New York, March 4, 2009. NYMAGIC, INC. (NYSE: NYM) reported today the results of consolidated operations for the fourth quarter ended December 31, 2008. The Company reported net losses of $(19.8) million, or $(2.36) per diluted share for the three months ended December 31, 2008, compared with net losses of $(8.3) million, or $(.93) per diluted share, for the fourth quarter of 2007. Net losses for the year ended December 31, 2008 totaled $(104.3) million, or $(12.23) per diluted share, compared with net earnings of $13.4 million, or $1.46 per diluted share, for the year ended December 31, 2007.
Net losses for the year and fourth quarter ended 2008 were increased by $(17.6) million and $(8.1) million, respectively due to uncertainty that the Company can fully utilize all deferred income taxes that arose from capital losses incurred. To the extent that the Company generates future capital gains to offset these losses, it may recover some or all of this amount.
INVESTMENTS
Net investment loss amounted to $(16.0) million for the fourth quarter of 2008 compared with net investment income of $3.4 million for the same period of 2007. For the year ended December 31, 2008, net investment losses were $(63.5) million as compared with net investment income of $35.5 million for the same period of 2007. Investment losses in 2008 largely reflected losses of $(42.3) million in investments categorized as trading securities as well as losses of $(26.8) million from limited partnerships. Trading securities included municipal bonds, preferred stocks, commercial middle market debt, hedged positions and exchange-traded funds.
Net realized investment losses were $(1.4) million for the fourth quarter of 2008, as compared with net realized investment losses of $(7.0) million for the same period of 2007. Net realized investment losses for the year ended December 31, 2008 were $(47.7) million compared with net realized investment losses of $(6.9) million for the same period in 2007. The net realized investment losses for the year ended December 31, 2008 were almost entirely attributable to the decline in the market value of the Company’s investments in “super senior” residential mortgage backed securities. These securities are collateralized by pools of “Alt-A” mortgages, and receive priority payments from these pools. The Company’s super senior securities rank senior to subordinated tranches of debt collateralized by each respective pool of mortgages. As of March 1, 2009 the levels of subordination ranged from 27% to 51% of the total debt outstanding for each pool. Delinquencies within the underlying mortgage pools (defined as payments 60+ days past due plus foreclosures plus real estate owned) ranged from 19.7% to 41.5% of total amounts outstanding. While the delinquency rates increased from March 2008 when they ranged from 3.4% to 21.2%, current subordination levels remain in excess of current delinquency rates for each pool. Delinquency rates are not the same as loss rates, but are an indication of the potential for some degree of loss in future periods. All of these securities are currently rated AAA or AAA- by Standard & Poor’s and were also rated AAA by Moody’s at February 1, 2009. During February, however, Moody’s adjusted their ratings on these securities and these ratings now range from Caa1 to A1.
Accumulated other comprehensive losses included in shareholders equity as of December 31, 2008 amounted to $(2.9) million and relate primarily to unrealized investment losses in the municipal portfolio held as Available for Sale.
At December 31, 2008 the Company’s total cash, investments and net receivable for securities sold amounted to $572.4 million. The investment portfolio at December 31, 2008 consisted of cash, short-term investments and net receivable for securities sold of $211.3 million, or 36.9%; fixed maturities and other debt investments of $226.3 million, or 39.5%, limited partnership hedge funds of $123.0 million, or 21.5%; and preferred stocks of $11.8 million, or 2.1%.
In early January 2009, the Company sold its remaining preferred stocks. During January and February, the Company increased its holdings of municipal and corporate bonds and maintained a major position in short term U.S. Treasury securities.
At February 28, 2009 the Company’s carrying value for the following classes of securities are as follows:
Cash in Banks: $ 3 million
U.S. Treasury Securities: 214 million
Municipal Bonds: 135 million
Mortgage Securities: 61 million
Corporate Bonds 31 million
Commercial Loans 2 million
Hedge Funds: 121 million
Receivables - Redemptions: 2 million
Total $569 million
INSURANCE OPERATIONS
Gross premiums written of $42.6 million and net premiums written of $31.4 million for the fourth quarter of 2008 decreased by 15% and 13%, respectively, over the same period of 2007. Gross premiums written of $217.3 million and net premiums written of $165.4 million decreased by 5% and 1%, respectively, for the year ended December 31, 2008 compared to the same period of 2007. The reduction in gross premiums written is largely attributable to the Company’s decision to terminate a cargo program with Southern Marine and Aviation at the end of 2007. The smaller decrease in net premiums written is consistent with our strategy of retaining more gross premiums written.
Net premiums earned of $38.6 million for the fourth quarter decreased by 15% over the same period of 2007. Net premiums earned of $167.1 million for the year ended December 31, 2008 increased 1% over the same period of 2007.
The Company's combined ratio was 100.3% for the three months ended December 31, 2008 as compared with 106.3% for the same period of 2007. The Company's combined ratio was 112.1% for the year ended December 31, 2008 as compared with 98.5% for the same period of 2007. Hurricanes Gustav and Ike contributed 4.0% to the year ended 2008 combined ratio. Favorable loss reserve development amounted to $4.5 million and $2.1 million during the fourth quarter of 2008 and 2007, respectively. Adverse loss reserve development amounted to $(2.7) million and favorable loss reserve development amounted to $13.8 million for the year ended December 31, 2008 and 2007, respectively. Contributing to the adverse development of losses during 2008 were reinsurance receivables written off during the second quarter of 2008 amounting to $12.4 million. Favorable loss reserve development for the year ended December 31, 2007 was largely attributable to the novation of certain excess workers’ compensation policies and favorable reported loss trends arising from the ocean marine line of business.
George Kallop, President and Chief Executive Officer, in commenting on the overall results for the quarter said, “The Company has suffered major setbacks during the past months, but we remain focused on building for the future. We have made major adjustments to our investment strategy with more emphasis on fixed income investments and less focus on hedge fund investments and equities. We decided to sell our remaining preferred stocks in December and early January. In addition, we have been reducing our investment in hedge funds and redeploying capital into selected municipal and corporate bonds. Regarding insurance operations, we are hopeful that MMO Agencies will become a substantial contributor to written premiums during 2009. During the past nine months, MMO Agencies has opened relationships with over 40 agency offices. In addition, we continue to add to our own underwriting staff. We expect that 2009 will be a challenging year, but our goal is to achieve significant profitability during the year.”
NYMAGIC, INC. will hold a conference call on its fourth quarter 2008 financial results live on Thursday, March 5, 2009 at 9:00 A.M. ET. The call will last for up to one hour.
Investors and interested parties will have the opportunity to listen to and join in the call by calling 800-374-0763 entering ID# 86181069 and registering with the operator. Please call no later than 10 minutes prior to the start of the call to register. A replay of the conference call will be available for 30 days by dialing 800-642-1687 and entering ID 86181069.
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Posted on March 04, 2009NYMAGIC, INC. is an insurance holding company whose property and casualty insurance subsidiaries specialize in underwriting ocean marine, inland marine and non-marine liability insurance, and whose agency subsidiaries specialize in establishing markets for such business. The Company maintains offices in New York and Chicago.
Any forward-looking statements concerning the Company’s operations, economic performance and financial condition contained herein, including statements related to the outlook for the Company’s performance and the Company’s ability to pay dividends in 2009 and beyond, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon a number of assumptions and estimates, which inherently are subject to uncertainties and contingencies, many of which are beyond the control of the Company. Some of these assumptions may not materialize and unanticipated events may occur which could cause actual results to differ materially from such statements. These include, but are not limited to, the cyclical nature of the insurance and reinsurance industry, premium rates, the estimation of loss reserves and loss reserve development, net loss retention, the effect of competition, the ability to collect reinsurance recoverables, the availability and cost of reinsurance, changes in the value of the Company’s investment portfolio, changes in the ratings assigned to the Company by rating agencies and other risks and uncertainties as included in the Company’s filings with the Securities and Exchange Commission. These risks could cause actual results for the 2009 year and beyond to differ materially from those expressed in any forward-looking statements made. The Company undertakes no obligation to update publicly or revise any forward-looking statements made.