Bermuda Q1 Earnings Recap: ACE, XL, Validus, RenRe, Endurance, Aspen, Montpelier Re

May 5, 2008

A number of Bermuda-based companies announced their first quarter results last week, which were generally lower than the same period of 2007. The financial credit crunch, combined with the ongoing soft market, had a noticeable effect on earnings, even though there were no significant natural catastrophes, other than some severe winter storms in Europe.

The following is a summary of those earnings reports:

ACE Limited
Net income for the quarter dropped 432 percent from $701 million in 2007 to $377 million, due mainly to investment losses, which went from a $16 million profit in Q1 2007 to a $353 million loss in Q1 2008. Gross premiums written were off slightly to $4.409 billion from $ 4.496 billion. The combined ratio was a very satisfactory 82.7 percent compared with 85.4 percent for the same quarter last year.

Chairman and CEO Evan Greenberg commented: “It was a busy and very good quarter for ACE. We closed two acquisitions – Combined Insurance and the Atlantic Companies’ personal lines business – and we announced our intention to re-domesticate our holding company to Zurich, Switzerland.

“These moves speak to the medium- and long-term strategic positioning of our Company. We had a strong quarter in terms of operating performance, with net operating income up 9.5 percent. Net income, which was down, and book value growth, which was essentially flat, were negatively impacted by the unprecedented volatility experienced in the debt and equity markets during the quarter.”

For the full report and a replay of the earnings conference call got to:

XL Capital
Net income available to shareholders plunged to $211.8 million from $549.7 million, again due to losses on investments of $102 million coupled with a decrease in net income from investment affiliates (mainly Security Capital Assurance) of $107.1 million. Total earnings, which includes investments dropped to $2.174 billion from $2.483 billion. The combined ratio was 87.8 percent compared with 92.0 percent in the prior year quarter.

President, CEO and Acting Chairman Brian M. O’Hara commented: “Although XL is steadily navigating through some extremely difficult global credit market conditions, which is reflected in our lower investment performance relative to the outstanding results in the prior year quarter, we have still achieved another solid performance from our Insurance, Reinsurance, and Life operations.”

For the full report and a replay of the earnings conference call got to:

Validus Holdings Limited
Net QI income actually rose to $66.5 million from $56.7 million in Q1 2007. Operating income was also up to $65.5 million from $53.7 million. This was partially due to the inclusion of Talbot. Validus concluded its acquisition of the company in July.

As a result gross premiums written increased by 38.0 percent to $521.6 million from $378.1 million; Talbot added $201.8 million. The combined ratio was 82.4 percent, which included $41.5 million of incurred losses relating to significant first quarter property losses.

Chairman and CEO Ed Noonan commented: “We are pleased to report solid earnings and a 13.5 percent annualized return on average equity for the quarter. We benefited greatly in the quarter from our acquisition of Talbot which has allowed us to grow our gross premium written by 38.0 percent and more fully diversify our global short-tail underwriting platform. In a quarter which saw individual risk losses of over $5 billion in the global market and continued turmoil in the credit markets, reporting solid net income of $66.5 million and maintaining a conservative balance sheet is a significant achievement for our company.”

For the full report and a replay of the earnings conference call got to:

RenaissanceRe Holdings Ltd.
RenRe’s Q1 net income available to common shareholders also declined to $137 million from $190.8/ million, mainly due to a drop in net investment income to $52.5 million from $108 million.

Gross premiums written were $527 million, compared to $ 632.7 million in Q1 2007. Total revenue dropped to $369.9 million from $ 488.3 million. The combined ratio was 51.4 percent in the first quarter, compared to a 65.6 percent in the first quarter of 2007, principally driven by lower insured catastrophic events compared to the first quarter of 2007, which was impacted by European windstorm Kyrill.

RenRe said: “The relatively low level of insured catastrophe losses offset a $53.7 million decrease in net premiums earned which was driven by lower gross premiums written and the impact of higher ceded premiums written.”

CEO Neill A. Currie commented: “I am pleased to report another solid quarter with an annualized operating ROE of over 21 percent and almost 3 percent growth in book value per share, inclusive of the impact of share buybacks. We continue to actively manage capital and returned over $239 million to our shareholders through share buybacks during the quarter, bringing our total purchases to date to over $460 million since the start of 2007.”

For the full report and a replay of the earnings conference call got to:

Endurance Specialty Holdings Ltd.
The Company reported net income of $77.8 million for the first quarter of 2008, compared to $101.8 million in Q1. Net investment income dropped to $46.87 million from $74.81 million, while net realized losses on investments was $11,484 million, up from a $2.084 million loss in Q1 2007.

Gross premiums written, however rose to $868.6 million, a 51.5 percent increase over the $573.3 million last year. The increase resulted primarily from agricultural premiums written in the Insurance segment by recently acquired ARMtech Insurance Services, Inc. and its affiliates.

Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, was $89.5 million. The combined ration dropped to 84.4 percent from 86.7 percent for the period.

Chairman and CEO Kenneth J. LeStrange commented “Endurance reported another quarter of solid operating results and book value growth in a quarter marked by significant capital market volatility and increased industry losses for global property risks. Our premiums were up significantly in the quarter, largely from our recently acquired agriculture insurance unit. The premium growth from our agriculture insurance business has the potential to enhance our future earnings and further diversify our underwriting portfolio. As we continue through 2008, we remain focused on identifying new opportunities for profitable growth while maintaining our underwriting discipline.”

For the full report and a replay of the earnings conference call got to:

Aspen Insurance Holdings

Net Income decreased to $81.2 million, compared to $121.9 million in Q1 2007, largely as a result of a 42 percent decline in net investment income to $39.1 million. Aspen’s return on equity (ROE) also declined to 12.8 percent versus 22.9 percent in Q1 2007.

As is the case with a number of other Bermuda-based Companies, the culprit was a decline in net investment income, which fell 42.1 percent to $39.1 million, compared to $67.5 million in Q1 2007. Gross written premiums decreased by 6.3 percent to $596.2 million from $636.5, while the combined ratio climbed to 85.4 percent from 79.4percent.

CEO Chris O’Kane commented: “Book value per share at the end of the first quarter was $29.22, which is up 23.7 percent year-over-year and the eighth consecutive quarterly increase in book value. Underwriting results were strong with a combined ratio of 85.4 percent, which is well within our plan. As we anticipated, we wrote less business this quarter because of declines in rates. We continue to maintain our underwriting discipline. Cash flow from operating activities also remained strong at $163.5 million for the quarter, up 27 percent. However, net income and EPS were impacted by disappointing returns from our investment in funds of hedge funds.”

For the full report and a replay of the earnings conference call got to:

Montpelier Re Holdings Ltd.
The reinsurance arm of the White Mountains Group saw its comprehensive net income fall to a $1.8 million loss, compared to the $72.6 million it earned in the same quarter of 2007. Operating income, which excludes foreign exchange and investment gains and losses, was in the black at $28.2 million, compared to $60.3 million in Q1 2007.

“The loss ratio for the quarter was 54.5 percent, which includes $42.8 million of large individual risk losses, slightly above the $30 – 40 million range pre-announced by the Company on February 19 due to subsequent claims notices, and $14 million of losses due to European windstorm Emma,” said the earnings announcement. “This was offset in part by net favorable prior year reserve development of $21 million, mainly as a result of adjustments to the 2004, 2005 and 2007 catastrophe losses. The combined ratio was 89.7 percent compared to 65.6 percent in the first quarter of 2007.”

Chairman and CEO Anthony Taylor commented: “As we indicated in February, the first quarter of 2008 was marked by an unusual frequency and severity of individual risk losses. Current market estimates have increased from our initial February estimate of over $2 billion to as much as $6 billion. Turning to the quarter’s investment performance, despite the extreme volatility in financial markets which impacted a wide range of asset classes our overall portfolio has stood up well, incurring a slight loss of 0.2 percent on a total return basis.”

For the full report and a replay of the earnings conference call got to:

Sources as indicated

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