Hurricanes take small bite out of Bermuda players’ earnings: Benfield

In its quarterly analysis of the top 16 Bermuda-based reinsurers, broker Benfield Group reports the third-quarter U.S. and Japanese hurricanes took their toll on earnings which have been persistently strong in the past few years.Net income dropped to US$3.3 billion, down 26% for the quarter, although a sign of the market’s continuing strength is highlighted by only five companies reporting combined ratios in excess of 100% during the quarter, despite losses from Hurricanes Charley, Frances, Ivan and Jeanne. The strength of the Bermuda market to withstand the storms, particularly given the market’s high exposure to Florida property catastrophes, was quelled to some extent by an average combined ratio of 95.6% among the top writers although this was up from 88.4% during the same period last year. "Analysis of the results of the global reinsurers in general and the Bermudians in particular indicate that the losses were an earnings event with little or no damage to balance sheets," the report notes.In fact, shareholders’ equity was up 19% between December 31, 2003 and the end of September 2004, to US$42 billion.And, CEOs seem bullish on the prospect for the storms to produce some positive effect on pricing in the property catastrophe market if statements made in the context of quarterly earnings releases is an indication. However, Benfield cautions, "the lack of damage to reinsurers’ balance sheets suggests that any positive or stabilizing effect of the storms on pricing is likely to be muted outside the affected area."