<PAGE>
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
FORM 10 - Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
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: 34-0-26512
RENAISSANCERE HOLDINGS LTD.
---------------------------
(Exact name of registrant as specified in its charter)
BERMUDA 98-013-8020
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
RENAISSANCE HOUSE
8-12 EAST BROADWAY
PEMBROKE, BERMUDA HM 19
(Address of principal executive offices) (Zip Code)
(441) 295-4513
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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 shares of RenaissanceRe Holding Ltd.'s common
shares, par value US $1.00 per share as of March 31, 1997 was 22,877,000.
Total number of pages in this report: 14 (including Exhibit 27)
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RenaissanceRe Holdings Ltd.
INDEX TO FORM 10-Q/A
<TABLE>
<S> <C> <C>
PART I -- Financial Information
ITEM 1 -- Financial Statements
Consolidated Balance Sheets as of March 31, 1997
(unaudited) and December 31, 1996 3
Unaudited Consolidated Statements of Operations for
the Three Months Ended March 31, 1997 and 1996. 4
Unaudited Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997 and 1996 5
Notes to Unaudited Consolidated Financial Statements 6
ITEM II -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II -- Other Information 12
ITEM 1 -- Legal Proceedings
ITEM 2 -- Changes in Securities
ITEM 3 -- Defaults Upon Senior Securities
ITEM 4 -- Submission of Matters to a Vote of Security Holders
ITEM 5 -- Other Information
ITEM 6 -- Exhibits and Reports on Form 8-K
Signature - RenaissanceRe Holdings Ltd. 13
</TABLE>
2
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Part I -- Financial Information
Item I -- Financial Statements
RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(United States Dollars)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
AS AT
----------------------------------
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Fixed maturities available for sale, at
fair value (Amortized cost $611,452
and $601,907, at March 31, 1997 and
December 31, 1996, respectively) $607,469 $603,484
Equity securities at market (cost $23,499) 23,564 --
-------- --------
Total Investments 631,033 603,484
Cash and cash equivalents 166,172 198,982
Premiums receivable 104,420 56,685
Ceded reinsurance balances 15,850 19,783
Accrued investment income 13,612 13,913
Deferred acquisition costs 12,956 6,819
Investment balances receivable 12,640 --
Other assets 5,317 5,098
-------- --------
TOTAL ASSETS $962,000 $904,764
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Reserve for claims and claim adjustment
expenses $110,138 $105,421
Reserve for unearned premiums 124,266 65,617
Bank loan 50,000 150,000
Reinsurance balances payable 15,712 18,072
Other 6,208 4,215
-------- --------
TOTAL LIABILITIES 306,324 343,325
-------- --------
COMPANY OBLIGATED MANDATORILY REDEEMABLE
CAPITAL SECURITIES OF A SUBSIDIARY
TRUST HOLDING SOLELY JUNIOR SUBORDINATED
DEBENTURES OF THE COMPANY (NOTE 5) 100,000 --
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 15,340 15,236
SHAREHOLDERS' EQUITY
Common shares 22,877 25,531
Additional paid-in capital 73,522 102,902
Loans to officers and employees (3,927) (3,868)
Net unrealized appreciation (depreciation)
on investments (3,918) 1,577
Retained earnings 451,782 422,061
-------- --------
TOTAL SHAREHOLDERS' EQUITY 540,336 546,203
-------- --------
TOTAL LIABILITIES, MINORITY INTEREST,
CAPITAL SECURITIES AND SHAREHOLDERS'
EQUITY $962,000 $904,764
======== ========
BOOK VALUE PER COMMON SHARE $ 23.62 $ 23.21
======== ========
COMMON SHARES OUTSTANDING 22,877 23,531
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(United States Dollars)
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
GROSS PREMIUMS WRITTEN $120,359 $140,548
======== ========
REVENUES
Net premiums written $117,648 $138,715
Increase in unearned premiums (61,747) (77,016)
-------- --------
Net premiums earned 55,901 61,699
Net investment income 12,125 10,058
Net foreign exchange losses (1,643) (94)
Net realized gains (losses) on investments 166 (617)
-------- --------
TOTAL REVENUES 66,549 71,046
-------- --------
EXPENSES
Claims and claim adjustment expenses
incurred 14,238 19,981
Acquisition expenses 6,378 6,322
Operating expenses 5,918 3,301
Corporate expenses 1,957 687
Interest expense 1,933 1,584
-------- --------
TOTAL EXPENSES 30,424 31,875
-------- --------
Income before minority interest and taxes 36,125 39,171
Minority Interest - Company Obligated Mandatorily
Redeemable Capital Securities of a Subsidiary Trust
holding solely Junior Subordinated Debentures of
the Company (Note 5) (545) --
Minority interest - Glencoe (143) --
-------- --------
Income before taxes 35,437 39,171
Income tax expense -- --
-------- --------
NET INCOME $ 35,437 $ 39,171
======== ========
EARNINGS PER COMMON SHARE $ 1.52 $ 1.50
======== ========
Weighted average Common Shares and
common equivalent shares outstanding 23,295 26,088
======== ========
Claims and claim expense ratio 25.5% 32.4%
Expense ratio 22.0% 15.6%
-------- --------
Combined ratio 47.5% 48.0%
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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RENAISSANCERE HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(United States Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 35,437 $ 39,171
ADJUSTMENTS TO RECONCILE NET INCOME TO
CASH PROVIDED BY OPERATING ACTIVITIES
Amortization and depreciation 1,331 703
Realized investment (gains) losses (166) 617
Minority shares of income 143 --
Change in:
Reinsurance balances, net (50,095) (54,418)
Ceded reinsurance balances
receivable 3,933 (2,730)
Deferred acquisition costs (6,137) (7,516)
Reserve for claims and claim
adjustment expenses 4,717 4,051
Reserve for unearned premiums 58,649 77,015
Other 1,227 4,182
------- -------
CASH PROVIDED BY OPERATING
ACTIVITIES 49,039 61,075
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 191,473 79,279
Purchase of investments available for
sale (238,051) (127,645)
------- -------
CASH APPLIED TO INVESTING
ACTIVITIES (46,578) (48,366)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Company
Obligated Mandatorily Redeemable
Capital Securities of a Subsidiary
Trust holding solely Junior
Subordinated Debentures of the
Company (Note 5) 98,500 --
Repayment of bank loan (100,000) (20,000)
Dividends paid (5,716) (5,121)
Purchase of Common Shares (28,055) --
------- -------
CASH APPLIED TO FINANCING
ACTIVITIES (35,271) (25,121)
------- -------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (32,810) (12,412)
------- -------
CASH AND CASH EQUIVALENTS,
BALANCE AT BEGINNING OF
PERIOD 198,982 139,163
------- -------
CASH AND CASH EQUIVALENTS,
BALANCE AT END OF PERIOD $166,172 $126,751
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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RenaissanceRe Holdings Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
(Expressed in United States Dollars)
(unaudited)
1. The consolidated financial statements have been prepared on the basis of
United States generally accepted accounting principles ("GAAP") and include the
accounts of RenaissanceRe Holdings Ltd. (the "Company") and its subsidiaries,
Renaissance Reinsurance Ltd. ("Renaissance Reinsurance") and Glencoe Insurance
Ltd. ("Glencoe"). In the opinion of management, these financial statements
reflect all the normal recurring adjustments necessary for a fair presentation
of the Company's financial position at March 31, 1997 and December 31, 1996, its
results of operations for the three months ended March 31, 1997 and 1996 and
cash flows for the three months ended March 31, 1997 and 1996. These
consolidated financial statements should be read in conjunction with the 1996
audited consolidated financial statements and related notes thereto. The results
of operations for any interim period are not necessarily indicative of results
for the full fiscal year.
2. Earnings per common share is calculated by dividing net income available to
common shareholders by weighted average common shares and common share
equivalents outstanding.
For the quarter ended March 31, 1997 the Company had 23,295,000 weighted
average common shares outstanding consisting of 22,862,000 weighted average
common shares and 433,000 weighted average common share equivalents issuable
pursuant to the Company's stock option plans. For the quarter ended March 31,
1996, the Company had 26,088,000 weighted average common shares outstanding
consisting of 25,605,000 weighted average common shares and 483,000 weighted
average common share equivalents issuable pursuant to the Company's stock option
plans. Total common shares outstanding as at March 31, 1997 and December 31,
1996 were 22,877,000 and 23,531,000, respectively.
3. During the quarter ended March 31, 1997, the Board of Directors of the
Company declared, and the Company paid, a dividend of $0.25 per common share to
shareholders of record as of February 19, 1997.
4. In January 1997, the Company purchased for cancellation an aggregate of
813,190 common shares from public shareholders of the Company for an aggregate
purchase price of $28.1 million (the "Tender Offer").
5. On March 7, 1997, the Company completed the sale of $100 million aggregate
liquidation amount of "Company Obligated, Mandatorily Redeemable Capital
Securities of Subsidiary Trust holding solely $103,092,783.51 of the Company's
8.54% Junior Subordinated Debentures due March 1, 2027" (the "Capital
Securities") issued by RenaissanceRe Capital Trust (the "Trust"), a newly
created Delaware subsidiary business trust of the Company. The Capital
Securities pay cumulative cash distributions at an annual rate of 8.54 percent,
payable semi-annually commencing September 1, 1997. The gross proceeds from the
6
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offering of the Capital Securities were used to repay a portion of the Company's
outstanding indebtedness under the Company's revolving credit facility with a
syndicate of commercial banks (the "Revolving Credit Facility").
The financial statements of the Trust will be consolidated into the
Company's consolidated financial statements with the Capital Securities shown as
"Company Obligated, Mandatorily Redeemable Capital Securities of a Subsidiary
Trust holding solely Junior Subordinated Debentures of the Company" on the
balance sheet. The Trust is a wholly owned subsidiary of the Company.
6. Interest paid was $1.7 million for the quarter ended March 31, 1997 and
$1.6 million for the same quarter in the previous year.
7. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard ("SFAS") No. 128, Earnings per Share. SFAS No.
128, simplifies the standards for computing earnings per share ("EPS")
previously found in APB Opinion No. 15, Earnings per Share. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures. Management does not believe
this new pronouncement will materially affect the Company's current disclosures
as the Company's capital structure is not considered complex nor is there
significant dilution from other securities or contracts to issue common stock.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods and requires restatement of
all prior-period EPS data presented. Earlier application is not permitted.
If SFAS No. 128 had been effective for the current reporting period, the pro-
forma affects would be as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
<S> <C> <C>
1997 1996
---- ----
Basic EPS $1.55 $1.53
Diluted EPS $1.52 $1.50
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the quarter ended March 31, 1997 compared to the quarter ended March 31,
1996
For the quarter ended March 31, 1997, net income available to common
shareholders was $35.4 million or $1.52 per share, compared to $39.2 million or
$1.50 per share for the same quarter in 1996. The decrease in reported net
income was primarily related to a decrease in net premiums earned, increases
in foreign exchange losses, and operating, corporate and interest expenses.
These items were partially offset by increases in investment income and
decreases in claims and claim adjustment expenses. Per share amounts for the
first quarter of 1997 benefited from a lower number of shares outstanding, as a
result of the Company's recent $100 million share repurchase transactions
consisting of (i) the purchase for cancellation from certain shareholders of the
Company in December 1996 of an aggregate of 2,085,361 common shares for an
aggregate purchase price of $71.9 million and (ii) the purchase for cancellation
from the public shareholders of the Company in January 1997 pursuant to the
Tender Offer of an aggregate of 813,190 common shares for an aggregate purchase
price of $28.1 million.
Gross premiums written for the first quarter of 1997 declined 14.4 percent to
$120.4 million from the $140.5 million reported for the same quarter of 1996.
The decline in gross premiums written was primarily related to the competitive
market for property catastrophe reinsurance. The premium decrease of 14.4
percent was the result of a 18.6 percent decrease in premiums due to the Company
not renewing coverage on existing business and a 6.1 percent decrease related to
changes in pricing, participation level and coverage on renewed business, which
was partially offset by an 10.3 percent increase in premiums related to new
business.
Net premiums written for the first quarter of 1997 were $117.6 million compared
with $138.7 million for the first quarter of 1996. Net premiums earned for the
first quarter of 1997 were $55.9 million, compared to $61.7 million for the same
quarter of 1996, a decrease of 9.4 percent. Total revenues for the first
quarter of 1997 decreased to $66.5 million from $71.0 million reported for the
same quarter of 1996.
The table below sets forth the Company's combined ratio and components thereof
for the quarters ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1997 1996
---- ----
<S> <C> <C>
Loss ratio 25.5% 32.4%
Expense ratio 22.0% 15.6%
---- ----
Combined ratio 47.5% 48.0%
==== ====
</TABLE>
Claims and claim adjustment expenses incurred for the quarter ended March 31,
1997 were $14.2 million or 25.5 percent of net premiums earned. In comparison,
claims and claim adjustment expenses for the quarter ended March 31, 1996 were
8
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$20.0 million or 32.4 percent of net premiums earned and included the provision
of $7.0 million for losses related to the Northeast USA winter storms.
Underwriting expenses are comprised of acquisition expenses and operating
expenses. Acquisition expenses were $6.4 million and $6.3 million for the
quarters ended March 31, 1997 and 1996, respectively. Operating expenses for the
first quarter of 1997 increased to $5.9 million compared with $3.3 million for
the same quarter of 1996 as a result of increased staffing at Renaissance
Reinsurance and the continued development of Glencoe.
Corporate expenses for the first quarter of 1997 include one-time fees of $1.5
million related to the issuance of $100 million aggregate liquidation amount of
Capital Securities during the quarter.
Net investment income (excluding net realized investment gains and losses) was
$12.1 million for the quarter ended March 31, 1997 compared to $10.1 million for
the same period in 1996. The increase was the result of a higher average yield
on the portfolio and higher average invested assets, which resulted primarily
from cash provided by operations.
Net foreign exchange losses for the quarter ended March 31, 1997 increased to
$1.6 million from $0.1 million for the same period in 1996. Substantial portions
of the Company's foreign denominated premiums incepted and were recorded on
January 1, 1997. Subsequent to the recording of these premiums, the U.S. Dollar
strengthened against the British Pound and other foreign currencies, which
resulted in the devaluation of these foreign denominated receivables and the
recording of the related foreign exchange loss.
Interest expense for the quarter ended March 31, 1997 increased to $1.9 million
from $1.6 million for the same period in 1996. The increase was primarily
related to higher average outstanding balances under the Revolving Credit
Facility.
LIQUIDITY AND CAPITAL RESOURCES
As a holding company, the Company relies on cash dividends and other permitted
payments from its subsidiaries to make principal, interest payments and cash
distributions on outstanding obligations and pay dividends, if any, to the
Company's shareholders. The payment of dividends by the Company's subsidiaries
to the Company is, under certain circumstances, limited under the Revolving
Credit Facility and under Bermuda insurance law. The Bermuda Insurance Act of
1978, amendments thereto and related regulations of Bermuda, require the
Company's subsidiaries to maintain a minimum solvency margin and a minimum
liquidity ratio. There are presently no significant restrictions on the payment
of dividends by the Company's subsidiaries to the Company.
9
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Cash flows from operating activities resulted principally from premium and
investment income, net of paid losses, acquisition costs and other related
expenses. The Company is unable to predict its cash flows from operating
activities, as it may be required to make large catastrophe claims payments to
its clients. As a consequence, cash flows from operating activities may
fluctuate between individual quarters and years.
Neither the Company nor its subsidiaries have material commitments for capital
expenditures. Based on its current operating plans, the Company believes that
its liquidity will be adequate in both the short term and long term.
In January 1997, the Company purchased for cancellation an aggregate of 813,190
common shares for an aggregate purchase price of $28.1 million in the Tender
Offer.
On March 7, 1997 the Company completed the sale of $100 million aggregate
liquidation amount of Capital Securities issued by the Trust. The Capital
Securities pay cumulative cash distributions at an annual rate of 8.54 percent,
payable semi-annually commencing September 1, 1997. Proceeds from the offering
of the Capital Securities were used to repay a portion of the Company's
outstanding indebtedness under the Revolving Credit Facility.
On December 12, 1996 the Company amended and restated the Revolving Credit
Facility to provide for the borrowing of up to $200 million on terms generally
extended to prime borrowers, at an interest rate, at the Company's option, of
either the base rate of the lead bank or the LIBOR rate plus a spread ranging
from 25 to 50 basis points. The full amount of the Revolving Credit Facility is
available until December 1, 1999 with two optional one-year extensions, if
requested by the Company and approved by the lenders. During the quarter, the
Company reduced its borrowings under the Revolving Credit Facility by $100
million. As of March 31, 1997, $50 million was outstanding under the Revolving
Credit Facility and the Company had $150 million of unused borrowing capacity
thereunder.
During 1996, the Company developed a multi-currency asset/liability optimization
model in conjunction with Tillinghast and Falcon Asset Management to integrate
asset, liability and capital decisions. As a result of this study, it was
determined that the Company could diversify its investment portfolio to include
investments in common stocks with minimal increase in overall corporate risk.
The analysis showed that the diversification benefits of equities offset their
greater volatility, and therefore, would not require significant additional
capital. During the first quarter of 1997, the Company purchased $23.5 million
of equity securities.
The Company's investment portfolio had a fair value of $797.2 million and
consisted of debt securities with fixed maturities of $607.5 million, equity
security investments of $23.6 million, and cash and cash equivalents of $166.2
million. At March 31, 1997, the fixed maturity investment portfolio had an
average rating of AA as measured by Standard & Poor's Ratings Group, an average
duration of 2.3 years and an average yield to maturity of 6.7 percent before
investment expenses.
10
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The Company's investments in equity securities and in cash and cash equivalents
include $22.3 million and $23.7 million of investments denominated in non-U.S.
currencies, respectively, representing approximately 5.6 percent of total
invested assets. The remaining 94.4 percent of the Company's invested assets are
invested in U.S. Dollar denominated investments. The Company's portfolio does
not contain any direct investments in real estate or mortgage loans.
11
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PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings
None.
Item 2 -- Changes in Securities
On March 7, 1997, the Company completed the sale of $100 million
aggregate liquidation amount of Capital Securities issued by the
Trust. The transaction was effected in reliance upon Rule 144A ("Rule
144A") promulgated under the Securities Act of 1933, as amended. The
Capital Securities were sold to institutional investors, each of whom
represented and warranted to the Company and the Trust that it is a
"Qualified Institutional Buyer" within the meaning of Rule 144A. The
initial purchasers of the Capital Securities were Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc, who each
received as compensation $10.00 per Capital Security sold. Pursuant to
its obligations with respect to the Capital Securites, the Company
shall not declare or pay any dividends or distributions on, or redeem,
purchase or acquire, or make a liquidation payment with respect to,
any of the Company's capital stock if the Company shall be in default
with respect to certain of its obligations under the Capital
Securities or if the Company shall have given notice of its intention
to defer its payment obligations with respect to the Capital
Securities and shall not have rescinded such notice.
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 From 8-K
a. Exhibits:
Exhibit 27 - Financial Data Schedule
b. Current Reports on Form 8-K:
The Registrant filed Current Reports on Form 8-K on
January 7, 1997, February 20, 1997 and March 19, 1997.
12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
RENAISSANCERE HOLDINGS LTD.
Date: May 15, 1997
By: /s/ Keith S. Hynes
____________________________
Keith S. Hynes
Senior Vice President and
Chief Financial Officer
13
