<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE 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, PEMBROKE, HM 08, BERMUDA
(Address of principal executive offices)
(441) 298-5100
(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 /X/ No / /
The number of outstanding common shares par value U.S. $0.01 per share of IPC
Holdings, Ltd., as of November 10, 1999, was 25,033,932.
TOTAL PAGES 30
EXHIBIT INDEX LOCATED ON PAGE 14
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars, except for per share amounts)
<TABLE>
<CAPTION>
As of As of
September 30, 1999 December 31, 1998
------------------ -----------------
(unaudited) (audited)
<S> <C> <C>
ASSETS:
Fixed maturity investments:
Available for sale, at fair market value (Amortized
cost 1999: $510,210; 1998: $478,806) $ 500,617 $ 484,863
Equity investments, available for sale (Cost 1999:
$70,474; 1998: $69,268) 68,732 94,152
Cash and cash equivalents 27,560 20,966
Reinsurance balances receivable (Related party 1999:
$4,325; 1998: $3,653) 36,925 20,747
Funds held by reinsured companies 0 2,434
Deferred premiums ceded 1,059 0
Loss reserves recoverable (Related party 1999: $432;
1998: $0) 4,321 0
Accrued investment income 12,205 14,752
Deferred acquisition costs 4,219 2,048
Prepaid expenses and other assets 3,920 3,129
--------- ---------
TOTAL ASSETS $ 659,558 $ 643,091
========= =========
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 89,046 $ 52,226
Unearned premiums 35,486 17,602
Reinsurance balances payable (Related party 1999: $212;
1998: $0) 2,119 0
Deferred commissions 90 0
Accounts payable and accrued liabilities (Related party
1999: $900; 1998: $1,689) 7,059 7,311
--------- ---------
TOTAL LIABILITIES 133,800 77,139
--------- ---------
SHAREHOLDERS' EQUITY:
Share capital (Common shares outstanding, par value
U.S.$0.01:1999: 25,033,932; 1998: 25,033,932 shares) 250 250
Additional paid-in capital 299,833 299,833
Retained earnings 237,010 234,928
Accumulated other comprehensive income (11,335) 30,941
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 525,758 565,952
--------- ---------
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 659,558 $ 643,091
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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<PAGE> 3
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of United States dollars, except for per share amounts)
<TABLE>
<CAPTION>
Quarter ended September 30, Nine Months ended September 30,
--------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
REVENUES: (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Gross premiums written $ 8,750 $ 15,671 $ 92,449 $ 106,242
Premiums ceded (516) 0 (3,615) 0
------------ ------------ ------------ ------------
Net written premiums 8,234 15,671 88,834 106,242
Change in unearned premium reserve 13,065 13,756 (16,825) (16,607)
------------ ------------ ------------ ------------
Net premiums earned 21,299 29,427 72,009 89,635
Net investment income 7,511 7,726 22,575 22,438
Realized gains/(losses), net on investments 286 342 30,464 4,030
------------ ------------ ------------ ------------
TOTAL REVENUES 29,096 37,495 125,048 116,103
============ ============ ============ ============
EXPENSES:
Losses and loss adjustment expenses, net 16,109 18,922 82,024 33,379
Acquisition costs, net 3,199 4,212 10,200 12,248
General and administrative expenses 2,191 2,960 6,927 7,922
Exchange loss / (gain) (200) 340 (29) 545
------------ ------------ ------------ ------------
TOTAL EXPENSES 21,299 26,434 99,122 54,094
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME $ 7,797 $ 11,061 $ 25,926 $ 62,009
============ ============ ============ ============
Basic net income per common share $ 0.31 $ 0.44 $ 1.04 $ 2.48
Diluted net income per common share $ 0.30 $ 0.42 $ 0.99 $ 2.33
Weighted average number of common share - basic 25,033,932 25,033,932 25,033,932 25,030,303
Weighted average number of common share - diluted 26,051,096 26,474,892 26,071,336 26,625,544
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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<PAGE> 4
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 1998
--------- ---------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,926 $ 62,009
Adjustments to reconcile net income to cash provided
by operating activities:
Amortization of investment premium, net 25 663
Realized (gains) losses, net on investments (30,464) (4,030)
Changes in, net:
Reinsurance balances receivable (16,178) (8,198)
Funds held by reinsured companies 2,434 (2,410)
Deferred premiums ceded (1,059) 0
Loss reserves recoverable (4,321) 0
Accrued investment income 2,547 602
Deferred acquisition costs (2,171) (2,459)
Prepaid expenses and other assets (791) (1,007)
Reserve for losses and loss adjustment expenses 36,820 15,628
Unearned premiums 17,884 16,607
Reinsurance balances payable 2,119 0
Deferred commissions 90 0
Accounts payable and accrued liabilities (252) 3,540
--------- ---------
32,609 80,945
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (267,208) (227,041)
Proceeds from sale of fixed maturity investments 191,000 170,417
Proceeds from maturities of fixed maturity investments 45,050 8,000
Purchases of equity investments (80,754) (2,204)
Proceeds from sale of equity investments 109,741 16,621
--------- ---------
(2,171) (34,207)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional share capital 0 300
Cash dividends paid to shareholders (23,844) (43,872)
--------- ---------
(23,844) (43,572)
--------- ---------
Net increase (decrease) in cash and cash equivalents 6,594 3,166
Cash and cash equivalents, beginning of period 20,966 9,746
--------- ---------
Cash and cash equivalents, end of period $ 27,560 $ 12,912
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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<PAGE> 5
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of United States dollars)
<TABLE>
<CAPTION>
Quarter ended September 30, Nine Months ended September 30,
--------------------------- -------------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 7,797 $ 11,061 $ 25,926 $ 62,009
-------- -------- -------- --------
Other comprehensive income:
Holding (losses ) gains, net on investments
during period (6,001) 1,488 (11,812) 16,638
Reclassification adjustment for (gains)
losses included in net income (286) (342) (30,464) (4,030)
-------- -------- -------- --------
(6,287) 1,146 (42,276) 12,608
-------- -------- -------- --------
Comprehensive income $ 1,510 $ 12,207 $(16,350) $ 74,617
======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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<PAGE> 6
IPC HOLDINGS, LTD. AND SUBSIDIARIES
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 subsidiaries, IPCRe Limited ("IPCRe") and
IPCRe Services Limited ("Services" and, together with the Company and IPCRe,
"IPC") and IPCRe Europe Limited, which is a wholly-owned subsidiary of
IPCRe. 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 and nine month
periods ended September 30, 1999 and 1998, respectively, the balance sheet
at September 30, 1999 and the cash flows for the nine month periods ended
September 30, 1999 and 1998, respectively. These interim consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 1998. The
results of operations for any interim period are not necessarily indicative
of results for the full year.
2. DIVIDENDS:
On February 28, 1999, the Directors declared a quarterly dividend of $0.3175
per share, payable to shareholders of record on March 9, 1999. Such
dividends were paid March 25, 1999.
On April 27, 1999, the Directors declared a quarterly dividend of $0.3175
per share, payable to shareholders of record on June 8, 1999. Such dividends
were paid on June 24, 1999.
On July 27, 1999, the Directors declared a quarterly dividend of $0.3175 per
share payable to shareholders of record on September 7, 1999. Such dividends
were paid on September 23, 1999.
On October 25, 1999, the Directors declared a quarterly dividend of $0.16
per share payable on December 16, 1999, to shareholders of record on
November 30, 1999.
3. NET INCOME PER SHARE:
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share", which requires dual presentation of basic and diluted
earnings per share. Diluted net income per common share is computed by
dividing net income by the weighted average number of shares of common stock
and common stock equivalents outstanding during the year. Stock options held
by a shareholder of the Company were considered common stock equivalents and
were included in the number of weighted average shares outstanding using the
treasury stock method. Stock options granted to employees on February 15,
1996, July 25, 1996, January 2, 1997, January 2, 1998 and January 5, 1999
were also considered common stock equivalents for the purpose of calculating
diluted net income per common share.
4. ACCOUNTING FOR DERIVATIVES:
The Financial Accounting Standards Board has also recently issued Statement
of Financial Accounting Standard No. 137 ("SFAS 137"), which is an amendment
to Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities," ("SFAS 133"), deferring the
effective date thereof to periods beginning after June 15, 2000. Management
does not expect the impact of the adoption of SFAS 137/133 on the Company's
financial position or results to be material.
5. DEPOSIT ACCOUNTING:
In October, 1998 the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-7, "Accounting for Insurance and
Reinsurance Contracts that do not Transfer Insurance Risk", which is
effective for fiscal years beginning after June 15, 1999. IPCRe does not
currently write or cede business which would be affected by this Statement.
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS, QUARTERS ENDED SEPTEMBER 30, 1999 AND 1998
In the quarters ended September 30, 1999 and 1998, IPCRe wrote premiums of
$8.8 million and $15.7 million, respectively. Written premiums were impacted
by rate reductions in the period, generally in the range of 5-10% but as
high as 15 to 20% in some cases, and the non-renewal of some contracts by
IPCRe, where the rates and/or terms were considered unsatisfactory. In
addition, IPCRe has not renewed, or has declined to write, multi-year
treaties from April 1, 1999 onwards, unless the proposed rates are
significantly higher than current levels. The reductions in written premiums
resulting from the above, which totaled approximately $7.0 million, were
partially offset by increased signings and additional business from existing
clients, and selectively written business for new clients, which totaled
approximately $0.4 million. Written premiums also included reinstatement
premiums of $1.0 million in the third quarter of 1999, which was $0.5
million less than the third quarter of 1998. Net premiums written were also
impacted by further cessions to IPCRe's proportional reinsurance facility,
which had the effect of reducing written premiums by a further $0.5 million.
Net premiums earned in the three months ended September 30, 1999 were $21.3
million, compared to $29.4 million in the same period in 1998, a decrease of
27.6%. Earned premiums are lower primarily because of the reduction in net
written premiums.
Net investment income was $7.5 million in the quarter ended September 30,
1999, compared to $7.7 million for the quarter ended September 30, 1998, a
decrease of 2.8%. The decrease arises from decreases in the net yield of the
portfolio, offset in part by the average amount of invested assets being
3.2% higher.
There was a net realized gain from the sale of investments in the quarter
ended September 30, 1999 of $0.3 million, compared to $0.3 million in the
third quarter of 1998. Net realized gains and losses fluctuate from period
to period, depending on the individual securities sold, as recommended by
IPCRe's investment advisor.
In the three months ended September 30, 1999, incurred losses were $16.1
million, compared to $18.9 million in the corresponding quarter of 1998.
Claim activity in the three months ended September 30, 1999 included
Hurricane Floyd, which caused severe flooding and other damage to north and
mid-Atlantic coastal states in September of this year, Cat.#90 which was a
hail and wind storm which affected Nebraska in June, 1999, the earthquake in
Turkey, Cyclone Davina, and Typhoon Bart, which struck Japan in late
September 1999. IPC's loss and loss expense ratio (the ratio of losses and
loss adjustment expenses to premiums earned) was 75.6% in the third quarter
of 1999, compared to 64.3% in the corresponding period in 1998.
Acquisition costs incurred, which consist primarily of commissions and
brokerage fees paid to intermediaries for the production of business, were
$3.2 million for the quarter ended September 30, 1999, compared to $4.2
million in the same period of 1998, a decrease of 24.1%. The reduction is
due primarily to the decrease in earned premiums. General and administrative
expenses were $2.2 million in the quarter ended September 30, 1999, compared
to the $3.0 million incurred in the corresponding period in 1998. The
decrease is due primarily to the initial fees for IPCRe's $300 million
standby credit facility, which became effective July 1, 1998. Such fees were
paid shortly thereafter. In addition, fees paid under an administrative
services agreement are based on earned premiums, and have declined in 1999
accordingly. IPC's expense ratio (the ratio of acquisition costs plus
general and administrative expenses to premiums earned) was 25.3% for the
quarter ended September 30, 1999 compared to 24.4% for the corresponding
period in 1998.
The following table summarizes the loss and loss expense ratio, expense
ratio and combined ratio (sum of loss and loss expense ratio, plus expense
ratio) for the quarters ended September 30, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
Quarter ended September 30,
---------------------------
1999 1998
------ ------
<S> <C> <C>
Loss & loss expense ratio 75.6% 64.3%
Expense ratio 25.3% 24.4%
Combined ratio 100.9% 88.7%
</TABLE>
Net income for the quarter ended September 30, 1999 was $7.8 million,
compared to $11.1 million for the corresponding period in 1998, a decrease
of 29.5%. Excluding the effects of net realized gains and losses arising
from the sale of investments, net operating income for the third quarter of
1999 was $7.5 million, compared to $10.7 million for the third quarter of
1998, a decrease of 29.9%. The decrease is primarily the result of the
reduction in earned premium, as discussed above.
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<PAGE> 8
RESULTS OF OPERATIONS, NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
In the nine months ended September 30, 1999 and 1998, IPCRe wrote premiums
of $92.4 million and $106.2 million, respectively, a decrease of 13.0%.
Written premiums were impacted by the following: rate reductions in the
period, generally in the range of 10% but as high as 15 to 20% in some
cases; program restructuring where ceding companies have consolidated; and
the non-renewal of some contracts by IPCRe, where the rates and/or terms
were considered unsatisfactory. In addition, IPCRe has not renewed, or has
declined to write, multi-year treaties from April 1, 1999 onwards, unless
the proposed rates are significantly higher than current levels. The
reductions in written premiums resulting from the above, which totaled
approximately $22.8 million, were partially offset by increased signings and
additional business from existing clients, and selectively written business
for new clients, which totaled approximately $5.1 million. Premiums were
also boosted by reinstatement premiums of $6.5 million from increased claim
activity, compared to $3.1 million for the nine months ended September 30,
1998. Net premiums written were also impacted by IPCRe's cessions to its
proportional reinsurance facility, which had the effect of reducing written
premiums by a further $3.6 million. Net premiums earned in the nine months
ended September 30, 1999 were $72.0 million, compared to $89.6 million in
the same period in 1998, a decrease of 19.7%. This reduction is primarily
due to the decrease in net premiums written, in the current year, as well as
in the latter half of 1998.
Net investment income was $22.6 million in the nine months ended September
30, 1999, compared to $22.4 million for the nine months ended September 30,
1998, an increase of 0.6%. The increase arises from the average amount of
invested assets being 5.8% higher, offset by decreases in short term
interest rates.
There were net realized gains from the sales of investments in the nine
months ended September 30, 1999 of $30.5 million, compared to $4.0 million
in the corresponding period of 1998. Net realized gains and losses fluctuate
from period to period, depending on the individual securities sold, as
recommended by IPCRe's investment advisor. Portfolio restructuring in the
first quarter of 1999, followed by the sale and subsequent repurchase of all
of the securities in IPCRe's equity portfolio during the second quarter,
resulted in the realization of significant gains which had accumulated since
the original purchases.
In the nine months ended September 30, 1999, incurred losses were $82.0
million, compared to $33.4 million in the corresponding period of 1998.
Claim activity in the nine months ended September 30, 1999 included the
Rouge Industries steel mill explosion in Michigan, losses from crop hail
damage during 1998, storms which took place in Australia and Ireland in late
December 1998, the hailstorm in Sydney, Australia, tornadoes which struck
Oklahoma, Tennessee and Texas in May of this year, Hurricane Floyd, the
earthquake which struck Turkey, as well as some development from Cat.# 51
(the May 1998 hailstorm which struck Minnesota), Hurricanes Georges and
Mitch, Typhoon Vicki and the cyclone which struck India. IPC's loss and loss
expense ratio was 113.9% in the first nine months of 1999 compared to 37.2%
in the corresponding period of 1998.
Acquisition costs incurred were $10.2 million for the nine months ended
September 30, 1999, compared to $12.2 million in the same period of 1998.
The reduction is reflective of the decrease in net earned premiums. General
and administrative expenses were $6.9 million in the nine months ended
September 30, 1999, compared to the $7.9 million incurred in the
corresponding period in 1998. The decrease is primarily due to a reduction
in fees based on earned premiums, which are paid under the administrative
services agreement, a decrease in the accrual of certain deferred benefits
for executives, and reduced insurance costs and professional fees. IPC's
expense ratio was 23.8% for the nine months ended September 30, 1999
compared to 22.5% for the corresponding period in 1998.
The following table summarizes the loss and loss expense ratio, expense
ratio and combined ratio for the nine months ended September 30, 1999 and
1998, respectively:
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 1998
------ ------
<S> <C> <C>
Loss & loss expense ratio 113.9% 37.2%
Expense ratio 23.8% 22.5%
Combined ratio 137.7% 59.7%
</TABLE>
Net income for the nine months ended September 30, 1999 was $25.9 million,
compared to $62.0 million for the corresponding period in 1998, a decrease
of 58.2%. Excluding the effects of net realized gains and losses arising
from the sale of investments, the net operating loss for the first nine
months of 1999 was $(4.5) million, compared to net operating income of $58.0
million for the corresponding period of 1998, a decrease of 107.8%. The
decrease is a result of the significant increase in claims, and reductions
in net earned premiums, as discussed above.
-8-
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
The Company is a holding company that conducts no reinsurance operations of
its own. The Company's cash flows are limited to distributions from IPCRe
and Services by way of loans or dividends. The dividends that IPCRe may pay
are limited under Bermuda legislation and IPCRe's revolving credit facility.
The Bermuda Insurance Act of 1978, and subsequent amendments thereto
("Bermuda regulations"), require IPCRe to maintain a minimum solvency margin
and a minimum liquidity ratio. The maximum dividend payable by IPCRe in
accordance with Bermuda regulations as of January 1, 1999 was approximately
$141 million.
IPCRe's sources of funds consist of premiums written, investment income and
proceeds from sales and redemptions of investments. Cash is used primarily
to pay losses and loss adjustment expenses, premiums retroceded, brokerage
commissions, excise taxes, general and administrative expenses and
dividends. The potential for a large catastrophe means that unpredictable
and substantial payments may need to be made within relatively short periods
of time. Hence the Company's cash flows may fluctuate significantly from
period to period.
Cash flows from operating activities in the nine months ended September 30,
1999 were $32.6 million compared to $80.9 million in the corresponding
period in 1998, which represents a decrease of 59.7%. The decrease arises
primarily from the reduction in operating income, as noted above.
Net cash outflows from investing activities in the first nine months of 1999
were $(2.2) million. In addition, a total of $23.8 million were paid to
shareholders in dividends on March 25, June 24 and September 23, 1999,
respectively. Cash and cash equivalents increased by $6.6 million in the
nine months, resulting in a balance of $27.6 million at September 30, 1999.
At September 30, 1999, 51.9% of IPC's fixed maturity portfolio (based on
market value) was held in cash, United States Treasury notes and in
securities rated AAA, and 34.4% was held in securities rated AA. The average
modified duration of IPC's fixed maturity portfolio was 2.2 years. IPC's
portfolio does not contain any investments in real estate or mortgage loans.
Management believes that IPCRe's $300 million revolving credit facility, and
the relatively high quality of its investment portfolio, provides sufficient
liquidity to meet IPC's cash demands.
Neither the Company, IPCRe nor Services have any material commitments for
capital expenditures.
YEAR 2000 READINESS DISCLOSURE STATEMENT
Certain computer programs use only the last two digits to refer to a
year. Therefore, these computer programs do not properly recognize the
century in which a particular year occurs and may, for example, treat "00"
as being the year 1900, instead of the year 2000. These computer programs
may be used in software applications or may be embedded in microprocessors
used to control the operation of computer hardware and other devices. If not
corrected, many computer programs could fail or create erroneous results.
This problem is commonly known as the "Y2K", "Millennium Bug" and/or "Year
2000" issue and systems and equipment which use computer programs and
microprocessors that do not have this problem are generally referred to as
being "compliant".
IPC's Critical Systems
IPC believes that all of its critical systems, including its hardware
and software, are currently compliant. IPC's critical systems include those
used in assessing underwriting risk, recording policy details, processing
related premium and claims transactions and communicating with brokers who
produce the business. Following minor remedial work to some computer
hardware and the upgrading of some software, a test programme was undertaken
on these systems and the results were completed by September 30, 1998 and
subjected to audit by technology consultants provided through American
International Group, Inc. ("AIG"). Accordingly, while there can be no
assurance that these systems will be free from failure, IPC believes that
any failure will not result in material adverse impact on IPC's results of
operations or financial condition.
Third Party Dependencies
IPC's Y2K compliance programme also includes a review of third party
dependencies, which includes non-information technology areas, including
office equipment, power supply, telecommunications and building
infrastructure.
Administrative Services
IPC's day-to-day administrative services, including the provision of
non-information technology, are performed by American International Company,
Limited ("AICL"), a wholly-owned subsidiary of AIG, pursuant
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<PAGE> 10
to an administrative services agreement (the "Administrative Services
Agreement"). Services and facilities provided pursuant to the Administrative
Services Agreement include legal and accounting services, office space in
Bermuda, the use of office equipment, electronic data services and other
services required by IPC in the ordinary course of business. IPC and AICL
have worked jointly to ensure compliance of systems used in the processing
of IPC's business and this work was completed by September 30, 1998.
In addition, AICL is monitoring progress towards compliance by
significant third parties from whom IPC receives non-information technology
services, such as the suppliers of electric power and local and
long-distance telephone services. In the event that such third parties are
unable to achieve compliance, AICL has developed contingency plans, for
example, independent power supply, which are designed to mitigate the
effects of a failure on the part of such third parties to supply services.
Accordingly, while there can be no assurance that these systems will be
free from failure, IPC believes that any failure will not result in material
adverse impact on IPC's results of operations or financial condition.
Other Third Parties
As of September 30, 1999, IPC has contacted other third parties, such
as brokers and depository institutions, with whom IPC currently has a
relationship which, in IPC's judgement, involves material Y2K compliance
concerns, in order to establish their degree of compliance and/or their
plans to become compliant prior to December 31, 1999. Among other things,
IPC's brokers collect, and maintain records of, premiums and claims and, as
such, make payments into IPC's depository institutions. Responses to IPC's
requests for compliance status indicate that, where this is not yet the
case, such third parties are planning to achieve Y2K compliance prior to
December 31, 1999. IPC continues to periodically request updates of
compliance status from third parties. In the event that such third parties
are unable to achieve compliance, IPC has developed contingency plans, which
are designed to mitigate the effects of failure of such third party systems
on IPC's business operations, by the creation of hard-copy records and
backed-up PC records. There can be no assurance that the systems of such
third parties will be timely converted, that IPC's contingency plans will
prove to be adequate or that failure of such systems in any event would not
have a material adverse effect on IPC's results of operations or financial
condition.
Costs
The costs incurred by IPC up to September 30, 1999 in effecting Y2K
compliance of its own systems are nominal and it is not anticipated that the
future costs of IPC's Year 2000 evaluation, compliance implementation and
contingency planning will be material. In addition, AICL is responsible for
the cost of compliance of the administrative services it supplies to IPC.
Therefore, assuming compliance has been achieved as aforesaid, it is not
anticipated that the total costs incurred in relation to the Y2K issue will
have a material adverse effect on IPC's results of operations.
Policy Risks
The extent of worldwide property damage (whether insured or uninsured)
which could result from failure or malfunction of non-compliant systems is
not known. Many of the insurance markets around the world in which IPC's
clients operate have not established a clear position on whether to include
or exclude Y2K risk in policies available in those markets. Although Y2K
exclusion clauses have been produced by some individual companies and some
insurance and reinsurance industry associations, to date they have not been
applied in a uniform manner. The Y2K issue is unique. Therefore,
notwithstanding the presence or absence of an exclusion of the Y2K risk in
insurance or reinsurance policies, in the general absence of legal
precedent, courts may determine, on a case-by-case basis, that coverage
exists for property damage resulting from failure or malfunction of
non-compliant systems.
IPCRe is principally an excess of loss property catastrophe reinsurer.
Currently, IPCRe's reinsurance policies do not specifically include Y2K as a
covered event and IPCRe currently does not intend to provide specific
coverage for losses arising from Y2K events. However, in the future, it is
possible that market forces could oblige IPCRe to provide such coverage, or
that certain of IPCRe's policies could be held to cover such losses. IPC
carefully monitors the terms of policy renewals with respect to the extent
that they oblige IPC to provide such coverage and, with respect to renewals
on or after January 1, 1999, declined certain business. Regardless of
IPCRe's intent not to provide specific coverage for losses arising from Y2K
events and IPCRe's actions to avoid obligations to provide such coverage, if
IPCRe is obliged to provide such coverage or its policies are held to cover
such losses, there can be no assurance that such losses would not have a
material adverse effect on IPCRe's future results of operations or financial
condition, commencing in the year 2000.
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<PAGE> 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
IPCRe commissioned an independent Value at Risk analysis, to estimate the
maximum potential loss of fair value for each segment of market risk, as of
December 31, 1998. There have been no material changes to the composition of
IPCRe's investment portfolio during the nine months to September 30, 1999. The
equity element of the total portfolio was reduced from approximately 15% to 12%
in February, 1999, and the proceeds were used to purchase money-market
instruments. In addition, there were no material changes to interest rates or
foreign exchange rates in the nine months. In addition, to reduce the potential
impact of exchange rate movements between the U.S. dollar and Australian dollar,
on the liabilities arising out of the Sydney hailstorm, IPCRe has purchased
U.S.$20 million of Australian dollars in May and June of 1999. At September
30, 1999 IPCRe held U.S.$9.7 million in Australian dollar time deposits.
Accordingly, management does not believe that there has been any material
change to the amount of market risk to which the Company is exposed, in the
period from January 1 to September 30, 1999.
NOTE ON FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Exchange Act. Forward-looking statements are statements other than historical
information or statements of current condition. Some forward-looking statements
may be identified by use of terms such as "believes", "anticipates", "intends",
or "expects". These forward-looking statements relate to Year 2000 issues,
including policy coverage issues and the effect of the future adoption of
accounting standards. In light of the risks and uncertainties inherent in all
forward-looking statements, the inclusion of such statements in this report
should not be considered as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved. Numerous factors
could cause the Company's actual results to differ materially from those in the
forward-looking statements, including unanticipated consequences of the
Millennium bug with respect to IPC or third parties.
-11-
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Unless otherwise indicated, exhibits are incorporated by
reference to the corresponding numbered exhibits to the
Company's Registration Statement on Form S-1 (Registration
No. 333-00088).
EXHIBIT
NUMBER DESCRIPTION
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
10.1 * Amended and Restated IPC Holdings, Ltd. Deferred
Compensation Plan
10.2 * Form of Limited Waiver to Credit Agreement between IPCRe
Limited, Bank One N.A.and other Lenders named therein
11.1 * Reconciliation of the numerator and denominator for basic
and diluted net income per common share ("EPS").
27.1 * Financial Data Schedule
* Filed herewith
(b) Reports on Form 8-K
NONE
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<PAGE> 13
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 NOVEMBER 10, 1999 /s/ John P. Dowling
----------------- ----------------------------------
JOHN P. DOWLING
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DATE NOVEMBER 10, 1999 /s/ John R. Weale
----------------- ----------------------------------
JOHN R. WEALE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
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<PAGE> 14
EXHIBIT INDEX
Unless otherwise indicated, exhibits are incorporated by reference to the
corresponding numbered exhibits to the Company's Registration Statement on
Form S-1 (Registration No. 333-00088).
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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
10.1 * Amended and Restated IPC Holdings, Ltd. Deferred
Compensation Plan
10.2 * Form of Limited Waiver to Credit Agreement between IPCRe
Limited, Bank One N.A. and other Lenders named therein
11.1 * Reconciliation of the numerator and denominator for basic
and diluted net income per common share ("EPS")
27.1 * Financial Data Schedule
* Filed herewith
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<PAGE> 1
EXHIBIT 10.1
IPC HOLDINGS, LTD.
DEFERRED COMPENSATION PLAN
SECTION 1: PURPOSE
The purpose of the Plan is to assist IPC Holdings, Ltd. ("IPC") in attracting
and retaining executives and other key employees by providing a compensation
deferral vehicle.
SECTION 2: DEFINITIONS
The following terms, as used herein, will have the meanings specified below.
2.1 "ACCOUNT" means the accounts (including any Investment Account)
and subaccounts established pursuant to Section 5.
2.2 "AWARD" means the annual cash incentive, if any, awarded under
IPC's annual incentive plan.
2.3 "BENEFICIARY" means the person(s) designated by the Participant,
in writing on a form provided by the Committee, to receive
payments under the Plan in the event of his death while a
Participant or, in the absence of such designation, the
Participant's estate.
2.4 "BOARD OF DIRECTORS" means the Board of Directors of IPC.
2.5 "CAUSE" means (i) the Participant's conviction of, or a plea of
guilty or nolo contendere to, a felony; (ii) the commission by
the Participant of an act of fraud or embezzlement against the
Company; (iii) the Participant's willful misconduct or gross
negligence in the performance of the Participant's duties and
responsibilities to the Company; (iv) the Participant's
continued failure to implement reasonable requests or directions
received in the course of his employment; (v) the Participant's
wrongful dissemination or use of confidential or proprietary
information; or (vi) the intentional and habitual neglect by the
Participant of his duties to the Company.
2.6 "CHANGE OF CONTROL" means a change of control as defined in
Section 10.2.
2.7 "COMMITTEE" means the Board of Directors or a committee
designated from time to time by the Board of Directors to
administer the Plan.
2.8 "COMPANY" means IPC and any direct or indirect wholly-owned
subsidiary of IPC.
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<PAGE> 2
2.9 "DEFERRAL AGREEMENT" means the agreement in a form approved by
the Committee and executed by a Participant pursuant to Section
4 setting forth the terms and conditions applicable to the
Participant's participation in the Plan.
2.10 "DEFERRAL ELECTION DATE" means, as to any Award, September 30 of
the calendar year preceding the calendar year in which such
Award would otherwise be paid or such other date established by
the Committee as the Deferral Election Date.
2.11 "DEFERRAL PERIOD" means the period beginning with the day a
Deferred Amount is credited to a Participant's Account and
ending upon the earlier of (i) the termination of the
Participant's employment as an Employee or (ii) if and to the
extent permitted by the Committee, such earlier date not less
than four years after the beginning of the Deferral Period as
set forth in the Participant's Deferral Agreement.
2.12 "DEFERRED AMOUNT" means the Mandatory Deferred Amount and the
Elective Deferred Amount, if any.
2.13 "DISABILITY" means (i) total disability as defined in the
long-term disability plan of the Company, as in effect from time
to time or (ii) if there is no such plan at the applicable time,
physical or mental incapacity as determined solely by the
Committee.
2.14 "ELECTIVE DEFERRED AMOUNT" means the amount of an Award that a
Participant has elected in his Deferral Agreement to be
deferred.
2.15 "EMPLOYEE" means an employee of the Company.
2.16 "INVESTMENT ACCOUNT" means the accounts established pursuant to
Section 5 to record the dollar amount and value of the Deferred
Amount allocated thereto.
2.17 "MANDATORY DEFERRED AMOUNT" means the amount of an Award under
IPC's annual incentive plan that, in accordance with such plan,
is mandatorily deferred.
2.18 "PARTICIPANT" means an Employee designated from time to time by
the Committee as a Participant in the Plan. A Participant will
be deemed a Participant for so long as he has an Account.
2.19 "PLAN" means this IPC Holdings, Ltd. Deferred Compensation Plan,
as amended from time to time.
2.20 "PLAN YEAR" means the fiscal year of the Company following the
year of an Award.
2.21 "IPC" means IPC Holdings, Ltd. and its successors.
2.22 "RETIREMENT" means retirement from employment as an Employee of
the Company at or after age 55.
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<PAGE> 3
2.23 "VALUE" means the value of an Account, determined in accordance
with the Plan.
SECTION 3: ELIGIBILITY
3.1 Participants will be selected by the Committee from among those
Employees who are eligible to participate in IPC's annual
incentive plan.
SECTION 4: DEFERRALS AND ALLOCATIONS
4.1 A Participant may elect to defer, under the terms and conditions
of the Plan, all or a portion of an Award. Such election must be
made by executing and delivering to IPC a Deferral Agreement on
or before the Deferral Election Date. Such election will be
irrevocable when made.
4.2 A Participant's Mandatory Deferred Amount is deferred, without
any action by the Participant, under the terms and conditions of
this Plan.
4.3 A Participant may elect, in his Deferral Agreement, to allocate
his Elective Deferred Amount and Mandatory Deferred Amount among
the Investment Accounts. In the absence of such an election, the
Participant's Deferred Amount will be allocated, in total, to
such Investment Account as the Committee may determine. A
Participant may, subject to such terms and conditions as the
Committee may establish, reallocate between or among such
Accounts all or a portion of the Value thereof.
4.4 A Participant may also elect, in his Deferral Agreement, the
Deferral Period for his Deferred Amount. Such election will be
irrevocable when made.
SECTION 5: ACCOUNTS
5.1 The Committee will cause to be established and maintained an
Account in the name of each Participant. Such Account will
include two or more Investment Accounts and such other accounts
and subaccounts as the Committee may determine.
5.2 The Participant's Investment Accounts will be credited with that
portion of the Participant's Deferred Amount allocated to such
Accounts, respectively, in accordance with the Participant's
election pursuant to Section 4.3. Such Account will be so
credited as of the day such Deferred Amount would have otherwise
been paid to the Participant. During the Deferral Period, the
balance in the Participant's Investment Accounts will increase
or decrease in accordance with the yield on the mutual fund or
investment index designated by the Committee at the time of the
establishment, and for purposes of determining the Value, of
such Investment Account.
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<PAGE> 4
SECTION 6: VESTING AND TERMINATION
6.1 A Participant will be immediately 100% vested in his Account
attributable to his Elective Deferred Amounts and will vest in
his Account attributable to his Mandatory Deferred Amounts in
accordance with the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERCENT VESTING DATE
- --------------------------------------------------------------------------------
<S> <C>
25 First Plan Year end during the Deferral Period
50 Second Plan Year end during the Deferral Period
75 Third Plan Year end during the Deferral Period
100 Fourth Plan Year end during the Deferral Period
- --------------------------------------------------------------------------------
</TABLE>
In the event of the Participant's Retirement, or if the
Participant's employment as an Employee is terminated by death
or Disability or by the Company other than for Cause, then,
notwithstanding the foregoing schedule, the Participant's
Account to the extent not yet vested will thereupon be 100%
vested; provided further that, if the Participant's employment
as an Employee is otherwise terminated, including being
terminated by the Company for Cause, the Participant's Account
to the extent not yet vested will, notwithstanding such
schedule, be forfeited upon the date of such termination of
employment.
As soon as practicable after receipt of a written request from
the Participant, the vested portion of the Participant's Account
will be distributed to the Participant in a single cash lump
sum.
6.2 Except as otherwise provided in Section 6.1, the Value of the
Participant's Account attributable to a Deferred Amount shall be
distributed to the Participant (or in the event of the
Participant's death, his Beneficiary) in a single cash lump sum
as soon as practicable after the end of the Deferral Period with
respect thereto.
SECTION 7: ADMINISTRATION
7.1 The Plan will be administered by the Committee. The Committee
will have full and complete authority, in its sole and absolute
discretion, (i) to exercise all of the powers granted to it
under the Plan, (ii) to construe, interpret and implement the
Plan, Deferral Agreements and any related documents, (iii) to
prescribe, amend and rescind rules relating to the Plan and
Deferral Agreements, (iv) to make all determinations necessary
or advisable in administering the Plan and Deferral Agreements
and (v) to correct any defect, supply any omission and reconcile
any inconsistency in the Plan and Deferral Agreements. The
Committee's determinations under the Plan need not be uniform
and may be made by it selectively among Employees and
Participants, whether or not such persons are similarly
situated. The actions and determinations of the Committee on all
matters relating to the
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<PAGE> 5
Plan, Deferral Agreements and any Accounts will be final,
conclusive, and binding on Employees and Participants for all
purposes.
7.2 The Committee may appoint such accountants, counsel, and other
experts as the Committee deems necessary or desirable in
connection with the administration of the Plan. The Committee
may also delegate to selected persons the authority to execute
and deliver such instruments and documents, to do all such acts
and things, and to take all such other steps deemed necessary,
advisable or convenient for the effective administration of the
Plan in accordance with its terms and purposes.
7.3 The Committee and others to whom the Committee has delegated
duties, authority or responsibilities for the administration of
the Plan will keep a record of all their proceedings and actions
and will maintain all such books of account, records and other
data as will be necessary for the proper administration of the
Plan.
7.4 The Company will pay all reasonable expenses incurred in
administering the Plan, including, but not limited to, the
payment of professional fees.
SECTION 8: AMENDMENT AND TERMINATION
8.1 The Board of Directors may at any time amend the Plan in whole
or in part, provided that no amendment shall be effective (i) to
decrease the amount credited to a Participant's Account prior to
the adoption of such Amendment or (ii) to defer or delay
payments to any Participant or Beneficiary in respect of any
Deferred Amount credited to a Participant's Account prior to the
adoption of such Amendment. Written notice of any amendments
shall be given to each Participant.
8.2 The Board of Directors may terminate the Plan if, as a result of
changes in any law or governmental agency or judicial
interpretation thereof, the continuance of the Plan, or the
operation of the Plan in non-modified fashion, will result in
adverse tax consequences to the Company or Participants.
8.3 Upon any termination of the Plan under Section 8.2, deferrals
shall prospectively cease and the Company will pay as soon as
practicable to each Participant the Value of his Account,
whether or not then vested, calculated as if each Participant
had terminated employment due to Retirement on the date of such
termination of the Plan.
SECTION 9: BENEFICIARY DESIGNATION
9.1 Each Participant shall have the right, at any time, to designate
a Beneficiary to whom payment under the Plan shall be made in
the event of his death prior to complete distribution of all
amounts due him under the Plan. Any Beneficiary designation
shall be made in writing on a form prescribed by Committee and
shall become effective only when filed.
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<PAGE> 6
9.2 Any Beneficiary designation may be changed by a Participant only
by written notice of such change to a form prescribed by the
Committee. The filing of a new Beneficiary designation form will
cancel all prior Beneficiary designations.
SECTION 10: CHANGE OF CONTROL
10.1 Upon the occurrence a Change of Control, the Value of all
Accounts will become fully vested.
10.2 A Change of Control will be deemed to occur if (i) any "person"
(as such term is defined in Section 3 (a) (9) and as used in
Sections 13(d) and 14(d) of the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act")),
excluding the Company or any of its subsidiaries, a trustee or
any fiduciary holding securities under an employee benefit plan
of the Company or any of its subsidiaries, an underwriter
temporarily holding securities pursuant to an offering of such
securities or a corporation owned, directly or indirectly, by
shareholders of the Company in substantially the same proportion
as their ownership of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the
company's then outstanding securities ("Voting Securities");
(ii) during any period of not more than two years, individuals
who constitute the Board as of the beginning of the period and
any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a
transaction described in clause (i) or (iii) of this sentence)
whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at such time or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof; (iii) the
shareholders of the Company approve a merger, consolidation,
amalgamation or reorganization or a court of competent
jurisdiction approves a scheme of arrangement of the Company,
other than a merger, consolidation, amalgamation, reorganization
or scheme of arrangement which would result in the Voting
Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity)
at least 50% of the combined voting power of the Voting
Securities of the Company or such surviving entity outstanding
immediately after such merger, consolidation, amalgamation,
reorganization or scheme of arrangement; or (iv) the
shareholders of the Company approve a plan of complete
liquidation of the Company or any agreement for the sale or
disposition by the Company of all or substantially all the
Company's assets.
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<PAGE> 7
SECTION 11: CLAIMS PROCEDURE
11.1 Any person claiming an amount under this Plan, requesting an
interpretation or ruling under the Plan, or requesting
information under the Plan shall present the request in writing
to the Committee who shall respond in writing within ninety (90)
days following receipt of the request. If the claim or request
is denied, the written notice of denial shall state (1) the
reasons for denial (2) a description of any additional material
or information required and an explanation of why it is
necessary; and (3) an explanation of the Plan's claim review
procedure. Any person whose claim or request is denied may make
a second request for review by notice given in writing to the
Committee. The claim or request shall be reviewed further by the
Committee, which may, but shall not be required to, grant the
claimant a hearing. A decision on such second request shall
normally be made within sixty (60) days after the date of the
second request. If an extension of time is required for a
hearing or other special circumstances, the claimant shall be
notified and the time limit shall be one hundred twenty (120)
days from the date of the second request. The decision by the
Committee shall be in writing and shall be final and bind all
parties concerned.
SECTION 12: MISCELLANEOUS
12.1 APPLICABLE LAW. The Plan, the Deferral Agreements and all
actions taken hereunder or thereunder will be governed by, and
construed in accordance with, the laws of Bermuda without regard
to the conflict of law principles thereof. The resolution of any
dispute hereunder or thereunder will be by binding arbitration
pursuant to the Bermuda International Conciliation and
Arbitration Act 1993 (exclusive of the Conciliation Part of such
Act).
12.2 COMPLIANCE WITH LAWS. This Plan, the Deferral Agreements and any
action pursuant hereto or thereto are subject to compliance with
all applicable laws, rules and regulations and to such approvals
by any regulatory or governmental authority as may, in the
opinion of counsel for IPC, be necessary or advisable in
connection therewith.
12.3 EFFECTIVE DATE. The Plan will be effective as of December 31,
1997.
12.4 GENDER, ETC. In interpreting the Plan, the masculine gender will
include the feminine, the neuter gender will include the
masculine or feminine, and the singular will include the plural,
unless the context clearly indicates otherwise.
12.5 INVALIDITY. If any term or provision contained herein is to any
extent invalid or unenforceable, such term or provision will be
reformed so that it is valid, and such invalidity or
unenforceability will not affect any other provision or part
hereof.
12.6 LIMITS OF LIABILITY. Any liability of the Company to any
Participant with respect to an Award will be based solely upon
the obligations created by the Plan and the Deferral Agreement.
Neither the Company, nor any member of the Board of Directors or
of the
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<PAGE> 8
Committee, nor any other person participating in the
determination of any question under the Plan, or in the
interpretation, administration or application of the Plan, will
have any liability to any person for any action taken, or not
taken, in good faith under the Plan.
12.7 NONASSIGNABILITY. No Account or any rights and privileges
pertaining thereto may be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise,
other than by will or by the laws of descent and distribution.
12.8 OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan will be
deemed in any way to limit or restrict the Company from making
any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter
in effect; and no Award or payment made under this Plan will be
taken into account in determining the benefit payable under any
other plan unless such other plan expressly so provides.
12.9 PAYMENTS TO OTHER PERSONS. If payments are legally required to
be made to any person other than the person to whom any amount
is made available under the Plan, payments will be made
accordingly. Any such payment will be a complete discharge of
the liability hereunder.
12.10 RIGHTS. Status as an eligible Employee or a Participant will not
be construed as a commitment that any Award, or, in the case of
a Participant, any further Award, will be made to such eligible
Employee or Participant or to eligible Employees or Participants
generally. Nothing contained in this Plan or in any Deferral
Agreement will confer upon any Employee or Participant any
rights as a stockholder of IPC or the Company or any right to
continue in the employ or other service of the Company or
constitute a contract or limit in any way the right of the
Company to change such person's compensation or other benefits
or to terminate the employment or other service of such person
with or without Cause.
12.11 SECTION HEADINGS AND REFERENCES. The section headings contained
herein are for the purpose of convenience only, and in the event
of any conflict, the text of the Plan, rather than the section
headings, will control. All section references are to sections
of the Plan.
12.12 WITHHOLDING TAXES. Whenever payments are to be made under the
Plan, the Company will withhold therefrom an amount sufficient
to satisfy any applicable governmental withholding tax
requirements related thereto.
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<PAGE> 1
EXHIBIT 10.2
LIMITED WAIVER
This Limited Waiver (this "Waiver") is made as of __________________ by
Bank One, NA, formerly known as The First National Bank of Chicago, individually
and as agent (the "Agent"), the other financial institutions signatory hereto
and IPCRe Limited, a Bermuda corporation (the "Borrower").
RECITALS
A. The Borrower, the Agent and the Lenders are party to that certain
Credit Agreement dated as of June 30, 1998 (as amended, the "Credit Agreement").
Unless otherwise specified herein, capitalized terms used in this Waiver shall
have the meanings ascribed to them by the Credit Agreement.
B. The Borrower has requested a waiver of, and the undersigned Lenders
wish to waive, certain provisions of the Credit Agreement on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the mutual execution hereof and
other good and valuable consideration, the parties hereto agree as follows:
1. Waiver. The undersigned Lenders hereby (a) waive any breach
of Section 6.10 of the Credit Agreement with respect to the Fiscal Quarter of
the Borrowing ending on __________________ arising solely out of the failure
during such Fiscal Quarter of the positive excess, if any, of (i) the positive
Consolidated Borrower Net Income, if any, for the period of the then most
recently ended four Fiscal Quarters of the Borrower over (ii) the aggregate
amount of all dividends, distributions, repurchases or other acquisitions paid
or made during such period to exceed the aggregate amount of all dividends,
distributions, repurchases and other acquisitions made by the Borrower during
such Fiscal Quarter (any such breach being a "Covenant Breach") and (b) waive
any Default or Unmatured Default under Section 7.3 of the Credit Agreement which
may have heretofore arisen out of the Covenant Breach.
2. Representation and Warranty. As an inducement to the
Lenders to grant the foregoing waiver, the Borrower represents and warrants
that, after giving effect to this Waiver, as of the date hereof (a) there exists
no Default or Unmatured Default and (b) the representations and warranties
contained in Article V of the Credit Agreement (other than Section 5.6) are true
and correct except to the extent any such representation or warranty is stated
to relate solely to an earlier date, in which case such representation or
warranty shall have been true and correct on and as of such earlier date.
3. Effective Time. This Waiver shall become effective upon (a)
the execution and delivery hereof by the Required Lenders (without respect to
whether it has been executed and delivered by all Lenders).
4. Miscellaneous.
(a) The execution, delivery and effectiveness of this
Waiver shall not operate as a waiver of any right, power or remedy of
the Agent or any Lender under the Credit Agreement or any Loan
Document, nor constitute a waiver of any Default, Unmatured Default,
condition or provision of the Credit Agreement or any Loan Document,
except as specifically set forth herein.
(b) Section headings in this Waiver are included
herein for convenience of reference only and shall not constitute a
part of this Waiver for any other purposes.
-23-
<PAGE> 2
(c) This Waiver may be executed in any number of
counterparts, each of which when so executed shall be deemed an
original but all such counterparts shall constitute one and the same
instrument.
5. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
[signature pages follow]
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<PAGE> 3
IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative
Agent have executed this Agreement as of the date first above written.
IPCRe LIMITED
By:
Title:
BANK ONE, NA (Main Office Chicago), formerly
known as The First National Bank of Chicago,
Individually and as Agent
By:
Title:
CITIBANK, N.A., Individually and as
Documentation Agent
By:
Title:
THE BANK OF BERMUDA LIMITED, Individually
By:
Title:
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<PAGE> 4
BANKBOSTON, N.A., Individually
By:
Title:
DEUTSCHE BANK AG (New York and Cayman Island
Branches), Individually
By:
Title:
By:
Title:
FLEET NATIONAL BANK, Individually
By:
Title:
ROYAL BANK OF CANADA, Individually
By:
Title:
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<PAGE> 5
MELLON BANK, N.A., Individually
By:
Title:
BANK OF MONTREAL, Individually
By:
Title:
DRESDNER BANK AG (New York Branch and Grand
Cayman Branch), Individually
By:
Title:
By:
Title:
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<PAGE> 1
EXHIBIT 11.1
IPC HOLDINGS, LTD. AND SUBSIDIARIES
RECONCILIATION OF BASIC AND DILUTED NET INCOME PER COMMON SHARE
(Expressed in thousands of United States dollars, except for per share amounts)
A reconciliation of the numerator and denominator for basic and diluted EPS is
given in the following table:
<TABLE>
<CAPTION>
Amount per
Three months ended September 30, 1999 Income Shares Share
- ------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Basic EPS $ 7,797 25,033,932 $0.31
Effect of Dilutive Options 1,017,164
Diluted EPS $ 7,797 26,051,096 $0.30
Three months ended September 30, 1998
- -------------------------------------
Basic EPS $ 11,061 25,033,932 $0.44
Effect of Dilutive Options 1,440,960
Diluted EPS $ 11,061 26,474,892 $0.42
Nine months ended September 30, 1999
- ------------------------------------
Basic EPS $ 25,926 25,033,932 $1.04
Effect of Dilutive Options 1,037,404
Diluted EPS $ 25,926 26,071,336 $0.99
Nine months ended September 30, 1998
- ------------------------------------
Basic EPS $ 62,009 25,030,303 $2.48
Effect of Dilutive Options 1,595,241
Diluted EPS $ 62,009 26,625,544 $2.33
</TABLE>
-28-
<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 NINE MONTHS ENDED SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FINANCIAL STATEMENTS (AND
THE NOTES THERETO) CONTAINED IN SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 500,617
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 68,732
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 569,349
<CASH> 27,560
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 4,219
<TOTAL-ASSETS> 659,558
<POLICY-LOSSES> 89,046
<UNEARNED-PREMIUMS> 35,486
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 250
<OTHER-SE> 525,508
<TOTAL-LIABILITY-AND-EQUITY> 659,558
72,009
<INVESTMENT-INCOME> 22,575
<INVESTMENT-GAINS> 30,464
<OTHER-INCOME> 0
<BENEFITS> 82,024
<UNDERWRITING-AMORTIZATION> 10,200
<UNDERWRITING-OTHER> 6,927
<INCOME-PRETAX> 25,926
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,926
<EPS-BASIC> 1.04
<EPS-DILUTED> 0.99
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
