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Gross premiums written for the quarter ended March 31, 2009 were $554.9 million, a decrease of 3.9% compared to $577.6 million for the quarter ended March 31, 2008. This reflects an increase from the first quarter of 2008 of 0.8% in the Company's worldwide reinsurance premiums, offset by a 13.3% decline in the Company's specialty insurance premiums, principally related to the Company's U.K. insurance group. Net premiums written during the first quarter of 2009 were $479.0 million, a decrease of 7.5% compared to $517.8 million during the first quarter of 2008. The combined ratio for the first quarter of 2009 was 96.5%, compared to 98.4% for the first quarter of 2008. The underwriting results for the quarter ended March 31, 2009 include $42.7 million, or 9.1 combined ratio points, related to current year catastrophe losses, principally Windstorm Klaus in Europe, compared to $36.6 million, or 7.2 combined ratio points, for the quarter ended March 31, 2008.
Net investment income amounted to $67.5 million for the first quarter of 2009, compared to $73.1 million for the first quarter of 2008. Net pre-tax realized losses were $99.4 million for the first quarter of 2009, compared to net pre-tax realized gains of $323.0 million for the first quarter of 2008. The net pre-tax realized loss for the quarter ended March 31, 2009 includes other-than-temporary write-downs of investments of $81.4 million and mark-to-market and foreign currency losses of $24.6 million, offset by net realized gains on the disposal of investments of $6.6 million. Net realized gains for the first quarter of 2008 benefited significantly from mark-to-market gains on the Company's investment in credit default and total return swaps, and included a $40.9 million realized loss related to other-than-temporary write-downs of investments.
Shareholders' equity was $2.7 billion and book value per common share(2) was $43.80 as of March 31, 2009, compared to shareholders' equity of $2.8 billion and book value per common share of $45.37 as of December 31, 2008. The Company did not repurchase any of its common shares during the first quarter of 2009.
For the quarter ended March 31, 2009, cash flow from operations was a negative $76.3 million, compared to positive cash flow from operations of $107.3 million for the quarter ended March 31, 2008. The first quarter of 2009 includes an increase in tax payments of $176.7 million compared to the first quarter of 2008, primarily related to the recognition of realized investment gains, during the fourth quarter of 2008, on closed credit default and total return swaps.
During the quarter, OdysseyRe paid a cash dividend of $0.075 per common share on March 31, 2009 to common shareholders of record as of March 17, 2009.
(1) "Operating income" after tax is a non-generally accepted accounting
principles ("GAAP") financial measure often used by investors to
evaluate performance in the insurance and reinsurance industry.
Operating income after tax is equal to net income available to
common shareholders, excluding net realized gains or losses and the
gain on the redemption of preferred shares. Although realized gains
or losses are an integral part of the Company's operations, the
amount recognized during any particular period cannot be reasonably
estimated and can vary significantly. Management believes that
providing operating income after tax to investors is a useful
supplement to GAAP information concerning the Company's performance.
A reconciliation of net income available to common shareholders to
operating income, after tax and related amounts per diluted share is
as follows (in millions, except per share amounts):
Three months ended, (unaudited)
March 31, 2009 March 31, 2008
$ Per Diluted $ Per Diluted
Share Share
Net income available to common shareholders $ 0.9 $ 0.01 $ 249.0 $ 3.61
Less: Net realized losses (gains), after tax 64.6 1.07 (209.9 ) (3.04 )
Gain on the redemption of preferred shares (8.0 ) (0.13 ) -- --
Operating income, after tax $ 57.5 $ 0.95 $ 39.1 $ 0.57
(2) Book value per common share, a financial measure often used by
investors, is calculated using common shareholders' equity, a
non-GAAP financial measure, which represents total shareholders'
equity, a GAAP financial measure, reduced by the equity attributable
to our preferred stock. The common shareholders' equity is divided
by our common shares outstanding at the end of each respective
period to derive book value per common share, as reflected in the
following table (in millions, except share and per share amounts):
March 31, December 31,
2009 2008
Total shareholders' equity $ 2,713.7 $ 2,827.7
Less: equity related to preferred stock 77.2 94.4
Total common shareholders' equity $ 2,636.5 $ 2,733.3
Common shares outstanding 60,194,029 60,242,949
Book value per common share $ 43.80 $ 45.37
A conference call to discuss OdysseyRe's first quarter financial results will be held at 10:00 a.m. Eastern Time on Friday, May 1, 2009.
A live audio webcast of the conference call will be available on the Odyssey Re Holdings Corp. web site (www.odysseyre.com). In addition, callers not able to access the Internet may listen to the conference call by dialing (888) 259-8724 (domestic) or (913) 312-1418 (international) with the passcode number 2648300. A replay of the call will be available from 12:00 p.m. Eastern Time on Friday, May 1, 2009, until 11:59 p.m. Eastern Time on Sunday, May 10, 2009. To access the replay, please call either (888) 203-1112 (domestic) or (719) 457-0820 (international); the passcode number is 2648300.
Odyssey Re Holdings Corp. is a leading worldwide underwriter of property and casualty treaty and facultative reinsurance, as well as specialty insurance. OdysseyRe operates through its subsidiaries, Odyssey America Reinsurance Corporation, Hudson Insurance Company, Hudson Specialty Insurance Company, Clearwater Insurance Company, Newline Underwriting Management Limited, Newline Asia Services Pte. Ltd. and Newline Insurance Company Limited. The Company underwrites through offices in the United States, London, Paris, Singapore, Toronto and Mexico City. Odyssey Re Holdings Corp. is listed on the New York Stock Exchange under the symbol, "ORH".
Certain statements contained herein may constitute forward-looking statements and are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: a reduction in net income if the Company's loss reserves are insufficient; the occurrence of catastrophic events with a frequency or severity exceeding the Company's estimates; the lowering or loss of one of the Company's financial or claims-paying ratings, including those of the Company's subsidiaries; an inability to realize the Company's investment objectives; a decrease in the level of demand for the Company's reinsurance or insurance business, or increased competition; emerging claim and coverage issues; risks relating to current governmental investigations; the risk that ongoing regulatory developments will disrupt the Company's business or mandate changes in industry practices that increase the Company's costs; changes in economic conditions, including interest rate, currency, equity and credit conditions; the Company's inability to access its subsidiaries' cash; loss of services of any of the Company's key employees; risks related to the Company's use of reinsurance brokers; failure of the Company's reinsurers to honor their obligations; regulatory and legislative changes; risks associated with the growth of the Company's specialty insurance business; and other factors that are described in the Company's filings with the Securities and Exchange Commission. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Visit OdysseyRe's web site - www.odysseyre.com - for additional information about the Company. In addition, anyone may view the Company's historical press releases and filings with the Securities and Exchange Commission, which provide additional data regarding the Company's prior quarterly and year-to-date results. This historical information may be found on OdysseyRe's web site under "Investor Information."
Consolidated financial and segment information follows:
ODYSSEY RE HOLDINGS CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
March 31, December 31,
2009 2008
(unaudited)
ASSETS
Investments and cash:
Fixed income securities, available for sale, at fair value $ 3,846,428 $ 3,594,278
(amortized cost $3,570,842 and $3,429,226, respectively)
Fixed income securities, held as trading securities, at fair value 412,374 338,209
(amortized cost $577,736 and $474,465, respectively)
Redeemable preferred stock, at fair value (cost $324 and $510, 108 114
respectively)
Equity securities:
Common stocks, at fair value (cost $1,802,909 and $1,628,611, 1,485,873 1,555,142
respectively)
Common stocks, at equity 139,982 141,473
Short-term investments, at fair value (cost $898,450 and $1,202,366, 898,494 1,202,360
respectively)
Cash and cash equivalents 461,785 755,747
Cash and cash equivalents held as collateral 11,236 82,374
Other invested assets 202,352 222,841
Total investments and cash 7,458,632 7,892,538
Accrued investment income 75,466 66,575
Premiums receivable 486,337 496,418
Reinsurance recoverable on paid losses 57,638 82,999
Reinsurance recoverable on unpaid losses 689,208 690,171
Prepaid reinsurance premiums 104,567 94,797
Funds held by reinsureds 130,425 128,543
Deferred acquisition costs 138,731 139,069
Federal and foreign income taxes receivable 310,439 52,096
Other assets 81,980 83,303
Total assets $ 9,533,423 $ 9,726,509
LIABILITIES
Unpaid losses and loss adjustment expenses $ 5,266,303 $ 5,250,484
Unearned premiums 719,224 701,955
Reinsurance balances payable 148,326 116,388
Funds held under reinsurance contracts 46,698 55,495
Debt obligations 489,309 489,278
Other liabilities 149,901 285,174
Total liabilities 6,819,761 6,898,774
SHAREHOLDERS' EQUITY
Preferred shares, $0.01 par value; 200,000,000 shares authorized; 32 39
2,000,000 and 2,000,000 Series A shares and 1,167,263 and
1,872,000 Series B shares issued and outstanding, respectively
Common shares, $0.01 par value; 500,000,000 shares authorized; 603 603
60,266,270 and 60,264,270 shares issued, respectively
Additional paid-in capital 592,469 614,203
Treasury shares, at cost (72,241 and 21,321 shares, respectively) (2,673 ) (795 )
Accumulated other comprehensive (loss) income, net of deferred (4,389 ) 82,421
income taxes
Retained earnings 2,127,620 2,131,264
Total shareholders' equity 2,713,662 2,827,735
Total liabilities and shareholders' equity $ 9,533,423 $ 9,726,509
ODYSSEY RE HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended March 31,
2009 2008
REVENUES
Gross premiums written $ 554,920 $ 577,554
Ceded premiums written 75,941 59,734
Net premiums written 478,979 517,820
Increase in net unearned premiums (8,961 ) (6,392 )
Net premiums earned 470,018 511,428
Net investment income 67,461 73,128
Net realized investment (losses) gains (99,363 ) 322,994
Total revenues 438,116 907,550
EXPENSES
Losses and loss adjustment expenses 317,591 352,250
Acquisition costs 93,004 108,147
Other underwriting expenses 43,105 42,775
Other expense, net 4,202 11,096
Interest expense 8,085 9,043
Total expenses 465,987 523,311
(Loss) income before income taxes (27,871 ) 384,239
Federal and foreign income tax (benefit) provision:
Current 34,622 110,687
Deferred (56,702 ) 22,607
Total federal and foreign income tax (benefit) provision (22,080 ) 133,294
Net (loss) income (5,791 ) 250,945
Preferred dividends (1,336 ) (1,913 )
Gain on redemption of Series B preferred shares 7,997 -
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 870 $ 249,032
BASIC
Weighted average common shares outstanding 59,375,095 68,039,341
Basic earnings per common share $ 0.01 $ 3.62
DILUTED
Weighted average common shares outstanding 59,848,828 68,536,586
Diluted earnings per common share $ 0.01 $ 3.61
DIVIDENDS
Dividends declared per common share $ 0.075 $ 0.063
COMPREHENSIVE (LOSS) INCOME
Net (loss) income $ (5,791 ) $ 250,945
Other comprehensive loss, net of tax (86,810 ) (4,047 )
Comprehensive (loss) income $ (92,601 ) $ 246,898
ODYSSEY RE HOLDINGS CORP.
BUSINESS SEGMENTS (UNAUDITED)
(IN THOUSANDS)
Three Months Ended
March 31, %
2009 2008 Change
GROSS PREMIUMS WRITTEN
Americas $ 195,297 $ 189,594 3.0 %
EuroAsia 160,317 157,947 1.5
London Market 72,942 101,058 (27.8 )
U.S. Insurance 126,364 128,955 (2.0 )
Total $ 554,920 $ 577,554 (3.9 ) %
NET PREMIUMS WRITTEN
Americas $ 190,697 $ 185,263 2.9 %
EuroAsia 153,586 150,848 1.8
London Market 52,487 84,067 (37.6 )
U.S. Insurance 82,209 97,642 (15.8 )
Total $ 478,979 $ 517,820 (7.5 ) %
NET PREMIUMS EARNED
Americas $ 195,203 $ 196,396 (0.6 ) %
EuroAsia 138,215 143,276 (3.5 )
London Market 54,424 76,673 (29.0 )
U.S. Insurance 82,176 95,083 (13.6 )
Total $ 470,018 $ 511,428 (8.1 ) %
Three Months Ended Percentage
March 31, Point
2009 2008 Change
LOSSES AND LOSS
ADJUSTMENT EXPENSES RATIO
Americas 60.1 % 66.9 % (6.8 )
EuroAsia 80.1 77.5 2.6
London Market 63.7 62.8 0.9
U.S. Insurance 66.8 64.9 1.9
Total 67.6 % 68.9 % (1.3 )
ACQUISITION COSTS AND OTHER
UNDERWRITING EXPENSES RATIO
Americas 31.0 % 33.0 % (2.0 )
EuroAsia 25.1 25.8 (0.7 )
London Market 28.3 27.0 1.3
U.S. Insurance 31.0 29.9 1.1
Total 28.9 % 29.5 % (0.6 )
COMBINED RATIO
Americas 91.1 % 99.9 % (8.8 )
EuroAsia 105.2 103.3 1.9
London Market 92.0 89.8 2.2
U.S. Insurance 97.8 94.8 3.0
Total 96.5 % 98.4 % (1.9 )
SOURCE: Odyssey Re Holdings Corp.
Odyssey Re Holdings Corp. R. Scott Donovan, 203-977-0199 Chief Financial Officer
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