PXRE Q4 Net Up 18%; But Full Year Down 76%

The Bermuda-based PXRE Group posted solid results in the fourth quarter with net income up 18 percent to $32.8 million, or $1.09 per diluted share, compared to $27.8 million, or $1.14 per diluted share, in the fourth quarter of 2003.

However, the property reinsurer’s full year results were severely impacted by $105 million in after-tax losses, net of reinstatement premiums, from the Florida hurricanes. Net income fell by 76.3 percent to $22.8 million, or $0.82 per diluted share, compared to $96.6 million, or $4.10 per diluted share, in 2003.

Operating income per diluted share rose slightly in the fourth quarter to $1.10 compared to $1.09 in the same period of 2003.”Net premiums earned in the Catastrophe and Risk Excess segment were up 19 percent,” said the announcement, while underwriting income was $38.4 million. On a fully diluted basis, book value per share was $21.30 at Dec. 31, 2004.

For the full year Net operating income per diluted share was $0.93 compared to $4.06 in 2003; net premiums earned in the Catastrophe and Risk Excess segment were up 15 percent, and underwriting income totaled $47.4 million.

President and CEO Jeffrey L. Radke commented: “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. As a property catastrophe specialist, our results will always be subject to the volatility of catastrophes. However, the relative size of our hurricane losses in 2004 demonstrated again the strength of our risk management capabilities, which are driven by our experienced underwriting team and our underwriting technology. Moreover, our efforts in this area will ensure that PXRE will always be able to capitalize on the opportunities that follow in the wake of major catastrophe losses.”

PXRE noted the following fourth quarter highlights:
— In November, PXRE raised $98 million of primary capital in a follow-on offering. The offering was increased in size due to strong market demand, and the convertible preferred shareholders converted 2,208 preferred shares into 1.6 million common shares which they sold in the offering. As projected, the capital raised was fully deployed during the Jan. 1 renewal cycle.
— The company reduced its general liability exited lines reserves by 50 percent through the commutation of its largest exited lines direct casualty program for approximately $1 million more than its Sept. 30, 2004 booked reserves for the program.
— PXRE reduced its finite risk exited lines reserves by 35 percent by commuting its largest finite reinsurance contract for $3 million less than the September 30, 2004 booked reserves.
— PXRE retained a third-party nationally recognized actuarial firm to conduct its normal triennial full scope review of loss reserves. Net loss reserves recorded by PXRE were slightly in excess of the actuarial firm’s point estimate.

Radke added: “Looking forward to 2005, we expect to report strong results primarily due to our success during the key January 1 renewal. We expect to achieve 10 percent growth in Net Earned Cat & Risk Premium during 2005, or 15 percent growth excluding reinstatement premiums. Given our performance at January 1, our capital is being fully utilized and we expect 2005 net operating income per diluted share of $4.50 to $5.00, assuming normalized catastrophe activity.”

PXRE also noted that “net premiums earned in the company’s core Catastrophe and Risk Excess segment for the quarter increased 19 percent, or $12.4 million, to $79.5 million compared to $67.1 million for the year-earlier period.

“The planned runoff of the company’s exited businesses caused net premiums earned for the quarter to decrease by 4 percent, or $3.3 million, to $79.8 million from $83.1 million for the year-earlier period. Net premiums earned in the exited lines segment decreased 99 percent, or $15.8 million, during the quarter to $0.2 million from $16.0 million in the year-earlier period.”