Old Bermudians Run Into Storm Headwinds

A global provider of reinsurance and insurance, RenaissanceRe reported $164.2 million in profit for 2004, a steep decline of 73.7 percent from $624.8 million profit reported in 2003. The company generated a combined ratio of 104.4 for 2004.

The earnings picture improved during the fourth quarter, when net income came in at $200.1 million higher than the total 2004 profit, and also improving from the $165.6 million profit reported during the 2003 fourth quarter.

RenaissanceRe's 2004 financial results ran into headwind from third-quarter Florida hurricane activity. "We've now recorded a net impact of $570 million from third-quarter hurricanes," Mr. Stanard said.

Overall net premiums written for 2004 came in at $1.3 billion, an increase from $1.2 billion a year earlier. "Our company is now well established as a leader not only in catastrophe reinsurance but also in various lines of specialty reinsurance and individual risk," Mr. Stanard said.

XL Capital Ltd., a global insurance, reinsurance and financial risk specialist, reached a new company record in annual profit, reporting $1.13 billion in net income for 2004over three times the $371.7 million income posted for 2003.

"The fact we earned $1.13 billion in net income for the year, despite incurring over $550 in major catastrophe losses, is a testament to the earning potential of XL," CEO Brian O'Hara told analysts in a February conference call.

XL said its bottom line benefited from reinsurance business, which avoided the huge losses seen one year ago. Results in 2003 were adversely impacted by a pre-tax reserve charge of nearly $700 million for North American casualty business written from 1997-2001.

However, XL mentioned as "one financial uncertainty" an independent valuation process it has entered into with Winterthur Swiss Insurance over settlement of a reserve seasoning agreement for XL's 2001 purchase of Winterthur International. According to Fitch Ratings, if XL is unsuccessful in this valuation process, the company could eventually face a $900 million net pre-tax charge from a reduced recoverable from Winterthur.

PartnerRe Ltd., a global multi-line reinsurance provider headquartered in Pembroke, Bermuda, increased its annual profit to $492.4 million in 2004, a 5.3 percent jump from $467.7 million income reported in 2003.

PartnerRe CEO Patrick Thiele commented that despite facing many natural catastrophes, PartnerRe still performed "exceptionally well."

"Our achievements in 2004 underscore the strength of the company both financially and operationally," he said.

On the January reinsurance renewal season, Mr. Thiele observed that while the U.S. reinsurance market was "rationally competitive" with pricing in most lines at reasonable profitability levels, European and international markets were "somewhat more competitive than expected."

For 2004, PartnerRe's net premiums written for 2004 were $3.9 billion, rising 7 percent from $3.6 billion in 2003. Non-life premiums for 2004 made up $3.4 billion of the overall total, up 5 percent.

Max Re Capital Ltd., a multi-line reinsurance and insurance provider, improved its full-year net income to $133.7 million in 2004, up from $120.6 million profit reported in 2003.

"I am pleased to be reporting record operating earnings for the company for fourth-quarter 2004 and indeed for the entire year," Max Re CEO Robert Cooney said. "We saw great contributions to earnings last year from our underwriting, particularly our traditional underwriting profits arising from insurance and traditional reinsurance of about $48 million to the company's bottom line."

Mr. Cooney said Max Re continued to shift its underwriting emphasis away from alternative risk-transfer products to more traditional higher-margin reinsurance and insurance products.

PXRE Group Ltd., the world's longest-tenured property-catastrophe specialist reinsurer, saw its 2004 income decline to $22.8 million a steep fall from $96.6 million profit reported for 2003because of $105 million in after-tax losses, net of reinstatement premiums, from Florida hurricanes.

PXRE Group had solid fourth-quarter results, however, with $32.8 million profit. "We are pleased by the strength of our fourth-quarter results and our ability to achieve a full-year profit of $22.8 million, despite the occurrence of more than $40 billion in worldwide natural catastrophes during 2004," said CEO Jeffrey Radke.

Commenting on Florida hurricane losses, Mr. Radke noted that as a property-catastrophe specialist, PXRE Group will always be subject to the volatility of catastrophes. Looking to 2005, he said he expects to report strong results, thanks to PXRE Group's success during the Jan. 1 renewals.

IPC Holdings Ltd., whose operating company IPCRe Ltd. specializes in property-catastrophe reinsurance on a worldwide basis, reported a much smaller annual profit of $138.6 million for 2004a decline from $260.6 million for 2003because of higher catastrophe losses from around the globe.

"The unprecedented event of four hurricanes making landfall in Florida and 10 typhoons making landfall in Japan, over a relatively short time span, undoubtedly challenged the historic claims models and made our clients' individual loss estimations very difficult," IPC Holdings CEO Jim Bryce said.

For 2004, IPC Holdings had net catastrophe loss and loss adjustment expenses of $215.6 million, much larger than losses of $54.4 million for 2003. Still, IPC produced a 78 combined ratio in 2004, Mr. Bryce pointed out.

Looking ahead in 2005, Mr. Bryce described Jan. 1 renewals as quite satisfactory. He observed that the reinsurance marketplace displayed a "reasonable level of underwriting discipline" during the January renewals.

Reproduced from National Underwriter Edition, March 4, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.