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Highlights for the second quarter of 2009: -- Shareholders' equity of $3.14 billion as of June 30, 2009, an increase of $310.6 million, or 11.0%, compared to December 31, 2008, and a 15.7% increase compared to March 31, 2009; -- Book value per common share(2) of $51.90 as of June 30, 2009, an increase of $6.53, or 14.4%, compared to December 31, 2008, and an increase of $8.10, or 18.5%, compared to March 31, 2009; -- Total invested assets and cash of $8.1 billion as of June 30, 2009, an increase of $197.6 million, or 2.5%, compared to December 31, 2008; and -- During the second quarter of 2009, 1.2 million shares of the Company's common stock were repurchased and retired at an aggregate cost of $47.5 million; 532,000 shares of the Company's common stock were repurchased and retired from July 1 through July 29, 2009 at an aggregate cost of $21.6 million. Gross premiums written for the quarter ended June 30, 2009 were $511.4 million, compared to $566.2 million for the quarter ended June 30, 2008. Gross premiums written related to the Company's worldwide reinsurance business decreased 10.3%, due largely to our non-U.S. dollar denominated business. Gross premiums written related to the Company's insurance business decreased 8.4% compared to the quarter ended June 30, 2008. Net premiums written for the second quarter of 2009 were $459.8 million, an 8.7% decrease compared to second quarter 2008 net premiums written of $503.5 million. The combined ratio for the second quarter of 2009 was 96.5%, compared to 98.7% for the second quarter of 2008. Results for the quarter ended June 30, 2009 reflect after-tax net current year catastrophe losses, principally related to our EuroAsia division, of $9.1 million, or $0.15 per diluted share, compared to $23.2 million, or $0.36 per diluted share, for the second quarter of 2008. For the six months ended June 30, 2009 and 2008, the combined ratio was 96.5% and 98.5%, respectively. Net investment income amounted to $93.0 million for the second quarter of 2009, compared to $64.7 million for the second quarter of 2008. Net pre-tax realized investment gains were $55.2 million for the second quarter of 2009, compared to $45.6 million for the second quarter of 2008. Net pre-tax realized investment gains were reduced by $45.3 million and $0.3 million for the quarters ended June 30, 2009 and 2008, respectively, related to other-than-temporary write-downs of investments. Net unrealized investment gains, after tax, were $346.3 million at June 30, 2009, compared to $75.2 million at December 31, 2008. For the quarter ended June 30, 2009, cash flow from operations was a negative $1.5 million, compared to positive cash flow from operations of $15.2 million for the quarter ended June 30, 2008. In the second quarter of 2009, OdysseyRe paid a cash dividend of $0.075 per common share on June 30, 2009 to common shareholders of record as of June 16, 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 investment gains or
losses and the gain on redemption of preferred shares. Although
realized investment 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):
Quarter ended (unaudited)
June 30, 2009 June 30, 2008
$ Per Diluted $ Per Diluted
Share Share
Net income available to common shareholders $ 121.8 $ 2.03 $ 65.2 $ 0.99
Less: Net realized investment gains, after tax (35.9 ) (0.60 ) (29.7 ) (0.45 )
Operating income, after tax $ 85.9 $ 1.43 $ 35.5 $ 0.54
Six months ended (unaudited)
June 30, 2009 June 30, 2008
$ Per Diluted $ Per Diluted
Share Share
Net income available to common shareholders $ 122.7 $ 2.04 $ 314.2 $ 4.66
Less: Net realized investment losses (gains), after tax 28.7 0.47 (239.6 ) (3.55 )
Gain on redemption of preferred shares (8.0 ) (0.13 ) -- --
Operating income, after tax $ 143.4 $ 2.38 $ 74.6 $ 1.11
(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 shares. 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 amounts).
June 30, March 31, December 31,
2009 2009 2008
Total shareholders' equity $ 3,138.4 $ 2,713.7 $ 2,827.7
Less: equity related to preferred shares 77.2 77.2 94.4
Total common shareholders' equity $ 3,061.2 $ 2,636.5 $ 2,733.3
Common shares outstanding 58,980,352 60,194,029 60,242,949
Book value per common share $ 51.90 $ 43.80 $ 45.37
A conference call to discuss the second quarter financial results will be held at 10:00 a.m. Eastern Time on Friday, July 31, 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) 215-7030 (domestic) or (913) 312-0648 (international); the passcode number is 1650124. A replay of the call will be available from 12:00 p.m. Eastern Time on Friday, July 31, 2009 until 11:59 p.m. Eastern Time on Sunday, August 9, 2009. To access the replay, please call either (888) 203-1112 (domestic) or (719) 457-0820 (international); the passcode number is 1650124. 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; 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)
June 30, December 31,
2009 2008
(unaudited)
ASSETS
Investments and cash:
Fixed income securities, available for sale, at fair value $ 3,887,483 $ 3,594,278
(amortized cost $3,536,089 and $3,429,226, respectively)
Fixed income securities, held as trading securities, at fair value 564,447 338,209
(amortized cost $670,287 and $474,465, respectively)
Redeemable preferred stock, at fair value (cost $108 and $510, 108 114
respectively)
Equity securities:
Common stocks, at fair value (cost $1,773,151 and $1,628,611, 1,928,766 1,555,142
respectively)
Common stocks, at equity 139,717 141,473
Short-term investments, at fair value (amortized cost $546,332 and 546,325 1,202,360
$1,202,366, respectively)
Cash and cash equivalents 856,266 755,747
Cash and cash equivalents held as collateral 12,813 82,374
Other invested assets 154,133 222,841
Total investments and cash 8,090,058 7,892,538
Accrued investment income 82,548 66,575
Premiums receivable 486,894 496,418
Reinsurance recoverable on paid losses 61,993 82,999
Reinsurance recoverable on unpaid losses 739,213 690,171
Prepaid reinsurance premiums 93,515 94,797
Funds held by reinsureds 128,859 128,543
Deferred acquisition costs 135,190 139,069
Federal and foreign income taxes receivable 143,313 52,096
Other assets 188,446 83,303
Total assets $ 10,150,029 $ 9,726,509
LIABILITIES
Unpaid losses and loss adjustment expenses $ 5,403,728 $ 5,250,484
Unearned premiums 692,503 701,955
Reinsurance balances payable 172,731 116,388
Funds held under reinsurance contracts 43,563 55,495
Debt obligations 489,340 489,278
Other liabilities 209,812 285,174
Total liabilities 7,011,677 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; 591 603
59,090,470 and 60,264,270 shares issued, respectively
Additional paid-in capital 542,077 614,203
Treasury shares, at cost (110,118 and 21,321 shares, respectively) (4,065 ) (795 )
Accumulated other comprehensive income, net of deferred income taxes 354,752 82,421
Retained earnings 2,244,965 2,131,264
Total shareholders' equity 3,138,352 2,827,735
Total liabilities and shareholders' equity $ 10,150,029 $ 9,726,509
ODYSSEY RE HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Six Months Ended June 30, Three Months Ended June 30,
2009 2008 2009 2008
REVENUES
Gross premiums written $ 1,066,308 $ 1,143,712 $ 511,388 $ 566,158
Ceded premiums written 127,522 122,410 51,581 62,676
Net premiums written 938,786 1,021,302 459,807 503,482
Decrease in net unearned premiums 11,703 5,664 20,664 12,056
Net premiums earned 950,489 1,026,966 480,471 515,538
Net investment income 160,427 137,824 92,966 64,696
Net realized investment (losses) gains:
Net realized investment gains 82,542 409,828 100,531 45,932
Other-than-temporary impairment losses (126,706 ) (41,203 ) (45,332 ) (301 )
Total net realized investment (losses) gains (44,164 ) 368,625 55,199 45,631
Total revenues 1,066,752 1,533,415 628,636 625,865
EXPENSES
Losses and loss adjustment expenses 639,494 712,304 321,903 360,054
Acquisition costs 190,848 213,193 97,844 105,046
Other underwriting expenses 87,127 86,395 44,022 43,620
Other (income) expense, net (11,251 ) 19,210 (15,453 ) 8,114
Interest expense 15,903 17,437 7,818 8,394
Total expenses 922,121 1,048,539 456,134 525,228
Income before income taxes 144,631 484,876 172,502 100,637
Federal and foreign income tax provision (benefit):
Current 64,824 179,943 30,202 69,256
Deferred (37,533 ) (12,952 ) 19,169 (35,559 )
Total federal and foreign income tax provision 27,291 166,991 49,371 33,697
Net income 117,340 317,885 123,131 66,940
Preferred dividends (2,670 ) (3,687 ) (1,334 ) (1,774 )
Gain on redemption of Series B preferred shares 7,997 - - -
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 122,667 $ 314,198 $ 121,797 $ 65,166
BASIC
Weighted average common shares outstanding 59,150,960 66,435,956 58,929,288 64,832,570
Basic earnings per common share $ 2.04 $ 4.67 $ 2.04 $ 0.99
DILUTED
Weighted average common shares outstanding 59,581,273 66,908,950 59,297,740 65,294,264
Diluted earnings per common share $ 2.04 $ 4.66 $ 2.03 $ 0.99
DIVIDENDS
Dividends declared per common share $ 0.150 $ 0.125 $ 0.075 $ 0.063
COMPREHENSIVE INCOME
Net income $ 117,340 $ 317,885 $ 123,131 $ 66,940
Other comprehensive income (loss), net of tax 272,331 (55,879 ) 359,141 (51,832 )
Comprehensive income $ 389,671 $ 262,006 $ 482,272 $ 15,108
ODYSSEY RE HOLDINGS CORP.
BUSINESS SEGMENTS (UNAUDITED)
(IN THOUSANDS)
Six Months Ended Three Months Ended
June 30, % June 30, %
2009 2008 Change 2009 2008 Change
GROSS PREMIUMS WRITTEN
Americas $ 385,685 $ 364,174 5.9 % $ 190,388 $ 174,580 9.1 %
EuroAsia 291,202 340,456 (14.5 ) 130,885 182,509 (28.3 )
London Market 147,875 180,273 (18.0 ) 74,933 79,215 (5.4 )
U.S. Insurance 241,546 258,809 (6.7 ) 115,182 129,854 (11.3 )
Total $ 1,066,308 $ 1,143,712 (6.8 ) % $ 511,388 $ 566,158 (9.7 ) %
NET PREMIUMS WRITTEN
Americas $ 377,614 $ 357,231 5.7 % $ 186,917 $ 171,968 8.7 %
EuroAsia 278,122 327,473 (15.1 ) 124,536 176,625 (29.5 )
London Market 113,692 140,531 (19.1 ) 61,205 56,464 8.4
U.S. Insurance 169,358 196,067 (13.6 ) 87,149 98,425 (11.5 )
Total $ 938,786 $ 1,021,302 (8.1 ) % $ 459,807 $ 503,482 (8.7 ) %
NET PREMIUMS EARNED
Americas $ 395,914 $ 378,097 4.7 % $ 200,711 $ 181,701 10.5 %
EuroAsia 278,490 299,637 (7.1 ) 140,275 156,361 (10.3 )
London Market 116,113 147,362 (21.2 ) 61,689 70,689 (12.7 )
U.S. Insurance 159,972 201,870 (20.8 ) 77,796 106,787 (27.1 )
Total $ 950,489 $ 1,026,966 (7.4 ) % $ 480,471 $ 515,538 (6.8 ) %
Six Months Ended Percentage Three Months Ended Percentage
June 30, Point June 30, Point
2009 2008 Change 2009 2008 Change
LOSSES AND LOSS
ADJUSTMENT EXPENSES RATIO
Americas 64.8 % 66.0 % (1.2 ) 69.4 % 65.0 % 4.4
EuroAsia 73.1 78.7 (5.6 ) 66.3 79.9 (13.6 )
London Market 62.9 61.5 1.4 62.2 60.2 2.0
U.S. Insurance 66.4 67.5 (1.1 ) 66.0 69.8 (3.8 )
Total 67.3 % 69.4 % (2.1 ) 67.0 % 69.8 % (2.8 )
ACQUISITION COSTS AND OTHER
UNDERWRITING EXPENSES RATIO
Americas 31.4 % 32.9 % (1.5 ) 31.7 % 32.8 % (1.1 )
EuroAsia 24.7 26.0 (1.3 ) 24.2 26.1 (1.9 )
London Market 28.7 28.5 0.2 29.0 30.1 (1.1 )
U.S. Insurance 32.4 27.5 4.9 33.8 25.3 8.5
Total 29.2 % 29.1 % 0.1 29.5 % 28.9 % 0.6
COMBINED RATIO
Americas 96.2 % 98.9 % (2.7 ) 101.1 % 97.8 % 3.3
EuroAsia 97.8 104.7 (6.9 ) 90.5 106.0 (15.5 )
London Market 91.6 90.0 1.6 91.2 90.3 0.9
U.S. Insurance 98.8 95.0 3.8 99.8 95.1 4.7
Total 96.5 % 98.5 % (2.0 ) 96.5 % 98.7 % (2.2 )
SOURCE: Odyssey Re Holdings Corp. Odyssey Re Holdings Corp. R. Scott Donovan, 203-977-0199 Chief Financial Officer For full details for ORH click here.
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