<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarter Ended March
31, 1998.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-12800
EXECUTIVE RISK INC.
(Exact name of registrant as specified in its charter)
Delaware
6-1388171
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
82 Hopmeadow Street 06070
Simsbury, Connecticut (Zip Code)
(Address of principal executive offices)
(860) 408-2000
(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 .
As of May 7, 1998, there were 10,889,037 shares of Executive Risk Inc.
Common Stock, $0.01 par value, outstanding, net of treasury shares.
<PAGE> 2
EXECUTIVE RISK INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements
<S> <C>
Independent Accountants' Review Report............................................... 2
Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997................................................. 3
Consolidated Statements of Income -
Three Months Ended March 31, 1998 and 1997 .......................................... 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 .......................................... 5
Notes to Consolidated Financial Statements........................................... 6 -7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................ 7-9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................... 9
SIGNATURES.............................................................................. 10
Exhibit 15.1 - Independent Accountants' Acknowledgment Letter........................... 11
Exhibit 27 - Financial Data Schedule.................................................... --
</TABLE>
NOTE ON FORWARD-LOOKING STATEMENTS: The Private Securities Litigation Reform Act
of 1995 provides a "safe harbor" for forward-looking statements. This Report may
include forward-looking statements, as do other publicly available Company
documents, including reports on Forms 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission and other written or oral statement made by
or on behalf of the Company, its officers and employees. When made, such
forward-looking statements reflect the then-current views of the Company or its
management with respect to future events and financial performance. There are
known and unknown risks, uncertainties and other factors that could cause actual
results to differ materially from those contemplated or indicated by such
forward-looking statements. These include, but are not limited to, risks and
uncertainties inherent in or relating to (i) general economic conditions,
including interest rate movements, inflation and cyclical industry conditions,
(ii) governmental and regulatory policies affecting professional liability, as
well as the judicial environment, (iii) the loss reserving process, (iv)
increasing competition in the market segments in which the Company operates, (v)
the conduct of international operations, including exchange rate fluctuations
and foreign regulatory changes, and (vi) the effects of Year 2000 on Company
insureds and the degree to which liability exposure is affected thereby. The
words "believe," "expect," "anticipate," "project," and similar expressions
identify forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. Neither the Company or its management undertakes any obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
1
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Stockholders and Board of Directors
Executive Risk Inc.
We have reviewed the accompanying consolidated balance sheet of Executive Risk
Inc. and its subsidiaries as of March 31, 1998, and the related consolidated
statements of income and cash flows for the three-month period ended March 31,
1998 and 1997. These consolidated financial statements are the responsibility of
the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
consolidated financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Executive Risk Inc. and
subsidiaries as of December 31, 1997, and the related consolidated statements of
income, stockholders' equity and cash flows for the year then ended (not
presented herein) and in our report dated February 3, 1998, we expressed an
unqualified opinion on those consolidated financial statements.
/S/ ERNST & YOUNG LLP
Stamford, Connecticut
May 7, 1998
2
<PAGE> 4
EXECUTIVE RISK INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
(In thousands, except share data) 1998 1997
---- ----
<S> <C> <C>
ASSETS
Fixed maturities available for sale, at fair value
(amortized cost: 1998 - $954,552 and 1997 - $905,050) $ 982,690 $ 934,981
Equity securities available for sale, at fair value
(cost: 1998 - $44,354 and 1997 - $42,787) 68,654 61,732
Cash and short-term investments, at cost which approximates market 65,991 88,505
----------- -----------
TOTAL CASH AND INVESTED ASSETS 1,117,335 1,085,218
Premiums receivable 36,229 40,033
Reinsurance recoverables 189,939 159,918
Accrued investment income 14,748 13,731
Deferred acquisition costs 36,952 34,581
Prepaid reinsurance premiums 101,209 99,847
Deferred income taxes 20,893 23,316
Other assets 43,555 29,160
----------- -----------
TOTAL ASSETS $ 1,560,860 $ 1,485,804
=========== ===========
LIABILITIES
Loss and loss adjustment expenses $ 693,609 $ 637,929
Unearned premiums 291,756 289,840
Senior notes payable 75,000 75,000
Ceded balances payable 28,713 37,165
Accrued expenses and other liabilities 54,277 44,687
----------- -----------
TOTAL LIABILITIES 1,143,355 1,084,621
PREFERRED SECURITIES OF EXECUTIVE RISK CAPITAL TRUST
Company obligated mandatorily redeemable preferred securities of
subsidiary, Executive Risk Capital Trust, holding solely $125,000,000 aggregate
principal amount of 8.675% Series B Junior Subordinated Deferrable Interest
Debentures of the Company due February 1, 2027 and $3,866,000 aggregate
principal amount of 8.675% Series A Junior Subordinated Deferrable Interest
Debentures of the Company due February 1, 2027 125,000 125,000
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value; authorized 4,000,000 shares;
issued - 1998 and 1997 - 0 shares -- --
Common Stock, $.01 par value; authorized 52,500,000 shares;
issued - 1998 - 12,001,808 shares and 1997 - 11,953,358 shares 120 120
Additional paid-in capital 178,447 176,234
Accumulated other comprehensive income 34,136 31,288
Retained earnings 112,362 101,101
Cost of shares in treasury, at cost: 1998 and 1997 - 1,114,421 shares (32,560) (32,560)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 292,505 276,183
----------- -----------
TOTAL LIABILITIES, PREFERRED SECURITIES OF EXECUTIVE RISK
CAPITAL TRUST AND STOCKHOLDERS' EQUITY $ 1,560,860 $ 1,485,804
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 5
EXECUTIVE RISK INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
(In thousands, except per share data) 1998 1997
---- ----
<S> <C> <C>
REVENUES
Gross premiums written $ 100,084 $ 83,035
Premiums ceded (39,742) (33,298)
--------- --------
Net premiums written 60,342 49,737
Change in unearned premiums (557) (3,508)
--------- --------
Net premiums earned 59,785 46,229
Net investment income 15,139 10,105
Net realized capital gains 1,775 1,006
Other income 83 146
--------- --------
TOTAL REVENUES 76,782 57,486
EXPENSES
Loss and loss adjustment expenses 40,116 31,321
Policy acquisition costs 10,617 7,481
General and administrative expenses 7,371 5,539
Interest expense 1,376 1,419
Minority Interest in Executive Risk 2,682 1,626
Capital Trust
--------- --------
TOTAL EXPENSES 62,162 47,386
--------- --------
INCOME BEFORE INCOME TAXES 14,620 10,100
Income tax expense (benefit)
Current 1,964 2,277
Deferred 1,177 (591)
--------- --------
3,141 1,686
--------- --------
NET INCOME $ 11,479 $ 8,414
========= ========
Earnings per common share $ 1.06 $ 0.90
Weighted average shares outstanding 10,862 9,327
Earnings per common share -
assuming dilution $ 0.98 $ 0.83
Weighted average shares outstanding -
assuming dilution 11,726 10,166
Dividends declared per common share $ 0.02 $ 0.02
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 6
EXECUTIVE RISK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
(In thousands) 1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,479 $ 8,414
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization and depreciation 990 515
Deferred income taxes 1,177 (591)
Amortization of bond premium 613 363
Net realized gains on investments (1,775) (1,006)
Stock based compensation plans 593 1,090
Amortization of loan arrangement fees 910
Other 1,264 1,997
Change in:
Premiums receivable, net of ceded balances payable (4,648) (5,264)
Accrued investment income (1,017) (452)
Deferred acquisition costs (2,371) (2,209)
Loss and loss adjustment expenses, net of reinsurance 25,659 23,909
recoverables
Unearned premiums, net of prepaid reinsurance premiums 554 3,498
Accrued expenses and other liabilities (15,579) (3,699)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,939 27,475
INVESTING ACTIVITIES
Proceeds from sales of fixed maturities available for sale 151,274 60,893
Proceeds from sales of equity securities available for sale 2,482 1,144
Proceeds from maturities of investment securities 17,134 10,897
Purchase of fixed maturities available for sale (201,204) (104,011)
Purchase of equity securities available for sale (5,717) (2,211)
Net capital expenditures (3,610) (1,843)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (39,641) (35,131)
FINANCING ACTIVITIES
Proceeds from exercise of options 589 58
Repayment of note payable to bank (70,000)
Proceeds from Capital Securities offering 125,000
Placement fees and other (183) (1,250)
Dividends paid on Common Stock (218) (187)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 188 53,621
--------- ---------
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM (22,514) 45,965
INVESTMENTS
--------- ---------
Cash and short-term investments at beginning of period 88,505 24,706
--------- ---------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 65,991 $ 70,671
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE> 7
EXECUTIVE RISK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying unaudited interim consolidated financial
statements of Executive Risk Inc. (the "Company" or "ERI") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting solely of normal
recurring accruals) considered necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim periods
have been included. Operating results for any interim period are not necessarily
indicative of results that may be expected for the full year. These consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and related notes contained in the Company's Annual Report
to Stockholders incorporated by reference in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997.
Certain prior year amounts have been reclassified to conform with the 1998
presentation.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity. SFAS 130 requires unrealized gains
or losses on the Company's available for sale securities and foreign currency
translation adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS 130.
During the first quarter of 1998 and 1997, total comprehensive income amounted
to $14.3 million and $2.6 million, respectively.
The components of comprehensive income, net of related tax, for the three-month
periods ended March 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net income $11,479 $8,414
------- ------
Unrealized gains (losses) on securities 2,315 (5,537)
Foreign currency translation adjustments 533 (250)
------- ------
Comprehensive income $14,327 $2,627
======= ======
</TABLE>
<PAGE> 8
EXECUTIVE RISK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
The components of accumulated other comprehensive income, net of related tax, at
March 31, 1998 and December 31, 1997 are, respectively, as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Unrealized gains (losses) on securities $34,084 $31,769
Foreign currency translation adjustments 52 (481)
------- -------
Accumulated comprehensive income $34,136 $31,288
======= =======
</TABLE>
In March 1998, the American Institute of Certified Public Accountants and the
Accounting Standards Executive Committee issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). SOP 98-1 requires the capitalization of certain
costs incurred after the date of adoption in connection with developing or
obtaining software for internal use. The Company currently expenses such costs
as incurred. SOP 98-1 is effective for financial statements for fiscal years
beginning after December 15, 1998, and is not expected to have a material impact
on the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations compares certain financial results for the three months ended March
31, 1998 with the corresponding period for 1997. The results of Executive Risk
Inc. (the "Company" or "ERI") include the consolidated results of Executive Risk
Management Associates ("ERMA"), Executive Re Inc. ("Executive Re"), and
Executive Re's direct and indirect insurance company subsidiaries, Executive
Risk Indemnity Inc. ("ERII"), Executive Risk Specialty Insurance Company
("ERSIC"), Executive Risk N.V. ("ERNV"), Quadrant Indemnity Company ("Quadrant")
and Executive Risk (Bermuda) Ltd. In addition, the Company's results include
Executive Risk Capital Trust, a Delaware statutory business trust (the "Trust"),
and Sullivan Kelly Inc. ("Sullivan Kelly"), and underwriting management company
which is a subsidiary of Executive Re. Also, 1997 results include a 50% interest
in UAP Executive Partners ("UPEX"), a French underwriting agency which was a
joint venture between the Company and Union des Assurances de Paris - Incendie
Accidents ("UAP"). The joint venture agreement between the Company and UAP was
terminated on December 31, 1997.
RESULTS OF OPERATIONS
The Company's net income for the first quarter of 1998 was $11.5 million, or
$0.98 per diluted share, as compared to $8.4 million, or $0.83 per diluted
share, earned in the first quarter of 1997. The Company's operating earnings,
calculated as net income before realized capital gains or losses, net of tax,
were $10.3 million, or $0.88 per diluted share, for the quarter ended March 31,
1998 and $7.8 million, or $0.76 per diluted share, for the quarter ended March
31, 1997.
Gross premiums written increased by $17.1 million, or 21%, to $100.1 million in
the first quarter of 1998 from $83.0 million in the first quarter of 1997. The
increase was principally due to growth in sales in miscellaneous professional
liability errors and omissions insurance ("E&O") partially offset by a decrease
in international directors and officers liability insurance ("D&O").
Ceded premiums increased $6.4 million, or 19%, to $39.7 million in the first
quarter of 1998 from $33.3 million in the first quarter of 1997. The rise in
ceded premiums was due principally to increased cessions on E&O and certain D&O
products as a result of higher writings.
7
<PAGE> 9
As a result of the foregoing, net premiums written increased $10.6 million, or
21%, to $60.3 million for the quarter ended March 31, 1998 from $49.7 million
for the quarter ended March 31, 1997. Over the same periods, net premiums earned
increased to $59.8 million from $46.2 million.
Net investment income increased by $5.0 million, or 50%, to $15.1 million for
the quarter ended March 31, 1998 from $10.1 million for the quarter ended March
31, 1997. This increase resulted principally from growth in invested assets,
measured on an amortized cost basis, from $756.8 million at March 31, 1997 to
$1,064.9 million at March 31, 1998, partially offset by a decrease in nominal
yields. The nominal portfolio yield of the fixed maturity portfolio at March 31,
1998 was 6.04%, compared to 6.24% at March 31, 1997. The tax equivalent yields
on the fixed maturity portfolio were 7.52% and 7.95% for these periods,
respectively.
The Company's net realized capital gains were $1.8 million in the first quarter
of 1998 as compared to $1.0 million in the first quarter of 1997. In the first
quarter of 1998, net capital gains were realized principally from the sale of
fixed maturity investments, equity mutual fund distributions and certain equity
limited partnership investments.
Loss and loss adjustment expenses ("LAE") increased by $8.8 million, or 28%,
from $31.3 million in the first quarter of 1997 to $40.1 million in the
comparable period of 1998 due to higher premiums earned. The Company's loss
ratio was 67.1% in the first quarter of 1998 as compared to 67.8% in the first
quarter of 1997. In connection with the Company's normal reserving review, which
includes a reevaluation of the adequacy of reserve levels for prior years'
claims, the Company reduced its unpaid loss and LAE reserves for prior report
years by $3.0 million, or $0.16 per diluted share, in the first quarter of 1998.
In the first quarter of 1997, the Company reduced its unpaid loss and LAE
reserves for prior report years by $1.9 million, or $0.12 per diluted share.
There can be no assurance that reserve adequacy reevaluations will produce
similar reserve reductions and net income increases in future quarters.
Policy acquisition costs increased by $3.1 million, or 42%, to $10.6 million for
the quarter ended March 31, 1998 from $7.5 million for the quarter ended March
31, 1997. The Company's ratio of policy acquisition costs to net premiums earned
increased from 16.2% in the first quarter of 1997 to 17.8% in the first quarter
of 1998. The increase in the policy acquisition cost ratio was attributable to
both higher commission amounts paid to brokers and increased compensation and
related expenses incurred in hiring additional underwriting staff to support the
growth in the Company's business.
General and administrative ("G&A") expenses increased $1.9 million, or 33%, to
$7.4 million in the first quarter of 1998 from $5.5 million in the first quarter
of 1997, due largely to increased compensation, benefit and related overhead
costs associated with the growth in premium volume. The ratio of G&A costs to
premiums earned increased slightly from 11.9% in the first quarter of 1997 to
12.3% in the first quarter of 1998.
The GAAP combined ratio increased to 97.2% in the first quarter of 1998 from
95.9% in the first quarter of 1997. The increase of 1.3 percentage points was
attributable to the increase in the policy acquisition cost and G&A ratio,
partially offset by a decrease in the loss ratio as discussed above. A combined
ratio below 100% indicates profitable underwriting prior to the consideration of
investment income, capital gains and interest expense. A company with a combined
ratio exceeding 100% can still be profitable in that period due to such factors
as investment income and capital gains realized during that period.
Interest expense of $1.4 million for both the first quarter of 1998 was
attributable principally to the Company's outstanding senior notes, while
interest expense of $1.4 million for 1997 was attributable principally to
outstanding balances under the Company's bank credit agreement. On December 12,
1997, the Company sold $75 million aggregate amount of 7.125% senior notes
payable. The outstanding balance under the Company's bank credit agreement was
$70 million from January 1, 1997 through February 5, 1997. On February 5, 1997,
the Company repaid the $70 million outstanding under the term loan portion of a
senior credit facility arranged through The Chase Manhattan Bank.
Minority interest in the Trust is attributable to distributions payable on the
securities of the Trust.
Income tax expense increased $1.4 million, or 86%, from $1.7 million in the
first quarter of 1997 to $3.1 million in the first quarter of 1998. The
Company's effective tax rate increased from 16.7% to 21.5% for
8
<PAGE> 10
the same periods. The increase in the effective tax rate was due to growth in
pre-tax income outpacing the increase in tax-exempt investment income.
LIQUIDITY AND CAPITAL RESOURCES
ERI is a holding company, the principal asset of which is equity in its
subsidiaries. ERI's cash flows depend primarily on dividends and other payments
from its subsidiaries. ERI's sources of funds consist primarily of premiums
received by the insurance subsidiaries, investment income and proceeds from
sales and redemptions of investments. Funds are used primarily to pay claims and
operating expenses, to purchase investments, to pay interest and principal under
the terms of the Company's indebtedness for borrowed money and to pay dividends
to Common Stock holders.
Cash flows from operating activities were $16.9 million for the quarter ended
March 31, 1998 and $27.5 million for the quarter ended March 31, 1997. The
decrease in operating cash flows resulted from higher losses and G&A expenses
paid, partially offset by an increase in net premiums and investment income
received. Rising loss payments are expected of a maturing professional liability
underwriter.
The Company believes that it has sufficient liquidity to meet its anticipated
insurance obligations as well as its operating and capital expenditure needs.
The Company's investment strategy emphasizes quality, liquidity and
diversification. With respect to liquidity, the Company considers liability
durations, specifically loss reserves, when determining investment maturities.
Average investment duration of the fixed maturity portfolio at March 31, 1998
and December 31, 1997 was 4.5 and 4.6 years, respectively, as compared to an
expected loss reserve duration of 5.0 to 5.5 years. The Company's short-term
investment pool was $66.0 million (5.9% of the total investment portfolio) at
March 31, 1997 and $88.5 million (8.2%) at December 31, 1997. The decrease in
the short-term investment pool was due principally to the capitalization of ERNV
from senior note proceeds which had been held in short-term investments at
year-end.
The Company's entire investment portfolio is classified as available for sale
under the provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," and is
reported at fair value, with the resulting unrealized gains or losses included
as a separate component of stockholders' equity until realized. The market value
of the portfolio at March 31, 1998 and December 31, 1997 was 103% of amortized
cost. At March 31, 1998 and December 31, 1997, stockholders' equity was
increased by $18.3 million and $19.5 million, respectively, to record the
Company's fixed maturity investment portfolio at fair value. At March 31, 1998,
the Company owned no derivative instruments, except for $120.9 million (fair
value) invested in mortgage and asset backed securities.
On February 20, 1998, the Company declared its first quarter dividend on the
Company's Common Stock of $.02 per share, which was paid on March 31, 1998 to
stockholders of record as of March 15, 1998. Such dividends totaled $0.2
million.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
15.1 Independent Accountant's Acknowledgment Letter
27 Financial Data Schedule
</TABLE>
b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter ended March 31,
1998.
9
<PAGE> 11
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert H. Kullas Chairman and Director May 12, 1998
- --------------------
Robert H. Kullas
/s/ Robert V. Deutsch Executive Vice President, Chief Financial Officer, May 12, 1998
- ---------------------
Robert V. Deutsch Chief Actuary, Treasurer, Assistant Secretary and
Director
(Principal Financial and Accounting Officer)
</TABLE>
10
<PAGE> 1
EXHIBIT 15.1
ACKNOWLEDGMENT LETTER
To the Stockholders and Board of Directors
Executive Risk Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 No. 33-78414) pertaining to the Executive Risk Inc. Nonqualified Stock
Option Plan, Executive Risk Inc. Employee Incentive Nonqualified Stock Option
Plan, Executive Risk Inc. IPO Stock Compensation Plan, Executive Risk Inc.
Nonemployee Directors Stock Option Plan, and Option Agreements for Outside
Directors of Executive Re Inc. of our report dated May 7, 1998 relating to the
unaudited consolidated interim financial statements of Executive Risk Inc. which
are included in its Form 10-Q for the quarter ended March 31, 1998.
/S/ ERNST & YOUNG LLP
Stamford, Connecticut
May 7, 1998
11
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 982,690
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 68,654
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,051,344
<CASH> 65,991
<RECOVER-REINSURE> 4,626
<DEFERRED-ACQUISITION> 36,952
<TOTAL-ASSETS> 1,560,860
<POLICY-LOSSES> 693,609
<UNEARNED-PREMIUMS> 291,756
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 75,000
125,000
0
<COMMON> 120
<OTHER-SE> 292,385
<TOTAL-LIABILITY-AND-EQUITY> 1,560,860
59,785
<INVESTMENT-INCOME> 15,139
<INVESTMENT-GAINS> 1,775
<OTHER-INCOME> 83
<BENEFITS> 40,116
<UNDERWRITING-AMORTIZATION> 10,617
<UNDERWRITING-OTHER> 11,429
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</TABLE>
