Bermuda-based property reinsurer PXRE Group Ltd. announced that its net income before convertible preferred share dividends was $41.6 million for the first quarter of 2006, compared to $22.7 million in the first quarter of 2005.
The positive result, however, doesn’t appear to significantly help the Company out of its current financial difficulties. PXRE was severely impacted by last fall’s hurricanes, and as a consequence lost its “A” rating and 65 percent of its business. The Company is very close to going into runoff, unless a buyer comes forward with a rescue plan.
President and CEO Jeffrey L. Radke offered the following comment on the Q1 results and the Company’s prospects: “We are continuing to actively explore potential strategic alternatives. During this process, we have explored the sale of PXRE, the sale of all or certain of our assets, mergers with one or more companies and the acquisition of smaller companies that would provide diversifying lines of business, share repurchases and other strategic alternatives. To date, our Board of Directors has not found an alternative that it believes would be in the best interests of our shareholders and reinsurance clients, but we are continuing the process. However, if our Board of Directors concludes that no other alternative would be in the best interests of our shareholders, it may determine that the best option is to place PXRE’s reinsurance business into runoff and eventually commence an orderly winding up of PXRE operations over some period of time that is not currently determinable.”
He added, however that “PXRE remains financially sound and able to meet all of its obligations to clients. We also have sufficient liquidity to meet all currently foreseen needs. Our financial results for the quarter underscore this fact. Most significantly, we did not experience any adverse development on our reserves for the 2005 hurricanes during the quarter.”
Radke recognized that the first quarter results weren’t sufficient to rescue PXRE. He indicated that although they were encouraging, “we do not expect to repeat this level of profitability in future quarters. As of May 5, 2006, approximately 65 percent of our in-force business as of January 1, 2006 has either been cancelled or non-renewed and it is anticipated that this percentage will increase as additional contracts are non-renewed on a going forward basis. Given this rate of cancellations and our limited ability to renew our existing reinsurance contracts and underwrite new reinsurance contracts, we expect to see significant decreases in net premiums earned in future quarters.”
“As a result of the cancellations and non-renewals our catastrophe exposures have been reduced. As of May 5, 2006, our largest gross zonal aggregate exposure to any single catastrophe event was approximately $475 million. As of July 1, 2006, we expect this aggregate exposure to have decreased by at least 20 percent from the current level, as the non- renewals and cancellations continue,” Radke concluded.”
The full earnings report and a webcast of the conference call following their release may be obtained on the Company’s Website at: www.pxre.com. In addition, a replay of the call will be available from May 10, 2006 – May 17, 2006 by dialing (888) 203-1112. Callers dialing from outside the U.S. and Canada can access the replay by dialing (719) 457-0820. Please enter 9432864 as the conference ID.
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