Alterra Specialty Field Trip to Richmond September 2010 Exhibit 99.1 |
This presentation may include forward-looking statements that reflect Alterra’s current views with respect to future events and financial performance. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” “may” and similar statements of a future or forward-looking nature identify forward-looking statements. All forward- looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and you should not place undue reliance on any such statements. Alterra believes that these factors include, but are not limited to, the following: (1) the adequacy of loss reserves and the need to adjust such reserves as claims develop over time; (2) the failure of any of the loss limitation methods employed; (3) the effects of emerging claims and coverage issues; (4) changes in general economic conditions, including changes in capital and credit markets; (5) the effect of competition and cyclical trends, including with respect to demand and pricing in the insurance and reinsurance markets; (6) any lowering or loss of financial ratings; (7) the occurrence of natural or man-made catastrophic events with a frequency or severity exceeding expectations; (8) the loss of business provided to Alterra by its major brokers; (9) the effect on Alterra’s investment portfolio of changing financial market conditions including inflation, interest rates, liquidity and other factors; (10) tax and regulatory changes and conditions; (11) the integration of Harbor Point Limited or new business ventures Alterra may enter into; and (12) retention of key personnel, as well as management’s response to any of the aforementioned factors. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionarys statements that are included herein and elsewhere, including the Risk Factors included in Alterra’s most recent reports on Form 10-K and Form 10-Q and other documents on file with the Securities and Exchange Commission. Any forward-looking statements made in this presentation are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Alterra will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Alterra or its business or operations. Alterra undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. The name Alterra Specialty is used throughout this presentation as the trade name to refer to Alterra’s U.S. specialty insurance operations. Cautionary Note Regarding Forward-Looking Statements |
Alterra Specialty contributes to Alterra Capital’s diversified niche orientation by adding profitable business in both property and casualty throughout the market cycle |
Executive Team 4 Executive Previous Experience Years Experience Steve Vaccaro CEO – Alterra Specialty CEO – Alterra America President & COO (1995 - 2004) Essex Insurance Company 38 Bryan Sanders COO – Alterra Specialty E&S Division, Hilb, Rogal & Hobbs President Dominion Specialty 28 Jon Hahn EVP – Brokerage Division Alterra Specialty VP Western Region Markel Corporation 18 Joe Mossbrook SVP – Contract Binding Alterra Specialty United America Insurance Penn America Reliance Insurance Company 19 Mike Miller SVP – Marine Division Alterra Specialty CUO Specialty Division Firemans Fund William H McGee 36 Phil Vedell SVP, CAO, Director of Catastrophe Management SVP Aon 13 Stephen Loderick SVP, CFO and Treasurer Alterra Specialty VP, CFO and Treasurer W.R. Berkley Markel Corporation 25 |
Nationwide excess and surplus lines writer of property, casualty and marine Start up operation for Alterra (previously Max) April 2007 Three distinct divisions: Brokerage, Marine, and Contract Binding Six strategically placed offices in the US Significant product diversification, strong distribution relationships and technical expertise Offering Property, Casualty, Marine, Professional Liability, Specialty Homeowners Admitted Company – Alterra America – Admitted in all 50 states Eligible Company – Alterra E&S – Eligible in 49 states on a surplus lines basis 5 Alterra Specialty – Leading E&S Writer Alterra Specialty contributes to Alterra Capital’s diversified niche orientation by adding profitable business in both property and casualty throughout the market cycle |
$285.5 million of GWP in 2009, small incremental growth in 2010 & 2011 Growth mostly from additional teams Combined ratio below 100%; targeting mid 90s with no change in market 70% short tail, 30% long tail Profitability improving as business matures into expense base Utilize third party reinsurance to minimize exposure in early years Adjusting programs as business matures and profitability trends are known Proactive management and control of property catastrophe exposures 6 From Start-up to Profits in Three Years. . . Alterra Specialty contributes to Alterra Capital’s diversified niche orientation by adding profitable business in both property and casualty throughout the market cycle |
Have grown carefully in soft market conditions, well positioned for harder market Will remain selective and continue to book conservatively Strong distribution relationships generate good flow to be selective Market conditions increasingly competitive Core property business remains highly profitable Cautiously building our casualty platforms We are consciously shrinking less profitable product lines due to competition Market dislocations provide the opportunity to add new teams and products Expanding product lines offered to producer base We have a reputation, among clients, of being problem solvers with strong underwriting expertise and not typically writers of commodity type business We concentrate on the small to medium size accounts, not the large Fortune 500 accounts 7 Selected Growth in Softer Market Alterra Specialty contributes to Alterra Capital’s diversified niche orientation by adding profitable business in both property and casualty throughout the market cycle |
8 Gross Premiums Written Brokerage Property 34% Brokerage Casualty 3% Professional Liability 0% CBA 34% Marine 22% Alterra Managers 7% 2009 GPW: $285.5 million 2010E GPW: ~$300 million Brokerage Casualty 6% Professional Liability 4% CBA 29% Brokerage Property 32% Alterra Managers 9% Marine 20% |
Alterra retains roughly 75% of the premium written in its U.S. Specialty casualty book 91.9% of premium is written with limits of $1 million or less Casualty – Small to Medium Size Account Business Focus Alterra Specialty GPW (12/31/09) 2009 Casualty Premium By Limit 2009 Casualty Policies By Limit Property Marine Casualty 31% 21% 48% $2.5mm to $5.0mm $1.0mm to $2.5mm $500k to $1mm $250k to $500k Less than $250k 2% 18% 77% 2% 2% 9 |
H1 2010 Update 10 Gross Written Premium on plan at approximately $170 million Continuing to broaden product lines and add small teams of experienced underwriters to better navigate market cycles Earned premium base continues to grow Restructuring reinsurance treaties to retain more profitable business Improving risk control by expanding audits in CBA division |
Highlights Underwriting/ Products 2009 GPW of $97.8mm H1 2010 GPW plan of $65.4 $25mm of per risk capacity, average policy is limit $10mm Average premium of approximately $48,000 per policy Both property cat and non-cat exposed layer accounts Middle market P&C Target markets include: apartments, offices, mixed use, hotels, shopping centers Proactive management of catastrophe exposures in real time Market Conditions Pricing softening due to higher capacity – Southeastern exposure down 10% on average; layers with high attachment points down 20% on average; CA quake dropped 10% on average Competition from standard markets continues to drive business away from the E&S marketplace Submission activity remains strong due to producer relationships Renewal retentions are within expectations Brokerage Property 11 |
Highlights Underwriting/ Products 2009 GPW of $10mm H1 2010 GPW of $9.2mm $6mm of per risk capacity (Primary or Umbrella X/S), 90% of policies have an average limit of $1mm All risks are individually underwritten with an average premium of approximately $27,500 per policy Products are light to moderately high hazard, including discontinued Habitational, Hospitality, Contractors-Commercial and Industrial, LRO, Vacant Properties, Manufacturing, Sales, Service and Repair, Commerical & Industrial Machinery and Equipment Market Conditions Marketplace pricing continues to deteriorate slightly Standard markets continue to take an aggressive approach in chasing new business and protecting renewals Handful of carriers continue to seek modest rate increases on renewal Implemented a restructured underwriting guideline for new and renewal business for apartments and condos Flat to minor rate decreases on good renewal business continues to be the norm for midsize ($25,000 to $75,000 and large accounts) Brokerage Casualty 12 |
Highlights Underwriting/ Products 2009 GPW with $61.4mm H1 2010 GPW of $34.0mm Approved to write on a non-admitted basis in 49 states and on admitted basis in all 50 states $25mm of per risk capacity, average policy limit is less than $5mm Regional offices in Atlanta, Dallas, New York, Philadelphia, and San Francisco Estimated size of the Commercial Inland/Ocean Marine Market > $10 Billion Target Market for Inland includes: Construction, Transportation & Logistics, Communications & Technology, Dealers, Specialty Inland Marine Target Market for Ocean includes: Importers/Exporters, Manufacturers, Distributors, Stevedores/Ship Repairers, Terminal Operators, Inland & Coastal Vessels Market Conditions Large primary players are very aggressive in the contracting segment. Leverage casualty capabilities to capture market share. Lloyd’s of London remains very active and aggressive in U.S. Marine Specialty lines. Pricing, terms, and “CAT” capabilities are helping them to grow rapidly in a soft market. Inland marine getting increasingly more competitive. Validus has started a new U.S. Ocean Marine Insurance operation in NY. Marine 13 |
Highlights Underwriting/ Products Trust but Verify Philosophy 2009 GPW of $96.1mm H1 2010 GPW of $50.2mm $2.5mm in per risk capacity / agents can only quote and bind up to a $1,000,000 policy limit – average policy premium $2,500 Property, non-cat property, casualty, inland marine, umbrella & X/S liability, specialty homeowners Targeted classes include: Artisans, Habitational, Mercantile/Office Buildings, Restaurants, Vacant Dwellings Significant Controls in place including: Stringent agency appointment process, extensive due diligence, more limited agency authorities than peers, quality assurance and audits (field audits done internally and by external audit company) Quarterly review of producers, loss ratio, and GPW analysis Market Conditions Property rates are slightly down from 2009 levels. Casualty rates are flat to down 10% from 2009. Commercial renewal rates are down 2% from the prior year. Admitted markets entering and causing some risk anti-selections issue Contract Binding Authority (CBA) 14 |
Highlights Underwriting/ Products Commenced in the fourth quarter 2009 with GPW of $0.6mm H1 2010 GPW of $5.9mm $5 mm of per risk capacity Average premium of approximately $10,500 per policy Products include: A&E, Lawyers E&O, Insurance Agents E&O, Misc. E&O Target markets include: Smaller firms; A&E < $10mm receipts, Lawyers < than 35 attorneys, Agents < $75mm premium Market Conditions The Professional Liability market remains soft. Individual segments are impacted by economic conditions and the number of competitors. Lawyers continue very soft with rates falling. Architects & Engineers remain soft but stabilizing. Insurance Agent E&O is an encouraging segment where the traditional players are re-underwriting their books and prices are rising. Miscellaneous E&O is quite segmented and individual underwriter appetites vary greatly. The Title Agents market has hardened dramatically following losses after the housing bubble burst. Professional Liability 15 |
Highlights Underwriting/ Products 2009 GPW of $19.6mm H1 2010 GPW of $9.7mm $10mm in per risk capacity/minimum premium of $100,000 Casualty business Targeted classes include: Healthcare, Transportation, Heavy Industrial, Pharmaceuticals, Medical Products, and other challenging risks Began writing Professional Liability (E&O) in March 2010 Market Conditions Large premium casualty remains competitive /soft with many markets writing below burn rate New entrants buying business include Ironshore , Tourus, and Montpelier US Erosion of terms including the use of occurrence trigger vs. claims made terms Alterra Managers 16 |
Alterra Specialty contributes to Alterra Capital’s diversified niche orientation by adding profitable business in both property and casualty throughout the market cycle |