<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report under section 13 or 15(d) of the Securities Exchange Act
of 1934. For the Quarterly period ended March 31, 2000.
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 1-10760
MUTUAL RISK MANAGEMENT LTD.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
BERMUDA NOT APPLICABLE
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44 Church Street,
Hamilton HM 12, Bermuda
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(441) 295-5688
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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 [_]
The number of outstanding shares of the registrant's Common Stock, $0.01 par
value, as of March 31, 2000 was 41,209,500.
<PAGE>
MUTUAL RISK MANAGEMENT LTD.
I N D E X
<TABLE>
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements:
Unaudited Consolidated Statements of Income and Comprehensive Income
for the three month periods ended March 31, 2000 and 1999 3
Unaudited Consolidated Balance Sheets at March 31, 2000
and December 31, 1999 4
Unaudited Consolidated Statements of Cash Flows for the
three month periods ended March 31, 2000 and 1999 5
Unaudited Consolidated Statements of Changes in Shareholders' Equity
at March 31, 2000 and December 31, 1999 6
Notes to Unaudited Consolidated Financial Statements at
March 31, 2000 7-16
Item 2. Management's Discussion and Analysis of Financial 17-21
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about 22
Market Risk
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibits
</TABLE>
Exhibit 27 - Financial Data Schedules
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS:
Three Months Ended March 31
2000 1999
<S> <C> <C>
REVENUES
Fee income $ 45,260,700 $45,493,875
Premiums earned 55,872,582 38,784,638
Net investment income 12,566,497 7,220,648
Realized capital (losses) gains (1,622,696) 502,376
Other income (losses) 12,700 (108,941)
------------ -----------
Total Revenues 112,089,783 91,892,596
------------ -----------
EXPENSES
Losses and loss expenses incurred 34,319,798 26,229,412
Acquisition costs 24,861,866 13,495,211
Operating expenses 34,647,734 29,100,135
Interest expense 5,996,439 1,602,073
Other expenses 712,011 660,168
------------ -----------
Total Expenses 100,537,848 71,086,999
------------ -----------
INCOME BEFORE INCOME TAXES 11,551,935 20,805,597
MINORITY INTEREST, AND EXTRAORDINARY ITEMS
Income taxes 993,197 2,014,284
------------ -----------
INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEMS 10,558,738 18,791,313
Minority interest 698,985 7,625
------------ -----------
INCOME BEFORE EXTRAORDINARY LOSS 11,257,723 18,798,938
Extraordinary loss on extinguishment of debentures, net of tax (4,327,242) -
------------ -----------
NET INCOME 6,930,481 18,798,938
Other comprehensive income, net of tax:
Unrealized losses on investments, net of reclassification
adjustment (1,158,147) (3,492,048)
------------ -----------
COMPREHENSIVE INCOME $ 5,772,334 $15,306,890
============ ===========
EARNINGS PER COMMON SHARE:
Net income available to Common Shareholders:
Basic $ 0.17 $ 0.44
============ ===========
Diluted $ 0.17 $ 0.40
============ ===========
Dividends per Common Share $ 0.07 $ 0.06
============ ===========
Weighted average number of Common
Shares outstanding - basic 41,209,071 42,634,135
============ ===========
Weighted average number of Common
Shares outstanding - diluted 41,308,945 50,411,359
============ ===========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
3
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 121,530,616 $ 155,387,061
Investments:
Held in available for sale account at fair value
(Amortized cost $497,966,190; 1999 - $466,858,482) 481,870,916 451,921,349
Equity investments held by special purpose entity 213,546,249 -
-------------- --------------
Total marketable investments 816,947,781 607,308,410
Other investments 27,308,373 28,425,474
Investment income due and accrued 6,482,292 5,172,711
Accounts receivable 526,432,806 564,590,025
Reinsurance receivables 1,743,023,563 1,729,935,575
Deferred expenses 30,706,037 30,406,066
Prepaid reinsurance premiums 306,945,229 281,077,921
Fixed assets 30,567,785 28,880,015
Deferred tax benefit 4,891,374 4,232,826
Goodwill 52,671,974 52,924,459
Other assets 7,235,888 6,829,547
Assets held in separate accounts 731,812,271 693,390,317
-------------- --------------
Total Assets $4,285,025,373 $4,033,173,346
============== ==============
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
Reserve for losses and loss expenses $1,863,166,330 $1,860,120,483
Reserve for unearned premiums 373,812,650 335,265,056
Pension fund reserves 67,509,722 67,980,867
Claims deposit liabilities 29,621,035 27,923,901
Accounts payable 299,050,579 353,965,743
Accrued expenses 12,554,521 11,053,705
Taxes payable 18,686,177 23,181,367
Bridging Loan 217,000,000 117,000,000
Other loans payable 4,041,823 4,048,589
Prepaid fees 62,760,613 58,025,464
Debentures 13,158,058 110,898,002
Minority interest in special purpose entity:
Non-recourse debentures 102,580,952
Redeemable non-voting preferred 96,000
Non-voting common 113,869,946
--------------
216,546,898 -
Other liabilities 13,956,647 12,175,828
Liabilities related to separate accounts 731,812,271 693,390,317
-------------- --------------
Total Liabilities 3,923,677,324 3,675,029,322
-------------- --------------
SHAREHOLDERS' EQUITY
Common Shares - Authorized 180,000,000 (par value $0.01)
Issued 41,209,500 (excluding 2,636,716 shares held in treasury)
(1999 - 41,205,191) 412,095 412,052
Additional paid-in capital 111,071,320 110,754,758
Accumulated other comprehensive (loss) income (16,095,274) (14,937,127)
Retained earnings 265,959,908 261,914,341
-------------- --------------
Total Shareholders' Equity 361,348,049 358,144,024
-------------- --------------
Total Liabilities & Shareholders' Equity $4,285,025,373 $4,033,173,346
============== ==============
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
4
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
<S> <C> <C>
NET CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 6,930,481 $ 18,798,938
Items not affecting cash:
Depreciation 2,585,439 1,746,282
Amortization of investments (27,790) (264,541)
Net loss on sale of investments (248,204) (134,274)
Other investment losses -- (360,916)
Amortization of convertible debentures 881,488 1,552,569
Deferred tax benefit (658,548) 313,218
Extraordinary loss on extinguishment of debentures 4,327,242 --
Other items (1,054,065) 505,909
Net changes in non-cash balances relating to operations:
Accounts receivable 38,157,219 (44,582,429)
Reinsurance receivables (13,087,988) (82,481,906)
Investment income due and accrued (1,309,581) 138,966
Deferred expenses (299,971) (4,261,886)
Prepaid reinsurance premiums (25,867,308) (2,086,707)
Other assets (426,462) 419,553
Reserve for losses and loss expenses 3,045,847 76,911,843
Prepaid fees 4,735,149 1,139,245
Reserve for unearned premium 38,547,594 7,089,906
Accounts payable (54,915,164) 4,161,382
Taxes payable (4,495,190) 2,783,514
Accrued expenses 1,500,816 2,404,072
Other liabilities 1,780,568 (2,314,977)
------------- ------------
NET CASH FLOW FROM (APPLIED TO) OPERATING ACTIVITIES 101,572 (18,522,239)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments - Available for sale 10,266,203 15,887,952
Proceeds from maturity of investments - Available for sale 7,377,577 14,473,986
Fixed assets purchased (4,399,366) (3,407,834)
Investments purchased - Available for sale (48,475,497) (47,782,620)
Acquisitions and other investments 1,083,686 (801,687)
Proceeds from sale of other investments -- 576,522
Special purpose entity, investments purchased (213,546,249) --
Other items (137,302) 12,269
------------- ------------
NET CASH FLOW APPLIED TO INVESTING ACTIVITIES (247,830,948) (21,041,412)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Bridging loan received 100,000,000 --
Other loans received (repaid) (6,766) 195,058
Extinguishment of convertible debentures (101,325,130) --
Proceeds from shares issued 316,605 5,343,511
Claims deposit liabilities 1,697,134 4,799,768
Pension fund reserves (471,145) (1,820,253)
Dividends paid (2,884,665) (3,389,272)
Special purpose entity, bonds & debentures issued 216,546,898 --
------------- ------------
NET CASH FLOW FROM FINANCING ACTIVITIES 213,872,931 5,128,812
------------- ------------
Net decrease in cash and cash equivalents (33,856,445) (34,434,839)
Cash and cash equivalents at beginning of period 155,387,061 117,422,652
------------- ------------
Cash and cash equivalents at end of period $ 121,530,616 $ 82,987,813
============= ============
Supplemental cash flow information:
Interest paid $ 5,114,951 $ 49,504
============= ============
Income taxes paid, net $ -- $ --
============= ============
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
5
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Treasury Common Share
Opening Shares Shares Unrealized Net Dividends
Balance Issued Purchased Loss (1) Income Declared (2)
Three Months Ended March 31, 2000
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Shares $ 412,052 43 - - - -
Additional paid-in capital 110,754,758 316,562 - - - -
Accumulated other
Comprehensive income (loss) (14,937,127) - - (1,158,147) - -
Retained earnings 261,914,341 - - - $ 6,930,481 (2,884,915)
----------------------------------------------------------------------------------
Total Shareholders' Equity
at March 31, 2000 $358,144,024 $ 316,605 - $ (1,158,147) $ 6,930,481 $ (2,884,915)
==================================================================================
Year Ended December 31, 1999
- ----------------------------
Common Shares $ 422,056 16,363 (26,367) - - -
Additional paid-in capital 114,916,045 25,626,183 (29,787,470) - - -
Accumulated other
Comprehensive income (loss) 4,456,781 - - (19,393,908) - -
Retained earnings 223,371,116 - - - 50,438,032 (11,003,871)
----------------------------------------------------------------------------------
Total Shareholders' Equity
at December 31, 1999 $343,165,998 25,642,546 (29,813,837) $(19,393,908) 50,438,032 (11,003,871)
==================================================================================
<CAPTION>
Dividend of
Acquired Closing
Companies (3) Balance
Three Months Ended March 31, 2000
- ---------------------------------
<S> <C> <C>
Common Shares - 412,095
Additional paid-in capital - 111,071,320
Accumulated other
Comprehensive income - (16,095,274)
Retained earnings - 265,959,908
----------------------------
Total Shareholders' Equity
at March 31, 2000 - $361,348,049
============================
Year Ended December 31, 1999
- ----------------------------
Common Shares - $ 412,052
Additional paid-in capital - 110,754,758
Accumulated other
Comprehensive income - (14,937,127)
Retained earnings (890,936) 261,914,341
----------------------------
Total Shareholders' Equity
at December 31, 1999 (890,936) 358,144,024
============================
</TABLE>
(1) Net of reclassification adjustment, net of tax (See Note 2).
(2) Dividend per share amounts were $.07 and $0.25 for the quarter ended
March 31, 2000 and the year ended December 31, 1999 respectively.
(3) Prior to the merger, Captive Resources paid dividends of $.51 in 1999 based
on the equivalent number of Common Shares that would have been outstanding
on the dividend dates after giving effect to the pooling of interests.
See Accompanying Notes to Unaudited Consolidated Financial Statements
6
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
1. INTERIM ACCOUNTING POLICY
In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company and the results of operations and cash flows for the three months
ended March 31, 2000 and 1999. Although the Company believes that the disclosure
in these financial statements is adequate to make the information presented not
misleading certain information and footnote information normally included in
financial statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. Results of operations for the three
months ended March 31, 2000 are not necessarily indicative of what operating
results may be for the full year.
2. COMPREHENSIVE INCOME
Statement 130 requires unrealized gains or losses on the Company's available for
sale investments, to be included in Other comprehensive income.
<TABLE>
<CAPTION>
(In thousands) Before tax Net of Tax
Three months ended March 31, 2000 Amount Tax Amount
- --------------------------------- ------ --- ------
<S> <C> <C> <C>
Net unrealized (losses) gains on available for $(1,406) $ (24) $(1,382)
sale investments arising during the period.
Less: reclassification adjustment for gains
realized in net income 248 $ 24 $ 224
------- ------ -------
Other comprehensive income $(1,158) $ -- $(1,158)
======= ====== =======
<CAPTION>
Three months ended March 31, 1999 Before Tax Net of Tax
- ---------------------------------
Amount Tax Amount
------ --- ------
<S> <C> <C> <C>
Net unrealized (losses) gains on available for
sale investments arising during the year. $(4,504) $1,114 $(3,390)
Less: reclassification adjustment for gains
realized in net income (134) 32 (102)
------- ------ -------
Other comprehensive income $(4,638) $1,146 $(3,492)
======= ====== =======
</TABLE>
7
<PAGE>
3. SEGMENT INFORMATION Quarter ended March 31
2000 1999
Revenue
Program Business $ 24,974 $22,908
Corporate Risk Management $ 10,413 $15,025
Specialty Brokerage $ 3,845 $ 3,141
Financial Services $ 6,029 $ 4,420
Underwriting $ 55,873 $38,785
Net investment income (1) $ 10,943 $ 7,723
Other $ 13 $ (109)
-------- -------
Total $112,090 $91,893
-------- -------
Income before income taxes, minority interest and extraordinary item
Program Business $ 6,525 $ 8,166
Corporate Risk Management $ 2,429 $ 6,547
Specialty Brokerage $ 1,352 $ 1,529
Financial Services $ 1,320 $ 152
Underwriting $ (3,309) (940)
Net investment income (2) $ 4,947 $ 6,121
Other $ (1,712) $ (769)
-------- -------
Total $ 11,552 $20,806
-------- -------
The subsidiaries' accounting records do not capture information by reporting
segment sufficient to determine identifiable assets by such reporting segments.
(1) Net of realized capital gains and losses.
(2) Net of realized capital gains and losses and interest expense.
8
<PAGE>
4. EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings
per common share.
<TABLE>
<CAPTION>
Quarter ended March 31,
(In thousands, except shares and earnings per share) 2000 1999
<S> <C> <C>
Numerator
Income before extraordinary loss $11,257,723 $18,798,938
Extraordinary loss on extinguishment of debentures, net of tax (4,327,242) --
----------- -----------
Net income 6,930,481 18,798,938
----------- -----------
Numerator for basic earnings per common share -
Net income available to common shareholders 6,930,481 18,798,938
Effect of dilutive securities:
Conversion of Zero Coupon Convertible Exchangeable
Subordinated Debentures -- (a) 1,552,569
----------- -----------
Numerator for diluted earnings per common share -
Net income available to common shareholders after assumed
conversions $ 6,930,481 $20,351,507
=========== ===========
Denominator
Denominator for basic earnings per common share -
Weighted average shares 41,209,071 42,634,135
Effect of dilutive securities:
Stock options 99,873 1,627,761
Conversion of Zero Coupon Convertible Exchangeable
Subordinated Debentures -- (a) 6,149,463
----------- -----------
Denominator for diluted earnings per common share -
Adjusted weighted average shares and assumed conversions 41,308,944 50,411,539
=========== ===========
Basic earnings per common share
Income before extraordinary loss $ 0.28 $ 0.44
Extraordinary loss on extinguishment of debentures, net of tax $ (0.11) --
----------- -----------
Basic earnings per common share $ 0.17 $ 0.44
=========== ===========
Diluted earnings per common share
Income before extraordinary loss $ 0.27 $ 0.40
Extraordinary loss on extinguishment of debentures, net of tax $ (0.10) $ -
----------- -----------
Diluted earnings per common share $ 0.17 $ 0.40
=========== ===========
</TABLE>
(a) Excludes the conversion of Convertible Debentures which have an anti-
dilutive effect.
9
<PAGE>
5. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Mutual Group Ltd. ("Mutual Group") is a wholly owned subsidiary of the
Parent Company. Substantially all of Mutual Group's income and cash flow is
generated by its subsidiaries. As a result, funds necessary to meet Mutual
Group's debt service obligations are provided in large part by distributions
or advances from its subsidiaries. Under certain circumstances, contractual
and legal restrictions, as well as the financial condition and operating
requirements of Mutual Group's subsidiaries, could limit the ability for
Mutual Group to obtain cash from its subsidiaries for the purpose of meeting
its debt service obligations.
The following financial information presents the condensed consolidating
balance sheets of the Parent Company, Mutual Group and other subsidiaries as of
March 31, 2000 and December 31, 1999 and condensed consolidating statements of
income and cash flows for the quarter ended March 31, 2000, and 1999.
Investments in subsidiaries are accounted for on the equity method and
accordingly, entries necessary to consolidate the Parent Company, Mutual Group,
and all other subsidiaries are reflected in the eliminations column. This
information should be read in conjunction with the consolidated financial
statements and footnotes of the Company. Certain balances have been reclassified
from the Mutual Risk Management Ltd. Parent Company Only Financial Information
presented in Item 14B Schedule II of Form 10-K/A for purposes of this condensed
presentation.
10
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 2000
<TABLE>
<CAPTION>
Parent Mutual Other
Company Group Subsidiaries Eliminations Consolidated
-------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents.......... $ 6,650 $ 1,329 $ 113,552 $ -- $ 121,531
Investments........... 8,306 -- 473,565 -- 481,871
Equity investments
held by special
purpose entity....... -- -- 213,546 -- 213,546
Other investments..... -- 580 26,728 -- 27,308
Investments in and
advances to
subsidiaries and
affiliates, net...... 577,218 250,383 (452,561) (375,040) --
Accounts Receivable... -- 25 526,408 -- 526,433
Reinsurance
receivables.......... -- -- 1,743,024 -- 1,743,024
Prepaid reinsurance
premiums............. -- -- 306,945 -- 306,945
Fixed assets.......... -- -- 30,568 -- 30,568
Deferred tax benefit.. -- -- 5,966 (1,075) 4,891
Taxes receivable -- 9,363 -- (9,363) --
Other assets.......... 618 44 96,434 -- 97,096
Assets held in
separate accounts.... -- -- 731,812 -- 731,812
-------- -------- ---------- --------- ----------
Total Assets........... $592,792 $261,724 $3,815,987 $(385,478) $4,285,025
======== ======== ========== ========= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES
Reserve for losses and
loss expenses........ $ -- $ -- $1,863,166 $ -- $1,863,166
Reserve for unearned
premiums............. -- -- 373,813 -- 373,813
Pension fund
reserves............. -- -- 67,509 -- 67,509
Claims deposit
liabilities.......... -- -- 29,621 -- 29,621
Accounts payable...... -- -- 299,050 -- 299,050
Accrued expenses...... 1,286 270 10,999 -- 12,555
Taxes payable......... -- -- 28,049 (9,363) 18,686
Bridging loan......... 217,000 -- -- -- 217,000
Other loans payable... -- -- 4,042 -- 4,042
Prepaid fees.......... -- -- 62,761 -- 62,761
Debentures............ 13,158 -- -- -- 13,158
Minority interest in
special purpose entity -- -- 216,547 -- 216,547
Deferred tax
liability............ -- 1,075 -- (1,075) --
Other liabilities..... -- -- 13,957 -- 13,957
Liabilities related to
separate accounts.... -- -- 731,812 -- 731,812
Total Liabilities...... 231,444 1,345 3,701,326 (10,438) 3,923,677
-------- -------- ---------- --------- ----------
SHAREHOLDERS' EQUITY.... 361,348 260,379 114,661 (375,040) 361,348
-------- -------- ---------- --------- ----------
Total Liabilities and
Shareholders'
Equity............... $592,792 $261,724 $3,815,987 $(385,478) $4,285,025
======== ======== ========== ========= ==========
</TABLE>
11
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Parent Mutual Other
Company Group Subsidiaries Eliminations Consolidated
-------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents.......... $ 6,722 $ 1,019 $ 147,646 $ -- $ 155,387
Investments........... 9,665 -- 442,255 -- 451,920
Other investments..... 1,006 474 26,946 -- 28,426
Investments in and
advances to
subsidiaries and
affiliates, net...... 566,724 244,693 (428,022) (383,395) --
Accounts Receivable... -- 906 563,684 -- 564,590
Reinsurance
receivables.......... -- -- 1,729,936 -- 1,729,936
Prepaid reinsurance
premiums............. -- -- 281,078 -- 281,078
Fixed assets.......... -- -- 28,880 -- 28,880
Deferred tax benefit.. -- -- 5,308 (1,075) 4,233
Other assets.......... 2,319 26 92,989 -- 95,334
Assets held in
separate accounts.... -- -- 693,390 -- 693,390
-------- -------- ---------- --------- ----------
Total Assets........... $586,436 $247,118 $3,584,090 $(384,470) $4,033,174
======== ======== ========== ========= ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY LIABILITIES
Reserve for losses and
loss expenses........ $ -- $ -- $1,860,120 $ -- $1,860,120
Reserve for unearned
premiums............. -- -- 335,265 -- 335,265
Pension fund
reserves............. -- -- 67,981 -- 67,981
Claims deposit
liabilities.......... -- -- 27,924 -- 27,924
Accounts payable...... 394 247 353,325 -- 353,966
Accrued expenses...... -- -- 11,054 -- 11,054
Taxes payable......... -- -- 23,181 -- 23,181
Bridging loan......... 117,000 -- -- -- 117,000
Other loans payable... -- -- 4,049 -- 4,049
Prepaid fees.......... -- -- 58,026 -- 58,026
Debentures............ 110,898 -- -- -- 110,898
Deferred tax
liability............ -- 1,075 -- (1,075) --
Other liabilities..... -- -- 12,176 -- 12,176
Liabilities related to
separate accounts.... -- -- 693,390 -- 693,390
Total Liabilities...... 228,292 1,322 3,446,491 (1,075) 3,675,030
-------- -------- ---------- --------- ----------
SHAREHOLDERS' EQUITY.... 358,144 245,796 137,599 (383,395) 358,144
-------- -------- ---------- --------- ----------
Total Liabilities and
Shareholders'
Equity............... $586,436 $247,118 $3,584,090 $(384,470) $4,033,174
======== ======== ========== ========= ==========
</TABLE>
12
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the year ended March 31, 2000
<TABLE>
<CAPTION>
Parent Mutual Other
Company Group Subsidiaries Eliminations Consolidated
------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Fee income............ $ -- $ -- $ 45,261 $ -- $ 45,261
Premiums earned....... -- -- 55,873 -- 55,873
Net investment
income............... 720 158 11,688 -- 12,566
Intercompany interest
income............... -- -- 8,164 (8,164) --
Realized capital
losses............... -- -- (1,623) -- (1,623)
Other (losses)
income............... 92 132 (211) -- 13
Equity in subsidiary
earnings............. 14,510 5,848 -- (20,358) --
------- ------- -------- -------- --------
Total revenues...... 15,322 6,138 119,152 (28,522) 112,090
------- ------- -------- -------- --------
EXPENSES
Losses and loss
expenses incurred.... -- -- 34,320 -- 34,320
Acquisition costs..... -- -- 24,862 -- 24,862
Operating expenses.... 52 89 34,507 -- 34,648
Interest expenses..... 4,013 -- 1,984 -- 5,997
Intercompany interest
expense.............. -- 8,164 -- (8,164) --
Other expenses........ -- -- 712 -- 712
------- ------- -------- -------- --------
Total expenses...... 4,065 8,253 96,385 (8,164) 100,539
------- ------- -------- -------- --------
INCOME BEFORE INCOME
TAXES AND MINORITY
INTEREST............... 11,257 (2,115) 22,767 (20,358) 11,551
Income taxes.......... -- 2,741 (3,374) -- (993)
------- ------- -------- -------- --------
INCOME BEFORE MINORITY
INTEREST............... 11,257 626 19,033 (20,358) 10,558
Minority Interest..... -- -- 669 -- 669
------- ------- -------- -------- --------
INCOME BEFORE
EXTRAORDINARY LOSS..... 11,257 626 19,732 (20,358) 11,257
Extraordinary loss on
extinguishment of
debentures, net of
tax.................. (4,327) -- -- -- (4,327)
------- ------- -------- -------- --------
NET INCOME.............. $ 6,930 $ 626 $ 19,732 $(20,358) $ 6,930
======= ======= ======== ======== ========
</TABLE>
13
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the year ended March 31, 1999
<TABLE>
<CAPTION>
Parent Mutual Other
Company Group Subsidiaries Eliminations Consolidated
------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Fee income............ $ -- $ -- $ 45,494 $ -- $ 45,494
Premiums earned....... -- -- 38,785 -- 38,785
Net investment
income............... 12 195 7,014 -- 7,221
Intercompany interest
income............... -- -- 5,100 (5,100) --
Realized capital
losses............... -- 361 141 -- 502
Other (losses)
income............... -- -- (109) -- (109)
Equity in subsidiary
earnings............. 20,375 9,764 -- (30,139) --
------- ------- -------- --------- --------
Total revenues...... 20,387 10,320 96,425 (35,239) 91,893
------- ------- -------- --------- --------
EXPENSES
Losses and loss
expenses incurred.... -- -- 26,229 -- 26,229
Acquisition costs..... -- -- 13,495 -- 13,495
Operating expenses.... 35 204 28,861 -- 29,100
Interest expenses..... 1,553 -- 49 -- 1,602
Intercompany interest
expense.............. -- 5,100 -- (5,100) --
Other expenses........ -- -- 661 -- 661
------- ------- -------- --------- --------
Total expenses...... 1,588 5,304 69,295 (5,100) 71,087
------- ------- -------- --------- --------
INCOME BEFORE INCOME
TAXES AND MINORITY
INTEREST............... 18,799 5,016 27,130 (30,139) 20,806
Income taxes.......... -- (574) 2,589 -- 2,015
------- ------- -------- --------- --------
INCOME BEFORE MINORITY
INTEREST............... 18,799 5,590 24,541 (30,139) 18,791
Minority Interest..... -- -- 8 -- 8
------- ------- -------- --------- --------
INCOME BEFORE
EXTRAORDINARY LOSS..... 18,799 5,590 24,549 (30,139) 18,799
Extraordinary loss on
extinguishment of
debentures, net of
tax.................. -- -- -- -- --
------- ------- -------- --------- --------
NET INCOME.............. $18,799 $ 5,590 $ 24,549 $ (30,139) $ 18,799
======= ======= ======== ========= ========
</TABLE>
14
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the period ended March 31, 2000
<TABLE>
<CAPTION>
Parent Mutual Other
Company Group Subsidiaries Consolidated
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
NET CASH FLOW FROM OPERATING
ACTIVITIES..................... $ (1,385) $(13,974) $ 15,461 $ 102
--------- -------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of
investments--available for
sale......................... -- -- 10,266 10,266
Proceeds from maturity of
investments--available for
sale......................... -- -- 7,378 7,378
Fixed asset purchases......... -- -- (4,399) (4,399)
Investments purchased--
available for sale........... (1,331) -- (47,144) (48,475)
Acquisitions and other
investments.................. -- -- 1,083 1,083
Proceeds from other
investments.................. -- -- -- --
Special purpose entity,
investments purchased........ -- -- (213,546) (213,546)
Other items................... -- -- (137) (137)
Investments in and advances to
subsidiaries and affiliates,
net.......................... 6,537 14,284 (20,821) --
--------- -------- --------- ---------
NET CASH FLOWS FROM (APPLIED TO)
INVESTING ACTIVITIES........... 5,206 14,284 (267,320) (247,830)
--------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Bridging loan received........ 100,000 -- -- 100,000
Other loans received.......... -- -- (7) (7)
Extinguishment of convertible
debentures................... (101,325) -- -- (101,325)
Proceeds from shares issued... 317 -- -- 317
Claims deposit liabilities.... -- -- 1,697 1,697
Pension fund reserves......... -- -- (471) (471)
Dividends paid................ (2,885) -- -- (2,885)
Special purpose entity,
bonds & debentures issued.... -- -- 216,546 216,546
NET CASH FLOW FROM (APPLIED TO)
FINANCING ACTIVITIES........... (3,893) -- 217,765 213,872
--------- -------- --------- ---------
Net increase (decrease) in
cash and cash equivalents.... (72) 310 (34,094) (33,856)
Cash and cash equivalents at
beginning of period.......... 6,722 1,019 147,646 155,387
--------- -------- --------- ---------
Cash and cash equivalents at
end of period................ $ 6,650 $ 1,329 $ 113,552 $ 121,531
========= ======== ========= =========
</TABLE>
15
<PAGE>
MUTUAL RISK MANAGEMENT LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the year ended March 31, 1999
<TABLE>
<CAPTION>
Parent Mutual Other
Company Group Subsidiaries Consolidated
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
NET CASH FLOW FROM OPERATING
ACTIVITIES...................... $ 130 $ (3,509) $ (15,143) $ (18,522)
-------- -------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES......................
Proceeds from sale of
investments--available for
sale.......................... -- 15,888 15,888
Proceeds from maturity of
investments--available for
sale.......................... -- -- 14,474 14,474
Fixed asset purchases.......... -- -- (3,408) (3,408)
Investments purchased--
available for sale............ -- (47,783) (47,783)
Acquisitions and other
investments................... -- -- (802) (802)
Proceeds from other
investments................... -- -- 577 577
Other items.................... -- -- 12 12
Investments in and advances to
subsidiaries and affiliates,
net........................... (1,968) 2,522 (554) --
-------- -------- --------- ---------
NET CASH FLOWS FROM (APPLIED TO)
INVESTING ACTIVITIES............ (1,968) 2,522 (21,596) (21,042)
-------- -------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES......................
Other loans received........... -- -- 195 195
Proceeds from shares issued.... 5,344 -- -- 5,344
Claims deposit liabilities..... -- -- 4,799 4,799
Pension fund reserves.......... -- -- (1,820) (1,820)
Dividends paid................. (3,389) -- -- (3,389)
-------- -------- --------- ---------
NET CASH FLOW FROM (APPLIED TO)
FINANCING ACTIVITIES............ (1,955) -- 3,174 5,129
-------- -------- --------- ---------
Net increase (decrease) in cash
and cash equivalents.......... (117) (987) (33,565) (34,435)
Cash and cash equivalents at
beginning of period........... 689 1,872 114,862 117,423
-------- -------- --------- ---------
Cash and cash equivalents at
end of period................. $ 806 $ 885 $ 81,297 $ 82,988
======== ======== ========= =========
</TABLE>
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the Quarters Ended March 31, 2000 and 1999
The results of operations for the first quarter of 2000 reflect improvement in
Fees, Operating income, Profit margins and Return on equity over the results for
our last two quarters. However, comparisons to the first quarter of 1999
continue to reflect the decline in operating results that took place in the
second half of last year. Net income available to common shareholders was $6.9
million or $0.17 per Common Share on a diluted basis for the first quarter of
2000, as compared to $18.8 million or $0.40 per diluted share in 1999, as shown
in the tables below.
TABLE 1 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
------------------------- ------------------------
($ thousands except per share data)
PER PER
COMMON SHARE COMMON SHARE
------------ ------------
Basic Diluted Basic Diluted
<S> <C> <C> <C> <C> <C> <C>
Net income available to
Common Shareholders $ 6,931 $ 0.17 $ 0.17 $18,799 $ 0.44 $ 0.40
Extraordinary loss (b) 4,327 0.11 0.11 - - -
------- ------- ------- ------- ------- -------
$11,258 $ 0.28 $ 0.28 $18,799 $ 0.44 $ 0.40
======= ======= ======= ======= ======= =======
Average number of
shares outstanding (000's) 41,209 41,309 (a) 42,634 50,411
------- ------- ------- -------
</TABLE>
(a) Excludes the conversion of Convertible Debentures which have an anti-
dilutive effect.
(b) Extraordinary loss on extinguishment of Convertible Debentures, net of tax.
Total revenues were $112.1 million for the first quarter of 2000, representing
an increase of 22% over the corresponding 1999 period. Table II shows the major
components of Revenues for these periods.
TABLE II - REVENUES
Three Months Ended March 31,
2000 1999 Increase
---- ---- --------
Fee income $ 45,261 $45,494 (1%)
Premiums earned 55,873 38,785 44%
Net investment income 12,566 7,221 74%
Realized capital (losses) gains (1,623) 502 N/M
Other income (losses) 13 (109) N/M
-------- -------
Total $112,090 $91,893 22%
======== =======
Fee income decreased slightly in the first quarter of 2000 to $45.3 million as
compared to $45.5 million in 1999. Pre-tax profit margins were 26% as compared
to 36% in 1999, but improved from the previous quarter's level of 13%.
SEGMENT ANALYSIS
The components of Fee income by business segment are illustrated in Table
III.
TABLE III - FEE INCOME BY BUSINESS SEGMENT
Three Months Ended March 31,
2000 1999 Increase (Decrease)
---- ---- -------------------
Program business fees $24,974 $22,908 9%
Corporate risk
management fees 10,413 15,025 (31)%
Specialty brokerage fees 3,845 3,141 22%
Financial services fees 6,029 4,420 36%
------- -------
Total $45,261 $45,494 (1)%
======= =======
Program Business
Program Business involves replacing traditional insurers and acting as a conduit
between producers of specialty books of business and reinsurers wishing to write
that business. The segment accounted for 55% of total Fee income in the first
quarter of 2000 compared to 50% in the corresponding 1999 period. Program
Business fees increased by 9% in the first quarter of 2000 to $25.0 million as
compared to $22.9 million in 1999. This resulted from the continued expansion of
this segment through the growth of existing programs. Profit margins were 26% in
the first quarter of 2000 as compared to 36% in 1999 as a result of high
operating expenses. Margins improved, however, from the previous quarter's level
of 8%.
Gross premiums written increased 45% to $335.2 million for the first quarter of
2000 as compared to $231.9 million in 1999, primarily as a result of the growth
within the Program Business segment. Program Business generally involves greater
premium volume per unit than Corporate Risk Management business. Premiums earned
increased 44% to $55.9 million in the first quarter of 2000, as compared to
$38.8 million in the corresponding 1999 period. These increases in Premiums
earned were also primarily due to the growth within the Program Business
segment.
Corporate Risk Management
Corporate Risk Management, the Company's original business segment, involves
providing services to businesses and associations seeking to insure a portion of
their risk in a loss sensitive Alternative Market structure. This segment
accounted for 23% of total Fee income in the first quarter of 2000, down from
33% in 1999. Corporate Risk Management fees decreased by 31% in the first
quarter of 2000 to $10.4 million. Profit margins were 23% in the first quarter
of 2000 as compared to 44% in 1999 as a result of the decline in fees, which was
not offset by a corresponding decline in operating expenses. Margins improved,
however, from the previous quarter's level of 14%. The level of Corporate Risk
Management fees in the first quarter of 1999 was higher than the remainder of
the year. The Company continues to expect that a firming of prices generally
will begin to improve the sale of corporate accounts later this year.
SPECIALTY BROKERAGE
The Company's Specialty Brokerage business segment provides access to
Alternative Risk Transfer insurers and reinsurers in Bermuda and Europe. The
segment produced $3.8 million of total Fee income in the first quarter of 2000,
representing 8% of total Fee income. Specialty Brokerage fees grew by 22% in the
first quarter as a result of increased business placed in Bermuda and London.
Profit margins declined to 35% in the first quarter of 2000, as compared to 49%
in the corresponding 1999 period.
FINANCIAL SERVICES
Financial Services, the Company's newest business segment, provides
administrative services to offshore mutual funds and other companies and offers
a proprietary family of mutual funds as well as asset accumulation life
insurance products for the high net worth market. The segment accounted for 14%
of total Fee income for the first quarter of 2000. Fees from Financial Services
increased in the quarter by 36% to $6.0 million over the 1999 corresponding
period, primarily as a result of an increase in the number of mutual funds
clients under administration from 205 to 303. Profit margins in the Financial
Services segment have been adversely affected since 1998 by the previously
announced revised executive incentive plan and staff expansion costs to service
new business, but increased to 22% for the first quarter of 2000. Excluding the
effect of the revised executive incentive plan, which will end in December 2000,
the profit margins in this segment would have been 27% for the quarter as
compared to 15% in 1999.
Investment Income
Gross investment income increased by $4.8 million or 55% to $13.6 million in the
first quarter of 2000 over 1999. Net investment income increased by 74% to $12.6
million in the first quarter of 2000, as compared to $7.2 million in 1999.
Included in Gross and Net investment income for the first time is $3.7 million
from a special purpose entity, Endeavour Real Estate Securities Ltd.
("Endeavour"). Endeavour was established by the Company's Financial Services
segment to offer offshore investors an opportunity to invest in U.S. real estate
investment trusts. Endeavour has attracted over $220 million from investors
through March 31, 2000. This investment income was offset by $1.4 million of
Realized losses, $1.9 million of Interest expense, $0.9 million of Operating
expenses and $(0.8) million of Minority interest in the quarter. The significant
assets and liabilities of Endeavour are shown as separate line items in the
Company's Consolidated Balance Sheet as Equity Investments held by Special
Purpose Entity and Minority Interest in Special Purpose Entity. In addition, the
Company increased its bridge loan facility in late December 1999 by $110
million, which was contributed to the Company's U.S. insurance companies. This
increased capitalization of the U.S. insurance companies accounted for most of
the remaining increase in Investment income. Investment yields, excluding
Endeavour, were 6.9% in the first quarter of 2000 as compared to 6.7% in the
corresponding 1999 period.
17
<PAGE>
TABLE IV - EXPENSES
Three Months Ended March 31,
2000 1999 Increase
Operating expenses $ 34,648 $29,100 19%
Total insurance costs 59,182 39,724 49%
Interest expense 5,996 1,602 274%
Other expenses 712 661 8%
-------- -------
Total $100,538 $71,087 41%
======== =======
Operating expenses increased 19% to $34.6 million for the first quarter of 2000,
compared to $29.1 million in 1999. The increase in Operating expenses is
attributable to an increase in personnel and other expenses to service the
Company's existing businesses, the effect of recent acquisitions and the $0.9
million of Operating expenses from Endeavour.
The fluctuations in Total insurance costs were the direct result of the
fluctuations in Premiums earned during the quarter. In the quarter, however, the
net underwriting loss increased to $3.3 million, compared to $0.9 million in
1999 as a result of increased legal costs and premium audit costs as well as an
increase in the loss ratio on our participation in our reinsurance treaty.
Interest expense increased $4.4 million over the corresponding 1999 period as a
result of Endeavour, which added $1.9 million in the quarter, and the bridge
loan financing, offset by a reduction in debenture interest.
The effective tax rate was 8.6% in the first quarter of 2000 compared to 9.7% in
the corresponding 1999 period. These effective tax rates were lower than the
expected federal income tax rate in the United States of 35% plus state income
taxes due to increased earnings outside of the United States and the Company's
investment in tax-exempt municipal securities, partially offset by state income
taxes and foreign taxes.
LIQUIDITY AND CAPITAL RESOURCES
Total assets increased to $4.3 billion at March 31, 2000 from $4.0 billion at
December 31, 1999. Assets held in separate accounts, which are principally
managed assets attributable to participants in the Company's IPC Programs,
accounted for approximately 17% of Total assets at March 31, 2000 and December
31, 1999. Total Shareholders' equity increased to $361 million at March 31, 2000
from $358 million at December 31, 1999 primarily as a result of Net income in
the quarter, less dividends paid and change in unrealized losses. Return on
equity, before extraordinary loss, was 13% for the quarter.
18
<PAGE>
CASH FLOW
Cash flow from operations has historically provided the Company its principal
source of liquidity. The Company produced a positive cash flow in the first
quarter of 2000 of $101,572.
The Company drew down an additional $100 million under its bridge loan facility
in the quarter, resulting in $217 million outstanding at March 31, 2000. During
the quarter, the Company repurchased $222 million face amount of its Convertible
Exchangeable Subordinated Debentures due 2015 at a cost of $101 million,
resulting in an extraordinary loss in the quarter of $4.3 million, net of tax.
The Company expects to refinance the bridge loan facility with permanent
financing during 2000. The Company has and filed an S-3 Shelf Registration
Statement with the U.S. Securities and Exchange Commission covering up to $500
million of debt and preferred securities and is currently negotiating a
revolving credit facility.
The Company believes that funds generated from operations and available credit
will be sufficient to finance its current operations and to make payments under
its debt facilities.
IMPACT OF YEAR 2000
The Company has not experienced any significant Year 2000 issues to date. All
systems identified for replacement before the Year 2000 were replaced. Since
the Company regularly updates its hardware and software, the pure additional
cost of Year 2000 compliance was not material.
The Company has taken steps that it believes are reasonably designed to obtain
assurances that its critical customers, reinsurance intermediaries, managing
general agents, suppliers and others have addressed their Year 2000 compliance
efforts. Although the change in date to Year 2000 has occurred, it is not
possible to conclude that all aspects of the Year 2000 issue that may affect the
Company relating to other third party providers have been fully resolved. The
inability of the Company's third party providers to properly address the Year
2000 issue could have an adverse material impact on the Company's financial
position or results of operations. Management will continue to monitor the
status of and its exposure to this issue, however, the Company has not
experienced any significant Year 2000 issues to date. Contingency plans are
still in place should critical customers, reinsurance intermediaries, managing
general agents, suppliers and others fail to resolve their own Year 2000 issues.
To date, the Company has not been notified of any Year 2000 related claims.
19
<PAGE>
SAFE HARBOR DISCLOSURE FOR FORWARD-LOOKING STATEMENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 (the "1995 Act"), the Company sets forth below
cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those which might be
projected, forecasted, or estimated or otherwise implied in the Company's
forward-looking statements, as defined in the 1995 Act, made by or on behalf of
the Company in press releases, written statements or 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,
telephone calls and conference calls. Such statements may include, but are not
limited to, projections of Fee income, Premiums earned, Net investment income,
Other income, Losses and loss expenses incurred, Acquisition costs, Operating
expenses, Other expenses, earnings (including earnings per share), cash flows,
plans for future operations, Shareholders' equity, financing needs, capital
plans, dividends, plans relating to products or services of the Company, and
estimates concerning the effects of litigation or other disputes, as well as
assumptions for any of the foregoing and are generally expressed with words such
as "believes", "estimates", "expects", "anticipates", "could have", "may have",
and similar expressions.
Forward-looking statements are inherently subject to risks and uncertainties.
The Company cautions that factors which may cause the Company's results to
differ materially from such forward-looking statements include, but are not
limited to, the following: (a) changes in the level of competition in the
reinsurance or primary insurance markets that adversely affect the volume or
profitability of the Company's business, including the intensification of price
competition, the entry of new competitors, existing competitors exiting the
market, and the development of new products by new and existing competitors; (b)
the failure by reinsurers, clients and others to meet their obligations to the
Company; (c) changes in tax laws; (d) the inadequacy of our reserves; (e)
changes in the demand for reinsurance, including changes in ceding companies'
retentions, and changes in the demand for primary and excess and surplus lines
insurance coverages; (f) the ability of the Company to execute its business
strategies and its reliance on key personnel; (g) and adverse development on
claims and claims expense liabilities related to business and the failure of
clients, reinsurers or others to meet their obligations to the Company in
connection with such losses.
20
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No material changes since December 31, 1999 Form 10-K.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit 27 - Financial Data Schedules
27.1 Current quarter ended Mar-31-2000
B. Reports on Form 8-K. No reports on Form 8-K were filed during the three
month period ended March 31, 2000.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MUTUAL RISK MANAGEMENT LTD.
______________________________________________
James C. Kelly
Senior Vice President, Chief Financial Officer
and Authorized Signatory
Date: May 15, 2000
22
<PAGE>
/s/ James C. Kelly
------------------
James C. Kelly
for conformed copy
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MUTUAL RISK
MANAGEMENT LTD.'S FINANCIAL STATEMENTS AS OF MARCH 31, 2000 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000826918
<NAME> MUTUAL RISK MANAGEMENT LTD.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 695,417
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 695,417
<CASH> 121,531
<RECOVER-REINSURE> 1,743,024
<DEFERRED-ACQUISITION> 30,706
<TOTAL-ASSETS> 4,825,025
<POLICY-LOSSES> 1,863,166
<UNEARNED-PREMIUMS> 373,813
<POLICY-OTHER> 67,510
<POLICY-HOLDER-FUNDS> 29,621
<NOTES-PAYABLE> 221,042
0
0
<COMMON> 412
<OTHER-SE> 360,936
<TOTAL-LIABILITY-AND-EQUITY> 4,285,025
55,873
<INVESTMENT-INCOME> 12,566
<INVESTMENT-GAINS> (1,623)
<OTHER-INCOME> 45,273
<BENEFITS> 34,320
<UNDERWRITING-AMORTIZATION> 24,862
<UNDERWRITING-OTHER> 41,356
<INCOME-PRETAX> 11,552
<INCOME-TAX> 993
<INCOME-CONTINUING> 10,559
<DISCONTINUED> 0
<EXTRAORDINARY> (4,327)
<CHANGES> 0
<NET-INCOME> 6,930
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
