Re Reports Mixed News In Early 3Q

Both Greenwich, Conn.-based W.R. Berkley Corp. and Bermuda-based PartnerRe reported increased third-quarter net income last night, but executives of the two companies gave slightly different views of the reinsurance market this morning.

While both said market conditions are becoming more competitive, they differed in their view of the behaviors of buyers in comments delivered on early morning conference calls.

William R. Berkley, chairman and chief executive officer of W.R. Berkley, reported net income of $180 million, or 93 cents per share for the quarter, a 3.5 percent jump from last year's third quarter.

PartnerRe reported an 11.1 percent jump in third-quarter net income–to $262.9 million, or $4.44 per share.

Mr. Berkley reported that reinsurance business had gotten more competitive in the quarter, and that ceding companies were looking to retain more business rather than pass it on to reinsurers.

“It's an interesting proposition to think that people are not buying reinsurance at the point in time when their primary prices are going down,” he commented, adding that the consequence is “good economic news” for his company's reinsurance operation in spite of lower volume.

“We're seeing across the board–treaty and facultative [reinsurance] business–fewer people buying,” he said, adding that this is “interesting because if you manage your business right, your customers help ensure you optimize your profitability, because you don't write as much business as the market gets softer,” he noted.

With respect to the competitive dynamics, Mr. Berkley said more limit is being offered with no change in prices.

Reinsurance premiums for the quarter–both gross and net–dropped about 24 percent at W.R. Berkley Corp., with the net figure coming in at $166.6 million. The only other segment to experience declining premiums was the specialty segment, where net premiums fell 7 percent to $402.3 million. This was due mainly to declining construction activity impacting the company's contractors book.

Overall, the company reported a 6 percent premium decline to $1.1 billion and a combined ratio of 88.5.

At PartnerRe, non-life reinsurance written premiums rose 4.6 percent to $726 million, and the non-life combined ratio came in at 74.1.

PartnerRe CEO Patrick Thiele said he expects to see a continued “slow, orderly decline” in prices, but the declines are consistent with lower levels of losses that reinsurers are experiencing.

In fact, the low level of losses making their way into PartnerRe, together with a seasonally adjusted method of booking earned premiums for catastrophe reinsurance business (with the highest amount of earned premiums booked in the third quarter for U.S. wind business) were two prominent factors boosting income for the quarter, Mr. Thiele said.

Reporting on recent talks at a global reinsurance conference in Baden Baden, he said that in spite of increased competition, he saw few changes in ceding company reinsurance programs.

In the past–in fact for two successive Jan. 1 renewal periods–Mr. Thiele said PartnerRe “started out 10 percent in the hole” because attachment points went up on reinsurance contracts as clients with improved financial positions sought to keep more reinsurance business rather pay high reinsurance prices.

“From what little we've seen so far in terms of actual proposed programs” for Jan. 1, “that's seemingly beginning to lessen,” he said. The attachment points of ceding companies are now at a level where any increase in loss frequency or severity hits them first rather than getting into reinsurance programs, he said, referring, in particular to the impact of second-quarter and third-quarter U.S. storms that did not impact reinsurers.