<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO ____________
COMMISSION FILE NUMBER 001-12595
PXRE CORPORATION
(FORMERLY PHOENIX RE CORPORATION)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 06-1183996
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
399 THORNALL STREET
EDISON, NEW JERSEY 08837
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(732) 906-8100
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
</TABLE>
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
----- -----
As of August 9, 1999, 11,742,581 shares of common stock, $.01 par value
per share, of the Registrant were outstanding.
- --------------------------------------------------------------------------------
<PAGE>
PXRE CORPORATION
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets at June 30, 1999
and December 31, 1998 3
Consolidated Statements of Income for the three and six months
ended June 30, 1999 and 1998 4
Consolidated Statements of Stockholders' Equity for the three and six
months ended June 30, 1999 and 1998 5
Consolidated Statements of Cash Flow for the three and six months
ended June 30, 1999 and 1998 6
Notes to Consolidated Interim Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION 31
</TABLE>
2
<PAGE>
PXRE Consolidated Balance Sheets
Corporation (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
<S> <C> <C> <C>
Assets Investments:
Fixed maturities, available-for-sale, at fair value (amortized
cost $337,153,000 and $308,658,000, respectively) $ 329,382,668 $ 309,477,075
Equity securities, at fair value (cost $29,871,000 and $41,146,000) 27,988,306 40,974,283
Short-term investments 46,517,364 58,861,983
Other invested assets, at equity (cost $69,627,903 and $66,588,000) 73,753,483 65,163,581
-------------- -------------
Total investments 477,641,821 474,476,922
Cash 4,753,130 16,117,473
Accrued investment income 4,925,829 5,330,419
Receivables:
Unreported premiums 24,156,125 18,440,954
Balances due from intermediaries and brokers 17,381,942 14,631,140
Other receivables 25,739,891 21,293,256
Reinsurance recoverable 37,674,169 41,260,657
Ceded unearned premiums 16,247,426 8,231,130
Deferred acquisition costs 8,071,725 4,122,603
Income tax recoverable 11,977,468 19,569,364
Other assets 10,492,313 9,217,218
-------------- -------------
Total assets $ 639,061,839 $ 632,691,136
============== =============
Liabilities Losses and loss expenses $ 101,640,369 $ 102,592,394
Unearned premiums 43,633,503 20,541,326
Debt payable 50,000,000 50,000,000
Other liabilities 35,266,255 25,664,972
-------------- -------------
Total liabilities 230,540,127 198,798,692
-------------- -------------
Minority interest in consolidated subsidiary:
Company-obligated mandatorily redeemable capital trust
pass-through securities of subsidiary trust holding solely a
company-guaranteed related subordinated debt 99,518,977 99,516,938
Stockholders' Serial preferred stock, $.01 par value -- 500,000 shares authorized;
Equity 0 shares issued and outstanding 0 0
Common stock, $.01 par value -- 40,000,000 shares authorized;
15,162,818 and 14,938,262 shares issued, respectively 151,628 149,382
Additional paid-in capital 263,494,315 259,147,554
Accumulated other comprehensive income:
Net unrealized (depreciation) appreciation on investments, net of
deferred income tax (benefit) expense of $(3,364,000) and $3,400 (6,498,086) 6,253
Retained earnings 135,908,176 139,842,939
Treasury stock at cost (3,425,946 and 2,614,498 shares) (77,662,302) (61,420,025)
Restricted stock at cost (362,890 and 167,832 shares) (6,390,996) (3,350,597)
-------------- -------------
Total stockholders' equity 309,002,735 334,375,506
-------------- -------------
Total liabilities and stockholders' equity $ 639,061,839 $ 632,691,136
============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
PXRE Consolidated Statements of Income
Corporation (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues Net premiums earned $ 28,694,483 $ 21,378,386 $ 52,525,433 $ 41,092,354
Net investment income 10,922,120 4,436,722 18,122,712 11,997,781
Net realized investment gains (losses) 1,193,499 427,454 (1,382,512) 1,652,097
Management fees 403,699 678,947 1,300,315 1,504,628
-------------- -------------- ------------- --------------
41,213,801 26,921,509 70,565,948 56,246,860
-------------- -------------- ------------- --------------
Losses and Losses and loss expenses incurred 17,969,860 2,951,664 36,867,922 6,522,461
Expenses Commissions and brokerage 6,138,823 4,288,096 12,545,751 8,280,112
Other operating expenses 7,079,920 3,600,868 13,317,713 7,950,721
Interest expense 842,700 601,890 1,673,985 1,146,171
Minority interest in consolidated subsidiary 2,218,328 2,231,923 4,326,769 4,463,807
-------------- -------------- ------------- --------------
34,249,631 13,674,441 68,732,140 28,363,272
-------------- -------------- ------------- --------------
Income before income taxes 6,964,170 13,247,068 1,833,808 27,883,588
Income tax provision (benefit) 1,918,000 4,058,000 (450,000) 8,708,000
-------------- -------------- ------------- --------------
Net income $ 5,046,170 $ 9,189,068 $ 2,283,808 $ 19,175,588
============== ============== ============= ==============
Comprehensive Other comprehensive income (loss), net of tax:
Income Net unrealized depreciation on investments (3,068,383) (2,963,187) (6,504,339) (2,612,165)
-------------- -------------- ------------- --------------
Comprehensive income (loss) $ 1,977,787 $ 6,225,881 $ (4,220,531) $ 16,563,423
============== ============== ============= ==============
Per Share Basic:
Net income $ 0.44 $ 0.67 $ 0.20 $ 1.40
============== ============== ============= ==============
Average shares outstanding 11,439,018 13,650,563 11,694,417 13,676,914
============== ============== ============= ==============
Diluted:
Net income $ 0.44 $ 0.67 $ 0.19 $ 1.39
============== ============== ============= ==============
Average shares outstanding 11,584,551 13,722,006 11,809,238 13,755,041
============== ============== ============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
PXRE Consolidated Statements of Stockholders' Equity
Corporation (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Common Stock: Balance at beginning of period $ 151,314 $ 148,453 $ 149,382 $ 148,063
Issuance of shares 314 892 2,246 1,282
-------------- -------------- ---------------- ----------------
Balance at end of period $ 151,628 $ 149,345 $ 151,628 $ 149,345
============== ============== ================ ================
Additional Balance at beginning of period $262,909,165 $256,322,483 $ 259,147,554 $ 255,060,792
Paid-in Capital: Issuance of common shares 603,096 2,726,588 4,504,173 3,984,577
Other (17,946) 13,120 (157,412) 16,822
-------------- -------------- ---------------- ----------------
Balance at end of period $263,494,315 $259,062,191 $ 263,494,315 $ 259,062,191
============== ============== ================ ================
Unrealized
Appreciation Balance at beginning of period $ (3,429,703) $ 3,524,028 $ 6,253 $ 3,173,006
(Depreciation) Change in fair value for the period (3,068,383) (2,963,187) (6,504,339) (2,612,165)
-------------- -------------- ---------------- ----------------
on Investments: Balance at end of period $ (6,498,086) $ 560,841 $ (6,498,086) $ 560,841
============== ============== ================ ================
Retained Balance at beginning of period $133,917,715 $157,286,353 $ 139,842,939 $ 150,749,451
Earnings: Net income 5,046,170 9,189,068 2,283,808 19,175,588
Dividends paid to common stockholders (3,055,709) (3,419,234) (6,218,571) (6,868,852)
-------------- -------------- ---------------- ----------------
Balance at end of period $135,908,176 $163,056,187 $ 135,908,176 $ 163,056,187
============== ============== ================ ================
Treasury Stock: Balance at beginning of period $(75,326,133) $(21,884,586) $ (61,420,025) $ (21,660,108)
Repurchase of common stock (2,289,569) (4,119,004) (16,195,677) (4,312,129)
Other (46,600) 0 (46,600) (31,353)
-------------- -------------- ---------------- ----------------
Balance at end of period $(77,662,302) $(26,003,590) $ (77,662,302) $ (26,003,590)
============== ============== ================ ================
Restricted Stock: Balance at beginning of period $ (6,579,063) $ (1,726,709) $ (3,350,597) $ (782,808)
Issuance of restricted stock (474,750) (2,646,987) (4,224,844) (3,838,227)
Amortization of restricted stock 616,217 214,225 1,137,845 430,211
Other 46,600 0 46,600 31,353
-------------- -------------- ---------------- ----------------
Balance at end of period $ (6,390,996) $ (4,159,471) $ (6,390,996) $ (4,159,471)
============== ============== ================ ================
Total Balance at beginning of period $311,643,295 $393,670,022 $ 334,375,506 $ 386,688,396
Stockholders' Issuance of common shares 603,410 2,727,480 4,506,419 3,985,859
Equity: Repurchase of common stock (2,289,569) (4,119,004) (16,195,677) (4,312,129)
Restricted stock, net 141,467 (2,432,762) (3,086,999) (3,408,016)
Unrealized (depreciation) appreciation on
investments net of deferred income tax (3,068,383) (2,963,187) (6,504,339) (2,612,165)
Net income 5,046,170 9,189,068 2,283,808 19,175,588
Dividends (3,055,709) (3,419,234) (6,218,571) (6,868,852)
Other (17,945) 13,123 (157,411) 16,825
-------------- -------------- ---------------- ----------------
Balance at end of period $309,002,735 $392,665,506 $ 309,002,735 $ 392,665,506
============== ============== ================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
PXRE Consolidated Statements of Cash Flow
Corporation (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash Flow Net income $ 5,046,170 $ 9,189,068 $ 2,283,808 $ 19,175,588
from Operating Adjustments to reconcile net income to net cash
Activities provided by operating activities:
Losses and loss expenses 10,232,478 (3,990,538) (952,025) (10,779,965)
Unearned premiums 79,076 (6,010,999) 15,075,881 2,681,993
Deferred acquisition costs (743,093) 225,956 (3,949,122) (705,348)
Receivables 20,621,140 3,832,037 (11,271,839) (11,998,990)
Reinsurance balances payable (7,557,935) (1,737,627) (1,315,563) 7,127,631
Reinsurance recoverable (3,990,836) (547,941) 3,586,488 (187,310)
Income tax recoverable 2,581,378 (4,493,338) 10,476,378 1,194,540
Other (20,007,317) 4,268,712 (10,270,735) (1,865,069)
------------- ------------- -------------- --------------
Net cash provided by operating activities 6,261,061 735,330 3,663,271 4,643,069
------------- ------------- -------------- --------------
Cash Flow Cost of fixed maturity investments (39,296,734) (47,398,419) (82,611,245) (94,113,268)
from Investing Fixed maturity investments matured/disposed 15,298,682 62,938,849 52,803,814 133,446,003
Activities Payable for securities (579,098) 4,219,586 10,220,990 4,219,586
Cost of equity securities (1,045,999) (4,163,718) (6,950,398) (6,211,960)
Equity securities disposed 1,603,831 104,838 22,299,690 184,828
Net change in short-term investments 29,803,859 12,981,219 14,445,804 (2,111,703)
Other invested assets purchased (9,979,202) (24,285,774) (14,283,942) (28,168,532)
Other invested assets disposed 222,996 0 11,245,712 0
------------- ------------- -------------- --------------
Net cash (used) provided by investing
activities (3,971,665) 4,396,580 7,170,425 7,244,953
------------- ------------- -------------- --------------
Cash Flow Proceeds from issuance of common stock 63,295 80,496 216,210 147,635
from Financing Cash dividends paid to common stockholders (3,055,710) (3,419,234) (6,218,572) (6,868,852)
Activities Repurchase of debt 0 (1,040,170) 0 (1,040,170)
Cost of treasury stock (2,289,569) (4,119,004) (16,195,677) (4,312,129)
------------- ------------- -------------- --------------
Net cash used by financing activities (5,281,984) (8,497,911) (22,198,039) (12,073,516)
------------- ------------- -------------- --------------
Net change in cash (2,992,588) (3,366,001) (11,364,343) (185,492)
Cash, beginning of period 7,745,718 9,458,385 16,117,473 6,277,876
------------- ------------- -------------- --------------
Cash, end of period $ 4,753,130 $ 6,092,383 $ 4,753,130 $ 6,092,383
============= ============= ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
PXRE Notes to Consolidated Financial Statements (Unaudited)
Corporation
- -------------------------------------------------------------------------------
1. Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP") in the
United States. These statements reflect the consolidated operations of PXRE
Corporation and its subsidiaries (collectively referred to as "PXRE"), PXRE
Reinsurance Company ("PXRE Reinsurance"), PXRE Trading Corporation, Cat Fund
L.P., PXRE Capital Trust I, PXRE Ltd., PXRE Managing Agency Limited and PXRE
Direct Underwriting Managers, Inc. The U.K. operations of PXRE Ltd. and PXRE
Managing Agency Limited are included in the consolidated results on a one
quarter lag period beginning in June 1997. In addition, following the merger of
PXRE and Transnational Re Corporation ("TREX") as described further in Note 2,
the consolidated operations include Transnational Insurance Company
("Transnational Insurance"), formerly Transnational Reinsurance Company, and
TREX Trading Corporation since December 11, 1996. During the period from January
1, 1996 to December 11, 1996, PXRE owned approximately 21% of TREX, which in
turn owned 100% of Transnational Insurance, and accounted for this investment
under the equity method. Following the merger, Transnational Insurance became a
wholly-owned subsidiary of PXRE Reinsurance. All material transactions between
the consolidated companies have been eliminated in preparing these consolidated
financial statements.
Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amount of 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 foregoing 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 1998 audited
consolidated financial statements and related notes. The preparation of interim
consolidated financial statements relies significantly upon estimates. Use of
such estimates, and the seasonal nature of a portion of the reinsurance
business, necessitates caution in drawing specific conclusions from interim
results.
Certain amounts in 1998 were reclassified to be consistent with the
1999 presentation.
Premiums Assumed and Ceded
Premiums on reinsurance business assumed are recorded as earned on a
pro rata basis over the contract period based on estimated subject premiums.
Adjustments based on actual subject premium are recorded once ascertained. The
portion of premiums written relating to unexpired coverages at the end of the
period is recorded as unearned premiums. Reinsurance premiums ceded are recorded
as incurred on a pro rata basis over the contract period.
Deferred Acquisition Costs
Acquisition costs consist of commissions and brokerage expenses
incurred in connection with contract issuance, net of acquisition costs ceded.
These costs are deferred and amortized over the period in which the related
premiums are earned. Deferred acquisition costs are
7
<PAGE>
PXRE Notes to Consolidated Financial Statements (Unaudited)
Corporation
- -------------------------------------------------------------------------------
reviewed to determine that they do not exceed recoverable amounts, after
considering investment income.
Management Fees
Management fees are recorded as earned under various arrangements
whereby PXRE Reinsurance acts as underwriting manager for other insurers and
reinsurers. These fees are initially based on premium volume, but are adjusted
in some cases through contingent profit commissions related to underwriting
results measured over a period of years.
Losses and Loss Expense Liabilities
Liabilities for losses and loss expenses are established in amounts
estimated to settle incurred losses. Losses and loss expense liabilities are
based on individual case estimates provided for reported losses for known events
and estimates of incurred but not reported losses. Losses and loss expense
liabilities are necessarily based on estimates and the ultimate liabilities may
vary from such estimates. Any adjustments to these estimates are reflected in
income when known. Reinsurance recoverable on paid losses and reinsurance
recoverable on unpaid losses are reported as assets. Reinsurance recoverable on
paid losses represent amounts recoverable from retrocessionaires at the end of
the period for gross losses previously paid. Provisions are established for all
reinsurance recoveries which are considered doubtful.
Investments
Fixed maturity investments and unaffiliated equity securities are
considered available-for-sale and are reported at fair value. Unrealized gains
and losses, as a result of temporary changes in fair value during the period
such investments are held, are reflected net of income taxes in stockholders'
equity. Unrealized losses which are deemed other than temporary are charged to
operations. Short-term investments, which have an original maturity of one year
or less, are carried at amortized cost which approximates fair value. Short term
investments also include limited partnerships which invest primarily in Treasury
securities and provide for fund withdrawals upon 30 days notice; these are
reported under the equity method. Other invested assets include investments in
limited partnerships reported under the equity method which includes the cost of
the investment and subsequent proportional share of the partnership earnings.
Realized gains or losses on disposition of investments are determined on the
basis of specific identification. The amortization of premiums and accretion of
discount for fixed maturity investments is computed utilizing the interest
method. The effective yield under the interest method is adjusted for
anticipated prepayments. PXRE invests in certain weather indexed contracts. Such
investments are carried at estimated fair value and such adjustments to
estimated fair value are included in realized gains and losses.
8
<PAGE>
PXRE Notes to Consolidated Financial Statements (Unaudited)
Corporation
- -------------------------------------------------------------------------------
Fair Value of Financial Instruments
Fair values of certain assets and liabilities are based on published
market values, if available, or estimates based upon fair values of similar
issues.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain instruments
embedded in other contracts. It requires that all derivatives be recognized as
either assets or liabilities in the balance sheet and measured at fair value.
Gains or losses from changes in the derivative values are to be accounted for
based on how the derivative was used and whether it qualifies for hedge
accounting.
The statement is effective for the first quarter of 2001. PXRE is
currently assessing the effect of adopting this statement. It is not expected,
however, that the adoption of this statement will have a material effect on
PXRE's financial position or results of operations.
Debt Issuance Costs
Debt issuance costs associated with the issuance of $100 million 8.85%
Capital Trust Pass-through Securities `sm' (TRUPS `sm') and the issuance of a
note under a $50 million Credit Agreement are being amortized over the term of
the related outstanding debt on a constant yield basis.
Excess of Fair Market Value of Net Assets of Business Acquired Over Cost
The excess of fair market value of net assets of TREX business acquired
over cost is included in other liabilities and is amortized on a straight-line
basis over three years.
Foreign Exchange
Foreign currency assets and liabilities are translated at the exchange
rate in effect at the balance sheet date. Resulting gains and losses are
reflected in income for the period.
The effect of the translation adjustments for the U.K. operations will
be recorded as a cumulative translation adjustment in a separate component of
stockholders' equity, net of applicable deferred income taxes; the translation
adjustment at June 30, 1999 was not material.
Federal Income Taxes
Deferred tax assets and liabilities reflect the expected future tax
consequences of temporary differences between carrying amounts and the tax bases
of PXRE's assets and liabilities.
9
<PAGE>
PXRE Notes to Consolidated Financial Statements (Unaudited)
Corporation
- -------------------------------------------------------------------------------
Comprehensive Income
During 1998, PXRE adopted SFAS No. 130, Reporting Comprehensive Income,
which establishes standards for reporting and presentation of comprehensive
income and its components. Comprehensive income is comprised of net income and
other comprehensive income. Other comprehensive income consists of the change in
the net unrealized appreciation or depreciation of investments, net of tax, and
the change in foreign currency translation adjustments, net of tax.
Earnings Per Share
Effective December 31, 1997, PXRE adopted SFAS No. 128, Earnings Per
Share which requires replacing primary earnings per share with basic earnings
per share disclosure and fully diluted earnings per share with diluted earnings
per share disclosure. Basic earnings per share are determined by dividing net
earnings (after deducting cumulative preferred stock dividends) by the weighted
average number of common shares outstanding. On a diluted basis both net
earnings and shares outstanding are adjusted to reflect the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity, unless the effect of the
assumed conversion is anti-dilutive. SFAS No. 128 requires restatement of all
prior period earnings per share data presented.
Stock-Based Compensation
PXRE accounts for its stock options in accordance with the provisions
of Accounting Principles Board Opinion No. 25 ("APB").
Segments of an Enterprise and Related Information
Effective December 31, 1998, PXRE adopted SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information. This statement requires
that companies report certain information about their operating segments,
including information about the products and services from which the revenues
are derived, the geographic areas of operation, and information about major
customers. The statement defines operating segments based on internal management
reporting and management's method of allocating resources and assessing
performance.
10
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
GENERAL
PXRE Corporation ("PXRE") is a Delaware holding company, with
national and international underwriting and service operations, which conducts
its business primarily through its principal operating subsidiaries, PXRE
Reinsurance Company ("PXRE Reinsurance"), PXRE Managing Agency Limited ("PXRE
Managing Agency"), PXRE Limited, the sole member of PG Butler Syndicate 1224
("PXRE Lloyd's Syndicate") and Transnational Insurance Company ("Transnational
Insurance"). The term "PXRE" as used herein, refers to one or more of PXRE
Reinsurance, PXRE Managing Agency, PXRE Lloyd's Syndicate and Transnational
Insurance in discussions of these entities' businesses and refers to PXRE
Corporation in all other circumstances.
The property and casualty reinsurance industry has been experiencing an
extended period of soft market conditions. Competition has increased in recent
years as a result of the ability of companies to raise additional capital and
the use of both traditional and non-traditional reinsurance products. The level
of excess capital has also been aided by favorable financial markets and the
lower than normal number of major catastrophe losses in recent years.
Consolidation has been, and continues to be, another dominant trend in the
reinsurance industry. Companies are now larger, offer significantly more
capacity to ceding companies and have greater access to capital through capital
markets or their parent organizations. Further, Lloyd's of London ("Lloyd's")
has rebounded from a period of uncertainty and is now aggressively competitive.
The result is an oversupply of capacity in the industry.
Despite soft market conditions, PXRE has taken advantage of both the
availability of capital in the financial markets and new opportunities in the
business. PXRE has raised additional capital for its reinsurance operations to
increase its capacity to underwrite risks and to position PXRE to take advantage
of market opportunities. Since its formation more than a decade ago, PXRE has
specialized in property reinsurance, including a strong focus on
catastrophe-related products. Although catastrophe-related coverages experienced
substantial improvements in pricing and other terms in 1993 to 1994 following
high levels of catastrophic loss activity experienced by the worldwide insurance
industry, coverage terms have been deteriorating since the beginning of 1995. In
response, PXRE has moved to layers of risk that are less affected by competitive
pressures and has reduced commitments on marginally priced business. Meanwhile,
PXRE has taken a number of initiatives to enable it to write new business, and
position itself for renewed growth during the current soft market. In late 1996,
PXRE completed the organization of PXRE Managing Agency and PXRE Lloyd's
Syndicate, thereby establishing a direct presence in the Lloyd's market and
accessing specialty types of insurance and reinsurance on a worldwide basis.
Underwriting premium volume and loss experience related to the business of PXRE
Lloyd's Syndicate is included in PXRE's consolidated results on a quarter lag
basis, commencing in the quarter ended June 30, 1997. In addition, in the first
quarter of 1998 Transnational Insurance (formerly Transnational Reinsurance
Company), PXRE's newly established excess and surplus lines carrier, commenced
operations, specializing in non-standard and excess property insurance risks. In
mid-1998, PXRE added teams of direct
11
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
writing reinsurance professionals to establish a direct writing reinsurance unit
and international reinsurance executives both to complement PXRE's existing
brokerage-based reinsurance operations and to provide excess of loss short tail
casualty products for casualty markets, primarily commencing with January 1999
renewals. PXRE has not previously had a significant presence in any casualty
markets. These steps are expected over time to reduce the financial statement
volatility associated with PXRE's catastrophe coverages which are expected to
fall below 50% of gross premiums written in 1999. Also in 1998, PXRE further
strengthened its Lloyd's unit with additional professionals and that unit is now
expanding into the provision of services to start-up syndicates and captives at
Lloyd's.
At June 30, 1999, PXRE was a party to retrocessional arrangements with a
number of insurers and reinsurers. Under these arrangements, PXRE cedes some of
its underwritten risks to the participants, subject to maximum aggregate
liabilities per reinsurance program. PXRE receives a management fee or
commission, initially based on premium volume, adjusted in some cases through
contingent profit commissions related to underwriting results measured over a
period of years. Future management fee income is dependent upon the amount of
business ceded to the participants and the profitability of that business.
Another arrangement with Select Reinsurance Ltd. ("Select Re"), a Bermuda
reinsurer, formerly Investors Reinsurance Ltd., was renegotiated in 1998, and
involves a five-year (commencing 1998) fee based undertaking to produce and
underwrite business with Select Re. The Board of Directors of Select Re includes
PXRE's Chief Executive Officer.
PXRE also purchases catastrophe retrocessional coverage for its own
protection, depending on market conditions. PXRE has significantly increased its
purchases of such coverage in 1998 and 1999 in light of the continued general
deterioration in catastrophe reinsurance pricing and the opportunity to buy
protection at more favorable terms than in recent years.
CERTAIN RISKS AND UNCERTAINTIES
As a reinsurer principally of property catastrophe-related coverages in
both the national and international markets, PXRE's operating results in any
given period depend to a large extent on the number and magnitude of natural and
man-made catastrophes such as hurricanes, windstorms, floods, earthquakes,
spells of severely cold weather, fires and explosions. While PXRE may, depending
on market conditions, purchase catastrophe retrocessional coverage for its own
protection, the occurrence of one or more major catastrophes in any given period
could nevertheless have a material adverse impact on PXRE's results of
operations and financial condition and result in substantial liquidation of
investments and outflows of cash as losses are paid.
12
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PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The estimation of losses for catastrophe reinsurers is inherently less
reliable than for reinsurers of risks which have an established historical
pattern of losses. In addition, insured events which occur near the end of a
reporting period, as well as with respect to PXRE's retrocessional book of
business, the significant delay in losses being reported to insurance carriers,
reinsurers and finally retrocessionaires require PXRE to make estimates of
losses based on limited information from ceding companies and based on its own
underwriting data. Because of the uncertainty in the process of estimating its
losses from insured events, there is a risk that PXRE's liabilities for losses
and loss expenses could prove to be inadequate, with a consequent adverse impact
on future earnings and stockholders' equity. Additionally, as a consequence of
its emphasis on property reinsurance, PXRE may forgo potential investment income
because property losses are typically settled within a shorter period of time
than casualty losses.
In addition, the potential for uncertainty for the 1999 underwriting
year is greater than in past years because of the increased casualty exposures
assumed by PXRE. Unlike property losses that tend to be reported more promptly
and usually are settled within a shorter time period, casualty losses are
frequently slower to be reported and may be determined only through the lengthy,
unpredictable process of litigation. Moreover, given its recent expansion of
casualty business, PXRE does not have an established historical loss pattern
that can be used to establish casualty loss liabilities. PXRE must therefore
rely on the inherently less reliable historical loss patterns reported by ceding
companies and industry loss standards in calculating its liabilities.
As PXRE underwrites risks from a large number of insurers based on
information generally supplied by reinsurance brokers, there is a risk of
developing a concentration of exposure to loss in certain geographic areas prone
to specific types of catastrophes. PXRE has developed systems and software tools
to monitor and manage the accumulation of its exposure to such losses.
Management has established guidelines for maximum tolerable losses from a single
or multiple catastrophic events based on historical data; however, no assurance
can be given that these maximums will not be exceeded in some future
catastrophe.
Premiums on reinsurance business assumed are recorded as earned on a pro
rata basis over the contract period based upon estimated subject premiums.
Management must estimate the subject premiums associated with the treaties in
order to determine the level of earned premiums for a reporting period. Such
estimates are based on information from brokers, which can be subject to change
as new information becomes available. Because of the inherent uncertainty in
this process, there is the risk that premiums and related receivable balances
may turn out to be higher or lower than reported.
13
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
PXRE's invested assets consist primarily of fixed maturities and
short-term investments, but also include equities and investments in limited
partnerships, real estate investment trusts ("REITS"), emerging market debt and
other high yield bonds. PXRE's investments are subject to market-wide risks and
fluctuations, as well as to risk inherent in particular securities.
Additionally, the estimated fair value of PXRE's investments does not
necessarily represent the amount which could be realized upon future sale
particularly if PXRE were required to liquidate a substantial portion of its
portfolio to fund catastrophic losses. PXRE's investment guidelines stress
conservation of principal, diversification of risk and liquidity.
Premium receivables and loss reserves include business denominated in
currencies other than U.S. dollars. PXRE is exposed to the possibility of
significant claims in currencies other than U.S. dollars. While PXRE holds
positions denominated in foreign currencies to mitigate, in part, the effects of
currency fluctuations on its results of operations, it currently does not hedge
its currency exposures before a catastrophic event which may produce a claim.
PXRE relies primarily on cash dividends and net tax allocation payments
from its subsidiaries PXRE Reinsurance and Transnational Insurance to pay its
operating expenses, to meet its debt service obligations and to pay dividends to
PXRE's stockholders. The payment of dividends by PXRE Reinsurance to PXRE, and
by Transnational Insurance to PXRE Reinsurance, is subject to limits imposed
under the insurance laws and regulations of Connecticut, the state of
incorporation and domicile of PXRE Reinsurance and Transnational Insurance, as
well as certain restrictions arising in connection with PXRE's outstanding
indebtedness.
In the event the amount of dividends available, together with other
sources of funds, are not sufficient to permit PXRE to meet its debt service,
its other obligations and to pay cash dividends, it would be necessary to obtain
the approval of the Connecticut Insurance Commissioner prior to the payment of
additional dividends by PXRE Reinsurance (or Transnational Insurance). If such
approval were not obtained, PXRE would have to adopt one or more alternatives,
such as refinancing or restructuring its indebtedness or seeking additional
equity. There can be no assurance that any of these strategies could be effected
on satisfactory terms, if at all.
The reinsurance business is increasingly competitive and is undergoing a
variety of challenging developments. The industry has in recent years moved
toward greater consolidation as ceding companies have placed increased
importance on size and financial strength in the selection of reinsurers.
Additionally, reinsurers are tapping new markets and complementing their range
of traditional reinsurance products with innovative new products which bring
together capital markets and reinsurance experience. PXRE competes with numerous
major national and international reinsurance and insurance companies, many of
which have substantially greater financial, marketing and management resources
than PXRE.
14
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PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
COMPARISON OF SECOND QUARTER RESULTS FOR
1999 WITH 1998
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
Increase
1999 1998 (Decrease)
---- ---- ----------
(000's) %
<S> <C> <C> <C>
Gross premiums written $ 39,245 $ 24,624 59.4
Ceded premiums:
Managed business participants 5,309 3,767 40.9
Catastrophe coverage and surplus reinsurance 5,162 5,489 (6.0)
-------- --------
Total reinsurance premiums ceded 10,471 9,256 13.1
-------- --------
Net premiums written $ 28,774 $ 15,368 87.2
======== ========
</TABLE>
Gross premiums written for the three months ended June 30, 1999,
increased 59.4% to $39,245,000 from $24,624,000 for the corresponding period of
1998. Net premiums written for the second quarter of 1999, increased 87.2% to
$28,774,000 from $15,368,000 for the corresponding period of 1998. Net premiums
earned for the second quarter of 1999, increased 34.2% to $28,694,000 from
$21,378,000 for the comparable period of 1998. Gross written, net written and
net earned premium for the three months ended June 30, 1999 increased from
prior-year levels reflecting new international, casualty and direct writing
business written by PXRE's new teams of underwriters and by PXRE Lloyd's
Syndicate. Underwriting results related to PXRE Lloyd's Syndicate are included
in the consolidated results on a one quarter lag basis.
Premiums ceded by PXRE to its managed business participants increased
40.9% to $5,309,000 for the three months ended June 30, 1999 compared with
$3,767,000 for the corresponding period of 1998. The increase in premiums ceded
to these programs was due primarily to the increase in gross premiums written.
Management fee income from all sources for the three months ended June
30, 1999 decreased 40.5% to $404,000 from $679,000 for the corresponding period
of 1998, reflecting a reduced profit commission from a higher combined ratio
offset, in part, by an increase in premiums ceded to managed business
participants.
The underwriting results of a property and casualty insurer are
discussed frequently by reference to its loss ratio, underwriting expense ratio
and combined ratio. The loss ratio is the result of dividing losses and loss
expenses incurred by net premiums earned. The underwriting expense ratio is the
result of dividing underwriting expenses (reduced by management fees, if any) by
net premiums written for purposes of statutory accounting practices ("SAP") and
net premiums earned for purposes of GAAP. The combined ratio is the sum of the
loss ratio and the underwriting expense ratio. A combined ratio under 100%
indicates underwriting profits
15
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
and a combined ratio exceeding 100% indicates underwriting losses. The combined
ratio does not reflect the effect of investment income on operating results. The
ratios discussed below have been calculated on a GAAP basis.
The loss ratio was 62.6% for the second quarter of 1999 compared with
13.8% for the comparable period of 1998 largely due to the impact of new
business units (approximately $9.9 million of losses and loss expenses in the
second quarter of 1999 relating to the Company's recent diversification
efforts), and continued loss development related to Hurricane Georges ($3.5
million) and miscellaneous losses ($2.3 million). The loss ratio for the second
quarter of 1999 reflected incurred catastrophe losses of $8,977,000 gross and
$4,469,000 net for the 1999 and prior accident years. In comparison, the loss
ratio for the second quarter of 1998 reflected incurred catastrophe losses of
$79,000 gross and favorable development of catastrophe losses of $1,182,000 net
for 1998 and prior accident years. The favorable development of the net
catastrophe losses was primarily due to a recovery in respect of a 1994 aviation
loss.
Significant catastrophe losses affecting the second quarter 1999 loss
ratio are as follows:
<TABLE>
<CAPTION>
Amount of Losses
----------------
Loss Event Gross Net
- ---------- ----- ---
(in thousands)
<S> <C> <C>
Hurricane Georges $5,298 $3,463
One Risk Loss 2,735 802
</TABLE>
PXRE did not experience any significant catastrophic losses for the
second quarter of 1998.
The provision for losses and loss expenses and the loss ratio includes
the effect of foreign exchange movements on PXRE's liability for losses and loss
expenses, resulting in a foreign currency exchange gain of $72,000 for the three
months ended June 30, 1999 compared to a loss of $339,000 for the corresponding
period of 1998.
During the second quarter of 1999, PXRE experienced adverse development
of $4,909,000 net for prior-year loss and loss expenses primarily related to
Hurricane Georges. The loss ratio for the comparable period of 1998 was
favorably affected by decreases to reserves of $2,441,000 net for prior-year
losses and loss expenses related to the triggering of a retrocessional recovery
on a 1994 aviation loss.
The underwriting expense ratio was 44.7% for the second quarter of 1999
compared with 33.7% for the comparable period of 1998. The increase in the
underwriting expense ratio was substantially due to higher commission rates from
new business and overhead associated with the newer operations. The combined
ratio was 107.3% for the second quarter of 1999 compared with 47.5% for the
corresponding period of 1998.
16
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PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Other operating expenses increased to $7,080,000 for the three months
ended June 30, 1999 from $3,601,000 in the comparable period of 1998. The
increase was mainly related to salaries and benefits associated with the new
underwriting teams as part of the planned diversification efforts. Included in
other operating expenses were foreign currency exchange losses of $168,000 for
the three months ended June 30, 1999 compared to gains of $26,000 for the
corresponding period of 1998.
During the second quarter of 1999, interest expense increased to
$843,000, as compared to $602,000 in the corresponding period of 1998. Interest
for the three months ended June 30, 1999 reflected the drawdown of $50 million
principal balance at a rate of 6.3%. This is part of PXRE's Credit Agreement
with a syndicate of lenders (as described under "Liquidity and Capital
Resources"). Interest in the three months ended June 30, 1998, reflected $21.4
million of PXRE's 9.75% Senior Debt which was retired in August, 1998. In
addition, in the second quarter of 1999 and 1998, PXRE incurred minority
interest expense amounting to $2,218,000 and $2,231,000 respectively related to
the $100 million of 8.85% Capital Trust Pass-through Securities 'sm' (TRUPS
'sm') (as described below under "Liquidity and Capital Resources").
Net investment income for the three months ended June 30, 1999 increased
146.2% to $10,922,000 from $4,437,000 for the comparable period of 1998. The
increase in net investment income was caused primarily by strong limited
partnership investment returns amounting to $5.4 million (which are carried on
the equity method) offset in part by a decrease in investment income on fixed
income securities due to a reduction in average assets invested in such assets
during the period. PXRE's pre-tax annualized investment yield was 9.6% for the
second quarter of 1999 compared with 3.7% for the corresponding period in 1998,
both calculated using amortized cost and investment income before investment
expenses. Net realized investment gains for the second quarter of 1999 were
$1,193,000 compared to gains of $427,000 for the corresponding period of 1998.
The net effects of foreign currency exchange fluctuations were losses of
$96,000 in the second quarter of 1999 and losses of $313,000 for the comparable
quarter of 1998. See "Liquidity and Capital Resources."
For the reasons discussed above, net income was $5,046,000 for the three
months ended June 30, 1999 compared to $9,189,000 for the comparable period of
1998. Diluted income per common share was $0.44 for the second quarter of 1999
compared to $0.67 for the prior comparable period based on diluted average
shares outstanding of approximately 11,585,000 in 1999 and 13,722,000 in the
corresponding period of 1998.The decrease in shares outstanding is due to a
share repurchase program.
17
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
COMPARISON OF YEAR-TO-DATE RESULTS FOR
1999 WITH 1998
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------
Increase
1999 1998 (Decrease)
---- ---- ---------
(000's) %
<S> <C> <C> <C>
Gross premiums written $101,452 $65,262 55.5
Ceded premiums:
Managed business participants 12,684 9,907 28.0
Catastrophe coverage and surplus
reinsurance 21,167 11,630 82.0
------ -------
Total reinsurance premiums ceded 33,851 21,537 57.2
------ -------
Net premiums written $67,601 $43,725 54.6
======= =======
</TABLE>
Gross premiums written for the first six months of 1999 increased 55.5%
to $101,452,000 from $65,262,000 for the comparable period of 1998. Net premiums
written for the six months ended June 30, 1999 increased 54.6% to $67,601,000
from $43,725,000 for the corresponding period of 1998. Net premiums earned for
the first six months of 1999 increased 27.8% to $52,525,000 from $41,092,000 in
the corresponding period of 1998. Gross written, net written and net earned
premium for the six months ended June 30,1999 increased from prior-year levels
reflecting new international, casualty and direct writing business written by
PXRE's new teams of underwriters and by PXRE Lloyd's Syndicate. PXRE's decision
to buy additional retrocessional coverage reduced the level of increase in net
written and net earned premium. Underwriting results related to PXRE Lloyd's
Syndicate are included in the consolidated results on a one-quarter lag basis.
Catastrophe written premiums ceded increased in part due to additional
coverage associated with new operations and in part due to opportunistic
purchases of catastrophe protection. PXRE's property business is protected by a
series of retrocessional agreements which currently provide protection
principally against unusual severity of loss and are not designed to protect
PXRE's exposure to smaller more frequent loss occurrences.
Premiums ceded by PXRE to its managed business participants increased
28.0% to $12,684,000 for the first six months of 1999 compared with $9,907,000
for the corresponding period of 1998. The increase in premiums ceded to these
programs was due primarily to increased amounts of premiums written by PXRE.
Management fee income from all sources for the six months ended June 30,
1999 decreased
18
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PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
13.6% to $1,300,000 from $1,505,000 for the corresponding period of 1998
reflecting a decrease in profit commission from a higher combined ratio offset,
in part, by an increase of premiums ceded to managed business participants.
The loss ratio was 70.2% for the six months ended June 30, 1999 compared
with 15.9% for the corresponding period of 1998 largely due to the impact of new
business units (approximately $16.3 million) and continued loss development
related to Hurricanes Georges ($9.3 million) and Mitch ($1.3 million) and other
1998 events ($3.3 million). The loss ratio for the first half of 1999 reflected
incurred catastrophe losses of $23,786,000 gross and $13,428,000 net for the
1999 and prior accident years. The loss ratio for the first six months of 1998
reflected a reversal of previously recorded catastrophe losses of $81,000 gross
and $1,247,000 net for 1998 and prior accident years. The reversal of the net
catastrophe losses was primarily due to the retrocessional recovery on the 1994
aviation loss.
Significant catastrophe losses affecting the six months ended June 30, 1999 loss
ratio are as follows:
<TABLE>
<CAPTION>
Amount of Losses
----------------
Loss Event Gross Net
- ---------- ----- ---
(in thousands)
<S> <C> <C>
Hurricane Georges $13,834 $9,319
One Risk Loss 4,880 2,044
Hurricane Mitch 2,529 1,329
</TABLE>
There were no significant catastrophe losses which occurred in the first
half of 1998.
The provision for losses and loss expenses and the loss ratio includes
the effect of foreign exchange movements on PXRE's liability for losses and loss
expenses, resulting in a foreign currency exchange gain of $531,000 for the
first six months of 1999 compared to a loss of $366,000 for the corresponding
period of 1998.
During 1999, PXRE experienced adverse development of $14,105,000 net for
prior-year loss and loss expenses primarily related to Hurricane Georges and
Mitch. The loss ratio for the comparable period of 1998 experienced savings of
$1,697,000 net for prior-year loss and loss expenses primarily related to the
triggering of a recovery on the 1994 aviation loss discussed earlier offset in
part by adverse development in the first quarter of 1998 due to the German,
Poland and Czech floods.
The underwriting expense ratio was 46.8% for the six months ended June
30, 1999 compared with 35.8% for the comparable quarter of 1998. The expense
ratio reflects higher commissions from new business as well as an increase in
salary and benefits incurred in building the diversified business. The
commission and brokerage ratio was 21.4% in the first half of 1999, compared
with 16.5% in the prior year period. The operating expense ratio was 25.4% in
the first half of 1999, compared to 19.3% in the year earlier period. The
19
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
combined ratio was 117.0% for the first six months of 1999 compared with 51.7%
for the corresponding period of 1998.
Other operating expenses increased to $13,318,000 for the six months
ended June 30, 1999 from $7,951,000 in the comparable period of 1998. The
increase was primarily related to salaries and benefits associated with PXRE's
new underwriting teams as part of the planned diversification efforts. Included
in other operating expenses were foreign currency exchange losses of $632,000
for the first six months of 1999 compared to losses of $48,000 for the
corresponding period of 1998.
During the first six months of 1999, interest expense increased to
$1,674,000 as compared to $1,146,000 in the corresponding period in 1998 . The
increase in interest expenses relates to a drawdown of $50 million principal
balance at a rate of 6.3%. This is part of PXRE's Credit Agreement with a
syndicate of lenders (as described under "Liquidity and Capital Resources").
Interest in the first six months of 1998 reflected $21.4 million of PXRE's 9.75%
Senior Debt which was retired in August, 1998. In addition in the first six
months of 1999, PXRE incurred minority interest expense amounting to $4,327,000
related to the $100 million of 8.85% Capital Trust Pass-through Securities 'sm'
(TRUPS 'sm') (as described below under "Liquidity and Capital Resources")
compared to $4,464,000 in the similar period of 1998.
Net investment income for the six months ended June 30, 1999 increased
51.1% to $18,123,000 from $11,998,000 for the same period of 1998. The increase
in net investment income was caused primarily by strong limited partnership
investment returns amounting to $7.9 million (which are carried on the equity
method) offset in part by a decrease in investment income on fixed income
securities due to a reduction in average assets invested in such assets during
the period. PXRE's pre-tax annualized investment yield was 8.2% for the six
months ended June 30, 1999 compared with 5.0% for the corresponding period in
1998, both calculated using amortized cost and investment income before
investment expenses. Net realized investment losses for the first six months of
1999 were $1,383,000 compared to gains of $1,652,000 for the corresponding
period of 1998 reflecting losses from trading of weather contracts in the first
quarter of 1999 offset, in part, by net gains from sale of securities.
The net effects of foreign currency exchange fluctuations were losses of
$101,000 in the six months ended June 30, 1999, as compared to losses of
$414,000 for the comparable period of 1998.
For the reasons discussed above, net income was $2,284,000 for the six
months ended June 30, 1999 compared to net income of $19,176,000 for the
corresponding period of 1998. Diluted net income per common share was $0.19 for
the six months ended June 30, 1999 compared to $1.39 for the corresponding
period of 1998 based on diluted average shares outstanding of approximately
11,809,000 in the first six months of 1999 and 13,755,000 in the comparable
period of 1998. The decrease in shares outstanding is due to a share repurchase
program.
20
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
PXRE relies primarily on cash dividends and net tax allocation payments
from its subsidiaries PXRE Reinsurance and Transnational Insurance to pay its
operating expenses and income taxes, to meet its debt service obligations and to
pay dividends to PXRE stockholders. The payment of dividends by PXRE Reinsurance
to PXRE and by Transnational Insurance to PXRE Reinsurance is subject to limits
imposed under the insurance laws and regulations of Connecticut, the state of
incorporation and domicile of PXRE Reinsurance and Transnational Insurance, as
well as certain restrictions arising in connection with PXRE indebtedness
discussed below. Under the Connecticut insurance law, the maximum amount of
dividends or other distributions that PXRE Reinsurance may declare or pay to
PXRE, and that Transnational Insurance may declare or pay to PXRE Reinsurance,
within any twelve-month period, without regulatory approval, is limited to the
lesser of (a) earned surplus or (b) the greater of 10% of policyholders' surplus
at December 31 of the preceding year or 100% of net income for the twelve-month
period ending December 31 of the preceding year, all determined in accordance
with SAP. Accordingly, the Connecticut insurance laws could limit the amount of
dividends available for distribution by PXRE Reinsurance or Transnational
Insurance without prior regulatory approval, depending upon a variety of factors
outside the control of PXRE, including the frequency and severity of catastrophe
and other loss events and changes in the reinsurance market, in the insurance
regulatory environment and in general economic conditions. The maximum amount of
dividends or distributions that PXRE Reinsurance may declare and pay during
1999, without regulatory approval, is $44,722,900. The maximum amount of
dividends or distributions that Transnational Insurance may declare and pay to
PXRE Reinsurance during 1999, without regulatory approval, is $2,901,000. During
the first half of 1999, $16,500,000 was paid by PXRE Reinsurance to PXRE and
authorization was obtained from the Connecticut Insurance Department to pay a
dividend of $10,000,000 by Transnational Insurance to PXRE Reinsurance which was
paid in the first quarter of 1999.
In the event the amount of dividends available, together with other
sources of funds, are not sufficient to permit PXRE to meet its debt service and
other obligations and to pay cash dividends, it would be necessary to obtain the
approval of the Connecticut Insurance Commissioner prior to the payment of
additional dividends by PXRE Reinsurance (or Transnational Insurance). If such
approval were not obtained, PXRE would have to adopt one or more alternatives,
such as refinancing or restructuring its indebtedness or seeking additional
equity. There can be no assurance that any of these strategies could be effected
on satisfactory terms, if at all. In the event that PXRE were unable to generate
sufficient cash flow and were otherwise unable to obtain funds necessary to meet
required payments of principal and interest on its indebtedness, PXRE could be
in default under the terms of the agreements governing such indebtedness. In the
event of such default, the holders of such indebtedness could elect to declare
all of the funds borrowed thereunder to be due and payable together with accrued
and unpaid interest.
21
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
In December 1998 PXRE entered into a Credit Agreement dated as of
December 30, 1998 (the "Credit Agreement") with First Union National Bank
("First Union") as Agent and as a Lender, pursuant to which First Union agreed
to make available to PXRE a $75,000,000 revolving credit facility. On May 18,
1999, pursuant to various Joinder Agreements and Assignment and Acceptance
Agreements, First Union syndicated the revolving credit facility, joining Fleet
National Bank, Credit Lyonnais New York Branch and The First National Bank of
Chicago as additional lenders (collectively with First Union, the "Lenders") As
at June 30, 1999, PXRE had outstanding borrowings under the Credit Agreement of
$50,000,000, the net proceeds of which were contributed to the capital of PXRE
Reinsurance.
The terms of the Credit Agreement have been amended twice pursuant to a
First Amendment and Waiver to Credit Agreement, dated May 18, 1999, and a second
Amendment and Waiver to Credit Agreement, dated June 25, 1999. The First
Amendment increased the applicable margin percentage for LIBOR loans under the
Credit Agreement by 1/8% and changed the governing law from North Carolina to
New York law. The Second Amendment modified various convenants related to the
investments that PXRE and its subsidiaries are permitted to make under the
Credit Agreement.
As amended, loans under the Credit Agreement bear interest at an annual
rate equal to First Union's base rate, as in effect from time to time, for base
rate loans or at a margin (1.00% as of June 30, 1999) over First Union's
Eurodollar rate for periods of 30, 60, 90 or 180 days for LIBOR loans. In
connection with the Credit Agreement, PXRE and First Union entered into an
interest rate swap which, effective December 31,1998, has the intended effect of
converting the initial $50,000,000 borrowings by PXRE into a fixed rate
borrowing at an annual interest of 6.34%. Commitments under the Credit Agreement
terminate on March 31, 2005 and are subject to annual reductions of 13 1/3%
commencing March 31, 2000 and 33 1/3% on March 31, 2005, and, unless due or paid
sooner, the aggregate principal of the loans are due and payable in full on
March 31, 2005.
The Credit Agreement contains covenants which, among other things, limit
the ability of PXRE and its subsidiaries (including PXRE Reinsurance,
Transnational Insurance and PXRE Limited): (a) to incur additional Indebtedness
(other than certain permitted Indebtedness); (b) to create Liens upon their
properties or assets (other than Permitted Liens); (c) to sell, transfer or
otherwise dispose of their assets, business or properties (other than certain
permitted dispositions); (d) to make additional Investments (other than certain
permitted Investments, including Permitted Acquisitions and other Investments in
compliance with, among other things, applicable law and the limitations set
forth in the investment policy of PXRE Reinsurance in effect on December 30,
1998 and not exceeding specified limits); (e) to pay dividends or repurchase
stock if after giving effect thereto a Default or Event of Default exists or the
Fixed Charge Coverage Ratio would be less than 1.5 to 1.0 as defined in the
Credit Agreement; (f) to enter into certain transactions with Affiliates; (g) to
engage in any business other than (1) the businesses engaged in on December 30,
1998 and businesses and activities reasonably related
22
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
thereto or (2) in the case of any Insurance Subsidiary, the sale of any property
and casualty insurance or reinsurance products; (h) to enter into or remain a
party to certain ceded reinsurance agreements (1) with certain reinsurers that
are neither rated "A-" or better by A.M. Best Company ("A.M. Best") nor have
financial strength ratings of "A-" or better by Standard & Poor's Corporation
("S&P") or Moody's Investors Services Inc. ("Moody's") unless such reinsurers
are Lloyd's syndicates and Lloyd's maintains a rating of "A-" or better by A.M.
Best or S&P or such reinsurers have provided appropriate collateral in respect
of their obligations, or (2) which constitute Surplus Relief Agreements and
which increase Combined Statutory Capital and Surplus by more than 5% as of the
most recent fiscal year end; or (i) to consolidate, merge or otherwise combine
(or agree to do any of the foregoing) unless, among other things, (1) PXRE is
the surviving entity in such merger or consolidation, (2) such merger or
consolidation constitutes a Permitted Acquisition and the conditions and
requirements of the Credit Agreement are complied with and (3) immediately
thereafter no Default or Event of Default exists. The Credit Agreement also
requires PXRE and PXRE Reinsurance where applicable to meet Leverage Ratio,
Fixed Charge Coverage Ratio, Risk-Based Capital Ratio and Combined Statutory
Surplus requirements. As at June 30, 1999, there was no default under the Credit
Agreement.
The Credit Agreement enumerates various Events of Default, including but
not limited to, if: (1) any Person or group becomes the "beneficial owner" of
securities of PXRE representing 20% or more of the combined voting power of the
then outstanding securities of PXRE ordinarily having the right to vote in the
election of directors; or (2) the Board of Directors of PXRE ceases to consist
of a majority of the individuals who constituted the Board as of December 30,
1998 or who subsequently become members after having been nominated, or
otherwise approved in writing, by at least a majority of individuals who
constituted the Board as of December 30, 1998 (or their approved replacements).
A copy of the Credit Agreement is filed as Exhibit 4.8 to PXRE's 1998 10-K and
is incorporated herein by reference. Copies of the Joinder Agreements, dated May
18, 1999, Assignment and Acceptance Agreements, dated May 18, 1999, the First
Amendment and Waiver to Credit Agreement, dated May 18, 1999, and the Second
Amendment and Waiver to Credit Agreement, dated June 25, 1999, are filed as
Exhibit 4.9 hereto and are incorporated herein by reference.
On January 29, 1997, PXRE Capital Trust I, a Delaware statutory business
trust and a wholly-owned subsidiary of PXRE ("PXRE Capital Trust") issued
$100,000,000 principal amount of its 8.85% TRUPS `sm' due February 1, 2027 in an
institutional private placement. Proceeds from the sale of these securities were
used to purchase PXRE's 8.85% Junior Subordinated Deferrable Interest Debentures
due February 1, 2027 (the "Subordinated Debt Securities"). On April 23, 1997,
PXRE and PXRE Capital Trust completed the registration with the Securities and
Exchange Commission of an exchange offer for these securities and the securities
were exchanged for substantially similar securities (the "Capital Securities").
Distributions on the Capital Securities (and interest on the related
Subordinated Debt Securities) are payable semi-annually, in arrears, on February
1 and August 1 of each year, commencing August 1, 1997. Minority interest
expense, including amortization of debt
23
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
offering costs, for the six months ended June 30, 1999, in respect of the
Capital Securities (and related Subordinated Debt Securities) amounted to
approximately $4,327,000. On or after February 1, 2007, PXRE has the right to
redeem the Subordinated Debt Securities, in whole at any time or in part from
time to time, subject to certain conditions, at call prices of 104.180% at
February 1, 2007, declining to 100.418% at February 1, 2016, and 100%
thereafter. PXRE has the right, at any time, subject to certain conditions, to
defer payments of interest on the Subordinated Debt Securities for Extension
Periods (as defined in the applicable indenture), each not exceeding 10
consecutive semi-annual periods; provided that no Extension Period may extend
beyond the maturity date of the Subordinated Debt Securities. As a consequence
of PXRE's extension of the interest payment period on the Subordinated Debt
Securities, distributions on the Capital Securities would be deferred (though
such distributions would continue to accrue interest at a rate of 8.85% per
annum compounded semi-annually). In the event that PXRE exercises its right to
extend an interest payment period, then during any Extension Period, subject to
certain exceptions, (i) PXRE shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or rights to
acquire such capital stock or make any guarantee payments (subject to specified
exceptions) with respect to the foregoing, and (ii) PXRE shall not make any
payment of interest on, or principal of (or premium, if any, on), or repay,
repurchase or redeem, any debt securities issued by PXRE which rank pari passu
with or junior to the Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, PXRE may commence a
new Extension Period, subject to certain requirements.
PXRE has used the net proceeds from the sale of the Capital Securities
for general corporate purposes, including the redemption and the purchase of
outstanding indebtedness and common stock of PXRE.
PXRE files federal income tax returns for itself and all of its direct
or indirect subsidiaries that satisfy the stock ownership requirements for
consolidation for federal income tax purposes (collectively, the
"Subsidiaries"). PXRE is party to an Agreement Concerning Filing of Consolidated
Federal Income Tax Returns (the "Tax Allocation Agreement") pursuant to which
each domestic Subsidiary makes tax payments to PXRE in an amount equal to the
federal income tax payment that would have been payable by such Subsidiary for
such year if it had filed a separate income tax return for such year. PXRE is
required to provide for payment of the consolidated federal income tax liability
for the entire group. If the aggregate amount of tax payments made in any tax
year by a domestic Subsidiary is less than (or greater than) the annual tax
liability for such Subsidiary on a stand-alone basis for such year, such
Subsidiary will be required to make up such deficiency to PXRE (or will be
entitled to receive a credit if payments exceed the separate return tax
liability) of the Subsidiary.
The primary sources of liquidity for PXRE's principal operating
subsidiaries are net cash flow from operating activities (including interest
income from investments), the maturity or sale of investments, borrowings,
capital contributions and advances from PXRE or PXRE
24
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Reinsurance and in the case of PXRE Reinsurance, dividends from Transnational
Insurance. Funds are applied primarily to the payment of claims, operating
expenses and, income taxes and to the purchase of investments. Premiums are
typically received in advance of related claim payments.
Net cash flow provided by operations was $6,261,000 during the second
quarter of 1999 compared with net cash flow provided by operations of $735,000
during the corresponding period of 1998, due to the effects of timing of
collection of receivables and reinsurance recoverables and payments of losses.
PXRE's management has established general procedures and guidelines for
its investment portfolio and oversees investment management carried out by
Phoenix Investment Partners, Limited, a public majority-owned subsidiary of
Phoenix Home Life Mutual Insurance Company, and by selected other investment
managers. PXRE's invested assets consist primarily of fixed maturities and
short-term investments, but also include equities, investments in limited
partnerships, REITS, emerging market debt and other high yield bonds. PXRE's
investments are subject to market-wide risks and fluctuations, as well as to
risk inherent in particular securities. As at June 30, 1999, 78.7% of PXRE's
investment portfolio, at fair value, consisted of fixed maturities and
short-term investments, while the balance was in equity securities including,
various mutual funds and other invested assets primarily in the form of limited
partnerships. PXRE's investment policies stress conservation of principal,
diversification of risk and liquidity and are approved by its Board of
Directors.
Of PXRE's fixed maturities portfolio at June 30, 1999, 84.1% of the fair
value was in obligations rated "A3" or "A-" or better by Moody's or S&P,
respectively. Mortgage and asset-backed securities accounted for 24.5% of fixed
maturities based on fair value at June 30, 1999. PXRE had no investments in real
estate or commercial mortgage loans; however, PXRE has invested in common and
preferred shares of publicly traded REITS. The average market yield to maturity
of PXRE's fixed maturities portfolio at June 30, 1999 and 1998 was 6.6% in each
period.
Fixed maturity and equity investments are reported at fair value, with
the net unrealized gain or loss, net of tax, reported as a separate component of
stockholders' equity. At June 30, 1999, PXRE had a $6,498,000 after-tax
unrealized loss in the value of its investment portfolio in stockholders' equity
($0.55 book value per share), primarily due to its emerging market investments
and changes in interest rates.
Short-term investments are carried at amortized cost, which approximates
fair value. PXRE's short-term investments, principally high-grade commercial
paper, U.S. Treasury bills and investment in a limited partnership which invests
primarily in U.S. Treasury bills, were $46,517,000 at June 30, 1999 compared to
$58,862,000 at December 31, 1998. Other invested assets amounting to $73,753,000
at June 30, 1999, which were comprised of limited partnerships, were accounted
for under the equity method. The amount of equity income included in short-
25
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
term investments and other invested assets as of June 30, 1999 amounted to
$7,634,000.
Dividends incurred in the six months ended June 30, 1999 were
approximately $6,219,000 compared to $6,869,000 in the corresponding period of
1998, as a result of the increase in the per share quarterly dividend from $0.25
to $0.26 commencing in the fourth quarter of 1998, more than offset by the
decline in outstanding shares resulting from stock repurchases. On July 7, 1999,
PXRE announced a proposed reorganization of the Company as a result of which a
new Bermuda-based holding company, PXRE Group Ltd. would become the parent
holding company of the Company. In anticipation of the reorganization, PXRE
announced that it will pay a quarterly dividend of $0.06 per share beginning in
the third quarter of 1999. The expected annual dividend based on shares
outstanding at June 30, 1999 is approximately $2,816,850.
In connection with the reorganization, PXRE will record a one-time
income tax charge of approximately $1.8 million in the third quarter of 1999
related to the cancellation of shares of PXRE Corporation held by its
subsidiary.
Book value per common share was $26.33 at June 30, 1999.
During the first six months of 1999, PXRE acquired 799,700 shares of
common stock under its currently authorized stock repurchase program. Subsequent
to April, 1999 the company has not purchased any additional shares of common
stock. PXRE continues to have authorization to repurchase approximately 500,300
shares but has suspended this program pending the reorganization. PXRE had
approximately 11,736,900 common shares outstanding as of June 30, 1999.
PXRE may be subject to gains and losses resulting from currency
fluctuations because substantially all of its investments are denominated in
U.S. dollars, while some of its net liability exposure is in currencies other
than U.S. dollars. PXRE holds, and expects to continue to hold, currency
positions and has made, and expects to continue to make, investments denominated
in foreign currencies to mitigate, in part, the effects of currency fluctuations
on its results of operations. Currency holdings and investments denominated in
foreign currencies do not constitute a material portion of PXRE's investment
portfolio and, in the opinion of PXRE's management, are sufficiently liquid for
its needs.
In connection with the capitalization of PXRE Lloyd's Syndicate, PXRE
has placed on deposit $46,287,000 par value of U.S. government securities and
municipal bonds as collateral for Lloyd's. In addition, PXRE issued a letter of
credit for the benefit of Lloyd's in the amount of $15,355,000, which is
collateralized by municipal bonds for approximately $17,835,000. In addition,
PXRE has provided a 'L'5,000,000 ($7,889,000 at June 30, 1999 exchange rates)
line of credit to PXRE Managing Agency for liquidity purposes. There has been no
drawdown of these amounts through June 30, 1999. Additionally, PXRE has made
loans to PXRE Managing Agency, PXRE Ltd. and PXRE Lloyd's Syndicate in the
amount of
26
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
$7,182,000 to provide liquidity for those operations.
In September 1997, PXRE and Phoenix Home Life completed the formation of
a joint venture, Cat Bond Investors L.L.C., with initial committed capital of
$20 million. The joint venture specializes in investing in instruments, the
returns on which are determined, in whole or in part, by the nature, magnitude
and/or effects of certain catastrophic events or meteorological conditions.
All amounts classified as reinsurance recoverable at June 30, 1999 are
considered by management of PXRE to be collectible in all material respects.
MARKET RISK
PXRE reviewed the change in its exposure to market risks since December
31, 1998. The components of PXRE's holdings in derivatives and other financial
instruments have not materially changed. PXRE's risk management strategy and
objectives have not materially changed. PXRE believes that the potential for
loss in each market risk sector described at year-end has not materially
changed.
INCOME TAXES
PXRE recognized a tax provision of $1,918,000 for the three-month period
ending June 30, 1999 compared to tax expense of $4,058,000 in the corresponding
period of 1998. For the six-month period ended June 30, 1999, the company
recognized a tax benefit of $450,000 compared to a tax expense of $8,708,000 for
the comparable period in 1998. The tax benefit reported by PXRE in 1999 is
attributable primarily to the amount of net income, tax-exempt income and
amortization of negative goodwill.
27
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR 2000 UPDATE
PXRE's Year 2000 Project is proceeding on schedule. The Project is
addressing the potential vulnerability that the Company may have to computer
chips and programs inside or outside the Company that may fail to properly
process dates associated with the coming millennial year change. PXRE believes
that the impact of Year 2000 issues on its internal computer systems will not be
material.
All of the company's internal computer servers operate in Oracle
database and Sun Microsystems' computing environments that have been certified
as Year 2000 compliant. The critical application software packages running on
these database servers were all developed in-house with the exception of the
Company's general ledger/accounts payable system. This latter system was
identified as not being Year 2000 compliant and was replaced with a new
compliant system in December 1998 to attain various business objectives,
including Year 2000 compliance.
All personal computers and related desktop and network equipment and
software have been inventoried and their Year 2000 compliance status reviewed.
Remediation of these non-compliant smaller devices was begun in January 1999 and
by June 30, 1999, was 95% complete. The task of replacing and upgrading the
remaining non-compliant equipment is not expected to be difficult, nor is the
cost expected to be material. PXRE budgeted $100,000 for 1999 for Year 2000
compliance expenditures.
PXRE has been in contact with its other material business partners to
determine their state of readiness with regard to the Year 2000 issue and the
potential impact on PXRE. PXRE has identified the following categories of
business partners as material to PXRE's ability to conduct its operations: banks
and investment advisors, reinsurance intermediaries, major reinsurance clients,
reinsurance providers, telecommunications providers, utilities and office space
providers.
In connection with reinsurance intermediaries and reinsurance clients,
PXRE has the ability to verify their calculations of reinsurance transactions so
that material errors brought on by a failure of their systems are capable of
being detected.
Where PXRE has determined that the relationship with a business partner
is material to its ability to conduct normal operations, PXRE has sent letters
to that partner requesting a statement of its Year 2000 initiative. Where deemed
necessary, PXRE is following up with the business partner to obtain additional
information. Based on these assurances and PXRE's internal reviews of the
information provided, PXRE has not currently identified a material business
partner that will not be compliant. However, there can be no assurance that all
business partners will supply accurate or up-to-date information regarding their
preparedness for the Year 2000, and, in general, there can be no assurance that
all material business partners will be compliant. Such non-compliance could have
a material effect on PXRE's financial position and results of operations.
28
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
PXRE has made the decision to evaluate the potential Year 2000 exposures
emanating from its reinsurance business by conducting an analysis of each
individual customer's risk exposures. Where appropriate, PXRE requires that an
exclusion be added to the reinsurance contract or letter of intent be received.
PXRE began adding exclusions to reinsurance contracts in early 1998.
Additionally, it is PXRE's position, in common with others in the industry that
Year 2000 exposures in and of themselves are not fortuitous losses and thus are
not covered under reinsurance contracts even without specific exclusions. For
these reasons, PXRE believes that its exposures to Year 2000 claims will not be
material. However, as was the case with environmental exposures, changing social
and legal trends may create unintended coverage for exposures by causing courts
to reinterpret reinsurance contracts and related exclusions. It is impossible to
predict what, if any, exposure reinsurance companies may ultimately have for
Year 2000 claims whether coverage for the issue is specifically excluded or
included.
PXRE is reviewing its disaster recovery procedures and testing its
ability to redeploy its computer and staff operations to a remote hot site
location in the event of failure on the part of public utilities to provide
electrical power or communication links following a Year 2000 problem.
Additional formal contingency plans will not be formulated until PXRE has
identified specific areas where there is a substantial risk of Year 2000
problems occurring, and no such other areas have been identified as of this
date.
Readers are cautioned that forward-looking statements contained in this
Year 2000 Update should be read in conjunction with the Company's disclosures
under the heading: "CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS."
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains various forward-looking statements and includes
assumptions concerning PXRE's operations, future results and prospects.
Statements included herein, as well as statements made by or on behalf of PXRE
in press releases, written statements or other documents filed with the
Securities and Exchange Commission, or in its communications and discussions
with investors and analysts in the normal course of business through meetings,
phone calls and conference calls, which are not historical in nature are
intended to be, and are hereby identified as, "forward-looking statements" for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934 as amended. These forward-looking statements are based on current
expectations and are subject to risk and uncertainties. PXRE cautions investors
and analysts that actual results or events could differ materially from those
set forth or implied by the forward-looking statements and related assumptions,
depending on the outcome of certain important factors including, but not limited
to, the following: (i) the frequency and severity of catastrophic events; (ii)
changes in the level of competition in the reinsurance or primary insurance
markets that impact the volume or profitability of the property-casualty
reinsurance business (these changes include, but are not limited to, the
intensity of price competition, the entry of new competitors, existing
competitors exiting the
29
<PAGE>
PXRE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CORPORATION FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
market and the development of new products by new and existing competitors);
(iii) changes in the demand for reinsurance, including changes in the amount of
ceding companies' retentions and changes in the demand for excess and surplus
lines insurance coverages; (iv) the ability of PXRE to execute its
diversification initiatives in markets in which PXRE has not had a significant
presence; (v) adverse development on loss reserves related to business written
in prior years; (vi) lower than estimated retrocessional recoveries on unpaid
losses, including the effects of losses due to a decline in the creditworthiness
of PXRE's retrocessionaires; (vii) increases in interest rates, which cause a
reduction in the market value of PXRE's interest rate sensitive investments,
including its fixed income investment portfolio; (viii) decreases in interest
rates causing a reduction of income earned on new cash flow from operations and
the reinvestment of the proceeds from sales, calls or maturities of existing
investments; (ix) market fluctuations in equity securities and securities
underlying limited partnership investments; (x) changes in the composition of
PXRE's investment portfolio; and (xi) changes in management's evaluation of the
impact of the Year 2000 problem on its operations.
In addition to the factors outlined above that are directly related to
PXRE's business, PXRE is also subject to general business risks, including, but
not limited to, adverse state, federal or foreign legislation and regulation,
adverse publicity or news coverage, changes in general economic factors and the
loss of key employees.
30
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At PXRE's Annual Meeting of Stockholders held on June 3, 1999, the
holders of Common Stock of PXRE approved the following (in each case, with no
broker non-votes):
(i) The election of three Class I directors to serve until the 2002
Annual Meeting of Stockholders and until their successors have
been elected and have qualified:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
Gerald L. Radke 9,408,508 746,272
Franklin D. Haftl 9,408,508 746,272
Wendy Luscombe 9,408,508 746,272
</TABLE>
(ii) The election of one Class III director to serve until the 2001
Annual Meeting of Stockholders and until a successor has been
elected and has qualified:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
F. Sedgwick Browne 9,408,508 746,272
</TABLE>
(iii) The election of one class II director to serve until the 2000
Annual Meeting of Stockholders and until a successor has been
elected and has qualified:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
Wilson Wilde 9,379,516 775,264
</TABLE>
(iv) The appointment of PricewaterhouseCoopers LLP as PXRE's
independent Accountants for the fiscal year ending December 31,
1999, by the vote of 10,088,677 votes for, 46,626 votes against
and 19,477 abstentions.
(v) The adoption of amendments to the PXRE Corporation Restated
Employee Annual Incentive Bonus Plan, by the vote of 10,052,789
votes for, 89,757 votes against and 17,232 abstentions.
(vi) The adoption of amendments to the PXRE Corporation 1992 Officer
Incentive Plan by a vote of 7,379,997 votes for, 1,568,716 votes
against and 23,568 abstentions.
31
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 4.9:
First Amendment and Waiver to Credit Agreement
Joinder Agreements
Assignment and Acceptance Agreements
Second Amendment and Waiver to Credit Agreement (attached
hereto as Exhibit 4.9)
(b) Exhibit 10.39
Employment Agreement dated April 14, 1999 between PXRE
Reinsurance Company and Jeffrey H. Mayer (attached hereto
as Exhibit 10.39) (m)
(c) Reports on Form 8-K
None
(M) Indicates a management contract or compensatory plan
or arrangement in which the directors and/or executive
officers of PXRE participate.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report or amendment thereto to be signed on its
behalf by the undersigned thereunto duly authorized.
PXRE CORPORATION
August 12, 1999 By: /s/ James F. Dore
---------------------
James F. Dore
Executive Vice President &
Chief Financial Officer
33
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as................................... 'SS'
The service mark symbol shall be expressed as...............................'sm'
The British pound sterling sign shall be expressed as.......................'L'
<PAGE>
FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT
THIS FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT, dated as of May
18, 1999 (this "First Amendment and Waiver"), is made in respect of the Credit
Agreement dated December 30, 1998 (as amended hereby, the "Credit Agreement"),
among PXRE CORPORATION, a Delaware corporation with its principal offices in
Edison, New Jersey (the "Borrower") the banks and financial institutions listed
on the signature pages thereof or that become parties thereto after the date
thereof (collectively the "Lenders"), and FIRST UNION NATIONAL BANK, as agent
for the Lenders (in such capacity, the "Agent"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Credit
Agreement.
RECITALS
A. The Borrower and the Agent agree to change the Applicable Margin
Percentage for LIBOR Loans to reflect a pricing increase at each of Levels I
through V of 1/8%.
B. The parties desire to remove the arbitration provision in the Credit
Agreement and substitute therefor a waiver of jury trial provision and to change
the governing law of the Credit Agreement from the laws of North Carolina to the
laws of New York.
C. The Borrower has requested that the Lenders waive a violation by the
Borrower of the Credit Agreement, and the Lenders have agreed to effect such
waiver upon the terms and conditions set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for themselves
and their successors and assigns, agree as follows:
ARTICLE I
AMENDMENT TO CREDIT AGREEMENT
1.1 Amendment to SECTION 1.1. The matrix set forth in the definition of
"Applicable Margin Percentage" in SECTION 1.1 of the Credit Agreement shall be
deleted in its entirety and the following shall be substituted therefor as of
the date hereof and such substitution will have no effect prior to the date
hereof:
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin
Moody's / Applicable Margin Applicable Margin Percentage for
Standard & Poor's Percentage for Percentage for Unutilized
Level Rating Base Rate Loans LIBOR Loans Commitments Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I A3 / A- or above 0.0% 0.750% 0.175%
II Baa1 / BBB+ 0.0% 0.875% 0.200%
III Baa2 / BBB 0.0% 1.000% 0.250%
IV Baa3 / BBB- 0.0% 1.125% 0.300%
V Less than Baa3 / BBB-
0.5% 1.625% 0.500%
</TABLE>
1.2 Amendment to SECTION 10.3. SECTION 10.3 of the Credit Agreement
shall be deleted in its entirety and the following SECTION 10.3 substituted
therefor:
10.3 Governing Law; Consent to Jurisdiction. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
THE PARTIES HERETO HEREBY DECLARE THAT IT IS THEIR INTENTION THAT THIS
AGREEMENT SHALL BE REGARDED AS MADE UNDER THE LAWS OF THE STATE OF NEW
YORK AND THAT THE LAWS OF SAID STATE SHALL BE APPLIED IN INTERPRETING
ITS PROVISIONS IN ALL CASES WHERE LEGAL INTERPRETATION SHALL BE
REQUIRED. EACH OF THE PARTIES HERETO AGREES (A) THAT THIS AGREEMENT
INVOLVES AT LEAST $250,000; AND (B) THAT THIS AGREEMENT HAS BEEN
ENTERED INTO BY THE PARTIES HERETO IN EXPRESS RELIANCE UPON N.Y.
GENERAL OBLIGATIONS LAW 'SS' 5-1401. NOTWITHSTANDING THE FOREGOING
CHOICE OF LAW, THE BORROWER HEREBY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH
CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF
THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR
UNDER ANY OF THE OTHER CREDIT DOCUMENTS, OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS, OR
ANY PROCEEDING TO WHICH THE AGENT OR ANY LENDER OR THE BORROWER IS A
PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN
CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT OR ANY LENDER OR THE
BORROWER. THE BORROWER IRREVOCABLY AGREES TO BE BOUND
<PAGE>
(SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT RENDERED OR
RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY
HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS
THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL
DIRECTED TO IT AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO
MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT
THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,
PROPER POSTAGE PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION.
1.3 Amendment to SECTION 10.4. SECTION 10.4 of the Credit Agreement
shall be deleted in its entirety and the following SECTION 10.4 substituted
therefor:
10.4 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED
UNDER APPLICABLE LAW, EACH OF THE BORROWER, THE LENDERS AND THE AGENT
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATED TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
ARTICLE II
WAIVER
The Borrower has made available to the Agent and the Lenders certain
preliminary financial information with respect to the fiscal quarter ended March
31, 1999. Based upon such preliminary financial information, the Borrower has
acknowledged that one of its Subsidiaries, Transnational Insurance Company
("Transnational"), has failed to comply with the provisions of Section 7.5(c)
(Investments) of the Credit Agreement as of the last day of the fiscal quarter
ended March 31, 1999, and such noncompliance is continuing as of the date
hereof. As a consequence of such noncompliance, an Event of Default has
occurred and is continuing under the Credit Agreement. The Borrower has
requested that the Lenders temporarily waive, until June 30, 1999, any Default
or Event of Default arising from any failure of Transnational to comply with
the provisions of SECTION 7.5(c) and the Lenders have agreed to provide
such waiver on the terms and conditions set forth herein.
Accordingly, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lenders hereby agree to waive the Default temporarily until
<PAGE>
June 30, 1999. The Borrower understands that the waiver of the Default by the
Lenders set forth herein is temporary in effect and will expire on June 30,
1999; and the Borrower further understands that on June 30, 1999, all of the
requirements of SECTIONS 7.5(c) of the Credit Agreement that have been
temporarily waived as provided herein (and not further waived or modified prior
to such time) shall, without any further action by or notice to or from the
Agent or any Lender, be in full force and effect, and unless such noncompliance
shall have been cured, the Agent and the Lenders shall have all of the rights
and remedies provided to them under the Credit Agreement, the other Credit
Documents, applicable law or otherwise with respect to any and all such
requirements as though no waiver had been granted hereunder.
If any Default or Event of Default (other than with respect to the
Specified Default being waived as specifically described hereinabove) should
occur and be continuing under the Credit Agreement, the Agent and the Lenders
will be under no obligation to forbear the exercise of their rights and
remedies under the Credit Agreement, the other Credit Documents, applicable law
or otherwise. The waiver of the Lenders set forth herein is limited as
specified, and shall not constitute or be deemed to constitute an amendment,
modification or waiver of any provision of the Credit Agreement or a waiver of
any Default or Event of Default except as expressly set forth herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby certifies and warrants to the Agent and the Lenders
that (a) after giving effect to the amendments and waiver effected hereby, each
of the representations and warranties contained in ARTICLE IV of the Credit
Agreement and in the other Credit Documents are true and correct in all material
respects on the date hereof with the same effect as though made on the date
hereof, both immediately before and after giving effect to this Amendment
(except to the extent any such representation or warranty is expressly stated to
have been made as of a specific date, in which case such representation or
warranty shall be true and correct as of such specified date), and (b) after
giving effect to the amendments and waiver effected hereby, no Default or Event
of Default shall have occurred and be continuing on the date hereof.
ARTICLE IV
GENERAL
4.1 Full Force and Effect. Except as expressly amended hereby, the
Credit Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Credit Agreement,
"hereinafter," "hereto," "hereof," and words of similar import shall, unless the
context otherwise requires, mean the Credit Agreement after amendment by this
First Amendment and Waiver. Any reference to the Credit Agreement or any of the
other Credit Documents herein or in any such documents shall refer to the Credit
Agreement and Credit Documents as amended hereby.
4.2 Applicable Law. This First Amendment and Waiver shall be governed
by and construed in accordance with the internal laws and judicial decisions of
the State of New York.
<PAGE>
4.3 Counterparts. This First Amendment and Waiver may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one instrument.
4.4 Headings. The headings of this First Amendment and Waiver are for
the purposes of reference only and shall not affect the construction of this
First Amendment and Waiver.
4.5 Effectiveness. This First Amendment and Waiver shall be deemed
fully effective when executed by each of the parties hereto.
[signatures appear on the following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
and Waiver to be executed by their duly authorized officers all as of the day
and year first above written.
PXRE CORPORATION
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
FIRST UNION NATIONAL BANK, as Agent, and
as a Lender
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
(signatures continued)
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
FLEET NATIONAL BANK
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
CREDIT LYONNAIS NEW YORK BRANCH
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
<PAGE>
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (this "Joinder Agreement") is made this 18th day
of May, 1999, by FLEET NATIONAL BANK (the "New Lender"). Reference is made to
the Credit Agreement, dated as of December 30, 1998 (as amended, modified,
supplemented or restated from time to time, the "Credit Agreement"), by and
among PXRE Corporation (the "Borrower"), certain banks and other financial
institutions from time to time parties thereto (the "Lenders"), and First Union
National Bank, as Agent. Unless otherwise defined herein, terms defined in the
Credit Agreement are used herein with the same meaning.
The New Lender hereby agrees as follows:
1. JOINDER AGREEMENT. Subject to the terms and conditions hereof and of
the Credit Agreement, the New Lender hereby agrees to become a Lender under the
Credit Agreement with a Commitment of NINE MILLION DOLLARS AND NO/100 DOLLARS
($9,000,000). After giving effect to this Joinder Agreement and the Additional
Financing adjustment required under SECTION 2.19 of the Credit Agreement, the
New Lender's Commitment and the aggregate outstanding principal amounts of the
Loans owing to the New Lender will be as set forth in Item 4 of Annex I attached
hereto.
2. NEW LENDER REPRESENTATIONS. The New Lender (i) confirms that it has
received a copy of the Credit Agreement, together with copies of the Financial
Statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Joinder
Agreement, (ii) agrees that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, (iii) appoints and
authorizes the Agent to take such action as Agent on its behalf under the Credit
Documents, and to exercise such powers and to perform such duties, as are
specifically delegated to or required of the Agent by the terms thereof,
together with such other powers as are reasonably incidental thereto, (iv)
agrees that it will perform in accordance with their terms all of the
obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender, and (vi) specifies as its address for payments and
notices the office set forth beneath its name on its signature page hereto.
3. EFFECTIVE DATE. Following the execution of this Joinder Agreement by
the New Lender, an executed original hereof, together with all attachments
hereto, shall be delivered to the Agent. The effective date of this Joinder
Agreement (the "Effective Date") shall be the date of execution hereof by the
Borrower, the Agent and the New Lender. Prior to the execution of this Joinder
Agreement by the Borrower, the New Lender shall have the right to cancel this
Joinder Agreement by written notice to the Borrower and the Agent in accordance
with Section 10.5 of the Credit Agreement, in which event this Joinder Agreement
shall be null and void and of no further effect. As of the Effective Date, the
Lender shall be a party to the Credit Agreement and, to the extent provided in
this Joinder Agreement, shall have the rights and obligations of a Lender
thereunder and under the other Credit Documents.
<PAGE>
4. GOVERNING LAW. This Joinder Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
(without regard to the conflicts of laws principles thereof).
5. ENTIRE AGREEMENT. This Joinder Agreement, together with the Credit
Agreement and the other Credit Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
6. SUCCESSORS AND ASSIGNS. This Joinder Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their successors
and assigns.
7. COUNTERPARTS. This Joinder Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all of which
shall together constitute one and the same instrument.
[signatures on following page]
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Joinder Agreement to
be executed by their duly authorized officers as of the date first above
written.
FLEET NATIONAL BANK
By: ______________________________
Name: ______________________________
Title: ______________________________
Accepted this 18th day of May, 1999:
FIRST UNION NATIONAL BANK, as Agent
By: ______________________________
Name: ______________________________
Title: ______________________________
Consented and agreed to:
PXRE CORPORATION, as the Borrower
By: ______________________________
Name: ______________________________
Title: ______________________________
3
<PAGE>
ANNEX I
1. Borrower: PXRE Corporation
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of December 30, 1998, among the Borrower,
certain Lenders from time to time parties thereto and First Union
National Bank, as Agent.
3. Date of Joinder Agreement: May 18, 1999
4. Amounts (as of date of Additional Financing adjustment pursuant to
Section 2.19 of the Credit Agreement):
<TABLE>
<CAPTION>
Aggregate for all Existing Share of New New Lender's Share after
Lenders Lender by Assignment Additional Financing
----------------- --------------------- -------------------------
<S> <C> <C> <C>
Commitment $75,000,000 $10,000,000 $19,000,000
Outstanding Loans $50,000,000 $6,666,666.67 $12,666,666.67
</TABLE>
5. Addresses for Payments and Notices:
New Lender: For Funding/Notices:
--------------------
Fleet National Bank
777 Main Street
CT MO 0250
Hartford, CT 06115
Attention: Mark E. Vickery
Telephone: (860)-986-7934
Telecopy: (860)-986-1264
Reference: PXRE Corporation
For Loan and Fee Payments:
--------------------------
Fleet National Bank
777 Main Street
CT MO 0250
Hartford, CT 06115
Attention: Mark E. Vickery
Telephone: (860)-986-7934
Telecopy: (860)-986-1264
Reference: PXRE Corporation
6. Effective Date: May 18, 1999 (in accordance with Section 3).
<PAGE>
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (this "Joinder Agreement") is made this 18th day
of May, 1999, by CREDIT LYONNAIS NEW YORK BRANCH (the "New Lender"). Reference
is made to the Credit Agreement, dated as of December 30, 1998 (as amended,
modified, supplemented or restated from time to time, the "Credit Agreement"),
by and among PXRE Corporation (the "Borrower"), certain banks and other
financial institutions from time to time parties thereto (the "Lenders"), and
First Union National Bank, as Agent. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein with the same meaning.
The New Lender hereby agrees as follows:
1. JOINDER AGREEMENT. Subject to the terms and conditions hereof and of
the Credit Agreement, the New Lender hereby agrees to become a Lender under the
Credit Agreement with a Commitment of SIXTEEN MILLION DOLLARS AND NO/100 DOLLARS
($16,000,000). After giving effect to this Joinder Agreement and the Additional
Financing adjustment required under SECTION 2.19 of the Credit Agreement, the
New Lender's Commitment and the aggregate outstanding principal amounts of the
Loans owing to the New Lender will be as set forth in Item 4 of Annex I attached
hereto.
2. NEW LENDER REPRESENTATIONS. The New Lender (i) confirms that it has
received a copy of the Credit Agreement, together with copies of the Financial
Statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Joinder
Agreement, (ii) agrees that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement, (iii) appoints and
authorizes the Agent to take such action as Agent on its behalf under the Credit
Documents, and to exercise such powers and to perform such duties, as are
specifically delegated to or required of the Agent by the terms thereof,
together with such other powers as are reasonably incidental thereto, (iv)
agrees that it will perform in accordance with their terms all of the
obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender, and (vi) specifies as its address for payments and
notices the office set forth beneath its name on its signature page hereto.
3. EFFECTIVE DATE. Following the execution of this Joinder Agreement by
the New Lender, an executed original hereof, together with all attachments
hereto, shall be delivered to the Agent. The effective date of this Joinder
Agreement (the "Effective Date") shall be the date of execution hereof by the
Borrower, the Agent and the New Lender. Prior to the execution of this Joinder
Agreement by the Borrower, the New Lender shall have the right to cancel this
Joinder Agreement by written notice to the Borrower and the Agent in accordance
with Section 10.5 of the Credit Agreement, in which event this Joinder Agreement
shall be null and void and of no further effect. As of the Effective Date, the
Lender shall be a party to the Credit Agreement and shall have the rights and
obligations of a Lender thereunder and under the other Credit Documents.
<PAGE>
4. GOVERNING LAW. This Joinder Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
(without regard to the conflicts of laws principles thereof).
5. ENTIRE AGREEMENT. This Joinder Agreement, together with the Credit
Agreement and the other Credit Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
6. SUCCESSORS AND ASSIGNS. This Joinder Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their successors
and assigns.
7. COUNTERPARTS. This Joinder Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all of which
shall together constitute one and the same instrument.
[signatures on following page]
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Joinder Agreement to
be executed by their duly authorized officers as of the date first above
written.
CREDIT LYONNAIS NEW YORK BRANCH
By: ______________________________
Name: ______________________________
Title: ______________________________
Accepted this 18th day of May, 1999:
FIRST UNION NATIONAL BANK, as Agent
By: ______________________________
Name: ______________________________
Title: ______________________________
Consented and agreed to:
PXRE CORPORATION, as the Borrower
By: ______________________________
Name: ______________________________
Title: ______________________________
3
<PAGE>
ANNEX I
1. Borrower: PXRE Corporation
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of December 30, 1998, among the Borrower,
certain Lenders from time to time parties thereto and First Union
National Bank, as Agent.
3. Date of Joinder Agreement: May 18, 1999
4. Amounts (as of date of Additional Financing adjustment pursuant to
Section 2.19 of the Credit Agreement):
<TABLE>
<CAPTION>
Aggregate
for all New Lender's
Lenders Share
---------- ------------
<S> <C> <C>
Commitment $75,000,000 $16,000,000
Outstanding Loans $50,000,000 $10,666,666.67
</TABLE>
5. Addresses for Payments and Notices:
New Lender: For Funding/Notices:
--------------------
Credit Lyonnais New York Branch
William McIlwain
1301 Avenue of the Americas
New York, NY 10019
Telephone: (212) 261-7794
Telecopy: (212) 2601-3401 or -3438
Reference: PXRE Corporation
For Loan and Fee Payments:
--------------------------
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Telephone: (212) 261-7794
Telecopy: (212) 2601-3401 or -3438
Attention: K. Mackey
Reference: PXRE Corporation
6. Effective Date: May 18, 1999 (in accordance with Section 3).
<PAGE>
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") is
made this 18th day of May, 1999, by and between FIRST UNION NATIONAL BANK (the
"Assignor") and FLEET NATIONAL BANK (the "Assignee"). Reference is made to the
Credit Agreement, dated as of December 30, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), among PXRE
CORPORATION (the "Borrower"), certain banks and other financial institutions
from time to time parties thereto (the "Lenders"), and First Union National
Bank, as Agent for the Lenders (the "Agent"). Unless otherwise defined herein,
capitalized terms used herein without definition shall have the meanings given
to them in the Credit Agreement.
The Assignor and the Assignee hereby agree as follows:
1. Assignment and Assumption. Subject to the terms and conditions
hereof, the Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, without recourse to the Assignor
and, except as expressly provided herein, without representation or warranty by
the Assignor, the interest as of the Effective Date (as hereinafter defined) in
and to all of the Assignor's rights and obligations under the Credit Agreement
and the other Credit Documents (in its capacity as a Lender thereunder)
represented by the percentage interest specified under the heading "Assigned
Share" in Item 4 of Annex I (such assigned interest, the "Assigned Share"),
including, without limitation, the Assigned Share of all rights and obligations
of the Assignor with respect to its Commitment, Note and Loans.
2. The Assignor. The Assignor (i) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder,
that such interest is free and clear of any adverse claim, and that as of the
date hereof the amount of its Commitment and outstanding Loans is as set forth
in Item 4 of Annex I, (ii) except as set forth in clause (i) above, makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement, any other Credit Document or any other instrument or document
furnished pursuant thereto or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Credit
Document or any other instrument or document furnished pursuant thereto, and
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any of its Subsidiaries or
the performance or observance by the Borrower or any of its Subsidiaries of any
of their respective obligations under the Credit Agreement, any other Credit
Document or any other instrument or document furnished pursuant thereto.
3. The Assignee. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance, (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements most recently required
<PAGE>
to have been delivered under SECTIONS 5.1 and 5.2 of the Credit Agreement and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance,
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement, (iv)
confirms that it is an Eligible Assignee, (v) appoints and authorizes the Agent
to take such actions as agent on its behalf under the Credit Agreement and the
other Credit Documents, and to exercise such powers and to perform such duties,
as are specifically delegated to the Agent by the terms thereof, together with
such other powers and duties as are reasonably incidental thereto, and (vi)
agrees that it will perform in accordance with their respective terms all of
the obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender. [To the extent legally entitled to do so, the
Assignee will deliver to the Agent, as and when required to be delivered under
the Credit Agreement, duly completed and executed originals of the applicable
tax withholding forms described in SECTION 2.17(d) of the Credit Agreement].(1)
4. Effective Date. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, an executed original hereof,
together with all attachments hereto, shall be delivered to each of the Agent
and the Borrower (and also to the Agent, the processing fee referred to in
SECTION 10.7(a) of the Credit Agreement). The effective date of this Assignment
and Acceptance (the "Effective Date") shall be the earlier of (i) the date of
acceptance hereof by the Agent and the Borrower or (ii) the date, if any,
designated as the Effective Date in Item 5 of Annex I (which date shall be not
less than five (5) Business Days after the date of execution hereof by the
Assignor and the Assignee). As of the Effective Date, (y) the Assignee shall be
a party to the Credit Agreement and, to the extent provided in this Assignment
and Acceptance, shall have the rights and obligations of a Lender thereunder and
under the other Credit Documents, and (z) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights (other than
rights under the provisions of the Credit Agreement and the other Credit
Documents relating to indemnification or payment of fees, costs and expenses, to
the extent such rights relate to the time prior to the Effective Date) and be
released from its obligations under the Credit Agreement and the other Credit
Documents.
5. Payments; Settlement. On or prior to the Effective Date, in
consideration of the sale and assignment provided for herein and as a condition
to the effectiveness of this Assignment and Acceptance, the Assignee will pay to
the Assignor an amount (to be confirmed between the Assignor and the Assignee)
that represents the Assigned Share of the principal amount of the Loans made by
the Assignor and outstanding on the Effective Date (together, if and to the
extent the Assignor and the Assignee so elect, with the Assigned Share of any
related accrued but unpaid interest, fees and other amounts). From and after the
Effective Date, the Agent will make all payments required to be made by it under
the Credit Agreement in respect of the interest assigned hereunder (including,
without limitation, all payments of principal, interest and fees in respect of
the Assigned Share of the Assignor's Commitment and Loans assigned hereunder)
directly to the Assignee. The Assignor and the Assignee shall be responsible for
making between themselves all
- -------------
(1) Insert if the Assignee is organized under the laws of a jurisdiction
outside the United States.
<PAGE>
appropriate adjustments in payments due under the Credit Agreement in respect of
the period prior to the Effective Date. All payments required to be made
hereunder or in connection herewith shall be made in Dollars by wire transfer of
immediately available funds to the appropriate party at its address for payments
designated in Annex I.
6. Governing Law. This Assignment and Acceptance shall be governed by,
and construed in accordance with, the internal laws of the State of New York
(without regard to the conflicts of laws principles thereof).
7. Entire Agreement. This Assignment and Acceptance, together with the
Credit Agreement and the other Credit Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
8. Successors and Assigns. This Assignment and Acceptance shall be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
9. Counterparts. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and
Acceptance to be executed by their duly authorized officers as of the date first
above written.
ASSIGNOR:
FIRST UNION NATIONAL BANK
By: _______________________________
Name: _______________________________
Title: _______________________________
ASSIGNEE:
FLEET NATIONAL BANK
By: _______________________________
Name: _______________________________
Title: _______________________________
Accepted this 18th day of May, 1999:
FIRST UNION NATIONAL BANK, as Agent
By: _______________________________
Name: _______________________________
Title: _______________________________
<PAGE>
Consented and agreed to:
PXRE CORPORATION
By: _______________________________
Name: _______________________________
Title: _______________________________
<PAGE>
ANNEX I
1. Borrower: PXRE Corporation
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of December 30, 1998, among PXRE
Corporation, certain Lenders from time to time parties thereto, and
First Union National Bank, as Agent.
3. Date of Assignment and Acceptance: May 18, 1999.
4. Amounts:
<TABLE>
<CAPTION>
Assigned Share
after
Aggregate Additional
for Assignor Assigned Share Financing
------------------------------------------------------------
<S> <C> <C> <C>
(a) Commitment $50,000,000 $10,000,000 $19,000,000
(b) Loans $50,000,000 $ 6,666,666.67 $12,666,666.67
</TABLE>
5. Effective Date: May 18, 1999
6. Addresses for Payments:
Assignor: First Union National Bank
301 South College Street
Charlotte, NC 28288-0608
Attention: Syndications
Telephone: (704) 383-4097
Telecopy: (704)-383-6037
Reference: PXRE Corporation
<PAGE>
Assignee: Fleet National Bank
777 Main Street CT MO 0250
Hartford, CT 06115
Attention: Mark E. Vickery
Telephone: (860)-986-7934
Telecopy: (860)-986-1264
Reference: PXRE Corporation
7. Addresses for Notices:
Assignor: First Union National Bank
301 South College Street
Charlotte, NC 28288-0608
Attention: Syndications
Telephone: (704) 383-4097
Telecopy: (704)-383-6037
Assignee: Fleet National Bank
777 Main Street CT MO 0250
Hartford, CT 06115
Attention: Mark E. Vickery
Telephone: (860)-986-7934
Telecopy: (860)-986-1264
Reference: PXRE Corporation
8. Lending Office of Assignee:
Fleet National Bank
777 Main Street CT MO 0250
Hartford, CT 06115
Attention: Mark E. Vickery
Telephone: (860)-986-7934
Telecopy: (860)-986-1264
Reference: PXRE Corporation
<PAGE>
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") is
made this 18th day of May, 1999, by and between FIRST UNION NATIONAL BANK (the
"Assignor") and THE FIRST NATIONAL BANK OF CHICAGO (the "Assignee"). Reference
is made to the Credit Agreement, dated as of December 30, 1998 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), among
PXRE CORPORATION (the "Borrower"), certain banks and other financial
institutions from time to time parties thereto (the "Lenders"), and First Union
National Bank, as Agent for the Lenders (the "Agent"). Unless otherwise defined
herein, capitalized terms used herein without definition shall have the meanings
given to them in the Credit Agreement.
The Assignor and the Assignee hereby agree as follows:
1. Assignment and Assumption. Subject to the terms and conditions
hereof, the Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, without recourse to the Assignor
and, except as expressly provided herein, without representation or warranty by
the Assignor, the interest as of the Effective Date (as hereinafter defined) in
and to all of the Assignor's rights and obligations under the Credit Agreement
and the other Credit Documents (in its capacity as a Lender thereunder)
represented by the percentage interest specified under the heading "Assigned
Share" in Item 4 of Annex I (such assigned interest, the "Assigned Share"),
including, without limitation, the Assigned Share of all rights and obligations
of the Assignor with respect to its Commitment, Note and Loans.
2. The Assignor. The Assignor (i) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder,
that such interest is free and clear of any adverse claim, and that as of the
date hereof the amount of its Commitment and outstanding Loans is as set forth
in Item 4 of Annex I, (ii) except as set forth in clause (i) above, makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement, any other Credit Document or any other instrument or document
furnished pursuant thereto or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Credit
Document or any other instrument or document furnished pursuant thereto, and
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any of its Subsidiaries or
the performance or observance by the Borrower or any of its Subsidiaries of any
of their respective obligations under the Credit Agreement, any other Credit
Document or any other instrument or document furnished pursuant thereto.
3. The Assignee. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance, (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements most recently required
<PAGE>
to have been delivered under SECTIONS 5.1 and 5.2 of the Credit Agreement and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance,
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement, (iv) confirms that it
is an Eligible Assignee, (v) appoints and authorizes the Agent to take such
actions as agent on its behalf under the Credit Agreement and the other Credit
Documents, and to exercise such powers and to perform such duties, as are
specifically delegated to the Agent by the terms thereof, together with such
other powers and duties as are reasonably incidental thereto, and (vi) agrees
that it will perform in accordance with their respective terms all of the
obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender. [To the extent legally entitled to do so, the
Assignee will deliver to the Agent, as and when required to be delivered under
the Credit Agreement, duly completed and executed originals of the applicable
tax withholding forms described in SECTION 2.17(d) of the Credit Agreement].(1)
4. Effective Date. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, an executed original hereof,
together with all attachments hereto, shall be delivered to each of the Agent
and the Borrower (and also to the Agent, the processing fee referred to in
SECTION 10.7(a) of the Credit Agreement). The effective date of this Assignment
and Acceptance (the "Effective Date") shall be the earlier of (i) the date of
acceptance hereof by the Agent and the Borrower or (ii) the date, if any,
designated as the Effective Date in Item 5 of Annex I (which date shall be not
less than five (5) Business Days after the date of execution hereof by the
Assignor and the Assignee). As of the Effective Date, (y) the Assignee shall be
a party to the Credit Agreement and, to the extent provided in this Assignment
and Acceptance, shall have the rights and obligations of a Lender thereunder and
under the other Credit Documents, and (z) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights (other than
rights under the provisions of the Credit Agreement and the other Credit
Documents relating to indemnification or payment of fees, costs and expenses, to
the extent such rights relate to the time prior to the Effective Date) and be
released from its obligations under the Credit Agreement and the other Credit
Documents.
5. Payments; Settlement. On or prior to the Effective Date, in
consideration of the sale and assignment provided for herein and as a condition
to the effectiveness of this Assignment and Acceptance, the Assignee will pay to
the Assignor an amount (to be confirmed between the Assignor and the Assignee)
that represents the Assigned Share of the principal amount of the Loans made by
the Assignor and outstanding on the Effective Date (together, if and to the
extent the Assignor and the Assignee so elect, with the Assigned Share of any
related accrued but unpaid interest, fees and other amounts). From and after the
Effective Date, the Agent will make all payments required to be made by it under
the Credit Agreement in respect of the interest assigned hereunder (including,
without limitation, all payments of principal, interest and fees in respect of
the Assigned Share of the Assignor's Commitment and Loans assigned hereunder)
directly to the Assignee. The Assignor and the Assignee shall be responsible for
making between themselves all
- ----------
(1) Insert if the Assignee is organized under the laws of a jurisdiction
outside the United States.
<PAGE>
appropriate adjustments in payments due under the Credit Agreement in respect of
the period prior to the Effective Date. All payments required to be made
hereunder or in connection herewith shall be made in Dollars by wire transfer
of immediately available funds to the appropriate party at its address for
payments designated in Annex I.
6. Governing Law. This Assignment and Acceptance shall be governed by,
and construed in accordance with, the internal laws of the State of New York
(without regard to the conflicts of laws principles thereof).
7. Entire Agreement. This Assignment and Acceptance, together with the
Credit Agreement and the other Credit Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
8. Successors and Assigns. This Assignment and Acceptance shall be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
9. Counterparts. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment and
Acceptance to be executed by their duly authorized officers as of the date first
above written.
ASSIGNOR:
FIRST UNION NATIONAL BANK
By: _______________________________
Name: _______________________________
Title: _______________________________
ASSIGNEE:
THE FIRST NATIONAL BANK OF CHICAGO
By: _______________________________
Name: _______________________________
Title: _______________________________
Accepted this 18th day of May, 1999:
FIRST UNION NATIONAL BANK, as Agent
By: _______________________________
Name: _______________________________
Title: _______________________________
<PAGE>
Consented and agreed to:
PXRE CORPORATION
By: _______________________________
Name: _______________________________
Title: _______________________________
<PAGE>
ANNEX I
1. Borrower: PXRE Corporation
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of December 30, 1998, among PXRE
Corporation, certain Lenders from time to time parties thereto, and
First Union National Bank, as Agent.
3. Date of Assignment and Acceptance: May 18, 1999.
4. Amounts:
<TABLE>
<CAPTION>
Aggregate Assigned Assignee's Share
for Assignor Share after Additional
Financing
--------------------------------------------------------------
<S> <C> <C> <C>
(a) Commitment $50,000,000 $19,000,000 $19,000,000
(b) Loans $50,000,000 $19,000,000 $12,666,666.67
</TABLE>
5. Effective Date: May 18, 1999
6. Addresses for Payments:
Assignor: First Union National Bank
301 South College Street
Charlotte, NC 28288-0608
Attention: Syndications
Telephone: (704) 383-4097
Telecopy: (704)-383-6037
Reference: PXRE Corporation
Assignee: The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attention: Lillian Arroyo
Telephone: (312)-732-2279
Telecopy: (312)-732-3246
Reference: PXRE Corporation
<PAGE>
7. Addresses for Notices:
Assignor: First Union National Bank
301 South College Street
Charlotte, NC 28288-0608
Attention: Syndications
Telephone: (704) 383-4097
Telecopy: (704)-383-6037
Reference: PXRE Corporation
Assignee: The First National Bank of Chicago
153 West 51st Street
New York, NY 10019
Attention: Timothy Stambaugh
Telephone: (212)-373-1124
Telecopy: (212)-373-1439
or
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attention: Gretchen Roetzer
Telephone: (312)-732-8068
Telecopy: (312)-732-6222
8. Lending Office of Assignee:
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Attention: Lillian Arroyo
Telephone: (312)-732-2279
Telecopy: (312)-732-3246
Reference: PXRE Corporation
<PAGE>
SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT
THIS SECOND AMENDMENT AND WAIVER TO CREDIT AGREEMENT, dated as of June
25, 1999 (this "Second Amendment and Waiver"), is made in respect of the Credit
Agreement dated December 30, 1998 (as amended hereby, the "Credit Agreement"),
among PXRE CORPORATION, a Delaware corporation with its principal offices in
Edison, New Jersey (the "Borrower") the banks and financial institutions listed
on the signature pages thereof or that become parties thereto after the date
thereof (collectively the "Lenders"), and FIRST UNION NATIONAL BANK, as agent
for the Lenders (in such capacity, the "Agent"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Credit
Agreement.
RECITALS
A. The Borrower and the Lenders agree to amend the definition in the
Credit Agreement of "Cash Equivalents" and to broaden the ability of the
Borrower to make certain investments of its assets.
B. The Borrower has requested that the Lenders waive a violation by the
Borrower of the Credit Agreement, and the Lenders have agreed to effect such
waiver upon the terms and conditions set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for themselves
and their successors and assigns, agree as follows:
ARTICLE I
AMENDMENT TO CREDIT AGREEMENT
1.1 Amendment to SECTION 1.1. The definition of "Cash Equivalents" in
SECTION 1.1 of the Credit Agreement shall be amended by deleting clause (v)
thereof and substituting the following clause (v) therefor:
(v) money market funds at least 95% of the assets of which are
continuously invested in securities of the type described in clauses
(i) through (iv) above.
<PAGE>
1.2 Amendment to SECTION 7.5(viii). SECTION 7.5(viii) of the Credit
Agreement shall be amended by deleting the word "and" at the end of clause (b),
deleting clause (c) thereof and substituting and adding the following clauses
(c) and (d) therefor:
(c) with respect to each Insurance Subsidiary's Investments,
other than those issued or unconditionally guaranteed by the United
States Government, the aggregate Investments of such Insurance
Subsidiary in the securities of any single issuer shall constitute at
all times no more than five percent (5%) of the Invested Assets of such
Insurance Subsidiary; and
(d) with respect to the Investments of the Borrower and the
non-Insurance Subsidiaries (other than Borrower's Investments of (A)
cash and Cash Equivalents and (B) up to $10,000,000 equity in Cat Bond
Investors, L.L.C.), (i) the aggregate of such Investments shall not
exceed six and one-half percent (6-1/2%) of Borrower's Consolidated Net
Worth, and (ii) the aggregate of such Investments in the securities of
any single issuer shall constitute at all times no more than one and
one-half percent (1-1/2%) of Consolidated Net Worth; and
1.3 Amendment to add SECTION 7.5(ix). SECTION 7.5(vii) of the Credit
Agreement shall be amended by deleting the word "and" and SECTION 7.5 shall be
amended to add the following SECTION 7.5(ix):
(ix) the Borrower's Investment in Cat Bond Investors, L.L.C. up to
$10,000,000.
ARTICLE II
WAIVER
The Borrower has made available to the Agent and the Lenders certain
preliminary financial information with respect to the fiscal quarter ended March
31, 1999. Based upon such preliminary financial information, the Borrower has
acknowledged that it has failed to comply with the provisions of SECTION 7.5(c)
(Investments) of the Credit Agreement (as in effect prior to this Second
Amendment and Waiver) as of the last day of the fiscal quarter ended March 31,
1999, and such noncompliance is continuing as of the date hereof. The Borrower
has requested that, in light of the amendments in ARTICLE I hereof, the Lenders
waive such noncompliance with SECTION 7.5(c) and the Lenders have agreed to
provide such waiver on the terms and conditions set forth herein.
Accordingly, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lenders hereby agree to waive any noncompliance of the
Borrower with respect to SECTION 7.5(c) of the Credit Agreement to the extent
the Investments of the Borrower that caused such noncompliance would not have
been in violation of SECTION 7.5(c) of the Credit Agreement had the amendments
set forth in ARTICLE I of this Second Amendment and Waiver been in effect at the
time such
2
<PAGE>
Investment had been made. This waiver is limited solely to the Investments of
the Borrower, and is not applicable to any Subsidiary of the Borrower.
The waiver of the Lenders set forth herein is limited as specified, and
shall not constitute or be deemed to constitute an amendment, modification or
waiver of any provision of the Credit Agreement or a waiver of any Default or
Event of Default except as expressly set forth herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby certifies and warrants to the Agent and the Lenders
that (a) after giving effect to the amendments and waiver effected hereby, each
of the representations and warranties contained in ARTICLE IV of the Credit
Agreement and in the other Credit Documents are true and correct in all material
respects on the date hereof with the same effect as though made on the date
hereof, both immediately before and after giving effect to this Amendment
(except to the extent any such representation or warranty is expressly stated to
have been made as of a specific date, in which case such representation or
warranty shall be true and correct as of such specified date), and (b) after
giving effect to the amendments and waiver effected hereby, no Default or Event
of Default shall have occurred and be continuing on the date hereof.
ARTICLE IV
GENERAL
4.1 Full Force and Effect. Except as expressly amended hereby, the
Credit Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Credit Agreement,
"hereinafter," "hereto," "hereof," and words of similar import shall, unless the
context otherwise requires, mean the Credit Agreement after amendment by this
Second Amendment and Waiver. Any reference to the Credit Agreement or any of the
other Credit Documents herein or in any such documents shall refer to the Credit
Agreement and Credit Documents as amended hereby.
4.2 Applicable Law. This Second Amendment and Waiver shall be governed
by and construed in accordance with the internal laws and judicial decisions of
the State of New York.
4.3 Counterparts. This Second Amendment and Waiver may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one instrument.
4.4 Headings. The headings of this Second Amendment and Waiver are for
the purposes of reference only and shall not affect the construction of this
Second Amendment and Waiver.
4.5 Effectiveness. This Second Amendment and Waiver shall be deemed
fully effective when executed by each of the parties hereto.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment and Waiver to be executed by their duly authorized officers all as of
the day and year first above written.
PXRE CORPORATION
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
FIRST UNION NATIONAL BANK, as Agent, and
as a Lender
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
(signatures continued)
4
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
FLEET NATIONAL BANK
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
CREDIT LYONNAIS NEW YORK BRANCH
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
5
<PAGE>
EXHIBIT 10.39
EMPLOYMENT AGREEMENT (this "Agreement") dated as of April 12, 1999
between PXRE Reinsurance Company, a Connecticut insurance company (the
"Company"), and Jeffrey H. Mayer, an individual residing at 532 Warwick Avenue,
Teaneck, NJ 07666, (the "Executive").
WHEREAS, the Company desires to employ the Executive and to enter into
this Agreement to set forth the terms of such employment; and
WHEREAS, the Executive desires to accept such employment and enter into
this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter forth, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1. General. The Company hereby employs the Executive, and the
Executive hereby agrees to serve the Company, as Executive Vice President of the
Company, upon the terms and subject to the conditions herein contained.
The Executive shall perform such other duties and services for the
Company and its affiliates, commensurate with the Executive's position, as may
be designated from time to time by the Chief Executive Officer (the "CEO") or
Board of Directors of the Company (the "Board"). The Executive agrees to serve
the Company faithfully and to the best of his ability under the direction of the
CEO and the Board.
1.2. Extent of Services. Except as may otherwise be approved in advance
by the Board, and except during vacation periods and reasonable periods of
absence due to sickness, personal injury or other disability, the Executive
shall devote his full working time throughout his period of employment with the
Company to the services required of him under this Agreement. The Executive
shall use his best efforts, judgment and energy to improve and advance the
business, reputation and interests of the Company in a manner consistent with
the duties of his position.
1.3. Term of Employment. The Executive's employment under this Agreement
shall commence as of April 28, 1999, or earlier should the Executive be released
by his current employer, (the "Effective Date") and shall terminate on the
earliest to occur of the third anniversary of the Effective Date and the date
of termination of the Executive's employment pursuant to Section 4 or 5. The
period commencing on the Effective Date and ending on the third anniversary of
the Effective Date is hereinafter referred to as the "Employment Term."
<PAGE>
1.4. Reimbursement of Business Expenses. The Company shall reimburse the
Executive for reasonable travel and other business expenses incurred by him in
the fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with Company practices in
effect from time to time.
2. COMPENSATION
2.1. Base Salary. From the Effective Date through the end of the
Executive's employment hereunder, the Executive shall be entitled to receive a
base salary ("Base Salary") at a rate of $300,000 per annum, payable in arrears
in equal installments in accordance with the Company's payroll practices, with
such increases as may be provided in accordance with the terms hereof. Once
increased, such higher amount shall constitute the Executive's annual Base
Salary.
2.2. Annual Review. The Executive's Base Salary shall be reviewed by the
CEO, based upon the Executive's performance, not less often than annually, and
may be increased but not decreased.
2.3. Annual Incentive Bonus Plan. Subject to the provisions of Section
4.2, the Executive shall be entitled to participate annually during the
Employment Term in the Company's Annual Incentive Bonus Plan (the "Bonus Plan"),
or such substitute plan as shall be established from time to time! by Company,
which provides for the payment of annual bonuses to key employees of the
Company, subject to the terms and conditions of the Bonus Plan or such
substitute plan, as the case may be. The. amount of the Executive's annual bonus
payout under the Bonus Plan shall range from zero to 82.5% of the Executive's
annual earned Base Salary, based upon the Company's return on equity percentages
in any of its relevant fiscal years, as determined by the Company in its
discretion. The Executive's bonus award under the Bonus Plan (if any) shall be
comprised of a combination of 70% cash and 30% restricted stock, the restricted
stock portion of which shall be subject to vesting following the expiration of
three years.
2.4. Equity Grants. Subject to the provisions of Section 4.2, the
Executive shall be entitled to participate annually during the Employment Term
in the Company's 1992 Officer Incentive Plan (the "Incentive Plan"), or such
substitute plan as shall be established from time to time by Company, which
provides for the grant of stock options and restricted shares of Company stock
to key employees of the Company, subject to the terms and conditions of the
Incentive Plan or such substitute plan, as the case may be. In addition, the
Executive shall receive, as of the Effective Date, an initial award of 10,000
Restricted Shares of the Company pursuant to the Incentive Plan, subject to such
terms and conditions as are set forth in the Incentive Plan, a copy of which is
attached hereto as Exhibit A. Vesting of this grant will be 100% after three
years, with no partial vesting prior to the end of the three-year period.
-2-
<PAGE>
3. EMPLOYEE BENEFITS
3.1. In General. The Executive and his dependents shall, during his
employment under this Agreement, be included to the extent eligible thereunder
in all pension, 401(k), health, medical, life, disability or other similar plans
or benefits which shall be established by the Company from time to time for, or
made available to, its executives.
3.2. Automobile Allowance. If the Executive is a Senior Vice President
or higher, in addition to all other compensation and benefits provided
hereunder, the Executive shall be entitled to receive a monthly automobile
allowance in the amount of $600 per month, payable at normal payroll intervals
of the Company.
4. TERMINATION OF EMPLOYMENT
4.1. Termination Without Cause, Resignation for Good Reason.
4. 1. 1. General. Subject to the provisions of Sections 4.1.2 and 4.1.3,
if, prior to the expiration of the Employment Term, the Executive's employment
is terminated by the Company without Cause (as defined in Section 4.3), or if
the Executive terminates his employment hereunder for Good Reason (as defined in
Section 4.4), the Company shall pay the Executive severance pay in an amount
equal to the Base Salary (at a rate in effect on the date of such termination
or, if a reduction in Base Salary is the basis for termination for Good Reason,
then the Base Salary in effect immediately prior to such reduction) for the
remainder of the Employment Term (such period being referred to hereinafter as
the "Severance Period"), at such intervals as the same would have been paid had
the Executive remained in the active service of the Company. In addition, the
Executive and his dependents shall continue to participate in the benefit plans
described in Section 3.1 for a period equal to the lesser of (a) the Severance
Period and (b) one year from the date of termination or resignation pursuant to
this Section 4.1.1; provided, however that the Company may, at its option, pay
to the Executive the present value of the aggregate dollar value of such
benefits, without the necessity to provide the respective benefits to the
Executive set forth in Section 3.1 hereof. Furthermore, the initial award of
10,000 shares will vest after a three year period as set forth in Section 2.4.
The Executive shall have no further right to receive any other compensation or
benefits after such termination or resignation of employment except as
determined in accordance with the terms of the employee benefit plans or
programs of the Company except that he shall receive payment for earned but
unused vacation. Salary continuation payments made and benefits provided to the
Executive pursuant to this Section 4.1.1 shall be reduced by compensation
earned and benefits received by the Executive from a subsequent employer during
the Severance Period.
-3-
<PAGE>
4.1.2. Conditions Applicable to the Severance Period. If, during the
Severance Period, the Executive breaches his obligations under Section 7 of this
Agreement, the Company may terminate the Severance Period and cease to make any
further payments or provide any benefits described in Section 4.1.1.
4.1.3. Death During Severance Period. In the event of the Executive's
death during the Severance Period, payments of Base Salary under this Section 4
shall cease as of the month immediately following such death.
4.1.4. Date of Termination. The date of termination of employment
without Cause shall be the date specified in a written notice of termination to
the Executive. The date of resignation for Good Reason shall be the date
specified in the written notice of resignation from the Executive to the
Company; provided, however, that no such written notice shall be effective
unless the cure period specified in Section 4.4 has expired without the Company
having corrected the event or events subject to cure. If no date of resignation
is specified in the written notice from the Executive to the Company, the date
of termination shall be the first day following the expiration of such cure
period.
4.2. Termination for Cause; Resignation Without Good Reason.
4.2.1. General. If, prior to the expiration of the Employment Term, the
Executive's employment is terminated by the Company for Cause, or the Executive
resigns from his employment hereunder other than for Good Reason, the Executive
shall be entitled only to payment of his Base Salary as then in effect through
and including the date of termination or resignation together with payment for
earned but unused vacation. The Executive shall have no further right to receive
any other severance, compensation or benefits after such termination or
resignation of employment, except as determined in accordance with the terms
of the employee benefit plans or programs of the Company.
4.2.2. Date of Termination. Subject to the proviso to Section 4.3, the
date of termination for Cause shall be the date specified in a written notice of
termination to the Executive. The date of resignation without Good Reason shall
be the date specified in the written notice of resignation from the Executive to
the Company, or if no date is specified therein, 10 business days after receipt
by the Company of written notice of resignation from the Executive.
4.3. Cause. Termination for "Cause" shall mean termination of the
Executive's employment because of:
(a) any wilful act or omission that constitutes a material breach by the
Executive of any of his obligations under this Agreement;
-4-
<PAGE>
(b) the wilful and continued failure or refusal of the Executive to
substantially perform the material duties required of him as an employee of the
Company;
(c) any wilful material violation by the Executive of any law or
regulation applicable to the business of the Company or any of its subsidiaries
or affiliates, or the Executive's conviction of or plea of nolo contendere to a
felony or a crime involving moral turpitude, or any wilful perpetration by the
Executive of a common law fraud; or
(d) any other wilful misconduct by the Executive that is injurious to the
financial condition or business reputation of, or is otherwise materially
injurious to, the Company or any of its subsidiaries or affiliates;
provided, however, that if any such Cause relates to the Executive's obligations
under this Agreement and is susceptible to cure, the Company shall not terminate
the Executive's employment hereunder unless the Company first gives the
Executive notice of its intention to terminate and of the grounds for such
termination, and the Executive has not, within 10 business days following
receipt of the notice, cured such Cause.
For purposes of this Section 4.3, an "affiliate" of a person or other
entity shall mean a person or other entity that directly or indirectly controls,
is controlled by, or is under common control with, the person or entity
specified.
4.4. Good Reason. For purposes of this Agreement, "Good Reason" shall
mean either of the following (occurring without the Executive's prior consent):
(a) a decrease in the Executive's base rate of compensation, or a failure
by the Company to pay material compensation due and payable to the Executive in
connection with his employment; or
(b) the failure by the Company to obtain an agreement from a successor to
assume and agree to perform this Agreement in accordance with the second
sentence of Section 8.3;
provided, however, that if any such Good Reason is susceptible of cure, the
Executive may not resign for Good Reason unless the Executive first gives the
Company notice of his intention to resign and of the grounds for such
resignation, and the Company has not, within 10 business days following receipt
of the notice, cured such Good Reason, or in the event that such Good Reason is
not susceptible to cure within such 10 business day period, the Company has not
taken all reasonable steps within such 10 business day period to cure such Good
Reason as promptly as practicable thereafter.
-5 -
<PAGE>
5. DEATH OR DISABILITY
In the event of termination of the Executive's employment by reason of
death or Permanent Disability (as hereinafter defined), the Executive (or his
estate, as applicable) shall be entitled to Base Salary and benefits determined
under Sections 2 and 3) through the date of termination. Other benefits shall
be determined in accordance with the benefit plans maintained by the Company,
and the Company shall have no further obligation hereunder. For purposes of
this Agreement, "Permanent Disability" means a physical or mental disability or
infirmity of the Executive that prevents the normal performance of substantially
all his duties as an employee of the Company, which disability or infirmity
shall exist, or in the option of an independent physician is reasonably likely
to exist, for any continuous period of 180 days.
6. NO MITIGATION OF DAMAGES
The Executive shall not be required to mitigate the amount of any
payment provided for in Section 4.1 by seeking other employment.
7. NONSOLICITATION; CONFIDENTIALITY: NONCOMPETITION
7.1. Nonsolicitation. For so long as the Executive is employed by the
Company and continuing for two years thereafter, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, as a
sole proprietor, member of a partnership, stockholder or investor, officer or
director of a corporation, or as an employee, associate, consultant, independent
contractor or agent of any person, partnership, corporation or other business
organization or entity other than the Company: (a) solicit or endeavor to entice
away from the Company or any of its subsidiaries any person or entity who is,
or, during the then most recent 12-month period, was, employed by, or had served
as an agent or key consultant of, the Company or any of its subsidiaries, or (b)
solicit or endeavor to entice away from the Company or any of its subsidiaries
any person or entity who is, or was within the then most recent 12-month period,
a customer or client (or reasonably, anticipated (to the general knowledge of
the Executive or the public) to become a customer or client) of the Company or
any of its subsidiaries.
7.2. Confidentiality. The Executive agrees that during the Employment
Term and thereafter he will not, except in the performance of his obligations to
the Company hereunder or as may otherwise be approved in advance by the Board,
directly or indirectly, disclose or use (except for the direct benefit of the
Company) any confidential information that he may learn or has leaned by reason
of his association with the Company, any client or any of their respective
subsidiaries and affiliates. The term "confidential information" includes ill
data, analyses, reports, interpretations, forecasts, documents and information
concerning or otherwise reflecting information and concerning the Company and
its affairs, including, without limitation with respect to clients, products,
policies, procedures, methodologies, trade secrets and other intellectual
property, systems, personnel, confidential reports, technical information,
financial information, business transactions, business
-6-
<PAGE>
plans, prospects or opportunities, but shall exclude any portion of such
information that (a) was acquired by the Executive prior to his employment by,
or other association with, the Company, (b) is or becomes generally available to
the public or is generally known in the industry or industries in which the
Company operates, in each case other than as a result of disclosure by the
Executive in violation of this Section 7.2 or (c) the Executive is required to
disclose under any applicable laws, regulations or directives of any government
agency, tribunal or authority having jurisdiction in the matter or under
subpoena or other process of law.
7.3. Noncompete. Except as may otherwise be approved in advance by the
Board, (1) for so long as the Executive is (x) employed by the Company, or (y)
receiving salary continuation payments pursuant to Section 4.1.1, and (ii) in
the case of a termination by the Company of the Executive's employment hereunder
for Cause or a resignation by the Executive other than for Good Reason,
continuing for one year after such termination or resignation, the Executive
shall not, directly or indirectly, as a sole proprietor, member of a
partnership, stockholder or investor (other than a stockholder or investor
owning not more than a .05% interest), officer or director of a corporation, or
as an employee, associate, consultant, independent contractor or agent of any
person, partnership, corporation or other business organization or entity other
than the Company or any of its subsidiaries, render any service to or in any way
be affiliated with a competitor (or any person or entity that is reasonably
anticipated (to the general knowledge of the Executive or the public) to become
a competitor) of the Company or any of its subsidiaries or affiliates or
otherwise involved in the businesses in which the Company or any of its
subsidiaries or affiliates is engaged. Notwithstanding anything contained in
this Section 7.3 ) to the contrary, (a) the period of applicability of this
Section 7.3 shall be extended by an additional day for each day on which the
Executive is in breach hereof and (b) the Board may in its discretion waive the
application of this Section 7.3, including, without limitation, in the event of
the Executive's resignation without Good Reason resulting from a serious family
illness or other serious misfortune.
7.4. Exclusive Property. The Executive confirms that all confidential
information with respect to the Company is and shall remain the exclusive
property of the Company. All business records, papers and documents kept or made
by the Executive. relating to the business of the Company shall be and remain
the property of the Company, except for such papers customarily deemed to be the
personal copies of the Executive.
7.5. Injunctive Relief. Without intending to limit the remedies available
to the Company, the Executive acknowledges that a breach of any of the covenants
contained in this Section 7 may result in material and irreparable injury to the
Company and its affiliates and subsidiaries for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the Company
shall be entitled to seek a temporary restraining order or a preliminary or
permanent injunction restraining the Executive from engaging in activities
prohibited by this Section 7 or such other relief as may be required
specifically to enforce any of the covenants in this Section 7. If for any
reason it is held that the restrictions under this Section 7 are not reasonable
or that consideration
-7-
<PAGE>
therefor is inadequate, such restrictions shall be interpreted or modified to
include as much of the duration and scope identified in this Section 7 as will
render such restrictions valid and enforceable.
8. MISCELLANEOUS
8.1. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
PXRE Reinsurance Company
399 Thornall Street
Edison, New Jersey 08837
Attention: Chief Executive Officer
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York,New York 10178
Attention: F. Sedgwick Browne, Esq.
To the Executive:
Jeffrey H. Mayer
532 Warwick Avenue
Teaneck, NJ 07666
All such notices shall be conclusively deemed to be received and shall be
effective, (a) if sent by hand delivery or courier service, upon receipt, (b) if
sent by telecopy or facsimile transmission, upon confirmation of receipt by the
sender of such transmission or (c) if sent by registered or certified mail, on
the fifth day after the day on which such notice is mailed.
8.2. Severability. Each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
-8-
<PAGE>
8.3. Assignment. The Company's rights and obligations under this
Agreement shall not be assignable by the Company except as incident to a
reorganization, merger or consolidation, or transfer of all or substantially all
the Company's business and properties (or portion thereof in which the Executive
is employed). The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all the business of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Neither this Agreement nor any rights hereunder shall be assignable or otherwise
subject to hypothecation by the Executive.
8.4. Entire Agreement. Except as expressly set forth herein, this
Agreement represents the entire agreement of the parties and shall supersede any
and all previous contracts, arrangements or understandings between the Company
and the Executive. This Agreement may be amended at any time by mutual written
agreement of the parties hereto.
8.5. Withholding. The payment of any amount pursuant to this Agreement
shall be subject to applicable withholding and payroll taxes, and such other
deductions as may be required under the Company's employee benefit plans, if
any.
8.6. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
executed and to be performed entirely within that State.
8.7. Waiver. No waiver by either party of any breach by the other party
of any condition or provision contained in this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar condition
or provision at the same or any prior or subsequent time. Any waiver must be in
writing and signed by the Executive or an authorized officer of the Company, as
the case may be.
8.8. Headings. The headings of the sections contained in this Agreement
are for convenience of reference only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
-9-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive has hereunto set his hand, as of the day and year
first above written.
PXRE REINSURANCE COMPANY
By GERALD L. RADKE
----------------------------------
Gerald L. Radke
Chairman, President and
Chief Executive Officer
Date: 4/12/99
--------------------------------
EXECUTIVE
JEFFREY H. MAYER
----------------------------------
Jeffrey H. Mayer
Date: 4/14/99
--------------------------------
-10-
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