Background
PXRE Group is a worldwide provider of catastrophe reinsurance products and services to both primary insurers and reinsurers. Since 1982, PXRE has been underwriting catastrophe and risk excess reinsurance, making it the original property catastrophe specialist.

For two decades, the company’s offerings have included: property catastrophe excess of loss; property catastrophe retrocessional excess of loss; property risk excess of loss; marine reinsurance; and aerospace reinsurance.

Over the past several years, PXRE has renewed its emphasis on its core competence, and in 2004, nearly 100 percent of its net premiums were written in the catastrophe and risk excess segment.

The company believes that the foundation of its success has been its strong relationships with key brokers and clients. The fact that 58 percent of its 2004 premium came from client relationships over 10 years old — and that the average tenure of its clients was nine years, as of December 31, 2004 — is a testament to PXRE’s ability to consistently and effectively meet clients’ needs.
Even more striking is the 29 percent of premium derived from client relationships 15 years or older — longer, the company points out, than most of its competitors have been in existence. PXRE credits the longevity of these relationships to a combination of factors, including superior service, excellent ratings, and perhaps most importantly, the company’s underwriting and risk management skills.

One of the company’s main achievements in 2004 was to complete its plan to focus PXRE around the company’s robust catastrophe and risk excess reinsurance business. PXRE’s core capabilities are catastrophe underwriting and risk management as demonstrated by a cumulative catastrophe and risk excess loss ratio of 51 percent that the company has achieved since 1987, its first full year as a public company.

Spotlight – The Crucible
The keys to PXRE’s out-performance in the area of risk management are its experienced underwriting staff, prudent exposure caps and underwriting technology centered on Crucible, the company’s underwriting management platform.

Crucibleallows PXRE to maintain strict controls throughout the underwriting process. By combining its proprietary retrocessional, aviation and per risk models with leading third-party catastrophe models, Crucibleenables PXRE to view all its business within one, internally consistent portfolio model. As a result, the company can effectively allocate capital to each individual transaction.

Crucible’s risk controls are supplemented with absolute caps on exposure to each geographic region, so that PXRE will be able to emerge from a worst-case scenario with its strong balance sheet intact to capitalise on post-event opportunities.

In addition, the company’s focused portfolio of short-tail business provides certainty as to size and scope of risks assumed.

Cruciblealso assists an experienced underwriting team in assessing risk by providing underwriters with portfolio risk analysis on a real-time basis. Underwriters are able to analyse each transaction’s impact on peak zones, modeled catastrophic events and portfolio volatility.

Analysis
PXRE focuses on short-tail, high-severity low-frequency lines of business, which it has successfully underwritten over the long term, although this strategy exposes the company to volatility in the short term. The company writes business in discrete geographic zones, such as the UK, continental Europe, Latin America, the Caribbean, Australia and Asia, as well as the US, and on a worldwide basis. PXRE diversifies its business by peril (i.e., by the type of catastrophe).

Among its lines of business are:

• Property catastrophe excess of loss reinsurance covers claims that arise from large catastrophes such as: hurricanes, windstorms, hailstorms, earthquakes, volcanic eruptions, fires, industrial explosions, freezes, riots, floods, and other man-made or natural disasters.
  Excess of loss products protect clients once their claims arising from a catastrophic event exceed a specified amount.
• Property catastrophe retrocessional reinsurance covers claims from other reinsurers or retrocedents, and is also excess of loss. However, retrocessional business is inherently more challenging because it involves an analysis of an additional level of exposure data.
  
• Property risk excess reinsurance protects clients from a single large loss from specific, individual properties (usually large manufacturing facilities, factories, etc.). This business is comprised of a highly diversified portfolio of property risk excess reinsurance agreements covering claims from individual insurance policies issued by ceding company clients. The marine portfolio is currently limited and provides retrocessional coverage primarily for large insured market losses in the off-shore energy, marine hull and cargo areas.
  
• Aerospace reinsurance is focused on the reinsurance of aircraft and satellite products. The company’s satellite business includes coverage for launches as well as limited in-orbit coverage. PXRE also underwrites satellite business on a proportional and excess of loss reinsurance basis.

Senior management
Chairman: Gerald Radke
President and CEO: Jeffrey Radke
COO: Guy Hengesbaugh
CFO: John Modin

Financial data
(half-year to June 30, 2005)
Gross premiums written: $192 million, up 20 percent
Net premiums earned: $163 million, up 18 percent
Net income: $61.6 million, up 9 percent
Shareholders’ equity: $764 million, up 20 percent

Website
www.pxregroup.com