<PAGE>
================================================================================
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 quarterly period 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 _______.
FOR THE QUARTER ENDED JUNE 30, 1999 COMMISSION FILE NUMBER 1-11688
AMERICAN RE CORPORATION
(Exact name of registrant as specified in its charter)
-------------
DELAWARE 13-3672116
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
555 COLLEGE ROAD EAST
PRINCETON, NEW JERSEY 08543-5241
(Address of principal executive offices) (zip code)
-------------
Registrant's telephone number, including area code: (609) 243-4200
----------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE.
COMMON STOCK -$.01 PAR VALUE 149.49712
- ---------------------------- ---------------------
Description of Class Shares Outstanding
as of August 13, 1999
<PAGE>
INDEX TO FORM 10-Q
PART I FINANCIAL INFORMATION
Item 1 -
Page
----
Consolidated balance sheets at June 30, 1999 (unaudited),
and December 31, 1998................................... 1
Consolidated statements of income for the three-month
and six-month periods ended June 30, 1999, and
1998 (unaudited)........................................ 2
Consolidated statements of cash flows for the six-month
periods ended June 30, 1999, and 1998 (unaudited)....... 3
Notes to consolidated interim financial statements........... 4
Item 2 -
Management's discussion and analysis of the Company's
Results of Operations and Financial Condition........... 10
PART II OTHER INFORMATION............................................ 18
ii
<PAGE>
PART I. FINANCIAL INFORMATION
AMERICAN RE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
(UNAUDITED)
ASSETS: JUNE 30, 1999 DECEMBER 31, 1998
------------------------------------------
<S> <C> <C>
Investments
Fixed Maturities
Bonds available for sale, at fair value (amortized cost:
June 30, 1999 - $6,564.6; December 31, 1998 - $6,688.6)................. $ 6,495.0 $ 6,876.0
Preferred stock available for sale, at fair value (amortized cost:
June 30, 1999 - $76.9; December 31, 1998 - $76.7)........................ 77.3 77.3
Equity securities available for sale, at fair value (cost: June 30,
1999 - $342.6; December 31, 1998 - $488.7)............................... 393.1 545.2
Other invested assets.......................................................... 37.4 27.9
Cash and cash equivalents......................................................... 601.2 274.9
------------------------------------------
Total investments and cash............................................. 7,604.0 7,801.3
Accrued investment income......................................................... 86.5 85.4
Premiums and other receivables ................................................... 1,245.8 1,315.5
Deferred policy acquisition costs................................................. 399.9 357.7
Reinsurance recoverables on paid and unpaid losses................................ 2,543.5 2,343.1
Funds held by ceding companies.................................................... 448.8 408.9
Prepaid reinsurance premiums...................................................... 155.6 148.2
Deferred federal income taxes..................................................... 237.3 142.6
Other assets...................................................................... 928.2 941.3
---------------------------------------
Total assets........................................................... $ 13,649.6 $ 13,544.0
==========================================
LIABILITIES:
Loss and loss adjustment expense reserves......................................... $ 7,336.2 $ 7,334.1
Unearned premium reserve.......................................................... 1,450.7 1,280.5
------------------------------------------
Total insurance reserves............................................... 8,786.9 8,614.6
Loss balances payable............................................................. 320.0 412.1
Funds held under reinsurance treaties............................................. 342.1 273.7
Senior bank debt.................................................................. 75.0 75.0
Senior notes...................................................................... 498.5 498.5
Other liabilities................................................................. 602.9 579.5
---------------------------------------
Total liabilities...................................................... 10,625.4 10,453.4
------------------------------------------
Company-obligated mandatorily redeemable preferred securities
of subsidiary trust holding as all of its assets
Junior Subordinated Debentures................................................ 237.5 237.5
------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock, par value: $0.01 per share; authorized:
1,000 shares; issued and outstanding: June 30, 1999, and
December 31, 1998 - 149.49712 shares.......................................... -- --
Additional paid-in capital........................................................ 1,332.4 1,332.4
Retained earnings................................................................. 1,500.3 1,397.6
Accumulated other comprehensive income............................................ (46.0) 123.1
------------------------------------------
Total stockholders' equity............................................. 2,786.7 2,853.1
------------------------------------------
Total liabilities, Company-obligated mandatorily redeemable
preferred securities of subsidiary trust and stockholders' equity... $ 13,649.6 $ 13,544.0
==========================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS.
-1-
<PAGE>
AMERICAN RE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD SIX-MONTH PERIOD
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE:
Premiums written....................................... $ 667.2 $ 564.0 $ 1,424.7 $ 1,246.3
Change in unearned premium reserve..................... 9.6 12.1 (168.1) (77.3)
---------------------------------------------------------------------
Premiums earned.................................. 676.8 576.1 1,256.6 1,169.0
Net investment income.................................. 101.7 105.5 208.7 216.1
Net realized capital gains............................. 37.5 27.9 58.2 59.8
Other income........................................... 2.3 7.0 16.8 18.4
---------------------------------------------------------------------
Total revenue.................................... 818.3 716.5 1,540.3 1,463.3
---------------------------------------------------------------------
LOSSES AND EXPENSES:
Losses and loss adjustment expenses.................... 511.3 394.9 908.0 790.3
Commission expense..................................... 148.3 138.6 299.2 277.3
Operating expense...................................... 65.7 55.4 124.9 110.6
Interest expense....................................... 10.0 10.6 20.5 21.1
Other expense.......................................... 16.5 25.2 42.0 49.0
---------------------------------------------------------------------
Total losses and expenses........................ 751.8 624.7 1,394.6 1,248.3
---------------------------------------------------------------------
Income before income taxes and
distributions on preferred securities
of subsidiary trust.......................... 66.5 91.8 145.7 215.0
Federal and foreign income taxes....................... 17.5 24.3 36.4 61.3
---------------------------------------------------------------------
Income before distributions on preferred
securities of subsidiary trust............... 49.0 67.5 109.3 153.7
Distributions on preferred securities of
subsidiary trust, net of applicable
income tax of $1.7 and $3.5, respectively........... (3.3) (3.3) (6.6) (6.6)
---------------------------------------------------------------------
Net income to common stockholders................ $ 45.7 $ 64.2 $ 102.7 $ 147.1
=====================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS.
-2-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED JUNE 30,
1999 1998
-------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ 102.7 $ 147.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in accrued investment income.................... (1.1) 4.4
Decrease (increase) in premiums and other receivables............... 69.7 (264.0)
Increase in deferred policy acquisition costs....................... (42.2) (29.1)
Increase in insurance reserves...................................... 172.3 181.1
Increase (decrease) in current and deferred federal and foreign
income tax assets............................................... (15.9) 38.4
Change in other assets and liabilities, net......................... (262.7) 40.9
Depreciation expense on property and equipment...................... 4.8 4.3
Net realized capital gains.......................................... (58.2) (59.8)
Change in other, net................................................ 12.4 34.6
-------------------------------------------
Net cash provided by operating activities......................... (18.2) 97.9
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments available for sale:
Purchases........................................................... (1,707.1) (4,551.4)
Maturities.......................................................... 240.5 221.9
Sales............................................................... 1,826.4 3,982.3
Other investments:
Purchases........................................................... (11.8) (1.1)
Sales............................................................... 1.6 --
Cost of additions to property and equipment............................ (4.8) (9.0)
-------------------------------------------
Net cash used in investing activities............................. 344.8 (357.3)
-------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS............... (0.3) (4.3)
-------------------------------------------
Net decrease in cash and cash equivalents......................... 326.3 (263.7)
Cash and cash equivalents, beginning of period............................. 274.9 641.6
-------------------------------------------
Cash and cash equivalents, end of period................................... $ 601.2 $ 377.9
===========================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS.
-3-
<PAGE>
AMERICAN RE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLARS IN MILLIONS)
(UNAUDITED)
1. BASIS OF PRESENTATION
American Re Corporation ("American Re" or the "Company") primarily acts
as the holding company for American Re-Insurance Company ("American
Re-Insurance"). American Re-Insurance underwrites property and casualty
reinsurance on a direct basis in both the domestic and international
markets. The Company is a 93% owned subsidiary of Munich Reinsurance
Company ("Munich Re"), a company organized under the laws of Germany.
The information for the interim periods ended June 30, 1999, and 1998, is
unaudited. The interim consolidated financial statements have been
prepared on the basis of generally accepted accounting principles and, in
the opinion of management, reflect all adjustments (consisting of normal
recurring 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. Intercompany
accounts and transactions have been eliminated. These financial
statements should be read in conjunction with the financial statements
and related notes in the Company's 1998 Form 10-K.
2. COMPREHENSIVE INCOME
The Company experienced a comprehensive loss of $45.7 million for the
three-month period ended June 30, 1999, compared to comprehensive income
of $67.3 million for the same period in 1998, and comprehensive income of
$66.4 million for the six-month period ended June 30, 1999, compared to
comprehensive income of $140.4 million for the same period in 1998. The
components of accumulated other comprehensive income are as follows:
<TABLE>
<CAPTION>
Net unrealized Net unrealized
appreciation of loss on foreign
investments exchange Total
------------------- ------------------ ------------------
<S> <C> <C> <C>
Balance at December 31, 1998 $158.9 $(35.8) $123.1
Period change (204.9) 2.9 (202.0)
Tax effect 71.7 (1.0) 70.7
Reclassification adjustment for gain/loss
included in net income (58.2) -- (58.2)
Tax effect 20.4 -- 20.4
------------------- ------------------ ------------------
Balance at June 30, 1999 $(12.1) $(33.9) $(46.0)
=================== ================== ==================
</TABLE>
-4-
<PAGE>
AMERICAN RE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLARS IN MILLIONS)
(UNAUDITED)
3. REINSURANCE
The Company reinsures certain risks to limit its exposure to catastrophes
and large or unusually hazardous risks. Although reinsurance agreements
contractually obligate the Company's reinsurers to reimburse it for the
agreed-upon portion of its gross paid losses, they do not discharge the
primary liability of the Company. The income statement amounts for
premiums written, premiums earned and losses and loss adjustment expenses
are net of reinsurance. Direct, assumed, ceded and net amounts for these
items are as follows:
<TABLE>
<CAPTION>
Three-month period Six-month period
ended June 30, ended June 30,
1999 1998 1999 1998
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Premiums written
Direct........................ $ 52.0 $ 40.7 $ 119.5 $ 77.9
Assumed .................... 806.1 685.7 1,653.3 1,492.2
Ceded......................... (190.9) (162.4) (348.1) (323.8)
---------------------------------------------------------------------------------
Net 667.2 564.0 1,424.7 1,246.3
=================================================================================
Premiums earned
Direct........................ 54.5 40.8 118.0 76.2
Assumed....................... 802.9 695.6 1,480.0 1,398.0
Ceded......................... (180.6) (160.3) (341.4) (305.2)
---------------------------------------------------------------------------------
Net 676.8 576.1 1,256.6 1,169.0
=================================================================================
Losses incurred
Direct........................ 87.5 51.1 99.1 74.1
Assumed....................... 478.9 484.6 1,085.5 950.4
Ceded......................... (55.1) (140.8) (276.6) (234.2)
---------------------------------------------------------------------------------
Net $ 511.3 $ 394.9 $ 908.0 $ 790.3
=================================================================================
</TABLE>
-5-
<PAGE>
AMERICAN RE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLARS IN MILLIONS)
(UNAUDITED)
4. SEGMENT REPORTING
American Re's Domestic Insurance Company Operations ("DICO") serves U.S.
insurance companies by providing them with customized, integrated treaty,
facultative and finite risk reinsurance programs primarily on a direct
basis. American Re's alternative market strategic business unit,
Munich-American RiskPartners, Inc. ("RiskPartners") provides customized
risk transfer, risk sharing, and risk management solutions to
self-insured clients worldwide. International Operations
("International") provides treaty, facultative and finite risk
reinsurance along with a range of other customized products and services
to insurance companies and other entities worldwide. In addition to its
core reinsurance business, American Re, through various subsidiaries
("Fee Subs"), offers a broad array of related services including
investment management, actuarial and financial analysis, due diligence
consulting for mergers and acquisitions, rent-a-captive facilities, and
reinsurance and insurance brokerage. The financial results of these
subsidiaries have been aggregated along with holding company operations
for presentation of segment results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
TOTAL
INSURANCE FEE SUBS &
DICO RISKPARTNERS INTERNATIONAL OPERATIONS HOLDING CO. TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
GROSS PREMIUMS WRITTEN $487.4 $221.2 $142.6 $851.2 $6.9 $858.1
--------------------------------------------------------------------------------
NET PREMIUMS WRITTEN 392.4 143.7 124.2 660.3 6.9 667.2
--------------------------------------------------------------------------------
PREMIUMS EARNED 397.2 138.9 133.8 669.9 6.9 676.8
Net investment income 99.2 2.5 101.7
Net realized capital gains 37.5 -- 37.5
Other income 0.8 1.5 2.3
----------------------------------------
Total revenue 807.4 10.9 818.3
----------------------------------------
LOSSES AND EXPENSES
LOSSES AND LAE 300.0 99.1 105.4 504.5 6.8 511.3
UNDERWRITING EXPENSES 139.5 39.0 36.0 214.5 (0.5) 214.0
Interest expense -- 10.0 10.0
Other expense 1.9 14.6 16.5
----------------------------------------
Total losses and expenses 720.9 30.9 751.8
----------------------------------------
Income before income
taxes and distributions on
preferred securities 66.5
=============
UNDERWRITING GAIN (LOSS) (42.3) 0.8 (7.6) (49.1) 0.6 (48.5)
================================================================================
LOSS AND LAE RATIO 75.5% 71.3% 78.8% 75.3% 98.3% 75.5%
UNDERWRITING EXPENSE RATIO 35.1% 28.1% 26.9% 32.0% (7.7)% 31.6%
--------------------------------------------------------------------------------
COMBINED RATIO 110.6% 99.4% 105.7% 107.3% 90.6% 107.1%
================================================================================
</TABLE>
<PAGE>
AMERICAN RE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1998
TOTAL
INSURANCE FEE SUBS &
DICO RISKPARTNERS INTERNATIONAL OPERATIONS HOLDING CO. TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
GROSS PREMIUMS WRITTEN $413.4 $181.8 $131.1 $726.3 -- $726.3
--------------------------------------------------------------------------------
NET PREMIUMS WRITTEN 328.0 124.2 111.8 564.0 -- 564.0
--------------------------------------------------------------------------------
PREMIUMS EARNED 366.5 92.4 117.2 576.1 -- 576.1
Net investment income 106.3 (0.8) 105.5
Net realized capital gains 27.9 -- 27.9
Other income -- 7.0 7.0
----------------------------------------
Total revenue 710.3 6.2 716.5
----------------------------------------
LOSSES AND EXPENSES
LOSSES AND LAE 253.4 65.6 75.9 394.9 -- 394.9
UNDERWRITING EXPENSES 139.0 28.6 26.4 194.0 -- 194.0
Interest expense -- 10.6 10.6
Other expense 6.4 18.8 25.2
----------------------------------------
Total losses and expenses 595.3 29.4 624.7
----------------------------------------
Income before income
taxes and distributions on
preferred securities 91.8
============
UNDERWRITING GAIN (LOSS) (25.9) (1.8) 14.9 (12.8) -- (12.8)
================================================================================
LOSS AND LAE RATIO 69.1% 71.0% 64.7% 68.5% -- 68.5%
UNDERWRITING EXPENSE RATIO 37.9% 31.0% 22.6% 33.7% -- 33.7%
--------------------------------------------------------------------------------
COMBINED RATIO 107.0% 102.0% 87.3% 102.2% -- 102.2%
================================================================================
</TABLE>
-7-
<PAGE>
AMERICAN RE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
TOTAL
INSURANCE FEE SUBS &
DICO RISKPARTNERS INTERNATIONAL OPERATIONS HOLDING CO. TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
GROSS PREMIUMS WRITTEN $1,010.9 $459.9 $293.8 $1,764.6 $8.2 $1,772.8
--------------------------------------------------------------------------------
NET PREMIUMS WRITTEN 843.1 306.4 267.0 1,416.5 8.2 1,424.7
--------------------------------------------------------------------------------
PREMIUMS EARNED 752.7 252.2 243.5 1,248.4 8.2 1,256.6
Net investment income 204.8 3.9 208.7
Net realized capital gains 58.2 -- 58.2
Other income (0.2) 17.0 16.8
----------------------------------------
Total revenue 1,511.2 29.1 1,540.3
----------------------------------------
LOSSES AND EXPENSES
LOSSES AND LAE 533.5 183.7 182.7 899.9 8.1 908.0
UNDERWRITING EXPENSES 271.2 76.0 77.3 424.5 (0.4) 424.1
Interest expense -- 20.5 20.5
Other expense 3.5 38.5 42.0
----------------------------------------
Total losses and expenses 1,327.9 66.7 1,394.6
----------------------------------------
Income before income
taxes and distributions on
preferred securities 145.7
============
UNDERWRITING GAIN (LOSS) (52.0) (7.5) (16.5) (76.0) 0.5 (75.5)
================================================================================
LOSS AND LAE RATIO 70.9% 72.8% 75.0% 72.1% 98.8% 72.3%
UNDERWRITING EXPENSE RATIO 36.0% 30.1% 31.7% 34.0% (4.9)% 33.7%
--------------------------------------------------------------------------------
COMBINED RATIO 106.9% 102.9% 106.7% 106.1% 93.9% 106.0%
================================================================================
</TABLE>
-8-
<PAGE>
AMERICAN RE CORPORATION
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1999
(DOLLARS IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
TOTAL
INSURANCE FEE SUBS &
DICO RISKPARTNERS INTERNATIONAL OPERATIONS HOLDING CO. TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
GROSS PREMIUMS WRITTEN $945.5 $350.4 $274.1 $1,570.0 -- $1,570.0
--------------------------------------------------------------------------------
NET PREMIUMS WRITTEN 778.6 245.6 222.1 1,246.3 -- 1,246.3
--------------------------------------------------------------------------------
PREMIUMS EARNED 781.0 176.8 211.2 1,169.0 -- 1,169.0
Net investment income 218.1 (2.0) 216.1
Net realized capital gains 59.8 -- 59.8
Other income 3.7 14.7 18.4
----------------------------------------
Total revenue 1,450.6 12.7 1,463.3
----------------------------------------
LOSSES AND EXPENSES
LOSSES AND LAE 534.9 118.1 137.3 790.3 -- 790.3
UNDERWRITING EXPENSES 269.5 60.9 57.5 387.9 -- 387.9
Interest expense -- 21.1 21.1
Other expense 9.5 39.5 49.0
----------------------------------------
Total losses and expenses 1,187.7 60.6 1,248.3
----------------------------------------
Income before income
taxes and distributions on
preferred securities 215.0
============
UNDERWRITING GAIN (LOSS) (23.4) (2.2) 16.4 (9.2) -- (9.2)
================================================================================
LOSS AND LAE RATIO 68.5% 66.8% 65.0% 67.6% -- 67.6%
UNDERWRITING EXPENSE RATIO 34.5% 34.4% 27.2% 33.2% -- 33.2%
--------------------------------------------------------------------------------
COMBINED RATIO 103.0% 101.2% 92.2% 100.8% -- 100.8%
================================================================================
</TABLE>
-9-
<PAGE>
MANAGEMENTS' DISCUSSION AND ANALYSIS OF THE COMPANY'S RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1999, COMPARED WITH QUARTER ENDED JUNE 30, 1998
The Company's net premiums written increased 18.3% to $667.2 million
for the quarter ended June 30, 1999, from $564.0 million for the same period in
1998. The increase in net premiums written was generally attributable to
traditional treaty net premium writings, which increased 35.5% to $473.3 million
for the second quarter of 1999 from $349.3 million for the same period in 1998.
The increase in treaty premiums was primarily attributable to: 1) the Company's
Domestic Insurance Company Operations ("DICO") which increased 44.2% to $275.3
million for the second quarter of 1999, from $190.9 million for the same period
in 1998, 2) the Company's alternative market operation, Munich-American
RiskPartners, Inc. ("RiskPartners"), which increased 88.3% to $64.6 million for
the second quarter of 1999, from $34.3 million for the same period in 1998, and
3) the Company's International Operations, which increased 10.7% to $102.7
million for the second quarter of 1999, from $92.8 million for the same period
in 1998. These increases were slightly offset by a 47.3% decrease in DICO's
finite risk treaty business to $11.7 million for the second quarter of 1999,
from $22.2 million for the same period in 1998. These overall increases in net
premiums written include $55.2 million from the Company's initiatives with
healthcare providers and reinsurance intermediaries, compared to $9.4 million
for these initiatives in the 1998 period.
Facultative net premiums written decreased 9.7% to $193.7 million for
the second quarter of 1999, from $214.7 million for the same period in 1998.
This decrease was generally attributable to decreases in program business,
reflective of adverse market conditions experienced by all three of the
Company's major business segments.
The Company's net premiums earned increased 17.5% to $676.8 million for
the quarter ended June 30, 1999, from $576.1 million for the same period in
1998. The increase in premiums earned was primarily attributable to the increase
in premiums written in the second quarter of 1999.
Net losses and LAE incurred increased 29.5% to $511.3 million for the
quarter ended June 30, 1999, from $394.9 million for the same period in 1998.
This increase was primarily attributable to increased net premiums earned during
the period, in addition to increases in the Company's ultimate current accident
year loss ratios for certain types of business, and the increase in treaty
business, which generally carries a higher loss ratio than facultative business.
Net losses and LAE also included $27.5 million of catastrophe losses in the
quarter ended June 30, 1999, compared to $9.0 million for the same period in
1998.
Underwriting expense, consisting of commission expense plus operating
expense, increased 10.3% to $214.0 million for the quarter ended June 30, 1999,
from $194.0 million for the same period in 1998. This increase was due to a 7.0%
increase in commission expense to $148.3 million for the second quarter of 1999
from $138.6 million for the same period in 1998. This increase was attributable
to the increase in premiums earned in the 1999 period. Operating expenses
increased 18.6% to $65.7 million for the second quarter of 1999 from $55.4
million for the second quarter of 1998. This increase was primarily due to a
decrease in the capitalization of deferred acquisition costs.
The Company experienced an underwriting loss (net premiums earned minus
losses and LAE incurred and underwriting expenses) of $48.5 million for the
quarter ended June 30, 1999, compared to an underwriting loss of $12.8 million
for the same period in 1998. On a GAAP basis, the Company's loss ratio increased
to 75.5% for the second quarter of 1999 from 68.5% for the same period in 1998,
while
-10-
<PAGE>
the underwriting expense ratio decreased to 31.6% for the second quarter of 1999
from 33.7% for the same period in 1998. As a result of these changes, the
combined ratio for the quarter ended June 30, 1999, increased to 107.1% from
102.2% for the same period in 1998.
Pre-tax net investment income decreased 3.6% to $101.7 million for the
quarter ended June 30, 1999, from $105.5 million for the same period in 1998.
This decrease is attributable to a decrease in invested assets from the 1998
period and overall lower portfolio yields. The Company's after-tax net
investment income decreased slightly to $75.1 million for the quarter ended June
30, 1999, from $77.2 million for the same period in 1998.
The Company realized net capital gains of $37.5 million for the
quarter ended June 30, 1999, compared to net capital gains of $27.9 million
for the same period in 1998. The 1999 period included capital gains of $1.0
million on the sale of bonds and $33.6 million on the sale of common stock.
The 1998 period included net capital gains of $23.1 million on the sale of
bonds and $15.3 million on the sale of common stock, offset by the $10.5
million write-down of common stock, preferred stock and other invested asset
holdings, as the decline in fair value of these securities was considered to
be other than temporary.
Other income decreased 67.1% to $2.3 million for the quarter ended June
30, 1999, from $7.0 million for the same period in 1998. This decrease was
primarily attributable to a decrease in revenues from fee subsidiaries. Other
expenses decreased 34.5% to $16.5 million for the second quarter of 1999 from
$25.2 million for the same period in 1998. This decrease was primarily
attributable to a decrease in non-insurance related expenses.
Income before income taxes and distributions on preferred securities
decreased by 27.6% to $66.5 million for the quarter ended June 30, 1999, from
$91.8 million for the same period in 1998. Federal and foreign income taxes
decreased to $17.5 million for the quarter ended June 30, 1999, from $24.3
million for the same period in 1998.
The Company recognized an after-tax charge of $3.3 million for each of
the three-month periods ended June 30, 1999 and 1998, representing the Company's
minority interest in the earnings of American Re Capital, a single-purpose
wholly owned subsidiary trust. The charge is due to the distributions incurred
by American Re Capital on the Cumulative Quarterly Income Preferred Securities
("QUIPS").
Net income to common stockholders decreased 28.8% to $45.7 million for
the quarter ended June 30, 1999, from $64.2 million for the same period in 1998.
SIX MONTHS ENDED JUNE 30, 1999, COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998
The Company's net premiums written increased 14.3% to $1,424.7 million
for the six months ended June 30, 1999, from $1,246.3 million for the same
period in 1998. The increase in net premiums written was generally attributable
to treaty net premiums writings, which increased 17.5% to $983.3 million for the
six months ended June 30, 1999 from $836.8 million for the same period in 1998.
The increase in treaty premiums was primarily attributable to: 1) the Company's
Domestic Insurance Company Operations ("DICO") which increased 15.9% to $522.3
million for the six months ended June 30, 1999, from $450.6 million for the same
period in 1998, 2) the Company's alternative market operation, Munich-American
RiskPartners, Inc. ("RiskPartners"), which increased 56.3% to $156.6 million for
the six months ended June 30, 1999, from $100.2 million for the same period in
1998, and 3) the Company's International Operations, which increased 35.6% to
$191.7 million for the six months ended June 30, 1999, from $141.4 million for
the same period in 1998. These increases were slightly offset by decreases in
the Company's finite risk treaty business. DICO's finite risk treaty writings
decreased 39.7% to $47.6 million for the six months ended June 30, 1999, from
$78.9 million for the
-11-
<PAGE>
same period in 1998, and International Operations decreased 13.4% to $56.9
million for the six months ended June 30, 1999, from $65.7 million for the same
period in 1998. These overall increases in net premiums written include $90.5
million from the Company's initiatives with healthcare providers and reinsurance
intermediaries, compared to $17.9 million for these initiatives in the 1998
period.
Facultative net premiums written increased 7.8% to $441.4 million for
the six months ended June 30, 1999, from $409.5 million for the same period in
1998. This increase was generally attributable to increased certificate business
in the six-month period and the restructuring of the Company's retrocessional
programs.
The Company's net premiums earned increased 7.5% to $1,256.6 million
for the six months ended June 30, 1999, from $1,169.0 million for the same
period in 1998. The increase in premiums earned was primarily attributable to
increases in net premiums written, somewhat offset by the timing of premiums
earned on business in force.
Net losses and LAE incurred increased 14.9% to $908.0 million for the
six months ended June 30, 1999, from $790.3 million for the same period in 1998.
This increase was primarily attributable to increases in the Company's ultimate
accident year loss ratios for certain types of business, and the increase in
treaty business, which generally carries a higher loss ratio than facultative
business. Net losses and LAE also included $27.5 million of catastrophe losses
in the six months ended June 30, 1999, compared to $12.0 million for the same
period in 1998.
Underwriting expense, consisting of commission expense plus operating
expense, increased 9.3% to $424.1 million for the six months ended June 30,
1999, from $387.9 million for the same period in 1998. This increase was due to
a 7.9% increase in commission expense to $299.2 million for the six months ended
June 30, 1999 from $277.3 million for the same period in 1998. This increase was
primarily attributable to the increase in net premiums earned in the 1999
period. Operating expenses increased 12.9% to $124.9 million for the six months
ended June 30, 1999 from $110.6 million for the six months ended June 30, 1998.
This increase was primarily due to a decrease in the capitalization of deferred
acquisition costs.
The Company experienced an underwriting loss (net premiums earned minus
losses and LAE incurred and underwriting expenses) of $75.5 million for the six
months ended June 30, 1999, compared to an underwriting loss of $9.2 million for
the same period in 1998. On a GAAP basis, the Company's loss ratio increased to
72.3% for the six months ended June 30, 1999 from 67.6% for the same period in
1998, while the underwriting expense ratio increased to 33.7% for the six months
ended June 30, 1999 from 33.2% for the same period in 1998. As a result of these
changes, the combined ratio for the six months ended June 30, 1999, increased to
106.0% from 100.8% for the same period in 1998.
Pre-tax net investment income decreased 3.4% to $208.7 million for the
six months ended June 30, 1999, from $216.1 million for the same period in 1998.
This decrease is attributable to a decrease in invested assets from the 1998
period and overall lower portfolio yields. The Company's after-tax net
investment income decreased slightly to $154.3 million for the six months ended
June 30, 1999, from $156.0 million for the same period in 1998.
The Company realized net capital gains of $58.2 million for the six
months ended June 30, 1999, compared to net capital gains of $59.8 million for
the same period in 1998. The 1999 period included capital gains of $10.3 million
on the sale of bonds and $48.5 million on the sale of common equities. The 1998
period included net capital gains of $59.7 million on the sale of bonds and
$15.1 million on the sale of common equities, offset by the $15.1 million
write-down of common stock and other invested asset holdings, as the decline in
fair value of these securities was considered to be other than temporary.
-12-
<PAGE>
Other income decreased 8.7% to $16.8 million for the six months ended
June 30, 1999, from $18.4 million for the same period in 1998. This decrease was
primarily attributable to a decrease in income from deposit liabilities. Other
expenses decreased 14.3% to $42.0 million for the six months ended June 30, 1999
from $49.0 million for the same period in 1998. This decrease was primarily
attributable to a decrease non-insurance related expenses.
Income before income taxes and distributions on preferred securities
decreased by 32.2% to $145.7 million for the six months ended June 30, 1999,
from $215.0 million for the same period in 1998. Federal and foreign income
taxes decreased to $36.4 million for the six months ended June 30, 1999, from
$61.3 million for the same period in 1998.
The Company recognized an after-tax charge of $6.6 million for each of
the six-month periods ended June 30, 1999 and 1998, representing the Company's
minority interest in the earnings of American Re Capital, a single-purpose
wholly owned subsidiary trust. The charge is due to the distributions incurred
by American Re Capital on the Cumulative Quarterly Income Preferred Securities
("QUIPS").
Net income to common stockholders decreased 30.2% to $102.7 million for
the six months ended June 30, 1999, from $147.1 million for the same period in
1998.
FINANCIAL CONDITION
Total consolidated assets increased slightly to $13,649.6 million at
June 30, 1999, from $13,544.0 million at December 31, 1998. Total consolidated
liabilities also increased slightly to $10,625.4 million at June 30, 1999, from
$10,453.4 million at December 31, 1998.
The total financial statement value of investments and cash decreased
2.5% to $7,604.0 million at June 30, 1999, from $7,801.3 million at December 31,
1998, primarily due to a decrease in the fair value of investments held. The
financial statement value of the investment portfolio at June 30, 1999, included
a net decrease from amortized cost to fair value of $18.6 million for debt and
equity investments, compared to a net increase of $244.5 million at December 31,
1998. At June 30, 1999, the Company recognized a cumulative unrealized loss of
$12.1 million due to the net adjustment to fair value on debt and equity
investments, after applicable income tax effects, which was reflected in
stockholders' equity as a component of accumulated other comprehensive income.
This represents a net decrease to stockholders' equity of $171.0 million from
the cumulative unrealized gain on debt and equity securities of $158.9 million
recognized at December 31, 1998.
Common stockholders' equity decreased 2.3% to $2,786.7 million at June
30, 1999, from $2,853.1 million at December 31, 1998. This decrease was
primarily attributable to a $169.1 million decrease in accumulated other
comprehensive income, net of tax, offset by net income of $102.7 million.
The Company's insurance/reinsurance subsidiaries' statutory surplus
decreased to $2,560.8 million at June 30, 1999, from $2,631.1 million at
December 31, 1998. Operating leverage, as measured by such subsidiaries'
premiums-to-surplus ratio, on an annualized basis was 0.96 to 1 and 0.87 to 1 at
June 30, 1999, and December 31, 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company is an insurance holding company whose only material
investment is in the capital stock of American Re-Insurance. The Company is
dependent on dividends and tax allocation payments, primarily from American
Re-Insurance, to meet its short- and long-term liquidity requirements, including
its debt service obligations.
-13-
<PAGE>
The Company's cash flow from operations may be influenced by a variety
of other factors, including cyclical changes in the property and casualty
reinsurance market, insurance regulatory initiatives, and changes in general
economic conditions. Liquidity requirements are met on a short- and long-term
basis by funds provided by operations and from the maturity and the sale of
investments. Cash provided by operations primarily consists of premiums
collected, investment income, and reinsurance recoverable balances collected,
less paid claims (including payments made to commute or settle reinsurance
arrangements), retrocession payments, underwriting and interest expenses, QUIPS
distributions, and income tax payments. Cash flows used in operations for the
Company were $18.2 million for the six-month period ended June 30, 1999,
compared to cash flows provided by operations of $97.9 million for the same
period in 1998. The decrease in the 1999 period is attributable to several
factors, including a higher level of paid losses, primarily due to an increase
in finite risk commutations, and increased paid losses on several large
traditional treaties.
Cash and cash equivalents were $601.2 million and $274.9 million at
June 30, 1999, and December 31, 1998, respectively. Cash and short-term
investments are maintained for liquidity purposes and represented 7.9% and 3.5%,
respectively, of total financial statement investments and cash on such dates.
MARKET AND INTEREST RATE RISK
The Company is subject to market risk arising from the potential change
in the value of its various financial instruments. These changes may be due to
fluctuations in interest and foreign exchange rate and equity prices. The major
components of market risk affecting the Company are interest rate, foreign
currency and equity risk.
The Company has both fixed and variable (primarily mortgage backed
securities and collateralized mortgage obligations) income investments with a
value of $6,572.3 million at June 30, 1999 that are subject to changes in value
due to market interest rates. The Company also has Senior Bank Debt of $75.0
million, Senior Notes of $498.5 million, and QUIPS of $237.5 million. The Senior
Bank Debt is a variable rate loan, while the Senior Notes, and QUIPS are fixed
rate instruments.
The Company has exposure to movements in various currencies around the
world, particularly the Belgium Franc and the Australian dollar. Changes in
currency exchange rates primarily affect the international components of the
Company's balance sheet, income statement, and statement of cash flows. This
exposure is somewhat offset because the Company's reinsurance premiums and
invested assets are partially offset by losses incurred and loss reserves,
respectively, generally denominated in the same currency. At June 30, 1999, the
Company had no material currency rate exposure.
In addition to interest rate and foreign exchange risk, the Company's
common equity portfolio of $393.1 million at June 30, 1999 is subject to changes
in value based on changes in equity prices, predominately from the United
States. To hedge a portion of its exposure to movements in its equity portfolio,
the Company entered into options contracts with a notional value of $7.2 million
at June 30, 1999.
The Company has recently established American Re Capital Markets, Inc.
to provide its clients with integrated solutions for mitigating risk in the
financial markets. Currently, American Re Capital Markets focuses on the weather
derivative market, which exposes the Company to movement in weather related
indexes. At June 30, 1999, the Company entered into 126 contracts with a
notional value of $209.8 million. At June 30, 1999, the maximum payment amount
of these contracts was $110.6 million, and the maximum receivable amount was
$136.0 million.
-14-
<PAGE>
THE YEAR 2000 PROBLEM
IMPACT OF THE YEAR 2000 PROBLEM. The "Year 2000 problem" refers to the
potential failure of computer software and embedded computer chips to properly
recognize the year 2000 and later dates, because such dates are represented only
by the last two digits of the year and may be interpreted during computer
operations as preceded by 19 rather than 20. The Company has been aware of the
Year 2000 problem for several years and has assigned a team of dedicated
in-house information technology staff, working with retained consultants and
designated representatives from each of the Company's major business areas, to
review all critical systems for their Year 2000 compliance and to correct all
problems identified.
THE COMPANY'S STATE OF READINESS. Some of the Company's Year 2000
problems have been eliminated in the ordinary course of ongoing upgrades to the
Company's technology platforms. However, in order to address the remainder of
the Company's Year 2000 non-compliant systems (e.g. certain mainframe systems,
old software applications, and some facilities equipment), in 1997 management
initiated a Year 2000 Compliance Program consisting of 5 phases: Phase 1 -
Planning, which consisted of defining the project scope, organizing a project
team, developing a detailed project plan and obtaining management approval;
Phase II - Inventory/Impact Analysis, which consisted of inventorying all of the
Company's technology as well as non-technology-based systems and equipment
containing embedded chips, determining whether there exists a potential Year
2000 problem, and analyzing the impact on the Company of such problem, and which
resulted in the creation of a Year 2000 database including all products and
services that need to be evaluated for Year 2000 compliance; Phase III -
Renovation, which consists of repairing or replacing critical items that are not
Year 2000 compliant; Phase IV - Vendor Compliance, pursuant to which, among
other things, the Company is seeking representations from vendors that their
products are Year 2000 compliant or modifications to make such products Year
2000 compliant and has retained research consultants to independently verify
vendors' Year 2000 compliance; and Phase V Enterprise Wide Testing and
Compliance Certification, which consists of performing a final integrated
testing of the corrected business operations and underlying technical
infrastructure in a controlled environment. The Company completed Phase I in
January 1998, Phase II in May 1998, and Phases III, IV and V in August 1999,
except that with respect to Phase III certain hardware in the Company's
technology infrastructure identified as Year 2000 non-compliant will be upgraded
or replaced to be Year 2000 compliant in early September 1999, and with respect
to Phase IV the Company continues seeking representations from certain vendors
as to the Year 2000 compliance of some products used at the Company. However,
the Company's Year 2000 compliance testing has indicated that all critical such
products would not pose a Year 2000 problem to the extent of such products'
components and features actually used by the Company.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES. The major business risks of a Year 2000
failure facing the Company are (i) the inability of the Company to maintain
critical business operations dependent on technology or the loss of facilities
infrastructure such as telephone communications, with the potential for lost
revenue and profits due to business disruptions, (ii) the direct costs
associated with restoring operations after disruption, (iii) the loss of
competitive market position due to a significant disruption of long duration,
and (iv) potential legal liabilities of the Company to third parties who may
claim dependence on, or to have been harmed by the failure of, the Company's
systems and operations. After all Phases are completed, the Company believes its
systems will be no more likely to suffer disruptions from the Year 2000 problem
than from any other type of hardware or software failures that can occur from
time to time with many complex systems. The Company has backup systems for
power, certain facilities infrastructure, and computer systems and has response
procedures in place with vendors in the event of such "ordinary" failures.
Unlike other businesses such as banking or computer based, transaction
-15-
<PAGE>
intensive retail operations, in the worst case scenario, the Company could
briefly cease computer-related business operations without significant legal,
regulatory, or financial impact. As a result, the Company has no additional
contingency plan specific to potential Year 2000 failures after the renovation
and compliance testing phases are completed. However, the Company, with the
assistance of an independent accounting firm, is developing an updated business
continuity plan which contemplates manual and other backup procedures to
maintain the Company's operations in the event of systems failure for any
reason, including failure as a result of a Year 2000 problem. This updated
business continuity plan is expected to be finalized and implemented by the end
of September 1999.
In addition to the risks and costs associated with its internal systems
and third party vendors, the Company continues to evaluate its underwriting risk
arising from potential losses associated with Year 2000 failures. Due to a
significant number of variables associated with the extent and severity of the
Year 2000 problem, the Company's underwriting risk arising from potential Year
2000 losses cannot be quantified. These variables include actual pervasiveness
and severity of Year 2000 system flaws, the amount of costs and expenses
directly attributable to Year 2000 failures, the portion of such amount, if any,
that constitutes insurable losses, and the extent of governmental intervention.
Moreover, standard insurance and reinsurance contracts neither explicitly
include nor explicitly exclude coverage for Year 2000 failures. As a result,
some Year 2000 related losses may or may not be determined to be covered under
standard insurance and reinsurance contracts, depending upon the specific
contract language, the applicable case law, and the facts and circumstances of
each loss. The Company is proactively seeking to minimize its potential Year
2000 underwriting exposures by (1) assisting clients in evaluation of their
potential Year 2000 exposure, (2) performing an underwriting evaluation of each
individual client's potential Year 2000 exposure, (3) structuring reinsurance
and insurance contract language where possible to mitigate potential exposure;
(4) recommending computer systems and technical support as appropriate, and (5)
providing a combination of financial protection and risk management solutions.
However, the Company cannot be certain that these steps will adequately minimize
its Year 2000 underwriting exposures, and given the possible magnitude of the
Year 2000 problem, the Company may incur a significant amount of Year 2000
related losses, including litigation expenses, and such losses may have a
material adverse impact on the Company's business, operations or financial
condition. The Company believes it is taking reasonable and appropriate measures
in the course of its business operations and client relationships to avoid or
mitigate such Year 2000 related liability exposure.
COSTS ASSOCIATED WITH YEAR 2000 ISSUES. Year 2000 specific expenditures
for the six months ended June 30, 1999, not including in-house resources, were
approximately $1.8 million. These expenses are paid out of working capital. The
Company currently has budgeted $4.0 million in expenses in connection with the
Company's Year 2000 compliance effort in 1999. It is anticipated that the total
Year 2000 compliance expenditures will not have a material adverse effect on the
Company's business, operations or financial condition.
SAFE HARBOR DISCLOSURE
The Company has disclosed certain forward-looking statements concerning
its operations, economic performance and financial condition, including, in
particular the likelihood of the Company's success in developing and expanding
its business and the Company's readiness to handle issues related to Year 2000
and risks related thereto. These statements are based upon a number of
assumptions and estimates which are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Company, and reflect future business decisions which are subject to change. Some
of these assumptions inevitably will not materialize, and unanticipated events
will occur which will affect the Company's results. Such statements may include,
but are not limited to, projections of premium revenue, investment income, other
-16-
<PAGE>
revenue, losses, expenses, earnings, cash flows, plans for future operations,
common stockholders' equity, investments, capital plans, dividends, plans
relating to products or services of American Re, and estimates concerning the
effects of litigation or other disputes. Such statements may also include, but
are not limited to, projections relating to the Company's ability to complete
the various phases of its Year 2000 Compliance Plan on time; the ability of
third party vendors and client companies to eliminate or minimize their Year
2000 exposures and the accuracy of their representations and warranties to the
Company; the Company's ability to minimize any possible Year 2000 underwriting
losses and the effects of Year 2000 reinsurance claims, litigation or other
disputes, as well as assumptions for any of the foregoing and are generally
expressed with words, such as "believes," "estimates," "expects," "anticipates,"
"plans," "projects," "forecasts," "goals," "could have," "may have" and similar
expressions.
-17-
<PAGE>
PART II. OTHER INFORMATION
AMERICAN RE CORPORATION
ITEMS 1 - 5 HAVE BEEN OMITTED AS THEY ARE EITHER INAPPLICABLE OR THE ANSWER IS
NEGATIVE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule is filed as part of this
report.
-18-
<PAGE>
AMERICAN RE CORPORATION
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.
AMERICAN RE CORPORATION
(Registrant)
/s/ George T. O'Shaughnessy, Jr.
-------------------------------------------------
GEORGE T. O'SHAUGHNESSY, JR.
Executive Vice President and
Chief Financial and Accounting Officer
Dated: August 13, 1999
-19-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN RE
CORPORATION'S REPORT ON FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
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<DEBT-CARRYING-VALUE> 0
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<EQUITIES> 393
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<CASH> 601
<RECOVER-REINSURE> 2,545
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<TOTAL-ASSETS> 13,650
<POLICY-LOSSES> 7,336
<UNEARNED-PREMIUMS> 1,451
<POLICY-OTHER> 320
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238<F1>
0
<COMMON> 0
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1,257
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<FN>
<F1>REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
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</TABLE>
