UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
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 1-10545
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TRANSATLANTIC HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3355897
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
80 Pine Street, New York, New York 10005
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 770-2000
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NONE
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 1996 22,964,789
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<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 1996 and December 31, 1995
<TABLE><CAPTION>
(Unaudited)
1996 1995
---- ----
ASSETS (in thousands, except share data)
<S> <C> <C>
Investments and cash:
Fixed maturities:
Bonds held to maturity, at amortized cost
(market value: 1996-$1,013,801; 1995-$951,497) $ 959,054 $ 878,068
Bonds available for sale, at market value
(amortized cost: 1996-$1,698,148; 1995-$1,700,599) 1,743,665 1,788,000
Equities:
Common stocks available for sale, at market value
(cost: 1996-$197,542; 1995-$197,704) 262,679 255,116
Nonredeemable preferred stocks available for sale,
at market value (cost: 1996-$6,955; 1995-$6,953) 6,030 6,025
Short-term investments (approximates market) 28,619 12,874
Cash and cash equivalents 86,208 47,832
---------- ---------
Total investments and cash 3,086,255 2,987,915
Accrued investment income 56,131 56,806
Premium balances receivable, net of losses payable:
Affiliates 21,604 27,104
Other 33,950 34,740
Reinsurance recoverable on paid and unpaid losses
and loss adjustment expenses:
Affiliates 133,955 134,326
Other 284,412 277,352
Funds held under reinsurance treaties:
Affiliates 955 1,058
Other 167,902 193,550
Deferred acquisition costs 52,200 47,200
Prepaid reinsurance premiums 31,170 39,716
Deferred income taxes 102,056 87,914
Other assets 13,354 11,286
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Total assets $ 3,983,944 $ 3,898,967
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $ 2,418,926 $ 2,388,155
Unearned premiums 311,948 291,568
Contingent commissions, expenses and taxes 9,852 6,764
Reinsurance balances payable:
Affiliates 2,883 14,791
Other 25,388 9,004
Funds held under reinsurance treaties:
Affiliates 312 312
Other 136,120 165,831
Current income taxes payable 24,588 12,256
Payable for securities in course of settlement 38,108 3,996
Other liabilities 17,185 17,788
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Total liabilities 2,985,310 2,910,465
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Commitments and contingent liabilities
Preferred Stock, $1.00 par value; shares authorized: 5,000,000 - -
Common Stock, $1.00 par value; shares authorized: 50,000,000;
shares issued: 1996-23,764,789; 1995-23,749,582 23,765 23,750
Additional paid-in capital 199,799 199,243
Net unrealized appreciation of investments, net of deferred
income taxes (1996-$38,405; 1995-$50,359) 71,324 93,525
Unrealized foreign currency translation gain 682 2,392
Retained earnings 713,064 679,592
Treasury Stock, at cost; 800,000 shares (10,000) (10,000)
---------- ---------
Total stockholders' equity 998,634 988,502
---------- ---------
Total liabilities and stockholders' equity $ 3,983,944 $ 3,898,967
========== =========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
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(in thousands, except per share data)
<S> <C> <C>
Income:
Net premiums written $251,932 $225,890
Increase in net unearned premiums (29,671) (590)
----------- ----------
Net premiums earned 222,261 225,300
Net investment income 44,859 41,521
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267,120 266,821
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Expenses:
Net losses and loss adjustment expenses 169,523 176,638
Net commissions 54,195 49,742
Other operating expenses 7,937 6,955
Increase in deferred acquisition costs (5,000) (1,700)
----------- ----------
226,655 231,635
----------- ----------
40,465 35,186
Realized net capital gains 5,274 2,643
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Operating income 45,739 37,829
Other deductions (451) (620)
----------- ----------
Income before income taxes 45,288 37,209
Income taxes 9,058 6,697
----------- ----------
Net income $36,230 $30,512
=========== ==========
Net income per common share $1.58 $1.33
=========== ==========
Dividends per common share $0.12 $0.10
=========== ==========
Weighted average common shares outstanding 22,959 22,929
=========== ==========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE><CAPTION>
1996 1995
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(in thousands)
Net cash provided by operating activities $96,814 $76,503
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<S> <C> <C>
Cash flows from investing activities:
Proceeds of bonds available for sale sold 104,146 47,896
Proceeds of bonds held to maturity redeemed 10,992 1,627
Proceeds of bonds available for sale redeemed or matured 25,432 11,412
Proceeds of equities sold 19,078 18,081
Purchase of bonds held to maturity (91,712) (47,517)
Purchase of bonds available for sale (128,562) (85,756)
Purchase of equities (16,268) (21,850)
Net purchase of short-term investments (15,745) (1,695)
Change in payable for securities in course of settlement 34,112 21,141
Other, net 3,070 (6,577)
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Net cash used in investing activities (55,457) (63,238)
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Cash flows from financing activities:
Dividends to stockholders (2,758) (2,293)
Proceeds from common stock issued 571 120
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Net cash from financing activities (2,187) (2,173)
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Change in unrealized foreign currency translation gain (794) 9,166
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Change in cash and cash equivalents 38,376 20,258
Cash and cash equivalents, beginning of period 47,832 62,789
----------- -----------
Cash and cash equivalents, end of period $86,208 $83,047
=========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
1. General
The interim consolidated financial statements are unaudited, but have been
prepared on the basis of generally accepted accounting principles and, in the
opinion of management, reflect all adjustments (consisting of normal accruals)
necessary for a fair presentation of results for such periods. The results of
operations and cash flows for any interim period are not necessarily indicative
of results for the full year.
2. Reinsurance
Premiums written and earned and losses and loss adjustment expenses
incurred were comprised of the following:
Three Months Ended
------------------
March 31,
---------
1996 1995
---- ----
(in thousands)
Gross premiums written $276,782 $249,089
Reinsurance ceded (24,850) (23,199)
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Net premiums written $251,932 $225,890
======== ========
Gross premiums earned $255,657 $247,029
Reinsurance ceded (33,396) (21,729)
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Net premiums earned $222,261 $225,300
======== ========
Gross incurred losses and loss
adjustment expenses $181,964 $192,272
Reinsurance ceded (12,441) (15,634)
-------- --------
Net losses and loss adjustment
expenses $169,523 $176,638
======== ========
3. Dividends
During the first quarter of 1996, the Board of Directors of Transatlantic
Holdings, Inc. declared a dividend of $2,758,000, or $0.12 per common share.
4. Income Taxes
Income tax refunds, net, in the first quarter of 1996 totaled $591,000. In
the same prior year quarter, income taxes paid totaled $804,000.
5. Additional Information
For further information, refer to the Transatlantic Holdings, Inc. Form
10-K filing for the year ended December 31, 1995.
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<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
---------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
-------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
MARCH 31, 1996
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OPERATIONAL REVIEW. The following table presents net premiums written,
net premiums earned and net investment income for the periods indicated:
Three Months Ended
March 31,
---------------------------
1996 1995 % Change
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(dollars in millions)
Net premiums written $251.9 $225.9 11.5%
Net premiums earned 222.3 225.3 (1.3)
Net investment income 44.9 41.5 8.0
Net premiums written for the first quarter of 1996 were higher than in the
comparable 1995 quarter. This increase in net premiums written was primarily a
result of domestic growth in medical malpractice and ocean marine lines offset,
in part, by a reduction in premiums from general casualty classes. Foreign net
premiums written accounted for 33.3 percent of net premium volume in the first
three months of 1996 compared to 36.1 percent in the same period of 1995. The
increase in net investment income in the 1996 quarter versus the comparable 1995
period resulted from positive cash flow offset, in part, by generally lower
available yields on bonds purchased as compared to yields on bonds disposed of
in recent periods.
The combined ratio was 100.9 for the first quarter of 1996 versus 103.5
for the first quarter of 1995. The first quarter loss and loss adjustment
expense ratios for 1996 and 1995 were 76.3 and 78.4, respectively. The combined
and loss ratios for 1995 included $4.5 million of incurred losses from the Kobe,
Japan earthquake. The underwriting expense ratios for the first quarters of 1996
and 1995 were 24.6 and 25.1, respectively. This reduction was caused primarily
by a decrease in the ratio of net commissions to net premiums written.
Realized net capital gains on the disposition of investments for the first
quarter totaled $5.3 million in 1996 compared with $2.6 million for the same
period of 1995.
Other deductions totaled $451,000 in the first quarter of 1996 versus
$620,000 in the same 1995 quarter.
Income before income taxes in the first quarter of 1996 increased 21.7
percent to $45.3 million from $37.2 million recorded in the same 1995 period.
The increase in income before income taxes is due to improved underwriting
results, increased net investment income and increased realized net capital
gains in the 1996 first quarter.
The effective tax rate for the first quarter of 1996 was 20.0 percent
compared to 18.0 percent for the comparable 1995 period. The effective tax rate
for the full year of 1995 was 19.5 percent. The higher 1996 rate compared to
the 1995 first quarter rate is due, in large part, to a lower proportion of
tax-exempt investment income to income before income taxes in 1996.
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<PAGE>
TRANSATLANTIC HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONT'D
MARCH 31, 1996
Net income in the first quarter of 1996 increased 18.7 percent to $36.2
million, or $1.58 per common share, compared with $30.5 million, or $1.33 per
common share, in the same period of 1995. Reasons for the increases are as
discussed above.
In the first quarter of 1996, a dividend of $0.12 per common share was
declared by the Board of Directors to stockholders of record as of June 7, 1996,
payable on June 21, 1996.
FINANCIAL CONDITION AND LIQUIDITY. Stockholders' equity totaled $998.6
million at March 31, 1996, an increase of $10.1 million from year-end 1995. The
increase in stockholders' equity is primarily comprised of net income of $36.2
million, offset by a decrease in net unrealized appreciation of investments, net
of deferred income taxes, of $22.2 million, a decrease in unrealized foreign
currency translation gain of $1.7 million, and dividends of $2.8 million.
Management believes that the liquidity of the Company has not materially changed
since the end of 1995.
The Company's increased operating cash flow in the first quarter of 1996
compared to the same 1995 period was primarily due to the 1996 increase in
domestic underwriting cash flow.
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM #6 - EXHIBITS AND REPORTS ON FORM 8-K
- - ------------------------------------------
(a) Exhibits
See accompanying Exhibit index
(b) In a Current Report on Form 8-K filed on February 16, 1996,
Transatlantic Holdings, Inc. filed, as Exhibit 4.1, an amendment to
the Company's 1990 Employee Stock Purchase Plan.
Omitted from this Part II are items which are inapplicable or to
which the answer is negative for the period covered.
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.
TRANSATLANTIC HOLDINGS, INC.
----------------------------
(Registrant)
STEVEN S. SKALICKY
---------------------------
Steven S. Skalicky
On behalf of the registrant and in his capacity as
Senior Vice President - Controller
(Chief Accounting Officer)
Dated May 10, 1996
- 7 -
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
<C> <S> <C>
Exhibit
Number Description Location
------ ----------- --------
11.1 Statement re computation of per share earnings Filed herewith.
27.0 Financial data schedule Provided herewith.
</TABLE>
- 8 -
EXHIBIT 11.1
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
----- ----
(in thousands, except per
common share data)
<S> <C> <C>
Weighted average common shares outstanding used in the
computation of per common share earnings:
Common shares issued 23,759 23,729
Common shares in treasury 800 800
---------- ---------
Weighted average common shares outstanding (1) 22,959 22,929
========== =========
Net income (applicable to common stock) $36,230 $30,512
========== =========
Net income per common share (1) $1.58 $1.33
========== =========
</TABLE>
(1) The effect of all other common stock equivalents is not significant;
therefore, this information is not presented.
- 9 -
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TRANSATLANTIC HOLDINGS, INC.'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 1,743,665
<DEBT-CARRYING-VALUE> 959,054
<DEBT-MARKET-VALUE> 1,013,801
<EQUITIES> 268,709
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,000,047
<CASH> 86,208
<RECOVER-REINSURE> 418,367
<DEFERRED-ACQUISITION> 52,200
<TOTAL-ASSETS> 3,983,944
<POLICY-LOSSES> 2,418,926
<UNEARNED-PREMIUMS> 311,948
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 23,765
<OTHER-SE> 974,869
<TOTAL-LIABILITY-AND-EQUITY> 3,983,944
222,261
<INVESTMENT-INCOME> 44,859
<INVESTMENT-GAINS> 5,274
<OTHER-INCOME> (451)
<BENEFITS> 169,523
<UNDERWRITING-AMORTIZATION> (5,000)
<UNDERWRITING-OTHER> 62,132
<INCOME-PRETAX> 45,288
<INCOME-TAX> 9,058
<INCOME-CONTINUING> 36,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,230
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
