMITED

SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA - QUARTER ENDED DECEMBER, 2012 (Unaudited)

(Expressed in thousands of United States Dollars)

 

     Property & Casualty                    
     Global
Insurance
    U.S.
Insurance
    Reinsurance     Alterra at
Lloyd’s
    Total     Life &
Annuity
Reinsurance
    Corporate     Consolidated  

Gross premiums written

   $ 97,964      $ 94,587      $ 125,630      $ 38,233      $ 356,414      $ 629      $ —        $ 357,043   

Reinsurance premiums ceded

     (48,698     (55,863     (10,950     1,704        (113,807     (74     —          (113,881
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 49,266      $ 38,724      $ 114,680      $ 39,937      $ 242,607      $ 555      $ —        $ 243,162   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 94,486      $ 98,142      $ 240,252      $ 71,248      $ 504,128      $ 629      $ —        $ 504,757   

Earned premiums ceded

     (47,524     (62,839     (41,447     (9,241     (161,051     (74     —          (161,125
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     46,962        35,303        198,805        62,007        343,077        555        —          343,632   

Net losses and loss expenses

     (39,503     (85,476     (130,869     (39,275     (295,123     —          —          (295,123

Claims and policy benefits

     —          —          —          —          —          (17,006     —          (17,006

Acquisition costs

     (552     (4,915     (49,339     (11,880     (66,686     91        —          (66,595

General and administrative expenses

     (7,871     (10,849     (19,002     (8,722     (46,444     (76     —          (46,520

Other income

     —          —          1,400        —          1,400        —          —          1,400   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underwriting income (loss)

   $ (964   $ (65,937   $ 995      $ 2,130      $ (63,776     n/a        —          n/a   

Net investment income

               13,727        38,312        52,039   

Net realized and unrealized gains on investments

                 11,476        11,476   

Net impairment losses recognized in earnings

                 (377     (377

Corporate other income

                 25        25   

Interest expense

                 (8,355     (8,355

Net foreign exchange gains

                 71        71   

Merger and acquisition expense

                 (3,289     (3,289

Corporate general and administrative expenses

                 (8,668     (8,668
            

 

 

   

 

 

   

 

 

 

Income (loss) before taxes

             $ (2,709   $ 29,195      $ (37,290
            

 

 

   

 

 

   

 

 

 

Loss ratio [a]

     84.1     242.1     65.8     63.3     86.0      

Acquisition cost ratio [b]

     1.2     13.9     24.8     19.2     19.4      

General and administrative expense ratio [c]

     16.8     30.7     9.6     14.1     13.5      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Combined ratio [d]

     102.1     286.8     100.2     96.6     119.0      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

[a] The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned for the property & casualty business.
[b] The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned for the property & casualty business.
[c] The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned for the property & casualty business.
[d] The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned for the property & casualty business.
n/a Not applicable.

Percentage totals may not add due to rounding.

 

8


ALTERRA CAPITAL HOLDINGS LIMITED

CONSOLIDATED UNDERWRITING RATIOS - QUARTER ENDED DECEMBER 31, 2012 (Unaudited)

 

     Property & Casualty  
     Global
Insurance
    U.S.
Insurance
    Reinsurance     Alterra
at Lloyd’s
    Total  

UNDERWRITING RATIOS

          

Loss ratio

     84.1     242.1     65.8     63.3     86.0

Acquisition cost ratio

     1.2     13.9     24.8     19.2     19.4

General and administrative expense ratio

     16.8     30.7     9.6     14.1     13.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     102.1     286.8     100.2     96.6     119.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EFFECT OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT FAVORABLE / (UNFAVORABLE)

          

Loss ratio [a]

     29.8     (19.8 %)      13.1     6.3     10.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT UNDERWRITING RATIOS

          

Loss ratio

     113.9     222.3     78.9     69.6     96.8

Acquisition cost ratio

     1.2     13.9     24.8     19.2     19.4

General and administrative expense ratio

     16.8     30.7     9.6     14.1     13.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     131.9     267.0     113.3     102.9     129.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

CONSOLIDATED UNDERWRITING RATIOS - QUARTER ENDED DECEMBER 30, 2011 (Unaudited)

 

     Property & Casualty  
     Global
Insurance
    U.S.
Insurance
    Reinsurance     Alterra
at Lloyd’s
    Total  

UNDERWRITING RATIOS

          

Loss ratio

     31.4     80.6     51.9     169.8     66.5

Acquisition cost ratio

     2.2     14.9     22.7     21.0     18.5

General and administrative expense ratio

     14.4     22.0     8.1     19.2     12.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     48.1     117.5     82.7     210.0     97.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EFFECT OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT FAVORABLE / (UNFAVORABLE)

          

Loss ratio [a]

     51.4     (17.0 %)      10.8     14.5     12.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT UNDERWRITING RATIOS

          

Loss ratio

     82.8     63.6     62.7     184.3     78.9

Acquisition cost ratio

     2.2     14.9     22.7     21.0     18.5

General and administrative expense ratio

     14.4     22.0     8.1     19.2     12.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     99.4     100.5     93.5     224.5     109.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

[a] Prior accident year reserve development excludes changes in reserves resulting from changes in premium estimates on prior years’ contracts.

Percentage totals may not add due to rounding.

 

9


ALTERRA CAPITAL HOLDINGS LIMITED

GLOBAL INSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE QUARTERS ENDED  
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 97,964      $ 81,627      $ 125,276      $ 66,771      $ 97,660      $ 101,116   

Reinsurance premiums ceded

     (48,698     (44,157     (53,224     (43,251     (50,172     (51,700
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 49,266      $ 37,470      $ 72,052      $ 23,520      $ 47,488      $ 49,416   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 94,486      $ 92,526      $ 92,803      $ 94,103      $ 91,077      $ 98,024   

Earned premiums ceded

     (47,524     (48,392     (45,367     (47,133     (42,827     (41,104
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     46,962        44,134        47,436        46,970        48,250        56,920   

Net losses and loss expenses

     (39,503     (31,631     (22,745     (18,061     (15,152     (31,842

Acquisition costs

     (552     (124     (239     (59     (1,084     (1,628

General and administrative expenses

     (7,871     (6,328     (6,913     (6,481     (6,952     (9,782

Other income (loss)

     —          —          1        815        (128     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underwriting income (loss)

   $ (964   $ 6,051      $ 17,540      $ 23,184      $ 24,934      $ 13,668   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss ratio

     84.1     71.7     47.9     38.5     31.4     55.9

Acquisition cost ratio

     1.2     0.3     0.5     0.1     2.2     2.9

General and administrative expense ratio

     16.8     14.3     14.6     13.8     14.4     17.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     102.1     86.3     63.0     52.4     48.1     76.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

10


ALTERRA CAPITAL HOLDINGS LIMITED

U.S. INSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE QUARTERS ENDED  
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 94,587      $ 88,006      $ 112,186      $ 104,282      $ 102,279      $ 77,745   

Reinsurance premiums ceded

     (55,863     (40,083     (51,524     (70,494     (45,443     (20,984
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 38,724      $ 47,923      $ 60,662      $ 33,788      $ 56,836      $ 56,761   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 98,142      $ 100,187      $ 100,300      $ 96,241      $ 90,048      $ 82,828   

Earned premiums ceded

     (62,839     (52,222     (44,490     (40,456     (34,078     (28,883
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     35,303        47,965        55,810        55,785        55,970        53,945   

Net losses and loss expenses

     (85,476     (46,489     (37,333     (37,564     (45,129     (35,723

Acquisition costs

     (4,915     (4,404     (6,169     (7,696     (8,349     (8,755

General and administrative expenses

     (10,849     (11,337     (12,215     (12,257     (12,299     (9,582

Other income

     —          —          —          81        84        68   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underwriting income (loss)

   $ (65,937   $ (14,265   $ 93      $ (1,651   $ (9,723   $ (47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss ratio

     242.1     96.9     66.9     67.3     80.6     66.2

Acquisition cost ratio

     13.9     9.2     11.1     13.8     14.9     16.2

General and administrative expense ratio

     30.7     23.6     21.9     22.0     22.0     17.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     286.8     129.7     99.8     103.1     117.5     100.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

11


ALTERRA CAPITAL HOLDINGS LIMITED

REINSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE QUARTERS ENDED  
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 125,630      $ 172,796      $ 256,333      $ 343,694      $ 96,942      $ 114,173   

Reinsurance premiums ceded

     (10,950     (30,318     (57,908     (72,109     (2,546     (2,908
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 114,680      $ 142,478      $ 198,425      $ 271,585      $ 94,396      $ 111,265   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 240,252      $ 223,231      $ 233,352      $ 214,184      $ 225,492      $ 218,513   

Earned premiums ceded

     (41,447     (36,446     (32,941     (32,036     (19,521     (21,082
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     198,805        186,785        200,411        182,148        205,971        197,431   

Net losses and loss expenses

     (130,869     (98,067     (103,656     (111,729     (106,906     (100,126

Acquisition costs

     (49,339     (47,159     (48,164     (42,416     (46,839     (39,296

General and administrative expenses

     (19,002     (16,259     (17,061     (19,311     (16,690     (26,640

Other income (loss)

     1,400        1,560        1,895        4,441        (100     (216
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underwriting income

   $ 995      $ 26,860      $ 33,425      $ 13,133      $ 35,436      $ 31,153   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss ratio

     65.8     52.5     51.7     61.3     51.9     50.7

Acquisition cost ratio

     24.8     25.2     24.0     23.3     22.7     19.9

General and administrative expense ratio

     9.6     8.7     8.5     10.6     8.1     13.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     100.2     86.5     84.3     95.2     82.7     84.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

12


ALTERRA CAPITAL HOLDINGS LIMITED

ALTERRA AT LLOYD’S SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE QUARTERS ENDED  
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 38,233      $ 43,074      $ 72,008      $ 146,143      $ 27,933      $ 20,427   

Reinsurance premiums ceded

     1,704        (8,835     (27,068     (38,590     (8,888     (1,859
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 39,937      $ 34,239      $ 44,940      $ 107,553      $ 19,045      $ 18,568   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 71,248      $ 66,553      $ 69,330      $ 72,899      $ 52,850      $ 44,381   

Earned premiums ceded

     (9,241     (13,440     (23,108     (20,049     (14,952     (11,894
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     62,007        53,113        46,222        52,850        37,898        32,487   

Net losses and loss expenses

     (39,275     (52,342     (33,030     (38,675     (64,346     (11,356

Acquisition costs

     (11,880     (10,104     (7,443     (9,434     (7,977     (3,963

General and administrative expenses

     (8,722     (7,342     (7,856     (9,095     (7,271     (10,260

Other income

     —          1        7        —          851        2,006   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underwriting income (loss)

   $ 2,130      $ (16,674   $ (2,100   $ (4,354   $ (40,845   $ 8,914   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss ratio

     63.3     98.5     71.5     73.2     169.8     35.0

Acquisition cost ratio

     19.2     19.0     16.1     17.9     21.0     12.2

General and administrative expense ratio

     14.1     13.8     17.0     17.2     19.2     31.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     96.6     131.4     104.6     108.2     210.0     78.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

13


ALTERRA CAPITAL HOLDINGS LIMITED

LIFE AND ANNUITY REINSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE QUARTERS ENDED  
     Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 629      $ 725      $ 1,054      $ 440      $ 1,169      $ 1,937   

Reinsurance premiums ceded

     (74     (84     (155     (18     (154     (166
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 555      $ 641      $ 899      $ 422      $ 1,015      $ 1,771   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 629      $ 725      $ 1,054      $ 440      $ 1,169      $ 1,937   

Earned premiums ceded

     (74     (84     (155     (18     (154     (166
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     555        641        899        422        1,015        1,771   

Net investment income

     13,727        13,224        13,466        14,776        11,515        12,084   

Net realized and unrealized (losses) gains on investments

     —          —          —          —          (5,509     3,981   

Other income

     —          —          —          —          413        357   

Claims and policy benefits

     (17,006     (11,838     (13,272     (13,466     (14,564     (18,551

Acquisition costs

     91        (132     (156     (119     (131     79   

General and administrative expenses

     (76     (74     (119     (34     (67     (1,088
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before taxes

   $ (2,709   $ 1,821      $ 818      $ 1,579      $ (7,328   $ (1,367
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

14


ALTERRA CAPITAL HOLDINGS LIMITED

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS (Unaudited)

(Expressed in thousands of United States Dollars)

 

          FOR THE QUARTERS ENDED  
          Dec. 31, 2012     Sept. 30, 2012     June 30, 2012     Mar. 31, 2012      Dec. 31, 2011     Dec. 31, 2010  

Property & Casualty:

                

Global Insurance:

                

Aviation

   S    $ 16,262      $ 5,996      $ 3,954      $ 1,302       $ 20,410      $ 22,677   

Excess Liability

   L      22,387        23,746        31,435        25,186         21,281        18,703   

Professional Liability

   L      46,026        36,558        59,407        24,466         40,360        47,737   

Property

   S      13,289        15,327        30,480        15,817         15,609        11,999   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
        97,964        81,627        125,276        66,771         97,660        101,116   

U.S. Insurance:

                

General/ Excess Liability

   L      23,675        18,240        23,683        34,667         31,618        28,572   

Marine

   S      21,719        25,333        28,634        25,201         23,806        17,758   

Professional Liability

   L      19,712        17,185        13,133        11,208         15,720        2,928   

Property

   S      29,481        27,248        46,736        33,206         31,135        28,487   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
        94,587        88,006        112,186        104,282         102,279        77,745   

Reinsurance:

                

Agriculture

   S      (305     576        5,298        17,505         186        (1,406

Auto

   S      10,850        2,491        39,590        512         20,548        22,578   

Aviation

   S      531        16,456        5,820        5,525         337        2,596   

Credit/ Surety

   S      6,844        19,018        3,266        35,850         6,764        1,557   

General Casualty

   L      33,449        11,182        23,625        14,956         13,130        18,078   

Marine & Energy

   S      2,587        3,259        6,610        13,395         3,407        (1,549

Medical Malpractice

   L      (2,238     5,565        8,105        11,276         1,673        19,554   

Other

   S      (23     (882     549        4,437         (181     520   

Professional Liability

   L      33,430        34,585        37,246        59,458         20,270        28,538   

Property

   S      35,547        68,266        117,629        161,124         21,645        9,134   

Whole Account

   S/L      1,824        2,879        191        1,408         2,408        289   

Workers’ Compensation

   L      3,134        9,401        8,404        18,248         6,755        14,284   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
        125,630        172,796        256,333        343,694         96,942        114,173   

Alterra at Lloyd’s:

                

Accident & Health

   S      7,789        9,574        8,250        17,432         5,646        5,570   

Agriculture

   S      (35     (2,627     613        20,370         —           —      

Aviation

   S      7,667        2,914        3,220        2,486         5,562        5,224   

Financial Institutions

   L      7,368        6,566        5,400        6,904         8,137        384   

International Casualty

   L      2,135        6,093        8,423        49,268         1,947        1,930   

Marine

   S      2,240        2,014        2,282        2,726         1,493        —      

Professional Liability

   L      3,537        4,980        6,108        5,428         1,868        4,204   

Property

   S      7,532        13,560        37,712        41,529         3,280        3,115   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
        38,233        43,074        72,008        146,143         27,933        20,427   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Aggregate Property & Casualty

      $ 356,414      $ 385,503      $ 565,803      $ 660,890       $ 324,814      $ 313,461   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Life & Annuity:

                

Life

      $ 629      $ 725      $ 1,407      $ 87       $ 399      $ 808   

Annuity

        —          —          (353     353         770        1,129   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Aggregate Life & Annuity

      $ 629      $ 725      $ 1,054      $ 440       $ 1,169      $ 1,937   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
                
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Aggregate Property & Casualty and Life & Annuity

      $ 357,043      $ 386,228      $ 566,857      $ 661,330       $ 325,983      $ 315,398   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

S = Short tail lines

      $ 162,887      $ 209,963      $ 340,739      $ 399,121       $ 160,851      $ 128,405   

L = Long tail lines

        193,527        175,540        225,064        261,769         163,963        185,056   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Aggregate Property & Casualty

      $ 356,414      $ 385,503      $ 565,803      $ 660,890       $ 324,814      $ 313,461   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Property [a]

      $ 85,849      $ 124,401      $ 232,557      $ 251,676       $ 71,669      $ 52,735   

Casualty [b]

        192,615        174,101        224,969        261,065         162,759        184,912   

Specialty [c]

        77,950        87,001        108,277        148,149         90,386        75,814   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Aggregate Property & Casualty

      $ 356,414      $ 385,503      $ 565,803      $ 660,890       $ 324,814      $ 313,461   
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

[a] Property includes property lines of business.
[b] Casualty includes excess liability, financial institutions, general liability, general casualty, international casualty, medical malpractice, professional liability and workers’ compensation lines of business.
[c] Specialty includes accident & health, agriculture, auto, aviation, credit/surety, energy, marine, other, and whole account lines of business.

 

15


ALTERRA CAPITAL HOLDINGS LIMITED

SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA - YEAR ENDED DECEMBER 31, 2012 (Unaudited)

(Expressed in thousands of United States Dollars)

 

    Property & Casualty     Life &
Annuity
Reinsurance
             
    Global
Insurance
    U.S.
Insurance
    Reinsurance     Alterra at
Lloyd’s
    Total       Corporate     Consolidated  

Gross premiums written

  $ 371,638      $ 399,061      $ 898,453      $ 299,458      $ 1,968,610      $ 2,848      $ —         $ 1,971,458   

Reinsurance premiums ceded

    (189,330     (217,964     (171,285     (72,789     (651,368     (331     —           (651,699
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

  $ 182,308      $ 181,097      $ 727,168      $ 226,669      $ 1,317,242      $ 2,517      $ —         $ 1,319,759   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earned premiums

  $ 373,918      $ 394,870      $ 911,019      $ 280,030      $ 1,959,837      $ 2,848      $ —         $ 1,962,685   

Earned premiums ceded

    (188,416     (200,007     (142,870     (65,838     (597,131     (331     —           (597,462
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

    185,502        194,863        768,149        214,192        1,362,706        2,517        —           1,365,223   

Net losses and loss expenses

    (111,940     (206,862     (444,321     (163,322     (926,445     —           —           (926,445

Claims and policy benefits

    —           —           —           —           —           (55,582     —           (55,582

Acquisition costs

    (974     (23,184     (187,078     (38,861     (250,097     (316     —           (250,413

General and administrative expenses

    (27,593     (46,658     (71,633     (33,015     (178,899     (303     —           (179,202

Other income

    816        81        9,296        8        10,201        —           —           10,201   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Underwriting income (loss)

    45,811        (81,760     74,413        (20,998     17,466        n/a        —           n/a   

Net investment income

              55,193        163,771        218,964   

Net realized and unrealized gains on investments

                70,886        70,886   

Net impairment losses recognized in earnings

                (6,908     (6,908

Corporate other income

                100        100   

Interest expense

                (35,644     (35,644

Net foreign exchange gains

                160        160   

Merger and acquisition expenses

                (3,289     (3,289

Corporate general and administrative expenses

                (52,360     (52,360
           

 

 

   

 

 

   

 

 

 

Income before taxes

            $ 1,509      $ 136,716      $ 155,691   
           

 

 

   

 

 

   

 

 

 

Loss ratio [a]

    60.3     106.2     57.8     76.3     68.0      

Acquisition cost ratio [b]

    0.5     11.9     24.4     18.1     18.4      

General and administrative expense ratio [c]

    14.9     23.9     9.3     15.4     13.1      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Combined ratio [d]

    75.7     142.0     91.5     109.8     99.5      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

[a] The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned for the property & casualty business.
[b] The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned for the property & casualty business.
[c] The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned for the property & casualty business.
[d] The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned for the property & casualty business.
n/a Not applicable.

Percentage totals may not add due to rounding.

 

16


ALTERRA CAPITAL HOLDINGS LIMITED

CONSOLIDATED UNDERWRITING RATIOS - YEAR ENDED DECEMBER 31, 2012 (Unaudited)

 

     Property & Casualty  
     Global
Insurance
    U.S.
Insurance
    Reinsurance     Alterra at
Lloyd’s
    Total  

UNDERWRITING RATIOS

          

Loss ratio

     60.3     106.2     57.8     76.3     68.0

Acquisition cost ratio

     0.5     11.9     24.4     18.1     18.4

General and administrative expense ratio

     14.9     23.9     9.3     15.4     13.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     75.7     142.0     91.5     109.8     99.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EFFECT OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT FAVORABLE / (UNFAVORABLE)

          

Loss ratio [a]

     23.9     (4.1 %)      6.9     0.5     6.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT UNDERWRITING RATIOS

          

Loss ratio

     84.2     102.1     64.8     76.8     74.6

Acquisition cost ratio

     0.5     11.9     24.4     18.1     18.4

General and administrative expense ratio

     14.9     23.9     9.3     15.4     13.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     99.6     137.9     98.5     110.3     106.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

CONSOLIDATED UNDERWRITING RATIOS - YEAR ENDED DECEMBER 31, 2011 (Unaudited)

 

     Property & Casualty  
     Global
Insurance
    U.S.
Insurance
    Reinsurance     Alterra at
Lloyd’s
    Total  

UNDERWRITING RATIOS

          

Loss ratio

     48.6     68.8     64.0     96.7     66.5

Acquisition cost ratio

     (0.3 %)      16.3     22.2     22.5     18.3

General and administrative expense ratio

     15.0     20.2     10.0     19.1     13.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     63.4     105.3     96.3     138.3     98.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EFFECT OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT FAVORABLE / (UNFAVORABLE)

          

Loss ratio [a]

     34.6     (4.5 %)      9.5     10.6     10.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT UNDERWRITING RATIOS

          

Loss ratio

     83.2     64.3     73.6     107.3     77.3

Acquisition cost ratio

     (0.3 %)      16.3     22.2     22.5     18.3

General and administrative expense ratio

     15.0     20.2     10.0     19.1     13.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     98.0     100.8     105.8     148.9     109.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

[a] Prior accident year reserve development excludes changes in reserves resulting from changes in premium estimates on prior years’ contracts.

Percentage totals may not add due to rounding.

 

17


ALTERRA CAPITAL HOLDINGS LIMITED

GLOBAL INSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 371,638      $ 365,761      $ 370,120   

Reinsurance premiums ceded

     (189,330     (181,454     (170,608
  

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 182,308      $ 184,307      $ 199,512   
  

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 373,918      $ 364,087      $ 391,716   

Earned premiums ceded

     (188,416     (175,348     (173,123
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     185,502        188,739        218,593   

Net losses and loss expenses

     (111,940     (91,753     (128,823

Acquisition costs

     (974     517        (3,381

General and administrative expenses

     (27,593     (28,377     (28,615

Other income

     816        686        760   
  

 

 

   

 

 

   

 

 

 

Underwriting income

   $ 45,811      $ 69,812      $ 58,534   
  

 

 

   

 

 

   

 

 

 

Loss ratio

     60.3     48.6     58.9

Acquisition cost ratio

     0.5     (0.3 %)      1.5

General and administrative expense ratio

     14.9     15.0     13.1
  

 

 

   

 

 

   

 

 

 

Combined ratio

     75.7     63.4     73.6
  

 

 

   

 

 

   

 

 

 

 

18


ALTERRA CAPITAL HOLDINGS LIMITED

U.S. INSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 399,061      $ 374,696      $ 323,990   

Reinsurance premiums ceded

     (217,964     (142,566     (98,576
  

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 181,097      $ 232,130      $ 225,414   
  

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 394,870      $ 337,041      $ 311,950   

Earned premiums ceded

     (200,007     (113,718     (125,218
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     194,863        223,323        186,732   

Net losses and loss expenses

     (206,862     (153,558     (118,337

Acquisition costs

     (23,184     (36,404     (28,444

General and administrative expenses

     (46,658     (45,171     (36,015

Other income

     81        279        507   
  

 

 

   

 

 

   

 

 

 

Underwriting income (loss)

   $ (81,760   $ (11,531   $ 4,443   
  

 

 

   

 

 

   

 

 

 

Loss ratio

     106.2     68.8     63.4

Acquisition cost ratio

     11.9     16.3     15.2

General and administrative expense ratio

     23.9     20.2     19.3
  

 

 

   

 

 

   

 

 

 

Combined ratio

     142.0     105.3     97.9
  

 

 

   

 

 

   

 

 

 

 

19


ALTERRA CAPITAL HOLDINGS LIMITED

REINSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 898,453      $ 907,186      $ 531,912   

Reinsurance premiums ceded

     (171,285     (83,984     (64,131
  

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 727,168      $ 823,202      $ 467,781   
  

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 911,019      $ 916,688      $ 705,398   

Earned premiums ceded

     (142,870     (70,510     (71,627
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     768,149        846,178        633,771   

Net losses and loss expenses

     (444,321     (541,959     (352,491

Acquisition costs

     (187,078     (187,853     (132,831

General and administrative expenses

     (71,633     (85,019     (70,639

Other income

     9,296        1,225        —      
  

 

 

   

 

 

   

 

 

 

Underwriting income

   $ 74,413      $ 32,572      $ 77,810   
  

 

 

   

 

 

   

 

 

 

Loss ratio

     57.8     64.0     55.6

Acquisition cost ratio

     24.4     22.2     21.0

General and administrative expense ratio

     9.3     10.0     11.1
  

 

 

   

 

 

   

 

 

 

Combined ratio

     91.5     96.3     87.7
  

 

 

   

 

 

   

 

 

 

 

20


ALTERRA CAPITAL HOLDINGS LIMITED

ALTERRA AT LLOYD’S SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 299,458      $ 253,067      $ 179,774   

Reinsurance premiums ceded

     (72,789     (63,708     (37,448
  

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 226,669      $ 189,359      $ 142,326   
  

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 280,030      $ 224,665      $ 164,648   

Earned premiums ceded

     (65,838     (60,922     (35,793
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     214,192        163,743        128,855   

Net losses and loss expenses

     (163,322     (158,323     (55,190

Acquisition costs

     (38,861     (36,805     (22,447

General and administrative expenses

     (33,015     (31,304     (23,965

Other income

     8        1,204        2,534   
  

 

 

   

 

 

   

 

 

 

Underwriting income (loss)

   $ (20,998   $ (61,485   $ 29,787   
  

 

 

   

 

 

   

 

 

 

Loss ratio

     76.3     96.7     42.8

Acquisition cost ratio

     18.1     22.5     17.4

General and administrative expense ratio

     15.4     19.1     18.6
  

 

 

   

 

 

   

 

 

 

Combined ratio

     109.8     138.3     78.8
  

 

 

   

 

 

   

 

 

 

 

21


ALTERRA CAPITAL HOLDINGS LIMITED

LIFE AND ANNUITY REINSURANCE SEGMENT DATA (Unaudited)

(Expressed in thousands of United States Dollars)

 

     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2010  

Gross premiums written

   $ 2,848      $ 3,356      $ 4,935   

Reinsurance premiums ceded

     (331     (365     (400
  

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 2,517      $ 2,991      $ 4,535   
  

 

 

   

 

 

   

 

 

 

Earned premiums

   $ 2,848      $ 3,356      $ 4,935   

Earned premiums ceded

     (331     (365     (400
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     2,517        2,991        4,535   

Net investment income

     55,193        48,534        49,785   

Net realized and unrealized (losses) gains on investments

     —           (10,408     11,358   

Other income

     —           382        286   

Claims and policy benefits

     (55,582     (59,382     (65,213

Acquisition costs

     (316     (557     (361

General and administrative expenses

     (303     (648     (2,964
  

 

 

   

 

 

   

 

 

 

Income (loss) before taxes

   $ 1,509      $ (19,088   $ (2,574
  

 

 

   

 

 

   

 

 

 

 

22


ALTERRA CAPITAL HOLDINGS LIMITED

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS (Unaudited)

(Expressed in thousands of United States Dollars)

 

          FOR THE YEARS ENDED  
          Dec. 31, 2012      Dec. 31, 2011      Dec. 31, 2010  

Property & Casualty:

           

Global Insurance:

           

Aviation

   S    $ 27,514       $ 32,376       $ 39,888   

Excess Liability

   L      102,754         98,582         89,933   

Professional Liability

   L      166,457         157,881         177,199   

Property

   S      74,913         76,922         63,100   
     

 

 

    

 

 

    

 

 

 
        371,638         365,761         370,120   

U.S. Insurance:

           

General Liability

   L      100,265         104,654         104,777   

Marine

   S      100,887         88,493         67,454   

Professional Liability

   L      61,238         44,169         12,454   

Property

   S      136,671         137,380         139,305   
     

 

 

    

 

 

    

 

 

 
        399,061         374,696         323,990   

Reinsurance [a]:

           

Agriculture

   S      23,074         30,682         29,222   

Auto

   S      53,443         98,360         32,285   

Aviation

   S      28,332         15,991         31,292   

Credit/ Surety

   S      64,978         41,210         7,004   

General Casualty

   L      83,212         74,652         50,394   

Marine & Energy

   S      25,851         24,012         16,381   

Medical Malpractice

   L      22,708         37,345         51,391   

Other

   S      4,081         3,071         2,729   

Professional Liability

   L      164,719         159,293         110,388   

Property

   S      382,566         351,791         166,129   

Whole Account

   S/L      6,302         35,800         3,871   

Workers’ Compensation

   L      39,187         34,979         30,826   
     

 

 

    

 

 

    

 

 

 
        898,453         907,186         531,912   

Alterra at Lloyd’s:

           

Accident & Health

   S      43,045         37,093         30,921   

Agriculture

   S      18,321         —            —      

Aviation

   S      16,287         13,269         16,138   

Financial Institutions

   L      26,238         27,205         19,448   

International Casualty

   L      65,919         51,902         25,489   

Marine

   S      9,262         1,493         —      

Professional Liability

   L      20,053         20,696         19,591   

Property

   S      100,333         101,409         68,187   
     

 

 

    

 

 

    

 

 

 
        299,458         253,067         179,774   
     

 

 

    

 

 

    

 

 

 

Aggregate Property & Casualty

      $ 1,968,610       $ 1,900,710       $ 1,405,796   
     

 

 

    

 

 

    

 

 

 

Life & Annuity:

           

Life

      $ 2,848       $ 1,530       $ 3,800   

Annuity

        —            1,826         1,135   
     

 

 

    

 

 

    

 

 

 

Aggregate Life & Annuity

      $ 2,848       $ 3,356       $ 4,935   
     

 

 

    

 

 

    

 

 

 
           
     

 

 

    

 

 

    

 

 

 

Aggregate Property & Casualty and Life & Annuity

      $ 1,971,458       $ 1,904,066       $ 1,410,731   
     

 

 

    

 

 

    

 

 

 

S = Short tail lines

      $ 1,112,708       $ 1,071,452       $ 711,971   

L = Long tail lines

        855,902         829,258         693,825   
     

 

 

    

 

 

    

 

 

 

Aggregate Property & Casualty

      $ 1,968,610       $ 1,900,710       $ 1,405,796   
     

 

 

    

 

 

    

 

 

 

Property [b]

      $ 694,483       $ 667,502       $ 436,721   

Casualty [c]

        852,750         811,358         691,890   

Specialty [d]

        421,377         421,850         277,185   
     

 

 

    

 

 

    

 

 

 

Aggregate Property & Casualty

      $ 1,968,610       $ 1,900,710       $ 1,405,796   
     

 

 

    

 

 

    

 

 

 

 

[a] Includes the results for Harbor Point from May 12, 2010.
[b] Property includes property lines of business.
[c] Casualty includes excess liability, financial institutions, general liability, general casualty, international casualty, medical malpractice, professional liability and workers’ compensation lines of business.
[d] Specialty includes accident & health, agriculture, auto, aviation, credit/surety, energy, marine, other, and whole account lines of business.

Percentage totals may not add due to rounding.

 

23


ALTERRA CAPITAL HOLDINGS LIMITED

INVESTMENT PORTFOLIO (Unaudited)

(Expressed in thousands of United States Dollars)

 

    Carrying Value     Fair Value  

Type of Investment

  As of
Dec. 31, 2012
    Investment
Distribution
    As of
Dec. 31, 2011
    Investment
Distribution
    As of
Dec. 31, 2012
    Investment
Distribution
    As of
Dec. 31, 2011
    Investment
Distribution
 

Cash and cash equivalents

  $ 694,756        8.6   $ 922,844        11.8   $ 694,756        8.4   $ 922,844        11.6
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

U.S. government and agencies

    885,370        11.0     751,806        9.6     885,370        10.7     751,806        9.5

Non-U.S. governments

    246,712        3.1     164,621        2.1     246,712        3.0     164,621        2.1

Corporate securities

    2,610,605        32.5     2,646,358        33.9     2,610,605        31.6     2,646,358        33.3

Municipal securities

    273,336        3.4     263,007        3.4     273,336        3.3     263,007        3.3

Asset-backed securities

    371,597        4.6     247,965        3.2     371,597        4.5     247,965        3.1

Residential mortgage-backed securities

    1,234,670        15.4     1,296,277        16.6     1,234,670        15.0     1,296,277        16.3

Commercial mortgage-backed securities

    454,259        5.7     361,097        4.6     454,259        5.5     361,097        4.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed maturities carried at fair value

  $ 6,076,549        75.6   $ 5,731,131        73.3   $ 6,076,549        73.6   $ 5,731,131        72.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other investments

  $ 316,955        3.9   $ 272,845        3.5   $ 316,955        3.8   $ 272,845        3.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investments carried at fair value

  $ 7,088,260        88.2   $ 6,926,820        88.6   $ 7,088,260        85.9   $ 6,926,820        87.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

U.S. government and agencies

  $ 27,639        0.3   $ 29,201        0.4   $ 31,481        0.4   $ 32,906        0.4

Non-U.S. governments

    527,843        6.6     524,449        6.7     680,094        8.2     623,080        7.8

Corporate securities

    296,360        3.7     319,609        4.1     358,308        4.3     354,504        4.5

Asset-backed securities

    424        0.0     1,000        0.0     425        0.0     1,003        0.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed maturities carried at amortized cost

  $ 852,266        10.6   $ 874,259        11.2   $ 1,070,308        13.0   $ 1,011,493        12.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity method investments

  $ 92,050        1.1   $ 13,670        0.2   $ 92,050        1.1   $ 13,670        0.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total invested assets

  $ 8,032,576        100.0   $ 7,814,749        100.0   $ 8,250,618        100.0   $ 7,951,983        100.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2012, the weighted average book yield of the cash and fixed maturities portfolio was 3.15%, and the weighted average duration was 4.5 years.

 

    Carrying Value     Fair Value  

Credit Ratings

  As of
Dec. 31, 2012
    Ratings
Distribution
    As of
Dec. 31, 2011
    Ratings
Distribution
    As of
Dec. 31, 2012
    Ratings
Distribution
    As of
Dec. 31, 2011
    Ratings
Distribution
 

U.S. government and agencies [a]

  $ 2,092,893        30.2   $ 1,869,405        28.3   $ 2,092,893        29.3   $ 1,869,405        27.7

AAA

    1,170,299        16.9     948,861        14.4     1,170,299        16.4     948,861        14.1

AA

    693,411        10.0     883,783        13.4     693,411        9.7     883,783        13.1

A

    1,520,959        22.0     1,378,361        20.9     1,520,959        21.3     1,378,361        20.4

BBB

    320,215        4.6     281,983        4.3     320,215        4.5     281,983        4.2

BB

    67,041        1.0     84,803        1.3     67,041        0.9     84,803        1.3

B

    158,934        2.3     131,159        2.0     158,934        2.2     131,159        1.9

CCC or lower

    38,420        0.6     53,157        0.8     38,420        0.5     53,157        0.8

Not rated

    14,377        0.2     99,619        1.5     14,377        0.2     99,619        1.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed maturities carried at fair value

  $ 6,076,549        87.7   $ 5,731,131        86.8   $ 6,076,549        85.0   $ 5,731,131        85.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

U.S. government and agencies

  $ 27,639        0.4   $ 29,201        0.4   $ 31,481        0.4   $ 32,907        0.5

AAA

    406,659        5.9     619,832        9.4     532,741        7.5     733,631        10.9

AA

    284,282        4.1     82,511        1.2     344,170        4.8     88,631        1.3

A

    99,235        1.4     117,600        1.8     119,756        1.7     129,791        1.9

BBB

    32,031        0.5     24,117        0.4     39,755        0.6     25,705        0.4

BB

    2,420        0.0     998        0.0     2,405        0.0     828        0.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed maturities carried at amortized cost

  $ 852,266        12.3   $ 874,259        13.2   $ 1,070,308        15.0   $ 1,011,493        15.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed maturities

  $ 6,928,815        100.0   $ 6,605,390        100.0   $ 7,146,857        100.0   $ 6,742,624        100.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

[a] Included within U.S. government and agencies are agency-issued residential mortgage-backed securities with a fair value of $1,207,523 (December 31, 2011: $1,117,599).

Percentage totals may not add due to rounding.

 

    Quarter Ended
Dec. 31, 2012
    Quarter Ended
Sept. 30, 2012
    Quarter Ended
June 30, 2012
    Quarter Ended
Mar. 31, 2012
    Quarter Ended
Dec. 31, 2011
    Quarter Ended
Dec. 31, 2010
 

Net investment income

  $ 52,039      $ 53,518      $ 54,729      $ 58,678      $ 57,080      $ 61,080   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized (losses) gains on trading fixed maturities

  $ (1,322   $ 3,621      $ 587      $ 1,066      $ 763      $ (3,893

Net realized gains on available for sale fixed maturities

    3,312        3,087        11,990        7,759        1,990        5,816   

Increase (decrease) in fair value of hedge funds

    4,871        8,245        (2,894     3,679        (5,415     5,465   

(Decrease) increase in fair value of structured deposit

    (1,004     1,003        (655     365        (313     1,773   

Income from equity method investments

    5,253        5,167        5,583        4,927        1,024        239   

Decrease in fair value of catastrophe bonds

    —           —           —           —           —           (52

Increase (decrease) in fair value of derivatives

    366        (687     (1,130     7,697        (3,824     477   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gains (losses) on investments

  $ 11,476      $ 20,436      $ 13,481      $ 25,493      $ (5,775   $ 9,825   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net impairment losses recognized in earnings

  $ (377   $ (592   $ (570   $ (5,369   $ (702   $ (1,774
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

24


ALTERRA CAPITAL HOLDINGS LIMITED

INVESTMENT PORTFOLIO (Unaudited)

(Expressed in thousands of United States Dollars)

 

            Periodic Rate of Return  
           Last     Year     Last     Last  
     As of     3 Months     to Date     12 months     60 months*  
     Dec. 31, 2012                          

Cash and fixed maturities

   $ 7,623,571        0.71     5.43     5.43     5.40
  

 

 

         

Distressed securities

   $ 11,214        5.30     12.42     12.42     2.77

Diversified arbitrage

     12,171        2.78     13.01     13.01     (3.03 %) 

Emerging markets

     3,576        1.23     (27.45 %)      (27.45 %)      (6.23 %) 

Event-driven arbitrage

     7,026        1.88     (10.83 %)      (10.83 %)      (10.59 %) 

Fixed income arbitrage

     —           0.00     0.00     0.00     7.73

Fund of funds

     18,316        2.34     8.45     8.45     2.63

Global macro

     61,145        1.73     7.77     7.77     4.11

Long / short credit

     377        (3.25 %)      (7.59 %)      (7.59 %)      (1.92 %) 

Long / short equity

     177,708        0.86     7.78     7.78     1.34

Opportunistic

     1,660        0.00     (2.00 %)      (2.00 %)      (24.89 %) 
  

 

 

         

Hedge funds **

     293,193        0.80     3.80     3.80     (1.14 %) 

Derivatives

     (488        

Structured deposits

     24,250           
  

 

 

         

Total other investments

   $ 316,955           

Equity method investments

   $ 92,050           
  

 

 

         

Total invested assets

   $ 8,032,576           
  

 

 

         

Hedge Fund Investment Return Data:

          

HFRI Fund of Funds Composite Index [a]

       1.34     4.81     4.81     (1.75 %) 

Hedge Fund Performance History - 60 months ended December 31, 2012

          

 

Monthly performance    2012     2011     2010     2009     2008  

January

     1.53     0.13     0.79     2.13     (1.37 %) 

February

     0.02     0.57     0.17     0.65     1.83

March

     (0.21 %)      0.29     1.02     (0.76 %)      (2.58 %) 

April

     (0.02 %)      0.73     0.88     (0.84 %)      (0.13 %) 

May

     (0.41 %)      (0.28 %)      (0.73 %)      2.45     2.51

June

     (0.48 %)      (0.89 %)      (0.83 %)      1.53     0.93

July

     0.81     0.15     0.36     1.40     (4.12 %) 

August

     1.20     (1.37 %)      (0.28 %)      0.78     (2.14 %) 

September

     0.53     (1.13 %)      1.28     1.71     (7.31 %) 

October

     (0.59 %)      0.07     0.84     1.53     (4.85 %) 

November

     0.73     (0.19 %)      0.40     0.35     (1.75 %) 

December

     0.65     (1.67 %)      0.31     0.77     (1.92 %) 
Quarterly performance                               

Q1

     1.33     0.98     1.99     2.00     (2.15 %) 

Q2

     (0.91 %)      (0.45 %)      (0.69 %)      3.14     3.33

Q3

     2.56     (2.33 %)      1.35     3.94     (13.03 %) 

Q4

     0.80     (1.79 %)      1.56     2.66     (8.31 %) 

Period return

     3.80     (3.57 %)      4.25     12.27     (19.38 %) 

Past performance should not be considered to be a reliable indicator of future performance.

 

[a] As reported by HFRI as of January 23, 2013
* Annualized
** Net of all fees

 

25


ALTERRA CAPITAL HOLDINGS LIMITED

LARGEST 25 CORPORATE HOLDINGS [a] (Unaudited)

(Expressed in thousands of United States Dollars)

 

     As of December 31, 2012  
     Amortized      Fair  
Issuer    Cost      Value  

European Investment Bank

   $ 65,085       $ 78,601   

General Electric Co.

     65,774         72,593   

KFW

     51,615         61,032   

JP Morgan Chase & Co

     57,442         60,953   

Bank of America Corp

     46,983         51,404   

Wells Fargo & Co

     41,479         45,563   

Goldman Sachs Group Inc

     41,459         44,064   

Verizon Communications Inc

     39,024         40,680   

Citigroup Inc

     32,822         37,114   

Metlife Inc

     34,011         36,971   

Novartis AG

     33,574         35,285   

Credit Suisse Group AG

     32,573         34,913   

UBS AG

     30,109         34,557   

AT&T Inc

     31,465         33,521   

Pepsico Inc

     31,055         33,054   

HSBC Holdings plc

     31,466         32,914   

BP plc

     29,935         31,557   

Barclays plc

     29,509         31,011   

Wal-Mart Stores Inc

     27,374         29,945   

Canadian Imperial Bank of Commerce

     29,403         29,780   

Morgan Stanley

     27,370         29,459   

Duke Energy Corp

     26,927         29,213   

Lloyds Banking Group plc

     24,540         27,246   

Costco Wholesale Corp

     26,354         26,846   

Coca-Cola Co

     24,343         26,723   
  

 

 

    

 

 

 
   $ 911,691       $ 994,999   
  

 

 

    

 

 

 

 

[a] Corporate holdings includes supranationals and government-guaranteed corporate securities.

 

26


ALTERRA CAPITAL HOLDINGS LIMITED

EUROPEAN GOVERNMENT AND EUROPEAN BANKING INSTITUTION HOLDINGS (Unaudited)

(Expressed in thousands of United States Dollars)

 

     As of December 31, 2012  
     Fair         
Largest European Government Holdings    Value      % of Total  

France

   $ 297,590         35.6

Germany

     281,758         33.7

Netherlands

     161,638         19.4

United Kingdom

     53,218         6.4

Belgium

     23,077         2.8

Norway

     7,381         0.9

Denmark

     4,487         0.5

All Other European Governments

     6,183         0.7
  

 

 

    

 

 

 

Total European Government Holdings

   $ 835,332         100.0
  

 

 

    

 

 

 
     As of December 31, 2012  
     Fair         
Largest European Banking Institution Holdings    Value      % of Total  

European Investment Bank

   $ 78,601         16.0

KFW

     61,032         12.5

UBS AG

     34,557         7.1

Credit Suisse Group AG

     33,296         6.8

HSBC Holdings plc

     30,691         6.3

Barclays plc

     29,190         6.0

Lloyds Banking Group plc

     27,246         5.5

Nordea Bank AB

     21,916         4.5

BNP Paribas SA

     20,673         4.2

All Other

     152,512         31.1
  

 

 

    

 

 

 

Total European Banking Institutions

   $ 489,714         100.0
  

 

 

    

 

 

 

Percentage totals may not add due to rounding.

 

27


ALTERRA CAPITAL HOLDINGS LIMITED

EUROPEAN CORPORATE FIXED MATURITIES INVESTMENT EXPOSURES (Unaudited)

(Expressed in thousands of United States Dollars)

 

     As of December 31, 2012  
     Banking
Institutions
     Other
Financial
Institutions
     Other
Corporates
     Total  

Country

           

United Kingdom

   $ 103,614       $ 33,053       $ 106,889       $ 243,556   

Netherlands

     46,632         1,561         61,089         109,282   

Germany

     88,409         —            13,043         101,452   

France

     40,610         851         58,446         99,907   

Supranational

     86,238         —            —            86,238   

Switzerland

     65,878         1,617         1,086         68,581   

Norway

     20,739         —            23,314         44,053   

Sweden

     32,593         —            —            32,593   

Luxembourg

     —            —            12,095         12,095   

Ireland

     1,237         —            3,172         4,409   

Spain

     3,764         —            515         4,279   

Jersey

     —            —            1,679         1,679   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value

   $ 489,714       $ 37,082       $ 281,328       $ 808,124   
  

 

 

    

 

 

    

 

 

    

 

 

 
           
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance sheet carrying value [a]

   $ 445,227       $ 34,348       $ 261,608       $ 741,183   
  

 

 

    

 

 

    

 

 

    

 

 

 

Credit rating

           

AAA

   $ 262,645       $ 27,617       $ 1,822       $ 292,084   

AA

     76,827         1,561         58,863         137,251   

A

     130,893         5,185         186,110         322,188   

BBB

     12,156         2,223         26,248         40,627   

BB

     4,977         496         1,944         7,417   

B

     2,216         —            5,129         7,345   

Not Rated

     —            —            1,212         1,212   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value

   $ 489,714       $ 37,082       $ 281,328       $ 808,124   
  

 

 

    

 

 

    

 

 

    

 

 

 
           
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance sheet carrying value [a]

   $ 445,227       $ 34,348       $ 261,608       $ 741,183   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

[a] The trading and available for sale portfolios are carried at fair value and the held to maturity portfolio is carried at amortized cost.

 

28


ALTERRA CAPITAL HOLDINGS LIMITED

NEW POINT IV SUMMARY (Unaudited)

(Expressed in thousands of United States Dollars)

New Point IV Limited (“New Point IV”) is a side car vehicle established in 2011 to provide capacity to write property catastrophe collateralized retrocessional coverage. New Point IV is sponsored by Alterra in partnership with Stone Point Capital LLC and other investors. Alterra provides underwriting services to New Point Re IV Limited (“New Point Re IV), a wholly-owned subsidiary of New Point IV.

Alterra owns 34.8% of the common shares of New Point IV and accounts for it as an equity method investment.

 

     FOR THE QUARTERS ENDED      FOR THE YEAR ENDED  
     Dec. 31, 2012      Dec. 31, 2011      Dec. 31, 2012      Dec. 31, 2011  

Gross Premiums Written by New Point IV [a]

   $ 370       $ —          $ 75,710       $ 8,843   

The following is included in Alterra’s consolidated financial statements for the respective periods:

  

Balance Sheet

           

Other investments [b]

   $ 88,469       $ 9,686       $ 88,469       $ 9,686   

Statement of Operations and Comprehensive Income

           

Other income [c]

   $ 1,531       $ 260       $ 9,153       $ 797   

Income from equity method investment [d]

   $ 5,342       $ 640       $ 21,114       $ 1,049   

 

[a] New Point IV is not consolidated by Alterra. Consequently, these gross premiums written are not included in Alterra’s gross premiums written.
[b] Represents Alterra’s 34.8% investment in New Point IV under the equity method of accounting.
[c] Represents the underwriting fees and profit commissions earned by Alterra in connection with New Point Re IV. This is included in the reinsurance segment and is included in net operating income.
[d] Represents Alterra’s 34.8% share of the net income of New Point IV. This is included within net realized and unrealized gains on investments in Alterra’s statement of operations and comprehensive income and is included in net operating income.

 

29


ALTERRA CAPITAL HOLDINGS LIMITED

SHAREHOLDER RETURN ANALYSIS (Unaudited)

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     FOR THE QUARTERS ENDED     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2012     Dec. 31, 2011  

Income and Return on Equity:

        

Net income (loss)

   $ (51,810   $ 30,948      $ 143,806      $ 65,282   

Net operating income (loss)

   $ (49,713   $ 31,685      $ 119,103      $ 96,600   

Average shareholders’ equity

   $ 2,881,449      $ 2,826,987      $ 2,862,663      $ 2,806,191   

Annualized return on average shareholders’ equity [a]

     (7.2 %)      4.4     5.0     2.3

Annualized net operating return on average shareholders’ equity [a]

     (6.9 %)      4.5     4.2     3.4

Book value and dividends per share:

        

Diluted book value per share

   $ 28.34      $ 26.91      $ 28.34      $ 26.91   

Dividends paid per share

   $ 0.16      $ 0.14      $ 0.60      $ 0.52   

Change in diluted book value per share

     (4.2 %)      (1.0 %)      5.3     3.5

Dividend payout ratio [b]

     0.6     0.5     2.1     1.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total return to shareholders [c]

     (3.6 %)      (0.5 %)      7.4     5.4
  

 

 

   

 

 

   

 

 

   

 

 

 

 

[a] Annualized return on average shareholders’ equity is defined as annualized net income divided by the average of the quarterly average shareholders’ equity balances.

Annualized net operating return on average shareholders’ equity is defined as annualized net operating income divided by the average of the quarterly average shareholders’ equity balances.

 

[b] Dividend payout ratio is calculated as dividends paid divided by beginning shareholders’ equity.
[c] Total return to shareholders is calculated as the change in diluted book value per share plus the dividend payout ratio.

Percentage totals may not add due to rounding.

 

30


ALTERRA CAPITAL HOLDINGS LIMITED

EARNINGS PER SHARE INFORMATION (Unaudited)

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     FOR THE QUARTERS ENDED      FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011      Dec. 31, 2012      Dec. 31, 2011  

Net income (loss) available to common shareholders

   $ (51,810   $ 30,948       $ 143,806       $ 65,282   

Denominator:

          

Weighted average shares - basic

          

Outstanding [a]

     95,361,754        103,081,593         97,700,159         105,022,397   

Unvested restricted share units

     329,945        241,784         312,265         227,286   
  

 

 

   

 

 

    

 

 

    

 

 

 
     95,691,699        103,323,377         98,012,424         105,249,683   

Share equivalents:

          

Warrants

     —           1,247,101         2,012,786         1,023,278   

Options

     —           101,285         128,204         124,022   

Employee stock purchase plan

     —           1,128         3,390         1,386   

Non participating restricted shares

     —           —            400,548         104,524   
  

 

 

   

 

 

    

 

 

    

 

 

 

Weighted average shares - diluted [b]

     95,691,699        104,672,891         100,557,352         106,502,893   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss) per share

   $ (0.54   $ 0.30       $ 1.47       $ 0.62   
  

 

 

   

 

 

    

 

 

    

 

 

 

Net income (loss) per diluted share

   $ (0.54   $ 0.30       $ 1.43       $ 0.61   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

[a] Includes weighted average unvested participating restricted shares.
[b] Computed using the treasury method. The treasury method assumes that the proceeds received from the exercise of options or warrants will be used to repurchase the Company’s common shares at the average market price during the period of calculation.

 

31


ALTERRA CAPITAL HOLDINGS LIMITED

OPERATING INCOME RECONCILIATION (Unaudited)

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     FOR THE QUARTERS ENDED     FOR THE YEARS ENDED  
     Dec. 31, 2012     Dec. 31, 2011     Dec. 31, 2012     Dec. 31, 2011  

Before tax

        

Net income (loss)

   $ (37,290   $ 24,047      $ 155,691      $ 55,781   

Net realized and unrealized (gains) losses on investments excluded from operating income, before tax [a]

     (888     1,059        (28,964     29,486   

Foreign exchange (gains) losses, before tax

     (71     (753     (160     1,312   

Merger and acquisition expenses, before tax

     3,239        —           3,239        —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income (loss)

   $ (35,010   $ 24,353      $ 129,806      $ 86,579   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net of tax

        

Net income (loss)

   $ (51,810   $ 30,948      $ 143,806      $ 65,282   

Net realized and unrealized (gains) losses on investments excluded from operating income, net of tax [a]

     (1,094     1,271        (27,826     30,391   

Foreign exchange (gains) losses, before tax

     (48     (534     (116     927   

Merger and acquisition expenses, net of tax

     3,239        —           3,239        —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income (loss)

   $ (49,713   $ 31,685      $ 119,103      $ 96,600   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     95,691,699        103,323,377        98,012,424        105,249,683   

Diluted

     95,691,699        104,672,891        100,557,352        106,502,893   

Basic per share data

        

Net income (loss)

   $ (0.54   $ 0.30      $ 1.47      $ 0.62   

Net realized and unrealized (gains) losses on investments excluded from operating income, net of tax [a]

     (0.01     0.01        (0.28     0.29   

Foreign exchange (gains) losses, net of tax

     —           (0.01     —          0.01   

Merger and acquisition expenses, net of tax

     0.03        —           0.03        —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income (loss)

   $ (0.52   $ 0.31      $ 1.22      $ 0.92   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted per share data

        

Net income (loss)

   $ (0.54   $ 0.30      $ 1.43      $ 0.61   

Net realized and unrealized (gains) losses on investments excluded from operating income, net of tax [a]

     (0.01     0.01        (0.28     0.29   

Foreign exchange (gains) losses, net of tax

     —           (0.01     —          0.02   

Merger and acquisition expenses, net of tax

     0.03        —           0.03        —      
  

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income (loss)

   $ (0.52   $ 0.30      $ 1.18      $ 0.91   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

[a] Net realized and unrealized (gains) losses on investments excluded from operating income includes realized and unrealized (gains) losses on trading securities, realized (gains) losses on available for sale securities, net impairment losses recognized in earnings, earnings from equity method investments in run off and changes in fair value of derivatives, catastrophe bonds and structured deposits.

Per share totals may not add due to rounding.

 

32


ALTERRA CAPITAL HOLDINGS LIMITED

BOOK VALUE PER SHARE (Unaudited)

(Expressed in thousands of United States Dollars, except per share and share amounts)

 

     As of Dec. 31, 2012      As of Dec. 31, 2011  

Price per share at period end

   $ 28.19       $ 23.63   

Shareholders’ equity

   $ 2,839,722       $ 2,809,235   

Goodwill and intangible assets

   $ 54,751       $ 56,111   

Tangible book value

   $ 2,784,971       $ 2,753,124   

Basic common shares outstanding [a]

     96,059,645         102,101,950   

Add: unvested restricted stock units

     354,015         241,108   

Add: dilutive impact of warrants outstanding

     3,546,067         1,938,297   

Add: dilutive impact of options outstanding

     253,598         125,424   

Add: unvested performance based restricted shares

     —            —      
  

 

 

    

 

 

 

Diluted shares outstanding [b]

     100,213,325         104,406,779   

Basic book value per share

   $ 29.56       $ 27.51   

Diluted book value per share

   $ 28.34       $ 26.91   

Basic tangible book value per share

   $ 28.99       $ 26.96   

Diluted tangible book value per share

   $ 27.79       $ 26.37   

 

[a] Includes unvested restricted shares.
[b] Computed using the treasury method. The treasury method assumes that the proceeds received from the exercise of options or warrants will be used to repurchase the Company’s common shares at the period-end market price.
[c] Not included in shareholders’ equity as of December 31, 2012 were $218.0 million of unrecognized net gains on held-to-maturity securities, which if included, would increase diluted book value per share by $2.18 as of December 31, 2012.

 

33


ALTERRA CAPITAL HOLDINGS LIMITED

REGULATION G

In presenting the Company’s results, management has included and discussed net operating income, net operating income per share, net operating income per diluted share, annualized net operating return on average shareholders’ equity, tangible book value per share and diluted tangible book value per share. These measures are “non-GAAP financial measures” as defined in Regulation G. Management believes that these non-GAAP financial measures, which may be defined differently by other companies, allow for a more complete understanding of the Company’s business. These measures, however, should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The reconciliation of such measures to their respective most directly comparable U.S. GAAP financial measures is presented in the attached financial information in accordance with Regulation G.

Net operating income is defined as net income excluding after-tax net realized and unrealized gains or losses on investments excluded from operating income (this includes net realized and unrealized gains or losses on trading securities, net realized gains or losses on available for sale securities, net impairment losses recognized in earnings, changes in fair value of derivatives, catastrophe bonds, structured deposits and earnings from equity method investments in run-off), after-tax net foreign exchange gains or losses and after-tax merger and acquisition expenses. Net operating income per share and per diluted share is defined as the net operating income divided by the weighted average common shares or weighted average diluted common shares, respectively. We believe that this non-GAAP measure provides a better indication of management performance and the underlying fundamentals of our operations as realized and unrealized gains and losses on investments excluded from operating income and foreign exchange gains and losses may fluctuate from period to period and are typically outside the control of management. Merger and acquisition expenses are not indicative of expenses fundamental to the business and may fluctuate from period to period.

Annualized net operating return on average shareholders’ equity is defined as annualized net operating income divided by the average of the quarterly average shareholders’ equity balances. Tangible book value is defined as shareholders’ equity excluding goodwill and intangible assets. Tangible book value per share and diluted tangible book value per share is defined as the tangible book value divided by the common shares outstanding or diluted common shares outstanding, respectively. These non-GAAP measures allow management to assess how the Company has performed in terms of wealth generated for its shareholders.

 

34