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Platinum Underwriters Holdings Ltd. Reports Operating Results (10-Q)

October 29, 2010 | About:
10qk

10qk

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Platinum Underwriters Holdings Ltd. (PTP) filed Quarterly Report for the period ended 2010-09-30.

Platinum Underwriters Holdings Ltd. has a market cap of $1.77 billion; its shares were traded at around $43.46 with a P/E ratio of 9.7 and P/S ratio of 1.5. The dividend yield of Platinum Underwriters Holdings Ltd. stocks is 0.7%.PTP is in the portfolios of David Dreman of Dreman Value Management, Arnold Schneider of Schneider Capital Management, Chuck Royce of Royce& Associates, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

We had $2.4 billion and $2.3 billion in capital resources as of September 30, 2010 and December 31, 2009, respectively. Our net income was $93.7 million and $109.5 million for the three months ended September 30, 2010 and 2009, respectively, and $233.2 million and $292.5 million for the nine months ended September 30, 2010 and 2009, respectively. The decrease in net income for the three and nine months ended September 30, 2010 reflects an increase in catastrophe losses, offset by stronger investment performance, including net realized gains on investments, an increase in net favorable development and a favorable impact from a change in estimate of the administrative costs of managing claims as compared with the same periods in 2009.

Our net premiums written were $199.4 million and $243.6 million for the three months ended September 30, 2010 and 2009, respectively, and $598.6 million and $697.0 million for the nine months ended September 30, 2010 and 2009, respectively. The decrease in net premiums written for the three and nine months ended September 30, 2010 was primarily due to the non-renewal of business that fell below our minimum pricing standards as compared with the same periods in 2009.

Net losses arising from major catastrophes were $30.5 million and $3.8 million for the three months ended September 30, 2010 and 2009, respectively. Net favorable development was $34.6 million and $20.3 million for the three months ended September 30, 2010 and 2009, respectively. Net favorable or unfavorable development is the development of prior years unpaid losses and LAE and the related impact on premiums and commissions. The net favorable development for the three months ended September 30, 2010 relating to prior years was substantially all in the Casualty segment. Additionally, we conducted a review of ULAE reserve factors across all lines of business during the three months ended September 30, 2010. The review involved a detailed analysis of our administrative costs of managing claims since our inception and, in our judgment, we concluded that the amounts paid had reached sufficient credibility for us to change our previously selected ULAE reserve factors. The change in the reserve factors resulted in a $15.8 million reduction of ULAE reserves.

The Property and Marine segment underwriting income decreased by $54.2 million for the three months ended September 30, 2010 as compared with the three months ended September 30, 2009, primarily due to an increase in net losses arising from major catastrophes and net unfavorable development. Net losses arising from major catastrophes were $30.5 million and $3.8 million for the three months ended September 30, 2010 and 2009, respectively. Net losses from major catastrophes for the three months ended September 30, 2010 were substantially attributable to losses arising from an earthquake in New Zealand. Net unfavorable development was $4.1 million for the three months ended September 30, 2010 and net favorable development was $12.2 million for the three months ended September 30, 2009. The change in our estimate of the administrative costs of managing claims resulted in a $2.4 million reduction of ULAE reserves.

Gross premiums written decreased by $43.9 million for the three months ended September 30, 2010 as compared with the three months ended September 30, 2009. Gross premiums written included reinstatement premiums related to major catastrophes of $1.3 million and $0.8 million for the three months ended September 30, 2010 and 2009, respectively. The decrease in gross premiums written was primarily due to decreases in the North American property classes, including crop, catastrophe excess-of-loss, and per risk excess-of-loss business for the three months ended September 30, 2010 as compared with the same period in 2009. The decrease in ceded premiums written was the result of a decrease in the purchase of proportional property and industry loss warranty retrocessional coverage for the three months ended September 30, 2010 as compared with the same period in 2009. Net premiums earned decreased by $34.2 million as a result of decreases in net premiums written primarily in crop, per risk excess of-loss and catastrophe excess-of-loss business in 2010. Net premiums written and earned were also affected by changes in the mix of business and the structure of the underlying reinsurance contracts.

Net losses and LAE increased by $24.4 million for the three months ended September 30, 2010 as compared with the three months ended September 30, 2009, primarily due to an increase in losses arising from major catastrophes, substantially attributable to the earthquake in New Zealand, and net unfavorable loss development, partially offset by a decrease in net premiums earned. Net unfavorable loss development was $4.5 million for the three months ended September 30, 2010 as compared with net favorable loss development of $12.4 million for the three months ended September 30, 2009. Net losses and LAE arising from major catastrophes was $31.8 million and $4.6 million for the three months ended September 30, 2010 and 2009, respectively. Net unfavorable loss development and related premium adjustments increased the net loss and LAE ratio by 3.3 points for the three months ended September 30, 2010 and net favorable development decreased the net loss and LAE ratio by 9.2 points for the three months ended September 30, 2009. Net losses arising from major catastrophes, with related premium adjustments, increased the net loss and LAE ratio by 31.7 points and 3.2 points for the three months ended September 30, 2010 and 2009, respectively. The resulting loss ratio, excluding catastrophes and development, decreased due to a lower proportion of crop business written, which had a higher loss ratio than the remainder of the segment, and a higher proportion of catastrophe business, which had a lower loss ratio than the remainder of the segment. Net unfavorable loss development for the three months ended September 30, 2010 was primarily attributable to an increase in the cedants estimates of ultimate losses for Hurricane Ike due to an increase in litigation involving coverage disputes. The change in our estimate of the administrative costs of managing claims in the three months ended September 30, 2010 decreased the net loss and LAE ratio by 2.4 points.

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