Transatlantic Holdings, Inc. reported that its net income for 2002 increased to $169.3 million, or $3.21 per common share (diluted), compared to $18.9 million, or $0.36 per common share (diluted), in the prior year. 2002 net income includes a previously announced fourth quarter charge of $65.0 million for the after-tax impact of an increase in net loss reserves.
Net income for 2001 includes after-tax catastrophe losses of $139.8 million (primarily related to the September 11th terrorist attacks) and an after-tax charge of $39.0 million for Enron reinsurance exposure. There were no significant catastrophe losses occurring during 2002. In addition, net income includes after-tax net realized capital losses of ($3.9) million and ($0.2) million for 2002 and 2001, respectively.
Net loss for the fourth quarter of 2002 amounted to ($6.4) million, or ($0.12) per common share (diluted), compared to net income of $6.5 million, or $0.12 per common share (diluted), in the 2001 fourth quarter. Net loss for the fourth quarter of 2002 includes the after-tax charge of $65.0 million for the impact of the aforementioned loss reserve increase and net income for the 2001 fourth quarter includes the after-tax charge of $39.0 million for Enron reinsurance exposure. In addition, net (loss) income includes after-tax net realized capital losses of ($4.1) million and ($5.3) million in the fourth quarters of 2002 and 2001, respectively.
“The year 2002 was marked by needed improvements in industry market conditions in virtually all lines and regions,” Robert Orlich, president and CEO, said. “In this environment, we achieved record increases in premiums and operating cash flow, with contributions spread throughout our domestic and international operations. Transatlantic’s financial strength and global business franchise remain on very strong footing.
“Our results, while solid, were tempered by an increase in loss reserves in the fourth quarter related to losses principally occurring between 1998 and 2000 in certain casualty lines. This adjustment was based on recently reported claims experience reflecting industry-wide trends, and was the result of the Company’s annual year-end loss reserve study. In addition, despite record cash flow, investment performance has been limited by the low interest rate environment.”
For 2002, income before income taxes increased to $188.3 million versus a loss before income taxes of ($34.1) million in 2001. 2002 income before income taxes includes pre-tax losses of $100 million for the aforementioned fourth quarter increase in net loss reserves and 2001 loss before income taxes includes pre-tax catastrophe losses of $215 million (primarily related to the terrorist attacks) and pre-tax losses of $60 million for Enron reinsurance exposure.
Loss before income taxes amounted to ($32.3) million in the fourth quarter of 2002 versus ($8.9) million in the fourth quarter of 2001. The fourth quarter 2002 loss before income taxes includes the $100 million of pre-tax losses for the aforementioned net loss reserve increase and the comparable 2001 period includes the $60 million of pre-tax losses for Enron reinsurance exposure.
Net premiums written for 2002 increased 31.2 percent to $2.5 billion from $1.9 billion in the prior year. Net premiums written for the fourth quarter of 2002 increased 37.2 percent to $657.4 million from $479.1 million reported in the same prior year quarter. International business represented 45.5 percent of net premiums written for 2002 versus 46.8 percent for 2001.
For 2002, the combined ratio was 102.3 versus 114.9 for the prior year. The aforementioned fourth quarter increase in net loss reserves added 4.2 to the year 2002 combined ratio. Pre-tax catastrophe losses and the pre-tax losses related to Enron Corporation added 12.0 and 3.4, respectively, to the combined ratio in 2001. The combined ratio for the fourth quarter of 2002 was 114.0 versus 113.0 for the comparable 2001 period.
The aforementioned increase in net loss reserves added 16.0 to the fourth quarter 2002 combined ratio while the pre-tax losses related to Enron Corporation added 13.6 to the combined ratio in the 2001 fourth quarter. (The Company’s combined ratio represents the sum of the ratio of net losses and loss adjustment expenses divided by net premiums earned and the ratio of the sum of net commissions and other operating expenses divided by net premiums written.)
In total, net loss and loss adjustment expense reserves rose $171.8 million during the 2002 fourth quarter, bringing the amount of such reserves to $3.3 billion at year-end.
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