<PAGE>
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, 1999
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 1-10545
-------
TRANSATLANTIC HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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, 1999 34,712,887
----------
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 1999 and December 31, 1998
</TABLE>
<TABLE>
<CAPTION>
(Unaudited)
1999 1998
------------ -----------
ASSETS (in thousands, except share data)
<S> <C> <C>
Investments and cash:
Fixed maturities:
Bonds held to maturity, at amortized cost (market value: 1999-$1,141,161;
1998-$1,210,534) $ 1,088,337 $ 1,124,455
Bonds available for sale, at market value (amortized cost: 1999-$2,432,757;
1998-$2,322,704) 2,431,640 2,409,054
Equities:
Common stocks available for sale, at market value (cost: 1999-$329,914;
1998-$358,223) 462,697 511,431
Nonredeemable preferred stocks available for sale, at market value
(cost: 1999-$57,714; 1998-$62,214) 58,194 62,967
Other invested assets 159,346 125,285
Short-term investments, at cost which approximates market value 31,235 25,052
Cash and cash equivalents 100,571 70,589
----------- -----------
Total investments and cash 4,332,020 4,328,833
Accrued investment income 68,777 65,503
Premium balances receivable, net 163,901 193,868
Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses:
Affiliates 210,007 231,043
Other 269,983 233,116
Deferred acquisition costs 70,943 67,578
Prepaid reinsurance premiums 32,540 30,596
Deferred income taxes 119,142 71,166
Other assets 26,666 31,546
----------- -----------
Total assets $ 5,293,979 $ 5,253,249
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Unpaid losses and loss adjustment expenses $ 3,084,702 $ 3,116,038
Unearned premiums 407,336 386,652
Reinsurance balances payable 99,626 89,521
Current income taxes payable - 224
Other liabilities 50,909 50,675
----------- -----------
Total liabilities 3,642,573 3,643,110
----------- -----------
Commitments and contingent liabilities
Preferred Stock, $1.00 par value; shares authorized: 5,000,000 - -
Common Stock, $1.00 par value; shares authorized: 100,000,000;
shares issued: 1999-35,512,887; 1998-35,466,836 35,513 35,467
Additional paid-in capital 200,248 198,425
Accumulated other comprehensive income 72,611 158,552
Retained earnings 1,353,034 1,227,695
Treasury Stock, at cost; 800,000 shares (10,000) (10,000)
----------- -----------
Total stockholders' equity 1,651,406 1,610,139
----------- -----------
Total liabilities and stockholders' equity $ 5,293,979 $ 5,253,249
=========== ===========
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
- 1 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Income:
Net premiums written $ 360,043 $ 330,208 $ 717,261 $ 662,736
Decrease (increase) in net unearned premiums 2,273 10,039 (22,904) (8,092)
--------- --------- --------- ---------
Net premiums earned 362,316 340,247 694,357 654,644
Net investment income 58,495 55,600 113,808 109,274
--------- --------- --------- ---------
420,811 395,847 808,165 763,918
--------- --------- --------- ---------
Expenses:
Net losses and loss adjustment expenses 257,470 245,117 501,889 477,950
Net commissions 91,408 81,252 170,086 155,397
Other operating expenses 12,355 11,813 25,742 22,715
Decrease (increase) in deferred acquisition costs 722 1,773 (3,365) (903)
--------- --------- --------- ---------
361,955 339,955 694,352 655,159
--------- --------- --------- ---------
58,856 55,892 113,813 108,759
Realized net capital gains 18,015 29,339 59,743 36,616
--------- --------- --------- ---------
Operating income 76,871 85,231 173,556 145,375
Other income (deductions) 20 (107) (7) (432)
--------- --------- --------- ---------
Income before income taxes 76,891 85,124 173,549 144,943
Income taxes 17,612 20,456 40,042 32,445
--------- --------- --------- ---------
Net income $ 59,279 $ 64,668 $ 133,507 $ 112,498
========= ========= ========= =========
Net income per common share:
Basic $1.71 $1.87 $3.85 $3.25
Diluted 1.70 1.86 3.83 3.23
Dividends per common share 0.125 0.11 0.235 0.21
Weighted average common shares outstanding:
Basic 34,702 34,639 34,692 34,620
Diluted 34,885 34,859 34,878 34,844
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
-2-
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
---- ----
(in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 92,892 $ 129,613
--------- ---------
Cash flows from investing activities:
Proceeds of bonds available for sale sold 308,004 158,988
Proceeds of bonds held to maturity redeemed 37,804 51,048
Proceeds of bonds available for sale redeemed or matured 115,114 133,576
Proceeds of equities sold 251,885 117,172
Purchase of bonds available for sale (572,767) (405,945)
Purchase of equities (163,026) (53,914)
Net purchase of other invested assets (30,080) (75,000)
Net purchase of short-term investments (8,017) (16,909)
Change in other liabilities for securities in course of settlement 7,357 11,311
Other, net 9,597 -
--------- ---------
Net cash used in investing activities (44,129) (79,673)
--------- ---------
Cash flows from financing activities:
Dividends to stockholders (7,633) (6,926)
Proceeds from common stock issued 1,869 2,423
Net disbursements from reinsurance deposits (10,715) (1,592)
--------- ---------
Net cash from financing activities (16,479) (6,095)
--------- ---------
Effect of exchange rate changes on cash and cash equivalents (2,302) (1,270)
--------- ---------
Change in cash and cash equivalents 29,982 42,575
Cash and cash equivalents, beginning of period 70,589 70,737
--------- ---------
Cash and cash equivalents, end of period $ 100,571 $ 113,312
========= =========
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
- 3 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 59,279 $ 64,668 $ 133,507 $ 112,498
--------- --------- --------- ---------
Other comprehensive (loss) income:
Net unrealized (depreciation) appreciation of investments:
Net unrealized holding (losses) gains arising during period (27,857) 2,748 (44,440) 49,418
Related income tax effect 9,750 (962) 15,554 (17,296)
Reclassification adjustment for gains included in net income (18,015) (29,339) (59,743) (36,616)
Related income tax effect 6,305 10,269 20,910 12,816
--------- --------- --------- ---------
(29,817) (17,284) (67,719) 8,322
--------- --------- --------- ---------
Net unrealized currency translation (loss) gain (7,348) (4,964) (28,035) 8,772
Related income tax effect 2,572 1,737 9,813 (3,069)
--------- --------- --------- ---------
(4,776) (3,227) (18,222) 5,703
--------- --------- --------- ---------
Other comprehensive (loss) income (34,593) (20,511) (85,941) 14,025
--------- --------- --------- ---------
Comprehensive income $ 24,686 $ 44,157 $ 47,566 $ 126,523
========= ========= ========= =========
The accompanying notes are an integral part of the condensed consolidated financial statements.
</TABLE>
- 4 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
1. General
The condensed 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. Certain
reclassifications have been made to conform the prior year's presentations with
1999. The results of operations and cash flows for any interim period are not
necessarily indicative of results for the full year.
2. Per Common Share Information
Net income per common share for the periods presented has been computed
below in accordance with Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share," and is based on the weighted average number of common
shares outstanding.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income (numerator) $ 59,279 $ 64,668 $133,507 $112,498
======== ======== ======== ========
Weighted average common shares outstanding
used in the computation of net income per share:
Average shares issued 35,502 35,439 35,492 35,420
Less: Average shares in treasury 800 800 800 800
-------- --------- -------- --------
Average outstanding shares - basic (denominator) 34,702 34,639 34,692 34,620
Average potential shares, principally stock options 183 220 186 224
-------- --------- -------- --------
Average outstanding shares - diluted (denominator) 34,885 34,859 34,878 34,844
======== ======== ======== ========
Net income per common share:
Basic $ 1.71 $ 1.87 $ 3.85 $ 3.25
Diluted 1.70 1.86 3.83 3.23
</TABLE>
- 5 -
<PAGE>
3. Reinsurance
Premiums written and earned and losses and loss adjustment expenses
incurred were comprised of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
Gross premiums written $ 400,565 $ 359,355 $ 806,668 $ 732,463
Reinsurance ceded (40,522) (29,147) (89,407) (69,727)
--------- --------- --------- ---------
Net premiums written $ 360,043 $ 330,208 $ 717,261 $ 662,736
========= ========= ========= =========
Gross premiums earned $ 412,100 $ 377,876 $ 781,820 $ 721,329
Reinsurance ceded (49,784) (37,629) (87,463) (66,685)
--------- --------- --------- ---------
Net premiums earned $ 362,316 $ 340,247 $ 694,357 $ 654,644
========= ========= ========= =========
Gross incurred losses and
loss adjustment expenses $ 289,383 $ 264,550 $ 569,561 $ 523,001
Reinsurance ceded (31,913) (19,433) (67,672) (45,051)
--------- --------- --------- ---------
Net losses and loss
adjustment expenses $ 257,470 $ 245,117 $ 501,889 $ 477,950
========= ========= ========= =========
</TABLE>
4. Dividends
During the second quarter of 1999, the Board of Directors of Transatlantic
Holdings, Inc. declared a dividend of $4,350,000 or $0.125 per common share.
5. Income Taxes
Income taxes paid, net, in the second quarter totaled $39,036,000 and
$29,847,000 in 1999 and 1998, respectively. For the 1999 and 1998 six month
periods, income taxes paid, net, totaled $42,947,000 and $35,217,000,
respectively.
- 6 -
<PAGE>
6. Segment Information
The following table presents a summary of comparative financial data by
segment:
<TABLE>
<CAPTION>
International
-----------------
Domestic Europe(3) Other Consolidated
-------- --------- ----- ------------
(in thousands)
<S> <C> <C> <C> <C>
Three Months Ended June 30, 1999:
Revenues(1)(2) $240,464 $155,209 $ 43,153 $438,826
Income before income taxes(2) 72,487 2,924 1,480 76,891
Three Months Ended June 30, 1998:
Revenues(1)(2) $245,379 $148,533 $ 31,274 $425,186
Income before income taxes(2) 71,648 11,380 2,096 85,124
<CAPTION>
International
-----------------
Domestic Europe(3) Other Consolidated
-------- --------- ----- ------------
(in thousands)
<S> <C> <C> <C> <C>
Six Months Ended June 30, 1999:
Revenues(1)(2) $491,517 $290,509 $ 85,882 $867,908
Income before income taxes(2) 152,927 16,167 4,455 173,549
Six Months Ended June 30, 1998:
Revenues(1)(2) $460,226 $275,557 $ 64,751 $800,534
Income before income taxes(2) 119,904 22,018 3,021 144,943
</TABLE>
- -------------------
(1) Revenues represent the sum of net premiums earned, net investment income and
realized net capital gains.
(2) Domestic revenues and income before income taxes include realized net
capital gains of $17,530 and $28,879 for the three months ended June 30,
1999 and 1998, respectively, and $59,024 and $35,473 for the six months
ended June 30, 1999 and 1998, respectively. Realized net capital gains for
other segments in each of the periods presented is not material.
(3) Includes revenues from the London, England office of $90,438 and $82,746 for
the three months ended June 30, 1999 and 1998, respectively, and $175,992
and $158,101 for the six months ended June 30, 1999 and 1998, respectively,
and revenues from the Zurich, Switzerland office of $30,378 and $37,605 for
the three months ended June 30, 1999 and 1998, respectively and $58,885 and
$77,725 for the six months ended June 30, 1999 and 1998, respectively.
7. Additional Information
For further information, refer to the Transatlantic Holdings, Inc. Form
10-K filing for the year ended December 31, 1998 and Form 10-Q filing for the
quarter ended March 31, 1999.
- 7 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
---------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
-------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
JUNE 30, 1999
-------------
OPERATIONAL REVIEW. The following table presents net premiums written, net
premiums earned and net investment income for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1999 1998 %Change 1999 1998 %Change
--------------------------------- ---------------------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Net premiums written $ 360.0 $ 330.2 9.0% $ 717.3 $ 662.7 8.2%
Net premiums earned 362.3 340.2 6.5 694.4 654.6 6.1
Net investment income 58.5 55.6 5.2 113.8 109.3 4.1
</TABLE>
Net premiums written for the second quarter and first six months of
1999 exceeded the comparable 1998 periods primarily as a result of increases in
international treaty business. The increases in international business were
caused, in large part, by a significant increase in the automobile liability
line. International business represented 51 percent of worldwide net premiums
written for the first six months of 1999 compared to 47 percent for the same
1998 period. While domestic net premiums written remained relatively level in
total for the 1999 second quarter and six month periods compared to the same
prior year periods, specialty casualty premiums significantly increased and
property lines premiums significantly decreased in the 1999 periods. The
reinsurance marketplace worldwide remained highly competitive.
The increase in net investment income for the second quarter and first
six months of 1999 versus the comparable 1998 periods resulted from continued
investment of positive operating cash flow. The percentage increase in
investment income in the current quarter over the prior year quarter was less
than comparable increases in most recently completed quarters due, in large
part, to the continued reduction in interest rates of investments purchased
versus investments disposed of, the reduced level of operating cash flow in
recent periods and the negative impact of foreign exchange on investment income
earned by certain of our international locations in the current periods.
The following table presents loss and loss adjustment expense ratios,
underwriting expense ratios and combined ratios for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
1999 1998 1999 1998
------------------------- ------------------------
<S> <C> <C> <C> <C>
Loss and loss adjustment
expense ratio 71.1 72.0 72.3 73.0
Underwriting expense ratio 28.8 28.2 27.3 26.9
Combined ratio 99.9 100.2 99.6 99.9
</TABLE>
There were no significant catastrophe losses in the second quarter or
first six months of 1999 or 1998. For the second quarter of 1999, the increase
in the underwriting expense ratio reflects an increase of 0.8 in the ratio of
net commissions to net premiums written, caused, in part, by a slight change in
the mix of business, partially offset by a reduction of 0.2 in the ratio of
other operating expenses to net premiums written. The increase in the
underwriting expense ratio for the first six months of 1999 reflects an increase
of 0.2 to both the commission ratio and the other operating expense ratio.
- 8 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONT'D
JUNE 30, 1999
Realized net capital gains on the disposition of investments totaled
$18.0 million in the second quarter of 1999 compared with $29.3 million for the
same period of 1998. For the first six months of 1999 and 1998, realized net
capital gains totaled $59.7 million and $36.6 million, respectively. The
redeployment of a portion of the equity portfolio generally into fixed income
investments in the 1999 first quarter accounted for the high level of realized
net capital gains in the first six months of 1999.
Income before income taxes in the second quarter of 1999 decreased 9.7
percent to $76.9 million from $85.1 million recorded in the same 1998 period
principally due to a decrease in realized net capital gains partially offset by
an increase in net investment income in 1999 compared to 1998. For the first six
months of 1999, income before income taxes totaled $173.5 million versus $144.9
million in the comparable prior year period, an increase of 19.7 percent. The
increase in income before income taxes in the first six months of 1999 versus
the comparable prior year period is primarily due to the increase in realized
net capital gains in the first half of 1999.
The effective tax rates for the second quarter and first six months
of 1999 were 22.9 percent and 23.1 percent, respectively, versus 24.0 percent
and 22.4 percent for the comparable 1998 periods. The higher effective tax rates
in the second quarter of 1998 and the first six months of 1999 resulted, in
large part, from higher realized net capital gains in those periods compared
to the comparable periods presented herein.
Net income excluding after-tax realized capital gains rose 4.3 percent
to $47.6 million, or $1.36 per common share (diluted), compared to $45.6
million, or $1.31 per common share (diluted), in the same prior year quarter.
For the first six months of 1999, net income excluding after-tax realized
capital gains totaled $94.7 million, or $2.71 per common share (diluted), a 6.7
percent increase over the six month 1998 amount of $88.7 million, or $2.55 per
common share (diluted). The increases in the 1999 periods are due, in large
part, to the higher amounts of net investment income, net of tax, in 1999 versus
the comparable 1998 periods.
Net income for the second quarter of 1999 totaled $59.3 million
compared to $64.7 million for the comparable prior year period. On a diluted per
common share basis, net income for the second quarters of 1999 and 1998 was
$1.70 and $1.86, respectively. For the first six months of 1999, net income was
$133.5 million versus $112.5 million in the same 1998 period. On a diluted per
common share basis, net income was $3.83 and $3.23 for the first six months of
1999 and 1998, respectively. Reasons for these fluctuations are as discussed
above.
In the second quarter of 1999, the Board of Directors declared a
quarterly dividend of $0.125 per common share to stockholders of record as of
September 3, 1999, payable on September 17, 1999. This represents a 13.6 percent
increase over the prior quarterly dividend.
FINANCIAL CONDITION AND LIQUIDITY. Stockholders' equity totaled
$1,651.4 million at June 30, 1999, an increase of $41.3 million from year-end
1998. The increase in stockholders' equity is primarily composed of net income
of $133.5 million, partially offset by a decrease in accumulated other
comprehensive income of $85.9 million (consisting of a reduction in net
unrealized appreciation of investments, net of taxes, of $67.7 million and a net
unrealized currency translation loss, net of taxes, of $18.2 million) less
dividends of $8.2 million.
The reduction in net unrealized appreciation of investments, net of
taxes, during the first six months of 1999 resulted, in large part, from
unrealized depreciation of bonds available for sale due to increasing market
interest rates during the period, a reclassification adjustment for capital
gains included in net income in the current period (principally from common
stocks available for sale) partially offset by net unrealized holding gains on
common stocks available for sale. Unrealized appreciation (depreciation) of
investments, net of taxes, a component of accumulated other comprehensive
income, is subject to significant volatility resulting from changes in the
market value of bonds and equities available for sale and other invested assets.
Market values may fluctuate due to changes in general economic conditions,
market interest rates and other factors.
- 9 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONT'D
JUNE 30, 1999
Operating cash flow in the second quarter and first six months of 1999
declined compared to the comparable 1998 periods, principally as a result of a
reduction in domestic underwriting cash flow (due largely to increased paid
losses) and an increase in taxes paid. Management believes that the liquidity of
Transatlantic Holdings, Inc. and subsidiaries (hereinafter TRH or the Company)
has not materially changed since the end of 1998.
TRH's operations are exposed to market risk. Market risk is the
risk of loss of fair market value resulting from adverse fluctuations in
interest and foreign currency exchange rates and equity prices.
Measuring potential losses in fair values has recently become the
focus of risk management efforts by many companies. Such measurements are
performed through the application of various statistical techniques. One such
technique is Value at Risk (VaR). VaR is a summary statistical measure that uses
historical interest and foreign currency exchange rates and equity prices and
estimates the volatility and correlation of each of these rates and prices to
calculate the maximum loss that could occur over a defined period of time given
a certain probability.
TRH believes that statistical models alone do not provide a reliable
method of monitoring and controlling market risk. While VaR models are
relatively sophisticated, the quantitative market risk information generated is
limited by the assumptions and parameters established in creating the related
models. Therefore, such models are tools and do not substitute for the
experience or judgment of senior management.
TRH has performed a VaR analysis to estimate the maximum potential
loss of fair value for financial instruments for each type of market risk. In
this analysis, financial instrument assets include all investments and cash and
accrued investment income. Financial instrument liabilities include unpaid
losses and loss adjustment expenses, net of reinsurance, and unearned premiums.
TRH calculated the VaR as of December 31, 1998. Through June 30,
1999, the economic facts and circumstances have not significantly changed.
Therefore, the VaR at December 31, 1998 is representative of a VaR which could
be calculated at June 30,1999. The VaR calculation as of December 31, 1998 used
the variance-covariance (delta-normal) methodology. The calculation also used
daily historical interest and foreign currency exchange rates and equity prices
in the two years ended December 31, 1998. The VaR model estimated the volatility
of each of these rates and equity prices and the correlation among them. For
interest rates, each country's yield curve was constructed using eleven separate
points on this curve to model possible curve movements. Inter-country
correlations were also used. The redemption experience of municipal and
corporate fixed maturities as well as the use of financial modeling were
employed in the analysis process. Thus, the VaR measured the sensitivity of the
asset and the liability portfolios to each of the aforementioned market risk
exposures. Each sensitivity was estimated separately to capture the market risk.
The following table presents the VaR of each component of market risk as of
December 31, 1998:
<TABLE>
<CAPTION>
MARKET RISK AMOUNT
- ----------- ------
(in millions)
<S> <C>
Interest rate $24
Currency 8
Equity 62
</TABLE>
Each sensitivity was then applied to a database which contained both
historical ranges of movements in all market factors and the correlations among
them. The results were aggregated to provide a single amount that depicts the
maximum potential loss in fair value at a confidence level of 95 percent for a
time period of one month. VaR with respect to the aggregate of the three
components of market risk cannot be derived by summing the individual risk
amounts in the table above. At December 31, 1998, the VaR for TRH's financial
instruments was approximately $69 million.
- 10 -
<PAGE>
TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONT'D
JUNE 30, 1999
OTHER MATTERS. The Year 2000 (Y2K) issue arises from the historic usage
of two, rather than four, digit date fields in computer equipment, software
packages and other devices using embedded chip technology, causing a date field
"00" to be recognized as the year 1900, rather than the year 2000. Failure to
recognize, repair or replace affected devices and systems could cause systems
failures or other disruptions resulting in, among other things, an inability to
process transactions, collect premiums, pay invoices or engage in similar normal
business activities.
Most TRH systems and software packages were installed or purchased
within the last five years, when the Y2K issue had already been identified and
was usually a consideration in the development process. TRH has taken steps to
identify its significant systems and programs, new and existing, hardware and
software information technology (IT) as well as non-IT (e.g., telephone systems,
fax machines and copiers), where Y2K failures could surface, and has effected
remedial changes and conducted appropriate testing. This process is essentially
complete for all critical systems. The costs associated with this process, which
are expensed as incurred, have not had and are not expected to have a material
effect on net income, financial position, cash flows or other non-Y2K IT
projects and initiatives.
In addition, TRH has identified those ceding companies, brokers,
reinsurers, banks, vendors and other business partners (collectively "third
parties") that are significant to its business and has asked each to advise on
the steps they are taking to address the Y2K issue. Responses have been received
from most and follow-up requests have been sent to those who failed to respond
or whose responses were not satisfactory. To date, no respondent has reported
significant potential problems in becoming Y2K compliant. The completion of
these activities is continuing during 1999.
TRH does not presently believe that Y2K issues related to its internal
IT and non-IT systems pose significant operational problems. Although TRH
continues to monitor third party readiness, it cannot provide assurance that
unresolved Y2K issues of such parties will not have a material adverse impact on
TRH's operations or financial results. TRH has considered the effects of
potential unresolved Y2K issues of third parties on its business and developed
contingency plans, as necessary. Such plans may include the selection of
alternate third parties, instituting alternative processes on a temporary basis
or other actions designed to mitigate the effects of a third party's lack of
preparedness. In addition, TRH has established an administrative process to
direct Y2K problem resolution activities, should the need arise, led by an
internal senior management team.
Any statements contained in this discussion that are not historical
facts, or that might be considered an opinion or projection, whether expressed
or implied, are meant as, and should be considered, forward-looking statements
as that term is defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on assumptions and opinions concerning a
variety of known and unknown risks. If any assumptions or opinions prove
incorrect, any forward-looking statements made on that basis may also prove
materially incorrect.
- 11 -
<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 20, 1999, the
stockholders:
(a) elected nine directors as follows:
<TABLE>
<CAPTION>
SHARES SHARES NOT
NOMINEE SHARES FOR WITHHELD VOTING
------- ---------- -------- ----------
<S> <C> <C> <C>
James Balog 31,912,866 83,069 2,697,976
C. Fred Bergsten 31,791,566 204,369 2,697,976
Ikuo Egashira 31,791,566 204,369 2,697,976
Maurice R. Greenberg 31,845,414 150,521 2,697,976
John J. Mackowski 31,912,866 83,069 2,697,976
Edward E. Matthews 31,912,914 83,021 2,697,976
Robert F. Orlich 31,912,914 83,021 2,697,976
Howard I. Smith 31,912,914 83,021 2,697,976
Thomas R. Tizzio 31,912,914 83,021 2,697,976
</TABLE>
(b) approved, by a vote of 23,846,036 shares to 8,142,079 shares, with 7,820
abstentions and 2,697,976 shares not voting, a proposal to amend the Certificate
of Incorporation, as amended, of Transatlantic Holdings, Inc. (TRH) to increase
the authorized shares of Common Stock from 50,000,000 to 100,000,000 shares.
(c) approved, by a vote of 31,978,441 shares to 15,417 shares, with 2,077
abstentions and 2,697,976 shares not voting, a proposal to select
PricewaterhouseCoopers LLP as independent accountants of TRH for 1999.
- 12 -
<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, 1999.
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)
/s/ STEVEN S. SKALICKY
------------------------------
Steven S. Skalicky
On behalf of the registrant and
in his capacity as
Executive Vice President - Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated August 6, 1999
- 13 -
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description Location
------- ----------- --------
<S> <C> <C>
27.0 Financial data schedule Provided herewith.
</TABLE>
- 14 -
<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, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 2,431,640
<DEBT-CARRYING-VALUE> 1,088,337
<DEBT-MARKET-VALUE> 1,141,161
<EQUITIES> 520,891
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 4,231,449
<CASH> 100,571
<RECOVER-REINSURE> 479,990
<DEFERRED-ACQUISITION> 70,943
<TOTAL-ASSETS> 5,293,979
<POLICY-LOSSES> 3,084,702
<UNEARNED-PREMIUMS> 407,336
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 35,513
<OTHER-SE> 1,615,893
<TOTAL-LIABILITY-AND-EQUITY> 5,293,979
694,357
<INVESTMENT-INCOME> 113,808
<INVESTMENT-GAINS> 59,743
<OTHER-INCOME> (7)
<BENEFITS> 501,889
<UNDERWRITING-AMORTIZATION> (3,365)
<UNDERWRITING-OTHER> 195,828
<INCOME-PRETAX> 173,549
<INCOME-TAX> 40,042
<INCOME-CONTINUING> 133,507
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,507
<EPS-BASIC> 3.85
<EPS-DILUTED> 3.83
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
