<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
/X/ Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1995
OR
/ / Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934 [No Fee Required]
Commission File Number 0-16748
------------------------------
INTERCARGO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3414667
(State or other jurisdiction (I.R.S. employer
of incorporation) identification no.)
1450 American Lane
20th Floor
Schaumburg, Illinois 60173
(Address of principal executive office and zip code)
Registrant's telephone number, including area code: 847-517-2990
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Title of Class
--------------------------
Common Stock, $1.00 Par Value
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
________
Aggregate Market Value of Voting Stock held by nonaffiliates as of March 21,
1996: $72,589,320
Number of Shares of Common Stock outstanding as of March 21, 1996: 7,640,981
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report for 1995 (incorporated by reference
under Part II).
Portions of the Registrant's definitive Proxy Statement for the 1996 Annual
Meeting of Stockholders (incorporated by reference under Part III).
==============================================================================
<PAGE> 2
INTERCARGO 10-K
---------- ----
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1)For information concerning the following consolidated financial
statements of the Registrant, reference is made to the Registrant's 1995
Annual Report to Stockholders, which financial information is incorporated
herein by reference.
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Income for the Years Ended December 31, 1995,
1994 and 1993.
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993.
Notes to Consolidated Financial Statements for each of the years in the
three year period ended December 31, 1995.
The following consolidated financial statements of Kingsway Financial
Services, Inc., the Company's Canadian subsidiary, are filed
herewith:
Independent Auditor's Report dated February 16, 1996.
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Operations and Retained Earnings for the years
ended December 31, 1995 and 1994.
Consolidated Statements of Changes in Financial Position for the years
ended December 31, 1995 and 1994.
Notes to Consolidated Financial Statements for the years ended December
31, 1995 and 1994.
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Statements of Operations and Retained Earnings for the years
ended December 31, 1994 and 1993.
Consolidated Statements of Changes in Financial Position for the years
ended December 31, 1994 and 1993.
Notes to Consolidated Financial Statements for the years ended December
31, 1994 and 1993.
(a)(2)The following consolidated financial statement schedules of the Company
listed below are contained in the index to Financial Statement Schedules
on page FS-1 herein:
Schedule I Summary of investments -- other than investments in related parties
Schedule II Condensed financial information of registrant
<PAGE> 3
Schedule IV Reinsurance
Schedule VI Supplemental information concerning property/casualty operations
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1995
(c) Exhibits. See Exhibit Index immediately following financial statement
schedules.
<PAGE> 4
THESE DOCUMENTS ARE A COPY OF THE SEPARATE FINANCIAL STATEMENTS OF KINGSWAY
FINANCIAL SERVICES, INC. FILED ON APRIL 2, 1996 PURSUANT TO A RULE 201
HARDSHIP EXEMPTION.
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Kingsway Financial
Services Inc. as at December 31, 1995 and December 31, 1994 and the
consolidated statements of operations and retained earnings and changes in
financial position for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1995 and December 31, 1994 and the results of its operations and the
changes in its financial position for the years then ended in accordance
with generally accepted accounting principles.
/s/ KPMG Peat Marwick Thorne
- ----------------------------
Chartered Accountants
Toronto, Canada
February 16, 1996
<PAGE> 5
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND DECEMBER 31, 1994 ($ IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash $ 1,363 $ 3,567
Investments (note 3) 59,924 31,342
Accrued investment income 583 655
Financed premiums receivable 12,914 11,211
Accounts receivable 5,587 5,707
Paid losses recoverable from reinsurers 551 495
Deferred policy acquisition costs 3,830 2,980
Deferred income taxes 691 363
Capital assets (note 4) 2,173 1,558
Goodwill 189 239
- --------------------------------------------------------------------------------
$ 87,805 $ 58,117
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to brokers $ - $ 187
Reinsurance premiums payable 911 806
Note payable to parent company (note 7) - 2,500
Accounts payable and accrued liabilities 1,350 653
Income taxes payable 55 146
Unearned premiums (note 6) 23,920 19,543
Unpaid claims (note 6) 24,322 16,988
Deferred service charges 570 637
----------------------------------------------------------------------------
51,128 41,460
Shareholders' equity:
Share capital (note 5) 21,889 5,636
Retained earnings (note 9) 14,788 11,021
----------------------------------------------------------------------------
36,677 16,657
- --------------------------------------------------------------------------------
$ 87,805 $ 58,117
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ James R. Zuhlke Director /s/ Murray A. Thompson Director
- ------------------- ----------------------
<PAGE> 6
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31,1994
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Gross premiums written $ 60,049 $ 55,619
- --------------------------------------------------------------------------------
Net premiums written $ 50,440 $ 48,013
- --------------------------------------------------------------------------------
Revenue:
Net premiums earned (note 6) $ 46,063 $ 42,414
Investment income 3,615 2,102
Premium finance income 1,298 1,234
-----------------------------------------------------------------------------
50,976 45,750
Expenses:
Claims incurred (note 6) 30,638 27,148
Commissions and premium taxes (note 6) 7,882 7,170
Salaries and employee benefits 3,797 3,192
General and administrative expenses 1,959 2,156
Interest (note 7) 227 157
-----------------------------------------------------------------------------
44,503 39,823
-----------------------------------------------------------------------------
Income before income taxes 6,473 5,927
Income taxes (note 8):
Current 3,034 2,880
Deferred (328) (248)
-----------------------------------------------------------------------------
2,706 2,632
-----------------------------------------------------------------------------
Net income 3,767 3,295
Retained earnings, beginning of year 11,021 7,726
- --------------------------------------------------------------------------------
Retained earnings, end of year $ 14,788 $ 11,021
- --------------------------------------------------------------------------------
Earnings per share (note 5):
Basic $ 1.23 $ 1.10
Fully diluted $ 1.23 $ 1.10
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994 ($ IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in):
Operating activities:
Net income $ 3,767 $ 3,295
Items not involving cash:
Amortization 244 232
Deferred income taxes (328) (248)
Gain on sale of capital assets - 1
Net realized gain on sale of investments (255) (19)
Amortization of bond premiums and discounts (2,190) (823)
------------------------------------------------------------------------------------------------
1,238 2,438
Change in non-cash balances:
Accrued investment income 72 (172)
Accounts receivable 120 (1,088)
Financed premiums receivable (1,703) (3,011)
Deferred policy acquisition costs (850) (352)
Due to brokers (187) (240)
Reinsurance premiums payable 105 352
Income taxes payable (91) 480
Accounts payable and accrued liabilities 697 267
Due to parent company - 393
Paid losses recoverable from reinsurers (56) (495)
Unearned premiums 4,377 6,052
Unpaid claims 7,334 6,043
Deferred service charges (67) 637
------------------------------------------------------------------------------------------------
10,989 11,304
Financing activities:
Issuance of share capital, net 16,253 -
Note payable to parent company (2,500) 2,500
Decrease in bank demand loan - (2,650)
------------------------------------------------------------------------------------------------
13,753 (150)
Investing activities:
Purchase of investments (144,061) (39,936)
Proceeds from sale of investments 117,924 33,114
Additions to capital assets (809) (393)
------------------------------------------------------------------------------------------------
(26,946) (7,215)
Increase (decrease) in cash during the year (2,204) 3,939
Cash, beginning of year 3,567 (372)
- ---------------------------------------------------------------------------------------------------
Cash, end of year $1,363 $3,567
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 8
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Kingsway Financial Services Inc. (the "Company") was incorporated under the
Business Corporations Act (Ontario) on September 19, 1989. On November 10,
1995 the Company filed articles of amendment deleting its "private company"
share restrictions. On December 18, 1995 the Company completed an Initial
Public Offering and its shares were listed on the Toronto Stock Exchange.
Prior to the Company issuing shares to the public it was a wholly owned
subsidiary of Intercargo Corporation ("Intercargo"), a company listed on
NASDAQ in the United States. After giving effect to the Initial Public
Offering, Intercargo owns approximately 50% of the Company's shares.
1. SIGNIFICANT ACCOUNTING POLICIES:
These consolidated financial statements are prepared in accordance
with generally accepted accounting principles and include the
accounts of the Company and its wholly owned subsidiary, Kingsway
General Insurance Company ('Kingsway General').
(a) Investments:
Fixed term investments are carried at amortized cost. Investments
in preferred and common shares are carried at cost. Gains and
losses on disposal of investments are determined as at the
settlement date.
(b) Capital assets:
Capital assets are carried at cost less accumulated amortization.
Amortization is provided on a declining balance basis at the
following annual rates:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
Buildings 5%
Computers and office equipment 30%
Automobiles 30%
Furniture 20%
</TABLE>
(c) Goodwill:
Goodwill arising on the purchase of the subsidiary company is
recorded at cost less accumulated amortization. Goodwill is
amortized on a straight-line basis over 10 years.
<PAGE> 9
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(d) Deferred policy acquisition costs:
Deferred policy acquisition costs represent certain costs such as
commissions and premium taxes related to the acquisition of new and
renewal premiums written during the period and are expensed as the
related premiums are recorded as income. The method followed in
determining the deferred policy acquisition costs limits the
deferral to its realizable value by giving consideration to losses
and expenses expected to be incurred as premiums are earned.
(e) Unearned premiums:
The Company recognizes premium income over the period covered by
each individual insurance contract. Unearned premiums represent
premiums received by the Company for insurance contracts which are
in force at the year end and will continue into the next fiscal
year.
(f) Unpaid claims:
The provision for unpaid claims includes adjustment expenses and
represents an estimate for the full amount of all costs including
investigation and the projected final settlements of claims
incurred up to the balance sheet date on an undiscounted basis
except for Ontario automobile disability benefits. These estimates
of future loss activity are necessarily subject to uncertainty and
are selected from a wide range of possible outcomes. These
provisions are adjusted up or down as additional information
affecting the estimated amounts becomes available during the course
of claims settlement. All changes in estimates are recorded as
incurred claims in the period in which they are determined.
(g) Reinsurance ceded:
Reinsurance premiums ceded, ceding commissions and reinsurance
recoveries on claims incurred are recorded as reductions of the
respective income and expense accounts. Unearned premiums on
business ceded and estimates of amounts recoverable from reinsurers
on unpaid claims are recorded as deductions from unearned premiums
and unpaid claims, respectively. A contingent liability exists
with respect to reinsurance ceded which could become a liability of
the Company in the event that any reinsurer is unable to meet its
obligations under the reinsurance agreement.
<PAGE> 10
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(h) Deferred service charges:
Service charge income on financed premiums is deferred and
recognized as income over the period covered by each individual
insurance contract.
2. ROLE OF THE ACTUARY AND EXTERNAL AUDITOR:
The actuary is appointed by the board of directors of the Company.
With respect to preparation of the audited financial statements, the
actuary is required to carry out a valuation of the policy liabilities
and to report thereon to the Company's shareholders. The valuation is
carried out in accordance with accepted actuarial practice and
regulatory requirements. The scope of the valuation encompasses the
policy liabilities as well as any other matter specified in any
direction that may be made by the Superintendent of Insurance
(Ontario). The policy liabilities consist of a provision for unpaid
claims and adjustment expenses on the expired portion of policies and
of future obligations on the unexpired portion of policies. In
performing the valuation of the liabilities for these contingent
future events, which are by their very nature inherently variable,
assumptions are made as to future loss ratios, trends, reinsurance
recoveries, external claims expenses and other contingencies, taking
into consideration the circumstances of the Company and the nature of
the insurance policies. The valuation is based on projections of
future claims and claims adjustment expenses. It is certain that
actual future claims and claims adjustment expenses will not develop
exactly as projected and may, in fact, vary significantly from the
projections. Further, the projections make no provision for
extraordinary future emergence of either new classes of claims or
claims categories not sufficiently recognised in the claims database.
The actuary relies on data and related information prepared by the
Company and makes use of the work of the auditor with respect to the
actuary's responsibility for the data as set forth by the standards of
the Canadian Institute of Actuaries.
The external auditors have been appointed by the shareholders,
pursuant to the Insurance Act, Ontario. Their responsibility is to
conduct an independent and objective audit of the consolidated
financial statements in accordance with generally accepted auditing
standards and to report thereon to the shareholders. In carrying out
their audit, the auditors make use of the work of the actuary and his
report on the policy liabilities of the Company. The auditors' report
outlines the scope of their audit and their opinion.
<PAGE> 11
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
3. INVESTMENTS:
($ IN THOUSANDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1995 1994
-----------------------------------------------------------------------
Cost Market Cost Market
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government of Canada
bonds $ 18,785 $ 19,167 $ 8,762 $ 8,592
Government of Canada
treasury bills - - 14,203 14,350
Provincial bonds 5,530 5,591 3,936 3,880
Municipal bonds 1,377 1,386 - -
Guaranteed investment
certificates 540 543 - -
Bankers acceptances 27,419 27,355
Corporate bonds &
debentures 2,283 2,343 2,956 2,934
Preferred shares 1,839 1,852 1,485 1,384
Common shares 2,151 2,199 - -
-----------------------------------------------------------------------
$ 59,924 $ 60,436 $ 31,342 $ 31,140
-----------------------------------------------------------------------
</TABLE>
<PAGE> 12
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
4. CAPITAL ASSETS:
($ IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------------------------
1995
------------------------------------------------------------
Accumulated Net
Cost amortization book value
------------------------------------------------------------
<S> <C> <C> <C>
Land $ 413 $ - $ 413
Buildings 1,409 160 1,249
Computers and office
equipment 525 247 278
Automobiles 272 145 127
Furniture 194 88 106
------------------------------------------------------------
$ 2,813 $ 640 $ 2,173
------------------------------------------------------------
<CAPTION>
------------------------------------------------------------
1994
------------------------------------------------------------
Accumulated Net
Cost amortization book value
------------------------------------------------------------
<S> <C> <C> <C>
Land $ 100 $ - $ 100
Buildings 1124 104 1020
Computers and office
equipment 376 179 197
Automobiles 268 110 158
Furniture 151 68 83
------------------------------------------------------------
$ 2,019 $ 461 $ 1,558
------------------------------------------------------------
</TABLE>
<PAGE> 13
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
5. SHARE CAPITAL:
Share capital consists of the following:
($ IN THOUSANDS)
<TABLE>
<CAPTION>
------------------------------------------------------------------
1995 1994
------------------------------------------------------------------
<S> <C> <C>
Authorized:
Unlimited number of Common Shares
Issued:
4,816,500 (1994 - 1,000,000) Common Shares $21,889 $5,636
-------------------------------------------------------------------
</TABLE>
(a) On November 10, 1995 the Company filed articles of
amendment deleting its "private company" share restrictions,
subdividing the Company's outstanding Common Shares on a 3 for 1
basis and deleting its Class A Special Shares and its Class B
Special shares.
(b) On November 28, 1995 the Company established a stock option
incentive plan for directors, officers and key employees of the
Company. The maximum number of Common Shares that may be issued
under the plan is 300,000 Common Shares. The maximum number of
Common Shares available for issuance to any one person under the
stock option plan is 5% of the Common Shares outstanding at the
time of the grant. On December 6, 1995 options to purchase
64,500 Common Shares were granted to certain officers and key
employees of the Company.
(c) On December 6, 1995, 16,500 Common Shares were issued to
certain employees of the Company for nominal consideration.
(d) Pursuant to an underwriting agreement dated December 8,
1995 the Company sold 1,800,000 Common Shares at $10 per share.
Underwriters fees and expenses of the issue amounting to
$1,747,000 have been deducted from the Company's Share Capital.
(e) On January 15, 1996, pursuant to the underwriting
agreement, the underwriters exercised their over-allotment option
to acquire an additional 180,000 Common Shares from the Company
at $10 per share. Fees of $108,000 were paid to the
underwriters.
(f) The weighted average number of shares outstanding for 1995
and 1994 were 3,065,240 and 3,000,000, respectively, after
giving retroactive effect to the 3 for 1 share subdivision
described above.
<PAGE> 14
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
6. UNDERWRITING POLICY AND REINSURANCE CEDED:
The Company follows the policy of underwriting and reinsuring
contracts of insurance, which limits the liability of the Company to a
maximum amount on any one loss of $200 in the event of a property or
liability claim. In addition, the Company has obtained catastrophe
reinsurance coverages which limit its liability in the event of a
series of claims arising out of a single occurrence.
The following items have been reduced by amounts ceded to reinsurers:
($ IN THOUSANDS)
<TABLE>
<CAPTION>
---------------------------------------------------------------------
1995 1994
---------------------------------------------------------------------
<S> <C> <C>
Unpaid claims $2,122 $2,661
Unearned premiums 3,543 2,896
Net premiums earned 8,961 6,909
Commissions and premium taxes 3,010 1,905
Claims incurred 3,596 3,216
</TABLE>
7. RELATED PARTY TRANSACTIONS:
In the normal course of business, the Company enters into reinsurance
transactions with Intercargo. Ceded premiums and claims incurred to
Intercargo for the year ended December 31, 1995 were $1,747,000 and
$823,000, respectively and for the year ended December 31, 1994 were
$1,247,000 and $805,000, respectively.
The note payable to Intercargo was repaid on December 18, 1995 from
the proceeds of the issuance of the Company's shares to the public.
Interest paid for the year ended December 31, 1995 amounted to
$227,000 (1994 - $Nil).
<PAGE> 15
KINGSWAY FINANCIAL SERVICES INC.
- --------------------------------------------------------------------------------
8. INCOME TAXES:
The Company's provision for income taxes compared to combined
statutory rates, is summarized as follows:
($ IN THOUSANDS)
<TABLE>
<CAPTION>
----------------------------------------------------------------
1995 1994
----------------------------------------------------------------
<S> <C> <C>
Income before taxation $6,473 $5,927
----------------------------------------------------------------
Statutory tax rate 44.5% 44.3%
----------------------------------------------------------------
Provision based on statutory rate $2,880 $2,626
Non-taxable investment income (40) (16)
Share issuance expenses (155) -
Other 21 22
----------------------------------------------------------------
$2,706 $2,632
----------------------------------------------------------------
</TABLE>
9. STATUTORY REQUIREMENTS - KINGSWAY GENERAL
The regulations of the Ontario Ministry of Financial Institutions
require that part of Kingsway General's retained earnings be
appropriated for assets that are non-admitted for regulatory purposes.
At December 31, 1995 and December 31, 1994 Kingsway General
appropriated retained earnings of $1,466,000 and $1,826,000,
respectively. The regulations also govern the payments of dividends
from Kingsway General to the Company.
10. SUBSEQUENT EVENTS:
On January 15, 1996 the Company issued additional Common Shares as
described in note 5, above.
On January 17, 1996 the Company entered into an agreement to purchase
all of the issued shares of York Fire & Casualty Company ("York") from
Highbourne Capital Corporation ("Highbourne"). The transaction is
subject only to the final approval of the shareholders of Highbourne
and is expected to close on or around February 29, 1996.
The purchase price, which is expected to be approximately $7,000,000,
is based on the adjusted Regulatory Capital of York as at December 31,
1995. The policy liabilities (unpaid claims, unearned premiums,
deferred acquisition costs and premium deficiencies) at December 31,
1995 will be re-evaluated as of December 31, 1996 and
<PAGE> 16
10. SUBSEQUENT EVENTS (CONTINUED):
December 31, 1997, based on experience to those dates. As a result
the purchase price of York may be altered as of each of these dates.
At closing, the Company will pay $1,500,000 and will issue Common
Shares valued at $10 per share for an aggregate value equal to
one-third of the purchase price. Highbourne will also receive a
Warrant which entitles it to purchase as of February 28, 1997, and for
30 days thereafter, that number of Common Shares valued at $10 per
share having an aggregate value equal to one-half of the difference
between the adjusted purchase price (evaluated as at December 31,
1996) and the amounts paid at closing. The warrant further allows
Highbourne to purchase as of February 28, 1998, and for 30 days
thereafter, that number of Common Shares valued at $10 per share equal
to the remaining balance of the adjusted purchase price evaluated as
at December 31, 1997.
The maximum number of Common Shares which may be issued pursuant to
the Warrant is 450,000 shares. Should the balance due to Highbourne
at February 28, 1998 exceed the shares to be issued under the Warrant,
the balance will be paid to Highbourne in cash within 30 days of
February 28, 1998.
<PAGE> 17
KINGSWAY FINANCIAL SERVICES INC.
Consolidated Balance Sheet
December 31, 1994, with comparative figures for 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash $ 3,567,299 $ -
Investments (note 3) 31,342,328 23,678,196
Accrued investment income 655,223 483,286
Financed premiums receivable 11,211,217 8,199,640
Accounts receivable 5,707,208 4,618,739
Due from reinsurers 494,500 -
Income taxes recoverable - 333,733
Due from parent company - 393,687
Deferred policy acquisition costs 2,979,527 2,627,763
Deferred income taxes 363,000 115,000
Capital assets (note 4) 1,557,828 1,348,450
Goodwill 238,987 288,691
- -----------------------------------------------------------------------------
$ 58,117,117 $ 42,087,185
- -----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Cheques issued in excess of bank balance $ - $ 371,973
Due to brokers 186,670 426,678
Reinsurance premiums payable 806,062 454,351
Note payable to parent company (note 7) 2,500,000 -
Bank demand loan - 2,650,000
Accounts payable and accrued liabilities 653,028 385,505
Income taxes payable 146,362 -
Unearned premiums (note 6) 19,543,181 13,491,229
Unpaid claims (note 6) 16,987,382 10,944,902
- -----------------------------------------------------------------------------
Deferred service charges 636,848 -
- -----------------------------------------------------------------------------
41,459,533 28,724,638
Shareholder's equity:
Share capital (note 5) 5,636,375 5,636,375
Retained earnings 11,021,209 7,726,172
- -----------------------------------------------------------------------------
16,657,584 13,362,547
- -----------------------------------------------------------------------------
$ 58,117,117 $ 42,087,185
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 18
KINGSWAY FINANCIAL SERVICES INC.
Consolidated Statement of Operations
Year ended December 31, 1994, with comparative figures for 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Gross premiums written $ 55,619,613 $ 30,001,899
- -----------------------------------------------------------------------------
Premiums retained, after reinsurance $ 48,013,493 $ 23,220,865
- -----------------------------------------------------------------------------
Revenue:
Premiums earned $ 42,414,405 $ 14,386,436
Premium financing income 1,233,585 439,154
--------------------------------------------------------------------------
43,647,990 14,825,590
Expenses:
Claims incurred (note 6) 27,148,022 8,307,728
Commissions 5,641,900 1,333,412
Premium taxes 1,528,637 638,181
Salaries and employee benefits 3,192,038 1,877,292
Office expenses 1,722,414 976,667
Amortization 233,169 200,662
Professional fees 146,464 99,646
Office rent - 131,234
Directors' fees 21,000 22,500
Interest 156,228 33,105
Capital tax 33,101 -
--------------------------------------------------------------------------
39,822,973 13,620,427
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Income before the undernoted 3,825,017 1,205,163
Investment income 2,102,020 1,668,127
- -----------------------------------------------------------------------------
Income before income taxes 5,927,037 2,873,290
Income taxes:
Current 2,880,000 1,175,000
Deferred (248,000) 115,000
--------------------------------------------------------------------------
2,632,000 1,290,000
- -----------------------------------------------------------------------------
Net income $ 3,295,037 $ 1,583,290
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 19
KINGSWAY FINANCIAL SERVICES INC.
Consolidated Statement of Retained Earnings
Year ended December 31, 1994, with comparative figures for 1993
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Retained earnings, beginning of year $ 7,726,172 $ 6,742,882
Net income for the year 3,295,037 1,583,290
Dividends paid - (600,000)
- -----------------------------------------------------------------------------
Retained earnings, end of year $ 11,021,209 $ 7,726,172
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 20
KINGSWAY FINANCIAL SERVICES INC.
Consolidated Statement of Changes in Financial Position
Year ended December 31, 1994, with comparative figures for 1993
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
Cash provided by (used in):
<S> <C> <C>
Operating activities:
Net income $ 3,295,037 $ 1,583,290
Items not involving cash:
Amortization 233,169 200,662
Deferred income taxes (248,000) 115,000
Loss (gain) on sale of fixed assets 821 (235)
Net realized gain on sale of investments (18,645) (136,756)
Amortization of bond premiums and discounts (823,415) 44,262
- --------------------------------------------------------------------------------
2,438,967 1,806,223
Change in non-cash balances:
Accrued interest (171,937) (59,747)
Accounts receivable (1,088,469) (22,130)
Financed premiums receivable (3,011,577) (6,781,964)
Deferred policy acquisition costs (351,764) (2,007,231)
Due to brokers (240,008) 346,727
Reinsurance premiums payable 351,711 227,864
Income taxes recoverable (payable) 480,095 (280,668)
Accounts payable and accrued liabilities 267,523 53,170
Due to (from) parent company 393,687 (641,699)
Due from reinsurers (494,500) -
Unearned premiums 6,051,952 8,834,429
Unpaid claims 6,042,480 (703,021)
Deferred service charge 636,848 -
- --------------------------------------------------------------------------------
11,305,008 771,953
Financing activities:
Note payable to parent company 2,500,000 -
Increase (decrease) in bank demand loan (2,650,000) 2,360,000
Dividends paid - (600,000)
- --------------------------------------------------------------------------------
(150,000) 1,760,000
Investing activities:
Purchase of investments (39,935,856) (35,031,356)
Proceeds from sale of investments 33,113,784 32,766,839
Additions to capital assets (393,664) (292,529)
- --------------------------------------------------------------------------------
(7,215,736) (2,557,046)
- --------------------------------------------------------------------------------
Increase (decrease) in cash position during the year 3,939,272 (25,093)
Cash position, beginning of year (371,973) (346,880)
- --------------------------------------------------------------------------------
Cash position, end of year $ 3,567,299 $ (371,973)
- --------------------------------------------------------------------------------
</TABLE>
Cash position is defined as cash less cheques issued in excess of bank
balance.
See accompanying notes to consolidated financial statements.
<PAGE> 21
Kingsway Financial Services Inc. (the "Company") was incorporated under the
Corporations Act of Ontario on September 19, 1989. The Company is a wholly
owned subsidiary of Intercargo Corporation, a company resident in the
United States.
1. SIGNIFICANT ACCOUNTING POLICIES:
These consolidated financial statements are prepared in accordance
with accounting principles generally accepted in Canada and include
the accounts of the Company and its subsidiary, Kingsway General
Insurance Company.
(a) Investments:
Fixed term investments are carried at amortized cost. Investments
in preferred shares are carried at cost. Gains and losses on
disposal of investments are determined on a completed transaction
basis.
(b) Capital assets:
Capital assets are carried at cost less accumulated amortization.
Amortization is provided at the following annual rates:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Asset Basis Rate
- -----------------------------------------------------------------
<S> <C> <C>
Building Declining balance 5%
Computers and office equipment Declining balance 30%
Automobiles Declining balance 30%
Furniture Declining balance 20%
- -----------------------------------------------------------------
</TABLE>
(c) Goodwill:
Goodwill arising on the purchase of the subsidiary company is
recorded at cost less accumulated amortization. Goodwill is
amortized on a straight-line basis over ten years.
(d) Deferred policy acquisition costs:
Deferred policy acquisition costs represent certain costs such as
commissions and premium taxes related to the acquisition of new and
renewal premiums written during the period and are expensed as the
related premiums are recorded as income. The method followed in
determining the deferred policy acquisition costs limits the
deferral to its realizable value by giving consideration to losses
and expenses expected to be incurred as premiums are earned.
<PAGE> 22
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(e) Unearned premiums:
The Company recognizes premium income over the period covered by
each individual insurance contract. Unearned premiums represent
premiums received by the Company for insurance contracts which are
in force at the year end and will continue into the next fiscal
year.
(f) Unpaid claims:
The provision for unpaid claims includes adjustment expenses and
represents an estimate for the full amount of all costs including
investigation and the projected final settlements of claims
incurred prior to the balance sheet date on an undiscounted basis.
These estimates of future loss activity are necessarily subject to
uncertainty and are selected from a wide range of possible
outcomes.
(g) Reinsurance ceded:
Reinsurance premiums ceded and reinsurance recoveries on claims
incurred are recorded as reductions of the respective income and
expense accounts. Unearned premiums on business ceded and
estimates of amounts recoverable from reinsurers on unpaid claims
are recorded as deductions from unearned premiums and unpaid
claims, respectively. A contingent liability exists with respect
to reinsurance ceded which could become a liability of the Company
in the event that any reinsurer is unable to meet its obligations
under the reinsurance agreement.
<PAGE> 23
2. ROLE OF THE ACTUARY AND EXTERNAL AUDITOR:
The actuary is appointed by the board of directors of the Company.
With respect to preparation of these financial statements, the actuary
is required to carry out a valuation of the policy liabilities and to
report thereon to the Company's shareholder. The valuation is carried
out in accordance with accepted actuarial practice and regulatory
requirements. The scope of the valuation encompasses the policy
liabilities as well as any other matter specified in any direction that
may be made by the superintendent. The policy liabilities consist of a
provision for unpaid claims and adjustment expenses on the expired
portion of policies and of future obligations on the unexpired portion
of policies. In performing the valuation of the liabilities for these
contingent future events, which are by their very nature inherently
variable, the actuary makes assumptions as to future rates of claim
frequency and severity, inflation, reinsurance recoveries, expenses and
other contingencies, taking into consideration the circumstances of the
Company and the nature of the insurance policies. The valuation is
based on projections of future claims and claims adjustment expenses.
It is certain that actual future claims and claims adjustment expenses
will not develop exactly as projected and may, in fact, vary
significantly from the projections. Further, the projections make no
provision for extraordinary future emergence of either new classes of
claims or post-contractual expansion of policy coverage. The actuary
relies on data and related information prepared by the Company and
makes use of the work of the auditor with respect to the actuary's
verification of the underlying data used in the valuation.
The external auditors have been appointed by the shareholder, pursuant
to the Insurance Act, Ontario. Their responsibility is to conduct an
independent and objective audit of the consolidated financial
statements in accordance with generally accepted auditing standards and
to report thereon to the shareholder. In carrying out their audit, the
auditors make use of the work of the actuary and his report on the
policy liabilities of the Company. The auditors' report outlines the
scope of their audit and their opinion.
<PAGE> 24
3. INVESTMENTS:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
Cost Market Cost Market
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government of Canada
bonds $ 8,762,449 $ 8,591,878 $ 9,238,592 $ 9,315,884
Government of Canada
treasury bills 14,203,174 14,350,272 12,926,828 12,968,810
Provincial bonds 3,935,531 3,879,764 - -
Guaranteed investment
certificates - - 352,158 360,360
Government of United
States treasury bills - - 661,595 661,702
Corporate bonds 1,092,478 1,113,930 - -
Corporate debentures 1,864,088 1,820,000 499,023 550,625
Preferred shares 1,484,608 1,383,725 - -
- --------------------------------------------------------------------------------
$ 31,342,328 $ 31,139,569 $ 23,678,196 $23,857,381
- --------------------------------------------------------------------------------
</TABLE>
4. CAPITAL ASSETS:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
Accumulated Net Net
Cost amortization book value book value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land $ 100,000 $ - $ 100,000 $ 100,000
Building 1,123,605 104,215 1,019,390 883,751
Computers and office
equipment 375,636 178,366 197,270 127,200
Automobiles 268,448 110,577 157,871 181,499
Furniture 150,841 67,544 83,297 56,000
- --------------------------------------------------------------------------------
$ 2,018,530 $ 460,702 $ 1,557,828 $ 1,348,450
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 25
5. SHARE CAPITAL:
Share capital consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Authorized:
Unlimited number of common shares
Unlimited number of Class A special shares
Unlimited number of Class B special shares
Issued:
1,000,000 common shares $ 5,636,375 $ 5,636,375
- --------------------------------------------------------------------------------
</TABLE>
6. UNDERWRITING POLICY AND REINSURANCE CEDED:
The Company follows the policy of underwriting and reinsuring contracts
of insurance, which limits the liability of the Company to a maximum
amount on any one loss of $200,000 in the event of a property or
liability claim. In addition, the Company has obtained reinsurance
having an upper amount of $2,750,000, which limits the Company's
liability to $250,000 in the event of a series of property claims
arising out of a single occurrence.
The amount deducted from unpaid claims and unearned premiums for
reinsurance ceded is $2,660,728 and $2,895,831, respectively (1993 -
$2,538,256 and $2,199,586, respectively). The amount deducted from
claims incurred is $3,216,457 (1993 - $3,486,133). The amount of
reinsurance commissions received was $1,905,000 (1993 - $1,477,000).
7. RELATED PARTY TRANSACTIONS:
In the normal course of business, the Company enters into reinsurance
transactions with its parent company. Premiums ceded by the Company to
its parent for the year ended December 31, 1994 were $1,247,432 (1993 -
$810,836). In addition, management fees of $3,675,730 were payable to
an affiliated company in the prior year.
The note payable to the parent company matures November 30, 1996, bears
interest at 9% and is repayable in the amount of $312,500 per quarter.
8. COMPARATIVE FIGURES:
Certain of the 1993 figures presented for comparative purposes have
been reclassified to conform with the presentation adopted in the
current year.
<PAGE> 26
INTERCARGO CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report FS-2
SCHEDULES
Summary of Investments-Other than Investments in Related
Parties (Schedule I) FS-3
Condensed Financial Information of Registrant (Schedule II) FS-4
Reinsurance (Schedule IV) FS-7
Supplemental Information Concerning Property/Casualty
Insurance Operations (Schedule VI) FS-8
</TABLE>
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Intercargo Corporation:
Under date of March 28, 1996, we reported on the consolidated balance
sheets of Intercargo Corporation and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1995, as contained in the 1995 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1995. In connection
with our audits of the aforementioned consolidated financial statements, we
also audited the related consolidated supplementary financial statement
schedules as listed in the accompanying index. These supplementary financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplementary financial
statement schedules based on our audits.
In our opinion, such supplementary financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information set forth
therein.
As discussed in note 1 to the consolidated financial statements, the Company
changed its method of accounting for investments to adopt the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," at January 1, 1994.
KPMG PEAT MARWICK LLP
Chicago, Illinois
March 28, 1996
FS-2
<PAGE> 28
SCHEDULE I
INTERCARGO CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS--OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
Amount at Which
Fair Shown in the
Type of Investment Cost (1) Value Balance Sheets
- ------------------ ---- ----- --------------
<S> <C> <C> <C>
(Available for Sale)
Fixed Maturities:
U.S. Government and Agency
obligations $13,670 13,739 13,739
State, municipal, and other tax
advantaged securities 19,776 20,445 20,445
Corporate securities 9,545 9,812 9,812
Other fixed maturity investments 774 773 773
------- ------ ------
Total fixed maturities 43,765 44,769 44,769
Equity securities 3,618 3,474 3,474
------- ------ ------
Total investments $47,383 48,243 48,243
======= ====== ======
</TABLE>
_______________________________
(1) Investments in fixed maturities are reflected at cost, adjusted for
amortization of premium or accretion of discounts.
See notes to consolidated financial statements.
See accompanying report of independent auditors.
FS-3
<PAGE> 29
SCHEDULE II
INTERCARGO CORPORATION
CONDENSED BALANCE SHEETS (Registrant only)
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
----------------
1995 1994
----------------
<S> <C> <C>
ASSETS
Investment in affiliates $11,898 -
Cash and cash equivalents 1,180 530
Equipment, at cost less accumulated depreciation 569 938
Investments in subsidiaries 29,476 35,385
Notes receivable
Due from affiliates 8,260 10,110
Due from non-affiliates 209 460
Other assets 1,988 1,250
------- -------
Total assets $53,580 48,673
======= =======
LIABILITIES
Accrued expenses and other liabilities $184 246
Federal income tax payable 40 51
Notes payable 9,735 8,325
Payable to affiliates - 130
------- -------
Total liabilities 9,959 8,752
------- -------
STOCKHOLDERS' EQUITY
Common stock -- $1 par value; authorized 20,000,000 shares;
issues and outstanding, 7,640,981 7,641 7,641
Additional paid-in capital 24,104 24,104
Unrealized loss on foreign currency translation (1,179) (2,002)
Net unrealized gain (loss) on available-for-sale securities 567 (1,546)
Retained earnings 12,488 11,724
------- -------
Total stockholders' equity 43,621 39,921
------- -------
Total liabilities and stockholders' equity $53,580 48,673
======= =======
</TABLE>
See notes to consolidated financial statements.
See accompanying report of independent auditors.
FS-4
<PAGE> 30
SCHEDULE II - Continued
INTERCARGO CORPORATION
CONDENSED STATEMENTS OF INCOME (Registrant only)
(in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------
1995 1994 1993
------ ----- -----
<S> <C> <C> <C>
Revenues
Revenues from affiliates $17 70 56
Net investment and other income 1,261 665 283
------ ----- -----
Total 1,278 735 339
------ ----- -----
Expenses
Interest expense 937 367 163
General and administrative expense 481 1,034 980
------ ----- -----
Total 1,418 1,401 1,143
------ ----- -----
Operating loss (140) (666) (804)
Federal income tax benefit 48 226 273
Equity in the operating earnings of subsidiaries,
net of income taxes 2,231 5,421 2,669
------ ----- -----
Net income $2,139 4,981 2,138
====== ===== =====
</TABLE>
See notes to consolidated financial statements.
See accompanying report of independent auditors.
FS-5
<PAGE> 31
SCHEDULE II - Continued
INTERCARGO CORPORATION
CONDENSED STATEMENTS OF CASH FLOW (Registrant only)
(in thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994 1993
-------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $2,139 4,981 2,138
Adjustments to reconcile net income to net cash
provided from operating activities:
Realized gains (241) - -
Equity of operating earnings of
subsidiaries, net of income tax (2,231) (5,421) (2,669)
Increase (decrease) in payable to affiliates (130) (934) 631
Depreciation and amortization 2 219 257
Change in income tax accounts (11) (173) 323
(Increase) decrease in notes receivable
Affiliates 1,850 (1,505) (8,605)
Non-affiliates 251 382 (199)
Increase (decrease) in accrued expenses and other liabilities (62) 154 (264)
Other, net (676) (422) (580)
------- ------- -------
Net cash provided from (used in) operating activities 891 (2,719) (8,968)
------- ------- -------
Cash flows from investing activities:
Long-term fixed maturities:
Purchases - - (457)
Sales - 796 404
Equity securities:
Sales - 347 457
Net (purchases) sales of short-term maturities - 2,993 (2,968)
Dividends received from subsidiary 250 - 2,007
Contribution of capital to subsidiary (5,000) (3,600) -
Sale of Kingsway common stock 4,107 - (35)
(Purchase) Sale of equipment, net 367 (458) (51)
------- ------- -------
Net cash provided from (used in) investing activities (276) 78 (643)
------- ------- -------
Cash flows from (used in) financing activities:
Proceeds from stock offering - - 6,375
Proceeds from exercise of stock equivalents - 50 359
Dividends paid to stockholders (1,375) (1,375) (1,141)
Proceeds from loans 1,410 325 8,000
------- ------- -------
Net cash provided from (used in) financing activities 35 (1,000) 13,593
------- ------- -------
Net increase(decrease) in cash and cash equivalents 650 (3,641) 3,982
Cash and cash equivalents:
Beginning of the period 530 4,171 189
------- ------- -------
End of the period $1,180 530 4,171
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
See accompanying report of independent auditors.
FS-6
<PAGE> 32
SCHEDULE IV
INTERCARGO CORPORATION AND SUBSIDIARIES
REINSURANCE
(dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- --------------------------------------------------------------------------------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies amount net
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Property and liability premiums
Year ended:
December 31, 1995 $98,460 $13,594 $1,288 $86,154 1.49%
December 31, 1994 86,216 11,565 146 74,797 .20%
December 31, 1993 54,924 9,722 291 45,493 .64%
</TABLE>
See accompanying report of independent auditors.
FS-7
<PAGE> 33
SCHEDULE VI
INTERCARGO CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G Column H
- -------------------------------------------------------------------------------------------------------------------
Claims and Claim
Adjustment Expenses
Reserves for Incurred Related to
Deferred Unpaid Claims Discount, -------------------
Policy and Claim if any, Net (1) (2)
Affiliation with Acquisition Adjustment Deducted in Unearned Earned Investment Current Prior
Registrant Costs Expenses Column C Premiums Premiums Income Year Year
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated property-
casualty entities
Year ended:
December 31, 1995 $4,898 $36,293 -- $17,691 $86,154 $6,273 $45,642 $6,104
December 31, 1994 6,602 38,836 -- 31,586 74,797 4,378 39,462 2,137
December 31, 1993 5,215 29,696 -- 26,470 45,493 3,990 19,326 1,788
<CAPTION>
Column A Column I Column J Column K
- ----------------------------------------------------------------------------
Amortization Paid Claims
of Deferred and Claim
Affiliation with Policy Acq. Adjustment Premiums
Registrant Costs Expenses Written
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated property-
casualty entities
Year ended:
December 31, 1995 $22,829 $37,696 $90,804
December 31, 1994 18,511 32,882 80,737
December 31, 1993 14,336 20,710 55,006
</TABLE>
See accompanying report of independent auditors.
FS-8
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: April 5, 1996
INTERCARGO CORPORATION
By: /s/ Lawrence P. Goecking
------------------------------
Lawrence P. Goecking
Chief Financial Officer
