Alterra Capital Reports Fourth Quarter and Year End 2012 Results
Alterra Capital Reports Fourth Quarter and Year End 2012 Results
Fourth Quarter Net Operating Loss of $0.52 per Diluted Share
2012 Net Operating Income of $1.18 per Diluted Share
2012 Diluted Book Value per Share Growth of 7.5%, including Dividends
Business Wire
HAMILTON, Bermuda -- February 5, 2013
Alterra Capital Holdings Limited (NASDAQ: ALTE; BSX: ALTE.BH) (“Alterra”)
today reported a net loss of $51.8 million, or a loss of $0.54 per diluted
share, for the fourth quarter of 2012, compared to net income of $30.9
million, or $0.30 per diluted share, for the same quarter of 2011.
The net operating loss for the fourth quarter of 2012 was $49.7 million, or a
loss of $0.52 per diluted share, compared to net operating income of $31.7
million, or $0.30 per diluted share, for the same quarter of 2011.
For the year ended December 31, 2012, Alterra reported net income of $143.8
million, or $1.43 per diluted share, compared to net income of $65.3 million,
or $0.61 per diluted share, for the year ended December 31, 2011. Net
operating income for the year ended December 31, 2012 was $119.1 million, or
$1.18 per diluted share, compared to net operating income of $96.6 million, or
$0.91 per diluted share, for the year ended December 31, 2011. Net operating
return on average shareholders’ equity for the year ended December 31, 2012
was 4.2%.
W. Marston (Marty) Becker, President and Chief Executive Officer of Alterra,
said: "Alterra's fourth quarter operating results were impacted heavily by
Hurricane Sandy. However, for the year, we are pleased to report net income of
$143.8 million and growth in diluted book value per share of 7.5%, including
dividends. Our 2012 results reflect the diversified underwriting strategy and
risk management discipline that has served us well, particularly in years with
major industry losses such as Sandy.
"On December 19 we ended the year with the announcement of a merger agreement
pursuant to which Alterra will be acquired by Markel Corporation. The
transaction is subject to shareholder and regulatory approval and is expected
to close in the first half of 2013. We believe the combined company will
establish itself as a leading specialty insurance and reinsurance company with
greater capacity and a broader range of products and services, and will be
better positioned for long-term success, including the creation of superior
shareholder value," Mr. Becker concluded.
Fourth quarter 2012 results for Alterra include:
* Property and casualty gross premiums written of $356.4 million,
representing an increase of $31.6 million or 9.7% compared to the same
quarter of 2011;
* Net premiums written of $242.6 million, representing an increase of $24.8
million or 11.4%, compared to the same quarter of 2011;
* A combined ratio on property and casualty business of 119.0%, compared to
97.4% for the same quarter of 2011;
* Significant property catastrophe event net losses of $115.0 million, net
of reinstatement premiums, related to Hurricane Sandy, principally within
the U.S. insurance segment, compared to net losses of $55.5 million, net
of reinstatement premiums, in the same quarter of 2011. A smaller
proportion of 2012's property catastrophe losses fell within the
attritional loss ratio, contributing to a higher combined ratio in 2012;
* Net favorable development on prior years’ loss reserves of $37.0 million,
or 10.8 combined ratio points, compared to $43.0 million, or 12.3 combined
ratio points, in the same quarter of 2011;
* Net investment income of $52.0 million, compared to $57.1 million in the
same quarter of 2011, a decrease of 8.8%;
* Income of $6.9 million from New Point Re IV Limited, a sidecar in which
Alterra has an indirect 34.8% equity interest, consisting of fees and
equity share earnings; and
* A deferred tax expense of $21.8 million to record a valuation allowance
against net deferred tax assets in the U.S. Uncertainty regarding the
future utilization of these deferred tax assets resulted in the valuation
allowance.
Gross premiums written and net premiums written from property and casualty
underwriting for the fourth quarter of 2012 are shown in the following table,
with the increase/decrease compared to the same quarter of 2011:
Segment ($ in GPW % Inc/(Dec) NPW % Combined
millions) Inc/(Dec) Ratio
Global Insurance $ 98.0 0.3% $ 49.3 3.7% 102.1%
Reinsurance 125.6 29.6% 114.7 21.5% 100.2%
U.S. Insurance 94.6 (7.5)% 38.7 (31.9)% 286.8%
Alterra at 38.2 36.9% 39.9 109.7% 96.6%
Lloyd’s
Total $ 356.4 9.7% $ 242.6 11.4% 119.0%
Results for the year ended December 31, 2012 include:
* Property and casualty gross premiums written of $1,968.6 million,
representing an increase of $67.9 million, or 3.6%, compared to the year
ended December 31, 2011;
* Net premiums written of $1,317.2 million, representing a decrease of
$111.8 million, or 7.8%, compared to the year ended December 31, 2011.
This decrease reflects increased property reinsurance premiums ceded in
order to manage aggregate property exposures across all segments, and a
decrease in net premiums written on the contract binding business in the
U.S. insurance segment resulting from the sale of the renewal rights for
this business in 2011;
* A combined ratio on property and casualty business of 99.5%, compared to
98.2% for the year ended December 31, 2011;
* Significant property catastrophe event net losses of $130.0 million, net
of reinstatement premiums, compared to net losses of $253.4 million, net
of reinstatement premiums, in 2011;
* Net underwriting losses of $17.5 million on agriculture reinsurance, net
of premiums and acquisition costs earned;
* Net favorable development on prior years’ loss reserves of $90.8 million,
or 6.7 combined ratio points, compared to $153.3 million, or 10.8 combined
ratio points, in 2011;
* Net investment income of $219.0 million, compared to $234.8 million in
2011, a decrease of 6.8%;
* Income of $30.3 million from New Point Re IV Limited consisting of fees
and equity share earnings; and
* A deferred tax expense of $24.6 million to record a valuation allowance
against net deferred tax assets in the U.S.
Gross premiums written and net premiums written from property and casualty
underwriting for the year ended December 31, 2012 are shown in the following
table, with the increase/decrease compared to the same period of 2011:
Segment ($ in GPW % NPW % Combined
millions) Inc/(Dec) Inc/(Dec) Ratio
Global $ 371.6 1.6% $ 182.3 (1.1)% 75.7%
Insurance
Reinsurance 898.5 (1.0)% 727.2 (11.7)% 91.5%
U.S. 399.1 6.5% 181.1 (22.0)% 142.0%
Insurance
Alterra at 299.5 18.3% 226.7 19.7% 109.8%
Lloyd’s
Total $ 1,968.6 3.6% $ 1,317.2 (7.8)% 99.5%
Balance Sheet
Total invested assets, including cash and cash equivalents, were $8,032.6
million as of December 31, 2012, an increase of $217.9 million from December
31, 2011. As of December 31, 2012, 95.9% of the fixed maturities portfolio (by
carrying value) was investment-grade, an increase from 94.4% as of December
31, 2011. As of December 31, 2012, the weighted average book yield of
Alterra’s cash and fixed maturities portfolio was 3.15%, and the weighted
average duration was 4.5 years.
Share repurchases under the Board-approved share repurchase authorization for
the year ended December 31, 2012 were 6,626,684 common shares at an average
price of $23.03 per share for a total of $152.6 million. Alterra did not
repurchase any common shares under the share repurchase authorization during
the fourth quarter of 2012. As of December 31, 2012, $301.7 million remained
under the share repurchase authorization.
Shareholders’ equity was $2,839.7 million as of December 31, 2012, an increase
of 1.1% from December 31, 2011. Diluted book value per share as of
December 31, 2012 was $28.34. Including dividends declared, diluted book value
per share decreased for the fourth quarter of 2012 by 3.6%, and grew by 7.5%
for the year ended December 31, 2012. Not included in shareholders’ equity as
of December 31, 2012 were $218.0 million of unrecognized gains on
held-to-maturity securities, which represented $2.18 in unrecognized diluted
book value per share.
A copy of Alterra’s fourth quarter financial supplement is available on
Alterra’s website at www.alterracap.com.
Alterra Capital Holdings Limited is a global enterprise dedicated to providing
diversified specialty insurance and reinsurance products to corporations,
public entities and property and casualty insurers.
Non-GAAP Financial Measures
In presenting Alterra’s results, management has included and discussed net
operating income, net operating income per diluted share, annualized net
operating return on average shareholders’ equity, net operating return on
average shareholders' equity and diluted tangible book value per share. These
measures are “non-GAAP financial measures” as defined in Regulation G.
Management believes that these non-GAAP financial measures, which may be
defined differently by other companies, allow for a more complete
understanding of Alterra’s business. These measures, however, should not be
viewed as a substitute for measures determined in accordance with U.S. GAAP.
The reconciliation of these measures to their respective most directly
comparable U.S. GAAP financial measures is presented in the attached financial
information in accordance with Regulation G.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
This release includes statements about future economic performance, finances,
expectations, plans and prospects of Alterra and Markel, both individually and
on a combined basis, that are forward-looking statements for purposes of the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. There are risks and uncertainties that could cause actual results to
differ materially from those expressed in or suggested by such statements. For
further information regarding factors affecting future results of Alterra and
Markel, please refer to their respective Annual Report on Form 10-K for the
year ended December 31, 2011 and Quarterly Reports on Form 10-Q and other
documents filed by Alterra and Markel since March 1, 2012 with the Securities
Exchange Commission (“SEC”). These documents are also available free of
charge, in the case of Alterra, by directing a request to Alterra through Joe
Roberts, Chief Financial Officer, or Susan Spivak Bernstein, Senior Vice
President, Investor Relations, at 441-295-8800 and, in the case of Markel, by
directing a request to Bruce Kay, Investor Relations, at 804-747-0136. Neither
Alterra nor Markel undertakes any obligation to update or revise publicly any
forward-looking statement whether as a result of new information, future
developments or otherwise.
This release contains certain forward-looking statements within the meaning of
the U.S. federal securities laws. Statements that are not historical facts,
including statements about Alterra's and Markel's beliefs, plans or
expectations, are forward-looking statements. These statements are based on
Alterra's or Markel's current plans, estimates and expectations. Some
forward-looking statements may be identified by use of terms such as
“believe,” “anticipate,” “intend,” “expect,” “project,” “plan,” “may,”
“should,” “could,” “will,” “estimate,” “predict,” “potential,” “continue,” and
similar words, terms or statements of a future or forward-looking nature. In
light of the inherent risks and uncertainties in all forward-looking
statements, the inclusion of such statements in this release should not be
considered as a representation by Alterra, Markel or any other person that
Alterra's or Markel's objectives or plans, both individually and on a combined
basis, will be achieved. A non-exclusive list of important factors that could
cause actual results to differ materially from those in such forward-looking
statements includes the following: (a) the occurrence of natural or man-made
catastrophic events with a frequency or severity exceeding expectations; (b)
the adequacy of loss reserves and the need to adjust such reserves as claims
develop over time; (c) the failure of any of the loss limitation methods the
parties employ; (d) any adverse change in financial ratings of either company
or their subsidiaries; (e) the effect of competition on market trends and
pricing; (f) cyclical trends, including with respect to demand and pricing in
the insurance and reinsurance markets; (g) changes in general economic
conditions, including changes in interest rates and/or equity values in the
United States of America and elsewhere; and (h) other factors set forth in
Alterra's and Markel's recent reports on Form 10-K, Form 10-Q and other
documents filed with the SEC by Alterra and Markel.
* * * * *
Risks and uncertainties relating to the proposed transaction include the risks
that: (1) the parties will not obtain the requisite shareholder or regulatory
approvals for the transaction; (2) the anticipated benefits of the transaction
will not be realized or the parties may experience difficulties in
successfully integrating the two companies; (3) the parties may not be able to
retain key personnel; (4) the conditions to the closing of the proposed merger
may not be satisfied or waived; (5) the outcome of any legal proceedings to
the extent initiated against Alterra or Markel or its respective directors and
officers following the announcement of the proposed merger is uncertain; (6)
the acquisition may involve unexpected costs; and (7) the businesses may
suffer as a result of uncertainty surrounding the acquisition. These risks, as
well as other risks of the combined company and its subsidiaries may be
different from what the companies expect, or have previously experienced, and
each party's management may respond differently to any of the aforementioned
factors. These risks, as well as other risks associated with the merger, are
more fully discussed in the joint proxy statement/prospectus of Markel and
Alterra that has been filed with the SEC. Readers are cautioned not to place
undue reliance on any forward-looking statements, which speak only as of the
date on which they are made.
ADDITIONAL INFORMATION ABOUT THE PROPOSED MERGER AND WHERE TO FIND IT:
This release relates to a proposed merger between Alterra and Markel. On
December 27, 2012, Markel filed with the SEC a registration statement on Form
S-4, and on January 18, 2013, Markel and Alterra each filed the definitive
joint proxy statement/prospectus. This release is not a substitute for the
definitive joint proxy statement/prospectus or any other document that Markel
or Alterra filed or may file with the SEC or send to its shareholders in
connection with the proposed merger. INVESTORS AND SECURITY HOLDERS ARE URGED
TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT
DOCUMENTS FILED OR THAT MAY BE FILED WITH THE SEC OR SENT TO SHAREHOLDERS AS
THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. All documents, when filed, will be
available free of charge at the SEC's website (www.sec.gov) or, in the case of
Alterra, by directing a request to Joe Roberts, Chief Financial Officer, or
Susan Spivak Bernstein, Senior Vice President, Investor Relations, at
441-295-8800 and, in the case of Markel, by directing a request to Bruce Kay,
Investor Relations, at 804-747-0136.
PARTICIPANTS IN THE SOLICITATION:
Alterra and Markel and their respective directors and executive officers may
be deemed to be participants in any solicitation of proxies from both
Alterra's and Markel's shareholders in favor of the proposed transaction.
Information about Alterra's directors and executive officers and their
ownership in Alterra common stock is available in the proxy statement dated
March 26, 2012 for Alterra's 2012 annual general meeting of shareholders.
Information about Markel's directors and executive officers and their
ownership of Markel common stock is available in the proxy statement dated
March 16, 2012 for Markel's 2012 annual meeting of shareholders.
ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per share and share
amounts)
December 31, December 31,
2012 2011
(Unaudited)
ASSETS
Cash and cash equivalents $ 440,298 $ 469,477
Fixed maturities, trading, at fair value 429,246 229,206
Fixed maturities, available for sale, at 5,647,303 5,501,925
fair value
Fixed maturities, held to maturity, at 852,266 874,259
amortized cost (fair value $1,070,308)
Equity method investments 92,050 13,670
Other investments, at fair value 316,955 272,845
Restricted cash and cash equivalents 254,458 453,367
Accrued interest income 65,361 71,322
Premiums receivable 729,877 715,154
Losses and benefits recoverable from 1,289,577 1,068,119
reinsurers
Deferred acquisition costs 146,328 145,850
Prepaid reinsurance premiums 247,740 212,238
Trades pending settlement 27,768 22,887
Goodwill and intangible assets 54,751 56,111
Other assets 64,272 79,417
Total assets $ 10,658,250 $ 10,185,847
LIABILITIES
Property and casualty losses $ 4,690,344 $ 4,216,538
Life and annuity benefits 1,159,545 1,190,697
Deposit liabilities 132,910 151,035
Funds withheld from reinsurers 92,733 112,469
Unearned property and casualty premiums 1,031,633 1,020,639
Reinsurance balances payable 157,199 134,354
Accounts payable and accrued expenses 107,742 110,380
Trades pending settlement 5,890 —
Senior notes 440,532 440,500
Total liabilities 7,818,528 7,376,612
SHAREHOLDERS’ EQUITY
Common shares (par value $1.00 per share);
96,059,645 (2011—102,101,950) shares 96,060 102,102
issued and outstanding
Additional paid-in capital 1,721,241 1,847,034
Accumulated other comprehensive income 244,172 166,957
Retained earnings 778,249 693,142
Total shareholders’ equity 2,839,722 2,809,235
Total liabilities and shareholders’ equity $ 10,658,250 $ 10,185,847
Book value per share $ 29.56 $ 27.51
Diluted book value per share $ 28.34 $ 26.91
Diluted tangible book value per share [a] $ 27.79 $ 26.37
Diluted shares outstanding 100,213,325 104,406,779
[a] Non-GAAP financial measure as defined by Regulation G.
ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
(Expressed in thousands of United States Dollars, except per share and share amounts)
Three Months Ended Year Ended
December 31, December 31,
2012 2011 2012 2011
REVENUES
Gross premiums $ 357,043 $ 325,983 $ 1,971,458 $ 1,904,066
written
Reinsurance premiums (113,881 ) (107,203 ) (651,699 ) (472,077 )
ceded
Net premiums written $ 243,162 $ 218,780 $ 1,319,759 $ 1,431,989
Earned premiums $ 504,757 $ 460,636 $ 1,962,685 $ 1,845,837
Earned premiums (161,125 ) (111,532 ) (597,462 ) (420,863 )
ceded
Net premiums earned 343,632 349,104 1,365,223 1,424,974
Net investment 52,039 57,080 218,964 234,846
income
Net realized and
unrealized gains 11,476 (5,775 ) 70,886 (38,339 )
(losses) on
investments
Total
other-than-temporary (3,143 ) (703 ) (9,552 ) (2,706 )
impairment losses
Portion of loss
recognized in other 2,766 1 2,644 (239 )
comprehensive income
(loss), before taxes
Net impairment
losses recognized in (377 ) (702 ) (6,908 ) (2,945 )
earnings
Other income 1,425 2,017 10,301 5,396
Total revenues 408,195 401,724 1,658,466 1,623,932
LOSSES AND EXPENSES
Net losses and loss 295,123 231,533 926,445 945,593
expenses
Claims and policy 17,006 14,564 55,582 59,382
benefits
Acquisition costs 66,595 64,380 250,413 261,102
Interest expense 8,355 13,296 35,644 43,688
Net foreign exchange (71 ) (753 ) (160 ) 1,312
(gains) losses
Merger and 3,289 — 3,289 —
acquisition expenses
General and
administrative 55,188 54,657 231,562 257,074
expenses
Total losses and 445,485 377,677 1,502,775 1,568,151
expenses
INCOME (LOSS) BEFORE (37,290 ) 24,047 155,691 55,781
TAXES
Income tax expense 14,520 (6,901 ) 11,885 (9,501 )
(benefit)
NET INCOME (LOSS) (51,810 ) 30,948 143,806 65,282
Holding (losses)
gains on available
for sale securities (2,988 ) (566 ) 114,263 97,044
arising in period
[a]
Net realized gains
on available for
sale securities (3,157 ) (3,103 ) (25,966 ) (11,179 )
included in net
income [a]
Portion of
other-than-temporary
impairment losses (2,765 ) (1 ) (2,643 ) 239
recognized in other
comprehensive income
[a]
Impact of net
unrealized
investment gains on (2,842 ) — (2,842 ) —
life & annuity
deferred acquisition
costs
Foreign currency
translation (9,308 ) (2,398 ) (5,597 ) (18,093 )
adjustment
Other comprehensive (21,060 ) (6,068 ) 77,215 68,011
income (loss)
COMPREHENSIVE INCOME $ (72,870 ) $ 24,880 $ 221,021 $ 133,293
(LOSS)
Net income (loss) $ (0.54 ) $ 0.30 $ 1.47 $ 0.62
per share
Net income (loss) $ (0.54 ) $ 0.30 $ 1.43 $ 0.61
per diluted share
Net operating (loss)
income per diluted $ (0.52 ) $ 0.30 $ 1.18 $ 0.91
share [b]
Weighted average
common shares 95,691,699 103,323,377 98,012,424 105,249,683
outstanding—basic
Weighted average
common shares 95,691,699 104,672,891 100,557,352 106,502,893
outstanding—diluted
[a] Net of tax.
[b] Non-GAAP financial measure as defined by Regulation G.
ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Year Ended December 31,
2012 2011
Common shares
Balance, beginning of year $ 102,102 $ 110,963
Issuance of common shares, net 842 1,529
Repurchase of shares (6,884 ) (10,390 )
Balance, end of year 96,060 102,102
Additional paid-in capital
Balance, beginning of year 1,847,034 2,026,045
Issuance of common shares, net 3,577 2,480
Stock based compensation expense 22,434 33,208
Repurchase of shares (151,804 ) (214,699 )
Balance, end of year 1,721,241 1,847,034
Accumulated other comprehensive income
Unrealized holdings gains on investments:
Balance, beginning of year 204,301 118,197
Holding gains on available for sale fixed 114,263 97,044
maturities arising in period, net of tax
Net realized gains on available for sale
securities included in net income, net of (25,966 ) (11,179 )
tax
Portion of other-than-temporary impairment
losses recognized in other comprehensive (2,643 ) 239
income, net of tax
Impact of net unrealized investment gains
on life & annuity deferred acquisition (2,842 ) —
costs
Balance, end of year 287,113 204,301
Cumulative foreign currency translation
adjustment:
Balance, beginning of year (37,344 ) (19,251 )
Foreign currency translation adjustment (5,597 ) (18,093 )
Balance, end of year (42,941 ) (37,344 )
Total accumulated other comprehensive 244,172 166,957
income, end of year
Retained earnings
Balance, beginning of year 693,142 682,316
Net income 143,806 65,282
Dividends (58,699 ) (54,456 )
Balance, end of year 778,249 693,142
Total shareholders’ equity $ 2,839,722 $ 2,809,235
ALTERRA CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASHFLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Year Ended December 31,
2012 2011
OPERATING ACTIVITIES
Net income $ 143,806 $ 65,282
Adjustments to reconcile net income to net
cash provided by operating activities:
Stock based compensation 22,434 33,208
Amortization of premium on fixed maturities 33,403 23,562
Accretion of deposit liabilities 1,816 9,298
Net realized and unrealized (gains) losses (70,886 ) 38,339
on investments
Net impairment losses recognized in earnings 6,908 2,945
Changes in:
Accrued interest income 5,996 4,079
Premiums receivable (10,822 ) (128,754 )
Losses and benefits recoverable from (219,516 ) (114,759 )
reinsurers
Deferred acquisition costs 3,348 (34,591 )
Prepaid reinsurance premiums (34,768 ) (63,564 )
Other assets 17,280 (1,476 )
Property and casualty losses 459,066 308,587
Life and annuity benefits (51,231 ) (59,010 )
Funds withheld from reinsurers (19,736 ) (8,680 )
Unearned property and casualty premiums 6,397 118,401
Reinsurance balances payable 22,711 31,931
Accounts payable and accrued expenses (3,093 ) 10,769
Cash provided by operating activities 313,113 235,567
INVESTING ACTIVITIES
Purchases of available for sale securities (2,236,243 ) (2,317,677 )
Sales of available for sale securities 923,875 1,311,423
Redemptions/maturities of available for sale 1,250,105 965,974
securities
Purchases of trading securities (532,454 ) (76,355 )
Sales of trading securities 305,184 24,563
Redemptions/maturities of trading securities 37,283 68,848
Purchases of held to maturity securities — (2,580 )
Redemptions/maturities of held to maturity 32,040 45,713
securities
Net (purchases) sales of other investments (28,175 ) 60,783
Net purchases of equity method investments (66,145 ) (6,766 )
Dividends from equity method investments 8,694 —
Change in restricted cash and cash 198,909 (103,458 )
equivalents
Cash used in investing activities (106,927 ) (29,532 )
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 4,419 4,009
Repurchase of common shares (158,688 ) (225,089 )
Dividends paid (58,322 ) (54,456 )
Additions to deposit liabilities 8,940 1,061
Payments of deposit liabilities (28,881 ) (6,733 )
Cash used in financing activities (232,532 ) (281,208 )
Effect of exchange rate changes on foreign (2,833 ) (11,047 )
currency cash and cash equivalents
Net decrease in cash and cash equivalents (29,179 ) (86,220 )
Cash and cash equivalents, beginning of year 469,477 555,697
CASH AND CASH EQUIVALENTS, END OF YEAR $ 440,298 $ 469,477
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid totaled $28,400 and $28,582 for the years ended December 31,
2012 and 2011, respectively.
Income taxes paid totaled $7,954 and $2,049 for the years ended December 31,
2012 and 2011, respectively.
ALTERRA CAPITAL HOLDINGS LIMITED
SCHEDULE OF SUPPLEMENTAL SEGMENT DATA - THREE MONTHS ENDED DECEMBER 31, 2012 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty Life &
Global U.S. Reinsurance Alterra at Total Annuity Corporate Consolidated
Insurance Insurance Lloyd’s Reinsurance
Gross premiums $ 97,964 $ 94,587 $ 125,630 $ 38,233 $ 356,414 $ 629 $ — $ 357,043
written
Reinsurance (48,698 ) (55,863 ) (10,950 ) 1,704 (113,807 ) (74 ) — (113,881 )
premiums ceded
Net premiums $ 49,266 $ 38,724 $ 114,680 $ 39,937 $ 242,607 $ 555 $ — $ 243,162
written
Earned $ 94,486 $ 98,142 $ 240,252 $ 71,248 $ 504,128 $ 629 $ — $ 504,757
premiums
Earned (47,524 ) (62,839 ) (41,447 ) (9,241 ) (161,051 ) (74 ) — (161,125 )
premiums ceded
Net premiums 46,962 35,303 198,805 62,007 343,077 555 — 343,632
earned
Net losses and (39,503 ) (85,476 ) (130,869 ) (39,275 ) (295,123 ) — — (295,123 )
loss expenses
Claims and
policy — — — — — (17,006 ) — (17,006 )
benefits
Acquisition (552 ) (4,915 ) (49,339 ) (11,880 ) (66,686 ) 91 — (66,595 )
costs
General and
administrative (7,871 ) (10,849 ) (19,002 ) (8,722 ) (46,444 ) (76 ) — (46,520 )
expenses
Other income — — 1,400 — 1,400 — — 1,400
Underwriting $ (964 ) $ (65,937 ) $ 995 $ 2,130 $ (63,776 ) n/a — n/a
income (loss)
Net investment 13,727 38,312 52,039
income
Net realized and unrealized 11,476 11,476
gains on investments
Net impairment
losses (377 ) (377 )
recognized in
earnings
Corporate 25 25
other income
Interest (8,355 ) (8,355 )
expense
Net foreign 71 71
exchange gains
Merger and
acquisition (3,289 ) (3,289 )
expenses
Corporate
general and (8,668 ) (8,668 )
administrative
expenses
Income (loss) $ (2,709 ) $ 29,195 $ (37,290 )
before taxes
Loss ratio (a) 84.1 % 242.1 % 65.8 % 63.3 % 86.0 %
Acquisition 1.2 % 13.9 % 24.8 % 19.2 % 19.4 %
cost ratio (b)
General and
administrative 16.8 % 30.7 % 9.6 % 14.1 % 13.5 %
expense ratio
(c)
Combined ratio 102.1 % 286.8 % 100.2 % 96.6 % 119.0 %
(d)
SCHEDULE OF SUPPLEMENTAL SEGMENT DATA - YEAR ENDED DECEMBER 31, 2012 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty Life &
Global U.S. Reinsurance Alterra at Total Annuity Corporate Consolidated
Insurance Insurance Lloyd’s Reinsurance
Gross premiums $ 371,638 $ 399,061 $ 898,453 $ 299,458 $ 1,968,610 $ 2,848 $ — $ 1,971,458
written
Reinsurance (189,330 ) (217,964 ) (171,285 ) (72,789 ) (651,368 ) (331 ) — (651,699 )
premiums ceded
Net premiums $ 182,308 $ 181,097 $ 727,168 $ 226,669 $ 1,317,242 $ 2,517 $ — $ 1,319,759
written
Earned $ 373,918 $ 394,870 $ 911,019 $ 280,030 $ 1,959,837 $ 2,848 $ — $ 1,962,685
premiums
Earned (188,416 ) (200,007 ) (142,870 ) (65,838 ) (597,131 ) (331 ) — (597,462 )
premiums ceded
Net premiums 185,502 194,863 768,149 214,192 1,362,706 2,517 — 1,365,223
earned
Net losses and (111,940 ) (206,862 ) (444,321 ) (163,322 ) (926,445 ) — — (926,445 )
loss expenses
Claims and
policy — — — — — (55,582 ) — (55,582 )
benefits
Acquisition (974 ) (23,184 ) (187,078 ) (38,861 ) (250,097 ) (316 ) — (250,413 )
costs
General and
administrative (27,593 ) (46,658 ) (71,633 ) (33,015 ) (178,899 ) (303 ) — (179,202 )
expenses
Other income 816 81 9,296 8 10,201 — — 10,201
Underwriting $ 45,811 $ (81,760 ) $ 74,413 $ (20,998 ) $ 17,466 n/a — n/a
income (loss)
Net investment 55,193 163,771 218,964
income
Net realized and unrealized 70,886 70,886
gains on investments
Net impairment
losses (6,908 ) (6,908 )
recognized in
earnings
Corporate 100 100
other income
Interest (35,644 ) (35,644 )
expense
Net foreign 160 160
exchange gains
Merger and
acquisition (3,289 ) (3,289 )
expenses
Corporate
general and (52,360 ) (52,360 )
administrative
expenses
Income before $ 1,509 $ 136,716 $ 155,691
taxes
Loss ratio (a) 60.3 % 106.2 % 57.8 % 76.3 % 68.0 %
Acquisition 0.5 % 11.9 % 24.4 % 18.1 % 18.4 %
cost ratio (b)
General and
administrative 14.9 % 23.9 % 9.3 % 15.4 % 13.1 %
expense ratio
(c)
Combined ratio 75.7 % 142.0 % 91.5 % 109.8 % 99.5 %
(d)
(a) The loss ratio is calculated by dividing net losses and loss expenses by
net premiums earned.
(b) The acquisition cost ratio is calculated by dividing acquisition costs by
net premiums earned.
(c) The general and administrative expense ratio is calculated by dividing
general and administrative expenses by net premiums earned.
(d) The combined ratio is calculated by dividing the sum of net losses and
loss expenses, acquisition costs and general and administrative expenses by
net premiums earned.
n/a Not applicable
Percentage totals may not add due to rounding.
SCHEDULE OF SUPPLEMENTAL SEGMENT DATA - THREE MONTHS ENDED DECEMBER 31, 2011 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty Life &
Global U.S. Reinsurance Alterra at Total Annuity Corporate Consolidated
Insurance Insurance Lloyd’s Reinsurance
Gross premiums $ 97,660 $ 102,279 $ 96,942 $ 27,933 $ 324,814 $ 1,169 $ — $ 325,983
written
Reinsurance (50,172 ) (45,443 ) (2,546 ) (8,888 ) (107,049 ) (154 ) — (107,203 )
premiums ceded
Net premiums $ 47,488 $ 56,836 $ 94,396 $ 19,045 $ 217,765 $ 1,015 $ — $ 218,780
written
Earned $ 91,077 $ 90,048 $ 225,492 $ 52,850 $ 459,467 $ 1,169 $ — $ 460,636
premiums
Earned (42,827 ) (34,078 ) (19,521 ) (14,952 ) (111,378 ) (154 ) — (111,532 )
premiums ceded
Net premiums 48,250 55,970 205,971 37,898 348,089 1,015 — 349,104
earned
Net losses and (15,152 ) (45,129 ) (106,906 ) (64,346 ) (231,533 ) — — (231,533 )
loss expenses
Claims and
policy — — — — — (14,564 ) — (14,564 )
benefits
Acquisition (1,084 ) (8,349 ) (46,839 ) (7,977 ) (64,249 ) (131 ) — (64,380 )
costs
General and
administrative (6,952 ) (12,299 ) (16,690 ) (7,271 ) (43,212 ) (67 ) — (43,279 )
expenses
Other income (128 ) 84 (100 ) 851 707 413 — 1,120
Underwriting $ 24,934 $ (9,723 ) $ 35,436 $ (40,845 ) $ 9,802 n/a — n/a
income (loss)
Net investment 11,515 45,565 57,080
income
Net realized and unrealized (5,509 ) (266 ) (5,775 )
losses on investments
Net impairment
losses (702 ) (702 )
recognized in
earnings
Corporate 897 897
other income
Interest (13,296 ) (13,296 )
expense
Net foreign 753 753
exchange gains
Corporate
general and (11,378 ) (11,378 )
administrative
expenses
Income (loss) $ (7,328 ) $ 21,573 $ 24,047
before taxes
Loss ratio (a) 31.4 % 80.6 % 51.9 % 169.8 % 66.5 %
Acquisition 2.2 % 14.9 % 22.7 % 21.0 % 18.5 %
cost ratio (b)
General and
administrative 14.4 % 22.0 % 8.1 % 19.2 % 12.4 %
expense ratio
(c)
Combined ratio 48.1 % 117.5 % 82.7 % 210.0 % 97.4 %
(d)
SCHEDULE OF SUPPLEMENTAL SEGMENT DATA - YEAR ENDED DECEMBER 31, 2011 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty Life &
Global U.S. Reinsurance Alterra at Total Annuity Corporate Consolidated
Insurance Insurance Lloyd’s Reinsurance
Gross premiums $ 365,761 $ 374,696 $ 907,186 $ 253,067 $ 1,900,710 $ 3,356 $ — $ 1,904,066
written
Reinsurance (181,454 ) (142,566 ) (83,984 ) (63,708 ) (471,712 ) (365 ) — (472,077 )
premiums ceded
Net premiums $ 184,307 $ 232,130 $ 823,202 $ 189,359 $ 1,428,998 $ 2,991 $ — $ 1,431,989
written
Earned $ 364,087 $ 337,041 $ 916,688 $ 224,665 $ 1,842,481 $ 3,356 $ — $ 1,845,837
premiums
Earned (175,348 ) (113,718 ) (70,510 ) (60,922 ) (420,498 ) (365 ) — (420,863 )
premiums ceded
Net premiums 188,739 223,323 846,178 163,743 1,421,983 2,991 — 1,424,974
earned
Net losses and (91,753 ) (153,558 ) (541,959 ) (158,323 ) (945,593 ) — — (945,593 )
loss expenses
Claims and
policy — — — — — (59,382 ) — (59,382 )
benefits
Acquisition 517 (36,404 ) (187,853 ) (36,805 ) (260,545 ) (557 ) — (261,102 )
costs
General and
administrative (28,377 ) (45,171 ) (85,019 ) (31,304 ) (189,871 ) (648 ) — (190,519 )
expenses
Other income 686 279 1,225 1,204 3,394 382 — 3,776
Underwriting $ 69,812 $ (11,531 ) $ 32,572 $ (61,485 ) $ 29,368 n/a — n/a
income (loss)
Net investment 48,534 186,312 234,846
income
Net realized and unrealized (10,408 ) (27,931 ) (38,339 )
losses on investments
Net impairment
losses (2,945 ) (2,945 )
recognized in
earnings
Corporate 1,620 1,620
other income
Interest (43,688 ) (43,688 )
expense
Net foreign
exchange (1,312 ) (1,312 )
losses
Corporate
general and (66,555 ) (66,555 )
administrative
expenses
Income (loss) $ (19,088 ) $ 45,501 $ 55,781
before taxes
Loss ratio (a) 48.6 % 68.8 % 64.0 % 96.7 % 66.5 %
Acquisition (0.3 )% 16.3 % 22.2 % 22.5 % 18.3 %
cost ratio (b)
General and
administrative 15.0 % 20.2 % 10.0 % 19.1 % 13.4 %
expense ratio
(c)
Combined ratio 63.4 % 105.3 % 96.3 % 138.3 % 98.2 %
(d)
(a) The loss ratio is calculated by dividing net losses and loss expenses by
net premiums earned.
(b) The acquisition cost ratio is calculated by dividing acquisition costs by
net premiums earned.
(c) The general and administrative expense ratio is calculated by dividing
general and administrative expenses by net premiums earned.
(d) The combined ratio is calculated by dividing the sum of net losses and
loss expenses, acquisition costs and general and administrative expenses by
net premiums earned.
n/a Not applicable
Percentage totals may not add due to rounding.
ALTERRA CAPITAL HOLDINGS LIMITED
SCHEDULE OF SUPPLEMENTAL PREMIUM DATA - YEAR ENDED DECEMBER 31, 2012 (Unaudited)
(Expressed in thousands of United States Dollars)
Year Ended December 31, Year Ended December 31,
2012 2011
Percentage Percentage
Gross of Total Movement Gross of Total
Premiums Gross on Prior Premiums Gross
Written Premiums Year Written [a] Premiums
Written Period Written
[a]
Property &
Casualty:
Global
Insurance:
Aviation S $ 27,514 1.4 % (15.0 )% $ 32,376 1.7 %
Excess L 102,754 5.2 % 4.2 % 98,582 5.2 %
Liability
Professional L 166,457 8.4 % 5.4 % 157,881 8.3 %
Liability
Property S 74,913 3.8 % (2.6 )% 76,922 4.0 %
371,638 18.9 % 1.6 % 365,761 19.2 %
U.S.
Insurance:
General/Excess L 100,265 5.1 % (4.2 )% 104,654 5.5 %
Liability
Marine S 100,887 5.1 % 14.0 % 88,493 4.6 %
Professional L 61,238 3.1 % 38.6 % 44,169 2.3 %
Liability
Property S 136,671 6.9 % (0.5 )% 137,380 7.2 %
399,061 20.2 % 6.5 % 374,696 19.7 %
Reinsurance:
Agriculture S 23,074 1.2 % (24.8 )% 30,682 1.6 %
Auto S 53,443 2.7 % (45.7 )% 98,360 5.2 %
Aviation S 28,332 1.4 % 77.2 % 15,991 0.8 %
Credit/Surety S 64,978 3.3 % 57.7 % 41,210 2.2 %
General L 83,212 4.2 % 11.5 % 74,652 3.9 %
Casualty
Marine & S 25,851 1.3 % 7.7 % 24,012 1.3 %
Energy
Medical L 22,708 1.2 % (39.2 )% 37,345 2.0 %
Malpractice
Other S 4,081 0.2 % 32.9 % 3,071 0.2 %
Professional L 164,719 8.4 % 3.4 % 159,293 8.4 %
Liability
Property S 382,566 19.4 % 8.7 % 351,791 18.5 %
Whole Account S/L 6,302 0.3 % (82.4 )% 35,800 1.9 %
Workers' L 39,187 2.0 % 12.0 % 34,979 1.8 %
Compensation
898,453 45.6 % (1.0 )% 907,186 47.6 %
Alterra at
Lloyd's:
Accident & S 43,045 2.2 % 16.0 % 37,093 1.9 %
Health
Agriculture S 18,321 0.9 % n/m — —
Aviation S 16,287 0.8 % 22.7 % 13,269 0.7 %
Financial L 26,238 1.3 % (3.6 )% 27,205 1.4 %
Institutions
International L 65,919 3.3 % 27.0 % 51,902 2.7 %
Casualty
Marine S 9,262 0.5 % n/m 1,493 0.1 %
Professional L 20,053 1.0 % (3.1 )% 20,696 1.1 %
Liability
Property S 100,333 5.1 % (1.1 )% 101,409 5.3 %
299,458 15.2 % 18.3 % 253,067 13.3 %
Aggregate
Property & $ 1,968,610 99.9 % 3.6 % $ 1,900,710 99.8 %
Casualty
Life &
Annuity:
Life $ 2,848 0.1 % 86.1 % $ 1,530 0.1 %
Annuity — — (100.0 )% 1,826 0.1 %
Aggregate Life $ 2,848 0.1 % (15.1 )% $ 3,356 0.2 %
& Annuity
Aggregate
Property & $ 1,971,458 100.0 % 3.5 % $ 1,904,066 100.0 %
Casualty and
Life & Annuity
S = Short tail $ 1,112,708 56.5 % $ 1,071,452 56.4 %
lines
L = Long tail 855,902 43.5 % 829,258 43.6 %
lines
Aggregate
Property & $ 1,968,610 $ 1,900,710
Casualty
Property [b] $ 694,483 35.3 % $ 667,502 35.1 %
Casualty [c] 852,750 43.3 % 811,358 42.7 %
Specialty [d] 421,377 21.4 % 421,850 22.2 %
Aggregate
Property & $ 1,968,610 $ 1,900,710
Casualty
[a] Comparative period has been re-presented to conform with the current
period's presentation.
[b] Property includes property lines of business.
[c] Casualty includes excess liability, financial institutions, general
liability, international casualty, medical malpractice, professional liability
and workers' compensation lines of business.
[d] Specialty includes accident & health, agriculture, auto, aviation, credit,
energy, marine, other, surety and whole account lines of business.
Percentage totals may not add due to rounding.
n/m Not meaningful.
ALTERRA CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS (UNAUDITED)
Net Operating Income and Net Operating Income per Diluted Share
(Expressed in thousands of United States Dollars, except per share and share
amounts)
Three Months Ended December Year Ended December 31,
31,
2012 2011 2012 2011
Net income
(loss) $ (37,290 ) $ 24,047 $ 155,691 $ 55,781
before tax
Net
realized
and
unrealized
(gains)
losses on
investments (888 ) 1,059 (28,964 ) 29,486
not
included in
operating
income,
before tax
[a]
Foreign
exchange
(gains) (71 ) (753 ) (160 ) 1,312
losses,
before tax
Merger and
acquisition 3,239 — 3,239 —
expenses,
before tax
Net
operating
income $ (35,010 ) $ 24,353 $ 129,806 $ 86,579
(loss)
before tax
Net income $ (51,810 ) $ 30,948 $ 143,806 $ 65,282
(loss)
Net
realized
and
unrealized
(gains)
losses on (1,094 ) 1,271 (27,826 ) 30,391
investments
not
included in
operating
income, net
of tax [a]
Foreign
exchange
(gains) (48 ) (534 ) (116 ) 927
losses, net
of tax
Merger and
acquisition 3,239 — 3,239 —
expenses,
net tax
Net
operating $ (49,713 ) $ 31,685 $ 119,103 $ 96,600
income
(loss)
Net income
(loss) per $ (0.54 ) $ 0.30 $ 1.43 $ 0.61
diluted
share
Net
realized
and
unrealized
(gains)
losses on (0.01 ) 0.01 (0.28 ) 0.29
investments
not
included in
operating
income, net
of tax [a]
Foreign
exchange — (0.01 ) — 0.01
losses, net
of tax
Merger and
acquisition 0.03 — 0.03 —
expenses,
net of tax
Net
operating
income $ (0.52 ) $ 0.30 $ 1.18 $ 0.91
(loss) per
diluted
share
Weighted
average
shares 95,691,699 103,323,377 98,012,424 105,249,683
outstanding
- basic
Weighted
average
shares 95,691,699 104,672,891 100,557,352 106,502,893
outstanding
- diluted
[a] Net realized and unrealized (gains) losses on investments not included in
operating income includes realized and unrealized (gains) losses on trading
securities, realized (gains) losses on available for sale securities, net
impairment losses recognized in earnings, earnings from equity method
investments in run-off and changes in fair value of derivatives, catastrophe
bonds and structured deposits.
Per share totals may not add due to rounding.
Annualized Net Operating Return on Average Shareholders' Equity
(Expressed in thousands of United States Dollars)
Three Months Ended December Year Ended December 31,
31,
2012 2011 2012 2011
Net income $ (51,810 ) $ 30,948 $ 143,806 $ 65,282
(loss)
Annualized
net income (207,240 ) 123,792 143,806 65,282
(loss)
Net operating $ (49,713 ) $ 31,685 $ 119,103 $ 96,600
income (loss)
Annualized
net operating (198,852 ) 126,740 119,103 96,600
income (loss)
Average
shareholders' $ 2,881,449 $ 2,826,987 $ 2,862,663 $ 2,806,191
equity [b]
Annualized
return on
average (7.2 )% 4.4 % 5.0 % 2.3 %
shareholders'
equity
Annualized
net operating
return on (6.9 )% 4.5 % 4.2 % 3.4 %
average
shareholders'
equity
[b] Average shareholders equity is computed as the average of the quarterly
average shareholders' equity balances.
Diluted Tangible Book Value Per Share
(Expressed in thousands of United States Dollars, except per share and share
amounts)
December 31, 2012 December 31, 2011
Shareholders' equity $ 2,839,722 $ 2,809,235
Goodwill and intangible assets 54,751 56,111
Tangible book value $ 2,784,971 $ 2,753,124
Diluted shares outstanding 100,213,325 104,406,779
Diluted tangible book value per $ 27.79 $ 26.37
share
ALTERRA CAPITAL HOLDINGS LIMITED
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA - DECEMBER 31, 2012 (UNAUDITED)
(Expressed in thousands of United States Dollars)
Type of As of Investment As of Investment
Investment December Distribution December Distribution
31, 2012 31, 2011
Cash and cash
equivalents $ 694,756 8.6 % $ 922,844 11.8 %
(restricted and
unrestricted)
U.S. government $ 885,370 11.0 % $ 751,806 9.6 %
and agencies
Non-U.S. 246,712 3.1 % 164,621 2.1 %
governments
Corporate 2,610,605 32.5 % 2,646,358 33.9 %
securities
Municipal 273,336 3.4 % 263,007 3.4 %
securities
Asset-backed 371,597 4.6 % 247,965 3.2 %
securities
Residential
mortgage-backed 1,234,670 15.4 % 1,296,277 16.6 %
securities
Commercial
mortgage-backed 454,259 5.7 % 361,097 4.6 %
securities
Fixed
maturities at $ 6,076,549 75.6 % $ 5,731,131 73.3 %
fair value
U.S. government $ 27,639 0.3 % $ 29,201 0.4 %
and agencies
Non-U.S. 527,843 6.6 % 524,449 6.7 %
governments
Corporate 296,360 3.7 % 319,609 4.1 %
securities
Asset-backed 424 — 1,000 —
securities
Fixed
maturities at $ 852,266 10.6 % $ 874,259 11.2 %
amortized cost
Equity method $ 92,050 1.1 % $ 13,670 0.2 %
investments
Other $ 316,955 3.9 % $ 272,845 3.5 %
investments
Total invested $ 8,032,576 100.0 % $ 7,814,749 100.0 %
assets
As of Ratings As of Ratings
Credit Rating December Distribution December Distribution
31, 2012 31, 2011
U.S. government
and agencies $ 2,092,893 30.2 % $ 1,869,405 28.3 %
[a]
AAA 1,170,299 16.9 % 948,861 14.4 %
AA 693,411 10.0 % 883,783 13.4 %
A 1,520,959 22.0 % 1,378,361 20.9 %
BBB 320,215 4.6 % 281,983 4.3 %
BB 67,041 1.0 % 84,803 1.3 %
B 158,934 2.3 % 131,159 2.0 %
CCC or lower 38,420 0.6 % 53,157 0.8 %
Not rated 14,377 0.2 % 99,619 1.5 %
Fixed
maturities at $ 6,076,549 87.7 % $ 5,731,131 86.8 %
fair value
U.S. government $ 27,639 0.4 % $ 29,201 0.4 %
and agencies
AAA 406,659 5.9 % 619,832 9.4 %
AA 284,282 4.1 % 82,511 1.2 %
A 99,235 1.4 % 117,600 1.8 %
BBB 32,031 0.5 % 24,117 0.4 %
BB 2,420 — 998 —
Fixed
maturities at $ 852,266 12.3 % $ 874,259 13.2 %
amortized cost
Total fixed $ 6,928,815 100.0 % $ 6,605,390 100.0 %
maturities
[a] Included within U.S. government and agencies are agency-issued residential
mortgage-backed securities with a fair value of $1,207,523 (December 31, 2011:
$1,117,599).
Percentage totals may not add due to rounding.
<td class="bwpadl0 bwnowrap bwpadr0 bwvertalignb bwalignr" colspa*Story too
large*
Three Months Ended December Year Ended December 31,
31,
2012 2011 2012 2011
Net investment $ 52,039 $ 57,080 $ 218,964 $ 234,846
income
Realized and
unrealized
(losses) gains (1,322 ) 763 3,952 2,031
on trading fixed
maturities
Net realized
gains on
available for 3,312 1,990 26,148
sale fixed
maturities
[TRUNCATED]
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