14 Insurers Report Q3 Results

A number of insurers have released financial results for Q3 2011. The following is a compilation of their announcements:


AIG

American International Group, Inc. today reported a net loss attributable to AIG of $4.1 billion and an after-tax operating loss of $3.0 billion for the quarter ended Sept. 30, 2011, compared with a net loss of $2.5 billion and an after-tax operating loss of $114 million for the third quarter of 2010.

The loss per share was $2.16 for the third quarter of 2011, compared with a diluted loss per share of $18.53 for the third quarter of 2010. The third quarter 2011 after-tax operating loss per share was $1.60, compared with an after-tax operating loss per share of $0.84 for the third quarter last year.

Declining equity markets contributed to a loss of $2.3 billion in the market valuation of AIG’s holding of AIA Group Limited (AIA) ordinary shares. Widening credit spreads, reduced interest rates, and changes in the timing of estimated future cash flows drove declines of $931 million in the recorded fair value of AIG’s holding of Maiden Lane III LLC (ML III), and $43 million for SunAmerica’s holding of Maiden Lane II LLC (ML II). In addition, various economic, technological and specific counterparty issues that were identified in the quarter contributed to a change in management’s judgment regarding certain aircraft in International Lease Finance Corporation’s (ILFC) fleet that resulted in a non-cash charge of approximately $1.5 billion.


Allied World

Allied World Assurance Company Holdings reported operating income of $86.2 million, or $2.19 per diluted share, for the third quarter of 2011 compared to operating income of $143.6 million, or $2.94 per diluted share, for the third quarter of 2010. Operating income for the nine months ended Sept. 30, 2011 was $89.0 million, or $2.24 per diluted share, compared to operating income of $300.5 million, or $5.79 per diluted share, for the first nine months of 2010.

The company reported a net loss of $11.0 million, or $0.29 per diluted share, for the third quarter of 2011 compared to net income of $254.5 million, or $5.21 per diluted share, for the third quarter of 2010. Net income for the nine months ended Sept. 30, 2011 was $91.4 million, or $2.30 per diluted share, compared to net income of $572.2 million, or $11.03 per diluted share, for the first nine months of 2010.


Assurant

Net operating income for the third quarter 2011 decreased 45 percent to $75.6 million, or $0.79 per diluted share, compared to third quarter 2010 net operating income of $137.7 million, or $1.27 per diluted share. Catastrophe losses of $52.3 million after-tax at Assurant Specialty Property drove the decline.

Net income for the third quarter 2011 decreased 46 percent to $76.0 million, or $0.79 per diluted share, compared to third quarter 2010 net income of $141.7 million, or $1.30 per diluted share. Results were affected by catastrophe losses at Assurant Specialty Property.

Net earned premiums, fees and other income in the quarter decreased slightly to $1.9 billion, reflecting a decline in premiums primarily at Assurant Health.

Net investment income in third quarter 2011 decreased 2 percent to $172.2 million, compared to $176.2 million in third quarter 2010, as investment yields declined.


Berkshire Hathaway

Berkshire Hathaway’s after-tax insurance underwriting earnings for the third quarter of 2011 included an after-tax gain of approximately $855 million from the reduction in estimated liabilities related to retroactive reinsurance contracts which was primarily attributable to lower than expected loss experience of one ceding company and from reductions in certain reinsurance liabilities that are settled in foreign currencies due to changes in foreign currency exchange rates. Berkshire’s after-tax insurance underwriting earnings for the first nine months of 2011 were net of after-tax losses of approximately $1.3 billion from several different catastrophe events occurring primarily in the first quarter.

At Sept. 30, 2011, our book value had increased by 1.5 percent since year-end to $96,876 per Class A equivalent share. Insurance float (the net liabilities we assume under insurance contracts) at Sept. 30, 2011 was $70 billion, an increase of $4 billion since the end of 2010.


Genworth Financial

Genworth Financial, Inc. reported results for the third quarter of 2011. The company reported net income of $29 million, or $0.06 per diluted share, compared with net income of $83 million, or $0.17 per diluted share, in the third quarter of 2010. Net operating income for the third quarter of 2011 was $104 million, or $0.21 per diluted share, compared with net operating income of $29 million, or $0.06 per diluted share, in the third quarter of 2010.

Investment losses, net of tax and other adjustments, were $60 million in the quarter compared to net investment gains of $54 million in the prior year.


The Hartford

The Hartford reported third quarter 2011 net income of $0 million, or $(0.02) per diluted share. Third quarter 2010 net income was $666 million, or $1.34 per diluted share.

Third quarter 2011 core earnings were $33 million, or $0.05 per diluted share. In the third quarter of 2010, core earnings were $705 million, or $1.42 per diluted share. Weighted average diluted shares outstanding were 473.4 million in the third quarter of 2011 compared with 495.3 million in the third quarter of 2010.

“In the third quarter, the industry faced a combination of capital markets volatility and significant catastrophe claims,” said The Hartford’s Chairman, President and CEO Liam E. McGee. “These conditions were a good test for the improvements we have made throughout the organization, particularly in enterprise risk management. Despite the challenges, the underlying performance of the businesses was good, the investment portfolio held up well, and our capital position remained strong.”

P&C commercial written premiums increased 7 percent from the third quarter of 2010, reflecting renewal written price increases, strong retention and increased exposures; P&C commercial combined ratio was 99.4 percent included 3.0 points for re-estimation of current accident losses for the first half of 2011; and group benefits loss ratio was 80.1 percent compared with 77.1 percent in the third quarter of 2010, reflecting less favorable life mortality and continued elevated disability claims incidence.


Liberty Mutual

Liberty Mutual Group reported a net loss of $111 million and net income of $81 million for the three and nine months ended Sept. 30, 2011, versus net income of $567 million and $1.1 billion in the same periods in 2010.

Revenues for the three months ended Sept. 30, 2011 were $8.767 billion, an increase of $380 million or 4.5 percent over the same period in 2010. Net written premium for the three months ended Sept. 30, 2011 was $8.155 billion, an increase of $435 million or 5.6 percent over the same period in 2010. Pre-tax operating loss before private equity income for the three months ended Sept. 30, 2011 was $341 million versus $513 million of pre-tax operating income before private equity income in the same period in 2010. Pre-tax operating loss for the three months ended Sept. 30, 2011 was $203 million versus $658 million of pre-tax operating income in the same period in 2010. Net loss for the three months ended Sept. 30, 2011 was $111 million versus $567 million of net income in the same period in 2010. Cash flows from operations for the three months ended Sept. 30, 2011 were $572 million, a decrease of $137 million or 19.3 percent from the same period in 2010.

The consolidated combined ratio before catastrophes, net incurred losses attributable to prior years and current accident year re-estimation for the three months ended Sept. 30, 2011 was 97.9 percent, no change from the same period in 2010. Including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, the Company’s combined ratio for the three months ended Sept. 30, 2011 increased 11.4 points to 110.5 percent. The consolidated combined ratio before catastrophes and net incurred losses attributable to prior years for the nine months ended Sept. 30, 2011 was 96.7 percent, a decrease of 0.9 points from the same period in 2010. Including the impact of catastrophes and net incurred losses attributable to prior years, the company’s combined ratio for the nine months ended Sept. 30, 2011 increased 6.6 points to 108.6 percent.


Montpelier Re

Montpelier Re Holdings Ltd. reported a fully converted book value per common share of $22.26 for the quarter ending Sept. 30 2011, a decrease of 4.3 percent from June 30, 2011, after taking into account common share dividends declared during the quarter.

The operating loss for the quarter was $0.40 per common share ($25 million) and the net loss was $1.07 per common share ($66 million), each expressed after preferred share dividends. The net loss includes $41 million of investment and foreign exchange losses, the majority of which were unrealized.

The 89 percent loss ratio for the third quarter includes $60 million of net catastrophe losses. These losses were partially offset by $18 million of favorable prior year loss development. The combined ratio was 121 percent for the quarter.

Net investment income was $17 million for the quarter and the total return on the investment portfolio was -0.8 percent.

As of Sept. 30, 2011, shareholders’ equity was $1.55 billion and total capital was $1.88 billion.


Munich Re

The difficult financial environment, currency translation effects and heavy burdens from natural catastrophes all influenced Munich Re’s nine-month result. The Group posted a profit of $109 million (same period last year: $2.57 billion) despite absorbing the claims burdens of $4.9 billion from major natural catastrophes at the start of the year. In the third quarter, Munich Re posted a profit of $393 million. Munich Re continues to anticipate a positive annual result for 2011 as a whole and aims to keep the dividend stable.

The Group increased its premium volume significantly; in the first nine months, gross premiums written were up 9.1 percent against the previous year. In reinsurance business, the exceptional claims costs for major losses masked a strong performance in basic business: whilst loss burdens from natural catastrophes were roughly $3.7 billion above the normalized expected value, the underwriting result declined by only some $2.5 billion. The combined ratio in reinsurance for the third quarter was 89.0 percent of net earned premiums, with reserve releases for prior-year losses contributing to this very good figure.


Principal

Principal Financial Group, Inc. reported operating earnings of $191.9 million for third quarter 2011, compared to $218.9 million for third quarter 2010. Operating earnings per diluted share were $0.61 for third quarter 2011, compared to $0.68 for third quarter 2010. The company reported net income available to common stockholders of $63.7 million, or $0.20 per diluted share for third quarter 2011, compared to $142.2 million, or $0.44 per diluted share for third quarter 2010. Operating revenues for third quarter 2011 were $2,026.3 million compared to $1,986.7 million for the same period last year.

Strong sales in two key retirement and investor services businesses in the third quarter, with $1.5 billion for full service accumulation and $2.6 billion for Principal funds, contributed to positive net cash flows of $350 million for full service accumulation and $180 million for Principal funds. Unaffiliated deposits of $5.6 billion in the quarter led to net cash flows of $1.2 billion for Principal Global Investors.

Principal International net cash flows of $700 million and $3.1 billion of operations acquired with our HSBC Mexican AFORE acquisition in the quarter contributed to a record $54.5 billion of assets under management.

The company continued momentum in U.S. Insurance Solutions with $41 million of Individual Life sales and $66 million of Specialty Benefits sales, and a strong capital position with an estimated risk-based capital ratio of 455 percent at quarter’s end and approximately $1.8 billion of excess capital.


Prudential

Prudential Financial, Inc. reported net income of its financial services businesses attributable to Prudential Financial, Inc. of $1.505 billion ($3.06 per common share) for the third quarter of 2011, compared to $1.167 billion ($2.46 per common share) for the year-ago quarter. After-tax adjusted operating income for the Financial Services Businesses was $520 million ($1.07 per common share) for the third quarter of 2011, compared to $1.004 billion ($2.12 per common share) for the year-ago quarter. Information regarding adjusted operating income, a non-GAAP measure, is provided below.

For the first nine months of 2011, net income for the financial services businesses attributed to Prudential Financial, Inc. amounted to $2.925 billion ($5.93 per common share) compared to $2.501 billion ($5.31 per common share) for the first nine months of 2010. After-tax adjusted operating income for the first nine months of 2011 for the financial services businesses amounted to $2.198 billion ($4.48 per common share) compared to $2.089 billion ($4.45 per common share) for the first nine months of 2010.


Sun Life

Sun Life Financial Inc. recorded an operating loss of $572 million for the third quarter of 2011, compared with operating net income of $403 million in the same period last year. The company’s operating loss per share was $0.99 in the third quarter of 2011, compared to operating net income of $0.71 in the third quarter of 2010. The reported loss was $621 million or $1.07 per share in the third quarter of 2011, compared to net income of $416 million or $0.73 per share in the same period last year.

Sun Life’s operating loss in the third quarter of 2011 was driven by net reserve increases of $684 million related to steep declines in both equity markets and interest rate levels, which were reflected primarily in the individual life and variable annuity businesses in SLF U.S. Updates to the company’s actuarial methods and assumptions, which generally occur in the third quarter of each year, further reduced net income by $203 million.


Tower Group

Tower Group, Inc. reported net loss attributable to common shareholders in the third quarter of 2011 of $16.4 million, or ($0.40) per diluted share. Net income attributable to common shareholders in the third quarter of 2010 was $28.6 million, or $0.66 per diluted share.

Operating loss was $15.3 million in the third quarter of 2011, or ($0.38) per diluted share compared to operating income of $27.9 million in the third quarter of 2010, or $0.65 per diluted share. The 2011 operating loss included catastrophe losses from Hurricane Irene of $60.1 million ($39.1 million after-tax, or $0.96 per diluted share).

Gross premiums written increased by 16.0 percent to $519.1 million. For the combined insurance segments, the net combined ratio rose to 109.9 percent from 96.8 percent—excluding the business that Tower manages on behalf of the Reciprocal Exchanges, the net combined ratio was 112.0 percent for the third quarter of 2011. The net loss ratio increased to 75.0 percent from 61.1 percent. The net loss ratio excluding the Reciprocal Exchanges increased to 77.6 percent from 59.1 percent. The catastrophe losses added 16.1 points to the third quarter 2011 net loss ratio, and 16.4 points to the third quarter 2011 net loss ratio excluding the Reciprocal Exchanges

The net expense ratio improved to 34.9 percent from 35.7 percent. Net investment income increased 7.2 percent to $31.4 million.


Travelers

Operating income in the third quarter of $332 million after tax decreased $526 million from the prior year quarter, primarily due to a $487 million after-tax decrease in underwriting results largely attributable to significantly higher catastrophe losses.

The underwriting results in the quarter reflected a GAAP combined ratio of 104.5 percent, as compared to 90.6 percent in the prior year quarter. This increase of 13.9 points in the combined ratio included a $489 million pre-tax increase in catastrophe losses (increase of 8.6 points) as well as a $38 million pre-tax decrease in net favorable prior year reserve development (increase of 0.8 points).

The quarter’s underlying underwriting results, which exclude net favorable prior year reserve development and catastrophe losses, reflected a GAAP combined ratio of 97.0 percent, as compared to 92.5 percent in the prior year quarter. This increase of 4.5 points was attributable to reduced underwriting margins related to previously anticipated earned pricing and loss cost trends, as well as the impact of higher non-catastrophe weather-related losses in both business and personal insurance.

Total revenues of $6.407 billion in the quarter decreased $75 million, or 1 percent, from the prior year largely due to a $224 million decrease in net realized investment gains, partially offset by a $183 million increase in earned premiums. Net realized investment gains in the prior year quarter included $205 million pre-tax from the sale of substantially all of the company’s remaining common stock holdings in Verisk Analytics, Inc. After-tax net investment income in the current quarter decreased 6 percent from the prior year quarter primarily due to lower reinvestment rates in the fixed income portfolio and lower average invested assets reflecting the impact of the company’s common share repurchases.

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