REAC SHAREHOLDERS FACES LONG WAIT FOR PAYOUTS

Shareholders of Sydney-based Reinsurance Australia Corp (ReAC) have been warned that they still face a wait of “some years” before they receive any cash from the failed company, IFD ’s sister publication the Re Report notes today. The forecast was made as the reinsurer disclosed that it has been forced to pursue legal action against a number of cedants, brokers and retrocessionaires that are claimed to owe it money. The legal battles, together with uncertainty over some remaining reinsurance contracts, mean that the company’s run-off might not be resolved for years, it warned. ReAC ran into problems in the late 1990s, following a succession of hefty catastrophe claims. It reported a loss of A$467m in 1998, followed by a A$373m deficit the following year. The deepening problems led to the departure of several senior executives and eventually resulted in the company entering run-off early in 2000. The remaining staff have since been forced to work closely with the Australian Prudential Regulation Authority, which appointed an inspector nearly two years ago when ReAC breached domestic solvency requirements. The latest developments emerged as the reinsurer reported its results for 2001. ReAC’s loss last year was A$1.1m, down from the 2000 figure of A$15.2m. Despite underwriting no new policies last year, the company noted that it had A$7.4m of unearned premium income at the end of December 2000 exposed to events in 2001 and beyond. It reported that its 2001 underwriting loss of A$23.6m was largely offset by investment earnings of A$22.5m.