Transatlantic Holdings, Inc. Q1 2010 Earnings Call Transcript

Transatlantic Holdings, Inc. Q1 2010 Earnings Call Transcript
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Transatlantic Holdings, Inc. (TRH)

Q1 2010 Earnings Call Transcript

April 29, 2010 11:00 am ET

Executives

Tom Cholnoky – SVP, IR

Bob Orlich – President and CEO

Mike Sapnar – EVP and Chief Underwriting Officer, Domestic Operations

Steven Skalicky – EVP and CFO

Analysts

Keith Alexander – JP Morgan

John Hall – Wells Fargo Securities

Presentation

Operator

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» Transatlantic Holdings, Inc. Q1 2010 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the first quarter 2010 Transatlantic Holdings earnings conference call. My name is Natasha, and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator instructions)

I would now like to turn the call over to Mr. Tom Cholnoky, Senior Vice President, Investor Relations. Please proceed sir.

Tom Cholnoky

Thank you. Good morning and welcome to Transatlantic Holdings’ earnings conference call to discuss results for the first quarter ended March 31, 2010. You can access a copy of our press release and the accompanying financial supplement on the investor information page of our corporate website at

www.transre.com

. Leading today's call will be Bob Orlich, President and Chief Executive Officer; Mike Sapnar, Chief Underwriting Officer for our Domestic Operations; and Steven Skalicky, our Chief Financial Officer.

After prepared comments we will open the call for questions. Before we begin, I note that we will refer to certain non-GAAP financial and operating measures on today's call. We provide reconciliation of those figures to their most directly comparable GAAP measures in our press release and supplement. In addition, comments made on today's call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current assumptions, and opinions concerning a variety of known and unknown risks. Actual results may differ materially from those contained in, or suggested by such forward-looking statements.

Transatlantic’s filings with the Securities and Exchange Commission contain a description of the business environment in which Transatlantic operates, and the important factors, risks and uncertainties that may affect its business and financial results. With that, I will turn the call over to Bob Orlich.

Bob Orlich

Thanks Tom, and good morning to everyone. The main event in the first quarter for everyone in the reinsurance industry was the return of significant catastrophe activity after several quarters of relative calm. Putting that aside for the moment, the remainder of our business continued its run of solid underwriting performance, and we feel good about the company's results, excluding the cat activity.

Market conditions are relatively unchanged since 1/1, which means we have seen some attractive opportunities in selective lines and as a more independent company we continue to see increased submissions in key geographic areas. Recapping the capacity events quickly, lost estimates from the Chilean earthquake and other first-quarter catastrophe events that impacted to a lesser degree have remained within our previously announced expectations.

These smaller catastrophe events include earthquakes in Haiti, storm activity in Australia and European windstorm Xynthia, each of which had an immaterial impact on an individual basis. The overall cat impact on the quarter while significant is manageable and it highlights a few things about our company. These include our global platform and the diversity of our book and the discipline we employ in writing cat business. Mike will talk more about this in his remarks.

Although cat activity was the main event for the industry, Transatlantic had a more significant and positive event in the quarter. The sale of almost all of AIG’s remaining ownership stake conducted through a successful secondary offering of approximately 8.5 million shares. As part of our share repurchase program, we purchased 2 million of these shares in the offering. The offering officially concludes the transaction to full independence, which began a little more than a year ago.

I have talked a lot on recent calls about the benefits of independence to Transatlantic. We saw one more benefit during the quarter when Transatlantic was added to the S&P 400 MidCap Index, which gives our shares greater visibility in the institutional investment community. With the secondary offering behind us, we move forward in a strong position with a solid capital base, a very well positioned global underwriting platform, and increasing business opportunities. We feel good about our position as we look out for the remainder of 2010.

Thanks again, and I will now turn it over to Mike Sapnar.

Mike Sapnar

Thanks Bob. Other than the cat events in the first quarter, we have seen no meaningful changes in market conditions across our product lines, since we last talked with you a couple of months ago. What I would like to do this quarter is focus my comments on a few selective developments of interest to Transatlantic and the reinsurance industry generally.

I will start with the significant cat events witnessed over the first few months of the year. Obviously, most of the attention and loss activity is centered on Chile and Xynthia, but as Bob highlighted they were a variety of events around the world during the quarter, including the Haiti earthquake, those powerful earthquakes in Taiwan and Turkey, two Australian hailstorms and the damaging winter storms in the north-eastern mid-Atlantic regions of the US.

Transatlantic costs in Chile are estimated at about $105 million net of reinstatements with several of the smaller events I just mentioned contributing the balance of the $130 million in pre-tax catastrophe costs reported in our press release. Our cat costs in the quarter were well within our tolerance given the size of the events for three reasons. First Transatlantic does not write cat exposed business without event limits. Many treaties covering non-peak markets do not carry event limits.

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