Odyssey Re Holdings Corp., which is 80 percent owned by Canada’s Fairfax Financial Holdings Limited, announced from its Stamford Conn. headquarters that it has updated its estimate of losses from Hurricane Katrina.
The company now expects them to be approximately $225 million before taxes, “which,” it said, “represents an after-tax net loss of approximately $146 million – net of applicable reinsurance and reinstatement premiums.”
It also announced plans to raise $102 million in additional capital through a share sale.
OdysseyRe had announced an initial estimate of losses, net of applicable reinsurance and reinstatement premiums, from Hurricane Katrina to be $80 to $100 million, before taxes. This prior estimate was based on an expected aggregate industry loss of approximately $30 billion. Current industry estimates put overall losses at around $40 billion.
“The updated loss estimate reflects new information received from ceding companies, which implies significantly higher industry losses than previously anticipated, and reflects an aggregate industry loss estimate of approximately $50 billion where ceding company information is not available,” said the announcement. “The extraordinary nature and scale of this loss, including potential legal and regulatory implications, adds substantial uncertainty and complexity to the estimating process,” it added.
OdysseyRe also said that it “estimates its net losses during the third quarter of 2005 from Hurricane Rita to be approximately $50 million before taxes, representing an after tax net loss of approximately $33 million.”
As most other insurers and reinsurers have indicated, Odyssey Re cautioned that the “loss estimates from Hurricanes Katrina and Rita are based on currently available information, and actual losses may vary from estimated losses as additional information becomes available.” The company said it would further update information on its Katrina/Rita losses when it files is third quarter earnings statement on October 27.
President and CEO Andrew A. Barnard commented: “Following what has been an extraordinary loss for the industry, we expect to be profitable for the year and continue to have the financial strength to take full advantage of market opportunities. The loss from Hurricane Katrina represents less than 10% of our shareholders’ equity, highlighting the benefits of OdysseyRe’s diversified platform.”
Odyssey Re also announced plans to sell 4,100,000 shares of its common stock to Wachovia Capital Markets, LLC, representing approximately $102 million; Fairfax, which owns 80 percent of OdysseyRe, has agreed to purchase 3,100,000 of the shares of the offering.
The sale is being made under a registration statement filed with the Securities and Exchange Commission.
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