<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
-----------------
For Quarter Ended June 30, 2000 Commission file Number 0-11538
------------------- --------
Overseas Partners Ltd.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Islands of Bermuda N/A
--------------------------------------------------------------------------------
(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
--------------------------------------------------------------------------------
(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)
123,395,428 Shares
-------------------------
Outstanding at August 7, 2000
<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,
---------- -----------
2000 1999
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS:
Investments:
Trading, at fair value-
Debt securities (amortized cost 2000-$545,170, 1999-$559,416) $ 506,997 $ 512,148
Equity securities (cost 2000-$1,296,355, 1999-$1,223,954) 1,726,812 1,737,498
Restricted investments, held-to-maturity, at amortized cost
(fair value 2000-$266,810, 1999-$254,619) 242,641 242,931
---------- ----------
2,476,450 2,492,577
Cash and cash equivalents 356,260 450,336
Receivables 911,854 711,495
Deferred acquisition costs 79,565 87,146
Real estate and leasing:
Operating leases with UPS 97,617 98,847
Finance leases 44,661 45,400
Hotel 157,635 159,403
Office buildings 787,418 790,864
Other assets
Goodwill 22,494 23,977
Other 79,575 55,237
---------- ----------
Total assets $5,013,529 $4,915,282
---------- ----------
LIABILITIES AND MEMBERS' EQUITY:
Liabilities:
Accrued losses and loss expenses $1,446,171 $ 972,201
Unearned premiums 528,782 376,745
Reinsurance balances payable 82,015 43,466
Accounts payable and other accruals 54,960 48,632
Deferred income taxes 19,048 16,542
Long-term debt 861,038 866,144
Minority interest 44,769 44,169
---------- ----------
Total liabilities $3,036,783 $2,367,899
---------- ----------
Commitments and contingencies -- --
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 127.5 million shares; outstanding 123,497,685 shares 12,750 12,750
Contributed surplus 39,991 39,991
Retained earnings 2,005,352 2,556,774
Treasury stock (2000 - 4,002,315 shares, 1999 - 3,108,585 shares), at cost (81,347) (62,132)
---------- ----------
Total members' equity 1,976,746 2,547,383
---------- ----------
Total liabilities and members' equity $5,013,529 $4,915,282
---------- ----------
</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,
----------------------------- ---------------------------
2000 1999 2000 1999
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Gross reinsurance premiums written $ 178,981 $210,402 $ 464,503 $ 635,781
Reinsurance premiums ceded (5,231) 555 (43,776) (7,565)
--------- -------- --------- ---------
Reinsurance premiums written 173,750 210,957 420,727 628,216
Change in unearned premiums (9,628) 24,381 (128,293) (183,526)
--------- -------- --------- ---------
Reinsurance premiums earned 164,122 235,338 292,434 444,690
Commission income 1,446 1,455 2,768 2,842
Operating leases with UPS 4,637 4,535 9,242 8,762
Finance leases 915 948 1,839 1,905
Hotel 28,959 27,925 51,265 48,254
Office buildings 39,203 36,486 77,326 74,136
Interest 14,874 12,148 30,515 25,004
Net holding (loss) gain on trading securities (37,113) 101,183 (29,822) 131,950
Amortization of fixed income securities 3,686 3,662 7,364 7,318
Dividends 3,085 2,981 5,987 6,324
--------- -------- --------- ---------
223,814 426,661 448,918 751,185
--------- -------- --------- ---------
EXPENSES:
Reinsurance losses and loss expenses 579,031 145,475 687,447 267,583
Reinsurance commissions, taxes and other 62,536 35,696 86,616 62,903
Depreciation expense 9,509 8,933 18,734 17,854
Real estate and leasing operating expenses 39,379 37,467 76,221 72,209
Interest expense 17,575 17,706 35,167 36,006
Minority interest in earnings 929 673 1,608 1,238
Investment expenses 1,261 1,549 2,683 3,004
Amortization of goodwill 747 626 1,493 1,252
Other operating expenses 3,035 3,207 6,556 6,186
--------- -------- --------- ---------
714,002 251,332 916,525 468,235
--------- -------- --------- ---------
(Loss) income before income taxes (490,188) 175,329 (467,607) 282,950
Income taxes (7,069) (2,340) (9,568) (4,477)
--------- -------- --------- ---------
Net (loss) income $(497,257) $172,989 $(477,175) $ 278,473
--------- -------- --------- ---------
Basic and diluted net (loss) income per share $ (4.02) $ 1.37 $ (3.86) $ 2.21
--------- -------- --------- ---------
Weighted average number of shares outstanding 123,581 126,231 123,693 125,785
--------- -------- --------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
Six Months Ended June 30, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Treasury Stock Total
Preference ------------------- ------------------ Contributed Retained Members'
Stock Shares Amount Shares Amount Surplus Earnings Equity
---------- ------- ------- ------ --------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
---------- ------- ------- ------ --------- ------- ---------- ----------
Balance, January 1, 2000 $ -- 127,500 $12,750 (3,109) $ (62,132) $39,991 $2,556,774 $2,547,383
Net loss -- -- -- -- -- -- (477,175) (477,175)
Purchase of shares -- -- -- (893) (19,215) -- -- (19,215)
Dividend declared ($0.60
per share) -- -- -- -- -- -- (74,247) (74,247)
---------- ------- ------- ------ --------- ------- ---------- ----------
Balance, June 30, 2000 $ -- 127,500 $12,750 (4,002) $ (81,347) $39,991 $2,005,352 $1,976,746
---------- ------- ------- ------ --------- ------- ---------- ----------
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S.$ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) income $(477,175) $ 278,473
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes 2,506 1,703
Depreciation expense 18,734 17,854
Minority interest in earnings 1,608 1,238
Net holding loss (gain) on trading securities 29,822 (131,950)
Amortization of fixed income securities (7,364) (7,318)
Other 2,395 (1,304)
Changes in assets and liabilities:
Receivables (200,359) (298,860)
Deferred acquisition costs 7,581 (27,590)
Other assets (24,338) (19,194)
Accrued losses and loss expenses 473,970 187,146
Unearned premiums 152,037 186,002
Reinsurance balances payable 38,549 10,575
Accounts payable and other accruals 6,328 (2,216)
Proceeds from sale of trading investments 536,003 489,872
Purchase of trading investments (549,904) (533,942)
--------- ---------
Net cash flow provided by operating activities 10,393 150,489
--------- ---------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from maturity of restricted investments 9,473 --
Purchase of restricted investments (1,903) --
Additions to real estate and leasing assets (12,435) (3,696)
--------- ---------
Net cash flow used by investing activities (4,865) (3,696)
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Purchases of treasury stock (19,215) (109,769)
Proceeds from sale of treasury stock -- 104,236
Repayment of debt (5,134) (4,654)
Distributions to minority interest (1,008) (2,608)
Dividends paid (74,247) --
--------- ---------
Net cash flow used by financing activities (99,604) (12,795)
--------- ---------
Net (decrease) increase in cash and cash equivalents (94,076) 133,998
Cash and cash equivalents:
Beginning of period 450,336 170,855
--------- ---------
End of period $ 356,260 $ 304,853
--------- ---------
Amounts paid for:
U.S. income taxes $ 7,005 $ 10,848
--------- ---------
Interest $ 35,566 $ 35,157
--------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(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, 1999.
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.
The results of operations for the six-month periods ended June 30, 2000 and 1999
are not necessarily indicative of the results to be expected for the full year.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Except as described in Note 1, 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 or
results of operations.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
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.
The United States Internal Revenue Service (IRS) previously asserted that the
Company was subject to U.S. taxation in the amount 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 also
asserted that the Company is subject to U.S. taxation for its 1991 through 1994
taxable years and has proposed an aggregate assessment of $319 million of tax,
plus additions to tax and interest, for those years. The Company has filed a
Protest against the proposed assessment with the Appellate Division of the IRS
with respect to the years 1991 through 1994. The IRS has not proposed an
assessment for years subsequent to 1994. 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 is
vigorously contesting 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 includes accident & health, automobile, aviation,
marine, property, workers' compensation and financial classes of reinsurance
business. Prior to October 1, 1999 the Company also provided shipper's risk
reinsurance. Real estate and leasing activities are owned and managed through
United States subsidiaries of Overseas Partners Capital Corp., a wholly-owned
subsidiary of OPL. There were no inter-segment revenues earned for the periods
ended June 30, 2000 and 1999. Inter-segment expenses, such as corporate
overhead, were allocated based on estimated utilization for the periods ended
June 30, 2000 and 1999.
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, 1999.
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 cash and 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
real estate properties, operating leases and finance 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, 2000
(Unaudited)
4. BUSINESS SEGMENTS (continued)
-----------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands) 2000 1999 2000 1999
----------------------------------------------------------------------------------------------------
REVENUES
Reinsurance:
Premiums earned $ 164,122 $235,338 $ 292,434 $444,690
Commission income 1,446 1,455 2,768 2,842
Investment (loss) income (28,567) 115,725 (6,610) 162,688
----------------------------------------------------------------------------------------------------
137,001 352,518 288,592 610,220
----------------------------------------------------------------------------------------------------
Real estate and leasing:
Rentals 73,714 69,894 139,672 133,057
Investment income 13,099 4,249 20,654 7,908
----------------------------------------------------------------------------------------------------
86,813 74,143 160,326 140,965
----------------------------------------------------------------------------------------------------
Consolidated 223,814 426,661 448,918 751,185
----------------------------------------------------------------------------------------------------
NET INCOME BEFORE TAXES
Reinsurance (505,827) 169,798 (488,154) 276,730
Real estate and leasing 19,421 9,364 28,596 13,658
Other operating expenses (3,782) (3,833) (8,049) (7,438)
----------------------------------------------------------------------------------------------------
Consolidated $(490,188) $175,329 $(467,607) $282,950
----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(In thousands) June 30, 2000 December 31, 1999
(Audited)
----------------------------------------------------------------------------------------
ASSETS
Reinsurance
<S> <C> <C>
Cash and investments $2,440,746 $2,581,509
Other 1,023,122 808,127
----------------------------------------------------------------------------------------
3,463,868 3,389,636
----------------------------------------------------------------------------------------
Real estate and leasing
Cash and investments 407,394 383,016
Other 1,142,267 1,142,630
----------------------------------------------------------------------------------------
1,549,661 1,525,646
----------------------------------------------------------------------------------------
Consolidated $5,013,529 $4,915,282
----------------------------------------------------------------------------------------
</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 70% of reinsurance revenues are generated from ceding companies
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 2000 and 1999, all of the
Company's long-lived assets were located in the United States.
The Company's largest reinsurance program, until its cancellation effective
October 1, 1999, related to the reinsurance of customer packages shipped by UPS.
Earned premiums on shipper's risk reinsurance were $nil and $91.1 million for
the three months ended June 30, 2000 and 1999, respectively. Net underwriting
income from shipper's risk reinsurance was $nil and $58.3 million for the three
months ended June 30, 2000 and 1999, respectively. OPL earned premiums of $15.3
million and $12.1 million for the three months ended June 30, 2000 and 1999,
respectively for the reinsurance of workers' compensation insurance, written by
Liberty Mutual Insurance company, for employees of a UPS subsidiary located in
the State of California. OPL's real estate and leasing segment includes a data
processing facility leased to UPS subsidiaries. Total rent from the facility
lease was $4.6 million and $4.5 million for the three months ended June 30, 2000
and 1999, respectively.
<PAGE>
OVERSEAS PARTNERS LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
4. BUSINESS SEGMENTS (continued)
-----------------
Earned premiums on shipper's risk reinsurance were $nil and $181.7 million for
the six months ended June 30, 2000 and 1999, respectively. Net underwriting
income from shipper's risk reinsurance was $nil and $116.4 million for the six
months ended June 30, 2000 and 1999, respectively. OPL earned premiums of $28.0
million and $24.2 million for the six months ended June 30, 2000 and 1999,
respectively for the reinsurance of workers' compensation insurance, written by
Liberty Mutual Insurance company, for employees of a UPS subsidiary located in
the State of California. Total rent from the facility lease was $9.2 million
and $8.8 million for the six months ended June 30, 2000 and 1999, respectively.
5. BERMUDA INSURANCE REGULATION
----------------------------
The Bermuda Insurance Act of 1978, amendments thereto and related Regulations
require OPL and its wholly-owned reinsurance subsidiaries to each maintain a
minimum solvency margin and a liquidity ratio. For the six months ended June
30, 2000 and 1999, they each met these requirements.
6. CONTINGENCIES
-------------
On November 19, 1999 and January 27, 2000 OPL was named as a defendant in two
class action lawsuits, filed on behalf of customers of UPS, in Montgomery
County, Ohio Court and Butler County, Ohio Court, respectively. The lawsuits
allege, amongst other things, that UPS told its customers that they were
purchasing insurance for coverage of loss or damage to goods shipped by UPS, but
a recent opinion by the United States Tax Court found that the insurance
program, as offered through UPS, several domestic insurance companies, and their
related reinsurance agreement with OPL, was not adequate for UPS to avoid
liability for federal income tax. The November 19, 1999 and January 27, 2000
actions were removed to federal court and thereafter transferred to the United
States District Court for the Southern District of New York and consolidated for
pretrial discovery purposes with other actions asserting claims against UPS. On
August 7, 2000, the Company and its wholly owned subsidiary, Overseas Partners
Capital Corp., were added as defendants in another class action lawsuit, also
pending in the Southern District of New York. The amended complaint alleges
violations of United States antitrust laws, and state unfair trade practice and
consumer protection laws. The Company believes that it has meritorious defenses
to all three actions and intends to defend them vigorously. The Company has
sought and will renew its filing of motions to dismiss the actions on various
grounds, including, among other things, lack of personal jurisdiction by the
Court over the Company. There can be no assurance, however, that an adverse
determination of the lawsuits would not have a material effect on the Company.
7. ACQUISITION
-----------
On June 30, 2000 OPL signed a definitive agreement to acquire Reliance
Reinsurance Company ("Reliance Re") for approximately $6 million, plus its
capital and surplus which is expected to be approximately $28 million at the
date of closing. The acquisition includes a team of up to 50 professionals and
staff. This transaction does not involve the assumption of any reinsurance
liabilities previously underwritten by Reliance Re. The acquisition is subject
to regulatory approval.
8. COMPARATIVE FIGURES
-------------------
Certain prior year amounts have been reclassified to conform to the current year
presentation.
<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, 2000 and 1999
-----------------------------------------
Reinsurance:
------------
<TABLE>
<S> <C> <C>
(In thousands) 2000 1999
----------------------------------------------------------------------------------------------------
Gross premiums written $ 178,981 $ 210,402
Premiums ceded (5,231) 555
----------------------------------------------------------------------------------------------------
Net premiums written 173,750 210,957
Change in unearned premiums (9,628) 24,381
----------------------------------------------------------------------------------------------------
Premiums earned 164,122 235,338
Commission income 1,446 1,455
----------------------------------------------------------------------------------------------------
165,568 236,793
----------------------------------------------------------------------------------------------------
Losses and loss expenses (579,031) (145,475)
Commissions and taxes (62,536) (35,696)
----------------------------------------------------------------------------------------------------
(641,567) (181,171)
----------------------------------------------------------------------------------------------------
Underwriting (loss) income (475,999) 55,622
----------------------------------------------------------------------------------------------------
Investment income:
U.S. equities (22,060) 72,332
Emerging market equities (23,675) 55,329
Fixed income 3,764 (19,941)
Strategic income mutual fund 10,200 6,035
Other 3,204 1,970
Expenses (1,261) (1,549)
----------------------------------------------------------------------------------------------------
Investment (loss) income (29,828) 114,176
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Reinsurance income $(505,827) $ 169,798
====================================================================================================
</TABLE>
The Company was originally formed to provide shippers' risk reinsurance covering
customer packages shipped by UPS. The program was cancelled effective October
1, 1999, following an adverse tax opinion issued against UPS earlier that year.
This had historically been our largest reinsurance program, generating up to
$380 million and $240 million of annual premium revenue and net underwriting
income, respectively.
The shipper's risk program was significant to the Company, not only because of
the magnitude of the underwriting income, but also because it's unique
characteristics influenced our prior strategic and operational decision-making.
Our long-term investment philosophy, our underwriting risk tolerance and our
real estate diversification were all closely related to management's perceptions
of the profitability, stability and liquidity of the shipper's risk program. We
are currently revising our business strategy to build on our strengths and
specialize in those lines of business that we believe have the potential to
provide for long-term profitability to our shareowners.
Over the last six months management, in conjunction with independent
consultants, has performed a thorough assessment of our business operations,
product lines and opportunities for future growth. As part of our quarterly
review process we, and our independent actuaries, have also completed a further
evaluation of our reserve for accrued losses and loss expenses. Our results for
the three- and six-month periods ended June 30, 2000, reflect the results of our
operational review, including:
. reserve strengthening totaling $460 million during the second quarter,
. the discontinuation of our property (non-catastrophe) and marine lines of
business as we do not believe that current pricing conditions for these lines
are conducive to short-term profitability,
. the cancellation of ten programs in the aviation, multi-line and accident &
health lines of business during the first quarter of 2000 as such programs
did not meet our risk and return criteria.
<PAGE>
Reinsurance: (continued)
------------
The reserve strengthening relates primarily to accident & health, aviation,
multi-line, marine and property programs written during 1997 to 1999. The charge
to earnings includes $30.4 million of irrecoverable deferred acquisition costs
for estimated premium deficiencies on the unexpired portion of policies in
force. The reserve strengthening reflects significant additional claims reported
to the Company in the second quarter and our assessment of prevailing conditions
in the reinsurance market, including recent industry announcements that indicate
deterioration in loss estimates for 1999 storms and other large industry events.
As a result of this reserve strengthening, our reinsurance segment incurred an
underwriting loss of $476.0 million for the three months ended June 30, 2000
compared to income of $55.6 million for the three months ended June 30, 1999.
Gross reinsurance premiums written decreased by $31.4 million for the three
months ended June 30, 2000 compared with the same period in the prior year. The
decrease was due primarily due to the loss of the shipper's risk reinsurance
business, which had generated $91.1 million of premiums written for the three
months ended June 30, 1999, offset by five new programs in our aviation and
accident & health lines, which generated $65.8 million of premiums written for
the three months ended June 30, 2000. Renewals accounted for $98.6 million of
premiums written during the three months ended June 30, 2000 compared with
$113.2 million during the three months ended June 30, 1999 and $16.6 million of
additional premiums were generated from the property catastrophe business.
Premiums ceded increased to $5.2 million for the three months ended June 30,
2000, compared to $(0.6) million for the same period last year as a result of
additional common account protection on our new accident & health programs and a
quota share retrocession of our property catastrophe business.
Reinsurance premiums earned decreased by $71.2 million for the three months
ended June 30, 2000 compared with the same period in the prior year, primarily
as a result of the loss of the shipper's risk reinsurance and the cancellation
of other programs over the last six months as discussed earlier.
Despite the decrease in premiums earned for the three months ended June 30,
2000, commissions and taxes increased to $62.5 million from $35.7 million during
the same period last year. The increase relates to the expensing of $30.4
million of deferred acquisition costs that are not expected to be recoverable as
a result of anticipated underwriting losses arising from the future recognition
of unearned premiums.
Our combined ratio, which is the ratio of the sum of losses, loss expenses,
commissions, taxes and other underwriting expenses to earned premiums increased
to 390.9% for the three months ended June 30, 2000 from 77.0% for the
corresponding period in 1999. Net underwriting loss for the quarter was $476.0
million compared to income of $55.6 million for the same period in 1999. This
decrease in income of $531.6 million was principally due to two factors:
. the reserve strengthening adjustments of $460 million during the second
quarter, as discussed earlier, and
. the cancellation of the shipper's risk program which contributed underwriting
income of $58.3 million for the three months ended June 30, 1999
The ceding company on one of the Company's programs has commenced arbitration
proceedings against the primary carrier for the underlying business. The ceding
company is seeking to rescind its contract with the primary carrier. The
arbitration proceedings will likely take many months to resolve. As such, it is
too early to determine whether the arbitration decision will be in the ceding
company's favor and therefore benefit OPL. The Company continues to reserve for
losses and loss expenses without regard to the likelihood of rescission.
The Company recently audited the books and records of another program. On the
advice of Counsel, the Company has subsequently issued a Reservation of Rights
letter indicating that the Company will not make any further loss payments under
the program until such time as the ceding company has satisfactorily resolved a
number of serious issues highlighted by the audit. The Reservation of Rights has
resulted in the ceding company serving an arbitration demand and drawing down
funds from the Company's letter of credit. Party arbitrators have been appointed
but the arbitration panel has not yet been constituted because of ongoing high-
level discussions between the parties. In the meantime, management believes that
current accrued losses and loss expenses are adequate to meet our obligations
under the contract.
Amid continued volatility in world wide bond and equity markets, net investment
losses related to our reinsurance segment for the three months ended June 30,
2000 were $29.8 million, compared to gains of $114.2 million for the same period
in 1999. The comparative performance of the investment markets reflected
concerns of inflationary pressures and resulting increasing interest rates. Net
investment income includes both realized and unrealized gains and losses on
investments.
<PAGE>
Reinsurance: (continued)
------------
The Company's U.S. S&P 500 based equity portfolio, which closely tracks the
index, decreased by 2.2% or $22.1 million for the three months ended June 30,
2000 compared to a gain of $72.3 million for the same period in 1999. Our
emerging markets equity portfolio lost 9.7% or $23.7 million for the three
months ended June 30, 2000 compared to gains of $55.3 million in the same period
in 1999, reflecting a 10% decline in emerging markets indices in April 2000
alone. Our global bond portfolio benefited from a reduction in short-term
interest rate expectations during the latter part of the quarter and returned
1.0% or $3.8 million for the quarter compared to a decline of $19.9 million for
the same quarter in 1999. Our U.S. strategic income portfolio, which is a
combination of fixed income investments, also benefited and returned 1.8% or
$10.2 million for the three months ended June 30, 2000 compared to $6.0 million
for the same period in 1999.
Real Estate and Leasing:
------------------------
<TABLE>
<S> <C> <C>
(In thousands) 2000 1999
---------------------------------------------------------------------------------------------------
REVENUE:
Office buildings $ 39,203 $ 36,486
Hotel 28,959 27,925
Leasing 5,552 5,483
---------------------------------------------------------------------------------------------------
73,714 69,894
---------------------------------------------------------------------------------------------------
EXPENSES:
Operating expenses (39,379) (37,467)
Interest expense (17,575) (17,706)
Depreciation (9,509) (8,933)
Minority interest in earnings (929) (673)
---------------------------------------------------------------------------------------------------
(67,392) (64,779)
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Operating income 6,322 5,115
---------------------------------------------------------------------------------------------------
Investment income:
Real estate investment trust certificates 8,015 (139)
Other 5,084 4,388
---------------------------------------------------------------------------------------------------
Investment income 13,099 4,249
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Real estate and leasing income $ 19,421 $ 9,364
===================================================================================================
</TABLE>
Office building revenue increased by 7.4% for the quarter ended June 30, 2000
from $36.5 million for the same period in 1999. This increase of $2.7 million
was due to increased revenues at all buildings including a $1.4 million increase
at Copley Place. Hotel revenue increased $1.0 million due to an increase in
room and occupancy rates over the same period in 1999. Leasing revenue has
increased from $5.5 million in the second quarter of 1999 to $5.6 million in the
second quarter of 2000 due to a $0.1 million increase in variable toll lease
revenue of the Ramapo Ridge data processing facility as a result of an
inflationary adjustment in rates and an increased volume of accounts processed.
Operating expenses have increased by $1.9 million primarily due to increases in
operating expenses at the hotel and Madison Plaza and additional real estate
taxes at Copley Place. The increase in operating expenses at the hotel is
primarily due to higher cost of sales as a result of increased revenues and
annual wage increases.
Investment income increased by $8.9 million from the same period in 1999
primarily as a result of an increase in the value of the real estate investment
trusts.
Real estate and leasing income for the quarter ended June 30, 2000 increased by
$10.1 million over the same period in 1999 primarily due to increased investment
income and also increased profitability of the office buildings, primarily
Copley Place.
Net Income:
-----------
Net income decreased by $670.2 million from the same period in 1999 due
primarily to the matters discussed above for the reserve strengthening, the
comparative performance of the investment markets and the loss of the shipper's
risk program on October 1, 1999. Net loss per share was $4.02 compared to
income per share of $1.37 for the same period in 1999.
<PAGE>
Six Months Ended June 30, 2000 and 1999
---------------------------------------
Reinsurance:
------------
<TABLE>
<S> <C> <C>
(In thousands) 2000 1999
----------------------------------------------------------------------------------------------------
Gross premiums written $ 464,503 $ 635,781
Premiums ceded (43,776) (7,565)
----------------------------------------------------------------------------------------------------
Net premiums written 420,727 628,216
Change in unearned premiums (128,293) (183,526)
----------------------------------------------------------------------------------------------------
Premiums earned 292,434 444,690
Commission income 2,768 2,842
----------------------------------------------------------------------------------------------------
295,202 447,532
----------------------------------------------------------------------------------------------------
Losses and loss expenses (687,447) (267,583)
Commissions and taxes (86,616) (62,903)
----------------------------------------------------------------------------------------------------
(774,063) (330,486)
----------------------------------------------------------------------------------------------------
Underwriting (loss) income (478,861) 117,046
----------------------------------------------------------------------------------------------------
Investment income:
U.S. equities (11,453) 113,110
Emerging market equities (19,320) 76,824
Fixed income 2,890 (45,111)
Strategic income mutual fund 13,386 14,162
Other 7,887 3,703
Expenses (2,683) (3,004)
----------------------------------------------------------------------------------------------------
Investment (loss) income (9,293) 159,684
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Reinsurance (loss) income $(488,154) $ 276,730
====================================================================================================
</TABLE>
For the six months ended June 30, 2000 our reinsurance segment experienced an
underwriting loss of $478.9 million compared to income of $117.0 million for the
six months ended June 30, 1999. This underwriting loss was largely due to a
reserve strengthening adjustment of $460.0 million made as a result of our
second quarter actuarial review discussed earlier. This adjustment primarily
related to the accident & health, aviation, multi-line, marine and property
lines of business.
Gross reinsurance premiums written decreased by $171.3 million for the six
months ended June 30, 2000 compared with the same period in the prior year,
primarily due to the loss of the shipper's risk reinsurance business and the
non-renewal of a number of programs, mainly in the first quarter. The shipper's
risk business related to the reinsurance of customer packages shipped by UPS.
This had historically been our largest reinsurance program up until its
cancellation effective October 1, 1999. This business had generated $181.7
million of premiums written for the six months ended June 30, 1999.
In addition, we declined to renew several accident and health, aviation, marine
and multi-line programs during the six months ended June 30, 2000, as such
programs did not meet our return requirements. This resulted in a decrease in
premiums written of $106.2 million compared to the prior year. We also
cancelled a number of existing property programs with premiums written of $76.0
million to avoid an aggregation of exposure with the new property catastrophe
risks written for the first time in 2000. This new property catastrophe
business generated premiums of $52.2 million for the six months ended June 30,
2000. We started to write property catastrophe business as we believe that the
risk-return characteristics will be more favorable, over the long term, than
from prior property programs.
Renewals accounted for $307.6 million of premiums written during the six months
ended June 30, 2000 compared with $386.1 million during the six months ended
June 30, 1999. We also wrote 18 new programs with premiums of $125.4 million
during the six months ended June 30, 2000 compared with 10 new programs yielding
premiums of $56.7 million in the same period in 1999. Accident and health and
aviation were the largest contributors to the increase in new business.
Revisions to original premium estimates reduced premiums written by $20.7
million for the six months ended June 30, 2000.
Premiums ceded increased to $43.8 million for the six months ended June 30,
2000, compared to $7.6 million for the same period last year. This follows our
purchase of several layers of excess of loss protection for the aviation book of
business. The reinsurance protection provides coverage of $77.0 million in
excess of $3.0 million for a single loss event. In addition we purchased
additional common account protection on our new accident & health programs and
entered in to a quota share retrocession of our property catastrophe business.
Reinsurance premiums earned decreased by $152.3 million for the six months ended
June 30, 2000 compared with the same period in the prior year, primarily as a
result of the loss of the shipper's risk reinsurance and the other factors
discussed above.
<PAGE>
Reinsurance: (continued)
------------
Despite the decrease in premiums earned for the six months ended June 30, 2000,
commissions and taxes increased to $86.6 million from $62.9 million during the
same period last year. The increase relates to the expensing of $30.4 million
of deferred acquisition costs that are not expected to be recoverable as a
result of anticipated underwriting losses arising from the future recognition of
unearned premiums.
Our combined ratio, which is the ratio of the sum of losses, loss expenses,
commissions, taxes and other underwriting expenses to earned premiums increased
to 264.7% for the six months ended June 30, 2000 from 74.3% for the
corresponding period in 1999. Net underwriting loss for the six months ended
June 30, 2000 was $478.9 million compared to income of $117.0 million for the
same period in 1999. This decrease in income of $595.9 million was principally
due to two several factors:
. the reserve strengthening adjustments of $460 million, and
. the cancellation of the shipper's risk program which contributed underwriting
income of $116.4 million for the six months ended June 30, 1999
For the six months ended June 30, 2000, bond and equity markets around the world
were extremely volatile, resulting in a net investment loss related to our
reinsurance segment for the six months ended June 30, 2000 of $9.3 million,
compared to net investment income of $159.7 million for the same period in 1999.
Net investment income includes both realized and unrealized gains and losses on
investments.
Our U.S. S&P 500 based equity portfolio, which closely tracks the index,
decreased by 0.3% for the six months ended June 30, 2000 generating losses of
$11.5 million as compared to gains of $113.1 million for the same period in
1999. Our emerging markets equity portfolio decreased by 8.1% or $19.3 million
for the six months ended June 30, 2000 compared to income of $76.8 million for
the same period in 1999. This was primarily as a result of a 10% decline in
emerging markets indices in April 2000. Despite a depreciating euro and rising
interest rates, our global bond portfolio returned 0.5% or $2.9 million for the
six months ended June 30, 2000 compared to a loss of $45.1 million in 1999. Our
U.S. strategic income portfolio, which is a combination of fixed income
investments, returned 2.6% or $13.4 million for the six months ended June 30,
2000 compared to $14.2 million for the same period 1999.
<PAGE>
Real Estate and Leasing:
------------------------
<TABLE>
<S> <C> <C>
(In thousands) 2000 1999
-----------------------------------------------------------------------------------------------------
REVENUE:
Office buildings $ 77,326 $ 74,136
Hotel 51,265 48,254
Leasing 11,081 10,667
-----------------------------------------------------------------------------------------------------
139,672 133,057
-----------------------------------------------------------------------------------------------------
EXPENSES:
Operating expenses (76,221) (72,209)
Interest expense (35,167) (36,006)
Depreciation (18,734) (17,854)
Minority interest in earnings (1,608) (1,238)
-----------------------------------------------------------------------------------------------------
(131,730) (127,307)
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Operating income 7,942 5,750
-----------------------------------------------------------------------------------------------------
Investment income:
Real estate investment trust certificates 10,772 (710)
Other 9,882 8,618
-----------------------------------------------------------------------------------------------------
Investment income 20,654 7,908
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Real estate and leasing income $ 28,596 $ 13,658
=====================================================================================================
</TABLE>
Office building revenue increased by 4.3% for the six months ended June 30, 2000
from $74.1 million for the same period in 1999. This increase of $3.2 million
was primarily due to increased revenues at Copley Place. Hotel revenue
increased $3.0 million due to an increase in room and occupancy rates over the
same period in 1999. Leasing revenue has increased from $10.7 million in the
six months ended June 30, 1999 to $11.1 million in the six months ended June 30,
2000 due to a $0.4 million increase in variable toll lease revenue of the Ramapo
Ridge data processing facility as a result of an inflationary increase in rates
and an increased volume of accounts processed.
Operating expenses have increased by $4.0 million primarily due to increases in
operating expenses at the hotel and additional real estate taxes at Copley
Place. The increase in operating expenses at the hotel is primarily due to
higher cost of sales as a result of increased revenues and annual wage
increases.
Investment income increased by $12.7 million from the same period in 1999
primarily as a result of an increase in the value of the real estate investment
trusts.
Real estate and leasing income for the six months ended June 30, 2000 increased
by $14.9 million over the same period in 1999 primarily due to increased
investment income, increased profitability of Copley Place, Atlanta Financial
Center and the hotel and increased variable toll lease revenue at the Ramapo
Ridge data processing facility.
Net Income:
-----------
Net income decreased by $755.6 million from the same period in 1999 due to the
significant underwriting losses and the comparative performance of the
investment markets. The underwriting losses were primarily due to a $460.0
million reserve strengthening adjustment for programs written in prior years and
also the loss of the shipper's risk program. Net income from shipper's risk for
the six months ended June 30, 2000 and 1999 was $nil and $116.4 million,
respectively. Net loss per share was $3.86, compared to income per share of
$2.21 for the same period in 1999.
<PAGE>
Liquidity and Capital Resources
-------------------------------
Our cash and cash equivalents decreased by $94.1 million during the six months
ended June 30, 2000 compared to an increase of $134.0 million in the same period
in 1999. Operating activities generated $10.4 million, investing activities
used $4.9 million and financing activities used $99.6 million compared to $150.5
million, $3.7 million and $12.8 million respectively, in the same period in
1999.
Reinsurance operations used $25.9 million for the six months ended June 30, 2000
compared to an inflow of $154.8 million for the same period in 1999. This was
largely due to the loss of the shipper's risk program and significant loss
payments on accident & health, marine and multi-line programs. Real estate
operations generated $24.4 million for the six months ended June 30, 2000
compared to $16.3 million for the same period in 1999. We received $33.8
million of interest and dividends, purchased $549.9 million of traded
investments and sold $536.0 million of investments in our trading portfolio
compared to $28.3 million, $533.9 million and $489.9 million respectively, for
the same period in 1999.
During the six months ended June 30, 2000 we purchased $19.2 million of shares
from our shareowners. For the same period in 1999 we purchased $109.8 million
of shares from our shareowners and received $104.2 million from sales of shares.
On March 10, 2000, we paid a dividend of $0.60 per share resulting in a cash
outflow of $74.3 million.
We are currently in negotiations to sell two of our real estate properties, and
may sell others as circumstances permit. The proceeds from the sale of
properties will be re-deployed into our reinsurance segment.
On November 23, 1999, the Board announced that it approved a temporary limit on
the number of shares that we are willing to purchase from any shareowners who
seek to sell such shares. Until further notice we are prepared to repurchase up
to 10% of any shareowner's shares between November 23, 1999 and November 1,
2000. This means that we are currently willing to purchase in the aggregate
approximately $270 million worth of our shares during this period. The Board
has determined that this would be the most equitable way to purchase shares in
the event shareowners wish to offer shares to the Company. The Board will
reconsider the amount of the temporary limit from time to time based upon the
demand for our shares and our continued maintenance of satisfactory earnings,
financial condition, and liquidity and capital requirements.
The Board has also authorized existing shareowners to purchase up to 10,000
shares of OPL Common Stock subject to registration of our shares for sale with
the Securities and Exchange Commission.
We intend to use any proceeds from the sale of shares for general corporate
purposes, including strategic investments and acquisitions and the financing
thereof. We may also use all or a portion of the proceeds to repurchase
additional shares from those other shareowners that may desire offering their
shares for repurchase by the Company.
Our investment policies are designed to achieve enhanced returns to shareowners,
measured over conventional medium- to long-term market cycle periods. Our fixed
income portfolio comprises highly liquid debt securities of governments,
supranationals, government agencies, financial institutions and utilities. Our
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 our investments permits us to respond quickly to
changing market conditions, our 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. We will, on
the other hand, earn income on the funds retained for a period of time until
eventual payment of a claim.
Despite the loss of our shipper's risk reinsurance business, we believe that our
investments, cash flow from operations and borrowing ability are adequate
sources of capital and liquidity for the payment of claims, operating expenses
and dividends and for share repurchases. We further believe that our strong
capital position will permit expansion of our reinsurance business, should
appropriate opportunities arise. In the event we decide to purchase additional
capital assets, we may, as demonstrated by our existing portfolio of assets,
finance such purchases from internally generated funds or from outside borrowing
which we believe would be readily available to us.
<PAGE>
Recent Developments
-------------------
As disclosed in the Taxation section of our Form 10-K for the year ended
December 31, 1999 ("1999 10-K"), under the passive foreign investment company
("PFIC") rules, a United States shareowner of OPL would be subject to rules
designed to approximate current taxation of the earnings of OPL if at least 75%
of the gross income of OPL were "passive income", or if at least 50% of the
average assets of OPL were to produce, or were held for the production of,
"passive income." In general, income derived in the active conduct of an
insurance business does not constitute "passive income," and assets that produce
or are held for the production of such income do not constitute "passive
assets." The opinion issued by the United States Tax Court against UPS,
discussed in the Reinsurance Activities section of the 1999 10-K, taxes to UPS
the shipper's risk reinsurance premium income received by OPL in past years.
However, the Tax Court did not decide whether shipper's risk reinsurance
premiums received by OPL are "active income" of OPL, which was not a party to
the case. The explanation contained in the 1999 10-K notes that it is not clear
what, if any, position the IRS might take regarding the character of the
shipper's risk reinsurance premiums to OPL.
During the second quarter of 2000, OPL was advised by the IRS of the existence
of an internal IRS memorandum that, among other things, consistent with the
outcome of the UPS case in the Tax Court, concludes that the shipper's risk
reinsurance premiums are not income of OPL and that the associated investment
income is not "active income" for purposes of the PFIC rules. The IRS memorandum
is expressly not binding on IRS auditing agents. However, based upon certain
assumptions and conclusions therein, the IRS could seek to impose the PFIC rules
against OPL's U.S. shareholders for one or more past years. It is not known at
this time whether the IRS will attempt to do so. It should be noted, in this
regard, that the UPS Tax Court decision in question is being appealed to the
U.S. Court of Appeals.
If OPL were found to be a PFIC in any year, those U.S. shareholders who held OPL
shares in that year would suffer adverse tax consequences with respect to
certain dispositions of and distributions on the shares. In general, gain
realized on the disposition of the shares would not be eligible for capital gain
treatment, and such gain as well as certain distributions on the shares would be
taxed under a special regime that would substantially increase the tax cost with
respect to the disposition or distribution. In addition, under the PFIC regime,
gain generally must be recognized from transactions that otherwise would be
entitled to nonrecognition treatment.
Safe Harbor Disclosure
----------------------
Some of the statements contained in this Securities and Exchange Commission
filing contain forward-looking information. Forward-looking statements are
statements other than historical information or statements of current condition.
Some forward looking statements can be identified by the use of such words as
"expect," "believe," "goal," "plan," "intend," "estimate," "may" and "will" or
similar words. These forward-looking statements relate to our plans and
objectives for future operations including our growth and operating strategy,
trends in our industry and our policy on future dividends.
You should be aware that these statements are subject to risks, uncertainties
and other factors, that could cause the actual results to differ materially from
those suggested by the forward-looking statements. Accordingly, there can be no
assurance that those indicated results will be realized. Among the important
factors that could cause actual results to differ materially from those
indicated by our forward-looking statements are:
. our ability to replace, with profitable business, the revenues that we
derived in the past from reinsurance of excess value package insurance
associated with the business of United Parcel Service of America, Inc.
. pricing pressure resulting from the competitive environment in which we
operate
. ability to collect reinsurance recoverables
. the uncertainties of the reserving process
. the occurrence of catastrophic events with a frequency or severity exceeding
our estimates
. loss of the services of any of the Company's executive officers
. uncertainties relating to government and regulatory policies (such as
subjecting us to insurance regulation or taxation in certain jurisdictions)
. losses due to interest rate fluctuations
. developments in global financial markets which could affect our investment
portfolio
. the resolution of any pending or future tax assessments by the IRS against us
. the resolution of other pending litigation
. the impact of mergers and acquisitions
We do not undertake to update these forward-looking statements in any manner.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
There has been no material change in the Company's market risks in 2000.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matters were submitted to a vote of security holders during the quarter ended
June 30, 2000.
<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, 2000.
<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.
Date: August 11, 2000 OVERSEAS PARTNERS LTD.
By: /s/ Mary R. Hennessy
--------------------
Mary R. Hennessy
Chief Executive Officer and President
By: /s/ Mark R. Bridges
-------------------
Mark R. Bridges
Vice President and Treasurer
(Principal Financial and Accounting
Officer)
