Bermuda-based Trenwick Group Ltd. reported an operating loss of $135 million, or $3.67 per share, for the third quarter of 2002 and an operating loss of $142.6 million, or $3.88 per share for the first nine months of 2002.
The net loss for the quarter was $136.9 million, compared to a $96.1 million net loss in the same period last year. Trenwick indicated that this did not include its $23 million in losses from the Sept. 11 attacks, which it recorded in the first quarter of 2002.
The bulletin said that the operating loss reported for the third quarter “resulted principally from $90.7 million of loss reserve increases recorded in Trenwick’s United States operating subsidiaries and Trenwick International Limited and a $54.5 million loss related to the establishment of a deferred tax valuation reserve in connection with Trenwick’s U.S. operations.”
Trenwick, which recently announced that it was undertaking a review of its reserve position. It said that most of the increases were due to loss activity in the years 1997-2000, and that they will be accordingly adjusted, and later years if necessary, when the review has been completed.
W. Marston Becker, Acting Chairman and Acting CEO, stated, “The increase in Trenwick’s loss reserves and the introduction of a deferred tax valuation reserve in the third quarter reflects Trenwick’s commitment to improving the quality of its balance sheet. These actions, along with any appropriate adjustments to loss reserves following completion of the current review by independent actuarial consultants, will provide Trenwick with an appropriate base upon which it can rebuild credibility with policyholders, rating agencies, creditors and investors.”
The announcement gave additional results as follows: “gross and net premium writings totaled $389.8 million and $182.3 million, respectively, for the quarter ended September 30, 2002 and $367.5 million and $242.8 million, respectively, for the quarter ended September 30, 2001. For the first nine months of 2002, gross and net premium writings totaled $1,305.3 million and $763.2 million, respectively, compared to gross and net premiums writings for the first nine months of 2001 of $1,060.7 million and $748.4 million, respectively.”
Trenwick has taken some important steps to address the situation. It announced the creation of an “underwriting facility” with Chubb Corp. (See IJ Website Oct. 28), said that it will cease writing program business in the U.S. (See IJ Website Oct. 31), and this week announced that Warren Buffet’s Berkshire Hathaway unit National Indemnity would provide further backing for its Lloyd’s Syndicate 839 (See IJ Website Nov. 5).
The initiatives will hopefully prove successful. Trenwick announced that its combined loss and expense ratio for the third quarter of 2002 was 145.1% compared to a combined loss and expense ratio of 150.4% for the third quarter of 2001. It pointed out, however that “the 2002 third quarter results include 46.5 percentage points related to adverse loss reserve development for 2000 and prior accident years. The 2001 third quarter results include 43.4 percentage points of unusual losses, principally related to the September 11th terrorist attacks.”
For the first nine months of the year its combined loss and expense ratio was 118.7% compared to a combined loss and expense ratio of 133.8% for the first nine months of 2001.
Topics USA Profit Loss
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