Alterra: A Good ‘Relative Performance’
Alterra Capital Holdings Limited today [Feb. 9] reported net income of $30.9 million, or $0.30 per diluted share, for the fourth quarter of 2011, compared to net income of $79.7 million, or $0.69 per diluted share, for the same quarter of 2010.
Net operating income for the fourth quarter of 2011 was $31.7 million, or $0.30 per diluted share, compared to net operating income of $76.2 million, or $0.66 per diluted share, for the same quarter of 2010. Annualized net operating return on average shareholders’ equity for the fourth quarter of 2011 was 4.5%.
For the year ended December 31, 2011, Alterra reported net income of $65.3 million, or $0.61 per diluted share, compared to net income of $302.3 million, or $3.17 per diluted share, in 2010. Net operating income for the year ended December 31, 2011 was $96.6 million, or $0.91 per diluted share, compared to net operating income of $251.7 million, or $2.64 per diluted share, in 2010. Net operating return on average shareholders’ equity for the year ended December 31, 2011 was 3.4%.
W. Marston (Marty) Becker [pictured[, president and CEO of Alterra, said: “We are pleased with Alterra’s relative performance in 2011. We have reported positive operating income and a positive return on equity. Importantly, we have grown our book value per share over the year.
“Considering the record level of industry property catastrophe losses in 2011, we believe our results highlight the benefits of our diversified underwriting strategy, measured cat risk appetite and sophisticated risk management discipline.
“We have worked hard these past few years to build a global organization with a geographic and product footprint that can meet the needs of our clients and enable us to capture opportunity. As a result, with the industry apparently on the cusp of change, we believe Alterra is particularly well positioned to take advantage of the expected improvement in prices.”
Fourth quarter 2011 results for Alterra include:
- Property and casualty gross premiums written of $324.8 million, representing an increase of $11.4 million, or 3.6%; net premiums written of $217.8 million, representing a decrease of $18.2 million, or 7.7%; and net premiums earned of $348.1 million, representing an increase of $7.3 million, or 2.1%; each as compared to the same quarter of 2010;
- A combined ratio on property and casualty business of 97.4% compared to 84.8% for the same quarter of 2010;
- Property catastrophe event and significant per-risk net losses of $55.5 million, net of reinstatement premiums, compared to $13.0 million in the same quarter of 2010. Losses net of reinsurance and reinstatements include $30.0 million for natural disasters during the fourth quarter of 2011. The remainder of the net losses relate to increased loss estimates on property catastrophe events from the first nine months of the year;
- Net favorable development on prior years’ loss reserves of $43.0 million, or 12.3 combined ratio points, compared to $28.0 million, or 8.2 combined ratio points, in the same quarter of 2010; and
- Net investment income of $57.1 million compared to $61.1 million in the same quarter of 2010, a decrease of 6.5%.
- Gross premiums written from property and casualty underwriting for the fourth quarter of 2011 were $324.8 million, generated by the segments as follows: insurance – $111.8 million, a decrease of $1.5 million, or 1.3%; reinsurance – $89.2 million, a decrease of $21.5 million, or 19.4%; U.S. specialty – $88.2 million, an increase of $22.6 million, or 34.4%; and Alterra at Lloyd’s – $35.7 million, an increase of $11.7 million, or 49.0%; each as compared to the same quarter of 2010.
- Combined ratios for the fourth quarter of 2011 by segment were 55.3% for insurance, 81.6% for reinsurance, 117.4% for US specialty and 193.1% for Alterra at Lloyd’s.
Results for the year ended December 31, 2011 include:
- Property and casualty gross premiums written of $1,900.7 million, representing an increase of $494.9 million, or 35.2%; net premiums written of $1,429.0 million, representing an increase of $394.0 million, or 38.1%; and net premiums earned of $1,422.0 million, representing an increase of $254.0 million, or 21.8%; each as compared to 2010;
- A combined ratio on property and casualty business of 98.2% compared to 85.7% in 2010;
- Property catastrophe event and significant per-risk net losses of $253.4 million, net of reinstatement premiums, compared to $54.9 million in 2010. Property catastrophe losses principally affected the reinsurance and Alterra at Lloyd’s segments;
- Net favorable development on prior years’ loss reserves of $153.3 million, or 10.8 combined ratio points, compared to $105.5 million, or 9.0 combined ratio points, in 2010;
- Net investment income of $234.8 million compared to $222.5 million in 2010, an increase of 5.6%; and
- A loss of principal of $25.0 million on a catastrophe bond investment triggered by the Japan earthquake and tsunami, which is included within net realized and unrealized losses on investments.
- Gross premiums written from property and casualty underwriting for the year ended December 31, 2011 were $1,900.7 million, generated by the segments as follows: insurance – $410.3 million, an increase of $10.7 million, or 2.7%; reinsurance – $869.7 million, an increase of $360.7 million, or 70.8%; U.S. specialty – $330.2 million, an increase of $35.7 million, or 12.1%; and Alterra at Lloyd’s – $290.5 million, an increase of $87.9 million, or 43.4%; each as compared to 2010.
- Combined ratios for the year ended December 31, 2011 by segment were 68.2% for insurance, 95.8% for reinsurance, 104.8% for U.S. specialty and 135.4% for Alterra at Lloyd’s.
- Alterra’s 2010 results of operations reflect the impact of the May 12, 2010 merger with Harbor Point Limited. Accordingly, a comparison of Alterra’s gross premiums written, net premiums written and other results of operations for the current and prior year 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 fourth quarter financial supplement available on Alterra’s website.
Balance Sheet
Total invested assets, including cash and cash equivalents, were $7,814.7 million as of December 31, 2011, a decrease of $46.6 million from December 31, 2010. As of December 31, 2011, 94.4% of the fixed maturities portfolio — by carrying value — was investment-grade, a decrease from 96.0% as of December 31, 2010. As of December 31, 2011, the weighted average book yield of Alterra’s cash and fixed maturities portfolio was 3.46% and the weighted average duration was 4.1 years.
Under a board-approved share repurchase authorization, Alterra repurchased 2,362,113 common shares during the fourth quarter of 2011 at an average price of $22.45 per share for a total of $53.0 million.
Share repurchases under the board-approved share repurchase authorization for the year ended December 31, 2011 were 10,305,705 common shares at an average price of $21.67 per share for a total of $223.3 million. As of December 31, 2011, $104.4 million remained under the Board-approved share repurchase authorization.
Shareholders’ equity was $2,809.2 million as of December 31, 2011, a decrease of 3.7% from December 31, 2010. Diluted book value per share as of December 31, 2011 was $26.91. Including dividends declared during 2011, diluted book value per share growth in 2011 was 5.5%.
Bermuda-based 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.
Founded in 1999, Alterra Capital Holdings Ltd. – formerly Max Capital Group Ltd. — has operations based in Bermuda, Ireland, the United States and the United Kingdom.
In September 2010, the company announced the amalgamation of its Bermuda operating subsidiaries, Alterra Insurance Limited and Harbor Point Re Limited. The newly amalgamated company was renamedAlterra Bermuda Limited.
