Alterra Capital Posts $82.8 Mn. Q3 Net Income; $222.7 Mn 9 Months

November 3, 2010

Bermuda-based Alterra Capital Holdings Limited reported net income of $82.8 million, or $0.70 per diluted share, for the third quarter of 2010, compared to net income of $95.3 million, or $1.64 per diluted share, for the same quarter of 2009.

Alterra was formed earlier this year through the merger of Max Capital Group Ltd. and Harbor Point Limited, a privately held company.

Net operating income, which excludes capital gains/losses, for the third quarter was $76.0 million, or $0.64 per diluted share, compared to net operating income of $53.7 million, or $0.92 per diluted share in Q3 2009. Annualized net operating return on average shareholders’ equity for the third quarter of 2010 was 10.2 percent.

For the nine months ended September 30, 2010, Alterra reported net income of $222.7 million, or $2.50 per diluted share, compared to net income of $183.6 million, or $3.18 per diluted share, for the same period of 2009. Net operating income for the nine months ended September 30, 2010 was $175.5 million, or $1.97 per diluted share, compared to net operating income of $148.4 million, or $2.57 per diluted share, for the same period of 2009. Annualized net operating return on average shareholders’ equity for the nine months ended September 30, 2010 was 10.2 percent.

The bulletin explained that the “results for Alterra include the results for Harbor Point and its subsidiaries from the date of the consummation of the merger on May 12, 2010. Comparative figures for 2009 represent the former Max results only. As a result, a comparison of Alterra’s gross premiums written from property and casualty underwriting and results of operations for the reinsurance segment for current and prior periods are not meaningful.”

Other highlights for the third quarter were detailed as follows:
— Property and casualty gross premiums written of $323.9 million, representing an increase of $58.1 million, or 21.9 percent; net premiums written of $263.4 million, representing an increase of $80.9 million, or 44.3 percent; and net premiums earned of $341.2 million, representing an increase of $133.3 million, or 64.1 percent; each as compared to the same quarter of 2009. The percentage increases in these figures primarily reflect incremental growth from recent expansion initiatives, including the merger with Harbor Point – whose premiums are not included in the comparative 2009 results of operations – as well as from new operations in Latin America and new product offerings at Alterra at Lloyd’s. These increases were partially offset by decreases in previously existing operations where writings were reduced due to unattractive returns;
— Property and casualty combined ratio of 86.0 percent compared to 90.9 percent in the same quarter of 2009;
— Property catastrophe event and significant per-risk net losses of $14.1 million compared to no material property catastrophe losses in the same quarter of 2009;
— Net favorable development on prior years’ loss reserves of $36.4 million, or 10.6 combined ratio points, compared to $15.2 million, or 7.3 combined ratio points, in the same quarter of 2009;
— Net investment income of $59.7 million compared to $42.8 million in the same quarter of 2009, an increase of 39.5 percent.

Alterra’s President and CEO, W. Marston (Marty) Becker, commented: “Alterra had a very solid quarter financially, and also operationally, with the Harbor Point merger integration proceeding as planned and now largely completed. Our balance sheet is very strong, and we are well positioned to respond to market opportunities as they arise.

“Our gross premiums written during the quarter were down on a pro forma basis, due in part to Alterra’s continued underwriting discipline in the face of a softening market, and to a related trend among primary companies to retain a greater share of business. Coupled with declining yields on invested assets, these factors added pressure to current operating income.

“We are pleased with the early results of our expansion into Latin America and the continued strong performance of our late 2008 Lloyd’s acquisition. Taken together with the quality underwriting teams that joined us as a result of our recent merger, we are strongly positioned both for today and for the future, with proven insurance and reinsurance capabilities in Bermuda, Dublin, London, and the U.S. – and now Latin America reinsurance as well.”

He added that the group remains “focused and committed to prudent capital allocation as a means for delivering consistent shareholder value. During the quarter we continued our share repurchase program, buying back shares at an attractive discount to book value. For the year to date we have returned over $435 million to shareholders in the form of dividends and share repurchases. We have also increased our capital flexibility this quarter by issuing long term debt at a favorable fixed rate of interest, reducing our allocation to short term variable rate borrowing. We believe this will prove beneficial in the future as interest rates inevitably rise from their current levels.”

Alterra will host a conference call on Wednesday, November 3, 2010 at 10:00 am (EDT) to discuss its third quarter results with interested investors and shareholders. The conference call can be accessed via telephone by dialing 1-888-713-4218 (toll-free U.S.) or 1-617-213-4870 (international) and using access code 55954665. The complete earnings report, as well as a live broadcast of the conference call will also be available on Alterra’s web site.

Source: Alterra Capital Holdings

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