HAMILTON, Bermuda, March 16 /PRNewswire-FirstCall/ -- PXRE Group Ltd. (the "Company") today announced the correction of a technical error in certain diluted earnings per share disclosures that was discovered in the process of finalizing the Company's Annual Report on Form 10-K with respect to net (loss) income before convertible preferred share dividends per diluted common share and net (loss) income per diluted common share reported in the press release issued on March 14, 2007 (the "Press Release") announcing the Company's results for the quarter and year ended December 31, 2006. Net (loss) income before convertible preferred share dividends per diluted common share for the year ended December 31, 2006 was $0.40 rather than $0.37 as previously reported. Net (loss) income per diluted common share for the year ended December 31, 2006 was $0.33, rather than $0.37 as previously reported. This correction had no impact on the Company's Unaudited Consolidated Balance Sheets including total shareholders' equity as of December 31, 2006 nor did it have any impact on any amounts reported on the Unaudited Consolidated Statements of Operations and Comprehensive Operations other than the diluted earnings per share disclosures referred to above. It also had no impact on Unaudited Consolidated Statements of Shareholders' Equity or Unaudited Consolidated Statements of Cash Flows. Lastly, this correction had no impact on fully diluted book value per common share as of December 31, 2006.
Corrected preliminary unaudited financial highlights and unaudited financial statements are attached hereto.
PXRE Group Ltd.
Unaudited Financial Highlights
(Dollars in thousands except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Gross premiums written $6,952 $114,617 $138,776 $542,325
Net premiums written $(18,169) $130,665 $53,509 $407,005
Revenues $1,776 $157,097 $137,802 $419,821
Losses and expenses (20,889) (564,052) (108,703) (1,111,472)
(Loss) income before income
taxes and convertible
preferred share dividends (19,113) (406,955) 29,099 (691,651)
Income tax expense (597) (39,510) (597) (5,907)
Net (loss) income before
convertible preferred
share dividends $(19,710) $(446,465) $28,502 $(697,558)
Net (loss) income to common
shareholders $(20,873) $(447,627) $23,638 $(704,598)
Net (loss) income per
diluted common share $(0.29) $(8.45) $0.33 $(21.65)
Average diluted shares
outstanding (000's) 77,156 73,555 77,072 43,517
Average diluted shares
outstanding when
antidilutive (000's) 72,006 52,987 71,959 32,541
Dec. 31, 2006 Dec. 31, 2005
Financial Position:
Cash and investments $1,216,392 $1,660,996
Total assets 1,401,343 2,116,047
Reserve for losses and
loss expenses 603,241 1,320,126
Shareholders' equity 496,767 465,318
Book value per common
share (1) 6.41 6.01
Statutory surplus:
PXRE Reinsurance Ltd. 564,209(2) 530,775(3)
PXRE Reinsurance Company 137,974(4) 126,991
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
GAAP Ratios:
Loss ratio 1.8% 340.2% 14.7% 260.5%
Expense ratio (78.2%) 17.1% 73.7% 21.9%
Combined ratio (76.4%) 357.3% 88.4% 282.4%
Losses Incurred by Segment:
Cat & Risk Excess $(3,847) $532,815 $6,490 $1,004,771
Exited 3,606 187 5,953 6,752
$(241) $533,002 $12,443 $1,011,523
Commission and Brokerage,
Net of Fee Income by Segment:
Cat & Risk Excess $806 $17,831 $18,697 $49,256
Exited - (114) 186 (297)
$806 $17,717 $18,883 $48,959
Underwriting (Loss) Income
by Segment: (5)
Cat & Risk Excess $(10,428) $(393,453) $59,761 $(664,445)
Exited (3,620) (613) (6,558) (7,713)
$(14,048) $(394,066) $53,203 $(672,158)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Underwriting (Loss) Income
Reconciled to (Loss) Income
Before Income Taxes and
Convertible Preferred Share
Dividends:
Underwriting (loss)
income (5) $(14,048) $(394,066) $53,203 $(672,158)
Net investment income 14,893 14,643 60,654 45,292
Net realized investment
gains (losses) 172 (14,370) (7,809) (14,736)
Other fee income 185 - 185 -
Other reinsurance related
expense (7,124) (936) (17,862) (936)
Operating expenses (9,732) (9,105) (43,373) (36,208)
Foreign exchange gains
(losses) 168 494 (1,444) 1,547
Interest expense (3,627) (3,615) (14,455) (14,452)
(Loss) income before
income taxes and
convertible preferred
share dividends $(19,113) $(406,955) $29,099 $(691,651)
(1) After considering convertible preferred shares.
(2) Estimated and before inter-company eliminations.
(3) Before inter-company eliminations.
(4) Estimated.
(5) Underwriting Income (Loss) by Segment (a GAAP financial measure): The
Company's reported underwriting results are its best measure of
profitability for its individual underwriting segments and accordingly
are disclosed in the footnotes to the Company's financial statements
required by SFAS 131, Disclosures about Segments of an Enterprise and
Related Information. Underwriting Income (Loss) by Segment is
calculated by subtracting losses and loss expenses incurred and
commission and brokerage, net of fee income from net earned premiums.
PXRE does not allocate net investment income, net realized investment
gains (losses), other fee income, other reinsurance related expense,
operating expenses, foreign exchange gains or losses, or interest
expense to its respective underwriting segments.
Statements in this release that are not strictly historical are forward- looking and are based upon current expectations and assumptions of management. Statements included herein, as well as statements made by or on behalf of PXRE in its communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, which are not historical in nature are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements, identified by words such as "intend," "believe," "anticipate," or "expects" or variations of such words or similar expressions are based on current expectations, speak only as of the date thereof, and are subject to risk and uncertainties. In light of the risks and uncertainties inherent in all future projections, the forward-looking statements in this report should not be considered as a representation by us or any other person that the Company's objectives or plans will be achieved. The Company cautions investors and analysts that actual results or events could differ materially from those set forth or implied by the forward-looking statements and related assumptions, depending on the outcome of certain important factors including, but not limited to, the following: (i) we face risks related to our proposed merger with Argonaut; (ii) if the merger with Argonaut is not completed, unless the Board of Directors identifies and implements a different operating strategic solution, we will not write or earn any material premiums in the future and, as a result, we expect to incur material operating losses since our remaining revenue is insufficient to cover our projected operating and other expenses; (iii) if the merger with Argonaut is not consummated, we may not be able to identify or implement a strategic alternative for PXRE; (iv) if the merger with Argonaut is not consummated and our Board of Directors concludes that no other feasible strategic alternative would be in the best interests of our shareholders, it may determine that the best course of action is to place the reinsurance operations of PXRE into runoff and eventually commence an orderly winding up and liquidation of PXRE operations over some period of time that is not currently determinable; (v) if the merger with Argonaut is not consummated and the Board of Directors elects to pursue a strategic alternative that does not involve the continuation of meaningful property catastrophe reinsurance business, there is a risk that the Company could incur additional material charges or termination fees in connection with our collateralized catastrophe facility and certain multiyear ceded reinsurance agreements; (vi) our ability to continue to operate our business and to consummate the merger with Argonaut or to identify, evaluate and complete any other strategic alternative is dependent on our ability to retain our management and other key employees, and we may not be able to do so; (vii) adverse events in 2006 negatively have affected the market price of our common shares, which may lead to further securities litigation, administrative proceedings or both being brought against us; (viii) reserving for losses includes significant estimates, which are also subject to inherent uncertainties; (ix) because of potential exposure to catastrophes in the future, our financial results may vary significantly from period to period; (x) we operate in a highly competitive environment and no assurance can be given that we will be able to compete effectively in this environment; (xi) reinsurance prices may decline, which could affect our profitability; (xii) we may require additional capital in the future; (xiii) our investment portfolio is subject to significant market and credit risks which could result in an adverse impact on our financial position or results; (xiv) we have exited the finite reinsurance business, but claims in respect of finite reinsurance could have an adverse effect on our results of operations; (xv) our reliance on reinsurance brokers exposes us to their credit risk; (xvi) we may be adversely affected by foreign currency fluctuations; (xvii) retrocessional reinsurance subjects us to credit risk and may become unavailable on acceptable terms; (xviii) we have exhausted our retrocessional coverage with respect to Hurricane Katrina, leaving us exposed to further losses; (xix) recoveries under our collateralized facility are triggered by modeled loss to a notional portfolio, rather than our actual losses arising from a catastrophe event, which creates a potential mismatch between the risks assumed through our inwards reinsurance business and the protection afforded by this facility; (xx) our inability to provide the necessary collateral could affect our ability to offer reinsurance in certain markets; (xxi) the insurance and reinsurance business is historically cyclical, and we may experience periods with excess underwriting capacity and unfavorable premium rates; conversely, we may have a shortage of underwriting capacity when premium rates are strong; (xxii) regulatory constraints may restrict our ability to operate our business; (xxiii) any determination by the United States Internal Revenue Service ("IRS") that we or our offshore subsidiaries are subject to U.S. taxation could result in a material adverse impact on the our financial position or results; and (xxiv) any changes in tax laws, tax treaties, tax rules and interpretations could result in a material adverse impact on our financial position or results. In addition to the factors outlined above that are directly related to PXRE's business, PXRE is also subject to general business risks, including, but not limited to, adverse state, federal or foreign legislation and regulation, adverse publicity or news coverage, changes in general economic factors, the loss of key employees and other factors set forth in PXRE's SEC filings. The factors listed above should not be construed as exhaustive. Therefore, actual results or outcomes may differ materially from what is expressed or forecasted in such forward-looking statements.
PXRE undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events (including catastrophe events), or otherwise.
These preliminary financial statements are unaudited and do not include footnotes that customarily accompany a complete set of financial statements; these footnotes will be furnished when the Company makes its filing on Form 10-K for the year ended December 31, 2006.
PXRE Consolidated Balance Sheets
Group Ltd. (Dollars in thousands, except par value per share)
December 31,
2006 2005
Assets
Investments:
Fixed maturities, at fair value:
Available-for-sale (amortized cost
$502,307 and $1,212,299, respectively) $502,254 $1,208,248
Trading (cost $14,794 and $28,225,
respectively) 15,497 25,796
Short-term investments, at fair value 671,197 261,076
Hedge funds, at fair value (cost $11,583 and
$132,690, respectively) 12,766 148,230
Other invested assets, at fair value
(cost $1,717 and $2,806, respectively) 2,427 3,142
Total investments 1,204,141 1,646,492
Cash 12,251 14,504
Accrued investment income 3,830 10,809
Premiums receivable, net 93,325 217,446
Other receivables 7,321 17,000
Reinsurance recoverable on paid losses 3,324 4,223
Reinsurance recoverable on unpaid losses 35,327 107,655
Ceded unearned premiums - 1,379
Deferred acquisition costs 8 5,487
Income tax recoverable - 6,295
Other assets 41,816 84,757
Total assets $1,401,343 $2,116,047
Liabilities
Losses and loss expenses $603,241 $1,320,126
Unearned premiums 113 32,512
Subordinated debt 167,089 167,081
Reinsurance balances payable 34,649 30,244
Deposit liabilities 54,425 68,270
Income tax payable 597 -
Other liabilities 44,462 32,496
Total liabilities 904,576 1,650,729
Shareholders' Equity
Serial convertible preferred shares, $1.00
par value, $10,000 stated value --
30 million shares authorized, 0.01 million
and 0.01 million shares issued and
outstanding, respectively 58,132 58,132
Common shares, $1.00 par value -- 350 million
shares authorized, 72.4 million and
72.3 million shares issued and outstanding,
respectively 72,351 72,281
Additional paid-in capital 873,142 875,224
Accumulated other comprehensive loss (100) (5,468)
Accumulated deficit (503,711) (527,349)
Restricted shares at cost (0.4 million and
0.5 million shares, respectively) (3,047) (7,502)
Total shareholders' equity 496,767 465,318
Total liabilities and shareholders' equity $1,401,343 $2,116,047
Consolidated Statements of Operations and Comprehensive
PXRE Operations
Group Ltd. (Dollars in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Revenues
Net premiums earned $(13,483) $156,653 $84,529 $388,324
Net investment income 14,893 14,643 60,654 45,292
Net realized investment
gains (losses) 172 (14,370) (7,809) (14,736)
Fee income 194 171 428 941
1,776 157,097 137,802 419,821
Losses and Expenses
Losses and loss expenses
incurred (241) 533,002 12,443 1,011,523
Commission and brokerage 815 17,888 19,126 49,900
Other reinsurance related
expense 7,124 936 17,862 936
Operating expenses 9,732 9,105 43,373 36,208
Foreign exchange (gains)
losses (168) (494) 1,444 (1,547)
Interest expense 3,627 3,615 14,455 14,452
20,889 564,052 108,703 1,111,472
(Loss) income before income
taxes and convertible preferred
share dividends (19,113) (406,955) 29,099 (691,651)
Income tax provision 597 39,510 597 5,907
Net (loss) income before
convertible preferred share
dividends $(19,710) $(446,465) $28,502 $(697,558)
Convertible preferred share
dividends 1,163 1,162 4,864 7,040
Net (loss) income to common
shareholders $(20,873) $(447,627) $23,638 $(704,598)
Comprehensive Operations,
Net of Tax
Net (loss) income before
convertible preferred share
dividends $(19,710) $(446,465) $28,502 $(697,558)
Net change in unrealized
appreciation (depreciation)
on investments 84 (4,435) (3,929) (12,061)
Reclassification adjustments
for losses included in net
(loss) income 20 11,952 7,996 12,164
Minimum additional pension
liability 1,847 (716) 1,970 (716)
Comprehensive (loss) income $(17,759) $(439,664) $34,539 $(698,171)
Per Share
Basic:
(Loss) income before
convertible preferred
share dividends $(0.27) $(8.43) $0.40 $(21.43)
Net (loss) income to
common shareholders $(0.29) $(8.45) $0.33 $(21.65)
Average shares
outstanding (000's) 72,006 52,987 71,954 32,541
Diluted:
Net (loss) income before
convertible preferred
share dividends $(0.29) $(8.45) $0.40 $(21.65)
Net (loss) income $(0.29) $(8.45) $0.33 $(21.65)
Average shares
outstanding (000's) 72,006 52,987 71,959 32,541
PXRE Consolidated Statements of Shareholders' Equity
Group (Dollars in thousands)
Ltd.
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Convertible Preferred Shares
Balance at beginning of
period $58,132 $58,132 $58,132 $163,871
Conversion of convertible
preferred shares - - - (109,108)
Dividends to convertible
preferred shareholders - - - 3,369
Balance at end of period $58,132 $58,132 $58,132 $58,132
Common Shares
Balance at beginning
of period $72,346 $29,395 $72,281 $20,469
Issuance of common
shares, net 5 42,886 70 51,812
Balance at end of period $72,351 $72,281 $72,351 $72,281
Additional Paid-in Capital
Balance at beginning of
period $873,009 $445,425 $875,224 $329,730
Issuance (cancellation) of
common shares, net 133 429,799 (2,082) 544,430
Tax effect of stock
options exercised - - - 1,064
Balance at end of period $873,142 $875,224 $873,142 $875,224
Accumulated Other Comprehensive
Operations
Balance at beginning
of period $(1,382) $(12,269) $(5,468) $(4,855)
Change in unrealized
gains on investments 104 7,517 4,067 103
Change in minimum additional
pension liability 1,847 (716) 1,970 (716)
Incremental effect of
applying FAS 158 (669) - (669) -
Balance at end of
period $(100) $(5,468) $(100) $(5,468)
(Accumulated Deficit)/Retained
Earnings
Balance at beginning
of period $(482,838) $(71,041) $(527,349) $194,081
Net (loss) income before
convertible preferred share
dividends (19,710) (446,465) 28,502 (697,558)
Dividends to convertible
preferred shareholders (1,163) (1,162) (4,864) (7,040)
Dividends to common
shareholders - (8,681) - (16,832)
Balance at end of period $(503,711) $(527,349) $(503,711) $(527,349)
Restricted Shares
Balance at beginning
of period $(3,598) $(9,683) $(7,502) $(6,741)
Cancellation (issuance) of
restricted shares, net - 1,503 2,376 (4,566)
Amortization of restricted
shares 551 678 2,079 3,805
Balance at end of period $(3,047) $(7,502) $(3,047) $(7,502)
Total Shareholders' Equity
Balance at beginning
of period $515,669 $439,959 $465,318 $696,555
Conversion of convertible
preferred shares - - - (109,108)
Issuance (cancellation) of
common shares, net 138 472,685 (2,012) 596,242
Restricted shares, net 551 2,181 4,455 (761)
Unrealized appreciation on
investments 104 7,517 4,067 103
Minimum additional pension
liability and effect of
applying FAS 158 1,178 (716) 1,301 (716)
Net (loss) income before
convertible preferred share
dividends (19,710) (446,465) 28,502 (697,558)
Dividends to convertible
preferred shareholders (1,163) (1,162) (4,864) (3,671)
Dividends to common
shareholders - (8,681) - (16,832)
Tax effect of stock
options exercised - - - 1,064
Balance at end of period $496,767 $465,318 $496,767 $465,318
PXRE Consolidated Statements of Cash Flows
Group (Dollars in thousands)
Ltd.
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Cash Flows from Operating
Activities
Premiums collected, net of
reinsurance $17,302 $10,147 $182,035 $301,982
Losses and loss adjustment
expenses paid, net of
reinsurance (123,585) (67,112) (620,947) (229,295)
Commission and brokerage
received (paid), net of
fee income 412 (14,617) (7,154) (28,727)
Operating expenses paid (11,213) (6,971) (45,967) (31,666)
Net investment income
received 14,191 13,825 57,180 37,788
Interest paid (1,385) (1,374) (14,338) (14,338)
Income taxes (paid)
recovered (31) (144) 6,295 18,328
Trading portfolio
purchased (8,499) - (38,392) (17,685)
Trading portfolio
disposed 7,222 - 50,139 3,369
Deposit paid (1,736) (2,060) (13,845) (3,873)
Other 473 (11,464) 10,747 (8,608)
Net cash (used) provided by
operating activities (106,849) (79,770) (434,247) 27,275
Cash Flows from Investing
Activities
Fixed maturities available
for sale purchased (23,068) (360,140) (90,510) (733,076)
Fixed maturities available
for sale disposed or
matured 50,178 58,747 794,485 209,763
Hedge funds purchased - (9,500) (4,000) (129,388)
Hedge funds disposed 6,017 8,170 145,097 123,219
Other invested assets
purchased - - (35) -
Other invested assets
disposed 186 1,494 1,577 3,738
Net change in short-
term investments 65,998 (86,850) (410,121) 35,242
Net cash provided
(used) by investing
activities 99,311 (388,079) 436,493 (490,502)
Cash Flows from Financing
Activities
Proceeds from
issuance of common
shares 138 474,222 628 483,169
Cash dividends paid
to common
shareholders - (8,681) - (16,832)
Cash dividends paid
to preferred
shareholders (1,163) (1,162) (4,864) (3,671)
Cost of shares
repurchased - (36) (263) (603)
Net cash (used)
provided by
financing activities (1,025) 464,343 (4,499) 462,063
Net change in cash (8,563) (3,506) (2,253) (1,164)
Cash, beginning of
period 20,814 18,010 14,504 15,668
Cash, end of period $12,251 $14,504 $12,251 $14,504
Reconciliation of net (loss)
income to net cash (used)
provided by operating
activities:
Net (loss) income before
convertible preferred share
dividends $(19,710) $(446,465) $28,502 $(697,558)
Adjustments to reconcile
net (loss) income to net
cash (used) provided by
operating activities:
Losses and loss
expenses (124,525) 334,684 (716,885) 860,041
Unearned premiums (4,709) (25,989) (31,020) 18,681
Deferred acquisition
costs 1,316 2,249 5,479 (3,742)
Receivables 17,229 (35,115) 133,800 (106,015)
Reinsurance balances
payable 18,504 (91,242) 4,405 19,307
Reinsurance
recoverable 698 166,359 73,228 (42,661)
Income taxes 566 39,365 6,892 24,507
Equity in earnings of
limited partnerships (264) (2,432) (6,460) (13,000)
Trading portfolio
purchased (8,499) - (38,392) (17,685)
Trading portfolio
disposed 7,222 - 50,139 3,369
Deposit liability (1,736) (2,060) (13,845) (3,873)
Receivable on
commutation - (35,154) 35,154 (35,154)
Other 7,059 16,030 34,756 21,058
Net cash (used)
provided
by operating
activities $(106,849) $(79,770) $(434,247) $27,275
Contact: Investors:
PXRE Group Ltd. Sard Verbinnen & Co
Robert P. Myron Jamie Tully/Lesley Bogdanow
Chief Financial Officer 212-687-8080
441-296-5858