Platinum Underwriters CEO Discusses Q3 2010 Results - Earnings Call Transcript

Platinum Underwriters CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Platinum Underwriters Holdings Ltd. (

PTP

)

Q3 2010 Earnings Call

October 21, 2010 8:00 am ET

Executives

Michael Price - CEO

Allan Decleir - EVP and CFO

Neal Schmidt - Chief Actuary

Analysts

Matthew Heimermann - JPMorgan

Dean Evans - KBW

Jay Cohen - Bank of America-Merrill Lynch

DeForest Hinman - Walthausen & Company

Ron Bobman - Capital Returns

Presentation

Operator

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Good morning and welcome to Platinum Underwriters third quarter 2010 earnings conference call and webcast. The company's earnings press release and financial supplement can be found on the Investor Relations section on the company's website at www.platinumre.com.

This call is being recorded. A replay of the call and webcast will be available from 11:00 a.m. Eastern Time today until midnight Eastern Time on Thursday, October 28, 2010. The replay can be accessed by dialing 888-203-1112 for U.S. callers and for international callers by dialing 719-457-0820. Please specify pass code 2242819.

Before we begin, please note that management believes certain statements on this teleconference may constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about expectations, estimates and assumptions concerning future events and financial performance of the company and are subject to significant uncertainties and risks that could cause current plans, anticipated actions and the company's future financial condition and results to differ materially from expectations. These uncertainties and risks include those disclosed in the company's filings with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made and the company assumes no obligation to update or revise them in the light of new information, future events or otherwise.

In addition, management will refer to certain non-GAAP measures which management believes allow for a more complete understanding of the company's financial results. A reconciliation of these measures to the most comparable GAAP measures is presented in the company's earnings press release and financial supplement.

At this time, we will turn the call over to Mr. Michael Price, Chief Executive Officer of Platinum.

Michael Price

Thank you, operator. Welcome to this morning's call. With me today are Allan Decleir, our Chief Financial Officer; and Neal Schmidt, our Chief Actuary. After providing an overview of our results for the quarter, I'll ask Allen to discuss those results in more detail. Then I'll cover our recent underwriting activity, our outlook on market conditions, recent investment actions and capital management. Finally, we'll be happy to take your questions.

We produced net income of $93.7 million in the quarter which is $2.13 per diluted common share. Our tangible book value per share grew by 7.6% in the quarter to $55.13. These results reflect average catastrophe activity, including $28.5 million from the New Zealand earthquake, favorable reserve development, strong investment performance on a total return basis, active capital management and the favorable impact of a change to our estimate of the administrative costs of managing claims.

Net premiums earned were 20% lower than the same quarter last year, reflecting our disciplined approach to underwriting in difficult market conditions.

Allen will now take us through the numbers in more detail.

Allan Decleir

Thank you, Michael, for providing the highlights, and good morning to everyone. Four noteworthy items impacted our net income before taxes for the quarter. Net investment income and net realized investment gains generated $75.4 million of income. Net favorable development provided $34.6 million of income. Net losses arising from 2010 major catastrophes negatively impacted earnings by $30.5 million. And unallocated loss adjustment expense reserve factor changes contributed $15.8 million to income.

Regarding our investment results, we continue to adjust our investment portfolio to respond to changes in market conditions. During the third quarter of 2010, we realized net gains of $44.4 million. The gains this quarter were primarily from the sale of U.S. treasuries.

Net investment income was $31.1 million for the quarter compared with $44.7 million for the same quarter last year. The decrease primarily resulted from lower new money yields.

Net impairment losses on investments were $4 million for the quarter. The impairments were taken on non-agency RMBS and subprime asset-backed securities.

Focusing on prior year development, our Casualty segment had net favorable development of $36.6 million mainly in the North American claims made, North American class and financial lines classes. Our Property and Marine segment had net unfavorable development in the quarter of $4.1 million. Our Finite Risk segment had net favorable development of $2.1 million.

Looking at 2010 catastrophes, our catastrophe losses were $30.5 million during the quarter, substantially all relating to the September 4 earthquake in New Zealand. There was no significant adjustment to our estimate of losses related to the earthquake in Chile.

Regarding unallocated loss adjustment expense reserves, during the quarter, we conducted a review of our unallocated loss adjustment expense reserve factors across all lines of business. The review involved a detailed analysis of our administrative cost of managing clients resulting in a $15.8 million reduction of these reserves.

Turning to income taxes for the third quarter, income tax expense for the quarter was $20.2 million, reflecting a 17.7% effective tax rate. These are both higher than recent periods. The increases reflect a higher proportion of income generated from our U.S. based subsidiaries which resulted from favorable loss development and realized gains on the sale of investments.

Michael will now offer some additional commentary. Michael.

Michael Price

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