<PAGE>
UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
----------------------
FORM 10 - Q
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Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
_________________
For Quarter Ended June 30, 1999 Commission file Number 0-11538
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Overseas Partners Ltd.
--------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Islands of Bermuda N/A
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Mintflower Place, 8 Par-la-Ville Road, Hamilton HM 08, Bermuda
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (441) 295-0788
--------------------
Not Applicable
--------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO ___
---
Common Stock, par value $.10 per share
--------------------------------------
(Title of Class)
127,500,000 Shares
------------------
Outstanding at August 16, 1999
<PAGE>
PART I, FINANCIAL INFORMATION
-----------------------------
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(In thousands, except share and per share amounts)
---------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
-------- -----------
1999 1998
---- ----
(Unaudited)
-----------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 304,853 $ 170,855
Investments:
Trading, at fair value-
Debt securities (amortized cost 1999-$541,098, 1998-$508,427) 512,755 536,017
Equity securities (cost 1999 -$1,391,260, 1998 -$1,353,321) 1,865,031 1,657,751
Restricted investments, held-to-maturity, at amortized cost
(fair value 1999-$268,263, 1998 -$292,236) 244,141 244,821
Receivables 797,092 500,710
Deferred acquisition costs 107,040 79,450
Real estate and leasing:
Operating leases with UPS 100,093 101,340
Finance leases 46,106 46,779
Hotel 162,264 164,601
Office buildings 799,301 810,033
Other assets
Goodwill 21,000 22,242
Other 55,415 33,744
- --------------------------------------------------------------------------------------------------------
Total assets $5,015,091 $4,368,343
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND MEMBERS' EQUITY:
Liabilities:
Accrued losses and loss expenses $ 655,472 $ 468,326
Unearned premiums 538,394 352,392
Reinsurance balances payable 38,868 28,293
Accounts payable and other accruals 53,187 55,403
Income taxes payable 16,862 18,565
Long-term debt 871,058 875,684
Minority interest 43,641 45,011
- --------------------------------------------------------------------------------------------------------
Total liabilities 2,217,482 1,843,674
- --------------------------------------------------------------------------------------------------------
Members' equity:
Preference Stock, par value $0.10 per share; authorized 200 million shares;
none issued -- --
Common Stock, par value $0.10 per share; authorized 900 million shares;
issued and outstanding, 127.5 million shares in 1999 and 1998 12,750 12,750
Contributed surplus 39,991 39,757
Retained earnings 2,755,338 2,476,865
Treasury stock (527,710 shares - 1999, 276,662 shares - 1998), at cost (10,470) (4,703)
- --------------------------------------------------------------------------------------------------------
Total members' equity 2,797,609 2,524,669
- --------------------------------------------------------------------------------------------------------
Total liabilities and members' equity $5,015,091 $4,368,343
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</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In thousands, except per share amounts)
----------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Gross reinsurance premiums written $210,402 $161,933 $ 635,781 $441,060
Reinsurance premiums ceded 555 (9,398) (7,565) (11,800)
- --------------------------------------------------------------------------------------------------------------
Reinsurance premiums written 210,957 152,535 628,216 429,260
Change in unearned premiums 24,381 26,440 (183,526) (88,592)
- --------------------------------------------------------------------------------------------------------------
Reinsurance premiums earned 235,338 178,975 444,690 340,668
Commission income 1,455 1,560 2,842 3,061
Operating leases with UPS 4,535 10,135 8,762 20,262
Finance leases 948 979 1,905 1,965
Hotel 27,925 25,750 48,254 43,909
Office buildings 36,486 29,074 74,136 58,519
Interest 12,148 16,269 25,004 31,821
Net holding gain (loss) on trading securities 101,183 (25,014) 131,950 94,960
Amortization of fixed income securities 3,662 1,318 7,318 2,607
Dividends 2,981 4,029 6,324 9,108
- --------------------------------------------------------------------------------------------------------------
426,661 243,075 751,185 606,880
- --------------------------------------------------------------------------------------------------------------
EXPENSES:
Reinsurance losses and loss expenses 145,475 94,775 267,583 172,771
Reinsurance commissions and taxes 35,696 22,287 62,903 47,342
Depreciation expense 8,933 8,622 17,854 17,171
Real estate and leasing operating expenses 37,467 31,722 72,209 63,315
Interest expense 17,706 15,739 36,006 31,511
Minority interest in earnings 673 543 1,238 1,160
Investment expenses 1,549 1,160 3,004 2,448
Amortization of goodwill 626 626 1,252 1,252
Other operating expenses 3,207 2,276 6,186 4,565
- --------------------------------------------------------------------------------------------------------------
251,332 177,750 468,235 341,535
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Income before income taxes 175,329 65,325 282,950 265,345
Income taxes (2,340) (3,892) (4,477) (7,088)
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Net income $172,989 $ 61,433 $ 278,473 $258,257
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Basic and diluted net income per share $ 1.37 $ 0.49 $ 2.21 $ 2.05
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Weighted average number of shares outstanding 126,231 125,935 125,951 125,785
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</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
------------------------------------------
Six Months Ended June 30, 1999 and 1998
---------------------------------------
(In thousands)
--------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Total
Preference Common Stock Treasury Stock Contributed Retained Members'
------------ --------------
Stock Shares Amount Shares Amount Surplus Earnings Equity
----- ------ ------ ------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 $ -- 131,000 $13,100 -- $ -- $26,642 $2,187,420 $2,227,162
Net income -- -- -- -- -- -- 258,257 258,257
Transfer of Common Stock held
for stock plans -- -- -- (1,746) (24,859) -- -- (24,859)
Retirement of treasury stock -- (4,000) (400) 4,000 68,000 -- (67,600) --
Purchase of shares -- -- -- (6,625) (112,617) -- -- (112,617)
Sale of treasury stock -- -- -- 2,604 39,445 4,665 -- 44,110
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1998 $ -- 127,000 $12,700 (1,767) $ (30,031) $31,307 $2,378,077 $2,392,053
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1999 $ -- 127,500 $12,750 (277) $ (4,703) $39,757 $2,476,865 $2,524,669
Net income -- -- -- -- -- -- 278,473 278,473
Purchase of shares -- -- -- (5,535) (109,769) -- -- (109,769)
Sale of treasury stock -- -- -- 5,284 104,002 234 -- 104,236
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 $ -- 127,500 $12,750 (528) $ (10,470) $39,991 $2,755,338 $2,797,609
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(U.S.$ in thousands)
--------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 278,473 $ 258,257
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 4,477 7,088
Depreciation 17,854 17,171
Minority interest in earnings 1,238 1,160
Net holding gain on trading securities (131,950) (94,960)
Amortization of fixed income securities (7,318) (2,607)
Other (6,686) (1,095)
Changes in assets and liabilities:
Interest and premiums receivable (174,386) (112,145)
Reinsurance recoverable on paid and unpaid losses (3,447) (2,793)
Unearned premiums ceded (2,477) (6,938)
Rentals receivable (3,458) (2,262)
Deposits with insurers (115,092) (44,374)
Deferred acquisition costs (27,590) (16,443)
Other assets (19,194) (1,777)
Accrued losses and loss expenses 187,146 54,282
Unearned premiums 186,002 95,512
Reinsurance balance payable 10,575 12,229
Accounts payable and other accruals (2,216) (2,691)
Proceeds from sale of traded investments 489,872 392,543
Purchases of traded investments (533,942) (644,617)
- -------------------------------------------------------------------------------------------
Net cash flow provided (used) by operating activities 147,881 (94,460)
- -------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to fixed assets (3,696) (7,471)
- -------------------------------------------------------------------------------------------
Net cash flow used by investing activities (3,696) (7,471)
- -------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Purchases of shares (109,769) (112,617)
Proceeds from sale of treasury stock 104,236 44,110
Repayment of debt (4,654) (3,760)
- -------------------------------------------------------------------------------------------
Net cash flow used by financing activities (10,187) (72,267)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 133,998 (174,198)
Cash and cash equivalents:
Beginning of period 170,855 355,056
- -------------------------------------------------------------------------------------------
End of period $ 304,853 $ 180,858
- -------------------------------------------------------------------------------------------
Amounts paid for:
U.S. income taxes $ 10,848 $ 3,806
- -------------------------------------------------------------------------------------------
Interest $ 35,157 $ 31,874
- -------------------------------------------------------------------------------------------
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 1999
-------------
(Unaudited)
-----------
1. GENERAL
-------
The accompanying unaudited interim consolidated financial statements include the
accounts of Overseas Partners Ltd. and its subsidiaries (collectively OPL or the
Company). OPL is engaged in the property, casualty and life reinsurance
business and in the real estate and leasing business.
The interim financial statements have been prepared pursuant to the rules and
regulations for reporting on Form 10-Q. Accordingly, certain information and
footnotes required by generally accepted accounting principles for complete
financial statements are not included herein. The interim financial statements
should be read in conjunction with the Overseas Partners Ltd. Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
Interim financial statements are subject to possible adjustments in connection
with the annual audit of the Company's financial statements for the full year;
in the Company's opinion, all adjustments necessary for a fair presentation of
these interim statements have been included and are of a normal and recurring
nature.
OPL reinsures shipper's risk insurance issued by U.S. based companies covering
loss or damage to packages carried by subsidiaries of UPS. As discussed in Note
4, the shipper's risk program represents a major source of premiums and
underwriting income for OPL's reinsurance business. On August 9, 1999, a judge
of the United States Tax Court issued an opinion in United Parcel Service of
------------------------
America, Inc. v. Commissioner of Internal Revenue. OPL is not a party to the
- -------------------------------------------------
case and is not directly affected by this decision. However, the opinion
concerns the taxability of premiums paid by UPS shippers for insurance covering
risks of loss or damage to packages carried by UPS (shipper's risk insurance)
and shipper's risk insurance is reinsured by OPL. The Tax Court opinion is
adverse to UPS and will likely cause it to change its current arrangements for
shipper's risk insurance. OPL has not been notified by the primary insurer of
any changes, but management believes that in the future shipper's risk
reinsurance premiums will be eliminated.
The results of operations for the six-month periods ended June 30, 1999 and 1998
are not necessarily indicative of the results to be expected for the full year.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. All activity is
recorded in U.S. dollars. Inter-company balances and transactions have been
eliminated in consolidation.
A statement of comprehensive income is not included as OPL's net income equals
comprehensive income.
The operating leases are with subsidiaries of United Parcel Service of America
Inc. (UPS).
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS 133 is effective beginning in the first quarter of fiscal 2001 and is not
expected to have a material impact on the Company's financial position. OPL has
no exposure to derivative instruments and hedging activities at this time.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3. TAXES
-----
OPL is organized under the laws of the Islands of Bermuda and does not consider
itself to carry on business through a permanent establishment in the United
States and, therefore, does not expect to be subject to U.S. income taxes.
Certain of OPL's subsidiaries engage in business in the U.S., primarily Overseas
Partners Capital Corp. (OPCC), and as a result, it, but not OPL, is subject to
U.S. income taxes. Under current Bermuda law, OPL is not obligated to pay any
tax in Bermuda based upon income or capital gains.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 1999
-------------
(Unaudited)
-----------
3. TAXES (continued)
-----
The United States Internal Revenue Service (IRS) previously asserted that the
Company was subject to U.S. taxation in the amounts of approximately $53 million
for its 1984 taxable year and $240 million for its 1985 through 1987 taxable
years, plus additions to tax and interest for those years. On February 13,
1998, the IRS indicated that it no longer intended to pursue its position
against the Company for 1984. On January 4, 1999, the IRS indicated that it no
longer intended to pursue its position against the Company for 1985 through
1987.
On December 22, 1998, the IRS issued a Notice of Deficiency with respect to the
Company's 1988 through 1990 taxable years in which it asserted that the Company
is subject to U.S. taxation in the aggregate amount of approximately $170
million, plus additions to tax and interest, for those years. On March 19,
1999, the Company filed a Petition in the United States Tax Court contesting the
asserted deficiencies in tax and additions to tax in the Notice. On May 18,
1999, the IRS filed its Answer to the Company's Petition. The IRS has not
asserted deficiencies in tax for years subsequent to 1990. However, the IRS may
take similar positions for subsequent years pending resolution of the years
currently in dispute.
OPL believes that it has no tax liability, that it is not subject to U.S.
taxation, and that there is substantial authority for its position. It has
vigorously contested the Notice of Deficiency for 1988 through 1990 and will
vigorously contest proposed assessments or any future assessments.
4. BUSINESS SEGMENTS
-----------------
The Company's operations are presently conducted through two segments:
reinsurance and real estate and leasing. The reinsurance segment is managed
from the Bermuda office and underwrites shipper's risk, accident and health,
automobile, aviation, marine, property and workers' compensation reinsurance.
Real estate and leasing activities are owned and managed through subsidiaries of
Overseas Partners Capital Corp., a wholly owned subsidiary of OPL. There were
no intersegment revenues earned for the periods ended June 30, 1999 and 1998.
Intersegment expenses, such as corporate overhead, were allocated based on
estimated utilization for the periods ended June 30, 1999 and 1998.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies disclosed in the Overseas Partners
Ltd. Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
Income before income taxes by segment consists of revenues less expenses related
to the respective segment's operations. The reinsurance segment maintains a
portfolio of liquid investments to support its reserves for accrued losses and
loss expenses and unearned premiums as well as its capital requirements.
Investments relating to real estate and leasing are primarily used to
collateralize long-term debt issued in connection with the purchase of assets
under operating leases. Summary financial information about the Company's
segments is presented in the following table.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 1999
-------------
(Unaudited)
-----------
4. BUSINESS SEGMENTS (continued)
-----------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
- ----------------------------------------------------------------------------------------------------
(In thousands) 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Reinsurance:
Premiums earned $235,338 $178,975 $444,690 $340,668
Commission income 1,455 1,560 2,842 3,061
Investment income (loss) 115,725 (7,680) 162,688 130,594
- ----------------------------------------------------------------------------------------------------
352,518 172,855 610,220 474,323
- ----------------------------------------------------------------------------------------------------
Real estate and leasing:
Rentals 69,894 65,938 133,057 124,655
Investment income 4,249 4,282 7,908 7,902
- ----------------------------------------------------------------------------------------------------
74,143 70,220 140,965 132,557
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Consolidated 426,661 243,075 751,185 606,880
- ----------------------------------------------------------------------------------------------------
NET INCOME BEFORE TAXES
Reinsurance 169,798 54,633 276,730 251,762
Real estate and leasing 9,364 13,594 13,658 19,400
Other operating expenses (3,833) (2,902) (7,438) (5,817)
- ----------------------------------------------------------------------------------------------------
Consolidated $175,329 $ 65,325 $282,950 $265,345
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(In thousands) June 30, 1999 December 31, 1998
(Audited)
- -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Reinsurance
Cash and investments $2,578,870 $2,273,000
Other 911,864 572,966
- -------------------------------------------------------------------------
3,490,734 2,845,966
- -------------------------------------------------------------------------
Real estate and leasing
Cash and investments 367,396 350,715
Other 1,156,961 1,171,662
- -------------------------------------------------------------------------
1,524,357 1,522,377
- -------------------------------------------------------------------------
Consolidated $5,015,091 $4,368,343
- -------------------------------------------------------------------------
</TABLE>
Substantially all of the Company's long-lived assets, interest expense,
depreciation expense and income tax expense relate to the Company's real estate
and leasing operations.
Approximately 80% of reinsurance revenues are generated from sources located in
the United States; the remainder is derived from customers located primarily in
European countries. All of the Company's leasing and real estate revenues are
generated in the United States. For 1999 and 1998, all of the Company's long-
lived assets were located in the United States.
Earned premiums on shipper's risk reinsurance were $91.1 million and $92.9
million for the three months ended June 30, 1999 and 1998, respectively. OPL
earned premiums of $12.1 million and $10.8 million for the three months ended
June 30, 1999 and 1998, respectively for the reinsurance of workers'
compensation insurance for employees of a UPS subsidiary located in the State of
California. Net underwriting income from shipper's risk reinsurance was $58.3
million and $63.5 million for the three months ended June 30, 1999 and 1998,
respectively. OPL's real estate and leasing segment includes five Boeing 757
aircraft (sold in July 1998) and a data processing facility leased to UPS
subsidiaries. Total rent from aircraft and facility leases was $4.5 million and
$10.1 million for the three months ended June 30, 1999 and 1998, respectively.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 1999
-------------
(Unaudited)
-----------
4. BUSINESS SEGMENTS (continued)
-----------------
Earned premiums on shipper's risk reinsurance were $181.7 million and $183.8
million for the six months ended June 30, 1999 and 1998, respectively. Net
underwriting income from shipper's risk reinsurance was $116.4 million and
$119.1 million for the six months ended June 30, 1999 and 1998, respectively.
OPL earned premiums of $24.2 million and $21.5 million for the six months ended
June 30, 1999 and 1998, respectively for the reinsurance of workers'
compensation insurance for employees of a UPS subsidiary located in the State of
California. Total rent from aircraft and facility leases was $8.8 million and
$20.3 million for the six months ended June 30, 1999 and 1998, respectively.
5. THE BERMUDA INSURANCE REGULATION
--------------------------------
The Bermuda Insurance Act of 1978, Amendments thereto and related Regulations
require OPL and its reinsurance subsidiary, each to maintain a minimum solvency
margin and a liquidity ratio. For the six months ended June 30, 1999 and 1998,
they each met these requirements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
------------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Transacted in U.S. Dollars)
----------------------------
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended June 30, 1999 and 1998
- -----------------------------------------
Reinsurance:
- ------------
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross premiums written $ 210,402 $ 161,933
Premiums ceded 555 (9,398)
- --------------------------------------------------------------------------------------------------------
Net premiums written 210,957 152,535
Change in unearned premiums 24,381 26,440
- --------------------------------------------------------------------------------------------------------
Premiums earned 235,338 178,975
Commission income 1,455 1,560
- --------------------------------------------------------------------------------------------------------
236,793 180,535
- --------------------------------------------------------------------------------------------------------
Losses and loss expenses (145,475) (94,775)
Commissions and taxes (35,696) (22,287)
- --------------------------------------------------------------------------------------------------------
(181,171) (117,062)
- --------------------------------------------------------------------------------------------------------
Underwriting income 55,622 63,473
- --------------------------------------------------------------------------------------------------------
Investment income:
U.S. equities 72,332 26,806
Emerging market equities 55,329 (59,502)
Fixed income (19,941) 24,854
Strategic income mutual fund 6,035 --
Other 1,970 162
Expenses (1,549) (1,160)
- --------------------------------------------------------------------------------------------------------
Investment income 114,176 (8,840)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Reinsurance income $ 169,798 $ 54,633
========================================================================================================
</TABLE>
Gross reinsurance premiums written increased by $48.5 million for the three
months ended June 30, 1999 compared with the same period in the prior year
primarily due to additional premiums generated from the renewal of automobile,
property and workers' compensation programs. One new program with premiums of
$1.5 million was written during the quarter ended June 30, 1999 compared with
eight new programs yielding premiums of $98.5 million in the same period in
1998. Premiums from the UPS shippers' risk program decreased by $1.8 million to
$91.1 million compared to $92.9 million in the same period last year. Shipper's
risk reinsurance historically has been OPL's largest source of revenue. On
August 9, 1999, a judge of the United States Tax Court issued an opinion in
United Parcel Service of America, Inc. v. Commissioner of Internal Revenue. OPL
- --------------------------------------------------------------------------
is not a party to the case and is not directly affected by this decision.
However, the opinion concerns the taxability of premiums paid by UPS shippers
for insurance covering risks of loss or damage to packages carried by UPS
(shipper's risk insurance) and shipper's risk insurance is reinsured by OPL. The
Tax Court opinion is adverse to UPS and will likely cause it to change its
current arrangements for shipper's risk insurance. OPL has not been notified by
the primary insurer of any changes, but management believes that in the future
shipper's risk reinsurance premiums will be eliminated. These premiums accounted
for underwriting income of $58.3 million for the three months ended June 30,
1999 and $63.5 million for the three months ended June 30, 1998.
Reinsurance premiums earned increased by $56.4 million for the three months
ended June 30, 1999 compared with the same period in the prior year as a result
of the growth in the volume of business written in 1998 and the first half of
1999.
The combined ratio, which is the ratio of the sum of losses, loss expenses,
commissions, taxes and other underwriting expenses to earned premiums, increased
to 77.0% for the three months ended June 30, 1999 from 65.4% for the
corresponding period in 1998. This resulted in a decrease in net underwriting
income of $7.9 million for the current quarter compared to same period last
year. These changes are due in part to a change in the mix of the Company's
business. Specifically, the new programs have lower margins than the traditional
shippers risk business which, for the quarter, accounted for only 43.3% of
premiums written compared to 57.4% during the same period in 1998. The increase
in the combined ratio as well as the decline in underwriting income can also be
attributed to lower margins on several lines of business as a result of
continued competitive pressures on premium rates.
<PAGE>
Reinsurance: (continued)
- ------------
Investment income related to our reinsurance segment for the three months ended
June 30, 1999 increased by $123.0 million over the same period in 1998. The
Company's U.S. S&P 500 based equity portfolio closed the quarter with a gain of
$72.3 million or a return of 7.2% compared with a loss of 0.5% in the same
period for 1998. Our emerging market equity portfolio benefited from continued
recovery and strong growth throughout Asia boosted by an aggressive interest
rate cut in China, earning $55.3 million for a gain of 21.7% contrasted with a
19.5% loss in the second quarter of 1998. Our U.S. dollar fixed income mutual
fund gained a further $6.0 million over the quarter, an increase of 1.3%.
Moderating these gains, our global bond portfolio declined $19.9 million, a loss
of 3.6% compared with a year ago gain of 2.7%, impacted by rising interest rates
in the United States and continued depreciation in the Euro exchange rate.
Real Estate and Leasing:
- -----------------------
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE:
Leasing $ 5,483 $ 11,114
Hotel 27,925 25,750
Office buildings 36,486 29,074
- ---------------------------------------------------------------------------------------------------
69,894 65,938
- ---------------------------------------------------------------------------------------------------
EXPENSES:
Operating expenses 37,467 31,722
Interest expense 17,706 15,739
Depreciation 8,933 8,622
Minority interest in earnings 673 543
- ---------------------------------------------------------------------------------------------------
64,779 56,626
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Operating income 5,115 9,312
- ---------------------------------------------------------------------------------------------------
Investment income:
Real estate investment trust certificates (139) 1,417
Other 4,388 2,865
- ---------------------------------------------------------------------------------------------------
Investment income 4,249 4,282
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Real estate and leasing income $ 9,364 $ 13,594
===================================================================================================
</TABLE>
Office building revenue increased by 25.5% for the quarter ended June 30, 1999
from $29.1 million for the same period in 1998. This increase of $7.4 million
was primarily due to the July 1998 purchase of Madison Plaza, a 45-story Class A
office building located in Chicago's Central Business District. Hotel revenue
increased $2.2 million due to an increase in room rates over 1998. Leasing
revenue has decreased from $11.1 million in the second quarter of 1998 to $5.5
million in the second quarter of 1999 due to the sale of five Boeing 757
aircraft to United Parcel Service Co. in July 1998, as well as a $0.4 million
decrease in variable toll revenue on the data processing facility lease.
Operating expenses have increased by $5.7 million due to the purchase of Madison
Plaza and an increase in operating costs at the hotel. Interest expense
increased by $2.0 million from the same period in 1998 due to the purchase of
Madison Plaza. Interest expense continues to include the expense associated with
the Series A bonds that were used to finance the original acquisition of the
aircraft. The proceeds from the sale of the aircraft were invested in zero
coupon U.S. treasury notes and corporate bonds to provide collateral for the
future interest obligations.
Operating income for the quarter ended June 30, 1999 decreased by $4.2 million
over the same period in 1998 primarily due to the loss of revenue from the 757s
to offset the continuing interest obligation on the Series A bonds. Also, a
restructuring of the toll rates on our Ramapo Ridge Facility which is leased to
subsidiaries of UPS, to reflect current overhead absorption, has led to a
decrease in the data processing facility's variable toll revenue. Improvements
in the profitability of the hotel offset these decreases.
Other investment income increased due to amortization on the zero coupon U.S.
treasury notes and corporate bonds held as substitute collateral for the
interest obligation on the Series A bonds.
<PAGE>
Net Income:
- ----------
Net income increased by $111.6 million over the same period in 1998 due to the
comparative performance of the investment markets offset by small declines in
reinsurance and real estate operating income. Net income per share was $1.37, a
$0.88 per share increase over the same period in 1998 as result of the
aforementioned factors.
Six Months Ended June 30, 1999 and 1998
- ---------------------------------------
Reinsurance:
- ------------
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross premiums written $ 635,781 $ 441,060
Premiums ceded (7,565) (11,800)
- -----------------------------------------------------------------------------------------------------
Net premiums written 628,216 429,260
Change in unearned premiums (183,526) (88,592)
- -----------------------------------------------------------------------------------------------------
Premiums earned 444,690 340,668
Commission income 2,842 3,061
- -----------------------------------------------------------------------------------------------------
447,532 343,729
- -----------------------------------------------------------------------------------------------------
Losses and loss expenses (267,583) (172,771)
Commissions and taxes (62,903) (47,342)
- -----------------------------------------------------------------------------------------------------
(330,486) (220,113)
- -----------------------------------------------------------------------------------------------------
Underwriting income 117,046 123,616
- -----------------------------------------------------------------------------------------------------
Investment income:
U.S. equities 113,110 134,422
Emerging market equities 76,824 (40,553)
Fixed income (45,111) 34,929
Strategic income mutual fund 14,162 --
Other 3,703 1,796
Expenses (3,004) (2,448)
- -----------------------------------------------------------------------------------------------------
Investment income 159,684 128,146
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Reinsurance income $ 276,730 $ 251,762
=====================================================================================================
</TABLE>
Gross reinsurance premiums written increased by $194.7 million for the six
months ended June 30, 1999 compared with the same period in the prior year. The
Company's accident and health, financial, marine, property and workers'
compensation programs all contributed to this increase. Premiums from ten new
programs totalled $56.7 million with the largest contributors being property,
marine and aviation programs with $18.9 million, $17.2 million and $13.7 million
in new premiums respectively. Premiums from renewed programs increased by $209.0
million, although $96.0 million of this increase was due to timing differences
on programs that were renewed in the first half of 1999 but were not contracted
and recorded until later periods in 1998. These timing differences are expected
to reverse during the remainder of the year. The Company declined to renew
several auto, aviation, property and marine programs as they did not meet the
Company's return requirements, resulting in a decrease in premiums written of
$82.3 million compared to the same period in the prior year. Premiums from the
UPS shippers' risk program decreased by $2.1 million to $181.7 million compared
to $183.8 million in the same period last year. Shipper's risk reinsurance
historically has been OPL's largest source of revenue. On August 9, 1999, a
judge of the United States Tax Court issued an opinion in United Parcel Service
---------------------
of America, Inc. v. Commissioner of Internal Revenue. OPL is not a party to the
- ----------------------------------------------------
case and is not directly affected by this decision. However, the opinion
concerns the taxability of premiums paid by UPS shippers for insurance covering
risks of loss or damage to packages carried by UPS (shipper's risk insurance)
and shipper's risk insurance is reinsured by OPL. The Tax Court opinion is
adverse to UPS and will likely cause it to change its current arrangements for
shipper's risk insurance. OPL has not been notified by the primary insurer of
any changes, but management believes that in the future shipper's risk
reinsurance premiums will be eliminated. These premiums accounted for
underwriting income of $116.4 million for the six months ended June 30, 1999 and
$119.1 million for the six months ended June 30, 1998.
Reinsurance premiums earned increased by $104.0 million for the six months ended
June 30, 1999 as a result of the growth in the volume of business written in the
second half of 1998 and the first half of 1999.
The combined ratio for the six months ended June 30, 1999 increased to 74.3%
from 64.6% for the corresponding period in 1998. This resulted in a decrease in
net underwriting income of 5.3% for the current period. These changes are due
in part to a change in the mix of the Company's business. Specifically, the new
programs have lower margins than the traditional shippers risk business which
accounted for only 28.6% of premiums written compared to 41.7% in 1998. The
increase in the combined ratio as well as the decline in underwriting income can
also be attributed to lower margins on several lines of business as a result of
continued competitive pressures on premium rates.
<PAGE>
Reinsurance: (continued)
- -----------
Investment income for the six months ended June 30, 1999 increased by $31.5
million over the same period in 1998. Although interest rates tightened in the
face of continued economic expansion in the United States, equity markets
generally benefited from continued strong earnings announcements and a lack of
inflation. These factors were the primary contributors to the performance of our
U.S. S&P 500 based equity portfolio which gained 11.7% or $113.1 million in the
first six months of 1999 compared with the same period in the prior year. The
emerging market equity portfolio earnings reflected the recovery throughout Asia
returning 34.6% over the first two quarters of 1999 with income of $76.8 million
compared with a loss of $40.6 million during the same period a year ago. With
interest rates in the United States ending the first half of 1999 at a 12-month
high, and a generally weaker Euro, our fixed income investments showed mixed
results. Our global bond portfolio declined 7.7% for a loss of $45.1 million for
the period against a gain of $34.9 million during the same period in the
previous year. Helping to mitigate this loss, our U.S. dollar fixed income
mutual fund earned $14.2 million, a gain of 3.4% over the same period in the
prior year.
Real Estate and Leasing:
- -----------------------
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE:
Leasing $ 10,667 $ 22,227
Hotel 48,254 43,909
Office buildings 74,136 58,519
- ---------------------------------------------------------------------------------------------------
133,057 124,655
- ---------------------------------------------------------------------------------------------------
EXPENSES:
Operating expenses 72,209 63,315
Interest expense 36,006 31,511
Depreciation 17,854 17,171
Minority interest in earnings 1,238 1,160
- ---------------------------------------------------------------------------------------------------
127,307 113,157
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Operating income 5,750 11,498
- ---------------------------------------------------------------------------------------------------
Investment income:
Real estate investment trust certificates (710) 2,298
Other 8,618 5,604
- ---------------------------------------------------------------------------------------------------
Investment income 7,908 7,902
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Real estate and leasing income $ 13,658 $ 19,400
===================================================================================================
</TABLE>
Office building revenue increased by 26.7% for the six months ended June 30,
1999 from $58.5 million for the same period in 1998. This increase of $15.6
million was primarily due to the July 1998 purchase of Madison Plaza, a 45-story
Class A office building located in Chicago's Central Business District. Hotel
revenue increased $4.3 million due to an increase in room rates over the same
period in 1998. Leasing revenue has decreased from $22.2 million for the same
period in 1998 to $10.7 million in 1999 due to the sale of five Boeing 757
aircraft to United Parcel Service Co. in July 1998, as well as a $1.2 million
decrease in variable toll revenue on the data processing facility lease.
Operating expenses have increased by $8.9 million due to the purchase of Madison
Plaza and an increase in operating costs at the hotel. Interest expense
increased by $4.5 million from the same period in 1998 due to the purchase of
Madison Plaza. Interest expense continues to include the expense associated with
the Series A bonds that were used to finance the original acquisition of the
aircraft. The proceeds from the sale of the aircraft were invested in zero
coupon U.S. treasury notes and corporate bonds to provide collateral for the
future interest obligations.
Net operating income from our office buildings and related management services
increased by $1 million to $7 million for the six months ended June 30, 1999,
while the net operating income from our hotel also increased by $0.4 million
compared to the same period in the prior year. These increases were offset by
the loss of income from the aircraft and a restructuring of the toll rates on
the Ramapo Ridge Facility, resulting in an overall decrease in operating income
of $5.7 million over 1998.
Other investment income increased due to amortization on the zero coupon U.S.
treasury notes and corporate bonds held as substitute collateral for the
interest obligation on the Series A bonds.
<PAGE>
Net Income:
- ----------
Net income increased by $20.2 million over the same period in 1998 due to the
comparative performance of the investment markets offset by small declines in
reinsurance and real estate operating income. Net income per share was $2.21, a
$0.16 per share increase over the same period in 1998 as result of the
aforementioned factors.
Liquidity and Capital Resources
- -------------------------------
OPL's cash and cash equivalents increased by $134.0 million during the six
months ended June 30, 1999. Operating activities generated $147.9 million while
investing and financing activities used $3.7 million and $10.2 million,
respectively. Reinsurance and real estate operations both provided inflows of
$154.8 million and $16.3 million, respectively. The Company received $28.3
million of interest and dividends and purchased an additional $44.1 million of
investments in its trading portfolio. Shareowners purchased $104.2 million of
shares from OPL's treasury stock during the first quarter while the Company
purchased $109.8 million of shares from its shareowners.
On July 21, 1999, OPL suspended the sale of its stock under the UPS stock
purchase plans (the Plans). This action was taken following the announcement by
United Parcel Service of America, Inc. (UPS) of its intended merger into a
subsidiary, United Parcel Service, Inc. (New UPS) and the initial public
offering of New UPS shares. UPS suspended the sale of its shares under the
Plans immediately following its announcement. Prior to the suspension, units of
UPS and OPL shares had been sold to UPS employees under the Plans.
OPL believes that its investments and cash flow from operations are adequate
sources of capital and liquidity for the payment of claims, operating expenses
and dividends and for its share repurchases. OPL further believes that its
strong capital position will permit continued expansion of its reinsurance
business, should appropriate opportunities arise. In the event OPL decides to
purchase additional capital assets, it may, as demonstrated by its existing
portfolio of assets, finance such purchases from internally generated funds or
from outside borrowing which OPL believes would be readily available to it.
OPL's investment policies are designed to achieve enhanced returns to
shareowners, measured over conventional medium- to long-term market cycle
periods. OPL's fixed income portfolio comprises highly liquid debt securities
of governments, supranationals, government agencies, financial institutions and
utilities. OPL's U.S. and emerging markets equity portfolios are comprised of
stocks drawn mainly from within the S&P 500 Index and the IFC Index.
Because the liquidity of OPL's investments permits OPL to respond quickly to
changing market conditions, OPL's investments are not significantly affected by
inflation. Inflation, including damage awards and costs, can substantially
increase the ultimate cost of claims in certain types of insurance. This is
because the actual payment of claims may take place a number of years after the
provisions for losses are reflected in the financial statements. OPL will, on
the other hand, earn income on the funds retained for a period of time until
eventual payment of a claim.
<PAGE>
Impact of the Year 2000 Issue
- -----------------------------
The Year 2000 issue is the result of the inability of computers, software and
other equipment utilizing microprocessors to recognize and properly process data
fields using two digits rather than four to define the applicable year. Time-
sensitive systems and software may recognize a date using "00" as the year 1900
rather than the year 2000.
OPL formed a Year 2000 Committee in May 1998 to evaluate the potential effects
of this issue and to ensure that the Company is Year 2000 ready. The Committee
is led by a senior member of management and comprises representatives from each
of the Company's locations and functional areas. The Committee developed a
formal, written plan, which outlines the required action steps to be completed
in order for the Company to be Year 2000 ready. The Committee makes periodic
reports of progress against the plan to the Chief Executive Officer and the
Board of Directors.
The Company has completed inventories of its information technology assets such
as computers and software and assessed each item for Year 2000 compliance (that
is, the ability of software, systems and equipment to properly handle date data
within and between the twentieth and twenty-first centuries). The Company does
not believe that it has significant exposure to non-compliant internal
information technology systems or assets. The Company has minimal exposure to
legacy systems and most hardware and software has either been purchased or
upgraded to Year 2000 Compliant technology within the last two years. A small
number of non-critical systems and assets have been replaced, repaired or
retired as part of the Year 2000 initiative.
The Company's real estate properties and office premises include systems that
rely on date sensitive computer programs or embedded chip microprocessors.
These systems include controlled access to the premises, elevators and
escalators, fire detection and safety systems and telecommunication systems. The
Company's worst case scenario is widespread disruption in building operations
should programmed systems not correctly recognize the Year 2000. In addition to
the potential for lost productivity, any failure of such systems could result in
additional claims against the Company from its tenants and other third parties.
The Company has identified and contacted all key equipment manufacturers and
service providers to assess whether such systems and equipment are Year 2000
compliant. Assurances have been received from key manufacturers and service
providers. The Company has identified those items that require repair,
remediation or replacement and has substantially completed the process of
repair, remediation and replacement as of June 30, 1999.
The Company has significant business relationships with investment managers,
banks, custodians, reinsurance companies, reinsurance intermediaries and utility
companies that provide services and financial reports that are critical to the
Company's operations. Enquiries have been made, and assurances received, of the
Company's significant business partners to determine their state of readiness
for the Year 2000. Despite these satisfactory responses, there is no guarantee
that such business partners will not suffer a year 2000 business disruption.
Such failures could have a material adverse effect on the Company's financial
condition and results of operations.
The Company's investment portfolio also has exposure to the impact of Year 2000
failures. OPL's fixed income portfolio comprises highly liquid debt securities
of governments, government agencies, financial institutions and utilities.
OPL's U.S. and emerging markets equity portfolios are comprised of stocks drawn
mainly from within the S&P 500 Index and the IFC Index. A global economic
crisis could have a material impact on the Company's investment earnings,
however, the likelihood or magnitude of such an event cannot be determined at
this point.
Reinsurance contracts that commenced in 1999 may expose the Company to increases
in the frequency and severity of claims as a direct result of Year 2000 failures
relating to the insured. Unfavorable outcomes to these claims, particularly for
property, aviation and marine exposures, could have a material impact on the
Company's financial condition and operations. It is not possible at this time
to determine how the Year 2000 issue will impact future claim experience. The
Company will continue to exercise underwriting discretion and explore
opportunities that may help to reduce this exposure, including the use of policy
exclusions, where possible.
The assessment and remediation phases for all mission critical systems were
complete by December 31, 1998. The Company has also completed the testing phase
for mission critical systems. The Company has also developed contingency plans
for each of its mission critical systems and functions. For the most part such
contingency plans require collation of hard copy audit trail or frequent reviews
prior to the Year 2000 in order to minimize loss of historical information. In
the event that there are computer hardware or software problems that are not
revealed until the Year 2000, the Company will implement manual procedures and
processes in place of the disrupted automated processes. However, the Company
realizes that any reasonable contingency plan cannot accurately account for all
possible scenarios, which may arise as a result of Year 2000 related computer
problems.
The Company retained an independent legal firm to assess the risks of liability
associated with the Company's Year 2000 plan. The legal firm continues to
monitor the Company's progress with respect to the plan.
<PAGE>
Impact of the Year 2000 Issue (continued)
- -----------------------------
Any costs incurred by the Company's business partners in connection with their
Year 2000 efforts will be borne by those business partners. Any costs incurred
in preparing OPL's internal systems and equipment for Year 2000 Compliance are
not expected to be material. The project costs incurred to date are less than
$1,000,000.
Safe Harbour Disclosure
- -----------------------
The Private Securities Litigation Reform Act of 1995 provides a "safe harbour"
for forward-looking statements. This Securities and Exchange Commission filing
contains forward looking statements made by management that reflect the views
and beliefs of the Company with respect to future events and financial
performance. The words "expect", "anticipate", "intend", "plan", "believe",
"seek", "estimate" and other similar expressions are intended to identify such
forward-looking statements; however, this Form 10Q also contains other forward-
looking statements in addition to historical information. The Company cautions
that there are various important factors that could cause actual results to
differ materially from those indicated in the forward-looking statements;
accordingly, there can be no assurance that such indicated results will be
realized. Among the important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements are: (i)
uncertainties relating to government and regulatory policies (such as subjecting
the Company to insurance regulation or taxation in additional jurisdictions),
(ii) the occurrence of catastrophic events with a frequency or severity
exceeding the Company's estimates, (iii) the legal environment, (iv) the
uncertainties of the reserving process, (v) loss of the services of any of the
Company's executive officers (vi) losses due to foreign currency exchange rate
fluctuations, (vii) ability to collect reinsurance recoverables, (viii) strikes
or similar disruptions in the business of UPS or other insureds, (ix) pricing
pressure resulting from the competitive environment in which the Company
operates, (x) the impact of mergers and acquisitions, (xi) the impact of Year
2000 related issues, (xii) developments in global financial markets which could
affect the Company's investment portfolio, (xiii) risks associated with the
introduction of lines of business, and (xiv) the resolution of any proposed or
future tax assessments by the IRS against the Company. By making these forward-
looking statements, the Company does not undertake to update them in any manner
except as may be required by the Company's disclosure obligations in filings it
makes with the Securities and Exchange Commission under the Federal securities
laws.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
---------------------------------------
PART II , OTHER INFORMATION
----------------------------
Item 6 - Exhibits and Reports on Form 8-K
- ------ --------------------------------
a) Exhibits: 27 - Financial Data Schedule (For SEC use only)
--------
b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
-------------------
ended June 30, 1999.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized, in the city of Hamilton, Bermuda.
Date: August 16, 1999 OVERSEAS PARTNERS LTD.
Signed in Hamilton, Bermuda
By: /s/ D. Scott Davis
------------------
D. Scott Davis
Chief Executive Officer and President
By: /s/ Mark R. Bridges
-------------------
Mark R. Bridges
Vice-President and Treasurer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OPL'S
CONSOLIDATED BALANCE SHEETS AND THE STATEMENTS OF CONSOLIDATED INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 244,141
<DEBT-MARKET-VALUE> 268,263
<EQUITIES> 1,865,031
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,621,927
<CASH> 304,853
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 107,040
<TOTAL-ASSETS> 5,015,091
<POLICY-LOSSES> 655,472
<UNEARNED-PREMIUMS> 538,394
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 871,058
0
0
<COMMON> 12,750
<OTHER-SE> 2,784,859
<TOTAL-LIABILITY-AND-EQUITY> 5,015,091
635,781
<INVESTMENT-INCOME> 38,646
<INVESTMENT-GAINS> 113,695
<OTHER-INCOME> 133,057
<BENEFITS> 267,583
<UNDERWRITING-AMORTIZATION> 62,903
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 282,950
<INCOME-TAX> 4,477
<INCOME-CONTINUING> 278,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 278,473
<EPS-BASIC> 2.21
<EPS-DILUTED> 2.21
<RESERVE-OPEN> 0<F1>
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>AMOUNTS FOR SECURITIES ACT INDUSTRY GUIDE 6 AND EXCHANGE ACT INDUSTRY GUIDE 4
DISCLOSURES ARE REQUIRED FOR ANNUAL FILINGS ONLY. ACCORDINGLY, NO AMOUNTS WILL
BE REPORTED FOR INTERIM FILINGS.
</FN>
</TABLE>
