<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, 2000
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)
<TABLE>
<CAPTION>
BERMUDA NOT APPLICABLE
------------------------------ --------------------------------
<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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, 2000, was 25,033,932.
TOTAL PAGES 15
EXHIBIT INDEX LOCATED ON PAGE 13
1
<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, 2000 December 31, 1999
--------- ---------
(unaudited) (audited)
<S> <C> <C>
ASSETS:
Fixed maturity investments:
Available for sale, at fair market value (Amortized
cost 2000: $513,645; 1999: $501,424) $ 507,013 $ 487,826
Equity investments, available for sale (Cost 2000:
$65,103; 1999: $70,699) 70,957 78,859
Cash and cash equivalents 16,287 28,069
Reinsurance balances receivable (Related party 2000:
$4,493; 1999: $3,886) 35,102 21,460
Deferred premiums ceded 1,611 384
Loss reserves recoverable (Related party 2000: $138;
1999: $459) 1,377 4,585
Accrued investment income 11,766 13,689
Deferred acquisition costs 4,316 1,980
Prepaid expenses and other assets 4,502 4,090
--------- ---------
$ 652,931 $ 640,942
========= =========
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 68,875 $ 111,441
Unearned premiums 35,928 16,364
Reinsurance balances payable (Related party 2000: $495;
1999: $119) 2,263 1,190
Deferred commissions 295 33
Accounts payable and accrued liabilities (Related party
2000: $751; 1999: $567) 7,663 6,983
--------- ---------
115,024 136,011
--------- ---------
SHAREHOLDERS' INVESTMENT:
Share capital (Common shares outstanding, par value
U.S.$0.01: 2000: 25,033,932; 1999: 25,033,932 shares) . 250 250
Additional paid-in capital 299,833 299,833
Retained earnings 238,602 210,286
Accumulated other comprehensive (loss) income (778) (5,438)
--------- ---------
537,907 504,931
--------- ---------
--------- ---------
$ 652,931 $ 640,942
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<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,
-------------------------------- --------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Gross premiums written $ 10,530 $ 8,750 $ 88,563 $ 92,449
Premiums ceded (1,131) (516) (3,784) (3,615)
------------ ------------ ------------ ------------
Net written premiums 9,399 8,234 84,779 88,834
Change in unearned premium reserve 10,796 13,065 (18,338) (16,825)
------------ ------------ ------------ ------------
Net premiums earned 20,195 21,299 66,441 72,009
Net investment income 7,861 7,511 23,271 22,575
Realized gains/(losses), net on investments 13 286 315 30,464
------------ ------------ ------------ ------------
28,069 29,096 90,027 125,048
------------ ------------ ------------ ------------
EXPENSES:
Losses and loss adjustment expenses, net 7,812 16,109 44,790 82,024
Acquisition costs, net 2,427 3,199 8,353 10,200
General and administrative expenses 2,146 2,191 7,089 6,927
Exchange loss / (gain) 655 (200) 1,479 (29)
------------ ------------ ------------ ------------
13,040 21,299 61,711 99,122
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME $ 15,029 $ 7,797 $ 28,316 $ 25,926
============ ============ ============ ============
Basic net income per common share $ 0.60 $ 0.31 $ 1.13 $ 1.04
Diluted net income per common share $ 0.59 $ 0.30 $ 1.12 $ 0.99
Weighted average number of common shares - basic 25,033,932 25,033,932 25,033,932 25,033,932
Weighted average number of common shares - diluted 25,637,678 26,051,096 25,295,102 26,071,336
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 4
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,
--------------------------- -------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET INCOME $ 15,029 $ 7,797 $ 28,316 $ 25,926
-------- -------- -------- --------
OTHER COMPREHENSIVE INCOME (LOSS):
Holding (losses ) gains, net on
investments during period 5,700 (6,001) 4,975 (11,812)
Reclassification adjustment for (gains)
losses included in net income (13) (286) (315) (30,464)
-------- -------- -------- --------
5,687 (6,287) 4,660 (42,276)
-------- -------- -------- --------
COMPREHENSIVE INCOME (LOSS) $ 20,716 $ 1,510 $ 32,976 $(16,350)
======== ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
2000 1999
--------- ---------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 28,316 $ 25,926
Adjustments to reconcile net income to cash provided
by operating activities:
Amortization of investment premium, net (293) 25
Realized (gains) losses, net on investments (315) (30,464)
Changes in, net:
Reinsurance balances receivable (13,642) (16,178)
Funds held by reinsured companies 0 2,434
Deferred premiums ceded (1,227) (1,059)
Loss reserves recoverable 3,208 (4,321)
Accrued investment income 1,923 2,547
Deferred acquisition costs (2,336) (2,171)
Prepaid expenses and other assets (412) (791)
Reserve for losses and loss adjustment expenses (42,566) 36,820
Unearned premiums 19,564 17,884
Reinsurance balances payable 1,073 2,119
Deferred commissions 262 90
Accounts payable and accrued liabilities 680 (252)
--------- ---------
(5,765) 32,609
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (174,304) (267,208)
Proceeds from sale of fixed maturity investments 149,894 191,000
Proceeds from maturities of fixed maturity investments 12,000 45,050
Purchases of equity investments (4,367) (80,754)
Proceeds from sale of equity investments 10,760 109,741
--------- ---------
(6,017) (2,171)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional share capital 0 0
Cash dividends paid to shareholders 0 (23,844)
--------- ---------
0 (23,844)
--------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (11,782) 6,594
CASH AND CASH EQUIVALENTS, beginning of period 28,069 20,966
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 16,287 $ 27,560
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
5
<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, 2000 and 1999, respectively, the balance sheet
at September 30, 2000 and the cash flows for the nine month periods ended
September 30, 2000 and 1999, respectively. These interim consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 1999. The
results of operations for any interim period are not necessarily indicative
of results for the full year.
2. DIVIDENDS:
No dividends have been declared or paid in 2000 to date.
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, January 4, 1999,
January 3, 2000 and July 3, 2000 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 ("FASB") issued Statement of
Financial Accounting Standard No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities". Subsequently, FASB issued
Statement of Financial Accounting Standard No. 137 ("SFAS 137"), which
effectively deferred the implementation date of SFAS 133 to periods
beginning after June 15, 2000. Management does not believe the impact of the
adoption of SFAS 133 on the Company's financial position or results of
operations 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 that is affected by this Statement.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS, QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999
The following is a discussion of the results of operations and financial
position of IPC Holdings, Ltd. References to "we", "our" or "IPC" mean IPC
Holdings together with its wholly-owned subsidiaries, IPCRe Limited
("IPCRe"), and IPCRe Services Limited. This discussion should be read in
conjunction with our Consolidated Financial Statements and related notes,
for the quarter and nine months ended September 30, 2000.
In the quarters ended September 30, 2000 and 1999, we wrote premiums of
$10.5 million and $8.8 million, respectively, an increase of 20.3%. Written
premiums in the quarter were higher due to the renewal of some programs that
were written on January 1, 1999 for periods of eighteen months, as our
clients sought to renew for periods extending past January 1, 2000. We also
wrote business for new clients and additional business for existing clients.
In addition, written premium volume benefitted from increases in premium
rates, which were in the range of 5 to 10% for loss-free contracts, and
approximately 10 to 20% for loss-impacted contracts. Written premiums also
included reinstatement premiums of $0.3 million in the third quarter of
2000, compared to $1.0 million of reinstatement premiums recorded in the
same period in 1999. We ceded premiums of $1.1 million to IPCRe's
proportional reinsurance facility in the third quarter of 2000, compared to
$0.5 million ceded in the third quarter of 1999. This increase is also due,
in part, to those contracts which were written last year for policy periods
extending beyond January 1, 2000. Net premiums earned in the three months
ended September 30, 2000 were $20.2 million, compared to $21.3 million in
the same period in 1999, a decrease of 5.2%. Earned premiums were lower
primarily because of the amount of reinstatement premiums written in the
third quarter of 1999, which are fully earned when written.
Net investment income was $7.9 million in the quarter ended September 30,
2000, compared to $7.5 million for the quarter ended September 30, 1999, an
increase of 4.7%. This increase is a result of an increase in the net yield
of the portfolio.
There was a small net realized gain from the sale of investments in the
quarter ended September 30, 2000, compared to a gain of $0.3 million in the
third quarter of 1999. 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, 2000, incurred losses were $7.8
million, compared to $16.1 million in the third quarter of 1999. Incurred
losses in the third quarter included the Kuwait National Petroleum explosion
($2.5 million), a satellite loss ($0.5 million) as well as some minor
development of claims from prior years. In the third quarter of 1999,
incurred losses included Hurricane Floyd in the United States, and the
Turkish earthquake. Our loss and loss expense ratio (the ratio of losses and
loss adjustment expenses to premiums earned) was 38.7% in the third quarter
of 2000, compared to 75.6% in the third quarter of 1999.
Acquisition costs incurred, which consist primarily of commissions and
brokerage fees paid to intermediaries for the production of business, were
$2.4 million for the quarter ended September 30, 2000, compared to $3.2
million in the same period of 1999, a decrease of 24.1%. This decrease is
due in part to the decrease in earned premiums, and because of reductions in
the amounts paid or accrued for profit commissions. General and
administrative expenses were $2.1 million in the quarter ended September 30,
2000, compared to the $2.2 million incurred in the corresponding period in
1999. This decrease is due primarily to reductions in administrative fees
which are based on earned premiums, as well as general reductions in various
operating expense categories. IPC's expense ratio (the ratio of acquisition
costs plus general and administrative expenses to premiums earned) was 22.6%
for the quarter ended September 30, 2000 compared to 25.3% for the
corresponding period in 1999.
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, 2000 and 1999, respectively:
<TABLE>
<CAPTION>
Quarter ended September 30,
---------------------------
2000 1999
---- ----
<S> <C> <C>
Loss & loss expense ratio 38.7% 75.6%
Expense ratio 22.6% 25.3%
Combined ratio 61.3% 100.9%
</TABLE>
Our net income for the quarter ended September 30, 2000 was $15.0 million,
compared to $7.8 million for the corresponding period in 1999, an increase
of 92.8%. Excluding the effects of net realized gains and losses arising
from the sale of investments, net operating income for the third quarter of
2000 was $15.0 million, compared to $7.5 million for the third quarter of
1999, an increase of 99.9%. This increase is primarily the result of lower
losses and lower expenses, as discussed above.
7
<PAGE> 8
RESULTS OF OPERATIONS, NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
For the nine months ended September 30, 2000 and 1999, we wrote premiums of
$88.6 million and $92.4 million, respectively, a decrease of 4.2%. Written
premiums were lower due to the amount of reinstatement premium written in
1999, resulting from the significantly higher loss activity in the period.
The decline in written premiums was partially offset by new business and
additional business written for existing clients. We also benefitted from
increases in premium rates, which were in the range of 3 to 10% for
loss-free contracts, and significant increases for loss-impacted contracts.
We ceded premiums of $3.8 million to IPCRe's proportional reinsurance
facility in the nine months ended September 30, 2000, compared to $3.6
million ceded in the corresponding period of 1999. Net premiums earned in
the nine months ended September 30, 2000 were $66.4 million, compared to
$72.0 million in the same period in 1999, a decrease of 7.7%. Earned
premiums were lower primarily because reinstatement premiums are fully
earned when written.
Net investment income was $23.3 million in the nine months ended September
30, 2000, compared to $22.6 million for the nine months ended September 30,
1999, an increase of 3.1%. This increase is a result of an increase in the
net yield of the portfolio.
There was a net realized gain from the sale of investments in the nine
months ended September 30, 2000 of $0.3 million, compared to a gain of $30.5
million in the corresponding period of 1999. Net realized gains and losses
fluctuate from period to period, depending on the individual securities
sold, as recommended by IPCRe's investment advisor. In February 1999, there
was a reallocation within the portfolio, whereby the equity element was
reduced from approximately 15% to 12%. In May 1999, we sold and subsequently
repurchased all of the equity securities in our portfolio, realizing the
gains which had been accumulating since their original purchase which also
resulted in significant gains.
In the nine months ended September 30, 2000, incurred losses were $44.8
million, compared to $82.0 million in the corresponding period of 1999.
Incurred losses in the first nine months of 2000 were primarily the result
of the development of claims from the European storms that occurred in
December 1999 and from Typhoon Bart, which struck Japan in late September
1999. Catastrophe losses from these events have increased by $29.5 million
during 2000. In addition, there has been the Kuwait National Petroleum
explosion ($2.5 million), a Kentucky warehouse fire ($0.8 million) and a
satellite loss ($0.5 million). In 1999, incurred losses included $6.3
million from the Rouge Industries steel mill explosion, $39.4 million from
the Sydney hailstorm in April, the tornadoes which struck various parts of
the mid-West United States in May ($10.1 million), Hurricane Floyd ($6.0
million) and the Turkish earthquake ($1.0 million). Our loss and loss
expense ratio was 67.4% in the first nine months of 2000, compared to 113.9%
in the corresponding period in 1999.
Acquisition costs incurred were $8.4 million for the nine months ended
September 30, 2000, compared to $10.2 million in the corresponding period of
1999, a decrease of 18.1%. The reduction is due to the decrease in earned
premiums, as well as reductions in the accruals of profit commissions and
no-claims bonuses, because of losses on those contracts. General and
administrative expenses were $7.1 million in the nine months ended September
30, 2000, compared to the $6.9 million incurred in the corresponding period
in 1999. This increase is due primarily to increases in various expense
categories, including salaries and benefits, and data processing. IPC's
expense ratio was 23.2% for the nine months ended September 30, 2000
compared to 23.8% for the corresponding period in 1999.
The following table summarizes the loss and loss expense ratio, expense
ratio and combined ratio for the nine months ended September 30, 2000 and
1999, respectively:
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
2000 1999
---- ----
<S> <C> <C>
Loss & loss expense ratio 67.4% 113.9%
Expense ratio 23.2% 23.8%
Combined ratio 90.6% 137.7%
</TABLE>
Our net income for the nine months ended September 30, 2000 was $28.3
million, compared to $25.9 million for the corresponding period in 1999, an
increase of 9.2%. Excluding the effects of net realized gains and losses
arising from the sale of investments, net operating income for the first
nine months of 2000 was $28.0 million, compared to an operating loss of
$(4.5) million for the first nine months of 1999, an increase of 717.0%.
This increase is primarily the result of lower losses and lower acquisition
costs, as discussed above.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
IPC Holdings is a holding company that conducts no reinsurance operations of
its own. Its 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, 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, 2000 was approximately $126 million, while none can be paid
currently under the credit facility without a waiver from certain covenants.
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 our cash flows fluctuate significantly from period to period.
Net cash outflows from operating activities in the nine months ended
September 30, 2000 were $(5.8) million compared to a net cash inflow from
operations of $32.6 million in the corresponding period in 1999, which
represents a decrease of 117.7%. The decrease is primarily the result of the
significant amount of net claim payments in the nine months to September 30,
2000, which totaled $79.9 million, compared to $49.3 million in the
corresponding period of 1999.
Net cash outflows from investing activities in the nine months ended
September 30, 2000 were $(6.0) million. Cash and cash equivalents decreased
by $11.8 million in the nine months ended September 30, 2000, resulting in a
balance of $16.3 million at September 30, 2000. At September 30, 2000, 56.3%
of IPC's fixed maturity portfolio (based on market value) was held in cash,
United States Treasury notes and in securities rated AAA, and 26.8% was held
in securities rated AA. The average modified duration of IPC's fixed
maturity portfolio was 2.7 years. IPC's portfolio does not contain any
investments in real estate or mortgage loans. We believe that IPCRe's $300
million revolving credit facility, and the relatively high quality of its
investment portfolio, provide sufficient liquidity to meet IPC's cash
demands.
Neither the Company, IPCRe nor Services have any material commitments for
capital expenditures.
YEAR 2000 DISCLOSURE STATEMENT
IPCRe is principally an excess of loss property catastrophe reinsurer.
IPCRe's reinsurance policies did not specifically include Y2K as a covered
event and IPCRe did not intend to provide specific coverage for losses
arising from Y2K events. We carefully monitored the terms of policy renewals
with respect to the extent that they oblige us to provide such coverage and,
with respect to renewals in 1999, we declined certain business.
Although no significant property damage has been reported with Y2K as its
primary cause, a limited number of commercial policyholders have sought a
response from their property insurers for compensation for remedial costs.
These cases involve a creative interpretation of the sue and labour clause
in policies, which is designed to compensate policyholders for costs
involved in efforts to mitigate losses from insured events. The outcome of
these cases is uncertain but, given the limited number of cases, we
currently believe that such cases are unlikely to have a significant impact,
if any, on IPCRe's operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our investment managers performed a Value at Risk ("VaR") analysis, to
estimate the maximum potential loss of fair value for each segment of market
risk, as of June 30, 2000. VaR is a summary statistical measure that uses
historical interest and foreign currency exchange rates and equity prices
and estimates of the volatility and correlation of each of these rates and
prices to calculate the maximum loss that could occur within a given
statistical confidence level and time horizon. The analysis calculated the
VaR with respect to the net fair value of our financial instrument assets as
of June 30, 2000 using historical simulation methodology. Previous analyses
performed as of December 31, 1998 and 1999, respectively, used the variance
covariance (delta normal) methodology. At June 30, 2000 the VaR of IPCRe's
investment portfolio was approximately $8.2 million, which represents a 95th
percentile value change over a one-month time horizon. This result was
obtained through historical simulation using approximately 750 days (3
years) of historical interest rate and equity market data. There have been
no material changes to the composition of IPCRe's investment portfolio since
June 30, 2000. Accordingly, we do not believe that there has been any
material change to the amount of market risk to which we are exposed, from
June 30 to September 30, 2000.
For certain non-U.S. dollar currencies, exchange rate movements have shown
some volatility, especially the Euro and Australian dollar, which have
declined by approximately 12% and 17%, respectively, since the beginning of
the year.
9
<PAGE> 10
To reduce the potential impact of exchange rate movements between the U.S.
dollar, Australian dollar and the Euro, on the liabilities arising out of
the Sydney hailstorm of April 1999 and the European storms of December 1999,
Australian Dollars and Euros were purchased in February 2000 for future
delivery to match anticipated pay-out patterns of the liabilities. Such
transactions were designed to provide a potential offset of the impact of
exchange rate movements through asset/liability matching. From a risk
perspective, we do not believe that the impact of such transactions on our
overall VaR to be material. At September 30, 2000 we held U.S.$6.2 million
in Australian dollar time deposits, and U.S.$3.4 million in Euro time
deposits, and the following forward purchase agreements were outstanding:
<TABLE>
<CAPTION>
Buy Sell Date
--- ---- ----
<S> <C> <C>
U.S.$0.00 million (euro) 0.43 million Nov. 24, 2000 (net transactions)
</TABLE>
There were no forward purchase/sale contracts in effect during 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 include but are not limited to the outcome of Y2K litigation and
the effect of currency forward purchase contracts and exchange rate
movements. 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, or those achieved
in the past, including: greater than expected severity or frequency of
catastrophic events, reductions in pricing, or a decrease in demand for
property catastrophe reinsurance, or changes in exchange rates and greater
than expected currency exposure.
10
<PAGE> 11
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).
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
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
11.1* Reconciliation of basic and diluted net income per common share ("EPS").
27.1* Financial Data Schedule
</TABLE>
* Filed herewith
(b) Reports on Form 8-K
NONE
11
<PAGE> 12
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, 2000 /s/ James P. Bryce
JAMES P. BRYCE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DATE NOVEMBER 10, 2000 /s/ John R. Weale
JOHN R. WEALE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
12
<PAGE> 13
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).
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
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
11.1* Reconciliation of basic and diluted net income per common share ("EPS")
27.1* Financial Data Schedule
</TABLE>
*Filed herewith
13
