![]() Investor Presentation Year Ended December 31, 2010 Exhibit 99.1 |
![]() 2 Cautionary Note Regarding Forward-Looking Statements Alterra was formed on May 12, 2010 by the merger of Max Capital Group Ltd. (“Max Capital”) and Harbor Point Limited (“Harbor Point”). 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 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. These factors include, but are not limited to, the following: (1) the adequacy of loss and benefit 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 effect of cyclical trends, including with respect to demand and pricing in the insurance and reinsurance markets; (4) changes in general economic conditions, including changes in capital and credit markets; (5) any lowering or loss of financial ratings; (6) the occurrence of natural or man-made catastrophic events with a frequency or severity exceeding expectations; (7) actions by competitors, including consolidation; (8) the effects of emerging claims and coverage issues; (9) the loss of business provided to Alterra by its major brokers; (10) the effect on Alterra’s investment portfolio of changing financial market conditions including inflation, interest rates, liquidity and other factors; (11) tax and regulatory changes and conditions; (12) retention of key personnel; (13) the integration of new business ventures Alterra may enter into; and 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 cautionary 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. |
![]() 3 Alterra’s Franchise is Well Positioned For Success Global underwriter of specialty insurance and reinsurance Multiple operating platforms - Bermuda, Ireland, United States, Lloyd's, Latin America Strong franchise positions across multiple specialty classes of business Opportunistic and disciplined underwriting strategy Strong culture of risk management Analytical and quantitative underwriting orientation Rolling 5 year average combined ratio, with cats, of 87.7% Strong, liquid balance sheet with conservative reserving track record Shareholders equity ~ $2.9 billion at 12/31/10 Low operating and financial leverage provides enhanced flexibility Proven track record of active capital management Returned $559 million or ~18% of pro forma 12/31/09 shareholders' equity (1) in 2010 through dividends and share repurchases Rated “A” (Excellent) by AM Best 2010 GPW (2) Long-Tail 46% Short-Tail 54% Insurance 43% Reinsurance 57% (1) Shareholders' equity of Max Capital and Harbor Point on a combined pro forma basis. (2) Pro forma gross premiums written as if the amalgamation occurred on January 1, 2010. (3) AM Best ratings reflect the agency’s opinion of our financial strength, operating performance and ability to meet our obligations. The ratings are not evaluation directed toward the protection of investors in securities of Alterra. |
![]() 4 Solid Fourth Quarter Results Fourth quarter 2010 net operating diluted EPS of $0.66 per share Decrease from Q4/09 principally due to increased outstanding shares from Harbor Point merger P&C gross premiums written grew 13.5% to $313.5 million Driven by the inclusion of Harbor Point, new business in Latin America, and expansion at Lloyd’s and U.S. Specialty Net investment income up 36.7% to $61.1 million Reflects additional cash and invested assets from inclusion of Harbor Point Q4 combined ratio of 84.8% Catastrophe losses from Q4 events of $13.0 million Diluted book value per share of $25.99 at 12/31/10 P&C GPW (13.5% increase) Operating Diluted EPS Growth in Gross Premiums Written… …With Solid Operating EPS Operating ROE 15.5% 10.2% Combined ratio 81.2% 84.8% = pro forma gross premiums written as if the amalgamation occurred on January 1, 2009 $276.3 $313.5 Q4 '09 Q4 '10 $1.04 $0.66 $335.0 Q4 '09 Q4 '10 |
![]() 5 Solid 2010 Year Results Full Year 2010 net operating diluted EPS of $2.64 per share Decrease from 2009 principally due to increased outstanding shares from Harbor Point merger P&C gross premiums written grew 5.6% to $1,405.8 million Driven by the inclusion of Harbor Point, new business in Latin America, and expansion at Lloyd’s and U.S. Specialty Net investment income up 31.1% to $222.5 million Reflects additional cash and invested assets from inclusion of Harbor Point Combined ratio of 85.7% Catastrophe losses from 2010 events of $54.9 million Diluted book value per share of $25.99 at 12/31/10 P&C GPW (5.6% increase) Operating Diluted EPS Growth in Gross Premiums Written… …With Solid Operating EPS Operating ROE 14.9% 10.2% Combined ratio 88.1% 85.7% = pro forma gross premiums written as of the amalgamation occurred on January 1, 2009 $1,331.2 $1,405.8 $3.62 $2.64 2009 2010 2009 2010 $1,902.6 $1,789.1 |
![]() 6 Challenging Times for P&C Insurers Profitable growth opportunities are scarce Market is stressed by historic low returns on invested assets Cash flow levels are deteriorating 2010 Industry loss events have generated high catastrophe losses Reserve redundancies at many companies are diminishing Self-assessment on certain lines and overall strategy Excess capital positions managed through share repurchases Soft markets provide the opportunity to differentiate between the stronger and weaker players |
![]() Pricing Pressure Across Most Platforms ____________________ Rate commentary reflects the Alterra renewal book as of 1/1/11. 7 |
![]() 8 Stringent underwriting and risk management practices Reward for ROE, not premium growth Avoid mistakes – protect the balance sheet Position for inflection point in pricing Expense management Strong controls across the organization Invest in the future Latin America, Lloyd’s, Alterra USA Balance between expenses and expansion Capital management Stay alert to accretive M&A opportunities Soft Market “Playbook” Stay focused on the message |
![]() Positioned to Successfully Execute ____________________ (1) Shareholders' equity of Max Capital and Harbor Point on a combined pro forma basis. 9 |
![]() 10 2004 Insurance Property 2003 Insurance Excess Liability Professional Liability 2005 Reinsurance Property / Property Cat Harbor Point formed 2006 Insurance Aviation 2008 Lloyd's Insurance Financial Institutions Prof. Indemnity Lloyd's Reinsurance Accident / Health Property 2007 U.S. E&S Insurance Property Inland Marine U.S. Casualty Reinsurance Multi Peril Crop Experienced & highly quantitative underwriting teams Lead underwriters average over 20 years in the business High percentage of employees hold professional designations 2009 Lloyd's Casualty (non U.S.) A&H Insurance U.S. Specialty Professional Liability Latin America Reinsurance 2002 Traditional Re Workers' Comp Medical Malpractice GL / PL Aviation Identifying & Recruiting "Franchise Players" Has Been Instrumental In Our Success 2010 Alterra formed by the merger of Max Capital and Harbor Point |
![]() 11 Reinsurance Insurance Lloyd’s U.S. Specialty Insurance Major Classes – Agriculture – Aviation – General casualty – Life and annuity – Marine and energy – Medical malpractice – Professional liability – Property – Surety, credit & political risk – Whole account – Workers’ comp – Aviation – Excess liability – Professional liability – Property – Aviation – Accident and Health – Financial institutions – International casualty treaty – Personal accident treaty – Professional liability – Property treaty – General liability – Marine – Miscellaneous professional liability – Property Operating Regions – Australia – Canada – European Union – Japan – Latin America – New Zealand – United States – European Union – United States – Denmark – Japan – Latin America – United Kingdom – United States Offices – Bermuda – Bogotá – Buenos Aires – Dublin – London – New Jersey – Bermuda – Dublin – Hamburg – Zurich – Copenhagen – Leeds – London – Rio de Janeiro – Tokyo – Atlanta – Dallas – New York – Philadelphia – Richmond – San Francisco – Sebastopol Local Knowledge Global Reach |
![]() 12 ____________________ Note: Pro forma gross premium written (“GPW”) represents the combined GPW of Max Capital and Harbor Point net of intercompany eliminations of GPW. Insurance (26.2% of 2010 P&C GPW) Reinsurance (36.1% of 2010 P&C GPW) Professional Liability Property Excess Liability Aviation General Casualty Property Aviation Workers Comp. Professional Liability Other Med. Mal. Marine & Energy Agriculture 2010 GPW: $370.1 million = pro forma Auto $1,060.4 $892.4 Alterra Has a Strong Market Position in Specialty Classes … Credit/ Surety Whole Account 2010 GPW: $509.1 million |
![]() 13 U.S. Specialty (23.0% of 2010 P&C GPW) Alterra at Lloyd’s (14.4% of 2010 P&C GPW) …With an Attractive Position in the U.S. Market and Lloyd’s Professional Liability Property Marine General Liability Property Aviation Fin. Institutions Prof. Liability Accident & Health 2009 GPW: $285.5 million 2009 GPW: $129.0 million 2010 GPW: $324.0 million 2010 GPW: $202.6 million Launched in 2007 Nationwide niche E&S underwriter 84% non-admitted 2010 combined ratio = 97.9% Acquired in November 2008 Direct and reinsurance 2010 combined ratio = 83.4% Int’l Casualty Surety |
![]() 14 Long-Tail Short-Tail North America Europe Other Credit/ Surety and Other Short-Tail Agriculture Marine & Energy Property Aviation Auto Professional Liability Medical Malpractice General Casualty Workers’ Comp Whole Account Insurance Mixed 2010 GPW = $1,410.7 million ____________________ (1) Pro forma as if Harbor Point merger occurred on January 1, 2010. (2) Includes Reinsurance segment (49.7%), Life & Annuity reinsurance (0.3%) and reinsurance written through Lloyd’s platform (7.4%). Diversified and Balanced Business Mix Global Platform (1) Line of Business (1) 2010 pro forma GPW = $1,794.1 million Accident & Health Life & Annuity Reinsurance (2) |
![]() 2 Losses $305.7 $95.1 $105.0 $306.0 $60.0 $317.0 $122.7 $112.2 $125.0 $124.0 $77.7 $63.0 $26.0 $58.0 $43.0 ____________________ Source: Company filings and press releases; losses are generally disclosed net of tax and net of reinstatement premiums. (1) Q2 net losses reflect only losses from the Chilean earthquake. Initial losses include the Chilean earthquake and Windstorm Xynthia. (2) Q2 net losses reflect Q1 estimates plus reported development, if any. (3) Initial loss estimate reflects 50% to 90% of Reuters consensus net operating earnings prior to the earthquake, based on disclosure that net income would remain positive for the quarter. (4) Initial estimates based on Chile and Xynthia, ultimate losses include the Chilean, Haitian, and Baja earthquakes, Xynthia and the Australian hailstorms. Based on international catastrophe losses being two-thirds of total catastrophe losses as disclosed in the earnings conference call. (5) Initial estimate is as of the first quarter conference call. Both initial and revised estimates reflect only the Chilean earthquake. (6) Pro forma; includes losses from Harbor Point and Max Capital prior to the merger. Expressed as a percentage of proforma 12/31/09 shareholders’ equity prior to the special dividend. (1) (2) (1) (2) (3) (1)(4) (1) (2) (2)(5) (6) Chilean Earthquake / Windstorm Xynthia Ultimate Net Losses as a % of 12/31/09 Common Equity ($ in millions) Superior Risk Management Skills. . . 6.1% Initial Estimate 1.5% 7.6% 5.4% 0.2% 5.5% 1.2% 1.3% 1.3% 2.4% 2.1% 2.1% 2.5% 3.2% 3.3% 4.4% 4.1% 4.1% 4.1% 0.1% 0.2% 0.3% 0.4% 0.3% 0.6% 0.6% 0.6% 0.8% 0.9% 1.0% 1.3% 1.5% 1.6% 2.4% 2.4% 2.5% 3.1% 3.8% 3.8% 4.4% 5.0% 5.0% 5.1% Revised Estimate 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 15 |
![]() 16 3 (1) (3) (2) Losses $256 $140 $276 $140 $135 $165 $287 $384 $171 $125 $148 $155 $113 $257 $50 (4) ____________________ Source: Company filings, as of 12/31/08. Losses are generally disclosed net of reinstatement premiums. (1) Results reflect Ike only. (2) Equity includes preferred, which subsequently converted to common. (3) Equity includes convertible note, which subsequently converted to common. (4) TRH does not disclose specific losses but did lose "$169.7 million principally relating to Hurricane Ike." $170 $305 Revised Estimate Initial Estimate (2) Ike / Gustav Ultimate Net Losses as a % of 6/30/08 Common Equity ($ in millions) 3.4% 3.8% 3.0% 4.2% 5.2% 6.0% 6.4% 7.2% 5.2% 7.8% 3.7% 5.3% 6.7% 8.3% 10.1% 6.6% 8.0% 4.4% 4.3% 0.0% 0.6% 2.2% 3.0% 4.3% 0.3% 2.6% 0.7% 0.3% 0.8% 0.8% 1.8% 0.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 12.4% 11.0% 10.1% 8.9% 8.9% 8.4% 8.1% 8.1% 7.8% 7.2% 7.0% 6.3% 6.0% 5.0% 4.8% 4.6% 3.4% VR FSR RNR MRH IPCR PTP ACGL AXS PRE HP AHL ENH ORH TRH AWH RE MXGL . . . Less Exposed to Swings in the Cat Market |
![]() 17 Florida wind 1 in 100 year event - $368 million net loss California earthquake 1 in 250 year event - $333 million net loss Europe wind 1 in 100 year event - $195 million net loss PML’s In-force as of January 1, 2011 |
![]() 18 ____________________ Short tail lines contributed to 77% of total growth over the 3 years to 2010 Strong Cycle Management Discipline Long Tail (GPW) Short Tail (GPW) ($ in millions) Non-Traditional Year over year growth: Year over year growth: Lloyd's -- -- -- -- -- NM 61.2% U.S. Specialty -- -- -- -- 274.7% 46.5% 4.9% Reinsurance (6.1%) (30.7%) 281.4% 17.2% (13.7)% 19.2% (10.0)% Insurance -- -- 141.7% 13.4% 13.5% 25.7% (23.2%) Total (5.0%) (12.8%) 251.3% 23.0% 5.3% 36.7% (2.7)% Lloyd's -- -- -- -- -- NM 49.2% U.S. Specialty -- -- -- -- 386.2% 47.8% 32.7% Reinsurance (1) 21.8% 72.2% 99.8% (15.9%) (8.3%) 16.4% (21.2%) Insurance 50.7% 30.5% (2.3%) (7.9%) (2.2%) 3.9% (9.0%) Total 38.1% 46.6% 43.9% (11.4%) 1.5% 18.9% (8.5%) (1) Excludes non-traditional, which is composed of structured contracts that Alterra stopped writing in 2003. (2) Gross Premiums written for 2006-2010 include premiums written by both Max Capital and Harbor Point after eliminating the impact of intercompany transactions. |
![]() Conservative Reserve Position with High % of IBNR ____________________ Note: Includes the results of Harbor Point from May 12, 2010, the closing date of the merger. $297 $278 2010 2009 2010 2009 2010 2009 2010 2009 IBNR Case Insurance Reinsurance Alterra at Lloyd's U.S. Specialty ($ in millions) 27% 24% 28% 73% 76% 68% 72% $1,306 $1,240 $2,042 $1,471 $261 $189 $0 $500 $1,000 $1,500 $2,000 $2,500 32% 75% 25% 36% 64% 38% 62% 50% 50% 19 |
![]() 20 Favorable Reserve Development $5.9 $45.1 $90.8 $77.2 $105.5 Development as a % of Net Reserves 0.3% 2.5% 4.1% 3.4% 3.4% Consistent Favorable Reserve Development Net Loss Reserves ($ in millions) ____________________ Note: Reserve development and net reserves prior to May 12, 2010 are for Max Capital only. Reserve development excludes changes in reserves resulting from changes in premium estimates on prior years’contracts. $1,840 $1,796 $2,128 $2,213 $2,985 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2006 2007 2008 2009 2010 |
![]() 21 High Quality, Liquid Investment Portfolio Alterra maintains a high quality, liquid portfolio 95.2% of portfolio in fixed income/cash, which consists of highly rated securities Assets are generally matched to liabilities Cycle management extends to investments – current posture is defensive Cash balance $905.6 million or 11.5% of portfolio As of December 31, 2010, average fixed income duration of approximately 4.2 years, including cash 63.0% of the cash and fixed maturities portfolio is held in cash, government / agency-backed securities and “AAA” securities 69.6% of fixed income portfolio rated “AA” or better Hedge fund investments are marked-to-market as of December 31, 2010 Minimal exposure to selected asset classes CMBS of $334.2 million (4.3% of portfolio) – average rating of AA+/Aa1 ABS of $87.9 million (1.1% of portfolio) RMBS of $1,168.4 million (14.9% of portfolio) – 91.1% agency- backed No CDO’s, CLO’s, SIV’s or other highly structured securities Less than $6 million of OTTI losses in the last two years Carrying Value $7.9 billion December 31, 2010 Cash 12% Other Investments 5% Fixed Income 83% |
![]() 22 2011 Plan Focus on growing book value per share Opportunistically allocate capital across segments Emphasize shorter-tail lines more than longer-tail New initiatives will be weighted more towards specialty lines Capital management through share repurchases and regular dividends Protect our strong, clean balance sheet |
![]() 23 ____________________ Note: Primary price / diluted book value multiple as of 2/11/11. Strongly Positioned to Build Shareholder Value Franchise positions in attractive specialty markets Well established operating platforms provide global access to business Diversified business portfolio across casualty and property lines Opportunistic approach – nimble and responsive to market trends High-quality liquid investment portfolio Invested asset leverage intended to drive more consistent returns Balance sheet strength with low leverage / financial flexibility Attractive entry point – price / diluted book value of 0.84x |
![]() 24 Appendices |
![]() 25 December 31, December 31, 2010 2009 Cash & Fixed Maturities 7,483 $ 4,944 $ Other Investments 378 318 Premium Receivables 589 567 Losses Recoverable 956 1,001 Other Assets 511 510 Total Assets 9,917 $ 7,340 $ Property & Casualty Losses 3,906 $ 3,178 $ Life & Annuity Benefits 1,276 1,373 Deposit Liabilities 148 153 Funds Withheld 121 140 Unearned Premium 905 628 Senior Notes 440 90 Other Liabilities 203 213 Total Liabilites 6,999 $ 5,775 $ Shareholders' Equity 2,918 1,565 9,917 $ 7,340 $ Strong Balance Sheet ($ in millions) ____________________ (1) Results for the year ended December 31, 2010 include results from Harbor Point following the close of the merger on May 12, 2010. |
![]() 26 YTD Results Comparison ($ in millions) Years ended (1) Pro forma years ended (2) December 31, December 31, December 31, December 31, 2010 2009 2010 2009 Gross Premiums Written 1,411 $ 1,375 $ 1,794 $ 1,940 $ Net Premiums Earned 1,172 834 1,392 1,383 Net Investment Income 222 170 247 239 Net Realized and Unrealized Gains on Investments 17 82 25 91 Other Than Temporary Impairment Charges (3) (3) (3) (3) Other Income 5 3 5 4 Total Revenues 1,413 1,086 1,666 1,714 Total Losses, Expenses & Taxes 1,111 840 1,373 1,261 Net Income 302 $ 246 $ 293 $ 453 $ Net Operating Income 252 $ 209 $ Property & Casualty Underwriting Loss Ratio 56.1% 62.4% Expense Ratio 29.6% 25.7% Combined Ratio 85.7% 88.1% (1) Results for the year ended December 31, 2010 include results from Harbor Point following the close of the merger on May 12, 2010. (2) Pro forma information is provided for informational purposes only, to present a summary of the combined results of operations assuming the amalgamation with Harbor Point had occurred on January 1, 2009. The pro forma information assumes the elimination of intercompany transactions and the amortization of certain acquisition accounting fair value adjustments. The pro forma information does not necessarily represent results that would have occurred if the amalgamation had taken place on January 1, 2009, nor is it necessarily indicative of the future results. |
![]() 27 Year ended December 31, 2010 ($ in millions) Differences in table due to rounding. Includes results from Harbor Point following the close of the merger on May 12, 2010. (1) Property and Casualty only. Diversified Operating Platform Life & Property & Casualty Annuity Corporate Consolidated Alterra at Insurance Reinsurance U.S. Specialty Lloyd's Total Reinsurance Gross premiums written $370.1 $509.1 $324.0 $202.6 $1,405.8 $4.9 - $ $1,410.7 Reinsurance premiums ceded (170.6) (64.1) (98.6) (37.4) (370.7) (0.4) - (371.1) Net premiums written $199.5 $445.0 $225.4 $165.2 $1,035.1 $4.5 - $ $1,039.6 Earned premiums 391.7 699.2 312.0 170.8 1,573.7 4.9 - 1,578.6 Earned premiums ceded (173.1) (71.6) (125.2) (35.8) (405.7) (0.4) - (406.1) Net premiums earned $218.6 $627.6 $186.8 $135.0 $1,168.0 $4.5 - $ $1,172.5 Net investment income $25.1 $60.1 $5.2 $11.6 $102.0 $49.8 $70.7 $222.5 Net realized and unrealized gains (losses) on investments 0.6 0.7 - (4.5) (3.2) 11.4 8.6 16.8 Net impairment losses recognized in earnings - - - - - - (2.6) (2.6) Other income 0.8 - 0.5 2.5 3.8 0.3 0.7 4.8 Total revenues $245.1 $688.4 $192.5 $144.6 $1,270.6 $66.0 $77.4 $1,414.0 Net losses and loss expenses $128.8 $347.8 $118.3 $59.9 $654.8 - $ - $ $654.8 Claims and policy benefits - - - - - 65.2 - 65.2 Acquisition costs 3.4 131.1 28.4 24.2 187.1 0.4 - 187.5 Interest expense 1.0 7.0 - - 8.0 5.8 14.5 28.3 Net foreign exchange losses (gains) - 1.7 - (1.7) - - (0.1) (0.1) Merger and acquisition expenses - - - - - - (48.8) (48.8) General and administrative expenses 28.6 66.1 36.0 28.5 159.2 3.0 58.4 220.6 Total losses and expenses 161.8 553.7 182.7 110.9 1,009.1 74.4 24.0 1,107.5 Income before taxes $83.3 $134.7 $9.8 $33.7 $261.5 ($8.4) $53.4 $306.5 Loss ratio 58.9% 55.4% 63.4% 44.3% 56.1% Acquisition cost ratio 1.6% 20.9% 15.2% 17.9% 16.0% General and administrative expense ratio 13.1% 10.5% 19.3% 21.2% 13.6% Combined ratio (1) 73.6% 86.8% 97.9% 83.4% 85.7% |