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 JUNE 30, 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.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3355897
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
80 Pine Street, New York, New York 10005
----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 770-2000
--------------
NONE
---------------------------------------------------
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
-------------- -----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1996 22,975,639
----------
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
(Unaudited)
1996 1995
----------- -----------
<S> <C> <C>
ASSETS (in thousands, except share data)
Investments and cash:
Fixed maturities:
Bonds held to maturity, at amortized cost
(market value: 1996-$1,052,805; 1995-$951,497) $ 1,006,150 $ 878,068
Bonds available for sale, at market value
(amortized cost: 1996-$1,686,050; 1995-$1,700,599) 1,717,054 1,788,000
Equities:
Common stocks available for sale, at market
value (cost: 1996-$221,935; 1995-$197,704) 287,300 255,116
Nonredeemable preferred stocks available for sale,
at market value (cost: 1996-$6,951; 1995-$6,953) 6,057 6,025
Short-term investments, at cost which approximates
market value 28,420 12,874
Cash and cash equivalents 83,478 47,832
----------- -----------
Total investments and cash 3,128,459 2,987,915
Accrued investment income 56,225 56,806
Premium balances receivable, net of losses payable:
Affiliates 7,925 27,104
Other 43,538 34,740
Reinsurance recoverable on paid and unpaid
losses and loss adjustment expenses:
Affiliates 121,102 134,326
Other 257,424 277,352
Funds held under reinsurance treaties:
Affiliates 1,649 1,058
Other 133,797 193,550
Deferred acquisition costs 52,125 47,200
Prepaid reinsurance premiums 32,318 39,716
Deferred income taxes 108,884 87,914
Other assets 16,265 11,286
----------- -----------
Total assets $ 3,959,711 $ 3,898,967
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $ 2,424,932 $ 2,388,155
Unearned premiums 312,655 291,568
Contingent commissions, expenses and taxes 11,729 6,764
Reinsurance balances payable:
Affiliates 3,586 14,791
Other 12,373 9,004
Funds held under reinsurance treaties:
Affiliates 312 312
Other 105,576 165,831
Current income taxes payable 20,577 12,256
Payable for securities in course of settlement 25,508 3,996
Other liabilities 16,865 17,788
----------- -----------
Total liabilities 2,934,113 2,910,465
----------- -----------
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: 1996-23,775,639; 1995-23,749,582 23,776 23,750
Additional paid-in capital 200,161 199,243
Net unrealized appreciation of investments, net of
deferred income taxes (1996-$33,416; 1995-$50,359) 62,059 93,525
Unrealized foreign currency translation gain 1,543 2,392
Retained earnings 748,059 679,592
Treasury Stock, at cost; 800,000 shares (10,000) (10,000)
----------- -----------
Total stockholders' equity 1,025,598 988,502
----------- -----------
Total liabilities and stockholders' equity $ 3,959,711 $ 3,898,967
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- 1 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Income:
Net premiums written $256,996 $232,513 $508,928 $458,403
(Increase) decrease in net unearned premiums 132 150 (29,539) (440)
--------- --------- --------- ---------
Net premiums earned 257,128 232,663 479,389 457,963
Net investment income 45,986 42,864 90,845 84,385
--------- --------- --------- ---------
303,114 275,527 570,234 542,348
--------- --------- --------- ---------
Expenses:
Net losses and loss adjustment expenses 185,980 174,485 355,503 351,123
Net commissions 65,406 57,893 119,601 107,635
Other operating expenses 8,121 7,000 16,058 13,955
(Increase) decrease in deferred acquisition costs 75 (1,000) (4,925) (2,700)
--------- --------- --------- ---------
259,582 238,378 486,237 470,013
--------- --------- --------- ---------
43,532 37,149 83,997 72,335
Realized net capital gains 3,820 2,678 9,094 5,321
--------- --------- --------- ---------
Operating income 47,352 39,827 93,091 77,656
Other deductions (189) (81) (640) (701)
--------- --------- --------- ---------
Income before income taxes 47,163 39,746 92,451 76,955
Income taxes 9,404 7,155 18,462 13,852
--------- --------- --------- ---------
Net income $ 37,759 $ 32,591 $ 73,989 $ 63,103
======== ======== ======== ========
Net income per common share $ 1.64 $ 1.42 $ 3.22 $ 2.75
======== ======== ======== ========
Dividends per common share $ 0.12 $ 0.10 $ 0.24 $ 0.20
======== ======== ======== ========
Weighted average common shares outstanding 22,968 22,934 22,963 22,932
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- 2 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $165,408 $151,425
---------- ----------
Cash flows from investing activities:
Proceeds of bonds available for sale sold 220,867 60,608
Proceeds of bonds held to maturity redeemed 12,367 2,463
Proceeds of bonds available for sale redeemed or matured 62,763 30,898
Proceeds of equities sold 69,713 47,679
Purchase of bonds held to maturity (140,118) (102,947)
Purchase of bonds available for sale (272,673) (145,637)
Purchase of equities (84,837) (59,291)
Net purchase of short-term investments (15,546) (2,192)
Change in payable for securities in course of settlement 21,512 20,573
Other, net 1,617 (6,622)
-------- --------
Net cash used in investing activities (124,335) (154,468)
-------- --------
Cash flows from financing activities:
Dividends to stockholders (5,522) (4,587)
Proceeds from common stock issued 944 451
-------- --------
Net cash from financing activities (4,578) (4,136)
-------- --------
Change in unrealized foreign currency translation gain (849) 7,566
-------- --------
Change in cash and cash equivalents 35,646 387
Cash and cash equivalents, beginning of period 47,832 62,789
-------- --------
Cash and cash equivalents, end of period $ 83,478 $ 63,176
======== ========
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
- 3 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 Six Months Ended
------------------ ----------------
June 30, June 30,
-------- --------
1996 1995 1996 1995
--------- --------- --------- ---------
(in thousands)
Gross premiums written $338,779 $277,412 $615,561 $526,501
Reinsurance ceded (81,783) (44,899) (106,633) (68,098)
-------- -------- -------- --------
Net premiums written $256,996 $232,513 $508,928 $458,403
======== ======== ======== ========
Gross premiums earned $337,763 $265,691 $593,420 $512,720
Reinsurance ceded (80,635) (33,028) (114,031) (54,757)
-------- -------- -------- --------
Net premiums earned $257,128 $232,663 $479,389 $457,963
======== ======== ======== ========
Gross incurred losses and loss
adjustment expenses $152,209 $181,571 $334,173 $373,843
Reinsurance ceded 33,771 (7,086) 21,330 (22,720)
-------- -------- -------- --------
Net losses and loss adjustment
expenses $185,980 $174,485 $355,503 $351,123
======== ======== ======== ========
3. Dividends
During the second quarter of 1996, the Board of Directors of Transatlantic
Holdings, Inc. declared a dividend of $2,764,000, or $0.12 per common share.
4. Income Taxes
Income taxes paid, net, in the second quarter totaled $14,189,000 and
$11,551,000 in 1996 and 1995, respectively. For the 1996 and 1995 six month
periods, income taxes paid, net, totaled $13,598,000 and $12,355,000,
respectively.
5. Additional Information
For further information, refer to the Transatlantic Holdings, Inc. Form
10-K filing for the year ended December 31, 1995 and Form 10-Q filing for the
quarter ended March 31, 1996.
- 4 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
---------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
-------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
JUNE 30, 1996
-------------
OPERATIONAL REVIEW. The following table presents net premiums written, net
premiums earned and net investment income for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------
1996 1995 % Change 1996 1995 % Change
---------------------------- --------------------------
(dollars in millions)
Net premiums written $257.0 $232.5 10.5% $508.9 $458.4 11.0%
Net premiums earned 257.1 232.7 10.5 479.4 458.0 4.7
Net investment income 46.0 42.9 7.3 90.8 84.4 7.7
Net premiums written for the second quarter and six months were higher than
in the comparable prior year periods. With respect to the second quarter, the
increase in net premiums written in 1996 was principally due to growth in
foreign premiums, particularly in the fire and auto liability lines. For the six
month period, growth was achieved domestically and internationally. Significant
increases were reported domestically in ocean marine and surety lines, partially
offset by reductions in certain general casualty classes. Internationally,
significant increases were reported in fire and auto liability lines. Foreign
business represented 36.0 percent of net premiums written in the first six
months of 1996 compared to 33.2 percent for the same 1995 period.
The increase in net investment income in 1996 versus the comparable 1995
periods 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 second quarter of 1996 versus 102.9
for the second quarter of 1995. The second quarter loss and loss adjustment
expense ratios for 1996 and 1995 were 72.3 and 75.0, respectively. The
underwriting expense ratios for the second quarters of 1996 and 1995 were 28.6
and 27.9, respectively. This increase was caused primarily by an increase in the
ratio of net commissions to net premiums written. For the first six months of
1996, the combined ratio was 100.8 versus 103.2 for the same prior year period.
The loss ratios were 74.2 and 76.7, respectively. The combined and loss ratios
for the first six months of 1995 included $4.5 million of incurred losses from
the Kobe, Japan earthquake. The first six months underwriting expense ratio was
26.6 versus 26.5 for the comparable prior year period.
Realized net capital gains on the disposition of investments for the second
quarter totaled $3.8 million in 1996 compared with $2.7 million for the same
period of 1995. For the first six months of 1996 and 1995, realized net capital
gains totaled $9.1 million and $5.3 million, respectively.
Income before income taxes in the second quarter of 1996 increased 18.7
percent to $47.2 million from $39.7 million recorded in the same 1995 quarter.
For the first six months of 1996, income before income taxes totaled $92.5
million versus $77.0 million in the comparable prior year period, an increase of
20.1 percent. The increases in income before income taxes in 1996 versus
comparable 1995 periods are primarily due to improved underwriting results,
increased net investment income and increased realized net capital gains in the
1996 periods.
- 5 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONT'D
JUNE 30, 1996
The effective tax rates for the second quarter and first six months of 1996
were 19.9 percent and 20.0 percent, respectively, versus 18.0 percent for the
comparable 1995 periods. The effective tax rate for the full year of 1995 was
19.5 percent. The higher 1996 rates are due, in large part, to a lower
proportion of tax-exempt investment income to income before income taxes in
1996.
Net income in the second quarter of 1996 increased 15.9 percent to $37.8
million, or $1.64 per common share, compared with $32.6 million, or $1.42 per
common share, in the same period of 1995. For the first six months of 1996, net
income was $74.0 million, or $3.22 per common share, versus $63.1 million, or
$2.75 per common share. Reasons for the increases are as discussed above.
In the second quarter of 1996, a dividend of $0.12 per common share was
declared by the Board of Directors to stockholders of record as of September 6,
1996, payable on September 19, 1996.
FINANCIAL CONDITION AND LIQUIDITY. Stockholders' equity totaled $1,025.6
million at June 30, 1996, an increase of $37.1 million from year-end 1995. The
increase in stockholders' equity is primarily composed of net income of $74.0
million, offset by a decrease in net unrealized appreciation of investments, net
of deferred income taxes, of $31.5 million, a decrease in unrealized foreign
currency translation gain of $849,000, and dividends of $5.5 million. The
decrease in net unrealized appreciation of investments, net of deferred income
taxes, occurred in the bonds available for sale portfolio due primarily to an
increase in interest rates during 1996. Management believes that the liquidity
of the Company has not materially changed since the end of 1995.
Operating cash flow for the second quarter of 1996 decreased slightly
compared to the same prior year period as a result of a decrease in underwriting
cash flow offset by an increase in cash flow from investment income. For the six
month periods, 1996 cash flow exceeded the comparable 1995 period due to
increased underwriting and investment income cash flow.
- 6 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM #4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
At the Company's Annual Meeting of Stockholders held on May 22, 1996, the
stockholders:
(a) elected eleven directors as follows:
SHARES SHARES NOT
NOMINEE SHARES FOR WITHHELD VOTING
------- ---------- -------- ----------
James Balog 20,923,712 32,710 2,008,367
Andrew A. Barnard 20,923,712 32,710 2,008,367
Ikuo Egashira 20,923,712 32,710 2,008,367
John M. Fowler 20,923,712 32,710 2,008,367
Maurice R. Greenberg 20,923,712 32,710 2,008,367
John J. Mackowski 20,923,712 32,710 2,008,367
Edward E. Matthews 20,923,712 32,710 2,008,367
Joseph F. Murphy 20,923,712 32,710 2,008,367
Robert F. Orlich 20,923,712 32,710 2,008,367
Howard I. Smith 20,923,712 32,710 2,008,367
Thomas R. Tizzio 20,923,712 32,710 2,008,367
(b) approved, by a vote of 20,953,990 shares to 332 shares, with 2,100
abstentions and 2,008,367 shares not voting, a proposal to select Coopers &
Lybrand L.L.P. as independent accountants for 1996.
- 7 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM #6 - EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
See accompanying Exhibit index
(b) There were no reports on Form 8-K for the three months ended
June 30, 1996.
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 August 7, 1996
- 8 -
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description Location
- ------- ----------- --------
11.1 Statement re computation of per share earnings Filed herewith.
27.0 Financial data schedule Provided herewith.
- 9 -
EXHIBIT 11.1
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
(in thousands, except per common share data)
<S> <C> <C> <C> <C>
Weighted average common shares outstanding used
in the computation of per common share earnings:
Common shares issued 23,768 23,734 23,763 23,732
Common shares in treasury 800 800 800 800
------- ------- ------- -------
Weighted average common shares outstanding (1) 22,968 22,934 22,963 22,932
======= ======= ======= =======
Net income (applicable to common stock) $37,759 $32,591 $73,989 $63,103
======= ======= ======= =======
Net income per common share (1) $1.64 $1.42 $3.22 $2.75
======= ======= ======= =======
</TABLE>
(1) The effect of all other common stock equivalents is not significant;
therefore, this information is not presented.
- 10 -
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
Financial Data Schedule
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TRANSATLANTIC HOLDINGS, INC.'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 1,717,054
<DEBT-CARRYING-VALUE> 1,006,150
<DEBT-MARKET-VALUE> 1,052,805
<EQUITIES> 293,357
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,044,981
<CASH> 83,478
<RECOVER-REINSURE> 378,526
<DEFERRED-ACQUISITION> 52,125
<TOTAL-ASSETS> 3,959,711
<POLICY-LOSSES> 2,424,932
<UNEARNED-PREMIUMS> 312,655
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 23,776
<OTHER-SE> 1,001,822
<TOTAL-LIABILITY-AND-EQUITY> 3,959,711
479,389
<INVESTMENT-INCOME> 90,845
<INVESTMENT-GAINS> 9,094
<OTHER-INCOME> (640)
<BENEFITS> 355,503
<UNDERWRITING-AMORTIZATION> (4,925)
<UNDERWRITING-OTHER> 135,659
<INCOME-PRETAX> 92,451
<INCOME-TAX> 18,462
<INCOME-CONTINUING> 73,989
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,989
<EPS-PRIMARY> 3.22
<EPS-DILUTED> 3.22
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
