Alterra Reports Third Quarter 2011 Results
Bermuda ‘s Alterra Capital Holdings Limited yesterday [Nov.1] reported net income of $48.4 million, or $0.46 per diluted share, for the third quarter of 2011, compared to net income of $82.8 million, or $0.70 per diluted share, for the same quarter of 2010.
Net operating income for the third quarter of 2011 was $50.1 million, or $0.47 per diluted share, compared to net operating income of $76.0 million, or $0.64 per diluted share, for the same quarter of 2010. Annualized net operating return on average shareholders’ equity for the third quarter of 2011 was 7.1 percent.
For the nine months ended September 30, 2011, Alterra reported net income of $34.3 million, or $0.32 per diluted share, compared to net income of $222.7 million, or $2.50 per diluted share, for the same period of 2010. Net operating income for the nine months ended September 30, 2011 was $64.9 million, or $0.61 per diluted share, compared to net operating income of $175.5 million, or $1.97 per diluted share, for the same period of 2010. Annualized net operating return on average shareholders’ equity for the nine months ended September 30, 2011 was 3.1 percent.
Alterra’s 2010 results include the results of operations for the former Harbor Point Limited companies from May 12, 2010. Accordingly, a comparison of Alterra’s gross premiums written and other results of operations for the current and prior nine month periods are not meaningful. Selected pro forma combined results of operations for periods prior to the merger for the reinsurance segment are provided in Alterra’s third quarter financial supplement available on Alterra’s website at www.alterracap.com.
W. Marston [Marty] Becker, President and Chief Executive Officer of Alterra, said: “Alterra’s reported results reflect a balanced quarter, with solid operating earnings across our segments and nearly five percent growth in diluted book value per share. Earnings are down compared to the prior year, pressured by higher catastrophe losses and lower investment yields. However, we remain pleased with the consistency of our underwriting results in the face of a very challenging year for property catastrophe business.
“The relatively limited impact of this year’s property catastrophe events on our results and the absence of negative development of our aggregated loss estimates beyond initially stated ranges continue to reflect favorably on the quality of Alterra’s diversified underwriting, risk management and reserving capabilities. As we near the end of the Atlantic hurricane season and approach the January renewal season, we believe that we have the capital and operational breadth and flexibility to take advantage of what appear to be more favorable market opportunities.”
Third quarter 2011 results for Alterra include:
- Property and casualty gross premiums written of $385.5 million, representing an increase of $61.6 million, or 19.0%; net premiums written of $294.7 million, representing an increase of $31.3 million, or 11.9%; and net premiums earned of $346.3 million, representing an increase of $5.1 million, or 1.5%; each as compared to the same quarter of 2010;
- A combined ratio on property and casualty business of 87.7% compared to 86.0% for the same quarter of 2010;
- Property catastrophe event and significant per-risk net losses of $42.8 million ($42.1 million net of reinstatement premiums) compared to $14.1 million in the same quarter of 2010. Losses net of reinsurance and reinstatements include $21.8 million for natural disasters during the third quarter of 2011, including Hurricane Irene. The remainder of the net losses relate to increased loss estimates on property catastrophe loss events from the first half of the year, which remain within previously announced ranges;
- Net favorable development on prior years’ loss reserves of $31.7 million, or 9.1 combined ratio points, compared to $36.4 million, or 10.7 combined ratio points, in the same quarter of 2010;
- Net investment income of $60.3 million compared to $59.7 million in the same quarter of 2010, an increase of 1.0%; and
- Net operating income of $50.1 million, or $0.47 per diluted share, representing an annualized net operating return on average shareholders’ equity of 7.1%.
- Gross premiums written from property and casualty underwriting for the third quarter of 2011 were $385.5 million, generated by the segments as follows: insurance – $86.0 million, an increase of $8.1 million, or 10.3%; reinsurance – $156.8 million, an increase of $32.8 million, or 26.4%; U.S. specialty – $72.2 million, an increase of $8.0 million, or 12.4%; and Alterra at Lloyd’s – $70.6 million, an increase of $12.8 million, or 22.2%; each as compared to the same quarter of 2010.
Combined ratios for the third quarter of 2011 by segment were 64.1% for insurance, 88.2% for reinsurance, 101.4% for US specialty and 95.8% for Alterra at Lloyd’s.
Results for the nine months ended September 30, 2011 include:
- Property and casualty gross premiums written of $1,575.9 million, representing an increase of $483.6 million, or 44.3%; net premiums written of $1,211.2 million, representing an increase of $412.2 million, or 51.6%; and net premiums earned of $1,073.9 million, representing an increase of $246.7 million, or 29.8%; each as compared to the same period of 2010. These increases primarily reflect the impact of the merger with Harbor Point – whose premiums are not included for the period prior to the merger;
- A combined ratio on property and casualty business of 98.4% compared to 86.1% for the same period of 2010;
- Property catastrophe event and significant per-risk net losses of $208.7 million ($197.9 million net of reinstatement premiums) compared to $44.0 million in the same period of 2010. Property catastrophe losses principally affected the reinsurance and Alterra at Lloyd’s segments;
- Net favorable development on prior years’ loss reserves of $110.4 million, or 10.3 combined ratio points, compared to $77.6 million, or 9.4 combined ratio points, in the same period of 2010;
- Net investment income of $177.8 million compared to $161.4 million in the same period of 2010, an increase of 10.2%;
- A loss of principal of $25.0 million on a catastrophe bond investment triggered by the Japan earthquake and tsunami, included within net realized and unrealized losses on investments; and
- Net operating income of $64.9 million, or $0.61 per diluted share, representing an annualized net operating return on average shareholders’ equity of 3.1%.
- Gross premiums written from property and casualty underwriting for the nine months ended September 30, 2011 were $1,575.9 million, generated by the segments as follows: insurance – $298.5 million, an increase of $12.1 million, or 4.2%; reinsurance – $780.6 million, an increase of $382.1 million, or 95.9%; U.S. specialty – $242.0 million, an increase of $13.1 million, or 5.7%; and Alterra at Lloyd’s – $254.8 million, an increase of $76.2 million, or 42.6%; each as compared to the same period of 2010.
Combined ratios for the nine months ended September 30, 2011 by segment were 72.7% for insurance, 100.3% for reinsurance, 100.5% for U.S. specialty and 116.5% for Alterra at Lloyd’s.
Balance Sheet
Total invested assets, including cash and cash equivalents, were $7,999.1 million as of September 30, 2011, an increase of $137.8 million from December 31, 2010. As of September 30, 2011, 95.1% of the fixed maturities portfolio (by carrying value) was investment-grade, a decrease from 96.0% as of December 31, 2010. As of September 30, 2011, the weighted average book yield of Alterra’s cash and fixed maturities portfolio was 3.35% and the weighted average duration was 4.2 years.
Under the Board-approved share repurchase authorization, Alterra repurchased 1,446,442 common shares during the third quarter of 2011 at an average price of $19.41 per share for a total of $28.1 million. Share repurchases under the Board-approved share repurchase authorization for the nine months ended September 30, 2011 were 7,943,592 common shares at an average price of $21.44 per share for a total of $170.3 million. As of September 30, 2011, $157.5 million remained under the Board-approved share repurchase authorization.
Shareholders’ equity was $2,844.7 million as of September 30, 2011, an increase of 1.8% from June 30, 2011. Diluted book value per share as of September 30, 2011 was $27.18, an increase of 4.6% from June 30, 2011.
Alterra Capital Holdings Limited is a global enterprise dedicated to providing diversified specialty insurance and reinsurance products to corporations, public entities and property and casualty insurers.
The company was formerly known as Max Capital Group Ltd. and changed its name to Alterra Capital Holdings Limited in May 2010. Alterra Capital Holdings Limited was founded in 1999 and is based in Hamilton, Bermuda.
