Transatlantic Holdings, Inc. Reports Fourth Quarter and Full Year 2011 Results
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Fourth quarter 2011 net loss and net operating loss include after-tax net catastrophe costs (net of reinsurance and net reinstatement premiums) of
In addition, fourth quarter 2011 net loss and net operating loss include pre-tax merger-related costs of
“Overall as we look to 2012, we are comfortable with our risk profile, given the product and geographic diversity of our exposures. Rate trends in the just completed
On
Other highlights in the fourth quarter of 2011 include:
- Net premiums written of
$863 million , a decline of 4.0% from the prior year quarter, excluding the impact of foreign exchange. - Net investment income of
$113 million , 6.6% less than the year ago period, largely as a result of a decline in income from other invested assets. - Combined ratio of 113.5%, which includes 17.6 percentage points related to net catastrophe costs. Such pre-tax net catastrophe costs totaled
$169 million in the quarter, consisting principally of$110 million related to floods inThailand and$51 million related to theFebruary 2011 New Zealand earthquake. In the 2010 fourth quarter, pre-tax net catastrophe costs totaled$23 million , and added 2.5 percentage points to the combined ratio. - Net loss and loss adjustment expense reserves of
$9.03 billion at quarter-end, an increase of$105 million (which is net of a decrease of$109 million due to foreign exchange) in the quarter. - Net operating cash inflows of
$94 million , which include the impact of significant catastrophe and merger-related costs paid during the quarter, including the termination fee paid toAllied World . - Stockholders’ equity of
$4.08 billion at quarter-end. During the quarter, TRH repurchased approximately 4.3 million of its outstanding common shares under its previously announced share repurchase program for$220 million . Pursuant to the merger agreement with Alleghany, share repurchases and dividend declarations were discontinued as ofNovember 20, 2011 . - Book value per common share of
$71.15 atDecember 31, 2011 , a 2.1% increase during the quarter.
For the full year of 2011, net loss totaled
Results for the year 2011 included the following items:
- Pre-tax net catastrophe costs of
$852 million partially offset by related tax benefits of$298 million , compared to pre-tax net catastrophe costs of$202 million partially offset by related tax benefits of$71 million in 2010. - Net favorable loss reserve development related to prior accident years of
$122 million , which is net of adverse development related to prior years' catastrophe events of$3 million . Net favorable development in 2010 totaled$57 million , which includes favorable development related to prior years’ catastrophe events of$4 million . - Pre-tax costs associated with merger-related activities of
$138 million , included in “other expenses, net,” offset by a minimal tax benefit related to such costs of$6 million . Of such pre-tax costs,$115 million represents termination fees and expense reimbursements paid toAllied World .
The calculation of catastrophe cost estimates involves a significant amount of judgment and is based on information presently available. Such estimates are often heavily reliant on industry loss predictions, preliminary data from cedants, output from catastrophe modeling software and market share analysis. Due to the preliminary nature of information used to prepare these estimates, among other factors, the ultimate costs that TRH will incur related to these events may differ materially from these estimates.
On
Please refer to the Investor Information–News–Earnings Information section of TRH’s website at www.transre.com for a copy of the Fourth Quarter 2011 Financial Supplement which includes additional information on TRH’s financial performance.
As announced on
The performance of TRH is commonly assessed by analysts and others based on performance measures which are not defined under GAAP. Those measures include net operating income (loss) (“NOI”), NOI Per Common Share (diluted) and annualized operating return on equity (“Annualized Operating ROE”). NOI is defined as GAAP net income (loss) excluding realized net capital gains (losses) and the gain (loss) on early extinguishment of debt, net of taxes. NOI Per Common Share (diluted) represents NOI divided by average common shares outstanding on a diluted basis. Annualized Operating ROE is defined as NOI divided by the average of beginning and ending stockholders’ equity, or for the three month periods, NOI divided by the average of beginning and ending stockholders' equity multiplied by four. In addition, GAAP annualized return on equity (“GAAP Annualized ROE”) is defined as GAAP net income (loss) divided by the average of beginning and ending stockholders’ equity, or for the three month periods, GAAP net income divided by the average of beginning and ending stockholders’ equity multiplied by four. TRH uses these measures in analyzing its performance as these measures focus on the core fundamentals of TRH’s operations. While TRH considers realized net capital gains (losses) and the gain (loss) on early extinguishment of debt as integral parts of its business and results, such items are not indicative of the core fundamentals of TRH’s operations. TRH believes these measures are of interest to the investment community because they provide additional meaningful methods of evaluating certain aspects of TRH’s operating performance from period to period on bases that are not otherwise apparent under GAAP. These non-GAAP measures, namely, NOI, NOI Per Common Share (diluted) and Annualized Operating ROE should not be viewed as substitutes for GAAP net income (loss), GAAP net income (loss) per common share on a diluted basis and GAAP Annualized ROE, respectively. Reconciliations of NOI, NOI Per Common Share (diluted) and Annualized Operating ROE to GAAP net income (loss), GAAP net income (loss) per common share on a diluted basis and GAAP Annualized ROE, respectively, the most directly comparable GAAP measures, are included later in this press release.
TRH’s GAAP combined ratio and its components are presented in accordance with the methodology commonly used by insurance industry analysts and TRH’s peers. The property and casualty insurance and reinsurance industries use the combined ratio as a measure of underwriting profitability. The combined ratio represents the sum of the loss ratio and the underwriting expense ratio. The loss ratio represents net losses and loss adjustment expenses incurred expressed as a percentage of net premiums earned. The underwriting expense ratio represents the sum of the commission ratio and the other underwriting expense ratio. The commission ratio represents the sum of net commissions and the decrease (increase) in deferred policy acquisition costs expressed as a percentage of net premiums earned. The other underwriting expense ratio represents other underwriting expenses expressed as a percentage of net premiums earned.
Net loss and loss adjustment expense reserves represent unpaid losses and loss adjustment expenses net of related reinsurance recoverable, and are presented in accordance with principles prescribed or permitted by insurance regulatory authorities.
In addition, book value per common share is defined as stockholders’ equity divided by common shares outstanding.
About
Visit – www.transre.com – for additional information about Transatlantic.
Cautionary Note Regarding Forward-Looking Statements
This communication contains forward-looking statements that involve a number of risks and uncertainties, including expectations regarding the aggregate net impact on TRH from recent catastrophe losses. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. For example, these forward-looking statements could be affected by factors including, without limitation, risks associated with the ability to consummate the merger with Alleghany and the timing of the closing of the merger; the ability to successfully integrate our operations and employees; the ability to realize anticipated benefits and synergies of the transaction; the potential impact of the announcement of the transaction or consummation of the transaction on relationships, including with employees, credit rating agencies, customers and competitors; the ability to retain key personnel; the ability to achieve targets for investment returns, revenues, and book value per share; changes in financial markets, interest rates and foreign currency exchange rates; pricing and policy term trends; increased competition; the impact of acts of terrorism and acts of war; greater frequency or severity of unpredictable catastrophic events; negative rating agency actions; the adequacy of loss reserves; changes in regulations or tax laws; changes in the availability, cost or quality of reinsurance or retrocessional coverage; the cyclical nature of the property and casualty insurance industry; judicial, legislative, political and other governmental developments; management’s response to the factors described herein; and those additional risks and factors discussed in reports filed with the
Additional Information about the Proposed Transaction and Where to Find It
This communication contains information about a proposed merger between TRH and Alleghany. In connection with the proposed merger, Alleghany has filed with the
TRH and Alleghany and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about TRH’s directors and executive officers is available in Transatlantic’s proxy statement dated
This communication does not constitute an offer to sell, or the solicitation of an offer to buy, any securities, or a solicitation of any vote or approval.
Consolidated Financial Data | |||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
December 31, | |||||||||||||||||||
2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Net premiums written | $ | 863,423 | $ | 900,775 | (4.1) | % | $ | 3,859,567 | $ | 3,881,693 | (0.6) | % | |||||||
Decrease (increase) in net unearned premiums | 98,524 | 33,207 | (40,105) | (23,073) | |||||||||||||||
Net premiums earned | 961,947 | 933,982 | 3.0 | 3,819,462 | 3,858,620 | (1.0) | |||||||||||||
Net investment income | 113,262 | 121,323 | (6.6) | 457,558 | 473,547 | (3.4) | |||||||||||||
Realized net capital gains: | |||||||||||||||||||
Total other-than-temporary impairments | (1,023) | (836) | (4,163) | (14,685) | |||||||||||||||
Less: other-than-temporary impairments | |||||||||||||||||||
recognized in other comprehensive | |||||||||||||||||||
income (loss) | - | - | - | 6,713 | |||||||||||||||
Other-than-temporary impairments | |||||||||||||||||||
charged to earnings |
(1,023) | (836) | (4,163) | (7,972) | |||||||||||||||
Other realized net capital gains | 21,752 | 13,982 | 92,763 | 38,073 | |||||||||||||||
Total realized net capital gains | 20,729 | 13,146 | 88,600 | 30,101 | |||||||||||||||
Loss on early extinguishment of debt | - | - | (1,179) | (115) | |||||||||||||||
Total revenues | 1,095,938 | 1,068,451 | 2.6 | 4,364,441 | 4,362,153 | 0.1 | |||||||||||||
Expenses: | |||||||||||||||||||
Net losses and loss adjustment expenses | 795,902 | 610,851 | 3,256,401 | 2,681,774 | |||||||||||||||
Net commissions | 216,711 </td> | 222,941 | 932,108 | 932,820 | |||||||||||||||
Decrease (increase) in deferred policy | |||||||||||||||||||
acquisition costs | 29,937 | 7,466 | (11,506) | (2,898) | |||||||||||||||
Other underwriting expenses | 49,454 | 44,609 | 172,332 | 177,624 | |||||||||||||||
Interest on senior notes | 16,383 | 17,080 | 66,769 | 68,272 | |||||||||||||||
Other expenses, net | 79,608 | 6,425 | 163,004 | 31,773 | |||||||||||||||
Total expenses | 1,187,995 | 909,372 | 4,579,108 | 3,889,365 | |||||||||||||||
</td> | |||||||||||||||||||
(Loss) income before income taxes | (92,057) | 159,079 | (157.9) | (214,667) | 472,788 | (145.4) | |||||||||||||
Income taxes (benefits) | (34,574) | 17,319 | (115,448) | 70,587 | |||||||||||||||
Net (loss) income | $ | (57,483) | $ | 141,760 | (140.5) | $ | (99,219) | $ | 402,201 | (124.7) | |||||||||
Net (loss) income per common share: | |||||||||||||||||||
Basic | $ | (0.98) | $ | 2.26 | (143.6) | % | $ | (1.62) | $ | 6.28 | (125.7) | % | |||||||
Diluted | (0.98) | 2.22 | (144.3) | (1.62) | 6.19 | (126.1) | |||||||||||||
Cash dividends declared per common share | $ | - | $ | 0.21 | (100.0) | $ | 0.65 | $ | 0.83 | (21.7) | |||||||||
Weighted average common shares outstanding: | |||||||||||||||||||
Basic | 58,412 | 62,821 | 61,424 | 64,092 | |||||||||||||||
Diluted | 58,412 | 63,882 | 61,424 | 64,930 | |||||||||||||||
GAAP underwriting ratios: | |||||||||||||||||||
Loss | 82.7 | % | 65.4 | % | 85.3 | % | 69.5 | % | |||||||||||
Commission | 25.6 | 24.6 | 24.1 | 24.1 | |||||||||||||||
Other underwriting expense |
5.2 | 4.8 | 4.5 | 4.6 | |||||||||||||||
Underwriting expense | 30.8 | 29.4 | 28.6 | 28.7 | |||||||||||||||
Combined | 113.5 | % | 94.8 | % | 113.9 | % | 98.2 | % | |||||||||||
Consolidated Financial Data | |||||||
As of |
|||||||
Balance Sheet Data: | |||||||
2011 | 2010 | ||||||
(in thousands, except share data) |
|||||||
ASSETS | |||||||
Investments: | |||||||
Fixed maturities: | |||||||
Held to maturity, at amortized cost (fair value: 2010- |
$ | - | $ | 1,189,801 | |||
Available for sale, at fair value (amortized cost: 2011- |
12,503,529 | 10,822,336 | |||||
Equities, available for sale, at fair value (cost: 2011- |
586,324 | 564,530 | |||||
Other invested assets | 266,185 | 275,977 | |||||
Short-term investments, at cost (approximates fair value) | 63,661 | 120,095 | |||||
Total investments | 13,419,699 | 12,972,739 | |||||
Cash and cash equivalents | 367,806 | 284,491 | |||||
Accrued investment income receivable | 146,494 | 150,695 | |||||
Premium balances receivable, net | 650,451 | 605,094 | |||||
Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses | 531,302 | 819,734 | |||||
Deferred policy acquisition costs | 250,710 | 238,296 | |||||
Prepaid reinsurance premiums | 10,188 | 75,291 | |||||
Deferred tax assets, net | 450,559 | 463,808 | |||||
Other assets | 107,464 | 95,206 | |||||
Total assets | $ | 15,934,673 | $ | 15,705,354 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Unpaid losses and loss adjustment expenses | $ | 9,529,003 | $ | 9,020,610 | |||
Unearned premiums | 1,177,325 | 1,212,535 | |||||
Senior notes | 1,005,960 | 1,030,511 | |||||
Other liabilities | 139,432 | 157,239 | |||||
Total liabilities | 11,851,720 | 11,420,895 | |||||
Preferred stock, |
- | - | |||||
Common stock, |
|||||||
2011-67,854,755; 2010-67,611,341 | 67,855 | 67,611 | |||||
Additional paid-in capital | 340,151 | 318,064 | |||||
Accumulated other comprehensive income | 330,946 | 154,615 | |||||
Retained earnings | 3,850,218 | 3,988,891 | |||||
Treasury stock, at cost: 2011-10,466,671; 2010-5,362,800 shares of common stock | (506,217) | (244,722) | |||||
Total stockholders' equity | 4,082,953 | 4,284,459 | |||||
Total liabilities and stockholders' equity | $ | 15,934,673 | $ | 15,705,354 | |||
Consolidated Financial Data | |||||||||||||
Condensed |
|||||||||||||
|
Three Months Ended | Twelve Months Ended | |||||||||||
December 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||
(in thousands) | |||||||||||||
Net cash provided by operating activities | $ | 93,772 | $ | 301,797 | $ | 596,471 | $ | 1,061,003 | |||||
Cash flows from investing activities: | |||||||||||||
Proceeds of fixed maturities available for sale sold | 624,395 | 443,403 | 1,436,309 | 1,186,098 | |||||||||
Proceeds of fixed maturities available for sale redeemed or matured | 263,946 | 397,466 | 966,350 | 947,819 | |||||||||
Proceeds of fixed maturities held to maturity redeemed | - | 20,000 | - | 20,000 | |||||||||
Proceeds of equities available for sale sold | 80,752 | 12,467 | 356,890 | 200,953 | |||||||||
Purchase of fixed maturities available for sale | (799,703) | (1,013,543) | (2,602,692) | (3,573,780) | |||||||||
Purchase of equities available for sale | (89,905) | (11,601) | (385,564) | (199,815) | |||||||||
Net (purchase) sale of other invested assets | (17,908) | 213 | 950 | 7,082 | |||||||||
Net sale of short-term investments | </td> | 75,056 | 18,177 | 54,592 | 725,957 | ||||||||
Change in other liabilities for securities in course of settlement | (6,865) | (47,309) | 4,975 | (6,510) | |||||||||
Net cash provided by (used in) investing activities | 129,768 | (180,727) | (168,190) | (692,196) | |||||||||
Cash flows from financing activities: | |||||||||||||
Dividends to stockholders | (12,681) | (13,222) | (52,652) | (52,611) | |||||||||
Common stock issued | 402 | 1,907 | (5,749) | (43) | |||||||||
Acquisition of treasury stock | (220,302) | (54,598) | (261,495) | (219,734) | |||||||||
Repurchase of senior notes | - | - | (26,110) | </td> | (3,105) | ||||||||
Other, net | 342 | 4,620 | 1,902 | 3,279 | |||||||||
Net cash used in financing activities | (232,239) | (61,293) | (344,104) | (272,214) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (8,069) | 896 | (862) | (7,825) | |||||||||
Change in cash and cash equivalents | (16,768) | 60,673 | 83,315 | 88,768 | |||||||||
Cash and cash equivalents, beginning of period | 384,574 | 223,818 | 284,491 | 195,723 | |||||||||
Cash and cash equivalents, end of period | $ | 367,806 | $ | 284,491 | $ | 367,806 | $ | 284,491 | |||||
Supplemental cash flow information: | |||||||||||||
Income taxes (paid) recovered, net |
$ | (3,949) | $ | 79,511 | $ | (21,679) | $ | 15,529 | |||||
Interest (paid) on senior notes | (33,176) | (33,895) | (66,572) | (68,439) | |||||||||
Consolidated Financial Data | |||||||||||
Comprehensive Income (Loss) Data: |
|||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||
December 31, | |||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||
(in thousands) | |||||||||||
Net (loss) income | $ | (57,483) | $ | 141,760 | $ | (99,219) | $ | 402,201 | |||
Other comprehensive income (loss): | |||||||||||
Net unrealized appreciation (depreciation) of investments, net of tax: |
|||||||||||
Net unrealized holding losses of fixed maturities on which | |||||||||||
other-than-temporary impairments were taken | - | - | - | (6,713) | |||||||
Net unrealized holding gains (losses) on all other securities | 101,820 | (266,119) | 384,850 | 4,967 | |||||||
Reclassification adjustment for gains included in | |||||||||||
net (loss) income | (11,142) | (14,101) | (86,245) | (53,791) | |||||||
Deferred income tax (charge) benefit on above | (31,738) | 98,077 | (104,513) | 19,438 | |||||||
58,940 | (182,143) | 194,092 | (36,099) | ||||||||
Change in retirement plan liabilities, net of tax: | |||||||||||
Change in retirement plan liabilities | (886) | 696 | (1,859) | 696 | |||||||
Deferred income tax benefit (charge) on above | 310 | (244) | 651 | (244) | |||||||
(576) | 452 | (1,208) | 452 | ||||||||
Net unrealized currency translation gain (loss), net of tax: | |||||||||||
Net unrealized currency translation gain (loss) | 3,031 | 30,679 | (25,466) | 185,479 | |||||||
Deferred income tax (charge) benefit on above | (1,061) | (10,738) | 8,913 | (64,918) | |||||||
1,970 | 19,941 | (16,553) | 120,561 | ||||||||
Other comprehensive income (loss) | 60,334 | (161,750) | 176,331 | 84,914 | |||||||
Comprehensive income (loss) | $ | 2,851 | $ | (19,990) | $ | 77,112 | $ | 487,115 | |||
Consolidated Financial Data | ||||||||||||||
Reconciliation of Non-GAAP Measures: | ||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||
December 31, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||
(dollars in thousands, except per share amounts) | ||||||||||||||
Net (loss) income | $ | (57,483) | $ | 141,760 | $ | (99,219) | $ | 402,201 | ||||||
Total realized net capital gains, net of tax(1) | (13,474) | (8,545) | (57,590) | (19,566) | ||||||||||
Loss on early extinguishment of debt, net of tax(1) | - | - | 767 | 75 | ||||||||||
Net operating (loss) income | $ | (70,957) | $ | 133,215 | $ | (156,042) | $ | 382,710 | ||||||
Net (loss) income per common share (diluted) | $ | (0.98) | $ | 2.22 | $ | (1.62) | $ | 6.19 | ||||||
Total realized net capital gains, net of tax(1) | (0.23) | (0.13) | (0.93) | (0.30) | ||||||||||
Loss on early extinguishment of debt, net of tax(1) | - | - | 0.01 | - | ||||||||||
Net operating (loss) income per common share (diluted) | $ | (1.21) | $ | 2.09 | $ | (2.54) | $ | 5.89 | ||||||
GAAP annualized return on equity | (5.5) | % | 13.1 | % | (2.4) | % | 9.7 | % | ||||||
Total realized net capital gains, net of tax(1) | (0.8) | (1.3) | (0.5) | |||||||||||
Loss on early extinguishment of debt, net of tax(1) | - | - | - | - | ||||||||||
Annualized operating return on equity | (6.8) | % | 12.3 | % | (3.7) | % | 9.2 | % | ||||||
(1) Assumes a tax rate of 35%. | ||||||||||||||
Source:
Copyright: | Copyright Business Wire 2012 |
Wordcount: | 4288 |
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