# Results: Rollercoaster results characterise Q1 2010

As first-quarter results emerged around the globe in May, we have seen some clear winners and losers with many suffering from heavy catastrophe losses, writes Katherine Blackler.

While overall first-quarter results from the reinsurance sector were solid, with a couple of reinsurers performing better than expected, many saw their results hit badly from the heavy catastrophe losses that were seen almost across the board in the early months of this year.

US (re)insurer Beazley reported a huge 195% increase in premiums to $438.2m for the quarter. One of the firm's largest gains was in its reinsurance book, which jumped 40% to$110.6m.

One of the biggest winners of the quarter was US insurer AIG, which reported net income of $1.5bn for the first quarter of 2010 compared to a net loss of$4.4bn in the first quarter of 2009.

Swiss Re also performed better than expected by analysts, with profit growth of 22% to $158m leading to reports that the reinsurer will soon be able to repay Berkshire Hathaway, which gave the company a loan in 2009. The increase came in spite of estimated claims of$500m from the earthquake in Chile and $100m from the winter storms that swept across Europe. Total group premiums fell to$4.97bn from $5.68bn. Meanwhile, Munich Re announced a quarterly profit of €485m, up from €437m in Q1 2009 due to large gains from the disposal of investments and despite natural catastrophe costs that were "unusually high". Its gross written premium (GWP) rose by 12.4% to €11.7bn. For its reinsurance sector, the combined ratio for the first quarter was 109.2% of net earned premiums, with natural catastrophes accounting for 20.8%. Munich Re's reinsurance business felt the impact of a greater burden from major losses that saw the operating result from the sector decrease to €605m but, thanks to a satisfying investment result of €935m, reinsurance still contributed €424m to the group's overall profit. One of only a few Bermudan (re)insurers that managed to perform better than last year was Allied World, which saw profits rise by over$2m during the first quarter of 2010 despite catastrophe losses and continued competition on pricing. The reinsurer saw $65m of losses attributable to the earthquake in Chile as well as losses of$21.5m from other major loss events, though its net income still climbed to $133.7m for the quarter from$131.4m for the same period in 2009.

Despite heavy catastrophe losses of $149m (compared with$34m for the first quarter of 2009), another Bermudan firm that prospered was Ace, which reported a 33% growth in its first-quarter net income.

Renaissance Re and Montpelier Re also gained despite heavy catastrophe losses. Renaissance Re reported net income of $165m in the first quarter of 2010. This compares to$97.3m for the first quarter of 2009. Montpelier saw a smaller gain - a $10m rise in net income - with a reported$94m loss in Chile and the $10m loss from windstorm Xynthia. Bermuda woe One of the Bermudan reinsurers most troubled by first-quarter catastrophe losses was Partner Re, which gave its net income as$79.7m for the quarter in comparison to $141.4m for the same period in 2009. Catastrophe losses totalled$329m, or 33%, on its non-life technical ratio with the reinsurer recording an operating loss of $41.8m for the first quarter of 2010. This compares to operating earnings of$155.7m for the first quarter of 2009.

Worse affected was Validus, which reported a net loss of $118.4m for the three months compared with net income of$94.9m for the first quarter of 2009. The reinsurer reported losses of $306.9m, net of reinstatement premiums, resulting from the Chilean earthquake, windstorm Xynthia and the Melbourne hailstorm. It also saw higher finance charges of$7.4m, which were offset by increased investment income of $7.5m, leading to a combined ratio for the quarter of 134.3%. Rival Bermudan firm Max Capital announced net income of$36.4m for the first quarter of 2010, compared to net income of $44.5m for the first quarter of 2009. Its property and casualty combined ratio was 90.5% - compared to 89.7% over the same quarter in 2009 - due to property catastrophe event losses of$9.6m compared to $3.4m in the same quarter in 2009. Further, XL, Argo, Axis, Endurance and Everest Re also reported drops in net income due to catastrophe losses. Argo's first quarter net income was$20.7m, compared to $27.0m for the first quarter of 2009, with estimated pre-tax losses attributable to first-quarter catastrophes - net of estimated reinstatement premiums totalling$29.1m.

Axis Capital's first-quarter net income, as available to its common shareholders, was $112m, compared with net income of$116m for the first quarter of 2009. The figure derives as a result of catastrophe losses of approximately $147m. Endurance showed a fall in profit of more than 28% after estimated losses of$65m from catastrophes. The Bermuda-based (re)insurer posted net income of $55.8m versus$78.3m in the same period last year. On the positive side, Endurance also saw a $35.6m increase in GWP to$818.9m.

XL's property casualty division reported a combined ratio of 110.5% - compared to 92.1% in the first quarter of 2009. The (re)insurer also declared net income of $128m and operating income of$149.6m for the quarter, down from $190.9m for the same period in 2009. The Chilean earthquake resulted in the recognition of losses, net of reinsurance and reinstatement premiums for XL, of$159.7m, of which $78.0m was recognised in the insurance segment and$81.7m was recognised in the reinsurance segment. Windstorm Xynthia resulted in the recognition of losses, net of reinsurance and reinstatement premiums, of $21.4m, of which$1.5m was recognised in the insurance segment and $19.9m was recognised in reinsurance. Perhaps one of the worst affected in Bermuda was Everest Re, which reported a net loss of$22.7m for the first quarter of 2010 compared to net income of $108.6m for the first quarter of 2009. Overall, catastrophe losses, net of reinstatement premiums and taxes, were$275.6m during the quarter.

Scor
It was not only the Bermudan reinsurers that saw their results dip due to heavy casualty losses. Scor saw its first-quarter net income drop by a dramatic 61%, with natural catastrophe losses behind €36m losses in the first quarter of 2010.

Transatlantic Re reported net income of $16m for the quarter, down from$75m a year ago, after reporting net pre-tax catastrophe costs of $30m. First-quarter revenue at Berkshire Hathaway Reinsurance this year also dropped 32% to$2.11bn, with catastrophe losses of $278m and$82m in the General Re and Berkshire Hathaway Reinsurance Group subsidiaries respectively. These losses were not much of a cause for concern, being easily absorbed given Berkshire's approximate \$64bn in statutory surplus capital in its insurance operations.