<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997
Commission File Number 1-10804
EXEL LIMITED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Cayman Islands 98-0058718
- ------------------------ -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Cumberland House, 1 Victoria Street, Hamilton, Bermuda HM 11
- ------------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (441) 292-8515
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO __________
---------
The number of registrant's Ordinary Shares ($0.01 par value) outstanding as of
June 27, 1997 was 84,366,824 excluding 27,574,800 shares held in treasury.
<PAGE>
2
EXEL LIMITED
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
-----------------------------
<TABLE>
<CAPTION>
Page No.
-------
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets
May 31, 1997 (unaudited) and
November 30, 1996 3
Consolidated Statements of Income
Three Months Ended May 31, 1997
and 1996 (unaudited) and Six Months
Ended May 31, 1997 and 1996 (unaudited) 5
Consolidated Statements of Cash Flows
Six Months Ended May 31, 1997
and 1996 (unaudited) 6
Notes to Unaudited Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 11
PART II. OTHER INFORMATION
--------------------------
Item 4. Submission of Matters to a Vote of Shareholders 29
Item 6. Exhibits and Reports on Form 8-K 31
Signatures 34
</TABLE>
<PAGE>
3
EXEL LIMITED
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
May 31, November 30,
1997 1996
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Investments:
Fixed maturities, at market value
(amortized cost : 1997 - $2,727,275; $2,733,473 $2,844,877
1996 - $2,812,415) ..............................
Equity securities, at market value
(cost: 1997 - $660,620; 1996 - $595,149) ........ 832,212 812,050
Short-term investments, at market
value (amortized cost: 1997 - $198,933;
1996 - $115,791) ................................ 198,736 115,999
----------- ------------
Total Investments 3,764,421 3,772,926
Cash and cash equivalents ......................... 580,289 252,734
Investment in affiliates
(cost: 1997 - $281,867; 1996 - $280,748)........... 426,899 414,891
Investment in partnerships......................... 26,435 23,803
Accrued investment income.......................... 47,413 55,729
Deferred acquisition costs......................... 24,141 30,383
Prepaid reinsurance premiums....................... 70,641 63,467
Premiums receivable................................ 292,490 345,082
Reinsurance balances receivable.................... 79,423 46,444
Other assets....................................... 35,203 26,079
----------- ------------
Total Assets..................................... $5,347,355 $5,031,538
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss expenses.................. $2,200,444 $2,099,096
Unearned premium................................. 578,374 679,535
Premium received in advance...................... 54,767 24,256
Loans payable.................................... 71,000 11,000
Accounts payable and accrued liabilities......... 21,536 28,171
Reinsurance premiums payable..................... 32,882 31,347
Payable for investments purchased................ 217,944 42,095
----------- ------------
Total Liabilities.................................. $3,176,947 $2,915,500
----------- ------------
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
May 31, November 30,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Contingencies
Shareholders' Equity:
Ordinary shares (par value $0.01):
authorized, 999,990,000 shares;
issued and outstanding, 84,316,870 shares
(excluding 27,574,800 shares held in
treasury) at May 31, 1997 and 87,170,644
shares (excluding 24,205,100 shares held in
treasury) at November 30, 1996.......................... 843 872
Contributed surplus..................................... 287,789 282,980
Net unrealized appreciation of investments.............. 179,011 256,430
Deferred compensation................................... (12,962) (4,169)
Retained earnings....................................... 1,715,727 1,579,925
------------- -------------
Total shareholders' equity..................... $ 2,170,408 $ 2,116,038
------------- -------------
Total liabilities and
Shareholders' equity........................... $ 5,347,355 $ 5,031,536
============= =============
</TABLE>
See accompanying notes to Consolidated Financial Statements.
<PAGE>
5
EXEL LIMITED
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
May 31, May 31,
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Net premiums earned............................... $129,817 $131,952 $249,654 $262,210
Net investment income............................. 54,160 50,249 105,717 98,022
Net realized gains on sale of
investments.................................... 126,313 16,202 158,926 152,261
Equity in net earnings of affiliates.............. 15,739 14,282 28,894 30,395
----------------------------------------------
Total revenues 326,029 212,685 543,191 542,888
----------------------------------------------
Expenses:
Losses and loss expenses.......................... 91,317 103,556 176,277 207,762
Acquisition costs................................. 10,792 9,012 20,699 17,584
Administration expenses........................... 12,078 10,636 23,662 19,735
----------------------------------------------
Total expenses 114,187 123,204 220,638 245,081
----------------------------------------------
Income before income tax expenses...................... 211,842 89,481 322,553 297,807
Income tax expense..................................... 262 495 2,855 1,732
----------------------------------------------
Net income............................................. $211,580 $ 88,986 $ 319,698 $ 296,075
==============================================
Weighted average number of
ordinary shares and
ordinary share equivalents
outstanding....................................... 85,859 93,545 86,820 94,522
Net income per ordinary
share and ordinary share
equivalent........................................ $2.46 $0.95 $3.68 $3.13
Dividends declared per share........................... $0.32 $0.25 $0.64 $0.45
</TABLE>
See accompanying notes to Consolidated Financial Statements.
<PAGE>
6
EXEL LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income .......................................... $ 319,698 $ 296,075
Adjustments to reconcile net income
to net cash provided by operating activities:
Net realized gains on sale of investments ........... (158,926) (152,261)
Amortization of premium on fixed maturities.......... 318 3,573
Amortization of deferred compensation .............. 1,596 628
Equity in earnings of affiliates net of
dividends received and consolidation
adjustments ....................................... (15,082) (24,151)
Unpaid losses and loss expenses ..................... 101,348 34,081
Unearned premiums ................................... (101,161) 81,412
Premiums received in advance ........................ 30,511 22,478
Deferred acquisition costs .......................... 6,242 8,283
Prepaid reinsurance premiums ........................ (7,174) (36,103)
Premiums receivable ................................. 52,592 (127,526)
Reinsurance balances receivable ..................... (32,979) (28,284)
Reinsurance premiums payable ........................ 1,535 12,100
Accrued investment income ........................... 8,316 1,607
Accounts payable and accrued liabilities ............ (6,635) 6,631
----------- ------------
Total adjustments ................................. (119,499) (197,532)
----------- ------------
Net cash provided by operating activities 200,199 98,543
----------- ------------
Cash flows provided by (used in)
investing activities:
Proceeds from sale of fixed maturities
and short-term investments ........................ 5,725,579 2,872,664
Proceeds from redemption of fixed
maturities and short-term investments ............. 80,360 79,000
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Proceeds from sale of equity securities....... 573,524 402,107
Purchases of fixed maturities and
short-term investments...................... (5,648,824) (3,497,370)
Purchases of equity securities................ (459,654) (208,691)
Deferred gains (losses) on forward hedge
contracts................................... (1,249) 2,770
Investment in affiliates...................... (1,119) (1,620)
Investment in limited partnerships............ (2,632) -
Other assets.................................. (9,124) (9,089)
----------- -----------
Net cash provided by (used in) investing
activities.................................. 256,861 (360,229)
----------- -----------
Cash flow (used in) provided by financing
activities:
Dividends paid.............................. (54,594) (42,006)
Issuance of shares.......................... 355 126
Proceeds from exercise of options........... 3,965 4,562
Repurchase of treasury shares............... (139,231) (174,305)
Loans payable............................... 60,000 -
----------- -----------
Net cash used in financing activities......... (129,505) (211,623)
----------- -----------
Increase (Decrease) in cash and cash
equivalents................................. 327,555 (473,309)
----------- -----------
Cash and cash equivalents - beginning
of period................................... $ 252,734 $ 673,433
----------- -----------
Cash and cash equivalents - end of period..... $ 580,289 $ 200,124
=========== ===========
Taxes paid................................. $ 1,799 $ 1,571
=========== ===========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
<PAGE>
8
EXEL LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of EXEL
Limited (together with its subsidiaries, the "Company") have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
financial statements. In the opinion of management, these unaudited financial
statements reflect all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of financial position and results
of operations as of the end of and for the periods presented. The results of
operations for any interim period are not necessarily indicative of the results
for a full year. The November 30, 1996 balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. For further information, refer to the
consolidated financial statements for the fiscal year ended November 30, 1996,
and footnotes thereto, included in the Company's Annual Report on Form 10-K (No.
1-10804).
All share amounts have been adjusted for the one-for-one stock dividend
paid to shareholders of record on July 26, 1996.
<PAGE>
9
2. INVESTMENT IN AFFILIATE
Summarized condensed financial information of Mid Ocean Limited, a 25.6% owned
affiliate, which is accounted for by the equity method, is as follows (U.S.
dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30 April 30,
Income Statement Data 1997 1996 1997 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Net premiums earned $130,772 $102,274 $238,849 $204,379
Net investment income 25,335 19,911 49,175 38,957
Net realized (losses) gains
on sale of investments (3,387) (1,986) (729) 7,196
Net income $ 62,916 $ 50,972 $114,918 $108,787
============================================
Company's share of net income $ 16,606 $ 14,282 $ 29,302 $ 30,395
============================================
</TABLE>
<TABLE>
<CAPTION>
April 30, October 31,
Balance Sheet Data 1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Cash, investments and accrued
interest $1,645,031 $1,539,259
Other assets 614,292 483,440
----------- -----------
Total assets $2,259,323 $2,022,699
=========== ===========
Reserves for losses and
loss expenses $ 476,366 $ 422,252
Reserves for unearned premiums 440,748 287,494
Other liabilities and minority
interest 134,466 195,754
Shareholders' equity 1,207,743 1,117,199
----------- -----------
Total liabilities
and shareholders' equity $2,259,323 $2,022,699
=========== ===========
Company's share of
shareholders' equity $ 309,122 $ 314,256
=========== ===========
</TABLE>
During the six months ended April 30, 1997 and 1996 the Company received
dividends from its affiliate of $14.5 million, and $5.1 million, respectively.
<PAGE>
10
3. ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued SFAS No. 128,
"Earnings per Share", effective for fiscal years ending after December 15, 1997.
Earlier application is not permitted. This statement simplifies the standards in
APB-15 for computing earnings per share by replacing primary earnings per share
and by altering the calculation of diluted earnings per share, which replaces
fully diluted earnings per share.
FASB also issued SFAS No. 129, "Disclosure of Information about Capital
Structure," effective for fiscal years ending after December 15, 1997. This
statement consolidates existing disclosure requirements and eliminates the
exemption for non public entities from certain disclosure.
Both new standards are expected to have a minimal impact on the Company.
4. SUBSEQUENT EVENTS
On June 11, 1997 23,071,143 shares of GCR Holdings Limited ("GCR") (or
approximately 90 percent of the outstanding shares of GCR) were validly tendered
pursuant to the cash tender offer of $27.00 per share (or $622.9 million) made
by the Company through its subsidiary Exel Acquisitions Ltd. This transaction
was funded through the Company's line of credit facility with Mellon Bank and
the balance from its fixed income portfolio. The amount of $400 million was
drawn from an available line of $500 million, repayable over various periods
over the next six months of which $300 million will be repaid after one month
through the liquidation of the GCR investment portfolio. GCR's operations will
be supported by the Company's investment portfolio and the line of credit.
Interest rates on these loans vary with their maturity, and are established at
the US Libor rate plus 20 basis points.
The Company's $200 million revolving line of credit with Mellon Bank was
replaced on June 11, 1997, by two revolving lines of credit, each for $250
million, one maturing in one year, the other in five years. These facilities are
provided by a syndicate of banks, led by Mellon Bank.
<PAGE>
11
EXEL LIMITED
------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
Results of Operations for the Three Months Ended May 31, 1997
-------------------------------------------------------------
Compared to the Three Months Ended May 31, 1996
-----------------------------------------------
Table I presents an analysis of the Company's underwriting revenues
for the periods indicated (U.S. dollars in thousands):
Table I
-------
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1997 1996 % Change
---- ---- --------
(unaudited)
<S> <C> <C> <C>
Gross premiums written $81,266 $160,169 (49.3)%
Net premiums written 64,350 143,810 (55.3)%
Net premiums earned 128,817 131,952 (1.6)%
</TABLE>
The decrease in gross premiums written in the second quarter of 1997 was
impacted by speciality reinsurance assumed ("SRA") contracts written in the
second quarter of 1996, being rewritten, resulting in the return of $33.1
million in premium of which $26.7 million was unearned. Further discussion is
provided on this matter following Table II.
Gross premiums written were also affected by the level of multi-year
policies written or as in the above case, cancelled in any given year. If gross
premiums were adjusted for this multi-year effect, adjusted premiums would be
$110.9 million and $105.5 million for 1997 and 1996, respectively. If, in
addition, the above mentioned SRA items were also excluded, gross premiums
written would have been $113.1 million and $95.5 million respectively.
A discussion of the decrease in net premiums written and net premiums
earned can be found following Table III.
<PAGE>
12
Table II presents the split of gross premiums written by X.L. Insurance
Company, Ltd. (X.L.), X.L. Europe Insurance (X.L.E.) and X.L. Reinsurance
Company, Ltd. (XLRe) and reflects the growth in SRA business for the periods
indicated, adjusted for the effects of multi-year premiums (U.S. dollars in
thousands):
Table II
--------
<TABLE>
<CAPTION>
Three Months Ended May 31,
1997 1996
X.L. X.L.E. XLRe Total X.L. X.L.E. XLRe Total
-----------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General liability $41,072 $9,638 - $50,710 $52,941 $12,535 - $65,476
Directors and officers
liability 3,024 919 - 3,943 5,368 1,069 - 6,437
Professional liability 8,290 2,263 - 10,553 7,354 2,417 - 9,771
Employment practices
liability 480 - - 480 - - - -
Property 5,712 797 - 6,509 3,221 (38) - 3,183
X.L. Risk solutions 3,316 - - 3,316 1,900 - - 1,900
Specialty reinsurance
assumed 3,500 1,103 30,764 35,367 - 2,723 15,978 18,701
-----------------------------------------------------------------------------------
Annualized premiums 65,394 14,720 30,764 110,878 70,784 18,706 15,978 105,468
Multi-year premiums (2,052) (1,443) (26,117) (29,612) 14,062 9,703 30,936 54,701
-----------------------------------------------------------------------------------
Gross premiums written $63,342 $13,277 $ 4,647 $81,266 $84,846 $28,409 $46,941 $160,169
===================================================================================
</TABLE>
The increase in gross written premiums on an annual basis is largely due to
the SRA line. This growth has been offset by decreases in the general liability
and directors and officers liability product lines. Professional liability and
employment practices liability grew modestly. The other growth areas include
the property and X.L. Risk Solutions product lines.
<PAGE>
13
As disclosed in previous filings, some SRA policies can have significant
premiums due to the nature of the risks and the multi-year coverage. These
policies are loss sensitive, providing large penalty premiums in the event of
losses, and the return of significant levels of premiums where little or no
losses are incurred by the end of the policy term. During the quarter, an XLRe
reinsured entered into a new contract, resulting in the return of $33.1 million
in premium of which $6.4 million had been earned. The net expense of the $6.4
million was offset by the release of the same amount accrued in experience
reserves. Because of the now apparent intent of this reinsured to cancel and
rewrite its contract after one year when it is loss free, only the first year
of the go forward contract net of experience contribution has been recorded,
resulting in gross premiums written of $3.0 million.
SRA premiums assumed by X.L.E. relate in part to reinsurance protection to
a Bermuda insurer which provides certificates of responsibility to ship owners
for compliance with the U.S. Oil Pollution Act of 1990. Premiums from this
program have decreased largely due to a restructuring of the facility to an
excess of loss basis from a quota share basis.
X.L. Risk Solutions was introduced late in the second quarter of 1996. X.L.
Risk Solutions is a coordinated initiative with CIGNA Risk Solutions, between a
subsidiary of the Company and CIGNA Property and Casualty ("CIGNA"). It provides
combined limits of capacity for two or more of the Company's stand alone product
lines over three or more years. In addition, the Company is providing property
coverage with CIGNA which is reflected in X.L.'s property line, together with
the continuing growth of the Company's traditional property cover.
<PAGE>
14
General liability insurance results continue to reflect the impact of
competitive pressures from the U.S. domestic market and Lloyds of London.
Despite these pressures, this division retained 84% of its business. Average
attachments on premiums written increased from $88.7 million to $107.3 million
and limits increased from $68.4 million to $91.9 million for the quarters ended
May 31, 1996 and 1997, respectively.
Table III presents certain underwriting information with respect to the
business written by the Company for the periods indicated (U.S. dollars in
thousands):
Table III
---------
<TABLE>
<CAPTION>
Gross Net Net
----- --- ---
Premiums written Premiums Written Premiums Earned
---------------- ------------------ ----------------
Three Months Ended May 31
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
General liability $ 41,258 $82,498 $ 27,405 $ 69,242 $ 71,202 $ 81,038
Directors and officers
liability 3,564 7,277 3,564 7,277 5,449 6,257
Professional liability 12,252 9,772 12,252 9,772 12,935 13,818
Employment practices
liability 480 - 316 - 1,180 -
Property 9,598 5,285 7,042 3,757 5,022 5,084
X. L. Risk solutions 4,864 5,700 4,521 4,125 2,433 117
Reinsurance assumed 9,250 49,637 9,250 49,637 31,596 25,638
------------------------------------------------------------------------------------
81,266 160,169 64,350 143,810 129,817 131,952
Multi year premiums 29,612 (54,701) 35,508 (51,588) - -
Annual adjustment for
reinsurance assumed
contracts 2,197 (10,000) 2,197 (10,000) 1,762 (4,453)
------------------------------------------------------------------------------------
Adjusted premiums $113,075 $95,468 $ 102,055 $ 82,222 $131,579 $127,499
====================================================================================
</TABLE>
<PAGE>
15
Net premiums written in the second quarter were affected by the SRA
anomalies and multi-year adjustments. With effect from December 1, 1996,
general liability premiums written under the managed alternate rating
methodology are included in the general liability quota share treaty. In
addition, the employment practices liability, X.L. Risk Solutions and property
business lines are all subject to reinsurance.
Net earned premiums were also impacted by the SRA volatility. As disclosed
above, if these SRA premiums had been excluded, net earned premiums would have
been $131.6 million and $127.5 million for 1997 and 1996, respectively.
Table IV presents an analysis of the Company's revenues from its portfolio
of investments and its investment in affiliates (U.S. dollars in thousands):
Table IV
--------
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1997 1996 % Change
---- ---- --------
(Unaudited)
<S> <C> <C> <C>
Net investment income $54,160 $50,249 7.8%
Net realized gains 126,313 16,202 N/M
Equity in net earnings
of affiliates 15,739 14,282 10.2%
</TABLE>
Net investment income has increased principally due to a larger asset base
over the same quarter last year.
The increase in realized gains resulted from the restructuring of the
Company's equity portfolio during the quarter.
Equity in net earnings of affiliates increased due to Mid Ocean Limited
reporting a 23% increase in net income in their second quarter of 1997 compared
to the same period in 1996. The Company's relative share however, was lower due
to its reduced ownership declining from 28.0% to 25.6%.
<PAGE>
16
Table V sets forth the Company's combined ratios and the components thereof
for the periods indicated using U.S. generally accepted accounting principles
(U.S. dollars in thousands):
Table V
-------
<TABLE>
<CAPTION>
Three Months Ended
May 31,
1997 1996
---- ----
(unaudited)
<S> <C> <C>
Loss and loss expense ratio 70.4% 78.5%
Underwriting expense ratio 17.6% 14.9%
Combined ratio 88.0% 93.4%
</TABLE>
The decrease in the loss ratio is largely a result of the reserving
methodology on the SRA business, which is established on a contract by contract
basis. A significant component of this business has been short tail, and due to
the level of attachments involved, no incurred but not reported reserve has
been accrued on several contracts. While these contracts are currently lowering
the loss ratio, any losses incurred on these contracts could have a negative
effect on the Company's operating results due to the absence of reserves in
respect thereof.
During the fourth quarter of 1996, X.L. acquired the assets of the American
Excess Insurance Association ("AEIA"). X.L. is subject to a fee based upon the
level of the AEIA book that binds with X.L. This fee will be expensed over five
years. After adjusting for the aforementioned item, the expense ratio would have
been 15.7%.
Net income was $211.6 million or $2.46 per share and $89.0 million or $0.95
per share for the quarters ended May 31, 1997 and 1996, respectively,
representing an increase of 158.9% per share. The increase in per share amounts
is primarily due to realized investment gains of $126.3 million compared to
$16.2 million for the respective quarters.
<PAGE>
17
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MAY 31, 1997
-----------------------------------------------------------
COMPARED TO THE SIX MONTHS ENDED MAY 31, 1996
---------------------------------------------
Table I presents an analysis of the Company's underwriting revenues for the
periods indicated (U.S. dollars in thousands):
Table I
-------
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1997 1996 % Change
---- ---- --------
(unaudited)
<S> <C> <C> <C>
Gross premiums written $185,616 $379,299 (51.1)%
Net premiums written 141,319 307,523 (54.0)%
Net premiums earned 249,654 262,210 (4.8)%
</TABLE>
The decrease in gross premiums written in the first six months of 1997 was
impacted by three specialty reinsurance assumed ("SRA") contracts written in the
first half of 1996 being rewritten, resulting in the return of $89.1 million in
premium. Of this amount $73.5 million was unearned. In addition, in the first
quarter of 1996, another SRA contract was written retroactively from June 1,
1995 resulting in a premium of $22.5 million over three years.
Gross premiums written are also affected by the level of multi-year
policies written or as in the above case, cancelled in any given year. If gross
premiums were adjusted for this multi-year effect, adjusted premiums would be
$245.9 million and $283.4 million for 1997 and 1996, respectively. If, in
addition, the above mentioned SRA items were also excluded, gross premiums
written would have been $254.3 million and $246.1 million, respectively.
A discussion of the decrease in net premiums written and net premiums
earned can be found following Table III.
<PAGE>
18
Table II present the split of gross premiums written by X.L, X.L.E and XLRe
for the periods for the periods indicated, adjusted for the effects of
multi-year premiums (U.S. dollars in thousands):
Table II
--------
<TABLE>
<CAPTION>
Six Months Ended May 31,
1997 1996
---- ----
X.L X.L.E XLRe Total X.L X.L.E XLRe Total
---------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General
liability $ 114,983 $ 26,401 - $ 141,384 $ 136,242 $ 33,180 - $ 169,432
Directors
and officers
liability 6,982 1,310 - 8,292 9,881 1,523 - 11,404
Professional
liability 12,087 3,458 - 15,545 11,158 3,409 - 14,567
Employment
practices
liability 4,729 - - 4,729 - - - -
Property 10,044 1,778 - 11,822 7,008 (38) - 6,970
X. L. Risk solutions 6,576 - - 6,576 1,900 - - 1,900
Specialty
reinsurance
assumed 8,968 5,798 42,822 57,588 10,150 12,446 56,540 79,136
---------------------------------------------------------------------------------------------------
Annualized
premiums 164,369 38,745 42,822 245,936 176,339 50,520 56,540 283,399
Multi-year
premiums 15,202 (2,383) (73,139) (60,302) (14,338) 9,780 100,458 95,900
---------------------------------------------------------------------------------------------------
Gross premiums
written $ 179,571 $ 36,262 $ (30,317) $ 185,616 $ 162,001 $ 60,300 156,998 $ 379,299
===================================================================================================
</TABLE>
The decrease in gross written premiums on an annual basis is largely due to
anomalies in the SRA line and the continuing competitive pressures felt by the
general liability and directors and officers liability product lines.
Professional liability and employment Practices liability continue to grow. The
other growth areas include the property and X.L. Risk Solutions product lines.
<PAGE>
19
During the first six months three SRA contracts were rewritten resulting in
the return of $89.1 million in premium of which $15.6 million had been earned.
The net expense of the $15.6 million was offset by the release of the same
amount accrued in experience reserves. For reasons previously discussed, only
the first year of the go forward contract net of experience contributions has
been recorded, resulting in gross premiums written of $6.1 million.
During the first quarter of 1996 X.L. wrote an SRA policy retroactively
from June 1, 1995 resulting in an adjusted premium of $15.3 million and a future
year premium of $7.3 million. There is no corresponding premium in the first six
months of 1997. The latter amount will not be recognized in annual premium until
the third quarter of 1997.
SRA premiums assumed by X.L.E. relate in part to reinsurance protection to
a Bermuda insurer which provides certificates of responsibility to ship owners
for compliance with the U.S. Oil Pollution Act of 1990. Premiums from this
program have decreased largely due to a restructuring of the facility to an
excess of loss basis from a quota share basis.
Employment practices liability represents the only other area of growth in
the first six months.
General liability insurance results continue to reflect the impact of
competitive pressures from the U.S. domestic market and Lloyds of London.
Despite these pressures, this division retained 84% of its business. Average
attachments on premiums written increased from $99.5 million to $119.8 million
and limits increased from $77.1 million to $89.7 million for the six months
ended May 31, 1996 and 1997 respectively
<PAGE>
20
Table III presents certain underwriting information with respect to the
business written by the Company for the periods indicated (U.S. dollars in
thousands):
Table III
---------
<TABLE>
<CAPTION>
Gross Net Net
----- --- ---
Premiums Written Premiums Written Premiums Earned
---------------- ---------------- ----------------
Six Months Ended May 31
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
General liability $135,997 $186,839 $ 98,825 $119,410 $146,627 $163,205
Directors and officers
liability 8,848 12,244 8,848 12,244 10,953 12,532
Professional liability 19,096 15,327 19,096 15,327 25,442 27,189
Employment practices
liability 4,729 - 2,919 - 2,001 -
Property 19,078 11,095 15,248 8,323 10,343 9,981
X. L. Risk solutions 13,419 5,700 11,934 4,125 4,104 117
Reinsurance assumed (15,551) 148,094 (15,551) 148,094 50,184 49,186
---------------------------------------------------------------
185,616 379,299 141,319 307,523 249,654 262,210
Multi year premiums 60,320 (95,900) 77,268 (91,414) - -
Annual adjustment for
reinsurance assumed
contracts 8,377 (37,250) 8,377 (37,250) 9,491 (12,425)
Reinsurance general
liability quota
share of unearned
premium - - - 35,544 - -
---------------------------------------------------------------
Adjusted premiums $254,313 $246,149 $266,964 $214,403 $259,145 $249,785
===============================================================
</TABLE>
<PAGE>
21
Net premiums written were affected by the SRA anomalies and multi-year
adjustments. In addition, the first six months of 1996 reflects the cession of
part of the general liability unearned premium reserve of $35.5 million on
December 1, 1995, the commencement of the general liability quota share treaty.
With effect from December 1, 1996 general liability premiums written under the
managed alternate rating methodology are also included. Employment practices
liability, X.L. Risk Solutions and property business lines are also subject to
reinsurance.
Net earned premiums were also impacted by the SRA volatility. As disclosed
above, if these SRA premiums had been excluded, net earned premiums would have
been $259.1 million and $251.8 million for 1997 and 1996, respectively.
Table IV presents an analysis of The Company's revenues from its portfolio
of investments and its investment in affiliates (U.S. dollars in thousands):
Table IV
--------
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1997 1996 % Change
---- ---- --------
(unaudited)
<S> <C> <C> <C>
Net investment income $105,717 $98,022 7.9%
Net realized gains 158,926 152,261 N/M
Equity in net earnings
of affiliate 28,894 30,395 (4.9)%
</TABLE>
Net investment income has increased principally due to a larger asset base
over the same period last year.
The significant gains realized in 1996 were the result of the liquidation
of two fixed maturity portfolios and one equity portfolio due to similarities in
strategies between managers. During the first quarter of 1997, the fixed
maturity portfolio was extensively restructured, realizing losses of $5.2
million. During the second quarter of 1997, the equity portfolio was
restructured resulting in the portfolio of one manager being liquidated. Total
gains realized by the equity managers during the six month period ended May 31,
1997 was $170 million of which $26.3 million were gains realized by a synthetic
equity portfolio. A further discussion of these derivatives is included under
"Financial Condition and Liquidity" section of the Management Discussion and
Analysis.
The decrease in equity earnings in affiliates is attributable to the
Company's ownership in Mid Ocean Limited ("MOCL") decreasing from approximately
28.0% in 1996 to 25.6% the first six months of 1997, due to the exercise of
options by MOCL's founding shareholders.
<PAGE>
22
Table V sets forth the Company's combined ratios and the components thereof
for the periods indicated using U.S. generally accepted accounting principles:
Table V
-------
<TABLE>
<CAPTION>
Six Months Ended
May 31,
1997 1996
---- ----
(unaudited)
<S> <C> <C>
Loss and loss expense ratio 70.6% 79.3%
Underwriting expense ratio 17.8% 14.2%
Combined ratio 88.4% 93.5%
</TABLE>
The decrease in the loss and loss expense ratio is the result of several
factors. There was a net release of short-tail reserves of $5.0 million and a
pull down effect caused by the release of SRA experience reserves, returned as
premium in the amount of $15.6 million, as previously mentioned. After adjusting
for these items the loss ratio would have been 74.2%. The decrease in the
adjusted ratio reflects the reserving methodology on the SRA business, which is
established on a contract by contract basis. A significant component of this
business has been short tail, and due to the level of attachments involved, no
incurred but not reported reserve has been accrued on several contracts. While
these contracts are currently lowering the loss ratio, any losses incurred on
these contracts could have a negative effect on the Company's operating results
due to the absence of reserves in respect thereof.
The return of the SRA premiums also affected the expense ratio. In
addition, during the fourth quarter of 1996, X.L. acquired the assets of the
AEIA. X.L. is subject to a fee based upon the level of the AEIA book that binds
with X.L. This fee will be expensed over five years. After adjusting for the
aforementioned items, the expense ratio would have been 15.8%.
Net income was $319.7 million or $3.68 per share and $296.1 million or
$3.13 per share for the six months ended May 31, 1997 and 1996, respectively,
representing an increase of 17.6% per share. The increase in per share amounts
is primarily due to a reduction in the weighted average shares outstanding from
94.5 million to 86.8 million.
<PAGE>
23
Financial Condition and Liquidity
---------------------------------
As a holding company, the Company's assets consist primarily of its
investments in the stock of its subsidiaries and the Company's future cash flows
depend on the availability of dividends or other statutorily permissible
payments from its subsidiaries. In order to pay dividends, the amount of which
are limited to accumulated net realized profits, the Company's principal
subsidiary, X.L., must maintain certain minimum levels of statutory capital and
surplus, solvency and liquidity pursuant to Bermuda statutes and regulations. At
May 31, 1997, X.L. could have paid dividends in the amount of approximately $1.4
billion. Neither the Company nor any of its subsidiaries other than X.L. had any
other restrictions preventing them from paying dividends. No assurance, however,
can be given that the Company or its subsidiaries will not be prevented from
paying dividends in the future. The Company's shareholders' equity at May 31,
1997 was $2.2 billion, of which $1.7 billion was retained earnings.
At May 31, 1997, total investments and cash net of the unsettled
investments trades were $4.1 billion, compared to $4.0 billion at November 30,
1996. The Company's fixed income investments (including short-term investments
and cash equivalents) at May 31, 1997 represented approximately 79% of invested
assets and were managed by several outside investment management firms with
different strategies. Substantially all fixed income securities are of
investment grade, and approximately 60% of the portfolio is in U.S. and
non-U.S. sovereign government obligations, corporate bonds and other securities
rated Aa or AA or better by a nationally recognized rating agency. Cash and cash
equivalents net of pending investment trades was $362.3 million at May 31, 1997,
compared to $210.6 million at November 30, 1996.
In fiscal 1996 and in fiscal 1997 through May 31, the total amount of
losses paid by the Company was $302.6 million and $105.1 million, respectively.
<PAGE>
24
Financial Condition and Liquidity (Continued)
---------------------------------
Insurance practices and regulatory guidelines suggest that property and
casualty insurance companies maintain a ratio of net premiums written to
statutory capital and surplus of not greater than 3 to 1, with a lower ratio
considered to be more prudent for a company that insures the types of exposures
written by X.L. X.L. maintained a ratio of 0.5 to 1 (calculated on an annualized
basis) for the six months ended May 31, 1997 and for the year ended November 30,
1996
The Company establishes reserves to provide for the estimated expenses of
settling claims, the general expenses of administering the claims adjustment
process and for losses incurred but not reported. These reserves are calculated
by using actuarial and other reserving techniques to project the estimated
ultimate net liability for losses and loss expenses. No assurance can be given
that actual claims made and payments related thereto will not be in excess of
the amounts reserved.
The Company commenced its initial share buy back program in September 1993
as authorized by the Board of Directors and obtained approval for subsequent
programs as each program was completed. As at May 31, 1997 the Company had
repurchased 27.6 million shares in total. During the six months then ended, the
Company purchased 3.4 million shares at a cost of $139.1 million, which was
funded from operations. The Company has 2.4 million shares remaining in its
authorized buy back program.
During the six month period ended May 31, 1997 there were two draw downs
from the Company's revolving line of credit facility, with Mellon Bank, each for
$30 million. The first one was drawn on April 14, 1997, repayable on October 14,
1997 at a rate of 6.12% and other was drawn on May 5, 1997 repayable June 5,
1997 at a rate of 5.81%.
<PAGE>
25
Derivative Financial Instruments
- --------------------------------
Foreign Currency Risk Management
--------------------------------
As part of its current investment strategy, the Company invests in non U.S.
Dollar denominated fixed maturities and equities. The Company hedges the
majority of the foreign currency exposure of its non-U.S. Dollar fixed maturity
investments using forward foreign exchange contracts that generally have
maturities of three months or less, and which are rolled over to provide
continuing coverage for as long as the investments are held. When an investment
is sold, the related foreign exchange sale contract is closed by entering into
an offsetting purchase. At May 31, 1997 the Company had, as hedges, foreign
exchange contracts for the sale of $203.1 million and the purchase of $71.6
million of foreign currency at fixed rates, primarily Canadian Dollars (17% of
net contract value), Finnish Markka (22%), Japanese yen (13%), Swedish Kroner
(18%) and Swiss Francs (18%). No other currency was greater than 10%. The market
value of non-U.S. Dollar fixed maturities held by the Company as at May 31, 1997
that were hedged by foreign exchange contracts was $130.5 million.
Unrealized foreign exchange gains or losses on foreign exchange contracts
hedging non-U.S. Dollar fixed maturity investments are deferred and included in
shareholders' equity. As at May 31, 1997, unrealized deferred gains amounted to
$196,000, and were offset by corresponding decreases in the dollar value of the
investments. Realized gains and losses on the maturity of these contracts are
also deferred and included in shareholders' equity until the corresponding
investment is sold. As of May 31, 1997, realized deferred losses amounted to
$2.0 million.
The Company uses foreign exchange contracts to manage the foreign exchange
risk of fluctuating foreign currencies on the value of its non-U.S. Dollar
equity investments. These contracts are not designated as specific hedges and,
therefore realized and unrealized gains and losses recognized on them are
recorded as a component of net realized gains and losses in the period in which
they occur. At May 31, 1997, the Company had such forward contracts outstanding
of $925.5 million, with unrealized gains of $11.7 million Gains of $14.3 million
were realized during the six month period then ended. Based on the outstanding
contracts' value, a 5% appreciation or devaluation of the U.S. Dollar as
compared to the level of other currencies under contract at May 31, 1997 would
have resulted in approximately $23.7 million in unrealized gains or $1.2 million
in unrealized losses, respectively.
<PAGE>
26
Derivative Financial Instruments
- --------------------------------
Foreign Currency Risk Management (Continued)
--------------------------------
The Company also manages exchange risk for a particular non-U.S. Dollar fixed
maturity portfolio in a manner similar to that of its non-U.S. Dollar equity
portfolio. The Company had outstanding forward contracts for sale of $51.2
million and for purchase of $37.3 million of foreign currencies at fixed rates.
A 5% appreciation or devaluation of the U.S. Dollar as compared to the other
currencies under contract at May 31, 1997 would have resulted in unrealized
gains of approximately $170,000 and $167,000, respectively. The market value of
the non-U.S. Dollar fixed maturities held was $148.5 million.
In addition, the Company also enters into foreign exchange contracts to buy
and sell foreign currencies in the course of trading its non-U.S. Dollar
investments. These contracts are not designated as specific hedges, and
generally have maturities of two weeks or less. As such, any realized or
unrealized gains or losses are recorded in income in the period in which they
occur. At May 31, 1997, the Company had $4.2 million of such contracts
outstanding, and had recognized a minimal amount in realized and unrealized
losses for the six month period. Based on this value, a 5% appreciation or
devaluation of the U.S. Dollar as compared to the level of other currencies
under contract at May 31, 1997 would have had no material effect on income.
Speculative Financial Instruments
---------------------------------
In accordance with its current investment guidelines, the Company may
invest up to 30% of its investment portfolio in equity securities. During 1996
these guidelines were amended so that this exposure could be obtained by direct
holdings of publicly traded equities and by investing in a synthetic portfolio.
In this synthetic equity portfolio, S&P 500 Index futures are held with an
exposure approximately equal in amount to the market value of underlying assets
held in this portfolio. As at May 31, 1997, the portfolio held $281.0 million in
exposure to S&P 500 Index futures together with fixed maturities, short-term
investments and cash amounting to $281.3 million. Based on this value, a 5%
increase or decrease in the price of these futures would have resulted in
positions of $295.1 million and $267.0 million, respectively. The value of the
futures is updated daily with the change recorded in income as a realized gain
or loss. For the six months ended May 31, 1997, net realized gains from index
futures totalled $26.3 million.
<PAGE>
27
Speculative Financial Instruments (Continued)
---------------------------------
With the introduction of the new fixed maturity managers during February
1997, certain managers may utilize derivative instruments to add value to the
investments they manage where they believe market inefficiencies exist. At May
31, 1997 bond futures outstanding were $340.7 million with underlying
investments having a market value of $1.8 billion (All managers are restricted
from leveraging their derivative positions). A 5% appreciation or devaluation of
these bond futures at this time would have resulted in unrealized gains of
approximately $17.0 million and unrealized losses of $17.1 million.
Another investment manager utilizes both stock and bond futures in the
global market to take advantage of market inefficiencies between countries and
types of securities. All futures are collateralized by cash and cash
equivalents securities. The total stock and bond futures' exposure at May 31,
1997 for this manager was $48.0 million with underlying investments having a
value of $50.4 million. A 5% appreciation or devaluation of these futures would
have resulted approximately in unrealized gains of $2.4 million and unrealized
losses of $2.4 million.
One of the Company's investment managers applies a global asset allocation
strategy, investing in both equity and fixed income securities as well as
tactical currency positioning. This manager had outstanding foreign exchange
contracts for sale of $39.6 million and for purchase of $35.4 million. A 5%
appreciation or devaluation of the U.S. dollar would have resulted in
approximately unrealized losses of $338,000 and unrealized gains of $58,000,
respectively.
Accounting Standards
- --------------------
The Financial Accounting Standards Board ("FASB") issued SFAS No. 128,
"Earnings per Share", effective for fiscal years ending after December 15, 1997.
Earlier application is not permitted. This statement simplifies the standards
in APB-15 for computing earnings per share by replacing primary earnings per
share and by altering the calculation of diluted earnings per share, which
replaces fully diluted earnings per share.
<PAGE>
28
Accounting Standards (Continued)
- --------------------
FASB also issued SFAS No. 128, "Disclosure of Information about Capital
Structure", effective for fiscal years ending after December 15, 1997. This
statement consolidates existing disclosure requirements and eliminates the
exemption for non public entities from certain disclosure.
Both new standards are expected to have a minimal impact on the Company.
Subsequent Events
- -----------------
On June 11, 1997 23,071,143 shares of GCR Holdings Limited ("GCR") (or
approximately 90 percent of the outstanding shares of GCR) were validly tendered
pursuant to the cash tender offer of $27.00 per share (or $622.9 million) made
by the Company through its subsidiary Exel Acquisitions Ltd. This transaction
was funded through the Company's line of credit facility with Mellon Bank and
the balance from its fixed income portfolio. The amount of $400 million was
drawn from an available line of $500 million, repayable over various periods
over the next twelve months of which $300 million will be repaid after one month
through the liquidation of the GCR investment portfolio. GCR's operations will
be supported by the Company's investment portfolio and the line of credit.
Interest rates on these loans vary with its maturity, and are established at the
US Libor rate plus 20 basis points.
The Company's $200 million revolving line of credit with Mellon Bank was
replaced on June 11, 1997, by two revolving lines of credit, each for $250
million, one maturing in one year, the other in five years. These facilities are
provided by a syndicate of banks, lead by Mellon Bank.
Current Outlook
- ---------------
The Company believes competitive pressures will continue throughout fiscal
1997 and constrain growth in the Company's traditional product lines. However,
the Company believes specific opportunities will exist in 1997 for growth in the
Company's property, X.L. Risk Solutions and employment practices liability
product lines, XLRe's specialty reinsurance lines, further developments in
non-U.S. business and selected types of political risk insurance.
The Company undertakes no obligation to update publicly changes in its
beliefs expressed herein.
<PAGE>
29
EXEL LIMITED
------------
PART II - OTHER INFORMATION
---------------------------
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
- --------------------------------------------------------
At the Annual General Meeting of Shareholders held on April 11, 1997 at the
Executive Offices of the Company, Cumberland House, One Victoria Street, 9th
Floor, Hamilton HM11, Bermuda, the shareholders approved the following:
1. To elect Class I Directors to hold office until 2000:
<TABLE>
<CAPTION>
Votes Votes
For* Against*
--- -------
<S> <C> <C>
Gilbert Gould 70,969,978 87,376
Ian R. Heap 70,592,944 464,410
John Loudon 70,654,386 402,986
Robert S. Parker 70,967,283 87,846
Alan Z. Senter 70,967,283 90,071
</TABLE>
Messrs. O'Hara, Thornton, Weiser, Clements, Esposito, Rance and Dr. Thrower
continue in office.
Votes*
-----
2. To amend the 1991 Performance Incentive Program;
For - 58,669,065 Against - 12,227,570 Abstaining - 160,719
3. To appoint Coopers & Lybrand, Bermuda as independent Auditors for the
fiscal year ending November 30, 1997;
Votes*
-----
For - 70,999,945 Against - 26,567 - Abstaining - 30,842
<PAGE>
30
* Before giving effect to the applicable provisions in the Company's Articles
of Association which limit the voting rights with respect to the shares of
any person or "group" of persons beneficially owning (within the meaning of
Section 13(d) (3) of the Securities Exchange Act of 1934) 10% or more of the
issued Ordinary Shares of the Company to a voting power of one share less
than 10% pursuant to a formula specified in the Articles of Association.
According to filings made with the Securities and Exchange Commission, two
separate "groups" of persons may each beneficially own in excess of 10% of the
issued Ordinary Shares of the Company. If the voting power of such groups were
limited pursuant to the formula specified in the Articles of Association, the
matters voted on by shareholders as set forth above would still have been
approved by the required vote of the shareholders.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXEL LIMITED
-----------------------
(Registrant)
/s/ Brian M. O'Hara
June 27, 1997 _______________________
Brian M. O'Hara
President and
Chief Executive Officer
/s/ Brian G. Walford
June 27, 1997 _______________________
Brian G. Walford
Executive Vice President and
Chief Financial Officer
<PAGE>
Exhibit 11
EXEL LIMITED
COMPUTATION OF EARNINGS PER ORDINARY SHARE AND
ORDINARY SHARE EQUIVALENT
(U.S. dollars in thousands except
per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1997 1996 1997 1996
(Unaudited) (Unaudited)
(U.S. Dollars in thousands except per
share amounts)
<S> <C> <C> <C> <C>
(A) Earnings per ordinary
share and ordinary share
equivalent -- primary:
Weighted average shares
outstanding ......... 84,883 92,354 85,850 93,362
Average stock options
outstanding (net of
repurchased shares
under the treasury
stock method ....... 976 1,191 970 1,160
-------- -------- -------- --------
Weighted average ordinary
shares and ordinary
shares equivalents
outstanding ........ 85,859 93,545 86,820 94,522
-------- -------- -------- --------
Net income:
Actual net income ... $ 211,580 $ 88,986 $ 319,698 $ 296,075
Assumed earnings on
excess option proceeds - - - -
-------- -------- -------- --------
Adjusted net income ... $ 211,580 $ 88,986 $ 319,698 $ 296,075
======== ======== ======== ========
Earnings per ordinary
share and ordinary
share equivalent .... $ 2.46 $ 0.95 $ 3.68 $ 3.13
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
May 31, May 31,
1997 1996 1997 1996
(Unaudited) (Unaudited)
(U.S. Dollars in thousands except per
share amounts)
<S> <C> <C> <C> <C>
(B) Earnings per ordinary
share and ordinary share
equivalent -- assuming full
dilution:
Weighted average shares
outstanding ......... 84,884 92,354 85,850 93,362
Average stock options
outstanding (net of
repurchased shares
under the treasury
stock method ....... 1,070 1,191 1,123 1,200
-------- -------- -------- --------
Weighted average ordinary
shares and ordinary
shares equivalents
outstanding ........ 85,954 93,545 86,973 94,562
-------- -------- -------- --------
Net income:
Actual net income ... $ 211,580 $ 88,986 $ 319,698 $ 296,075
Assumed earnings on
excess option proceeds - - - -
-------- -------- -------- --------
Adjusted net income ... $ 211,580 $ 88,986 $ 319,698 $ 296,075
======== ======== ======== ========
Earnings per ordinary
share and ordinary
share equivalent .... $ 2.46 $ 0.95 $ 3.68 $ 3.13
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<DEBT-HELD-FOR-SALE> 2,932,209
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 832,212
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,764,421
<CASH> 580,289
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 24,141
<TOTAL-ASSETS> 5,347,355
<POLICY-LOSSES> 2,200,444
<UNEARNED-PREMIUMS> 578,374
<POLICY-OTHER> 54,767
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 71,000
843
0
<COMMON> 0
<OTHER-SE> 2,169,565
<TOTAL-LIABILITY-AND-EQUITY> 5,347,355
249,564
<INVESTMENT-INCOME> 105,717
<INVESTMENT-GAINS> 158,926
<OTHER-INCOME> 28,894
<BENEFITS> 176,277
<UNDERWRITING-AMORTIZATION> 20,699
<UNDERWRITING-OTHER> 23,622
<INCOME-PRETAX> 322,553
<INCOME-TAX> 2,855
<INCOME-CONTINUING> 319,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319,698
<EPS-PRIMARY> 3.68
<EPS-DILUTED> 3.68
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
