Investor Presentation Quarter Ended March 31, 2011 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; and (13) the integration of new business ventures Alterra may enter into; 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 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. |
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 position across multiple specialty classes of business Opportunistic and disciplined underwriting strategy Strong culture of risk management Analytical and quantitative underwriting orientation 5 year average combined ratio including cats of 87.7% Strong, liquid balance sheet with conservative reserving track record Shareholders’ equity ~ $2.7 billion at 3/31/11 Low operating and financial leverage enhances flexibility Proven track record of active capital management Q1 repurchases of $137.1 million 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 (3) ____________________ (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 directed toward the protection of investors in securities of Alterra. 2010 GPW (2) 3 |
4 First Quarter Results Q1 2011 net operating loss of $0.23 per share P&C gross premiums written grew 69.4% to $627.4 million, down 7% on a pro forma basis (1) Driven by the inclusion of Harbor Point, new business in Latin America and expansion at Lloyd’s Net investment income up 19.4% to $57.8 million Reflects additional cash and invested assets from inclusion of Harbor Point Q1 combined ratio of 112.5% Catastrophe losses from Q1 events of $115.5 million ($106.3 million net of reinstatements) or 28.3 points on the combined ratio Diluted book value per share of $25.34 at 3/31/11, down 2.5% from 12/31/2010 (1) Pro forma gross premiums written as if the amalagamation occurred January 1, 2010. Impacted by Catastrophe Events But Capital Remains Strong |
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 $1,902.6 $1,789.1 2009 2010 $1,331.2 $1,405.8 $3.62 $2.64 2009 2010 |
6 Getting Closer To An Inflection Point First quarter global industry cat losses estimated ~ $50 billion Industry is stressed by historic low returns on invested assets Profitable growth opportunities have been difficult to identify Cash flow levels have deteriorated for many market participants Reserve redundancies at many market participants have diminished Share repurchase activity slowed due to high cat losses International property cat markets have improved Pricing poised to further move with the next catalyst Alterra is strongly positioned to be a primary beneficiary of improving market conditions globally |
7 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 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 2011 Lloyd’s Property Direct &Facultative U.S. Specialty Excess Casualty Experienced & highly quantitative underwriting teams Lead underwriters average over 20 years in the business High percentage of employees hold professional designations |
8 How We Built Alterra The Expansion of our Employee Base Generated our Growth in Premiums Presented on a pro forma basis as if the merger with Harbor Point was completed on January 1, 2006 600 500 400 300 200 100 0 2,500 2,000 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (E) Gross Premiums Written (Traditional P&C only) Employees Locations Countries 2 2 2 2 2 2 2 2 8 4 2 2 10 15 17 22 12 9 8 4 |
9 Reinsurance Insurance Lloyd’s U.S. Specialty Insurance Major Classes – Agriculture – Auto – Aviation – Credit, surety and political risk – General casualty – Life and annuity – Marine and energy – Medical malpractice – Professional liability – Property – Whole account – Workers’ comp – Aviation – Excess liability – Professional liability – Property – Accident & health Insurance – Aviation – Financial institutions – International casualty treaty – Marine and cargo – Personal accident treaty – Professional liability – Property treaty – Property direct and facultative – Surety – General liability – Marine – 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 – New York – Sebastopol, CA – Zurich – Copenhagen – Leeds – London – Rio de Janeiro – Tokyo – Atlanta – Chicago – Dallas – New York – Philadelphia – Richmond – San Francisco Local Knowledge Global Reach |
10 ____________________ 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 Alterra Has a Strong Market Position in Specialty Classes … Credit/ Surety Whole Account 2010 GPW: $509.1 million $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 $1,200.0 $396.6 $382.9 $389.4 $427.8 $370.1 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 2006 2007 2008 2009 2010 $1,047.7 $998.3 $900.4 2006 2007 2008 2009 2010 $1,060.4 $892.4 |
11 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 |
12 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 Reinsurance (2) Insurance Mixed 2010 GPW = $1,410.7 million ____________________ (1) Pro forma as if the amalgamation 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 = $1,794.1 million Accident & Health Life & Annuity |
Positioned to Successfully Execute ____________________ (1) Shareholders' equity of Max Capital and Harbor Point on a combined pro forma basis. 13 |
14 Peer PML’s as a Percent of Common Equity C&S ($B): $3.5 $2.7 1.1 $3.1 $5.1 $1.9 $2.9 $4.2 $4.3 $3.1 $6.3 ____________________ Note: RNR, MRH and PRE do not disclose their PMLs for either 1-in-100 year events or 1-in-250 year events. (1) 1-in-100 PML and 1-in-250 for U.S. hurricane is $835 mm and $1,103 mm, respectively. Maximum zonal aggregate is $1.9 billion for U.S. hurricane and California earthquake. (2) Self-imposed limit of 25% of total capital. (3) 1-in-100 PML for U.S. hurricane is $1,085 mm based on an industry loss modeled at $121 billion. 1-in-250 for U.S. hurricane is $1,459 mm based on an industry loss modeled at $195 billion. (4) Tri-county Florida is the largest zonal exposure. Northeast wind was $733 mm. Self-imposed limit of 25% of common equity. (5) 1-in-100 PML for U.S. wind is $309 mm. 1-in-250 for U.S. quake is $287 mm, and 1-in-250 for U.S. wind of $390 mm. Historically, 1-in-100 was approximately 12% of total capital. |
15 Our strategy is to diversify our book of business so that property cat is a part of our business but not our whole business Our results demonstrate that we know our risk exposure Our reserving process has been tested by large, recent loss events including: 2011 Australian floods, New Zealand earthquake, Japanese earthquake and tsunami 2010 Chilean earthquake, New Zealand earthquake 2008 Hurricanes Ike/Gustav Superior Risk Management Skills Alterra’s losses as a % of equity are consistently below our peer group average and we have not made meaningful adjustments to loss estimates |
16 2011 – First Quarter Catastrophe Losses Alterra is at the Low End of the Range for Q1 2011 Cat Losses Reported to Date __________________ Source: Company reports and SNL Financial as reported to May 5, 2011 |
17 2010 – Chilean Earthquake / Windstorm Xynthia Alterra’s Losses Are Consistently Below Peer Group Averages ____________________ 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 combined 12/31/09 equity prior to the special dividend. |
18 2008 – Hurricanes Ike / Gustav On a Pro-forma Basis Alterra Losses Are Consistently Below Peer Group Averages ____________________ 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 preferred, which subsequently converted to common. (4) TRH does not disclose specific losses but did lose "$169.7 million principally relating to Hurricane Ike." |
19 Florida wind 1 in 100 year event - $330 million net loss California earthquake 1 in 250 year event - $320 million net loss Europe wind 1 in 100 year event - $185 million net loss Alterra’s PML’s In-force as of April 1, 2011 ____________________ Note: Based on RMS 10.0 |
20 ____________________ (1) Excludes non-traditional, which is composed of structured contracts that Alterra stopped writing in 2003. (2) Gross Premiums written for 2006-2010 include premiums written by both Max Capital and Harbor Point after eliminating the impact of intercompany transactions. Short tail lines contributed to 77% of total growth over the 3 years to 2010 Strong Cycle Management Discipline Long Tail (GPW) Short Tail (GPW) ($ in millions) Non-Traditional Year over year growth: Year over year growth: Lloyd's -- -- -- -- -- NM 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%) 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)% |
21 Reserves for Loss and Loss Expenses ____________________ Note: Includes the results of Harbor Point from May 12, 2010, the closing date of the merger. ($ in millions) |
22 Favorable Reserve Development $5.9 $45.1 $90.8 $77.2 $105.5 Development as a % of Net Reserves 0.3% 2.5% 4.1% 3.4% 3.4% Reserve Development Net Loss Reserves ($ 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. |
23 High Quality, Liquid Investment Portfolio As of March 31, 2011 Alterra maintains a high quality, liquid portfolio 95.4% 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 $1,001.1 million or 12.8% of portfolio Average fixed income duration of approximately 4.1 years, including cash 63.3% of the cash and fixed maturities portfolio is held in cash, government / agency-backed securities and “AAA” securities 69.5% of fixed income portfolio rated “AA” or better Hedge fund investments are marked-to-market Minimal exposure to selected asset classes CMBS of $355.9 million (4.8% of portfolio) – average rating of AA+/Aa1 ABS of $115.7 million (1.5% of portfolio) RMBS of $1,179.0 million (15.7% of portfolio) – 92.1% agency- backed No CDO’s, CLO’s, SIV’s or other highly structured securities Less than $7 million of OTTI losses over the last nine quarters Carrying Value $7.8 billion March 31, 2011 Cash 13% Other Investments 5% Fixed Income 82% |
24 ____________________ (1) Price / diluted book value multiple as of 5/5/11. 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 (1) |
25 Appendices |
26 March 31, December 31, 2011 2010 Cash & Fixed Maturities 7,490 $ 7,483 $ Other Investments 358 378 Premium Receivables 809 589 Losses Recoverable 1,053 956 Other Assets 540 511 Total Assets 10,250 $ 9,917 $ Property & Casualty Losses 4,185 $ 3,906 $ Life & Annuity Benefits 1,316 1,276 Deposit Liabilities 147 148 Funds Withheld 122 121 Unearned Premium 1,065 905 Senior Notes 440 440 Other Liabilities 252 203 Total Liabilites 7,527 $ 6,999 $ Shareholders' Equity 2,723 2,918 10,250 $ 9,917 $ Strong Balance Sheet ($ in millions) |
27 YTD Results Comparison ____________________ (1) Results for the quarter ended March 31, 2010 do not include results from Harbor Point prior to 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, 2010. 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, 2010, nor is it necessarily indicative of the future results. ($ in millions) Quarters ended (1) Pro forma quarter ended (2) March 31, March 31, March 31, 2011 2010 2010 Gross Premiums Written 628 $ 371 $ 677 $ Net Premiums Earned 380 194 338 Net Investment Income 58 48 65 Net Realized and Unrealized (Losses) Gains on Investments (19) 6 13 Other Than Temporary Impairment Charges (1) - - Other Income 1 - - Total Revenues 419 248 416 Total Losses, Expenses & Taxes 466 212 339 Net (Loss) Income (47) $ 36 $ 77 $ Net Operating (Loss) Income (25) $ 41 $ Property & Casualty Underwriting Loss Ratio 80.2% 64.6% Expense Ratio 32.3% 25.9% Combined Ratio 112.5% 90.5% |
28 Quarter ended March 31, 2011 ($ in millions) ____________________ Differences in table due to rounding. (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 $71.3 $375.0 $70.4 $110.7 $627.4 $0.4 - $ $627.8 Reinsurance premiums ceded (43.2) (37.3) (33.6) (23.2) (137.3) - - (137.4) Net premiums written $28.0 $337.7 $36.8 $87.6 $490.1 $0.4 - $ $490.5 Earned premiums 98.9 249.9 73.2 66.8 488.8 0.4 - 489.3 Earned premiums ceded (44.7) (20.2) (23.9) (20.6) (109.4) - - (109.4) Net premiums earned $54.2 $229.7 $49.3 $46.2 $379.5 $0.4 - $ $379.9 Net losses and loss expenses ($34.7) ($186.9) ($31.4) ($51.5) ($304.4) - $ - $ ($304.4) Claims and policy benefits - - - - - (14.7) - (14.7) Acquisition costs (0.2) (49.1) (8.1) (13.1) (70.4) (0.2) - (70.6) General and administrative expenses (9.8) (23.3) (9.4) (9.7) (52.2) (0.2) - (52.4) Other income 0.8 - - 0.2 1.0 - - 1.0 Underwriting income (loss) $10.4 ($29.6) $0.5 ($27.8) ($46.6) n/a $0.0 n/a Net investment income $12.3 $45.4 $57.8 Net realized and unrealized losses on investments 2.8 (21.6) (18.8) Net impairment losses recognized in earnings (1.0) (1.0) Corporate other income 0.3 0.3 Interest expense (8.5) (8.5) Net foreign exchange gains 0.9 0.9 Corporate general and administrative expenses (18.8) (18.8) Income (loss) before taxes $0.5 ($3.3) ($49.4) Loss ratio 63.9% 81.4% 63.6% 111.4% 80.2% Acquisition cost ratio 0.3% 21.4% 16.4% 28.2% 18.6% General and administrative expense ratio 18.1% 10.1% 19.1% 21.0% 13.8% Combined ratio (1) 82.4% 112.9% 99.0% 160.7% 112.5% |