Dallas-based Republic Companies Group Inc. released information regarding its response to the recent hurricanes and the financial effects on the company’s third quarter results.
Its personnel and representatives were already mobilized assisting policyholders impacted by Hurricane Katrina when Hurricane Rita made landfall, allowing the company to rapidly respond to the new storm.
The effect on Republic’s financials of both Hurricane Katrina and Hurricane Rita should be within the loss expected from a major wind-related catastrophe covered by Republic’s reinsurance treaties, the company said. During the third quarter, Republic purchased additional reinsurance coverage to protect against additional catastrophe weather events in 2005.
The after tax impact on Republic’s third quarter net income of Hurricane Rita (net of recoveries from catastrophe reinsurance treaties) and the cost of additional reinsurance coverage is estimated at $1.3 million. The remainder of the cost of the additional reinsurance coverage will be reflected in our fourth quarter results.
Taking into account the previously reported impact of Hurricane Katrina, the total, after tax impact on its third quarter financials of the two hurricanes (net of reinsurance recoveries) and the related purchase of additional reinsurance, is approximately $4.6 million.
Member companies of The Republic Group provide insurance for windstorm damage and related risks to homes, automobiles and commercial businesses in Texas and Louisiana. Consistent with industry practice, Republic’s policy terms do not include losses related to flood damage. Republic has no significant property risks in the other states impacted by Hurricane Rita.
Parker Rush, president and chief executive officer commented, “We continue to work diligently with our policyholders and independent agents impacted by Hurricanes Rita and Katrina to assist them in their rebuilding efforts. Long before these catastrophes occurred, we took prudent and conservative measures to ensure our ability to manage through events of this magnitude and make good on our contractual obligations to policyholders and agents. Our 102-year commitment to this region remains as strong today as after similar events in years past. Republic and its employees continue to provide other financial and volunteer assistance to residents impacted by these events.”
The losses related to Hurricane Rita are a subject of continuing assessment. As such, Republic is not yet able to fully assess the gross losses incurred by the company as a result of Hurricane Rita. However, sufficient information is now available to report that the company expects the gross loss to be within the limits of its excess of loss reinsurance coverage. This estimate is preliminary and based on broad assumptions about coverage, damage and reinsurance, including claims received to date, industry loss estimates, estimates from industry and proprietary models, and contract language, among other factors.
Republic plans to announce its third-quarter financial results on Nov. 3.
For the full year 2005, Republic has decreased its return on average equity guidance from a range of 13 percent – 15 percent to a range of 12 percent – 14 percent.
Republic Companies Group Inc. is a holding company of a group of insurance companies and related entities that provide personal and commercial property and casualty insurance products to individuals and small to medium- size businesses primarily in Texas, Louisiana, Oklahoma and New Mexico.
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