![]() Investor Presentation Quarter Ended December 31, 2011 Exhibit 99.1 |
![]() 2 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 (14) 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. Cautionary Note Regarding Forward-Looking Statements |
![]() 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 and 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 Business mix shift towards shorter-tail lines 5 year average combined ratio (including cats) of 91.2% Liquid balance sheet with conservative reserving track record Shareholders’ equity ~ $2.8 billion at 12/31/11 Low operating and financial leverage S&P rating upgraded to “A” from “A-”; AM Best rating of “A” Proven track record of active capital management 2011 repurchases of $223.3 million and dividends of $54.5 million, or 9.5% of 1/1/11 shareholders’ equity Returned $559 million or ~18% of pro forma 1/1/10 opening shareholders' equity (1) in 2010 through dividends and share repurchases Raised quarterly dividend by 17% in August 2011 to $0.14 per share ____________________ (1) Shareholders' equity of Max Capital and Harbor Point on a combined pro forma basis. 2011 GPW |
![]() 4 Fourth Quarter 2011 Results Fourth quarter 2011 net operating diluted EPS of $0.30 per share Decrease from 2010 due to higher catastrophe losses and lower investment yields P&C gross premiums written grew 3.6% to $324.8 million Driven by new underwriting teams and new reinsurance business opportunities and new business in Latin America Net investment income of $57.1 million compared to $61.1 million in 2010 Combined ratio of 97.4% Catastrophe losses of $55.5 million, net of reinstatement premium Diluted book value per share of $26.91 at 12/31/11. P&C GPW (3.6% increase) 84.8% 97.4% Combined Ratio $25.98 $27.18 $25.99 $26.94 Expansion into new lines and regions |
![]() 5 Calendar 2011 Results Calendar 2011 net operating diluted EPS of $0.91 per share Decrease from 2010 due to higher catastrophe losses and lower investment yields P&C gross premiums written grew 35.2% to $1,900.7 million Driven by additional premium from the merger with Harbor Point on May 12, 2010; Also new underwriting teams, new reinsurance business opportunities and new business in Latin America Net investment income of $234.8 million compared to $222.5 million in 2010 Combined ratio of 98.2% Catastrophe losses of $253.4 million, net of reinstatement premium Diluted book value per share of $26.91 at 12/31/11 up from $25.99 at 12/31/10 P&C GPW (35.2% increase) Growth in Book Value 85.7% 98.2% Combined Ratio Diluted Book Value per Share (3.5% increase) Expansion into new lines and regions |
![]() 6 2011 global industry cat losses estimated over $105 billion Market stressed by historic low returns on invested assets Cash flow levels deteriorating Industry reserve redundancies diminishing Property cat underwriting markets improving Casualty lines showing flat to modest improvement Pricing poised to positively move further with the next catalyst Market on the Cusp of Change Alterra is positioned to be a beneficiary of improving market conditions |
![]() 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 2011 Lloyd’s Property Direct & Facultative U.S. Specialty Excess Casualty 7 |
![]() 8 Reinsurance Insurance Lloyd’s US Specialty Insurance Major Classes – Agriculture – Auto – Aviation – General Casualty – Marine and Energy – Medical Malpractice – Professional Liability – Property – Surety, Credit and Political Risk – Whole Account – Workers’ compensation – Aviation – Excess Liability – Professional Liability – Property – Accident & Health – Agriculture – Aviation – Casualty – Financial Institutions – Marine – Professional Lines – Property – Surety – Excess Casualty – General Liability – Marine – Professional Liability – Property Operating Regions – Worldwide – European Union – United States – Worldwide – United States Offices – Bermuda – Bogotá – Buenos Aires – Dublin – London – Rio de Janeiro – Summit, NJ – Bermuda – Chicago – Dublin – Hamburg – London – New York – Sebastopol, CA – Zurich – Copenhagen – London – Rio de Janeiro – Tokyo – Zurich – Atlanta – Chicago – Dallas – New York – Richmond – San Francisco Local Knowledge Global Reach |
![]() 9 ____________________ Note: Pro forma gross premium written (“GPW”) represents the combined GPW of Max Capital and Harbor Point net of intercompany eliminations of GPW. Insurance (21.6% of 2011 P&C GPW) Reinsurance (45.7% of 2011 P&C GPW) Professional Liability Property Excess Liability Aviation General Casualty Property Aviation Workers Comp. Professional Liability Other Med. Mal. Marine & Energy Agriculture 2011 GPW: $410.3 million = pro forma Auto Alterra Has a Strong Market Position in Specialty Classes … Credit/ Surety Whole Account 2011 GPW: $869.7 million 2010 GPW: $399.6 million 2010 Pro forma GPW: $892.4 million |
![]() 10 U.S. Specialty (17.4% of 2011 P&C GPW) Alterra at Lloyd’s (15.3% of 2011 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 2010 GPW: $294.5 million 2010 GPW: $202.6 million 2011 GPW: $330.2 million 2011 GPW: $290.5 million Int’l Casualty Surety |
![]() 11 North America Europe Other Reinsurance Insurance (2) 2010 GPW = $1,410.7 million ____________________ (1) Pro forma as if Harbor Point merger occurred on January 1, 2010. (2) Includes Reinsurance segment, Life & Annuity reinsurance and reinsurance written through Lloyd’s platform. Diversified and Balanced Business Mix Global Platform 2011 Line of Business 2011 2010 pro forma GPW = $1,794.1 million (1) 2011 GPW = $1,904.1 million |
![]() 12 ____________________ Source: Company filings, SNL Financial. As of September 30, 2011. Diversified reinsurers include RE, AXS, ACGL, TRH, PRE, AWH, ENH, AHL, PTP, AGII, ALTE and ORH for historical years. Property focused reinsurers include RNR, VR, MRH, FSR and IPCR for historical years. Diversified Reinsurers Property Focused Reinsurers Diversified Platforms Generate More Consistent Margins Alterra has performed well within its diversified peer group with less volatility than property focused reinsurers Median 116% 84% 82% 95% 84% 91% 115% 95% Alterra 106% 86% 88% 92% 88% 86% 98% 92% Median 201% 55% 61% 89% 66% 84% 138% 99% |
![]() 13 3 Year Return on Equity Alterra’s ROEs Have Been Less Volatile Than Most Peers ____________________ Source: JMP Research, SNL Financial. 2011 ROE is estimated. Alterra ROE reflects Pro-Forma data for Max and Harbor Point prior to the merger in May 2010. ACGL AHL AXS AWH MRH PRE PTP RNR VR ALTE ENH 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% Std. Dev. |
![]() 14 Our strategy is to diversify our book of business so that property cat is one of many components of our business Results demonstrate that we adequately manage 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, US spring storms, Hurricane Irene 2010 Chilean earthquake, New Zealand earthquake 2008 Hurricanes Ike/Gustav Superior Risk Management Alterra’s losses from catastrophe events as a % of equity are below our peer group average |
![]() 15 Peer PML’s as a Percent of Common Equity ____________________ Source: Dowling & Partners Research Note: RNR, MRH and PRE do not disclose their PMLs for either 1-in-100 year events or 1-in-250 year events. All data is based on RMS 11. RE and TRH utilize AIR. (1) 1-in-100 Self-imposed limit of 25% of total capital. (2) 1-in-100 PML and 1-in-250 for U.S. hurricane is $736 mm and $965 mm, respectively. (3) Single Zone 1-in-250 Tolerance is 25% of common S/E. (4) 1-in-250 Tolerance is 25% of common S/E. (5) 1-in-250 Tolerance is 20% of total capital. |
![]() 16 2011 – “The Year of The Cat” Alterra’s Losses are Below The Peer Group __________________ Source: Company reports and SNL Financial *Includes estimated Q4 2011 catastrophe losses **As of September 30, 2011 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Losses Percentage of December 31, 2010 Capital and Surplus FSR* PRE PTP MRH RE TRH AHL ENH RNR AGII** AWH* ALTE ACGL* |
![]() 17 2010 – Chilean Earthquake / Windstorm Xynthia/ September New Zealand Earthquake Alterra’s 2010 Losses Are Below Peer Group ____________________ (2) Q2 net losses reflect only losses from the Chilean earthquake. Initial losses include the Chilean earthquake and Windstorm Xynthia. (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. 0 50 100 150 200 250 300 350 400 450 0% 2% 4% 6% 8% 10% FSR PTP (1) VR (2) RNR (3) MRH RE PRE AHL AXS (2) TRH (2) AWH (2)(4) ENH AGII (1)(5) ACGL(1) ALTE (6) Ultimate Net Losses Reported Percentage of December 31, 2009 Capital and Surplus Source: Company filings and press releases; losses are generally disclosed net of tax and net of reinstatement premiums. (1) Q2 net losses reflect Q1 estimates plus reported development, if any. |
![]() 2008 – Hurricanes Ike / Gustav ____________________ Source: Company filings, as of 12/31/08. Losses are generally disclosed net of reinstatement premiums. (1) Equity includes preferred, which subsequently converted to common. (2) Results reflect Ike only. (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." 18 0% 2% 4% 6% 8% 10% 12% 14% 0 50 100 150 200 250 300 350 400 450 VR FSR RNR MRH IPCR(1)PTP(1)ACGL AXS PRE(2) HP(3) AHL ENH ORH TRH(4) AWH RE MXGL Ultimate Net Losses Reported Percentage of June 30, 2008 Capital and Surplus |
![]() 19 PML goal of no more than 25% of starting capital in 1 in 250 year event Adjust position as market pricing makes risk/reward attractive Use RMS with “all switches on” and gross-up factors on standard model Incorporate AIR, market share, industry and client historical loss data Capture detailed location data and put a premium on data quality Historically our losses for events have been close to expected ranges PML and aggregate usage is incorporated into our pricing models Key In-force PMLs as of January 1, 2012 US wind 1 in 100 year event - $496 million net loss California earthquake 1 in 250 year event - $364 million net loss Europe wind 1 in 100 year event - $137 million net loss Cat Aggregate & PML Management |
![]() 20 Reserves for Loss and Loss Expenses ($ in millions) Insurance Reinsurance U.S. Specialty Alterra at Lloyd's $1,336 68% 32% 2011 2010 2011 2010 2011 2010 2011 2010 $1,335 74% 26% $2,105 $2,041 63% 37% 68% 32% $308 59% 41% 28% $232 72% 65% 35% 62% 38% $468 $297 $2,500 $2,000 $1,500 $1,000 $500 $0 Note: As of 12/31/2011 and 12/31/2010; includes the results of Harbor Point from May 12, 2010, the closing date of the merger. Case IBNR |
![]() 21 Favorable Reserve Development $5.9 $45.1 $90.8 $77.2 $105.5 $153.3 Development as a % of Net Reserves prior to development 0.3% 2.5% 4.1% 3.4% 3.4% 4.6% Reserve Development History ($ 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. - 500 1,000 1,500 2,000 2,500 3,000 3,500 2006 2007 2008 2009 2010 2011 Net Loss Reserves |
![]() 22 High Quality, Liquid Investment Portfolio As of December 31, 2011 Alterra maintains a high quality, liquid portfolio 96.3% of portfolio in fixed income/cash, which consists of highly rated securities Assets are generally matched to liabilities Cycle management extends to investments – 2011 posture was defensive Cash balance $922.8 million or 11.8% of portfolio Average fixed income duration of approximately 4.1 years, including cash 58.3% of the cash and fixed maturities portfolio is held in cash, government / agency-backed securities and “AAA” securities 67.1% of fixed income portfolio rated “AA” or better Hedge fund investments are marked-to-market Minimal exposure to selected asset classes CMBS of $361.1 million (4.6% of portfolio) – average rating of AA+/Aa1 ABS of $249.0 million (3.2% of portfolio) RMBS of $1,296.3 million (16.6% of portfolio) – 86.2% agency- backed No CDO’s, CLO’s, SIV’s or other highly structured securities Less than $9.0 million of OTTI losses over the last ten quarters Carrying Value $7.8 billion December 31, 2011 Cash 12% Other Investments 4% Fixed Income 84% |
![]() 23 European Government Holdings Total European government holdings represent $727.1 million, or 9.3% of the investment portfolio No exposure to Greece, Portugal, Italy or Spain European financial institutions Total European financial institution holdings represent $471.0 million, or 6.0% of the $7.8 billion investment portfolio Two largest holdings, which total $115.7 million, are with government-backed financial institutions. European Exposure As of December 31, 2011 France 36% Germany 34% Netherlands 20% Ireland 3% Belgium 3% United Kingdom 2% Denmark 1% Other 1% KFW 10% Credit Suisse 8% Lloyds 7% UBS 6% BNP Paribas 6% HSBC 5% Barclays 5% Other 39% European Investment Bank 14% |
![]() 24 ____________________ Note: Primary price / diluted book value multiple as of 2/9/12. Well Positioned to Build Shareholder Value Franchise positions in attractive specialty markets 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 0.90x |
![]() 25 Appendices |
![]() 26 December 31, December 31, 2011 2010 Cash & Fixed Maturities 7,528 $ 7,483 $ Other Investments 287 378 Premium Receivables 715 589 Losses Recoverable 1,068 956 Other Assets 588 511 Total Assets 10,186 $ 9,917 $ Property & Casualty Losses 4,217 $ 3,906 $ Life & Annuity Benefits 1,191 1,276 Deposit Liabilities 151 148 Funds Withheld 112 121 Unearned Premium 1,021 905 Senior Notes 441 440 Other Liabilities 244 203 Total Liabilites 7,377 $ 6,999 $ Shareholders' Equity 2,809 2,918 10,186 $ 9,917 $ 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. (1) |
![]() 27 YTD Results Comparison ($ in millions) Year ended (1) Year ended (2) Dec. 31, Dec. 31, Dec. 31, 2011 2010 2010 Gross Premiums Written 1,904 $ 1,411 $ 1,794 $ Net Premiums Earned 1,425 1,172 1,391 Net Investment Income 235 222 247 Net Realized and Unrealized (Losses) Gains on Investments (38) 17 25 Other Than Temporary Impairment Charges (3) (3) (3) Other Income 5 6 5 Total Revenues 1,624 1,414 1,665 Total Losses, Expenses & Taxes 1,559 1,112 1,373 Net Income 65 $ 302 $ 292 $ Net Operating Income 97 $ 252 $ Property & Casualty Underwriting Loss Ratio 66.5% 56.1% Expense Ratio 31.7% 29.6% Combined Ratio 98.2% 85.7% (1) Results for the year ended December 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. |
![]() 28 Year ended December 31, 2011 ($ in millions) Totals in table may not add 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 $410.3 $869.7 $330.2 $290.5 $1,900.7 $3.4 - $ 1,904.10 $ Reinsurance premiums ceded (200.2) (83.1) (123.9) (64.5) (471.7) (0.4) - (472.1) Net premiums written $210.1 $786.6 $206.3 $226.0 $1,429.0 $3.0 - $ 1,432.00 $ Earned premiums $398.5 $894.0 $302.6 $247.3 $1,842.5 $3.4 - $ 1,845.90 $ Earned premiums ceded (187.7) (70.0) (101.3) (61.4) (420.5) (0.4) - (420.9) Net premiums earned 210.8 824.0 201.3 185.9 1,422.0 3.0 - 1,425.0 Net losses and loss expenses (105.8) (528.0) (139.6) (172.3) (945.6) - - (945.6) Claims and policy benefits - - - - - (59.4) - (59.4) Acquisition costs (0.4) (182.3) (35.5) (42.4) (260.5) (0.6) - (261.1) General and administrative expenses (37.7) (79.3) (35.8) (37.0) (189.9) (0.6) - (190.5) Other income 1.0 1.2 - 1.2 3.4 0.4 - 3.8 Underwriting income (loss) 67.9 35.7 (9.6) (64.6) 29.4 n/a - n/a Net investment income 48.5 186.3 234.8 Net realized and unrealized gains (losses) on investments (10.4) (27.9) (38.3) Net impairment losses recognized in earnings (2.9) (2.9) Corporate other income 1.6 1.6 Interest expense (43.7) (43.7) Net foreign exchange gains (1.3) (1.3) Corporate general and administrative expenses (66.6) (66.6) Income (loss) before taxes ($19.1) $45.5 $55.8 Loss ratio 50.2% 64.1% 69.3% 92.7% 66.5% Acquisition cost ratio 0.2% 22.1% 17.6% 22.8% 18.3% General and administrative expense ratio 17.9% 9.6% 17.8% 19.9% 13.4% Combined ratio (1) 68.2% 95.8% 104.8% 135.4% 98.2% |