Good morning all, General Re earning report...
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Thursday November 5, 7:21 pm Eastern Time
Company Press Release
General Re Corporation Reports Third Quarter 1998 Earnings
STAMFORD, Conn.--(BUSINESS WIRE)--Nov. 5, 1998--General Re Corporation reports operating income of $230 million, or $2.92 per diluted share ($3.01 per basic share), for the quarter ended September 30, 1998. This is a decrease of 1.0% from the $2.95 per diluted share ($3.03 per basic share) that was reported in the comparable quarter of 1997. Operating earnings during the third quarter of 1998 were adversely affected by losses from Hurricane Georges and expenses related to General Re's pending merger with Berkshire Hathaway Inc. (Unless otherwise stated, all per share amounts are calculated on a diluted basis.)
Net income for the third quarter of 1998 was $4.98 per share, compared with $2.98 per share in the third quarter of 1997. Net income for the quarter includes $2.06 per share of after-tax realized capital gains, compared to $.03 per share of after-tax realized capital gains for the same period in 1997.
For the first nine months of 1998, operating income per share was $9.25 per share, an increase of 5.8% from the comparable results of $8.74 per share for the first nine months of 1997. Net income was $11.59 per share for the first nine months of 1998, compared to $8.76 per share for the first nine months of 1997. Net income includes $2.34 and $.02 per share of after-tax realized capital gains in the first nine months of 1998 and 1997, respectively.
Comprehensive income for the third quarter of 1998 was $20 million, or $0.25 per share. For the first nine months of 1998, comprehensive income was $847 million, or $10.70 per share, compared to $1,421 million, or $17.31 per share, for the first nine months of 1997. Comprehensive income, or ''owners' earnings'', consists of net income, unrealized changes in investment values, and foreign currency translation gains and losses.
General Re's annualized operating return on equity, which excludes investment gains and losses, was 16.7% for the first nine months of 1998. Total return on equity, which includes investment gains and losses, for the twelve months ended September 30, 1998 was 15.6%.
The consolidated underwriting combined ratio for global property/casualty operations for the third quarter of 1998 was 103.5%, compared with 100.3% for the third quarter of 1997. For the first nine months of 1998, the consolidated underwriting combined ratio was 101.3%, compared with 100.6% for the same period in 1997.
Consolidated net premiums written for the third quarter were $1,419 million, a decrease of 12.5% from the $1,621 million recorded in the third quarter of 1997. For the nine months ended September 30, 1998, consolidated net premiums written were $4,524 million, a decrease of 9.8% from the $5,017 million of net premiums written in the same period of 1997. Adjusted for the effects of foreign exchange and non-traditional business, consolidated traditional premiums decreased 5.4% and 0.2% in the third quarter and first nine months of 1998, respectively.
Worldwide after-tax net investment income was $247 million, or $3.15 per share, in the third quarter of 1998, compared with $241 million, or $2.96 per share, in the comparable quarter of 1997, an increase of 6.4% on a per share basis. For the nine months ended September 30, 1998, worldwide after-tax net investment income totaled $730 million, or $9.25 per share, up 5.1% from $8.80 per share in the first nine months of 1997. Adjusted for the effects of foreign exchange, worldwide after-tax net investment income per share increased 7.7% and 7.2% for the third quarter and first nine months of 1998, respectively.
Excluding the impact of non-premium or deposit transactions, cash flow available for investment from worldwide insurance operations was approximately $307 million and $946 million in the third quarter and first nine months of 1998, respectively. This compares to $424 million and $974 million in the comparable periods of 1997.
North American Property/Casualty:
The underwriting combined ratio for the North American property/casualty operations for the third quarter of 1998 was 104.1%, compared to 99.4% in the third quarter of 1997. Losses from Hurricane Georges adversely affected 1998's third quarter underwriting result. For the first nine months of 1998, the combined ratio was 101.0%, compared with 99.3% for the first nine months of 1997.
North American property/casualty net premiums written were $710 million for the third quarter of 1998, a decrease of 11.0% from the $798 million for the same period of 1997. For the first nine months of the year, North American property/casualty net premiums written decreased 14.1% to $1,994 million from $2,320 million.
North American traditional premiums decreased 4.5% in the quarter and 6.6% year-to-date. Traditional premiums comprised approximately 92% and 95% of the total North American property/casualty premiums written in the third quarter and first nine months of 1998, respectively. Non-traditional premiums written declined 49% in the third quarter and 66% year-to-date compared to the same periods of 1997. Non-traditional premium volume in the quarter and year-to-date decreased due to the previously disclosed termination of a contract with approximately $250 million of annual premium.
After-tax net investment income was $169 million, or $2.15 per share, for the third quarter of 1998, compared to $168 million, or $2.06 per share, for the same period in 1997, an increase of 4.4% on a per share basis. After-tax net investment income for the first nine months of 1998 was $509 million, or $6.45 per share, an increase of 4.7% compared to $6.16 per share for the same period of 1997. Pretax total return for the North American property/casualty investment portfolio was approximately 5.0% for the first nine months of 1998.
Excluding deposit transactions, cash flow available for investment from the North American property/casualty operations was $256 million and $599 million for the third quarter and first nine months of 1998, respectively. This compares with $314 million and $569 million for the comparable periods of 1997.
International Property/Casualty:
The results for the international property/casualty operations are reported on a one quarter lag.
The underwriting combined ratio for the international property/casualty operations for the third quarter of 1998 was 102.1%, compared to 101.5% for the same period in 1997. For the first nine months of 1998, the underwriting combined ratio was 101.8%, compared with 102.3% in 1997.
International property/casualty net premiums written were $403 million for the third quarter of 1998, a decrease of 18.7% from the $496 million for the same period of 1997. For the first nine months of 1998, international property/casualty net premiums written decreased 10.2% to $1,605 million from $1,787 million in the same period of 1997. Adjusted for the effects of foreign exchange and non-traditional business, traditional international property/casualty premiums written decreased approximately 9.2% in the quarter due to competitive market conditions and increased 3.2% in the first nine months of 1998.
After-tax net investment income for the international property/casualty segment was $57 million, or $.73 per share, for the third quarter of 1998, compared to $58 million, or $.71 per share for the same period in 1997. After-tax net investment income for the first nine months of 1998 was $165 million, or $2.09 per share, compared to $170 million, or $2.08 per share for the same period of 1997. Adjusted for the effects of foreign exchange, international property/casualty after-tax net investment income per share increased approximately 7.0% and 7.7% in the third quarter and first nine months of 1998, respectively.
Excluding deposit transactions, operating cash flow for the international insurance operations, which includes cash flow from both the international property/casualty and the global life/health segments, was $51 million for the third quarter of 1998, compared with $110 million for the same period in 1997. For the first nine months of 1998, the operating cash flow was $347 million, compared to $405 million for the first nine months of 1997.
Life/Health:
The results for the global life/health operations are also reported on a one quarter lag.
Pretax operating income for the global life/health operations was $18 million in the third quarter, and $55 million for the first nine months of the year, compared to $19 million and $62 million, respectively, for the same periods of 1997.
Global life/health operations reported net premiums written of $305 million in the third quarter of 1998, a decrease of 6.7% from the $327 million reported for the same period of 1997. In the first nine months of 1998, net premiums written increased 1.7% to $925 million from $910 million in 1997.
Global life reinsurance premiums written were $199 million in the quarter, a decrease of 13.6% compared to the third quarter of 1997. Adjusted for the effects of foreign exchange, global life reinsurance premiums decreased approximately 10.4% in the quarter and increased 1.0% year-to-date. Growth in life reinsurance business has slowed during 1998 due to product mix changes in Europe and merger and acquisition activity among primary life insurers.
Health reinsurance premiums were $107 million in the quarter and $317 million year-to-date, an increase of 9.8% and 19.7%, respectively. Health reinsurance premiums are generated primarily in the United States, and therefore, are not significantly affected by changes in foreign exchange rates.
Financial Services:
Financial Services had operating revenues of $78 million for the third quarter of 1998, an increase of 7.4% over the $73 million reported for the same period in 1997. Pretax operating income in the third quarter was $24 million, compared to $25 million in the third quarter of 1997.
Operating revenues for the first nine months of 1998 were $267 million and pretax income was $93 million, compared to $237 million and $87 million for the first nine months of 1997, respectively. The increase in revenues and pretax operating income in the first nine months of 1998 was due to growth in General Re Financial Products' business.
Invested Insurance Assets and Common Shareowners' Equity:
Invested insurance assets at September 30, 1998 were $24.7 billion, or $326.41 per share, an increase of 2.8% over the $317.38 per share at December 31, 1997. The increase from year-end was principally due to operating cash flow, partially offset by dividends, share repurchases and maturing deposit transactions.
Common shareowners' equity totaled $8,450 million, or $111.64 per share, compared to $8,161 million, or $105.40 per share, at December 31, 1997, an increase of 5.9% on a per share basis. As of September 30, 1998, General Re had 75.7 million common shares outstanding.
From January 1, 1998 to June 18, 1998, General Re repurchased 2,076,600 shares of its common stock for aggregate consideration of $454 million. No shares have been repurchased since the announcement of General Re's merger with Berkshire Hathaway.
Merger with Berkshire Hathaway Inc [NYSE:BRKa - news].:
On June 19, 1998, General Re announced an agreement to merge with Berkshire Hathaway Inc. In September, both companies' shareowners approved the merger. In addition, the companies have received all of the necessary regulatory approvals. The companies expect the merger to close in the fourth quarter after receiving certain rulings from the Internal Revenue Service.
General Re Corporation is a holding company for global reinsurance and related risk management operations. It owns General Reinsurance Corporation and National Reinsurance Corporation, the largest professional property/casualty reinsurance group domiciled in the United States, and also holds a controlling interest in Kolnische Ruckversicherungs-Gesellschaft AG (Cologne Re), a major international reinsurer. Together, General Re and Cologne Re transact reinsurance business as ''General & Cologne Re.''
In addition, General Re writes excess and surplus lines insurance through General Star Management Company, provides alternative risk solutions through Genesis Underwriting Management Company, provides reinsurance brokerage services through Herbert Clough, Inc., manages aviation insurance risks through United States Aviation Underwriters, Inc., and acts as a business development consultant and reinsurance intermediary through Ardent Risk Services, Inc. General Re also operates as a dealer in the swap and derivatives market through General Re Financial Products Corporation, and provides specialized investment services to the insurance industry through General Re-New England Asset Management, Inc.
Certain statements that appear in this press release that do not relate to historical financial information may constitute forward-looking statements. Statements containing words such as believes, anticipates, plans, expects, projects, forecasts, estimates, may, could or similar words, are forward-looking. Any forward-looking statement is subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Various risks and uncertainties that could affect General Re's future results are set forth in General Res June 30, 1998 Form 10-Q.
General Re Corporation news releases, including quarterly financial results, are available on the Internet (http://www.genre.com).
General Re Corporation
Consolidated Financial Information
(in millions, except share information) |
