Exhibit 99.1
Contact: Investors:
PXRE Group Ltd. KCSA Worldwide
John Modin Michael Cimini
Chief Financial Officer 212-896-1233
441-296-5858 mcimini@kcsa.com
john.modin@pxre.com ----------------
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PXRE Group Ltd. NEWS RELEASE
PXRE House [PXRE LOGO]
110 Pitts Bay Road, Pembroke HM 08
Bermuda
441 296 5858
441 296 6162 FAX
PXRE REPORTS SECOND QUARTER
NET INCOME INCREASED 51%
------------------------
COMPANY DECLARES REGULAR QUARTERLY DIVIDEND
HAMILTON, Bermuda -- (PR Newswire) - August 4, 2004 -- PXRE Group Ltd.
(NYSE: PXT) today announced results for the second quarter ended June 30, 2004.
Highlights for the quarter included:
o Net income increased 51% to $32.3 million from $21.5 million
o Net operating income per diluted common share was $1.21 compared to
$0.92
o Underwriting income was up 61%
o On a fully diluted basis, book value per share was $23.21 at June
30, 2004
o Annualized return on equity was 22.4%
Jeffrey L. Radke, the President & Chief Executive Officer of PXRE
Group, commented, "We are pleased with this quarter's results. Our Cat & Risk
business continues to perform exceptionally well in this attractive rate
environment. The market continues to behave as we anticipated with only moderate
rate reductions in peak zones. We have continued to increase our U.S.
catastrophe and worldwide retrocessional books of business, as the returns
offered at these rate levels remain attractive. Larger rate reductions occurred
in some non-peak zones such as Latin America and Australia. We have taken
appropriate steps, trimming exposure in those areas which no longer generate
adequate returns on capital. Overall, we expect moderate growth for the full
year in our Cat and Risk net premiums earned."
Radke continued, "During the quarter, we completed the re-focus of PXRE
by exiting the Finite risk line of business. As a result, the Finite risk
business is now included in our Exited Lines segment.
1
Our decision to maintain a short duration fixed income portfolio
reduced the impact of interest rate hikes in the quarter. Our hedge fund
portfolio again showed its resiliency, as it was modestly profitable in a
quarter in which many hedge fund indices were negative.
PXRE is well positioned for the remainder of 2004 and 2005. We believe
that PXRE's disciplined underwriting skills, advanced technology, unequalled
experience in trading through market cycles and long standing franchise will
continue to produce attractive returns on equity, assuming normalized loss
activity."
As a result of a planned premium reduction in the Company's Exited
Lines segment, revenue declined 20% for the second quarter of 2004 to $74.7
million from $93.8 million for the same period a year ago. Net premiums earned
for the quarter decreased 17% to $69.6 million from $84.0 million for the
year-earlier period. Net premiums earned in the Company's core Catastrophe and
Risk Excess segment for the quarter were $66.2 million compared to $68.6 million
for the year-earlier period.
REVENUES AND NET PREMIUMS EARNED
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THREE MONTHS ENDED SIX MONTHS ENDED
($000's) JUNE 30, JUNE 30,
------------------------------ ---------- -----------------------------
2004 2003 CHANGE % 2004 2003 CHANGE %
-------------- --------------- ---------- --------------- ------------- ----------
Revenues $ 74,704 $ 93,790 (20) $ 151,213 $ 185,313 (18)
============== =============== =============== =============
Net Premiums Earned:
Cat & Risk Excess $ 66,187 $ 68,621 (4) $ 132,382 $ 130,320 2
Exited 3,378 15,394 (78) 6,135 38,468 (84)
-------------- --------------- --------------- -------------
$ 69,565 $ 84,015 (17) $ 138,517 $ 168,788 (18)
============== =============== =============== =============
Net premiums written decreased 12% to $51.2 million for the second
quarter of 2004 from $58.0 million for the same period of 2003. The decrease
reflects a planned reduction in the Exited Lines segment. Net premiums written
in the Company's core Catastrophe and Risk Excess segment were $48.5 million
compared to $53.1 million for the year-earlier period.
NET PREMIUMS WRITTEN
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THREE MONTHS ENDED SIX MONTHS ENDED
($000's) JUNE 30, JUNE 30,
------------------------------ ---------- ------------------------------ ---------
2004 2003 CHANGE % 2004 2003 CHANGE %
-------------- --------------- ---------- --------------- -------------- ---------
Net Premiums Written:
Cat & Risk Excess $ 48,481 $ 53,097 (9) $ 137,323 $ 142,408 (4)
Exited 2,743 4,948 (45) 3,613 8,981 (60)
-------------- --------------- --------------- --------------
$ 51,224 $ 58,045 (12) $ 140,936 $ 151,389 (7)
============== =============== =============== ==============
Net investment income for the second quarter of 2004 decreased 43% to
$4.9 million from $8.6 million for the corresponding period of 2003 primarily as
a result of a $4.4 million decrease in income from hedge funds, offset by $1.0
million of additional income from the fixed maturity and short-term investment
portfolios. The return of PXRE's hedge fund portfolio was 0.7% for the second
quarter of 2004 compared to 4.7% for the second quarter of 2003. Net realized
investment gains were insignificant for the second quarters of both 2004 and
2003. Interest expense for the second quarter of 2004 was $3.5 million compared
to $2.7 million for the comparable quarter of 2003. The increase reflects an
additional $30.9 million of trust preferred securities issued since June 30,
2003, and the effect of a full quarter's interest expense on the $33.5 million
of trust preferred securities issued during the quarter ended June 30, 2003.
2
PXRE's GAAP loss ratio for the second quarter of 2004 was 26.0%
compared with 53.1% for the second quarter of 2003. The loss ratio in the
Company's core Catastrophe and Risk Excess segment was 21.3%, reflecting the low
level of catastrophic events in the quarter. The expense ratio was 28.5% for the
second quarter of 2004 compared to 28.6% in the year-earlier quarter.
GAAP RATIOS
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------- ----------------------------------
2004 2003 2004 2003
------------------ ------------------ ---------------- -----------------
Loss Ratio, All Lines 26.0% 53.1% 26.2% 45.8%
Expense Ratio 28.5 28.6 29.6 30.8
------------------ ------------------ ---------------- -----------------
Combined Ratio 54.5% 81.7% 55.8% 76.6%
================== ================== ================ =================
Loss Ratio, Cat & Risk Excess 21.3% 42.1% 23.5% 29.2%
Net income reflects a tax rate of 2.0% for the second quarter of 2004
compared to 1.7% for the second quarter of 2003.
During the second quarter of 2004, PXRE recorded after-tax unrealized
depreciation in investments of $14.9 million in other comprehensive income which
resulted in a $0.54 decrease in book value. The cause of this decrease in value
was primarily an increase in interest rates during the quarter.
Net operating income was $32.8 million or $1.21 per diluted common
share during the second quarter of 2004 compared to $21.2 million or $0.92 per
diluted common share for the corresponding period of 2003. Net operating income
is a non-GAAP financial measure. A reconciliation of net operating income to net
income is set forth in the attached schedule of Unaudited Financial Highlights.
This reconciliation discloses adjustments, net of tax, excluded from net income
because management does not consider these items to be an integral part of the
Company's performance or indicative of trends in its business operations in a
particular period. The excluded items may be material in a period. Management
believes that providing non-GAAP financial measures such as net operating income
provides useful information regarding PXRE's results of operations consistent
with industry practices, which enables investors, security analysts and rating
agencies to make performance comparisons with PXRE's competitors.
On a fully diluted basis, book value per share increased to $23.21 per
share at June 30, 2004 from $23.02 per share at March 31, 2004. The June 30,
2004 book value amount reflects the after-tax unrealized depreciation in
investments of $0.54 mentioned above.
Separately, the Company announced that its Board of Directors has
declared a regular quarterly cash dividend of $0.06 per common share. The
dividend will be paid on August 30, 2004, to shareholders of record as of August
16, 2004.
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PXRE - with operations in Bermuda, Barbados, the United States and
Europe - provides reinsurance products and services to a worldwide marketplace.
The Company's primary focus is providing property catastrophe reinsurance and
retrocessional coverage. The Company also provides marine, aviation and
aerospace products and services. The Company's shares trade on the New York
Stock Exchange under the symbol "PXT."
PXRE Group Ltd. is scheduled to hold a conference call with respect to
its second quarter financial results on Thursday, August 5, 2004 at 10:00 a.m.
Eastern Time.
A live webcast of the conference call will be available online at
www.pxre.com. The dial-in numbers are (800) 314-7867 for domestic callers and
(719) 867-0640 for international callers. The reservation number for both is
186855.
Quarterly financial statements are expected to be available on the
Company's website under the press release section of News and Events after
market close on August 4, 2004. To request other printed investor material from
PXRE or additional copies of this news release, please call (441) 296-5858, send
e-mail to Investor.Relations@pxre.com, or visit www.pxre.com.
Statements in this release that are not strictly historical are
forward-looking and are based upon current expectations and assumptions of
management. Statements included herein, as well as statements made by or on
behalf of PXRE in its communications and discussions with investors and analysts
in the normal course of business through meetings, phone calls and conference
calls, which are not historical in nature are intended to be, and are hereby
identified as, "forward-looking statements" for purposes of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934 as amended. These
forward-looking statements, identified by words such as "intend," "believe,"
"anticipate," or "expects" or variations of such words or similar expressions
are based on current expectations, speak only as of the date hereof, and are
subject to risk and uncertainties. In light of the risks and uncertainties
inherent in all future projections, these forward-looking statements in this
report should not be considered as a representation by us or any other person
that the Company's objectives or plans will be achieved. The Company cautions
investors and analysts that actual results or events could differ materially
from those set forth or implied by the forward-looking statements and related
assumptions, depending on the outcome of certain important factors including,
but not limited to, the following: (i) because of exposure to catastrophes,
PXRE's financial results may vary significantly from period to period; (ii) The
Company may be overexposed to losses in certain geographic areas for certain
types of catastrophe events; (iii) PXRE operates in a highly competitive
environment; (iv) reinsurance prices may decline, which could affect the
Company's profitability; (v) underwriting reinsurance includes the application
of judgment, the assessment of probabilities and outcomes, and assumption of
correlations, which are subject to inherent uncertainties; (vi) reserving for
losses includes significant estimates which are also subject to inherent
uncertainties; (vii) a decline in the credit rating assigned to the Company's
claim-paying ability may impact its potential to write new or renewal business;
(viii) a decline in the Company's ratings may require us to transfer premiums
retained by us into a beneficiary trust or may allow clients to terminate their
contract with us; (ix) The Company's investment portfolio is subject to market
and credit risks which could result in a material adverse impact on its
financial position or results; (x) because PXRE depends on a few reinsurance
brokers for a large portion of revenue, loss of business provided by them could
adversely affect us; and the Company's reliance on reinsurance brokers exposes
us to their credit risk; (xi) The Company may be adversely affected by foreign
currency fluctuations; (xii) retrocessional reinsurance subjects us to credit
risk and may become unavailable on acceptable terms; (xiii) the impairment of
the Company's ability to provide collateral to cedents could affect its ability
to offer reinsurance in certain markets; (xiv) the reinsurance business is
historically cyclical, and the Company may experience periods with excess
underwriting capacity and unfavorable premium rates; conversely, PXRE may have a
shortage of underwriting capacity when premium rates are strong; (xv) regulatory
constraints may restrict the Company's ability to operate its business; (xvi)
contention by the United States Internal Revenue Service that the Company or its
offshore subsidiaries are subject to U.S. taxation could result in a material
adverse impact on the Company's financial position or results; and (xvii)
changes in tax laws, tax treaties, tax rules and interpretations could result in
a material adverse impact on the Company's financial position or results. In
addition to the factors outlined above that are directly related to PXRE's
business, PXRE is also subject to general business risks, including, but not
limited to, adverse state, federal or foreign legislation and regulation,
adverse publicity or news coverage, changes in general economic factors, the
loss of key employees and other factors set forth in PXRE's SEC filings. The
factors listed above should not be construed as exhaustive. Therefore, actual
results or outcomes may differ materially from what is expressed or forecasted
in such forward-looking statements.
PXRE undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events (including catastrophe
events), or otherwise.
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PXRE GROUP LTD.
UNAUDITED FINANCIAL HIGHLIGHTS
(Dollars in thousands except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ----------------------------
2004 2003 2004 2003
---- ---- ---- ----
Gross premiums written $ 52,914 $ 66,378 $ 160,317 $ 178,848
============ ============ ============ ============
Net premiums written $ 51,224 $ 58,045 $ 140,936 $ 151,389
============ ============ ============ ============
Revenues $ 74,704 $ 93,790 $ 151,213 $ 185,313
Losses and expenses (41,708) (71,941) (85,580) (138,348)
------------ ------------ ------------ ------------
Income before income taxes and cumulative effect of accounting
change 32,996 21,849 65,633 46,965
Income tax provision (660) (371) (1,313) (1,880)
------------ ------------ ------------ ------------
Income before cumulative effect of accounting change and
convertible preferred share dividends 32,336 21,478 64,320 45,085
Cumulative effect of accounting change, net of $0.2 million
tax expense - - (1,053) -
------------ ------------ ------------ ------------
Net income before convertible preferred share dividends $ 32,336 $ 21,478 $ 63,267 $ 45,085
============ ============ ============ ============
Net income per diluted common share $ 1.20 $ 0.93 $ 2.37 $ 1.96
============ ============ ============ ============
Average shares outstanding (000's) 27,021 23,183 26,664 22,959
Net income before convertible preferred share dividends $ 32,336 $ 21,478 $ 63,267 $ 45,085
Adjustments, net of tax:
Realized investment losses (gains) 304 (72) 283 (84)
Cumulative effect of accounting change - - 1,053 -
Severance, net of pension gain - - 1,020 -
Foreign exchange losses (gains) 133 (164) 338 113
------------ ------------ ------------ ------------
Net operating income (1) $ 32,773 $ 21,242 $ 65,961 $ 45,114
============ ============ ============ ============
Net income per diluted common share $ 1.20 $ 0.93 $ 2.37 $ 1.96
Adjustments, net of tax:
Realized investment gains 0.01 - 0.01 -
Cumulative effect of accounting change - - 0.04 -
Severance, net of pension gain - - 0.04 -
Foreign exchange losses (gains) - (0.01) 0.01 -
------------ ------------ ------------ ------------
Net operating income per diluted common share (1) $ 1.21 $ 0.92 $ 2.47 $ 1.96
============ ============ ============ ============
GAAP RATIOS:
Loss ratio 26.0% 53.1% 26.2% 45.8%
Expense ratio 28.5% 28.6% 29.6% 30.8%
------------ ------------ ------------ ------------
Combined ratio 54.5% 81.7% 55.8% 76.6%
============ ============ ============ ============
LOSSES INCURRED BY SEGMENT:
Cat & Risk Excess 14,095 28,919 31,123 38,003
Exited 3,982 15,735 5,093 39,251
------------ ------------ ----------- ------------
$ 18,077 $ 44,654 $ 36,216 $ 77,254
============ ============ =========== ============
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
---- ---- ---- ----
COMMISSION AND BROKERAGE, NET OF FEE INCOME BY SEGMENT:
Cat & Risk Excess 8,864 7,149 15,995 17,262
Exited 1,088 6,361 2,530 14,978
------------ ------------ ----------- -----------
$ 9,952 $ 13,510 $ 18,525 $ 32,240
============ ============ =========== ===========
UNDERWRITING INCOME (LOSS) BY SEGMENT: (2)
Cat & Risk Excess 43,228 32,553 85,264 75,055
Exited (1,692) (6,702) (1,488) (15,761)
------------ ------------ ----------- -----------
$ 41,536 $ 25,851 $ 83,776 $ 59,294
============ ============ =========== ===========
JUNE 30, DEC. 31,
FINANCIAL POSITION: 2004 2003
-------------- --------------
Cash and investments $ 1,056,944 $ 1,012,327
Total assets 1,396,241 1,359,647
Reserve for losses and loss expenses 428,469 450,635
Shareholders' equity 635,204 564,516
Book value per common share (3) 23.21 22.24
Return on equity 22.4%(4) 19.2%
Statutory surplus:
PXRE Reinsurance Ltd. 499,124(5) 425,839
PXRE Reinsurance Company 427,481(6) 425,210
Ratings (A.M. Best/ S&P):
PXRE Reinsurance Ltd. A/A A/A
PXRE Reinsurance Company A/A A/A
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ----------------------------
2004 2003 2004 2003
---- ---- ---- ----
UNDERWRITING INCOME RECONCILED TO INCOME BEFORE INCOME
TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE:
Net underwriting income (2) $ 41,536 $ 25,851 $ 83,776 $ 59,294
Net investment income 4,915 8,557 11,784 14,032
Net realized investment (losses) gains (38) 110 51 109
Other operating expenses (9,868) (10,488) (22,488) (19,664)
Foreign exchange (losses) gains (94) 492 (360) 252
Interest expense (3,455) (2,673) (7,130) (7,037)
Other - - - (21)
------------ ------------ ------------ ------------
Income before income taxes and cumulative effect of
accounting change $ 32,996 $ 21,849 $ 65,633 $ 46,965
============ ============ ============ ============
(1) Net operating income (a non-GAAP financial measure) is net income excluding
after-tax realized investment gains and losses, cumulative effect of
accounting change, severance expenses, net of a pension gain and foreign
exchange losses. These items are excluded because management does not
consider these items to be an integral part of the Company's performance or
indicative of trends in the business operations in a particular period. The
excluded items may be material in a period. Management believes that
providing non-GAAP financial measures such as net operating income provides
useful information regarding PXRE's results of operations consistent with
industry practices, which enables investors, security analysts and rating
agencies to make performance comparisons with PXRE's competitors.
(2) Underwriting Income (Loss) by Segment (a GAAP financial measure): The
Company's reported underwriting results are its best measure of
profitability for its individual underwriting segments and accordingly are
disclosed in the footnotes to the Company's financial statements required
by SFAS 131, Disclosures about Segments of an Enterprise and Related
Information. Underwriting Income (Loss) by Segment is calculated by
subtracting losses incurred and commission and brokerage, net of fee income
from net earned premiums. PXRE does not allocate net investment income, net
realized investment gains, interest expense, other operating expenses or
foreign exchange gains or losses to its respective underwriting segments.
(3) After considering convertible preferred shares.
(4) Annualized.
(5) Estimated and before inter-company eliminations.
(6) Estimated.
These preliminary financial statements are unaudited and do not include
footnotes that customarily accompany a complete set of financial statements;
these footnotes will be furnished when the Company makes its filing on Form 10-Q
for the quarter ended June 30, 2004.
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