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Bermuda property-casualty insurance companies beefing up their capital reserves in the wake of huge hurricane losses have now issued or will issue more than $9 billion in securities, Moody's Investors Service reported.

At the same time, an analyst at Banc of America Securities said a number of Bermuda insurer-reinsurer groups have seen earnings bolstered by strong investment yields as many companies report higher than expected investment income.

Moody's in New York said 14 firms on the island had replenished 71 percent of their third quarter losses by issuing equity, hybrid and debt securities and an additional $3 billion of securities offerings have been announced.

"These companies have raised capital to re-fortify their balance sheets and to capitalize on opportunities afforded by an improving pricing environment, particularly on property insurance and reinsurance," the rating agency concluded.

"However," Moody's added, "the degree to which the market improves is likely to be affected by the amount of capital ultimately raised by both existing Bermuda companies and Lloyd's syndicates, and to a lesser degree, the 'Class of 2005' start-ups."

Among the startups it mentioned were:

o Harbor Point Ltd., formed by Chubb Corp. and Stone Point Capital LLC.

o Amlin Bermuda, formed by Lloyd's.

o Validus Holdings Ltd., formed by a private equity consortium.

o Lancashire; a venture incorporating Rosemont Re runoff.

o A new XL Capital Ltd. venture for volatile reinsurance business.

o New Castle Reinsurance Company Ltd., formed by Citadel Investment Group.

James Eck, Moody's assistant vice president, noted that after the third quarter's industry-wide insured losses of $50 billion, Moody's has taken negative actions on more than half the 13 companies it rates, including four downgrades.

Of 14 publicly-traded Bermuda companies studied by Moody's, there were $8.4 billion in net after-tax catastrophe losses.

Analysts at Banc America said many insurers/reinsurers are seeing a rise in their portfolio investment yields, adding to an already strong earnings outlook. In the third quarter, they said 77 percent of the companies studied reported higher than expected income.

Examining current reinvestment rates of companies against their current investment portfolio yield to determine the potential benefit or hit to earnings that reinvesting maturing investments will have on 2006 earnings, Banc of America said they found three Bermuda companies that appear to be the biggest beneficiaries.

Listed in this favorable category by Banc of America were: Montpelier Re Holdings, Arch Capital Group and XL Capital Ltd.

Special Reports /

$9B Recapitalization By Bermuda Insurers

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