American Re Corp. reported first-quarter net income of $56.5 million, compared with $88.5 million in the first quarter of 2005.
The Princeton-based company attributed the 25 percent decline in earnings to higher interest expense on ceded funds held, mainly for the loss portfolio transfer reinsurance agreement executed in 2005 with Munich Re, the company's parent.
The company reported a 7 percent decline in gross premiums written for the first quarter, posting $889.3 million, compared with $954.1 million for the same period in 2005.
The combined ratio for the quarter was 97.3, compared with 90.8 for the same period in 2005. The accident-year combined ratio for the company's core business units was 96.8 for 2006, compared with 95.4 in 2005. The core results exclude noncore business operations and corporate retrocessions.
American Re Chairman John Phelan said the results were in line with expectations. "Although the loss portfolio transfer had a dampening effect on current earnings, it also significantly strengthened the company's capital position as demonstrated by the NAIC Risk Based Capital ratio, which was in excess of 400 percent as of Dec. 31, 2005 compared with 236 percent at the end of 2004."
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