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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
(FINAL AMENDMENT)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
AUGUST 18, 1998
Date of Report (Date of earliest event reported)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-8993 94-2708455
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
80 SOUTH MAIN STREET, HANOVER, NEW HAMPSHIRE 03755
(Address of principal executive offices)
(603) 643-1567
(Registrant's telephone number, including area code)
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This Final Amendment amends and supplements the Form 8-K Current Report
originally filed on August 18, 1998, relating to the Company's acquisition of
all the outstanding common stock of Folksamerica Holding Company, Inc.
("Folksamerica") that it did not previously own. Folksamerica is the parent
company of Folksamerica Reinsurance Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Item 7 is hereby amended by adding the following information:
(a) Financial Statements of Businesses Acquired.
Unaudited historical condensed consolidated financial statements of
Folksamerica and its subsidiaries as of December 31, 1997 and June 30, 1998
and for the three and six-month periods ended June 30, 1998 and 1997, filed
as Exhibit 99(a) hereto.*
Audited historical consolidated financial statements of Folksamerica and
its subsidiaries as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, including the report of
PricewaterhouseCoopers LLP, filed as Exhibit 99(b) hereto.*
(b) Pro Forma Financial Information.
Unaudited pro forma condensed combined financial statements of the
Registrant and its subsidiaries consisting of a pro forma balance sheet as
of June 30, 1998, a pro forma income statement for the six months ended
June 30, 1998 and a pro forma income statement for the twelve months ended
December 31, 1997, together with the notes thereto, filed as Exhibit 99(c)
hereto.*
Unaudited pro forma condensed combined financial statements of the
Registrant and its subsidiaries consisting of a pro forma income statement
for the year ended December 31, 1998, together with the notes thereto,
filed as Exhibit 99(d) hereto.
(c) Exhibits. The following exhibits are filed herewith:
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EXHIBIT NO. DESCRIPTION
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10 (a) Stock Purchase Agreement dated as of July 1, 1998, by and among Fund American
Enterprises Holdings, Inc., White Mountains Holdings, Inc. and the Sellers (as
defined therein).*
10 (b) Assignment and Assumption Agreement dated as
of August 18, 1998, by and among Folksam
Omsesidig Sakforsakring, Samvirke Skadeforsikring
AS and Fund American
Enterprises Holdings, Inc.*
23 (a) Consent of PricewaterhouseCoopers LLP*
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99 (a) Unaudited historical condensed consolidated financial
statements of Folksamerica and its subsidiaries as of
December 31, 1997 and June 30, 1998 and for the three
and six-month periods ended June 30, 1998 and 1997.*
99 (b) Audited historical consolidated financial statements
of Folksamerica and its subsidiaries as of December 31,
1997 and 1996 and for each of the three years in the
period ended December 31, 1997, including the report of
PricewaterhouseCoopers LLP.*
99 (c) Unaudited pro forma condensed combined financial
statements of the Registrant and its subsidiaries
consisting of a pro forma balance sheet as of June 30,
1998, a pro forma income statement for the six months
ended June 30, 1998 and a pro forma income statement for
the twelve months ended December 31, 1997, together with
the notes thereto.*
99 (d) Unaudited pro forma condensed combined financial
statements of the Registrant and its subsidiaries
consisting of a pro forma income statement for the year
ended December 31, 1998, together with the notes thereto,
filed as Exhibit 99(d) hereto.
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* previously filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Dated: April 6, 1999 By: /s/
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Michael S. Paquette
Senior Vice President and
Controller
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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10 (a) Stock Purchase Agreement dated as of July 1, 1998, by and among Fund
American Enterprises Holdings, Inc., White Mountains Holdings, Inc. and
the Sellers (as defined therein).*
10 (b) Assignment and Assumption Agreement dated as of August 18, 1998, by and
among Folksam Omsesidig Sakforsakring, Samvirke Skadeforsikring AS and
Fund American Enterprises Holdings, Inc.*
23 (a) Consent of PricewaterhouseCoopers LLP*
99 (a) Unaudited historical condensed consolidated financial statements of
Folksamerica and its subsidiaries as of December 31, 1997 and June 30,
1998 and for the three and six-month periods ended June 30, 1998 and
1997.*
99 (b) Audited historical consolidated financial statements of Folksamerica and
its subsidiaries as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31,1997, including the report of
PricewaterhouseCoopers LLP.*
99 (c) Unaudited pro forma condensed combined financial statements of the
Registrant and its subsidiaries consisting of a pro forma balance sheet
as of June 30, 1998, a pro forma income statement for the six months
ended June 30, 1998 and a pro forma income statement for the twelve
months ended December 31, 1997, together with the notes thereto.*
99 (d) Unaudited pro forma condensed combined financial statements of the
Registrant and its subsidiaries consisting of a pro forma income
statement for the year ended December 31, 1998, together with the notes
thereto.
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* previously filed
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Exhibit 99(d)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of Fund American
Enterprises Holdings, Inc. and its subsidiaries ("Fund American") is being
presented in connection with Fund American's purchase, on August 18, 1998, of
all the outstanding common stock of Folksamerica Holding Company, Inc. and its
subsidiaries ("Folksamerica") that it did not previously own (the
"Transaction").
The accompanying unaudited pro forma condensed combined income statement of Fund
American for the year ended December 31, 1998 (the "pro forma income statement")
present the results for Fund American as if the Transaction had occurred as of
January 1, 1998. The pro forma income statement does not purport to represent
what Fund American's results of operations actually would have been had the
Transaction in fact occurred as of the date indicated, or to project Fund
American's results of operations for any future date or period. The pro forma
adjustments are based on available information and certain assumptions that Fund
American currently believes are reasonable under the circumstances. The
unaudited pro forma financial information should be read in conjunction with:
(i) Fund American's Annual Report on Form 10-K for the year ended December 31,
1998; (ii) Fund American's Quarterly Report on Form 10-Q for the three and nine
month periods ended September 30, 1998; (iii) the separate historical financial
statements of Folksamerica as of June 30, 1998 and for the three and six month
periods ended June 30, 1998 (previously filed); and (iv) the separate historical
financial statements of Folksamerica as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997 (previously
filed).
The pro forma adjustments and pro forma combined amounts are provided for
informational purposes only. Fund American's financial statements will reflect
the actual effects of the Transaction only from the date the Transaction
occurred. The pro forma adjustments contained herein assume that the tax rate is
35%, the maximum Federal statutory rate for corporations.
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FUND AMERICAN ENTERPRISES HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
INCOME STATEMENT
(in millions of dollars)
A. Pro forma adjustment to eliminate Folksamerica=s results of operations
for the period from August 18, 1998 to December 31, 1998, the period
during which Folksamerica was a consolidated subsidiary of Fund
American.
B. Pro forma adjustment to eliminate Fund American's equity in earnings of
Folksamerica and preferred stock dividends received from January 1,
1998 to December 31, 1998.
C. Pro forma adjustment to reflect a reduction in net investment income
earned on the portion of short-term investment balances deemed to have
partially financed the Transaction ($27.0 million). The consolidated
pro forma income information assumes that the annualized yield on
short-term investments used to partially fund the Transaction was 5.50%
for the period from January 1, 1998 to August 18, 1998.
D. Pro forma adjustment to reflect additional interest expense associated
with the monies borrowed under Fund American's existing debt
arrangements ($50.0 million) to partially fund the Transaction. The
consolidated pro forma income information assumes that the annualized
applicable interest rate on such indebtedness was 6.04% for the period
from January 1, 1998 to August 18, 1998.
E. Pro forma adjustment to reflect the amortization of the net change in
goodwill and the related incremental deferred credit associated with
the Transaction ($7.9 million) for the period from January 1, 1998 to
August 18, 1998. Fund American's amortization period is expected to be
five years.
F. Adjustment to reflect the income tax effects of B, C and D above.
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FUND AMERICAN ENTERPRISES HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(in millions of dollars)
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Pro Forma Adjustments
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Fund for the Pro Forma
REVENUES American Folksamerica Eliminations [A] Transaction Combined
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Net written premiums $ 238.6 $ 212.6 $ (73.7) $ 377.5
Change in unearned insurance premiums 7.4 25.5 (11.7) 21.2
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Earned insurance premiums 246.0 238.1 (85.4) -- 398.7
Earnings from unconsolidated ins affiliates 24.3 -- (5.6)[B] 18.7
Other ins operations revenues 12.2 -- 12.2
Gross mortgage servicing revenue 78.1 -- 78.1
Amortization and impairment of servicing (55.2) -- (55.2)
Gain on financial instruments 20.4 -- 20.4
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Net mortgage servicing revenue 43.3 -- -- -- 43.3
Net gain on sales of mortgages 86.8 -- 86.8
Gain on sale of mortgage servicing 15.2 -- 15.2
Other mortgage servicing revenues 31.9 -- 31.9
Net investment income 118.4 49.8 (18.1) (0.9)[C] 149.2
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TOTAL REVENUES $ 578.1 $ 287.9 $ (103.5) $ (6.5) $ 756.0
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EXPENSES
Ins losses and loss adj expenses $ 174.8 $ 170.3 $ (59.8) $ 285.3
Compensation and benefits 130.2 14.9 (7.1) 138.0
Insurance and reinsurance acquisition expenses 54.8 74.2 (29.1) 99.9
Interest expense 83.9 3.8 (1.4) 1.9 [D] 88.2
General expenses 75.4 (3.8) 1.4 (1.0)[E] 72.0
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TOTAL EXPENSES 519.1 259.4 (96.0) 0.9 683.4
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PRETAX OPERATING EARNINGS 59.0 28.5 (7.5) (7.4) 72.6
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Net realized investment gains 71.0 7.3 0.8 -- 79.1
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PRETAX EARNINGS 130.0 35.8 (6.7) (7.4) 151.7
Income tax provision 47.8 8.5 (1.2) (2.1)[F] 53.0
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NET INCOME 82.2 27.3 (5.5) (5.3) 98.7
Other comprehensive income, after tax (8.9) 26.0 (16.3) -- 0.8
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COMPREHENSIVE NET INCOME $ 73.3 $ 53.3 $ (21.8) $ (5.3) $ 99.5
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Less preferred stock dividends (3.7) (4.3) -- 4.3 [B] (3.7)
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Net income applicable to common stock $ 78.5 $ 23.0 $ (5.5) $ (1.0) $ 95.0
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Comprehensive net income applicable to common stock $ 69.6 $ 49.0 $ (21.8) $ (1.0) $ 95.8
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Basic earnings per common share:
Net income $ 13.38 $ 16.19
Comprehensive net income 11.87 16.33
Diluted earnings per common share:
Net income $ 11.94 $ 14.46
Comprehensive net income 10.58 14.59
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