<PAGE> 1
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: March 31, 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: 0-27662
IPC Holdings, Ltd.
(Exact name of registrant as specified in its charter)
Bermuda Not Applicable
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
American International Building, 29 Richmond Road, Hamilton, HM 08, Bermuda
(Address of principal executive offices)
(441) 295-2121
(Registrant's telephone number, including area code)
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 .......No...X...
The number of outstanding shares of IPC Holdings, Ltd. common stock, par
value U.S. $0.01 per share, as of April 30, 1996 was 25,000,000.
Total pages 12
Exhibit Index located on page 11
<PAGE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
IPC HOLDINGS, LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars except for per share amounts)
<TABLE>
<CAPTION>
As of As of
March 31, 1996 December 31, 1995
(unaudited) (audited)
<S> <C> <C>
ASSETS:
Fixed maturity investments:
Available for sale, at fair market value (Amortized
cost 1996: $238,831; 1995: $211,121) $230,857 $215,632
Held to maturity, at amortized cost (Fair market value
1996: $220,166; 1995: $214,356) 221,809 210,341
Cash and cash equivalents 8,713 18,109
Reinsurance balances receivable (Related party 1996:
$6,169; 1995: $2,804) 50,061 25,451
Accrued investment income 14,122 12,352
Deferred acquisition costs 5,994 2,441
Prepaid expenses and other assets 2,012 922
Total assets $533,568 $485,248
LIABILITIES:
Reserve for losses and loss adjustment expenses $25,113 $24,717
Unearned premiums 57,946 23,971
Accounts payable and accrued liabilities (Related party
1996: $973; 1995: $698) 1,658 2,268
Total liabilities $84,717 $50,956
SHAREHOLDERS' EQUITY:
Share capital (1996: 25,000,000 shares, par value U.S.
$.01, outstanding; 1995: 1,000 shares, par value U.S.
$200 outstanding) 250 200
Additional paid-in capital 299,267 299,317
Unrealized gain (loss) on investments (7,974) 4,511
Retained earnings 157,308 130,264
Total shareholders' equity 448,851 434,292
Total liabilities and shareholders' equity $533,568 $485,248
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE> 3
IPC HOLDINGS, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of United States dollars except for per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, 1996 March 31, 1995
(unaudited) (unaudited)
<S> <C> <C>
REVENUES:
Premiums written (Related party 1996: $5,925;
1995: $3,918) $61,808 $53,570
Change in unearned premiums (33,975) (30,302)
Premiums earned 27,833 23,268
Net investment income 6,726 4,987
Realized capital gains (losses), net 3,503 545
Total revenues 38,062 28,800
EXPENSES:
Losses and loss adjustment expenses 6,634 13,874
Acquisition costs (Related party 1996: $558;
1995: $388) 2,657 2,346
General and administrative expenses (Related party
1996: $1,540; 1995: $1,339) 2,202 2,253
Exchange (gain) loss, net (475) (1,595)
Total expenses 11,018 16,878
Net income $27,044 $11,922
Net income per common share $1.03 $0.47<F1>
Weighted average number of common shares 26,140,361 25,165,504<F1>
<FN>
<F1>
Pro Forma
</FN>
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE> 4
IPC HOLDINGS, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, 1996 March 31, 1995
(unaudited) (unaudited)
<S> <C> <C>
CASHFLOWS FROM OPERATING ACTIVITIES:
Net income $27,044 $11,922
Adjustments to reconcile net income to cash provided
by operating activities:
Amortization of investment premium, net 944 1,250
Realized capital (gains) losses, net (3,503) (545)
Changes in, net:
Reinsurance balances receivable (24,610) (23,340)
Accrued investment income (1,770) (238)
Deferred acquisition costs (3,553) (3,250)
Prepaid expenses and other assets (1,090) 81
Reserve for losses and loss adjustment expenses 396 10,850
Unearned premiums 33,975 30,832
Accounts payable and accrued liabilities (610) 978
27,223 28,540
CASHFLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed maturity investments:
Available for sale (242,246) (29,972)
Held to maturity (16,059) (19,950)
Proceeds from sales of fixed maturity investments:
Available for sale 217,686 16,680
Held to maturity 0 0
Proceeds from maturities of fixed maturity investments:
Available for sale 0 0
Held to maturity 4,000 8,000
(36,619) (25,242)
Net increase (decrease) in cash and cash equivalents (9,396) 3,298
Cash and cash equivalents at beginning of period 18,109 17,772
Cash and cash equivalents at end of period $8,713 $21,070
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<PAGE> 5
IPC HOLDINGS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars except for per share amounts)
(unaudited)
1. GENERAL:
The consolidated interim financial statements presented herein have been
prepared on the basis of United States generally accepted accounting
principles ("GAAP") and include the accounts of IPC Holdings, Ltd. (the
"Company") and its wholly owned subsidiary, International Property
Catastrophe Reinsurance Company, Ltd. ("IPC Re" and, together with the
Company, "IPC"). In the opinion of management, these financial
statements reflect all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the results of operations
for the three month periods ended March 31, 1996 and 1995, the balance
sheet at March 31, 1996 and the cashflows for the three month periods
ended March 31, 1996 and 1995. These interim consolidated financial
statements should be read in conjunction with the audited financial
statements for the year ended December 31, 1995. The results of
operations for any interim period are not necessarily indicative of
results for the full year.
2. CAPITAL:
On March 13, 1996, the Company completed an initial public offering in
which 13,521,739 common shares held by existing shareholders were sold.
Proceeds to selling shareholders were $281,590 which represented a price
of $20.825 per share. The Company did not receive any of the proceeds
from the sale of shares, but did pay certain expenses related to the
offering. Immediately prior to the offering the Company's share capital
consisted of 1,000 common shares, par value $200 per share, all of which
were outstanding. Subsequent to the offering the Company's share capital
consists of: (i) 75,000,000 common shares, par value $0.01 per share, of
which 25,000,000 are outstanding and (ii) 25,000,000 preferred shares,
par value $0.01 per share, of which none are outstanding.
3. DIVIDENDS:
On April 18, 1996 the Directors approved the payment of a dividend of
$0.2875 per share on June 27, 1996 to shareholders of record on June 11,
1996.
<PAGE>
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations, Quarters Ended March 31, 1996 and 1995
In the quarters ended March 31, 1996 and 1995 IPC wrote premiums of
$61.8 million and $53.6 million, respectively, an increase of 15%
including reinstatement premiums of $2.5 million and $1.6 million,
respectively. Premiums written increased as a result of new business
from both new and existing clients although the increase was offset to
some extent by rate reductions, generally in the range of 10%. Premiums
earned in the three months ended March 31, 1996 and 1995 were $27.8
million and $23.3 million respectively, an increase of 19%.
Losses and loss adjustment expenses incurred during the first quarter of
1996 were $6.6 million compared to $13.9 million in the corresponding
period in 1995, which included the earthquake in Kobe, Japan. While
there were no major catastrophes during the first quarter of 1996, there
was a significant amount of loss activity in what turned out to be the
third highest first quarter ever in terms of loss activity in the United
States. IPC's loss ratio (the ratio of losses and loss adjustment
expenses to premiums earned) decreased from 59.6% in the first quarter
of 1995 to 23.8% in the first quarter of 1996. IPC's business is the
reinsurance of man-made and natural disasters and its loss experience
will generally include infrequent events of great severity. Hence there
is the potential for great volatility in losses incurred in any period
with a corresponding impact on net income and shareholders' equity.
Acquisition costs, which consist primarily of commissions and brokerage
fees paid to intermediaries for the production of business and excise
taxes, were $2.7 million in the first quarter of 1996, after deferring
those costs relating to unearned premiums, compared to $2.3 million in
the first quarter of 1995. General and administrative expenses were $2.2
million, a small decrease from the $2.3 million reported for the first
quarter of 1995. General and administrative expenses in the first
quarter of 1996 included $0.4 million relating to the Company's initial
public offering. The Company's expense ratio (the ratio of acquisition
costs and general and administrative expenses to premiums earned) was
17.5% in the first quarter of 1996 compared to 19.8% in the first
quarter of 1995.
Net investment income was $6.7 million in the first quarter of 1996, an
increase of $1.7 million or 34% from the $5.0 million reported in the
corresponding period in 1995. This increase resulted from a higher
investment yield, 5.9% in the first quarter of 1996 compared to 5.3% in
the first quarter of 1995, and an average investment base which was 21%
higher in the first quarter of 1996 compared to the same period in 1995.
Net income for the first three months of 1996 was $27.0 million, an
increase of 127% over the $11.9 million reported in the corresponding
period in 1995. Excluding the effects of realized gains arising from the
sale of investments, net operating income was $23.5 million, an increase
of 107% over the corresponding period in 1995.
Liquidity and Capital Resources
Cashflows from operating activities in the first quarter of 1996 were
$27.2 million compared to $28.5 million in the first quarter of 1995.
This 5% reduction reflects higher loss payments and earlier settlement
of certain expenses in the first quarter of 1996 compared to the first
quarter of 1995.
Net cashflows used in investing activities in the first quarter of 1996
were $36.6 million. Cash and cash equivalents were reduced by $9.4
million in the quarter leaving a balance of $8.7 million at March 31,
1996. At March 31, 1996, 7% of IPC's fixed income portfolio was held in
United States Treasury notes and a further 63% in securities rated AAA.
<PAGE>
<PAGE> 7
Liquidity and Capital Resources-Cont'd
On March 13, 1996, the Company completed an initial public offering in
which 13,521,739 common shares held by existing shareholders were sold.
Proceeds to selling shareholders were $281.6 million which represented a
price of $20.825 per share. The Company did not receive any of the
proceeds from the sale of shares, but did pay certain expenses related
to the offering. Immediately prior to the offering the Company's share
capital consisted of 1,000 common shares, par value $200 per share, all
of which were outstanding. Subsequent to the offering the Company's
share capital consists of: (i) 75,000,000 common shares, par value $0.01
per share, of which 25,000,000 are outstanding and (ii) 25,000,000
preferred shares, par value $0.01 per share, of which none are
outstanding.
<PAGE>
<PAGE> 8
PART II. OTHER INFORMATION
Item 2. Submission of Matters to a Vote of Security-Holders
On February 15, 1996, the shareholders of the Company passed a unanimous
written resolution pursuant to which they (i) amended the Bye-laws of
the Company to, among other things, provide for an expanded Board of
Directors, (ii) accepted the resignation of each of the then current
members of the Board of Directors and (iii) elected the following
persons as directors of the Company to serve until the next annual
general meeting of the Company:
1. Joseph C.H. Johnson
2. Michael L. Bouris
3. John P. Dowling
4. Ron Hiram
5. Dr. the Honorable Clarence James
6. Frank Mutch
7. John T. Schmidt
On February 15, 1996, the annual general meeting of the shareholders of
the Company was held. At the meeting shareholders were asked to vote
upon resolutions (i) electing the persons listed in the preceding
paragraph as directors of the Company to serve until the 1997 annual
general meeting of the Company; (ii) approving, contingent upon
consummation of the Company's initial public offering, (a) the
conversion of each existing voting and non-voting share of the Company
into 25,000 common shares (the "Exchange"), (b) restated Bye-laws of the
Company, (c) an amended and restated option agreement (the "AIG Option")
between the Company and American International Group, Inc. ("AIG"), and
(d) a registration rights agreement between the Company and its existing
shareholders; (iii) approving an amended and restated administrative
services agreement among the Company, IPC Re and American International
Company Limited ("AICL"); (iv) approving the Company's Stock Option Plan
and initial grants thereunder; (v) reserving for issuance common shares
to be issued under the AIG Option and the Stock Option Plan; (vi)
establishing the compensation of the Company's directors; (vii)
approving the minutes of meetings of the Company's shareholders on
July 24, 1995 and December 20, 1995; (viii) approving the Company's
financial statements as of and for the year ended December 31, 1995;
(ix) appointing Arthur Andersen & Co. as auditors of the Company for the
fiscal year ending December 31, 1996; and (x) approving actions taken by
the officers and directors of the Company on behalf of the Company since
the 1995 annual general meeting of shareholders. All resolutions were
passed by the following vote of shareholders: For - 659; Against -
None; Abstentions - 50. These numbers do not reflect the Exchange, which
occurred on March 13, 1996. No other business was conducted at the
meeting.
The shareholders of the Company passed a unanimous written resolution on
March 12, 1996 approving the giving of financial assistance by the
Company in connection with the Exchange and the initial public offering.
<PAGE>
<PAGE> 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Unless otherwise indicated, exhibits are
incorporated herein by reference to the correspondingly
numbered exhibits to the Company's Registration Statement
on Form S-1 (Registration No. 333-00088).
Exhibit
Number Description
2.2 Board Resolution Authorizing the Exchange
3.1 Memorandum of Association of the Company
3.2 Amended and Restated Bye-laws of the Company
3.3 Form of Memorandum of Increase of Share Capital
3.4 Form of Registration Rights Agreement
4.1 Form of Share Certificate
10.1A Termination Agreement among the Company and its existing
shareholders (including exhibits thereto)
10.1B Amendment No. 1 to the Termination Agreement dated as of
February 15, 1996
10.2 Form of Amended and Restated Option Agreement to be entered
into between the Company and AIG
10.3 IPC Holdings, Ltd. Stock Option Plan
10.4 IPC Re Defined Contribution Retirement Plan
10.5 Amended and Restated Administrative Services Agreement among
IPC and AICL
10.6 Investment Management Agreement between IPC Re and AIGIC and
addendum thereto
10.7 Investment Sub-Advisory Agreement between AIGIC and AIGIC
(Europe) (formerly known as Dempsey & Company International
Limited)
10.8 Custodial Agreement between AIGTS and IPC Re
10.9 Retirement Agreement between IPC Re and James P. Bryce
10.10 Retirement Agreement between IPC Re and Peter J.A. Cozens
11.1 * Statement regarding Computation of Per Share Earnings
__________
* Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company
during the three months ended March 31, 1996.
<PAGE>
<PAGE> 10
IPC HOLDINGS, LTD.
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.
IPC Holdings, Ltd.
(Registrant)
Date May 13, 1996 /s/ John P. Dowling
John P. Dowling
President and Chief Executive Officer
Date May 13, 1996 /s/ S. George Cubbon
S. George Cubbon
Vice President (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE>
<PAGE> 11
EXHIBIT INDEX
Unless otherwise indicated, exhibits are incorporated herein by reference
to the correspondingly numbered exhibits to the Company's Registration
Statement on Form S-1 (Registration No. 333-00088).
Exhibit
Number Description
2.2 Board Resolution Authorizing the Exchange
3.1 Memorandum of Association of the Company
3.2 Amended and Restated Bye-laws of the Company
3.3 Form of Memorandum of Increase of Share Capital
3.4 Form of Registration Rights Agreement
4.1 Form of Share Certificate
10.1A Termination Agreement among the Company and its existing
shareholders (including exhibits thereto)
10.1B Amendment No. 1 to the Termination Agreement dated as of
February 15, 1996
10.2 Form of Amended and Restated Option Agreement to be entered
into between the Company and AIG
10.3 IPC Holdings, Ltd. Stock Option Plan
10.4 IPC Re Defined Contribution Retirement Plan
10.5 Amended and Restated Administrative Services Agreement among
IPC and AICL
10.6 Investment Management Agreement between IPC Re and AIGIC and
addendum thereto
10.7 Investment Sub-Advisory Agreement between AIGIC and AIGIC
(Europe) (formerly known as Dempsey & Company International
Limited)
10.8 Custodial Agreement between AIGTS and IPC Re
10.9 Retirement Agreement between IPC Re and James P. Bryce
10.10 Retirement Agreement between IPC Re and Peter J.A. Cozens
11.1 * Statement regarding Computation of Per Share Earnings
_______
* Filed herewith
<PAGE> 1
Exhibit 11.1
IPC HOLDINGS, LTD. AND SUBSIDIARY
COMPARISON OF NET INCOME PER COMMON SHARE
(Net income expressed in thousands of United States dollars)
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
March 31, 1996 March 31, 1995
(unaudited) (unaudited)
<S> <C> <C>
Net income $27,044 $11,922
Weighted Average Common
Shares Outstanding 25,000,000 25,000,000
Dilutive Effect of Share Options 1,140,361 165,504<F1>
Total 26,140,361 25,165,504<F1>
Net income per Common Share $1.03 $0.47
<FN>
<F1>
Pro Forma
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM 10-Q OF IPC HOLDINGS, LTD. FOR THE QUARTER ENDED MARCH 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-START> JAN-01-1996
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 230,857
<DEBT-CARRYING-VALUE> 221,809
<DEBT-MARKET-VALUE> 220,166
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 452,666
<CASH> 8,713
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 5,994
<TOTAL-ASSETS> 533,568
<POLICY-LOSSES> 25,113
<UNEARNED-PREMIUMS> 57,946
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
<COMMON> 250
0
0
<OTHER-SE> 448,601
<TOTAL-LIABILITY-AND-EQUITY> 533,568
27,833
<INVESTMENT-INCOME> 6,726
<INVESTMENT-GAINS> 3,503
<OTHER-INCOME> 0
<BENEFITS> 6,634
<UNDERWRITING-AMORTIZATION> 2,657
<UNDERWRITING-OTHER> 2,202
<INCOME-PRETAX> 27,044
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,044
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.03
<RESERVE-OPEN> 24,717
<PROVISION-CURRENT> 6,212
<PROVISION-PRIOR> 422
<PAYMENTS-CURRENT> 146
<PAYMENTS-PRIOR> 6,092
<RESERVE-CLOSE> 25,113
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
