Transatlantic Holdings, Inc. Announces Second Quarter Results

Business Wire, July 28, 2005

NEW YORK -- Transatlantic Holdings, Inc. (NYSE: TRH) today reported that its net income for the second quarter of 2005 amounted to $79.2 million, or $1.20 per common share (diluted), compared to $87.8 million, or $1.32 per common share (diluted), in the same prior year quarter. Net income for the first six months of 2005 amounted to $168.6 million, or $2.55 per common share (diluted), compared to $177.5 million, or $2.68 per common share (diluted), in the same prior year period.

There were no significant net catastrophe losses occurring in the second quarters of 2005 or 2004. The first six months of 2005 includes the aggregate estimated impact of significant net catastrophe losses recorded in the first quarter of $25.0 million, or $18.8 million after tax. There were no significant net catastrophe losses occurring in the first six months of 2004.

Commenting on results, Robert F. Orlich, Chairman, President and Chief Executive Officer, said, "Results for the quarter were negatively impacted by adverse development of catastrophe losses from the second half of 2004 that, while mostly recoverable under our reinsurance protections, gave rise to approximately $20 million of reinstatement premiums that reduced net premiums written and earned. Nonetheless, Transatlantic was able to achieve an annualized GAAP return on equity of 12.7 percent for the first half of 2005 and cash flow has remained strong, despite sizeable payments of prior year catastrophe losses.

"Premium volume declined in the second quarter compared to a year ago, due largely to higher ceding company retentions in recent periods and the continuing trend of softening primary and reinsurance rates in most classes. Terms and conditions, however, have generally been holding firm. Transatlantic will not support business that it views as under-priced.

"We believe that our financial strength, global market expertise and premiere client service will continue to serve us well in this challenging environment."

For the second quarter of 2005, income before income taxes amounted to $97.5 million versus $112.5 million in the second quarter of 2004. Included in these results are pre-tax realized net capital gains of $1.9 million and $2.2 million in the second quarters of 2005 and 2004, respectively. For the first six months of 2005, income before income taxes amounted to $210.3 million compared to $228.0 million in the same prior year period. Included in these results are pre-tax realized net capital gains of $10.9 million and $9.5 million for the first six months of 2005 and 2004, respectively. Additionally, income before income taxes for the first six months of 2005 includes significant pre-tax net catastrophe losses recorded in the first quarter of $25.0 million.

Net premiums written for the second quarter of 2005 totaled $883.7 million compared to $927.2 million in the same period in 2004, a decrease of 4.7 percent. Net premiums written for the first six months of 2005 totaled $1,769.0 million compared to $1,834.7 million in the comparable prior year period, a decrease of 3.6 percent. International business represented 54.8 percent of net premiums written in the first six months of 2005 versus 47.1 percent in the comparable 2004 period. (Refer to the table in the consolidated statistical supplement presenting the effect of changes in the foreign currency exchange rates on the decrease in net premiums written between periods.)

For the second quarter of 2005, the combined ratio was 97.8 versus 95.7 for the comparable 2004 quarter. For the first six months of 2005, the combined ratio was 97.8 compared to 95.8 in the same prior year period. The impact of significant net catastrophe losses added 1.4 to each of the loss and loss adjustment expense ratio and combined ratio for the first six months of 2005.

Net loss and loss adjustment expense reserves declined $5.1 million during the second quarter, bringing the net increase in such reserves for the first six months of 2005 to $76.0 million. At June 30, 2005, net loss and loss adjustment expense reserves stood at $5.06 billion. Paid losses for the second quarter and first six months of 2005 includes $73 million and $146 million, respectively, related to catastrophes occurring principally in 2004. (Refer to the analysis of changes in net loss and loss adjustment expense reserves in the consolidated statistical supplement for additional information.)

TRH's loss and loss adjustment expense ratio represents net losses and loss adjustment expenses divided by net premiums earned. The underwriting expense ratio represents the sum of net commissions and other underwriting expenses divided by net premiums written. The combined ratio represents the sum of the loss and loss adjustment expense ratio and the underwriting expense ratio. Net loss and loss adjustment expense reserves represent unpaid losses and loss adjustment expenses, net of related reinsurance recoverable. The combined ratio and its components, as well as net loss and loss adjustment expense reserves, are presented in accordance with principles prescribed or permitted by insurance regulatory authorities as these are standard measures in the insurance and reinsurance industries.