NU Online News Service, May 5, 3:46 p.m. EDT
A dozen Bermuda reinsurers that released first-quarter 2010 earnings over the last week were hit hard by $1.4 billion in catastrophe losses, primarily related to the earthquake in Chile.
So far, Bermuda companies put their exposure to the explosion of Deepwater Horizon–a second-quarter event–at a fraction of the total, with nine Bermuda companies estimating just over $200 million in total.
In spite of the first-quarter catastrophe losses, which also included the Chile earthquake, European Windstorm Xynthia and storms in Australia, first-quarter net income fell only 12 percent for the group and the overall capital remained nearly unchanged from year-end at $43 billion.
While the catastrophes added 24 points to the overall combined ratio for the group, favorable loss development from prior years offset a big chunk of the deterioration.
For the group, the overall combined ratio was 101.6, roughly 15 points higher than last year's result of 86.
With the favorable loss development from prior years, strong investment results also offset the negative impacts of catastrophe losses to bottom-line income for most insurers in the group.
Only one of the companies–Everest Re, with $354 million in first-quarter catastrophe losses–reported a bottom-line loss of $23 million, while eight others reported double-digit declines in net income.
The 12 companies whose first-quarter results were compiled by NU are: Arch Capital Group Ltd., Aspen Insurance Holdings Limited, AXIS Capital Holdings Limited, Endurance Specialty Holdings Ltd., Montpelier Re Holding Ltd., Platinum Underwriters Holdings Ltd., Everest Re Group Ltd., Max Capital Group Ltd., RenaissanceRe Holdings Ltd., XL Capital Ltd., Flagstone Reinsurance Holdings Limited, and Lancashire Insurance.
Max Capital, which reported one of the smallest net income declines–18.3 percent–also reported minimal catastrophe losses of only $10 million for the first quarter. Max Capital's results do not include $30-to-$50 million in first-quarter catastrophes losses for Harbor Point, which is set to merge with Max later this year.
Also not included in the $1.4 billion first-quarter catastrophe loss total are catastrophe losses for PartnerRe and Validus Re, whose earnings will be announced later this week. In pre-earnings release announcements, PartnerRe put its Chilean earthquake exposure at $220-to-$320 million, while Validus estimated $170-to-$270 million.
Adding these three companies would put the Bermuda first-quarter catastrophe total over $1.9 billion, almost 10-times the estimates Bermuda companies have put out for the Gulf oil rig disaster.
Lancashire, a significant offshore energy writer, said during a first-quarter earnings conference call this morning that its exposure to the Deepwater catastrophe would be about one-month's earnings. The company reported first-quarter net income of $8.1 million, along with a first-quarter combined ratio of 99.1, including $95 million in losses from the Chilean earthquake.
Lancashire executives said the $95 million is not a firm number, since its Chile earthquake losses relate to property retrocessional coverage–a segment for which cat loss information is slow to emerge. They said, however, that they are confident the Chile quake loss will fall in a range of $65-to-$125 million.
While Lancashire did not specifically quantify its losses stemming from the oil rig disaster, other Bermudians that have reported exposure to this event are: AXIS, with a gross loss of $60 million possible, but only $8 million on a net of reinsurance basis; PartnerRe estimating between $60- and $70 million; and Validus, putting its loss estimate range at $38-to-$45 million.
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