FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1999
Commission file number 1-11238
NYMAGIC, INC.
(Exact name of registrant as specified in its charter)
New York 13-3534162
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
330 Madison Avenue, New York, New York
10017 (Address of principal executive offices) (zip code)
(212) 551-0600
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal years, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On October 1, 1999 there were 9,686,152 shares of common stock, $1.00 par
value outstanding.
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NYMAGIC, INC.
INDEX
Part I. FINANCIAL INFORMATION: PAGE NO.
Consolidated Balance Sheets
September 30, 1999 and December 31, 1998 2
Consolidated Statements of Income
Nine Months Ended September 30, 1999 and
September 30, 1998 3
Consolidated Statements of Income
Three Months Ended September 30, 1999 and
September 30, 1998 4
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and
September 30, 1998 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION 15
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NYMAGIC, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
---- ----
ASSETS (unaudited)
Investments:
Fixed maturities available for sale,
at fair value (amortized cost
$306,061,901 and $342,583,525) $305,973,205 $353,403,303
Equity securities at fair value (cost
$56,210,102 and $54,368,172) 68,815,748 73,418,473
Short-term investments 26,808,546 16,200,606
------------- -------------
Total investments 401,597,499 443,022,382
------------ ------------
Cash 1,464,469 1,583,390
Accrued investment income 4,745,805 6,189,866
Premiums and other receivables, net 43,798,548 41,422,913
Reinsurance receivables 210,856,767 199,730,802
Deferred policy acquisition costs 4,615,628 4,277,430
Prepaid reinsurance premiums 21,017,400 19,393,546
Deferred income taxes 10,341,493 5,811,741
Property, improvements and equipment, net 2,000,172 2,341,021
Other assets 8,039,736 6,547,403
--------------- ---------------
Total assets $708,477,517 $730,320,494
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $394,057,017 $401,584,146
Reserve for unearned premiums 50,719,667 46,878,550
Ceded reinsurance payable 15,232,753 23,795,992
Notes payable 13,708,413 17,458,413
Other liabilities 8,234,609 11,454,977
Dividends payable 968,615 968,549
---------------- -----------
Total liabilities 482,921,074 502,140,627
------------- -----------
Common stock 15,017,892 15,017,892
Paid-in capital 27,896,907 28,029,410
Accumulated other comprehensive income 8,156,099 19,436,591
Retained earnings 216,841,454 208,198,204
------------- -------------
267,912,352 270,682,097
Treasury stock, at cost, 5,331,740 and
5,332,400 shares (42,355,909) (42,502,230)
---------------------------------
Total shareholders' equity 225,556,443 228,179,867
------------- -------------
Total liabilities and shareholders' equity $708,477,517 $730,320,494
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Nine months ended
September 30,
1999 1998
---- ----
Revenues:
Net premiums earned $42,794,986 $63,605,255
Net investment income 13,869,435 15,712,648
Realized investment gains 8,872,368 7,244,240
Commission and other income 517,125 950,516
------- -----------
Total revenues 66,053,914 87,512,659
------------ ------------
Expenses:
Losses and loss adjustment expenses incurred 27,550,500 45,771,922
Policy acquisition expenses 9,166,152 7,975,969
General and administrative expenses 14,603,560 15,900,733
Interest expense 829,844 1,064,038
------------- --------------
Total expenses 52,150,056 70,712,662
----------- ----------
Income before income taxes 13,903,858 16,799,997
---------- ----------
Income taxes:
Current 818,793 3,769,746
Deferred 1,535,045 (599,795)
------------- --------------
Total income taxes 2,353,838 3,169,951
----------- ------------
Net income $ 11,550,020 $13,630,046
============ ===========
Weighted average shares of common stock
outstanding-basic 9,689,247 9,676,749
Basic earnings per share $ 1.19 $ 1.41
============= =============
Weighted average shares of common stock
outstanding-diluted 9,689,247 9,704,296
Diluted earnings per share $ 1.19 $ 1.40
============= =============
Dividends declared per share $ .30 $ .30
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
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NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended
September 30,
1999 1998
---- ----
Revenues:
Net premiums earned $16,497,176 $10,794,455
Net investment income 4,557,856 5,234,275
Realized investment gains 2,408,670 306,610
Commission and other income 210,885 226,623
------------- ------------
Total revenues 23,674,587 16,561,963
------------ ------------
Expenses:
Losses and loss adjustment expenses incurred 11,687,777 6,022,182
Policy acquisition expenses 3,789,529 2,513,268
General and administrative expenses 4,231,846 4,549,531
Interest expense 231,158 332,676
------------- ------------
Total expenses 19,940,310 13,417,657
------------ ----------
Income before income taxes 3,734,277 3,144,306
------------- -----------
Income taxes:
Current (169,846) 688,200
Deferred 789,654 (622,687)
----------- ------------
Total income taxes 619,808 65,513
---------- --------
Net income $ 3,114,469 $3,078,793
============ ==========
Weighted average shares of common stock
outstanding-basic 9,694,223 9,683,869
Basic earnings per share $ .32 $ .32
=============== =============
Weighted average shares of common stock
outstanding-diluted 9,694,223 9,706,841
Diluted earnings per share $ .32 $ .32
=============== =============
Dividends declared per share $ .10 $ .10
=============== =============
The accompanying notes are an integral part of these consolidated financial
statements.
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NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months ended
September 30,
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 11,550,020 $ 13,630,046
Adjustments to reconcile net income to
net cash provided by (used in ) operating activities:
Provision for deferred taxes 1,535,045 (599,795)
Realized investment gains (8,872,368) (7,244,240)
Net bond amortization 1,729,333 1,630,352
Depreciation and other, net 491,810 478,427
Changes in:
Premiums and other receivables (2,375,635) 13,451,510
Reinsurance receivables (11,125,965) (49,422,347)
Ceded reinsurance payable (8,563,239) (14,525,675)
Accrued investment income 1,444,061 910,392
Deferred policy acquisition costs (338,198) 1,104,663
Prepaid reinsurance premiums (1,623,854) 11,477,139
Other assets (1,492,333) (1,375,083)
Unpaid losses and loss adjustment expenses (7,527,129) 45,436,738
Reserve for unearned premiums 3,841,117 (16,417,130)
Other liabilities (3,220,368) 2,581,425
Other (17,295) 95,568
-------- ------------
Total adjustments (36,115,018) (12,418,056)
------------ -------------
Net cash (used in) provided by operating
activities (24,564,998) 1,211,990
Cash flows from investing activities:
Fixed maturities acquired (51,782,945) (68,036,963)
Equity securities acquired (40,429,204) (36,636,310)
Net purchase of short-term investments (10,622,257) (3,213,088)
Fixed maturities matured 21,567,879 22,466,653
Fixed maturities sold 65,476,183 51,892,323
Equity securities sold 47,030,268 39,576,265
Acquisition of property, improvements (150,961) (622,187)
and equipment, net ------------ -----------
Net cash provided by investing activities 31,088,963 5,426,693
------------ -----------
Cash flows from financing activities:
Proceeds from stock issuance ------ 509,427
Cash dividends paid to stockholders (2,906,704) (2,901,580)
Net sale (repurchase) of common stock 13,818 (20,573)
Proceeds from borrowings ------ 5,000,000
Loan principal repayments (3,750,000) (8,750,000)
------------- -------------
Net cash used in financing activities (6,642,886) (6,162,726)
------------- -------------
Net (decrease) increase in cash (118,921) 475,957
Cash at beginning of period 1,583,390 1,042,310
------------- -------------
Cash at end of period $ 1,464,469 $ 1,518,267
============ =============
The accompanying notes are an integral part of these consolidated financial
statements.
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NYMAGIC, INC.
Notes to Consolidated Financial Statements
1) The interim consolidated financial statements are unaudited but, in the
opinion of management, reflect all material adjustments necessary for a fair
presentation of results for such periods. Adjustments to financial statements
consist of normal recurring items. The results of operations for any interim
period are not necessarily indicative of results for the full year. These
financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1998.
2) The insurance company and agency subsidiaries underwrite commercial insurance
in four major lines of business. The Company considers ocean marine,
aviation, other liability and inland marine as appropriate segments for
purposes of evaluating the Company's overall performance. The Company
evaluates revenues and income or loss by line of business. Revenues include
premiums earned and commission income. Income or loss includes premiums
earned and commission income less the sum of losses incurred, policy
acquisition costs and other expenses.
The financial information by segment is as follows:
(in thousands)
Nine months ended
September 30, 1999 September 30, 1998
Income Income
Segments: Revenues (Loss) Revenues (Loss)
Ocean marine(a) $37,625 $2,448 $48,724 $1,932
Aviation 3,392 (6,363) 2,647 (3,222)
Other liability 1,997 (1,323) 13,130 (1,450)
Inland marine 220 (146) (314) 671
--- ---- ----- ---
Subtotal 43,234 (5,384) 64,187 (2,069)
Other income 79 79 369 369
Net investment income 13,869 13,869 15,713 15,713
Realized investment gains 8,872 8,872 7,244 7,244
Corporate expenses --- (2,702) --- (3,393)
Interest expense --- (830) --- (1,064)
Income taxes --- (2,354) --- (3,170)
------- ------- ------- -------
Total $66,054 $11,550 $87,513 $13,630
======= ======= ======= =======
(a) 1999 and 1998 include revenues of approximately $10,220 and $14,387,
respectively, and (loss) of $(1,804) and $(1,348), respectively, from the
Company's Syndicate #1265.
<PAGE>
NYMAGIC, INC.
Notes to Consolidated Financial Statements
(in thousands)
Three months ended
September 30, 1999 September 30, 1998
Income Income
Segments: Revenues (Loss) Revenues (Loss)
Ocean marine(a) $14,834 $744 $11,578 $(423)
Aviation 1,492 (2,066) (1,602) (180)
Other liability 321 (644) 911 (791)
Inland marine 61 41 54 849
-- -- -- ---
Subtotal 16,708 (1,925) 10,941 (545)
Other income 1 1 79 79
Net investment income 4,557 4,557 5,235 5,235
Realized investment gains 2,409 2,409 307 307
Corporate expenses --- (1,077) --- (1,599)
Interest expense --- (231) --- (333)
Income taxes --- (620) --- (65)
------- ------ ------- ------
Total $23,675 $3,114 $16,562 $3,079
======= ====== ======= ======
(a) 1999 and 1998 include revenues of approximately $6,734 and $282,
respectively, and (loss) of $(625) and $(520), respectively, from the Company's
Syndicate 1265.
3) The Company's comparative comprehensive income disclosure is as follows:
Nine months ended Three months ended
September 30, September 30,
1999 1998 1999 1998
(in thousands)
Net income $11,550 $13,630 $3,114 $3,079
Other comprehensive (loss), net of tax:
Unrealized (losses) on securities
(($17,328),$(577)and($9,838),($2,972)pretax) (11,263) (375) (6,394) (1,932)
Foreign currency translation adjustment (17) 95 127 62
Other comprehensive income (loss) (11,280) (280) (6,267) (1,870)
-------- -------- ------- -------
Total comprehensive income (loss) $270 $13,350 $(3,153) $1,209
======== ======== ======= =======
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NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net income for the three months ended September 30, 1999, was $3,114,000 or
$.32 per share on a diluted basis compared with $3,079,000 or $.32 per share for
the third quarter of 1998. Net income for the nine months ended September 30,
1999, was $11,550,000 or $1.19 per share on a diluted basis compared with the
nine months ended September 30, 1998, net income of $13,630,000 or $1.40 per
share. Operating income, which excludes the effects of realized investment gains
after taxes from net income, was $1,549,000, or $.16 per share on a diluted
basis, for the third quarter of 1999, versus $2,879,000, or $.30 per share, for
the same period of the prior year. Operating income was $5,783,000, or $.60 per
share on a diluted basis, for the nine months ended September 30, 1999, compared
to $8,921,000, or $.92 per share, for the same period of the prior year.
For the nine months ended September 30, 1999, total revenues and net premiums
earned were $66,054,000 and $42,795,000, respectively. This compares with total
revenues and net premiums earned of $87,513,000 and $63,605,000, respectively,
in last year's first nine months, both of which include approximately $24.6
million relating to two transactions involving one-time portfolio transfers of
premiums. The transactions involved the assumption of ocean marine business by
the Company's Lloyd's of London Syndicate #1265 and miscellaneous casualty
business by our domestic insurance company. Excluding these one-time items,
total revenues and net premiums earned for the nine months ended September 30,
1999 would have increased 5% and 10%, respectively. Total revenues and net
premiums earned for the third quarter of 1999 were $23,675,000 and $16,497,000,
or increases of 43% and 53%, respectively, when compared with total revenues and
net premiums earned of $16,562,000 and $10,794,000 for the third quarter of
1998.
Ocean marine net premiums earned increased in 1999 by 9%, excluding
one-time items, and is largely attributable to business derived from Syndicate
#1265. Approximately $10.1 million in net premiums earned was produced by
Syndicate #1265 through nine months in 1999. However, competition remained
intense in 1999 and adversely affected ocean marine premium rates. Aviation net
premiums earned grew 41% year to date as a result of higher reinsurance costs in
the prior year resulting from reinstatement costs on several large aviation
losses and rate increases obtained in 1999 on accounts with poor loss records.
As the underwriting climate for gross premiums remains soft in the aviation and
ocean marine segments, the Company maintains an adequate level of reinsurance to
protect its exposure to any one loss. The other liability line decreased 22%,
excluding one time items, when compared to 1998 due to the effects of
competitive pricing as well as a decline in premium production.
Losses and loss adjustment expenses incurred as a percentage of net premiums
earned were 70.8% for the three months ended September 30, 1999 as compared to
55.8% for the third quarter of 1998. For the nine months ended September 30,
1999, such ratio was 64.4% as compared to 72.0% for the same period of the prior
year. The loss ratio for the two assumption of premiums in 1998 was
approximately 100% and had the effect of increasing this ratio significantly.
<PAGE>
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Absent such business, the loss ratio would have been approximately 56.7%
for the nine months ended September 30 1998. The Company recorded higher loss
ratios in the aviation segment of business in 1999 due to increases in the
frequency of losses. In addition, the Company's core ocean marine segment
recorded higher loss ratios in 1999, attributable to loss experience produced
from our Syndicate #1265.
Commission and other income for the nine months ended September 30, 1999 was
$517,000 as compared to $951,000 for the same period of 1998. Larger amounts of
contingent profit commissions from reinsurance transactions in the Company's
aviation and ocean marine segments were recorded in 1998.
Interest expense decreased to $830,000 for the nine months ended September
30, 1999 from $1,064,000 for the same period of the prior year primarily as a
result of a decrease in loan principal outstanding.
Net investment income for the nine months and the third quarter ended
September 30, 1999 decreased by 12% and 13%, respectively, from the level of net
investment income achieved in the same periods of 1998. Contributing to the
decline were lower investment yields and a reduction in invested assets brought
about by the payments of both a large number of aviation losses on a gross basis
and reinsurance premiums in 1999.
Policy acquisition expenses as a percentage of net premiums earned for the
nine months ended September 30, 1999 were 21.4% as compared with 12.5% for the
same period of the prior year. The same ratio was 23.0% and 23.3% for the three
months ended September 30, 1999 and 1998, respectively. The increase in the
nine-month ratio is due in large part to the two transactions involving
assumptions of premiums in 1998. Absent such business, the ratio would have been
approximately 20.5% for the nine months ended September 30 1998.
General and administrative expenses decreased by 8.2% in 1999 from the first
nine months of 1998. The prior year's amounts included certain non-recurring
expenses incurred in connection with the assumption of premiums and the
formation of the Company's Lloyd's syndicate. In addition, larger expenses were
recorded for two employee benefit plans in 1998.
Realized investment gains of $8,872,000 for the nine months ended September
30, 1999 result mainly from the sale of appreciated equity securities in
addition to sales resulting from monitoring the Company's overall exposure to
equities in accordance with its investment guidelines.
<PAGE>
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTINUED
Liquidity and Capital Resources
Total investments decreased to $401.6 million at September 30, 1999 primarily
due to both reductions in unrealized gains on investments and reductions in the
investment portfolio to fund both payments of aviation losses on a gross basis
and reinsurance premiums in 1999. These payments contributed to cash flow used
in operations in 1999 of $24.6 million. The Company maintains an adequate level
of reinsurance in the aviation line to prevent any one loss from significantly
affecting net income. However, timing differences between the payment of gross
losses by the Company and cash collections received from reinsurers may
adversely impact cash flow in any one period.
The decrease in accumulated other comprehensive income at September 30, 1999
is mainly attributable to decreases in unrealized appreciation of investments,
net of deferred income taxes, and principally reflects the adverse impact of
higher interest rates in 1999 on the market value of the Company's investment
portfolio.
The Company adheres to investment guidelines as prescribed by the finance
committee of the Board of Directors. Such guidelines were designed to provide
the Company with adequate capital protection and sufficient liquidity to meet
existing obligations. The Company believes that it has adequate resources to
meet its liquidity requirements.
The Company issued in 1999, 10,560 shares of common stock held in treasury
to members of the Board of Directors as part of the Board's annual compensation
program. The Company also repurchased 9,900 shares of common stock in 1999 at a
price of $13.69.
Other Matters
Vincent T. Papa, a former President and Chief Executive Officer of the
Company, has filed suit in the New York Supreme Court seeking damages from the
Company based upon alleged breaches by the Company of its obligations under an
employment agreement with Mr. Papa. The Company intends vigorously to defend
itself against said claims and believes it has no further obligations to Mr.
Papa.
<PAGE>
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTINUED
The insurance pools participated in the issuance of umbrella casualty
insurance for various Fortune 1000 companies in the period from 1978 to 1983.
Depending on the accident year, the insurance pools' maximum net retention per
occurrence ranged from $250,000 to $500,000. The Company's effective pool
participation on such risks varied from 11% in 1978 to 30% in 1983. At September
30, 1999 and December 31, 1998, the Company's net loss and loss adjustment
expense reserves for Asbestos/Pollution policies amounted to $9.2 million and
$9.0, respectively. As of September 30, 1999, the Company had approximately 400
policies which had at least one claim relating to Asbestos/Pollution exposures.
Net loss and loss adjustment expense payments on Asbestos/Pollution policies
amounted to $766,000 and $650,000 for the nine month periods ended September 30,
1999 and September 30, 1998, respectively. The Company believes that the
uncertainty surrounding Asbestos/Pollution exposures, including issues as to
insureds' liabilities, ascertainment of loss date, definitions of occurrence,
scope of coverage, policy limits and application and interpretation of policy
terms, including exclusions, all affect the estimation of ultimate losses. Under
such circumstances, it is difficult to determine the ultimate loss for
Asbestos/Pollution related claims. Given the uncertainty in this area, losses
from Asbestos/Pollution related claims are likely to adversely impact the
Company's results from operations in future years and may vary materially from
such reserves reported as of September 30, 1999. However, the Company believes
that, in the aggregate, the unpaid loss and loss adjustment expense reserves as
of September 30, 1999, allow for an adequate provision and that the ultimate
resolution of Asbestos/Pollution claims will not have a material adverse impact
on the Company's financial position.
Impact of Year 2000
The following discussion is based on management's best estimates, which
were derived using numerous assumptions of future events, including, without
limitation, the continuing availability of basic utilities and other resources.
There can be no guarantee that these assumptions will prove accurate, and,
accordingly, actual results may materially differ from those anticipated.
Readiness and Compliance Plan
The Company separated its Year 2000 compliance plan into three major
phases: (1) Information Technology; (2) Compliance by Vendors and Business
Relations; and (3) Potential Underwriting Losses. These three phases are
considered the most critical components of the Year 2000 efforts for the
Company.
Information Technology
In 1998, the Company replaced its computer hardware system with a
client-server architecture which is Year 2000 compliant. In 1999, the Company
successfully upgraded its insurance business operations software, as well as its
remaining software (which includes financial applications for accounts payable,
general ledger and other packages), to be Year 2000 compliant.
<PAGE>
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTINUED
Compliance by Vendors and Business Relations
In connection with the Company's Year 2000 plan, the Company communicated
with its various business relationships and vendors to determine the extent of
their Year 2000 compliance. In 1998, the Company mailed questionnaires to
approximately 300 companies which the Company considers to have an important
relationship with the Company. To date, substantially all have responded that
they are in the process of becoming Year 2000 compliant before January 1, 2000.
The non-responding companies represent a few small companies which, in the event
such business relationship may need to be terminated, are not expected to have a
material adverse effect on the Company's financial condition.
Potential Underwriting Losses
Property/casualty insurance companies may have an underwriting exposure
relating to the Year 2000 phenomenon. Although the Company has not received any
claims for coverage from insureds based on losses resulting from Year 2000
issues, there can be no assurance that insureds will be free from losses of this
type or that the Company will be free from claims made under the Company's
insurance policies. If any claims are made, coverage, if any, will depend on the
facts and circumstances of the claim and the provisions of the subject insurance
policy. The Company, in certain instances, has been able to include Year 2000
exclusions in its policy forms. Also, the Company is requesting information from
certain insureds as to the extent of their Year 2000 compliance. The Company
will continue to monitor policies issued throughout the 1999 year as a result of
compliance under this phase of its Year 2000 evaluation efforts. At this time,
the Company is unable to determine whether the adverse impact and/or extent of
underwriting losses, if any, in connection with the foregoing circumstances
would be material to the Company.
<PAGE>
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTINUED
Cost of Year 2000 Compliance
The Company estimated, based on its evaluations and actions taken so far,
that the aggregate cost of its information technology project, including the
cost of achieving Year 2000 compliance, will be approximately $1,350,000, of
which approximately $1,320,000 has been expended through September 30, 1999.
These costs (excluding internal personnel expenses) are comprised of outside
consulting service costs for evaluation and upgrade of systems, acquisition
costs for new equipment and components, and licensing and purchase fees for new
and upgraded software. This process has not had a material impact on the status
of other internal technology projects.
Contingency Plan
The Company is in the process of developing a contingency plan that
addresses Year 2000 issues relating to environmental concerns which includes,
among other items, telephone and security systems, copiers, electrical
availability, etc. In addition, a disaster recovery plan is being formulated to
address environmental concerns in the event of any non-compliance. These plans
are expected to be completed by December 31, 1999.
There can be no assurance that the Company will be immune from both
unforeseen Year 2000 business interruptions and underwriting losses arising from
Year 2000; and such losses may result in a material and adverse effect on the
Company's business, assets, liquidity and financial condition.
Market Risks
The investment portfolio has exposure to market risks which includes the
effect of adverse changes in interest rates, credit quality, equity prices and
foreign exchange rates on the portfolio. Interest rate risk includes the changes
in the fair value of fixed maturities based upon changes in interest rates.
Credit quality risk includes the risk of default by issuers of debt securities.
Foreign currency risk includes exposure to changes in foreign exchange rates on
the market value and interest income of foreign denominated investments. Equity
risk includes the potential loss from changes in the fair value of equity
securities. Other than the effect of adverse changes in interest rates on the
Company's unrealized gain on fixed maturities at September 30, 1999, there have
been no material changes to the Company's exposure to market risks in 1999 as
compared to those disclosed in the Company's financial statements for the year
ended December 31, 1998.
<PAGE>
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTINUED
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking
statements concerning the Company's operations, economic performance and
financial condition, including, in particular the likelihood of the Company's
success in developing and expanding its business and Year 2000 compliance. These
statements are based upon a number of assumptions and estimates which are
inherently subject to significant uncertainties and contingencies, many of which
are beyond the control of the Company, and reflect future business decisions
which are subject to change. Some of these assumptions inevitably will not
materialize, and unanticipated events will occur which will affect the Company's
results.
Such statements are made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements may include, but are
not limited to, projections of premium revenue, investment income, other
revenue, losses, expenses, earnings, cash flows, plans for future operations,
common stockholders' equity, investments, capital plans, dividends, plans
relating to products or services, plans for Year 2000 compliance, and estimates
concerning the effects of litigation or other disputes, as well as assumptions
of any of the foregoing and are generally expressed with words such as
"believes," "estimates," "expects," "anticipates," "plans," "projects,"
"forecasts," "goals," "could have," "may have" and similar expressions.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
No. 27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
September 30, 1999.
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.
NYMAGIC, INC.
(Registrant)
Date: November 15, 1999 /s/ Robert W. Bailey
------------------------ ------------------------
Robert W. Bailey
(Chairman of the Board)
/s/ Thomas J. Iacopelli
-------------------------
Thomas J. Iacopelli
(Chief Financial Officer)
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<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 305,973
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 68,816
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 401,597
<CASH> 1,464
<RECOVER-REINSURE> 210,857
<DEFERRED-ACQUISITION> 4,615
<TOTAL-ASSETS> 708,478
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 50,720
<POLICY-OTHER> 394,057
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 13,708
0
0
<COMMON> 15,018
<OTHER-SE> 210,539
<TOTAL-LIABILITY-AND-EQUITY> 708,478
42,795
<INVESTMENT-INCOME> 13,869
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<INCOME-PRETAX> 13,904
<INCOME-TAX> 2,354
<INCOME-CONTINUING> 11,550
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 11,550
<EPS-BASIC> 1.19
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