CEO: ‘A Difficult Year For Platinum’
Bermuda-based re/insurance provider Platinum Underwriters Holdings, Ltd. today [Feb. 9] reported a net loss of $17.7 million and a loss per common share of $0.46 for the quarter ended December 31, 2010 and net income of $215.5 million and diluted earnings per common share of $4.78 for the year ended December 31, 2010.
The results for the quarter include net premiums earned of $185.0 million, net favorable development of $27.7 million, net investment income and net realized gains on investments of $38.9 million and net catastrophe losses of $68.2 million relating to the New Zealand earthquake and $9.9 million relating to the Australian floods.
Michael D. Price, president and CEO of Platinum, commented, “2010 was a difficult year for underwriting and investing with heavy catastrophe losses and volatile interest rates. Despite these challenges, Platinum had an acceptable year, producing double digit returns and growth in book value per share for the year. Our book value per common share was $50.20 as of December 31, 2010, an increase of 11.0% for the full year.”
Mr. Price added, “Despite the prevailing soft market conditions, we expect to participate selectively in a variety of reinsurance classes while maintaining our strategy of underwriting for profitability, not market share, and continuing to align our capital base with business opportunities.”
Platinum Underwriters Holdings, Ltd. is a leading provider of property, casualty and finite risk reinsurance coverages, through reinsurance intermediaries, to a diverse clientele on a worldwide basis. Based on Pitts Bay Road, Platinum operates through its principal subsidiaries in Bermuda and the United States.
Results for the quarter ended December 31, 2010 are summarized as follows:
Net loss was $17.7 million and the loss per common share was $0.46.
Net premiums written were $162.0 million and net premiums earned were $185.0 million.
GAAP combined ratio was 107.8%.
Net investment income was $30.4 million.
Net realized gains on investments were $8.5 million.
Results for the quarter ended December 31, 2010 as compared with the quarter ended December 31, 2009 are summarized as follows:
Net income decreased $108.5 million.
Net premiums written decreased $38.8 million (or 19.3%) and net premiums earned decreased $42.6 million (or 18.7%).
GAAP combined ratio increased 30.5 percentage points.
Net investment income decreased $10.4 million (or 25.5%).
Net realized gains on investments decreased $16.2 million.
Net premiums written for Platinum’s Property and Marine, Casualty and Finite Risk segments for the quarter ended December 31, 2010 were $76.9 million, $82.6 million and $2.5 million, respectively, representing 47.5%, 51.0% and 1.5%, respectively, of total net premiums written. Combined ratios for these segments were 143.6%, 71.2% and 112.8%, respectively. Compared with the quarter ended December 31, 2009, net premiums written decreased $37.5 million (or 32.8%), increased $0.1 million (or 0.1%) and decreased $1.4 million (or 36.6%) in the Property and Marine, Casualty and Finite Risk segments, respectively.
Results for the year ended December 31, 2010 are summarized as follows:
Net income was $215.5 million and diluted earnings per common share were $4.78.
Net premiums written were $760.6 million and net premiums earned were $780.0 million.
GAAP combined ratio was 86.0%.
Net investment income was $134.4 million.
Net realized gains on investments were $107.8 million.
Results for the year ended December 31, 2010 as compared with the year ended December 31, 2009 are summarized as follows:
Net income decreased $167.8 million (or 43.8%).
Net premiums written decreased $137.2 million (or 15.3%) and net premiums earned decreased $157.3 million (or 16.8%).
GAAP combined ratio increased 9.3 percentage points.
Net investment income decreased $29.6 million (or 18.0%).
Net realized gains on investments increased $29.2 million.
Net premiums written for Platinum’s Property and Marine, Casualty and Finite Risk segments for the year ended December 31, 2010 were $412.7 million, $329.4 million and $18.5 million, respectively, representing 54.3%, 43.3% and 2.4%, respectively, of total net premiums written. Combined ratios for these segments were 104.2%, 62.3% and 117.5%, respectively. Compared with the year ended December 31, 2009, net premiums written decreased $104.3 million (or 20.2%), $27.1 million (or 7.6%) and $5.8 million (or 23.9%) in the Property and Marine, Casualty and Finite Risk segments, respectively.
Total assets were $4.61 billion as of December 31, 2010, a decrease of $407.3 million (or 8.1%) from $5.02 billion as of December 31, 2009. Fixed maturity investments and cash and cash equivalents were $4.21 billion as of December 31, 2010, a decrease of $157.2 million (or 3.6%) from $4.37 billion as of December 31, 2009.
Shareholders’ equity was $1.90 billion as of December 31, 2010, a decrease of $182.3 million (or 8.8%) from $2.08 billion as of December 31, 2009. Book value per common share was $50.20 as of December 31, 2010 based on 37.8 million common shares outstanding, an increase of $4.98 (or 11.0%) from $45.22 as of December 31, 2009 based on 45.9 million common shares outstanding. During the three months ended December 31, 2010, the Company repurchased an aggregate of 1,685,714 common shares for approximately $75.1 million at a weighted average cost, including commissions, of $44.53 per share. During the year ended December 31, 2010, the Company repurchased an aggregate of 9,672,231 common shares for approximately $379.7 million at a weighted average cost, including commissions, of $39.25 per share. Additionally, the Company purchased 6,000,000 options held by The Travelers Companies, Inc. for $98.5 million on October 18, 2010.
The company also reported that the previously announced purchase of 2,500,000 options held by RenaissanceRe Holdings Ltd. for $47.9 million closed on January 20, 2011.
During 2011, flooding occurred in large areas of Australia and Cyclone Yasi made landfall in Northern Queensland, Australia. Based on industry loss estimates, market share analysis, portfolio modeling, a review of individual contracts and discussions with brokers and clients, the company currently believes the financial impact from these events is likely to fall in the range of $15 million to $30 million. The company’s assessment of its exposure to these events is ongoing and the actual impact of these events on the company’s results may differ materially from the Company’s current assessment. Losses from these events will be reflected in the Company’s financial statements for the first quarter of 2011.
Non-GAAP Financial Measures
In presenting the Company’s results, management has included and discussed certain financial measures that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP). Such measures, including segment underwriting income (or loss), related underwriting ratios and book value per common share, are referred to as non-GAAP. These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures, which are used to monitor the results of operations, allow for a more complete understanding of the underlying business. These measures should not be viewed as a substitute for those determined in accordance with GAAP. A reconciliation of such measures to the most comparable GAAP figures such as income before income tax expense and total shareholders’ equity is presented in the attached financial information in accordance with Regulation G.
Platinum Underwriters Holdings, Ltd.
Condensed Consolidated Balance Sheets
As of December 31, 2010 and 2009
($ in thousands, except per share data)
December 31, December 31,
2010 2009
(Unaudited)
Assets
Investments $ 3,047,973 $ 3,660,515
Cash, cash equivalents and short-term investments 1,164,525 709,134
Accrued investment income 31,288 29,834
Reinsurance premiums receivable 162,682 269,912
Reinsurance balances (prepaid and recoverable) 18,434 29,710
Funds held by ceding companies 84,078 84,478
Deferred acquisition costs 36,584 40,427
Other assets 68,749 197,568
Total assets $ 4,614,313 $ 5,021,578
Liabilities
Unpaid losses and loss adjustment expenses $ 2,217,378 $ 2,349,336
Unearned premiums 154,975 180,609
Debt obligations 250,000 250,000
Commissions payable 59,388 90,461
Other liabilities 37,117 73,441
Total liabilities 2,718,858 2,943,847
Total shareholders’ equity 1,895,455 2,077,731
Total liabilities and shareholders’ equity $ 4,614,313 $ 5,021,578
Book value per common share (a) $ 50.20 $ 45.22
(a) Book value per common share is determined by dividing shareholders’ equity by actual common shares outstanding of 37,757,926 shares.
Platinum Underwriters Holdings, Ltd.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)
For the Three and Twelve Months Ended December 31, 2010 and 2009
($ and amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2010 2009 2010 2009
Revenue
Net premiums earned $ 184,980 $ 227,584 $ 779,994 $ 937,336
Net investment income 30,430 40,871 134,385 163,941
Net realized gains on investments 8,494 24,713 107,791 78,630
Net impairment losses on investments (11,050) (5,864) (36,610) (17,603)
Other income (expense) (165) (1,138) (207) 3,084
Total revenue 212,689 286,166 985,353 1,165,388
Expenses
Net losses and loss adjustment expenses 152,283 109,993 467,420 478,342
Net acquisition expenses 32,742 47,916 146,676 176,419
Net changes in fair value of derivatives 3,089 2,913 9,588 9,741
Operating expenses 20,731 25,698 82,636 94,682
Net foreign currency exchange losses (gains) 2,446 (242) 1,385 (399)
Interest expense 4,764 4,759 18,996 19,027
Total expenses 216,055 191,037 726,701 777,812
Income (loss) before income taxes (3,366) 95,129 258,652 387,576
Income tax expense 14,358 4,358 43,154 4,285
Net income (loss) (17,724) 90,771 215,498 383,291
Preferred dividends – - – 1,301
Net income (loss) attributable to common shareholders $ (17,724) $ 90,771 $ 215,498 $ 381,990
Basic
Weighted average common shares outstanding 38,670 48,294 41,930 49,535
Basic earnings (loss) per common share $ (0.46) $ 1.88 $ 5.14 $ 7.71
Diluted
Adjusted weighted average common shares outstanding 40,953 51,466 45,052 52,315
Diluted earnings (loss) per common share $ (0.46) $ 1.76 $ 4.78 $ 7.33
Comprehensive income (loss)
Net income (loss) $ (17,724) $ 90,771 $ 215,498 $ 383,291
Other comprehensive income (loss), net of deferred taxes (83,083) (36,726) 45,517 133,226
Comprehensive income (loss) $ (100,807) $ 54,045 $ 261,015 $ 516,517
Platinum Underwriters Holdings, Ltd.
Segment Reporting (Unaudited)
For the Three Months Ended December 31, 2010 and 2009
($ in thousands)
Three Months Ended December 31, 2010
Segment underwriting results Property and Marine Casualty Finite Risk Total
Net premiums written $ 76,900 $ 82,656 $ 2,461 $ 162,017
Net premiums earned 92,065 90,307 2,608 184,980
Net losses and loss adjustment expenses 111,215 39,935 1,133 152,283
Net acquisition expenses 12,635 18,600 1,507 32,742
Other underwriting expenses 8,354 5,796 302 14,452
Total underwriting expenses 132,204 64,331 2,942 199,477
Segment underwriting income (loss) $ (40,139) $ 25,976 $ (334) (14,497)
Net investment income 30,430
Net realized gains on investments 8,494
Net impairment losses on investments (11,050)
Other expense (165)
Net changes in fair value of derivatives (3,089)
Corporate expenses not allocated to segments (6,279)
Net foreign currency exchange (losses) gains (2,446)
Interest expense (4,764)
Income (loss) before income taxes $ (3,366)
GAAP underwriting ratios:
Net loss and loss adjustment expense 120.8% 44.2% 43.4% 82.3%
Net acquisition expense 13.7% 20.6% 57.8% 17.7%
Other underwriting expense 9.1% 6.4% 11.6% 7.8%
Combined 143.6% 71.2% 112.8% 107.8%
Three Months Ended December 31, 2009
Segment underwriting results Property and Marine Casualty Finite Risk Total
Net premiums written $ 114,423 $ 82,548 $ 3,884 $ 200,855
Net premiums earned 133,934 89,189 4,461 227,584
Net losses and loss adjustment expenses 64,081 47,085 (1,173) 109,993
Net acquisition expenses 19,281 22,821 5,814 47,916
Other underwriting expenses 10,406 7,094 370 17,870
Total underwriting expenses 93,768 77,000 5,011 175,779
Segment underwriting income (loss) $ 40,166 $ 12,189 $ (550) 51,805
Net investment income 40,871
Net realized gains on investments 24,713
Net impairment losses on investments (5,864)
Other expense (1,138)
Net changes in fair value of derivatives (2,913)
Corporate expenses not allocated to segments (7,828)
Net foreign currency exchange (losses) gains 242
Interest expense (4,759)
Income before income taxes $ 95,129
GAAP underwriting ratios:
Net loss and loss adjustment expense 47.8% 52.8% (26.3%) 48.3%
Net acquisition expense 14.4% 25.6% 130.3% 21.1%
Other underwriting expense 7.8% 8.0% 8.3% 7.9%
Combined 70.0% 86.4% 112.3% 77.3%
The GAAP underwriting ratios are calculated by dividing each item above by net premiums earned.
Platinum Underwriters Holdings, Ltd.
Segment Reporting (Unaudited)
For the Twelve Months Ended December 31, 2010 and 2009
($ in thousands)
Twelve Months Ended December 31, 2010
Segment underwriting results Property and Marine Casualty Finite Risk Total
Net premiums written $ 412,675 $ 329,397 $ 18,517 $ 760,589
Net premiums earned 418,763 343,812 17,419 779,994
Net losses and loss adjustment expenses 343,509 119,679 4,232 467,420
Net acquisition expenses 60,224 71,474 14,978 146,676
Other underwriting expenses 32,678 23,091 1,260 57,029
Total underwriting expenses 436,411 214,244 20,470 671,125
Segment underwriting income (loss) $ (17,648) $ 129,568 $ (3,051) 108,869
Net investment income 134,385
Net realized gains on investments 107,791
Net impairment losses on investments (36,610)
Other income (expense) (207)
Net changes in fair value of derivatives (9,588)
Corporate expenses not allocated to segments (25,607)
Net foreign currency exchange (losses) gains (1,385)
Interest expense (18,996)
Income before income taxes $ 258,652
GAAP underwriting ratios:
Net loss and loss adjustment expense 82.0% 34.8% 24.3% 59.9%
Net acquisition expense 14.4% 20.8% 86.0% 18.8%
Other underwriting expense 7.8% 6.7% 7.2% 7.3%
Combined 104.2% 62.3% 117.5% 86.0%
Twelve Months Ended December 31, 2009
Segment underwriting results Property and Marine Casualty Finite Risk Total
Net premiums written $ 517,011 $ 356,488 $ 24,335 $ 897,834
Net premiums earned 528,488 388,901 19,947 937,336
Net losses and loss adjustment expenses 250,646 226,511 1,185 478,342
Net acquisition expenses 66,992 88,841 20,586 176,419
Other underwriting expenses 37,331 25,644 1,412 64,387
Total underwriting expenses 354,969 340,996 23,183 719,148
Segment underwriting income (loss) $ 173,519 $ 47,905 $ (3,236) 218,188
Net investment income 163,941
Net realized gains on investments 78,630
Net impairment losses on investments (17,603)
Other income (expense) 3,084
Net changes in fair value of derivatives (9,741)
Corporate expenses not allocated to segments (30,295)
Net foreign currency exchange (losses) gains 399
Interest expense (19,027)
Income before income taxes $ 387,576
GAAP underwriting ratios:
Net loss and loss adjustment expense 47.4% 58.2% 5.9% 51.0%
Net acquisition expense 12.7% 22.8% 103.2% 18.8%
Other underwriting expense 7.1% 6.6% 7.1% 6.9%
Combined 67.2% 87.6% 116.2% 76.7%
The GAAP underwriting ratios are calculated by dividing each item above by net premiums earned.
