<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number 1-11868
ZURICH REINSURANCE CENTRE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3703575
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Chase Manhattan Plaza, 43rd Floor
New York, New York 10005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 898-5000
Former name, former address and former fiscal year, if changed since
last report:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
(Class) (Outstanding at November 1, 1996)
Common Stock, $.01 par value 26,191,508 Shares
<PAGE> 2
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
<S> <C>
Item 1 - Consolidated Financial Statements
Independent Accountants' Review Report 3
Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 4
Consolidated Statements of Operations -
Three and nine months ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
- -------- -----------------
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
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<PAGE> 3
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors and Shareholders
Zurich Reinsurance Centre Holdings, Inc.
We have reviewed the accompanying consolidated balance sheet of Zurich
Reinsurance Centre Holdings, Inc. and Subsidiaries as of September 30, 1996, and
the related consolidated statements of operations for the three-month and
nine-month periods ended September 30, 1996 and 1995 and the consolidated
statements of cash flows for the nine-month periods ended September 30, 1996 and
1995. These consolidated financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
consolidated financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Zurich Reinsurance Centre Holdings,
Inc. and Subsidiaries as of December 31, 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended (but not presented herein) and in our report dated February 12, 1996, we
expressed an unqualified opinion on those consolidated financial statements.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
November 6, 1996
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<PAGE> 4
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ------------
1996 1995
---- ----
(UNAUDITED)
ASSETS
<S> <C> <C>
Fixed maturities available-for-sale (amortized cost: 9/30/96
$1,235,681; 12/31/95 $1,096,903) $ 1,234,818 $1,122,822
Equity securities available-for-sale (cost: 9/30/96 $118,192;
12/31/95 $105,542) 145,978 124,543
Investment in affiliate (cost: 9/30/96 $9,769; 12/31/95 $3,973) 9,769 3,973
Short-term investments, at cost, which approximates market 72,472 54,063
Cash and cash equivalents 207,968 206,699
----------- ----------
Total cash and invested assets 1,671,005 1,512,100
----------- ----------
Accrued investment income 15,912 15,734
Premiums receivable 249,420 205,410
Reinsurance recoverables:
Paid losses 1,383 1,312
Unpaid losses 38,950 30,981
Prepaid reinsurance premiums 2,756 7,126
Deferred policy acquisition costs 85,183 72,200
Deferred federal income taxes 40,386 31,369
Other assets 70,733 47,432
----------- ----------
Total assets $ 2,175,728 $1,923,664
=========== ==========
LIABILITIES
Losses and loss adjustment expenses $ 876,846 $ 689,609
Unearned premiums 308,138 272,132
7 1/8% Senior Notes due 2023 198,408 198,394
Other liabilities 108,440 81,959
----------- ----------
Total liabilities 1,491,832 1,242,094
----------- ----------
SHAREHOLDERS' EQUITY
Preferred stock ($.10 par value, 20,000,000 shares
authorized; no shares outstanding) -- --
Common stock ($.01 par value, 50,000,000 shares
authorized; 26,189,708 and 26,197,541 shares issued
and outstanding at 9/30/96 and 12/31/95, respectively) 262 262
Paid-in capital 623,264 624,068
Unrealized appreciation of investments (net of deferred taxes of
$9,455 and $15,776 at 9/30/96 and 12/31/95, respectively) 17,468 29,144
Retained earnings 43,129 28,096
Treasury stock, at cost (7,833 and 0 shares at 9/30/96 and
12/31/95, respectively) (227) --
----------- ----------
Total shareholders' equity 683,896 681,570
----------- ----------
Total liabilities and shareholders' equity $ 2,175,728 $1,923,664
=========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE> 5
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
REVENUES
<S> <C> <C> <C> <C>
Net premiums written (net of premiums ceded of
$2,176 and $5,173 for the three months and
$4,850 and $8,326 for the nine months ended
September 30, 1996 and 1995, respectively) $ 188,599 $173,784 $ 553,431 $418,509
Increase in unearned premiums 14,174 40,640 40,376 77,121
--------- -------- --------- --------
Net premiums earned (net of premiums ceded of
$2,464 and $3,000 for the three months and
$9,220 and $6,252 for the nine months ended
September 30, 1996 and 1995, respectively) 174,425 133,144 513,055 341,388
Net investment income 23,309 21,500 67,276 58,842
Realized capital gains (losses) (5,483) 7,772 (10,906) 14,530
Other income 518 50 849 511
--------- -------- --------- --------
Total revenues 192,769 162,466 570,274 415,271
--------- -------- --------- --------
EXPENSES
Loss and loss adjustment expenses (net of reinsurance
recoveries of $3,601 and $1,067 for the three months
and $12,155 and $2,813 for the nine months ended
September 30, 1996 and 1995, respectively) 123,001 101,687 364,613 258,177
Commissions 47,590 32,607 138,346 83,266
Other operating costs and expenses 11,834 10,914 35,229 31,937
Interest and amortization 3,917 4,177 11,602 11,969
--------- -------- --------- --------
Total expenses 186,342 149,385 549,790 385,349
--------- -------- --------- --------
Income before income taxes 6,427 13,081 20,484 29,922
Federal income tax expense 1,613 4,191 5,451 4,309
--------- -------- --------- --------
NET INCOME $ 4,814 $ 8,890 $ 15,033 $ 25,613
========= ======== ========= ========
PER SHARE DATA
Weighted average shares outstanding (in 000's) 26,185 26,182 26,157 26,158
========= ======== ========= ========
Net income $ 0.18 $ 0.34 $ 0.57 $ 0.98
========= ======== ========= ========
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE> 6
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
---- ----
(UNAUDITED)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 15,033 $ 25,613
Adjustments to reconcile net income to net cash provided by
operating activities:
Losses and loss adjustment expenses, net 179,268 159,552
Unearned premiums, net 40,376 77,121
Premiums receivable (44,010) (53,048)
Deferred policy acquisition costs (12,983) (20,424)
Current and deferred taxes (18,713) (5,594)
Other assets and other liabilities 29,657 12,489
Realized capital (gains) losses 10,906 (14,530)
----------- -----------
Net cash provided by operating activities 199,534 181,179
----------- -----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Sales of fixed maturities 1,722,442 1,579,579
Maturities or calls of fixed maturities 66,500 18,752
Purchases of fixed maturities (1,941,646) (1,642,473)
Sales of equity securities 49,107 31,861
Purchases of equity securities (63,306) (105,743)
Net purchases of short-term investments (18,409) (39,184)
Purchase of Re Capital Corporation, net of cash acquired -- 18,485
Cost of additions to property and equipment (3,237) (1,321)
----------- -----------
Net cash used in investing activities (188,549) (140,044)
----------- -----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Payment of cash dividend to shareholders (2,619) --
Purchase of treasury stock (5,891) --
Conversion of Re Capital Debentures (1,206) (71,929)
----------- -----------
Net cash used in financing activities (9,716) (71,929)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS 1,269 (30,794)
Cash and cash equivalents, beginning of period 206,699 180,320
----------- -----------
Cash and cash equivalents, end of period $ 207,968 $ 149,526
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE> 7
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial information and in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, such financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting solely of normal recurring accruals)
considered necessary for a fair presentation have been included. The results of
operations for the interim period are not necessarily indicative of the results
that may be expected for the year ended December 31, 1996, as quarterly results
may be affected by several factors including, but not limited to, changes in the
interest rate environment and catastrophic losses. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in Zurich Reinsurance Centre Holdings, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1995.
Financial information has been included herein related to the consolidated
financial statements of Zurich Reinsurance Centre Holdings, Inc. ("ZRCH") and
its wholly-owned subsidiaries, principally Zurich Reinsurance Centre, Inc.
("ZRC") and ZC Insurance Company ("ZCIC"), (together with ZRCH, the "Company").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Losses and Loss Adjustment Expenses
Effective January 1, 1996, the Company adopted discounting for certain tabular
workers' compensation indemnity reserves. This method is preferable as it is
more representationally faithful to the economics of the underlying business and
it will enhance comparability of the Company's financial statements as it is the
prevalent method used in the reinsurance industry. Such reserves were discounted
to present value using a 5% interest rate. Since the effect of such discount as
of January 1, 1996 was $0.8 million, it has been reported as a component of
earnings. Discounting had no material effect on net income for the three and
nine months ended September 30, 1996 or on the pro forma net income for the
three and nine months ended September 30, 1995. Tabular workers' compensation
indemnity reserves, net of discount, were $2.8 million as of September 30, 1996.
Stock-Based Compensation
The Company adopted the accounting provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
in 1996. SFAS No. 123 applies a fair value-based accounting method to employee
stock-based compensation arrangements. During May 1996, the Company's
shareholders approved the Company's Stock Option Plan (the "Stock Option Plan"),
and the Company issued an initial grant of options covering 503,575 shares of
the Company's common stock, effective January 1, 1996. For the nine months ended
September 30, 1996, the Company expensed $0.4 million, net of tax, related to
the Stock Option Plan.
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<PAGE> 8
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INCOME TAXES
The Company's overall effective tax rate for the three and nine months ended
September 30, 1996 was 25.1% and 26.6%, respectively. The Company's overall
effective tax rate for the three and nine months ended September 30, 1995 was
32.0% and 14.4%, respectively. The overall effective tax rates for 1996 and 1995
had both operating income and realized capital gain (loss) components. For the
three and nine months ended September 30, 1996, the effective tax rate on
operating income was 29.7% and 29.6%, respectively. The effective tax rate on
operating income was 27.5% and 29.8% for the three and nine months ended
September 30, 1995, respectively. The effective tax rate on operating income for
1996 and 1995 differed from the federal statutory rate of 35.12% due principally
to tax-exempt investment income and dividends. The effective tax rate on
realized capital gains (losses) approximated the federal statutory rate of
35.12% for the three and nine months ended September 30, 1996 and for the three
months ended September 30, 1995. The effective tax benefit on realized capital
gains for the nine months ended September 30, 1995 was 1.9% and differed from
the federal statutory rate of 35.12% due to the reversal of a valuation
allowance that was previously established by the Company to offset potential tax
benefits from realized capital losses.
-8-
<PAGE> 9
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OPERATING INCOME
The Company's pre-tax operating income (excluding realized capital gains and
losses) increased 124.3% to $11.9 million in the third quarter of 1996, compared
to $5.3 million for the third quarter of 1995. The Company's pre-tax operating
income increased 103.9% to $31.4 million for the nine months ended September 30,
1996, compared to $15.4 million for the nine months ended September 30, 1995.
The increase is primarily due to improved underwriting results and growth in net
investment income.
NET INCOME
Net income was $4.8 million for the third quarter of 1996, compared to $8.9
million for the corresponding period of 1995, due to a $4.5 million increase in
after-tax operating income offset by an $8.6 million decline in after-tax
realized capital gain (loss) activity. Net income was $15.0 million for the nine
months ended September 30, 1996, compared to $25.6 million for the corresponding
period in 1995, due to an $11.3 million increase in after-tax operating income
offset by a $21.9 million decline in after-tax realized capital gain (loss)
activity.
PREMIUMS
Gross premiums written for the three and nine months ended September 30, 1996
were $190.8 million and $558.3 million, respectively, representing a 6.6% and
30.8% increase, respectively, over the comparable 1995 periods. The Company
entered into a quota share treaty with members of the Zurich American Insurance
Group (the "ZA Quota Share") during the third quarter of 1995. The ZA Quota
Share contributed $41.0 million and $34.8 million to third quarter 1996 and 1995
gross premiums written, respectively, and $146.0 million and $34.8 million to
gross premiums written for the nine months ended September 30, 1996 and 1995,
respectively. Net premiums written for the three and nine months ended September
30, 1996 were $188.6 million and $553.4 million, representing a 8.5% and 32.2%
increase, respectively, over the comparable 1995 periods. (The growth
exhibited by net premiums written was consistent with gross premiums
written since there were no significant changes in the Company's retention
levels or retrocessional programs during the nine months ended September 30,
1996 or 1995.) Net premiums earned for the three and nine month periods ended
September 30, 1996 were $174.4 million and $513.1 million, respectively,
reflecting a 31.0% and 50.3% increase, respectively, over the comparable 1995
periods. For the three and nine months ended September 30, 1996, net premiums
written increased less on a percentage basis than net premiums earned due to the
maturing of the Company's book of business.
LOSS AND LOSS ADJUSTMENT EXPENSES AND COMMISSIONS
Loss and loss adjustment expenses for the third quarter of 1996 increased to
$123.0 million, a 21.0% increase over the comparable 1995 period. For the nine
months ended September 30, 1996, loss and loss adjustment expenses increased to
$364.6 million, a 41.2% increase over the comparable 1995 period. There were no
significant catastrophe losses in either 1996 or 1995. Commissions for the three
and nine months ended September 30, 1996 were $47.6 million and
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<PAGE> 10
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
$138.3 million, respectively, compared to $32.6 million and $83.3 million for
the three and nine months ended September 30, 1995, respectively. The increase
in both losses and commissions is due to significant growth in earned premiums
as discussed above. The GAAP loss and commission ratio for the three and nine
months ended September 30, 1996 was 97.8% and 98.0%, respectively, compared to
100.9% and 100.0% for the three and nine months ended September 30, 1995,
respectively. The loss and commission ratio has trended downward due to
refinement of the loss reserving process and a greater percentage of well
performing renewal business. In addition, the components of the loss and
commission ratio have shifted primarily due to a greater percentage of business
written on a pro rata basis. Pro rata treaties generally have lower loss ratios
but higher commission ratios than excess of loss treaties.
OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses were $11.8 million in the third quarter of
1996 compared to $10.9 million for the corresponding period of 1995. For the
nine months ended September 30, 1996, other operating costs and expenses were
$35.2 million compared to $31.9 million for the corresponding period of 1995.
The GAAP expense ratio of 6.3% for the third quarter of 1996 was consistent with
the comparable quarter of 1995. The GAAP expense ratio of 6.4% for the nine
months ended September 30, 1996 declined from 7.6% for the nine months ended
September 30, 1995 due primarily to an expanded premium base.
STATUTORY COMBINED RATIOS
ZRC's statutory combined ratio for the third quarter of 1996 declined to 103.0%
from 107.0% for the same period of 1995, primarily due to the lower loss and
commission ratio discussed above. ZRC's statutory combined ratio for the nine
months ended September 30, 1996 declined to 103.3% from 107.6% for the same
period in 1995 due to a 3.0 percentage point decline in the loss and commission
ratio and a 1.3 percentage point decline in the expense ratio. ZRC's statutory
combined ratio differs from the Company's GAAP combined ratio primarily due to
the deferral of certain acquisition costs and the inclusion of certain holding
company expenses, each of which is considered in the Company's GAAP combined
ratio.
NET INVESTMENT INCOME
Net investment income for the third quarter of 1996 was $23.3 million, an 8.4%
increase over the comparable 1995 period. Net investment income for the first
nine months of 1996 was $67.3 million, a 14.3% increase over the comparable 1995
period. Growth in net investment income continues as the cash and invested asset
base expands due to strong cash flows, primarily attributable to underwriting
operations and net investment income. The after-tax annualized net investment
income yield of 4.0% and 3.9% for the three and nine months ended September 30,
1996, respectively, was comparable to 4.3% and 4.4% for the three and nine
months ended September 30, 1995, respectively.
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<PAGE> 11
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REALIZED CAPITAL GAINS (LOSSES)
Pre-tax realized capital gains (losses) were $(5.5) million for the third
quarter of 1996, compared to $7.8 million for the third quarter of 1995. For the
nine months ended September 30, 1996, pre-tax realized capital gains (losses)
were $(10.9) million, compared to $14.5 million for the corresponding period of
1995. The 1996 and 1995 realized capital gain (loss) activity is reflective of
market conditions and is consistent with the Company's investment philosophy,
whereby capital gains (losses) are realized to maximize total investment return.
INTEREST AND AMORTIZATION
Interest and amortization expense for the third quarter of 1996 was $3.9
million, a 6.2% decline compared to the corresponding period of 1995. Interest
and amortization expense for the first nine months of 1996 was $11.6 million, a
3.1% decline from the corresponding period of 1995. The decrease in interest and
amortization expense is primarily due to the conversion of the Company's
remaining 5 1/2% Convertible Debentures, due 2000 (the "Convertible Debentures")
(assumed from Re Capital Corporation during April, 1995).
TAXES
The Company's overall effective tax rate for the three and nine months ended
September 30, 1996 was 25.1% and 26.6%, respectively. The Company's overall
effective tax rate for the three and nine months ended September 30, 1995 was
32.0% and 14.4%, respectively. The overall effective tax rates for 1996 and 1995
had both operating income and realized capital gain (loss) components. For the
three and nine months ended September 30, 1996, the effective tax rate on
operating income was 29.7% and 29.6%, respectively. The effective tax rate on
operating income was 27.5% and 29.8% for the three and nine months ended
September 30, 1995, respectively. The effective tax rate on operating income for
1996 and 1995 differed from the federal statutory rate of 35.12% due principally
to tax-exempt investment income and dividends. The effective tax rate on
realized capital gains (losses) approximated the federal statutory rate of
35.12% for the three and nine months ended September 30, 1996 and for the three
months ended September 30, 1995. The effective tax benefit on realized capital
gains for the nine months ended September 30, 1995 was 1.9% and differed from
the federal statutory rate of 35.12% due to the reversal of a valuation
allowance that was previously established by the Company to offset potential tax
benefits from realized capital losses.
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<PAGE> 12
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
CASH AND INVESTED ASSETS
During the first nine months of 1996, the Company's cash and invested assets
increased 10.5% to $1,671.0 million. The increase is principally due to cash
flows from operations, offset somewhat by a decrease in the market value of the
Company's investment portfolio. As of September 30, 1996, approximately 74% of
the Company's cash and invested assets were invested in fixed maturity
securities, 9% in equity securities and 17% in short-term investments and cash
and cash equivalents, consistent with the allocation as of December 31, 1995.
Approximately 84% of the fixed maturity portfolio at September 30, 1996 and
December 31, 1995 was invested in U.S. government obligations or securities
rated "triple-A" by Moody's Investors Service. The balance of the fixed maturity
portfolio was invested in other investment-grade fixed maturities. The duration
of the Company's fixed maturity portfolio of 4.1 years as of September 30, 1996
approximated the 4.3 years duration at December 31, 1995.
LOSS RESERVES
Liabilities for gross losses and loss adjustment expenses (together, "loss
reserves") were $876.8 million as of September 30, 1996, a $187.2 million
increase from December 31, 1995. The increase in loss reserves is principally
due to significant growth in premium volume during 1996.
SHAREHOLDERS' EQUITY
Shareholders' equity at September 30, 1996 was $683.9 million compared to $681.6
million at December 31, 1995. The increase in shareholders' equity is due to
after-tax operating income, partially offset by realized and unrealized capital
losses.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and short-term investments as of September 30, 1996
increased to $280.4 million, or 7.5% since December 31, 1995, as a result of
operating cash flow and sector shifts consistent with the Company's investment
strategy.
Net cash provided by operating activities for the nine months ended September
30, 1996 was $199.5 million, compared to $181.2 million for the nine months
ended September 30, 1995. The increase in cash flows is primarily attributable
to underwriting operations and net investment income. For the nine months ended
September 30, 1996, net cash used in financing activities of $9.7 million
resulted from the Company's repurchase of its common stock, a dividend payment
and the conversion of the Convertible Debentures. Net cash used in financing
activities for the first nine months of 1995 was $71.9 million and resulted from
the conversion of the Convertible Debentures.
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<PAGE> 13
ZURICH REINSURANCE CENTRE HOLDINGS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit Description Page
------- ----------- ----
15 Letter regarding unaudited interim financial information 15
27 Financial Data Schedule 16
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the period ended September
30, 1996.
Omitted from this Part II are items which are inapplicable or to which
the answer is negative for the period covered.
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<PAGE> 14
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.
Zurich Reinsurance Centre Holdings, Inc.
(Registrant)
Date November 8, 1996 /s/ Richard E. Smith
-------------------------------------------
Richard E. Smith
President and Chief Executive Officer
Date November 8, 1996 /s/ Karen O'Connor Rubsam
-------------------------------------------
Karen O'Connor Rubsam
Sr. Vice President, Chief Financial Officer
and Treasurer
-14-
<PAGE> 1
Exhibit 15
Acknowledgment Letter
Board of Directors and Shareholders
Zurich Reinsurance Centre Holdings, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 No. 33-75598) pertaining to the Zurich Reinsurance Centre Holdings,
Inc. 1993 Employees' Stock Purchase Plan of our report dated November 6, 1996
relating to the unaudited consolidated interim financial statements of Zurich
Reinsurance Centre Holdings, Inc. which is included in its Form 10-Q for the
quarter ended September 30, 1996.
We are also aware of the incorporation by reference in the Zurich Reinsurance
Centre Holdings, Inc. Registration Statement (Form S-8 No. 33-93390) pertaining
to the Zurich Reinsurance Centre, Inc. (ZRC) 401(k) Plan of our report dated
November 6, 1996 relating to the unaudited consolidated interim financial
statements of Zurich Reinsurance Centre Holdings, Inc. which is included in its
Form 10-Q for the quarter ended September 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not part of
these registration statements prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ ERNST & YOUNG LLP
Stamford, Connecticut
November 6, 1996
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<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
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0
0
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513,055
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