<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to .
--------------- ----------------
Commission file number 0-14737
TRENWICK GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1152790
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Metro Center
One Station Place
Stamford, Connecticut 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 353-5500
None
(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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES ..[x]... NO ...
Indicate the number of shares outstanding of each of the issuer's classes of
common stock.
Class Outstanding at April 30, 1997
Common Stock, $.10 par value 11,936,432
<PAGE> 2
TRENWICK GROUP INC.
INDEX
Page
PART I. Financial Information Number
Consolidated Balance Sheet
March 31, 1997 and December 31, 1996 3
Consolidated Statement of Income
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statement of Changes in Common Stockholders' Equity
Three Months Ended March 31, 1997 and 1996 5
Consolidated Statement of Cash Flows
Three Months Ended March 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-10
Management's Discussion and Analysis 11-15
of Financial Condition and Results
of Operations
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE> 3
TRENWICK GROUP INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(dollars in thousands)
<S> <C> <C>
Assets
Securities available for sale at fair value:
Debt securities (amortized cost: $762,980 and $700,476) $ 765,863 $ 713,998
Equity securities (cost: $26,989 and $21,346) 29,700 25,959
Cash and cash equivalents 29,924 14,253
----------- ---------
Total investments and cash 825,487 754,210
Accrued investment income 10,848 10,386
Receivables from ceding insurers 77,533 62,689
Reinsurance recoverable balances, net 52,247 47,772
Deferred policy acquisition costs 23,522 21,805
Net deferred income taxes 24,136 20,231
Other assets 7,289 3,711
----------- ---------
Total assets $ 1,021,062 $ 920,804
=========== =========
Liabilities and Stockholders' Equity
Liabilities:
Unpaid claims and claims expenses $ 481,974 $ 467,177
Unearned premium income 79,960 71,448
Convertible debentures -- 103,500
Other liabilities 26,654 12,926
----------- ---------
Total liabilities 588,588 655,051
----------- ---------
Company-obligated mandatorily redeemable preferred
capital securities of subsidiary trust holding solely junior
subordinated debentures of Trenwick 110,000 --
----------- ---------
Common stockholders' equity:
Common stock, $.10 par value, 22,500,000 shares
authorized; 11,936,442 and 10,087,826 shares outstanding 1,194 1,009
Additional paid-in capital 153,406 94,423
Retained earnings 165,411 159,512
Net unrealized appreciation of securities available for
sale, net of income taxes 3,635 11,789
Deferred compensation under stock award plan (1,172) (980)
----------- ---------
Total common stockholders' equity 322,474 265,753
----------- ---------
Total liabilities and stockholders' equity $ 1,021,062 $ 920,804
=========== =========
</TABLE>
All share and per share information reflects a 3 for 2 stock split, paid on
April 15, 1997.
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
TRENWICK GROUP INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
-------- ------
(in thousands except per share data)
<S> <C> <C>
Revenues:
Net premiums earned $ 53,914 $47,691
Net investment income 11,729 9,869
Net realized investment gains 1,915 50
-------- -------
Total revenues 67,558 57,610
-------- -------
Expenses:
Claims and claims expenses incurred 30,804 29,199
Policy acquisition costs 17,377 12,242
Underwriting expenses 3,989 4,028
Interest expense 2,507 1,624
-------- -------
Total expenses 54,677 47,093
-------- -------
Income before income taxes and extraordinary item 12,881 10,517
Income taxes 3,080 2,335
-------- -------
Income before extraordinary item 9,801 8,182
Extraordinary loss on debt redemption,
net of $558 income tax benefit 1,037 --
-------- -------
Net income $ 8,764 $ 8,182
======== =======
PRIMARY EARNINGS PER SHARE
Income before extraordinary item $ .89 $ .80
Extraordinary loss (.10) --
-------- -------
Net income $.79 $ .80
======== =======
FULLY DILUTED EARNINGS PER SHARE
(assuming conversion of dilutive
convertible debentures)
Income before extraordinary item $ .81 $ .69
Extraordinary loss (.06) --
-------- -------
Net income $ .75 $ .69
======== =======
DIVIDENDS PER COMMON SHARE $ .24 $ .21
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
All share and per share information reflects a 3-for-2 stock split, paid on
April 15, 1997.
4
<PAGE> 5
TRENWICK GROUP INC.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
(dollars in thousands)
<S> <C> <C>
Common stockholders' equity, beginning of year $ 265,753 $ 240,776
Common stock, $.10 par value, and additional paid-in capital:
Conversion of debentures (1,783,926) 57,780 --
Exercise of employer stock options
(60,000 and 12,000 shares) 756 158
Income tax benefits from additional
compensation deductions allowable
for income tax purposes 476 94
Restricted common stock awarded
(9,782 and 9,293 shares) 328 320
Common stock purchased and retired
(5,091 and 5,226 shares) (171) (180)
Retained earnings:
Net income 8,764 8,182
Cash dividends (2,865) (2,046)
Net unrealized appreciation of securities available for sale:
Change in unrealized appreciation (12,541) (11,967)
Change in applicable deferred income taxes 4,387 4,188
Deferred compensation under stock award plan:
Restricted common stock awarded (328) (320)
Compensation expense recognized 135 133
--------- ---------
Common stockholders' equity, end of period $ 322,474 $ 239,338
========= =========
</TABLE>
All share and per share information reflects a 3-for-2 stock split, paid on
April 15, 1997.
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
TRENWICK GROUP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Premiums collected $ 37,391 $ 45,465
Ceded premiums paid (464) (1,663)
Claims and claims expenses paid (31,581) (19,951)
Claims and claims expenses recovered 700 636
Underwriting expenses paid (5,141) (5,130)
--------- --------
Cash provided by underwriting activities 905 19,357
Net investment income received 11,863 10,647
Interest expense paid (496) --
Income taxes paid (recovered) (2,158) 89
--------- --------
Cash provided by operating activities 10,114 30,093
--------- --------
Cash flows for investing activities:
Purchases of debt securities (98,189) (22,216)
Sales of debt securities 31,966 5,025
Maturities of debt securities 15,947 10,707
Purchases of equity securities (8,351) (72)
Sales of equity securities 4,621 21
Additions to premises and equipment (51) (137)
--------- --------
Cash used for investing activities (54,057) (6,672)
--------- --------
Cash flows for financing activities:
Issuance of mandatorily redeemable preferred
capital securities 110,000 --
Redemption of convertible debentures (46,997) --
Issuance costs of capital securities (1,280) --
Issuance of common stock 756 158
Dividends paid (2,865) (2,046)
--------- --------
Cash provided (used) by financing activities 59,614 (1,888)
--------- --------
Change in cash and cash equivalents 15,671 21,533
Cash and cash equivalents, beginning of period 14,253 6,760
--------- --------
Cash and cash equivalents, end of period $ 29,924 $ 28,293
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
TRENWICK GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The interim consolidated financial statements included those of Trenwick
Group Inc. and its subsidiaries and have been prepared in conformity with
generally accepted accounting principles applied on a basis consistent
with prior periods. Certain items in the financial statements have been
reclassified to conform with the 1997 presentation.
Management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The interim consolidated financial statements are unaudited; however, in
the opinion of management, the interim consolidated financial statements
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim periods.
These interim statements should be read in conjunction with the 1996
audited financial statements and related notes.
Earnings Per Share
Primary earnings per share are computed based on the weighted average
number of shares of common stock and common stock equivalents outstanding
during each year. Primary weighted average shares outstanding are adjusted
to reflect as outstanding, throughout each year presented, common stock
equivalents pursuant to the assumed exercise of stock options. Fully
diluted earnings per share are computed based on the assumption that the
convertible debentures are converted into common shares.
Supplemental earnings per share reflect primary earnings per share
adjusted as if the conversion was consummated as of the beginning of the
period.
7
<PAGE> 8
The weighted average shares of common stock outstanding and net income per share
amounts are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING:
Primary 11,066 10,250
Supplemental 12,077 12,034
Fully diluted 12,083 13,451
PER SHARE AMOUNTS:
Primary $.79 $.80
=== ===
Supplemental $.75 $.73
=== ===
Fully diluted $.75 $.69
=== ===
</TABLE>
Issuance costs of capital securities
The issuance costs associated with the issuance of the capital securities
are being amortized over the term of the junior subordinated debentures.
2. REINSURANCE
Trenwick purchases reinsurance to reduce its exposure to catastrophe
losses and the frequency of large losses in all lines of business.
Trenwick, however, remains liable in the event that its retrocessionaires
do not meet their contractual obligations. The effects of reinsurance on
premiums written, premiums earned and claims and claims expenses incurred
is as follows (in thousands):
<TABLE>
<CAPTION>
Premiums Written
Three Months Ended
March 31,
---------------------
1997 1996
------- --------
<S> <C> <C>
Assumed $72,737 $64,031
Ceded (13,179) (5,148)
-------- --------
Net $59,558 $58,883
======= =======
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Premiums Earned
Three Months Ended
March 31,
---------------------
1997 1996
------- --------
<S> <C> <C>
Assumed $64,225 $52,835
Ceded (10,311) (5,144)
-------- --------
Net $53,914 $47,691
======= =======
</TABLE>
<TABLE>
<CAPTION>
Claims and Claims Expenses Incurred
Three Months Ended
March 31,
---------------------
1997 1996
------- -------
<S> <C> <C>
Assumed $46,517 $36,348
Ceded (15,713) (7,149)
-------- --------
Net $30,804 $29,199
======= =======
</TABLE>
3. MANDATORILY REDEEMABLE PREFERRED CAPITAL SECURITIES
On January 28, 1997, Trenwick completed a private offering of $110 million
in 8.82% Subordinated Capital Income Securities ("Capital Securities")
through Trenwick Capital Trust I ("Trust"), a Delaware statutory business
trust. Trenwick owns all the common securities of the Trust ("Common
Securities"). Concurrently with the issuance of the Capital Securities,
the Trust invested the proceeds their sale, together with the
consideration paid to the Trust by Trenwick for the Common Securities, in
Trenwick's Junior Subordinated Debentures, whose terms are similar to
those of the Capital Securities.
The Trust was formed for the sole purpose of issuing the Capital
Securities and the Common Securities, investing the proceeds thereof in
the Junior Subordinated Debentures and making distributions to the holders
of the Capital Securities. The Capital Securities mature on February 1,
2037; require preferential cumulative cash distributions at an annual rate
of 8.82%, payable semi-annually on February 1 and August 1 (beginning
August 1, 1997) from the payment of interest on the Junior Subordinated
Debentures; and are guaranteed by Trenwick, within certain limits, as to
the payment of distributions and liquidation or redemption payments. They
are subject to mandatory redemption, (i) in whole but not in part at
maturity, upon repayment of the Junior Subordinated Debentures, at a
redemption price equal to the principal amount plus accrued and unpaid
interest; (ii) in whole but not in part at any time, contemporaneously
with the optional prepayment of the Junior Subordinated Debentures upon
the occurrence and continuation of certain events, at a redemption price
equal to the greater of the principal amount or the present value of
principal and
9
<PAGE> 10
interest payable to February 1, 2007, plus accrued and unpaid interest and
possible additional sums; and (iii) in whole or in part, after February 1,
2007, contemporaneously with the optional prepayment of the Junior
Subordinated Debentures, at a redemption price equal to the principal
amount plus accrued and unpaid interest and possible additional sums. Upon
the occurrence and continuation of an event of default with respect to the
Junior Subordinated Debentures, the Capital Securities shall have a
preference over the Common Securities. Upon the occurrence of an event of
default (A) with respect to the Junior Subordinated Debentures which is
attributable to Trenwick's failure to make required payments or (B) with
respect to Trenwick's guarantee, the holders of the Capital Securities may
institute a direct action against Trenwick.
4. COMMON STOCKHOLDERS' EQUITY
Stock Options and Benefit Plans
For the three months ended March 31, 1997, Trenwick awarded key employees
an aggregate of 9,782 shares of common stock under the terms of the 1989
Stock Plan, valued at an average of $33.50 per share (approximately
$328,000). Trenwick is recognizing compensation expense determined by the
value of the shares, amortized over a five year vesting period. During the
three month period, 5,091 shares were repurchased at an average of $33.50
per share (approximately $171,000) in connection with the satisfaction of
withholding taxes payable upon the vesting of shares previously awarded
under the plan.
Common Stock Split
On March 6, 1997, Trenwick's Board of Directors approved a three-for-two
stock split payable on April 15, 1997 to stockholders of record at the
close of business on March 18, 1997. An amount equal to the par value of
the additional shares issued have been transferred from additional paid-in
capital to common stock. In this report, all share and per share data have
been retroactively restated to reflect the stock split.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Trenwick ("Trenwick") is a holding company whose principal subsidiary, Trenwick
America Reinsurance Corporation ("Trenwick America Re") reinsures property and
casualty risks written by U.S. insurance companies. Substantially all of
Trenwick America Re's business is produced by reinsurance brokers. Trenwick
America Re divides its business into three categories: treaty, specialty and
facultative.
OPERATING RESULTS
Trenwick reported an increase in its first quarter income before extraordinary
item of 20% to $9.8 million, compared to $8.2 million for the first quarter of
1996. Fully diluted per share income before extraordinary item increased 17% to
$.81, compared to $.69 in the prior year first quarter. Net income for the first
quarter of 1997 was $8.8 million or $.75 per fully-diluted share. In the first
quarter of 1997, Trenwick recorded an extraordinary loss of $1.0 million
associated with the redemption of $45.8 million principal amount of its 6%
convertible debentures. There were no extraordinary items in the first quarter
of 1996.
Realized after-tax investment gains in the first quarter of 1997 were $1.2
million or approximately $.11 per share, compared to $33,000 or $.01 per share
for the same period in 1996.
11
<PAGE> 12
PREMIUMS
Trenwick's gross premium writings in the quarter increased 14%, consisting of a
21% increase in casualty business, offset by a 20% decline in property business.
However, Trenwick's net premiums written increased only nominally to $59.6
million in the first quarter of 1997 compared to $58.9 million in the same
period in 1996, primarily because the Company elected to purchase additional
stop loss reinsurance protection on casualty business effective January 1, 1997.
The decision to increase the Company's stop loss protection was driven by the
continued general deterioration in reinsurance pricing and the opportunity to
buy additional protection at more favorable terms than in prior years. The
distribution of the Company's net premiums written by type for the three months
ended March 31, 1997 was as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 % Change
---- ---- --------
<S> <C> <C> <C>
CASUALTY
Treaty $34,250 $37,280 8%
Specialty 15,620 9,851 59
Facultative 1,307 1,354 (3)
--------- --------- --
51,177 48,485 6
PROPERTY 8,381 10,398 (19)
-------- -------- --
Total $59,558 $58,883 1%
======= ======= ==
</TABLE>
Trenwick's premium growth in casualty business in the first quarter of 1997
resulted from an increase in specialty treaty business, due to several new
accounts underwritten in the second half of 1996. Casualty treaty business
declined primarily as a result of an increase in retention by a ceding company
on business which renewed January 1, 1997. Property business continued to
decline primarily as a result of the Company's direct and indirect withdrawal
from catastrophe business, caused by the prolonged deterioration in pricing.
New casualty business increased 27% in the quarter over the same period in 1996
and represented approximately 29% of total premium writings during the period.
Continuing casualty business increased 18% in the quarter over the same period
in 1996. Continuing casualty business represented 59% of the total premium
writings during the period. The Company's property business represented
approximately 12% of total premium writings for the quarter ended March 31,
1997.
12
<PAGE> 13
UNDERWRITING EXPERIENCE
The combined ratio is one means of measuring the profitability of a property and
casualty company. The combined ratio reflects underwriting experience, but does
not reflect income from investments or provisions for income taxes. A combined
ratio below 100% indicates profitable underwriting and a combined ratio
exceeding 100% indicates unprofitable underwriting. Although a reinsurer may
have unprofitable underwriting results, the reinsurer may still be profitable
because of investment income earned on the accumulated invested assets.
The following table sets forth Trenwick's combined ratios and the components
thereof calculated on a GAAP basis for the period indicated, together with
Trenwick America Re's combined ratio calculated on a statutory basis:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Claims and claims expense ratio 57.1% 61.2%
---- ----
Expense ratio:
Policy acquisition expense ratio 32.2 25.7
Underwriting expense ratio 7.4 8.4
----- -----
Total expense ratio 39.6% 34.1%
---- ----
Combined ratio (GAAP basis) 96.7% 95.3%
---- ----
Trenwick America Re
statutory combined ratio 95.9% 93.8%
---- ----
</TABLE>
As indicated, Trenwick's claims and claims expense ratio improved in the first
quarter of 1997 compared to the same period in 1996. The claims and claims
expense ratio in the first quarter of 1997 includes favorable development of $2
million, offset by $1.2 million of profit commissions, on business written in
prior years.
13
<PAGE> 14
INVESTMENT INCOME
Net investment income of $11.7 million in the first quarter of 1997 increased
19% compared to $9.9 million for the same period in 1996. Pre-tax yields on
invested assets, excluding equity securities, averaged 6.4% in both 1997 and
1996. This growth resulted primarily from funds received of $29.7 million from
the aggregate excess of loss commutation recorded in December 1996, coupled with
approximately $61 million of funds received in January 1997 from Trenwick's
previously reported private offering of $110 million 8.82% Subordinated Capital
Income Securities. The remaining proceeds were used to redeem $46 million
principal amount of the Company's convertible debentures, plus accrued interest.
After-tax net investment income in the first quarter of 1997 was $9.1 million
compared to $7.7 million for the comparative period in 1996. The effective tax
rate on net investment income for the three months ended was approximately 22.5%
in 1997, versus 21.8% in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, Trenwick's consolidated investments and cash totaled
$825.5 million, as compared to $754.2 million at December 31, 1996. The fair
value of the Company's debt securities portfolio exceeded amortized cost of
$763.0 million and $700.5 million by $2.9 million and $13.5 million at March 31,
1997 and December 31, 1996, respectively. At March 31, 1997 and at December 31,
1996, the fair value of the Company's equity securities exceeded cost of $27.0
million and $21.3 million by $2.7 million and $4.6 million, respectively
As of March 31, 1997, Trenwick's consolidated stockholders' equity totaled
$322.5 million or $27.02 per share, as compared to $265.8 million or $26.34 per
share at December 31, 1996. This $56.7 million increase resulted primarily from
the conversion of $57.7 million in debentures into approximately 1.8 million
shares partially offset by a decrease in the unrealized appreciation on the debt
and equity investments. Since December 31, 1996, the unrealized appreciation of
debt and equity investments declined $8.2 million, net of tax, or $.68 per
share, primarily as a result of the increase in interest rates.
In January 1997, the Company made a private offering of $110,000,000 in 8.82%
Subordinated Capital Income Securities due February 20, 2037 through Trenwick
Capital Trust I, a Delaware statutory business trust. In connection with this
offering, the Company called for redemption all $103,500,000 aggregate principal
amount of the Company's 6% convertible debentures due December 15, 1999, on
February 20, 1997, at a redemption price of 102.57% principal amount plus
accrued interest to the redemption date. Of the $103,500,000 principal amount of
debentures outstanding on that date, $45,819,000 principal amount were redeemed
and $57,681,000 principal amount were converted into an aggregate of 1,783,926
shares of the Company's common stock, par value $.10 per share. The remaining
net proceeds from the offering of the Capital Securities will be used for
general corporate purposes, which may include investments in and advances to
subsidiaries, the financing of growth and expansion, the financing of possible
future acquisitions and other corporate purposes.
Statutory surplus of Trenwick America Re was $294.2 million as of March 31,
1997, compared to $286.3 million as of December 31, 1996.
14
<PAGE> 15
Cash flow from operations of $10.1 million in the first quarter of 1997
decreased approximately 66% compared to cash flow from operations of $30.1
million in the first quarter of 1996. In the first quarter last year, the
Company benefited from non-recurring premium collections of approximately $7
million and below average paid loss activity. In 1997, operating cash flow was
reduced by a return premium on an expiring account and an acceleration in
payment of interest costs associated with the redemption of the Company's 6%
convertible debentures.
Cash provided by financing activities in the first quarter of 1997 increased to
$60.9 million compared to cash used for financing activities of $1.9 million in
the first quarter of 1996. This increase primarily resulted from funds received
from the aforementioned private offering partially offset by the debt
redemption.
Trenwick declared a first quarter dividend of $.24 per share in 1997, a 14%
increase compared to $.21 in the first quarter of 1996.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11.0 Computation of Earnings Per Share
27.0 Financial Data Schedule
b) Reports on Form 8-K
None
16
<PAGE> 17
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.
TRENWICK GROUP INC.
-------------------
(Registrant)
Date: May 14, 1997 JAMES F. BILLETT, JR.
------------- -----------------------------
James F. Billett, Jr.
Chairman, President and
Chief Executive Officer
Date: May 14, 1997 ALAN L. HUNTE
------------ ------------------------
Alan L. Hunte
Vice President, Chief Financial Officer
and Treasurer
17
<PAGE> 1
TRENWICK GROUP INC.
Exhibit 11.0 -- COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Income Before Extraordinary Item Net Income
-------------------------------- ----------
Three Months Ended Three Months Ended
March 31, March 31,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME AVAILABLE TO COMMON
STOCKHOLDERS:
Income before extraordinary item/net
income (primary) $ 9,801 $ 8,182 $ 8,764 $ 8,182
Add interest on convertible debentures
converted February 20, 1997 into
common stock, net of applicable taxes 322 589 322 589
------- ------- ------- -------
Income available (supplemental) 10,123 8,771 9,086 8,771
Add interest on convertible debentures
redeemed - when dilutive to each of those 256 467 0 467
------- ------- ------- -------
Income available (fully diluted) $10,379 $ 9,238 $ 9,086 $ 9,238
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING:
Average common shares outstanding 10,888 9,894 10,888 9,894
Equivalent shares associated with employee
stock options 178 356 178 356
------- ------- ------- -------
Weighted average common and common
equivalent shares (primary) 11,066 10,250 11,066 10,250
Additional shares associated with
convertible debentures converted February
20, 1997 1,011 1,784 1,011 1,784
------- ------- ------- -------
Weighted average common and common
equivalent shares (supplemental) 12,077 12,034 12,077 12,034
Additional shares associated with
convertible debentures redeemed - when
dilutive to each of these 803 1,417 0 1,417
Additional equivalent shares associated
with employee stock options 6 0 6 0
Weighted average common and common ------- ------- ------- -------
equivalent shares
(fully diluted) 12,886 13,451 12,083 13,451
======= ======= ======= =======
PER SHARE AMOUNTS:
Primary $ 0.89 $ 0.80 $ 0.79 $ 0.80
======= ======= ======= =======
Supplemental $ 0.84 $ 0.73 $ 0.75 $ 0.73
======= ======= ======= =======
Fully diluted $ 0.81 $ 0.69 $ 0.75 $ 0.69
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-Q FOR THE THREE MONTHS ENDED MARCH
31, 1997 FOR TRENWICK GROUP INC.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 765,863
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 29,700
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 795,563
<CASH> 29,924
<RECOVER-REINSURE> 77,533<F1>
<DEFERRED-ACQUISITION> 23,522
<TOTAL-ASSETS> 1,021,062
<POLICY-LOSSES> 481,974
<UNEARNED-PREMIUMS> 79,960
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 1,194
<OTHER-SE> 321,280
<TOTAL-LIABILITY-AND-EQUITY> 1,021,062
53,914
<INVESTMENT-INCOME> 11,729
<INVESTMENT-GAINS> 1,915
<OTHER-INCOME> 0
<BENEFITS> 30,804
<UNDERWRITING-AMORTIZATION> 17,377
<UNDERWRITING-OTHER> 6,496
<INCOME-PRETAX> 12,881
<INCOME-TAX> 3,080
<INCOME-CONTINUING> 9,801
<DISCONTINUED> 0
<EXTRAORDINARY> (1,037)
<CHANGES> 0
<NET-INCOME> 8,764
<EPS-PRIMARY> .79
<EPS-DILUTED> .75
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>REPRESENTS NET REINSURANCE RECOVERABLE BALANCES AFTER OFFSET OF FUNDS HELD AND
REINSURANCE BALANCES PAYABLE.
</FN>
</TABLE>
