Transatlantic Holdings, Inc. Announces Record Quarterly Earnings
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Book Value Per Share Increases 13.9% in the 2009 Third Quarter
NEW YORK--(BUSINESS WIRE)-- Transatlantic Holdings, Inc. (NYSE: TRH) today reported financial results for the quarter and nine months ended September 30, 2009. TRH's net income for the third quarter of 2009 totaled $153 million, or $2.28 per common share (diluted), compared to a net loss of ($108) million, or ($1.62) per common share (diluted) in the third quarter of 2008.
TRH's net operating income for the third quarter of 2009 was $149 million, or $2.22 per common share (diluted), compared to a net operating loss of ($5) million, or ($0.08) per common share (diluted), in the third quarter of 2008.
Book value per share increased 13.9% in the quarter, reaching a record high of $60.90 at September 30, 2009. Stockholders' equity exceeded $4.0 billion at quarter-end.
Commenting on the quarter, Robert F. Orlich, President and Chief Executive Officer, said, "We are pleased to report record quarterly earnings. Our results reflect strong underwriting performance, which benefited from minimal catastrophe loss activity, and improved investment returns. As a result of robust earnings and significant unrealized investment gains due to stronger financial markets, our book value per share grew dramatically.
"As for market trends, we have seen significant price increases for property catastrophe-exposed accounts, particularly in peak zones, and for those that have had prior loss experience. These increases began to level off in the second half of the year. We continue to monitor casualty pricing closely, focusing our efforts on niche markets which show improvement from the first half of the year.
"As we approach the annual January 1 renewal season, we are well-positioned in the marketplace, with an enviable global franchise, and our financial condition is stronger than ever."
Other highlights in the third quarter of 2009 include:
-- GAAP basis annualized ROE of 16.1% based on third quarter results;
Annualized operating ROE of 15.7%.
-- Combined ratio of 91.9%, with strong performance in each segment.
Pre-tax catastrophe costs were minimal in the current quarter and $146
million in the year-ago period. Favorable loss reserve development
amounted to $7 million in the 2009 third quarter compared to adverse
development of $1 million in the prior year period.
-- Net operating cash flow of $301 million.
-- Net premiums written of $973 million, declining 9%, excluding the impact
of foreign exchange, from record quarterly premiums reported in the same
2008 quarter. For the nine month periods, net premiums written increased
2% from a year ago, excluding foreign exchange. Premium volume for the
current year reflects TRH's exit from certain accounts where margins
were inadequate.
-- Net investment income of $123 million, an increase of 12% year over
year, resulting from an increase in income from other invested assets.
-- Realized net capital gains of $7 million, which are net of ($16) million
of other-than-temporary impairments charged to earnings. In the third
quarter of 2008, realized net capital losses totaled ($158) million,
which includes other-than-temporary impairments charged to earnings of
($124) million.
-- Net loss and loss adjustment expense reserves increased $74 million
(including $29 million due to foreign exchange) during the quarter,
bringing the amount of such reserves to $7.71 billion at September 30,
2009.
-- At quarter end, consolidated investments and assets totaled $11.82
billion and $14.65 billion, respectively.
For the first nine months of 2009, net income totaled $341 million, or $5.10 per common share (diluted), compared to $98 million, or $1.47 per common share (diluted), for the first nine months of 2008. Net operating income for the first nine months of 2009 totaled $386 million, or $5.78 per common share (diluted), compared to $249 million, or $3.73 per common share (diluted), for the first nine months of 2008. The increase in net income for the nine month period was largely due to improved underwriting performance, reflecting de minimis catastrophe costs in 2009 compared to $144 million of pre-tax catastrophe costs a year ago, and a reduction in realized net capital losses. The calculation of net operating income excludes the impact of realized net capital gains (losses) and gain on early extinguishment of debt, each net of tax.
Caution concerning forward-looking statements:
This press release contains forward-looking statements, including management's beliefs about financial, credit and industry market conditions and expectations regarding the aggregate net impact on TRH from recent catastrophe losses, within the meaning of the U.S. federal securities laws. These forward-looking statements are based on assumptions and opinions concerning a variety of known and unknown risks. Please refer to TRH's Annual Report on Form 10-K for the year ended December 31, 2008 and TRH's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 as well as its other and future filings and reports filed with or furnished to the Securities and Exchange Commission for a description of the business environment in which TRH operates and the important factors, risks and uncertainties that may affect its business and financial results. If any assumptions or opinions prove incorrect, any forward-looking statements made on that basis may also prove materially incorrect. TRH is not under any obligation to (and expressly disclaims any such obligations to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
####
TRH will host a conference call on Thursday, October 29, 2009 at 11:00 a.m. (ET) to discuss third quarter 2009 results. The call will be webcast live on the Internet available through the Investor Information-Earnings Information section of TRH's website at www.transre.com. The live conference call can also be accessed by dialing 866-730-5771 (in the U.S.) or 857-350-1595 (International). The passcode for the conference call is 36524268.
Please refer to the Investor Information-Earnings Information section of TRH's website at www.transre.com for a copy of the third quarter 2009 Financial Supplement which includes additional information on TRH's financial performance.
After the completion of the call, an archived webcast will be available in the Investor Relations section of TRH's website until mid-January 2010. A replay of the call will also be available until November 5, 2009 by dialing 888-286-8010 (in the U.S.) or 617-801-6888 (International). The passcode to access the replay is 74754014.
####
Transatlantic Holdings, Inc. (TRH) is a leading international reinsurance organization headquartered in New York, with operations on six continents. Its subsidiaries, Transatlantic Reinsurance Company(R), Trans Re Zurich and Putnam Reinsurance Company, offer reinsurance capacity on both a treaty and facultative basis structuring programs for a full range of property and casualty products, with an emphasis on specialty risks.
####
The financial information in this earnings release and the financial supplement that is posted on TRH's website includes performance measures called Net Operating Income (Loss) ("NOI"), NOI Per Common Share (diluted) and Annualized Operating Return on Equity ("Annualized Operating ROE") which are based on a methodology other than generally accepted accounting principles in the United States ("GAAP"). NOI is defined as GAAP net income (loss) excluding realized net capital gains (losses) and gain on early extinguishment of debt, each net of taxes. NOI Per Common Share (diluted) represents NOI divided by average common shares outstanding on a diluted basis. GAAP annualized return on equity is defined as GAAP net income divided by the average of beginning and ending stockholders' equity for the period multiplied by four (for the three month periods) or four-thirds (for the nine month periods). Annualized Operating ROE is defined as NOI divided by the average of beginning and ending stockholders' equity multiplied by four (for the three month periods) or four-thirds (for the nine month periods). TRH uses these measures in analyzing its performance as these measures focus on the core fundamentals of TRH's operations. While TRH considers realized capital gains and losses and the gain 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 and GAAP annualized return on equity, 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 return on equity, respectively, the most directly comparable GAAP measures, are included later in this press release.
TRH's GAAP combined ratio and its components, for all periods in this press release, are now 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 LAE 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 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. Prior to the third quarter of 2009, TRH's combined ratio and its components were presented in accordance with principles prescribed or permitted by insurance regulatory authorities. The GAAP combined ratio presented differs from the previously presented statutory combined ratio in the commission ratio and the other underwriting expense ratio components. The commission ratio now includes changes in deferred acquisition costs in the numerator and replaces net premiums written with net premiums earned in the denominator. The other underwriting expense ratio now replaces net premiums written with net premiums earned in the denominator. TRH believes that, taken as a whole, the current presentation of the combined ratio is not materially different from the previously presented statutory combined ratio and that this change will provide consistency with how TRH's peers report their combined ratios.
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.
Transatlantic Holdings, Inc. and Subsidiaries
Consolidated Financial Data
Statement of Operations Data:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 Change 2009 2008 Change
(in thousands, except per share data)
Revenues:
Net premiums written $ 972,572 $ 1,094,182 (11.1 ) % $ 3,026,014 $ 3,118,319 (3.0 ) %
Decrease (increase)
in net unearned 35,510 (67,251 ) (13,133 ) (51,504 )
premiums
Net premiums earned 1,008,082 1,026,931 (1.8 ) 3,012,881 3,066,815 (1.8 )
Net investment 123,205 110,433 11.6 344,224 348,135 (1.1 )
income
Realized net capital
gains (losses):
Total
other-than-temporary (21,946 ) (124,191 ) (88,182 ) (202,416 )
impairments
Less:
other-than-temporary
impairments
recognized in other
comprehensive
income (loss) 6,093 - 6,565 -
Other-than-temporary
impairments
charged to earnings (15,853 ) (124,191 ) (81,617 ) (202,416 )
Other realized net
capital gains 22,453 (33,413 ) 2,161 (30,107 )
(losses)
Total realized net
capital gains 6,600 (157,604 ) (79,456 ) (232,523 )
(losses)
Gain on early
extinguishment of - - 9,878 -
debt
Total revenues 1,137,887 979,760 16.1 3,287,527 3,182,427 3.3
Expenses:
Net losses and loss 657,765 848,258 2,011,426 2,204,313
adjustment expenses
Net commissions 222,854 241,705 703,987 739,008
Decrease (increase)
in deferred 6,867 (8,215 ) (6,770 ) (8,723 )
acquisition costs
Other underwriting 38,671 33,638 107,214 97,854
expenses
Interest on senior 10,137 10,861 30,432 32,577
notes
Other, net 5,514 7,197 17,272 18,982
Total expenses 941,808 1,133,444 2,863,561 3,084,011
Income (loss) before 196,079 (153,684 ) - 423,966 98,416 330.8
income taxes
Income taxes 42,816 (46,163 ) 83,183 551
(benefits)
Net income (loss) $ 153,263 $ (107,521 ) - $ 340,783 $ 97,865 248.2
Net income (loss)
per common share:
Basic $ 2.31 $ (1.62 ) - % $ 5.13 $ 1.48 247.6 %
Diluted 2.28 (1.62 ) - 5.10 1.47 247.9
Cash dividends per $ 0.20 $ 0.19 5.3 $ 0.59 $ 0.54 9.3
common share
Weighted average
common shares
outstanding:
Basic 66,384 66,265 66,374 66,252
Diluted 67,081 66,265 66,821 66,762
GAAP Underwriting
Ratios:
Loss 65.3 % 82.6 % 66.8 % 71.9 %
Commission 22.8 22.7 23.1 23.8
Other underwriting 3.8 3.3 3.6 3.2
expense
Underwriting expense 26.6 26.0 26.7 27.0
Combined 91.9 % 108.6 % 93.5 % 98.9 %
Transatlantic Holdings, Inc. and Subsidiaries
Consolidated Financial Data
As of September 30, 2009 and December 31, 2008
Balance Sheet Data:
2009 2008
(in thousands, except share data)
ASSETS
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair $ 1,215,358 $ 1,218,603
value: 2009-$1,288,748; 2008-$1,210,432)
Available for sale, at fair value (amortized 9,252,135 8,013,071
cost: 2009-$8,964,949; 2008-$8,294,813)
Equities, available for sale, at fair value:
Common stocks (cost: 2009-$410,013; 468,262 425,645
2008-$479,714)
Nonredeemable preferred stocks (cost: 36,186 98,230
2009-$34,330; 2008-$102,804)
Other invested assets 273,042 243,795
Short-term investments, at cost (approximates 574,648 230,213
fair value)
Total investments 11,819,631 10,229,557
Cash and cash equivalents 329,574 288,920
Accrued investment income 150,167 141,563
Premium balances receivable, net 602,551 665,187
Reinsurance recoverable on paid and unpaid 818,630 790,499
losses and loss adjustment expenses
Deferred acquisition costs 251,999 239,610
Prepaid reinsurance premiums 108,755 84,238
Deferred income taxes 363,277 692,345
Other assets 206,813 245,019
Total assets $ 14,651,397 $ 13,376,938
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $ 8,505,555 $ 8,124,482
Unearned premiums 1,287,251 1,220,133
5.75% senior notes due December 14, 2015 697,124 722,243
Other liabilities 118,407 111,860
Total liabilities 10,608,337 10,178,718
Preferred Stock, $1.00 par value; shares - -
authorized: 10,000,000; none issued
Common Stock, $1.00 par value; shares
authorized: 200,000,000;
shares issued: 2009-67,374,043; 67,374 67,353
2008-67,353,258
Additional paid-in capital 275,195 268,027
Accumulated other comprehensive income (loss) 206,804 (257,690 )
Retained earnings 3,515,606 3,142,449
Treasury Stock, at cost: 988,900 shares of (21,919 ) (21,919 )
common stock
Total stockholders' equity 4,043,060 3,198,220
Total liabilities and stockholders' equity $ 14,651,397 $ 13,376,938
Transatlantic Holdings, Inc. and Subsidiaries
Consolidated Financial Data
Condensed Cash
Flow Data:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(in thousands)
Net cash provided
by operating $ 300,755 $ 408,304 $ 776,548 $ 901,731
activities
Cash flows from
investing
activities:
Proceeds of fixed
maturities 137,287 1,445,444 487,713 2,794,577
available for sale
sold
Proceeds of fixed
maturities
available for sale 209,332 52,307 464,909 512,559
redeemed or
matured
Proceeds of fixed
maturities held to - 25,000 - 25,000
maturity redeemed
Proceeds of
equities available 236,894 344,614 802,418 801,756
for sale sold
Purchase of fixed
maturities (322,878 ) (1,439,911 ) (1,225,548 ) (3,498,192 )
available for sale
Purchase of
equities available (182,284 ) (347,311 ) (722,908 ) (825,527 )
for sale
Net sale
(purchase) of - 406 (24,784 ) (22,772 )
other invested
assets
Net sales in
securities lending - 133,800 - 572,356
invested
collateral
Net purchase of
short-term (389,672 ) (116,077 ) (490,832 ) (174,395 )
investments
Change in other
liabilities for
securities in 4,948 (133,763 ) 20,230 (129,228 )
course of
settlement
Other, net 7,898 (13,666 ) (16,456 ) 2,581
Net cash (used in)
provided by (298,475 ) (49,157 ) (705,258 ) 58,715
investing
activities
Cash flows from
financing
activities:
Net change in
securities lending - (402,744 ) - (841,300 )
payable
Dividends to (13,276 ) (12,591 ) (38,497 ) (33,791 )
stockholders
Common stock 63 366 (108 ) 747
issued
Repurchase of - - (15,479 ) -
senior notes
Other, net 2,010 (130 ) 1,453 566
Net cash used in
financing (11,203 ) (415,099 ) (52,631 ) (873,778 )
activities
Effect of exchange
rate changes on 4,653 (6,541 ) 21,995 (3,877 )
cash and cash
equivalents
Change in cash and (4,270 ) (62,493 ) 40,654 82,791
cash equivalents
Cash and cash
equivalents, 333,844 400,716 288,920 255,432
beginning of
period
Cash and cash
equivalents, end $ 329,574 $ 338,223 $ 329,574 $ 338,223
of period
Supplemental cash
flow information:
Income taxes paid, $ (28,851 ) $ (25,807 ) $ (42,751 ) $ (104,310 )
net
Interest paid on - - (20,110 ) (21,563 )
senior notes
Transatlantic Holdings, Inc. and Subsidiaries
Consolidated Financial Data
Comprehensive Income
(Loss) Data:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(in thousands)
Net income (loss) $ 153,263 $ (107,521 ) $ 340,783 $ 97,865
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 (6,093 ) - (6,565 ) -
impairments were taken
Net unrealized holding
gains (losses) on all 349,803 (471,111 ) 580,496 (794,285 )
other securities
Reclassification
adjustment for (gains)
losses included in
net income (loss) (12,219 ) 161,907 71,294 222,594
Deferred income tax
(charge) benefit on (116,021 ) 108,222 (225,828 ) 200,092
above
215,470 (200,982 ) 419,397 (371,599 )
Net unrealized currency
translation gain (loss),
net of tax:
Net unrealized currency 199,777 (108,025 ) 179,480 (49,799 )
translation gain (loss)
Deferred income tax
(charge) benefit on (69,922 ) 37,809 (62,818 ) 17,430
above
129,855 (70,216 ) 116,662 (32,369 )
Other comprehensive 345,325 (271,198 ) 536,059 (403,968 )
income (loss)
Comprehensive income $ 498,588 $ (378,719 ) $ 876,842 $ (306,103 )
(loss)
Transatlantic Holdings, Inc. and Subsidiaries
Consolidated Financial Data
Reconciliation of
Non-GAAP Measures:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(dollars in thousands, except per share amounts)
Net income (loss) $ 153,263 $ (107,521 ) $ 340,783 $ 97,865
Total realized net
capital (gains) (4,289 ) 102,443 51,647 151,140
losses, net of tax
(Gain) on early
extinguishment of - - (6,421 ) -
debt, net of tax
Net operating income $ 148,974 $ (5,078 ) $ 386,009 $ 249,005
(loss)
Net income (loss) per
common share $ 2.28 $ (1.62 ) $ 5.10 $ 1.47
(diluted)
Total realized net
capital (gains) (0.06 ) 1.54 0.78 2.26
losses, net of tax
(Gain) on early
extinguishment of - - (0.10 ) -
debt, net of tax
Net operating income
(loss) per common $ 2.22 $ (0.08 ) $ 5.78 $ 3.73
share (diluted)
GAAP annualized 16.1 % (13.4 ) % 12.5 % 4.1 %
return on equity
Total realized net
capital (gains) (0.4 ) 12.8 1.9 6.3
losses, net of tax
(Gain) on early
extinguishment of - - (0.2 ) -
debt, net of tax
Annualized operating 15.7 % (0.6 ) % 14.2 % 10.4 %
return on equity
Source: Transatlantic Holdings, Inc.
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