SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: Commission File Number:
MARCH 31, 1997 1-13816
- -------------- -------
EVEREST REINSURANCE HOLDINGS, INC.
----------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 22-3263609
-------- ----------
(State or other juris- IRS Employer Identification
diction of incorporation Number)
or organization)
3 GATEWAY CENTER
NEWARK, NEW JERSEY 07102
------------------------
(201) 802-8000
--------------
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 the filing
requirements for at least the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of Shares Outstanding
Class at April 29, 1997
----- -----------------
COMMON STOCK, $.01 PAR VALUE 50,463,552
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
INDEX TO FORM 10-Q
PART I
FINANCIAL INFORMATION
---------------------
PAGE
ITEM 1. FINANCIAL STATEMENTS ----
--------------------
Consolidated Balance Sheets at March 31, 1997 (unaudited)
and December 31, 1996 3
Consolidated Statements of Operations for the three months
ended March 31, 1997 and 1996 (unaudited) 4
Consolidated Statements of Changes in Stockholders' Equity for
the three months ended March 31, 1997 and 1996 (unaudited) 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 1997 and 1996 (unaudited) 6
Notes to Consolidated Interim Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF
-------------------------------------
OPERATIONS 11
----------
PART II
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS 14
-----------------
ITEM 2. CHANGES IN SECURITIES None
---------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
-------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
----------------------------------
SECURITY HOLDERS None
----------------
ITEM 5. OTHER INFORMATION 14
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
--------------------------------
<PAGE>
PART I - ITEM 1
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value per share)
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------
ASSETS: 1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
Fixed maturities - held to maturity,
at amortized cost (market
value: 1997, $85,508;
1996, $88,374) $ 78,974 $ 80,522
Fixed maturities- available for sale,
at market value (amortized cost:
1997, $3,258,944; 1996, $3,194,246) 3,285,285 3,281,972
Equity securities, at market value
(cost: 1997, $132,182;
1996, $115,367) 161,585 147,280
Short-term investments 52,500 49,486
Other invested assets 14,245 12,750
Cash 45,283 52,595
----------- -----------
Total investments and cash 3,637,872 3,624,605
Accrued investment income 53,570 50,211
Premiums receivable 244,078 218,087
Reinsurance receivables 730,089 749,062
Funds held by reinsureds 171,837 173,386
Deferred acquisition costs 80,316 84,123
Prepaid reinsurance premiums 8,482 5,265
Deferred tax asset 150,881 124,664
Other assets 11,062 9,949
----------- -----------
TOTAL ASSETS $ 5,088,187 $ 5,039,352
=========== ===========
LIABILITIES:
Reserve for losses and loss
adjustment expenses $ 3,265,220 $ 3,246,858
Unearned premium reserve 359,830 355,908
Funds held under reinsurance
treaties 194,890 177,921
Losses in the course of payment 44,357 24,343
Contingent commissions 82,897 83,279
Other net payable to reinsurers 9,293 8,779
Current federal income taxes 18,936 25,879
Other liabilities 40,085 30,362
----------- -----------
Total liabilities 4,015,508 3,953,329
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, par value: $0.01;
50 million shares authorized; no
shares issued and outstanding -- --
Common stock, par value: $0.01;
200 million shares authorized;
50.8 million shares issued 508 508
Paid-in capital 389,202 389,196
Unearned compensation (324) (374)
Net unrealized appreciation
(depreciation) of investments, net
of deferred income taxes 36,234 77,766
Cumulative foreign currency
translation adjustment, net of
deferred income taxes (4,666) (354)
Retained earnings 658,945 626,501
Treasury stock, at cost; 0.3 million
shares (7,220) (7,220)
----------- -----------
Total stockholders' equity 1,072,679 1,086,023
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 5,088,187 $ 5,039,352
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
3
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
--------- ---------
(unaudited)
REVENUES:
<S> <C> <C>
Premiums earned $ 230,443 $ 210,269
Net investment income 54,042 44,768
Net realized capital gain/(loss) (199) 3,812
Other income/(loss) 3,234 (376)
--------- ---------
287,520 258,473
--------- ---------
CLAIMS AND EXPENSES:
Incurred loss and loss adjustment
expenses 166,841 155,125
Commission and brokerage expenses 61,045 54,479
Other underwriting expenses 13,709 13,871
--------- ---------
241,595 223,475
--------- ---------
INCOME BEFORE TAXES 45,925 34,998
Income tax 11,461 7,247
--------- ---------
NET INCOME $ 34,464 $ 27,751
========= =========
PER SHARE DATA:
Average shares outstanding
(000's) 50,490 50,793
Net income per share $ 0.68 $ 0.55
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
4
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
COMMON STOCK (shares outstanding):
Balance, beginning of period 50,490,273 50,792,869
Issued during the period 400 --
------------ ------------
Balance net of treasury stock, end
of period 50,490,673 50,792,869
============ ============
COMMON STOCK (par value):
Balance, beginning of period $ 508 $ 508
Issued during the period -- --
------------ ------------
Balance, end of period 508 508
------------ ------------
ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period 389,196 387,349
Common stock issued during the
period 6 --
------------ ------------
Balance, end of period 389,202 387,349
------------ ------------
UNEARNED COMPENSATION:
Balance, beginning of period (374) (692)
Net decrease during the period 50 90
------------ ------------
Balance, end of period (324) (602)
------------ ------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) OF INVESTMENTS,
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period 77,766 83,726
Net (decrease) during the period (41,532) (42,008)
------------ ------------
Balance, end of period 36,234 41,718
------------ ------------
CUMULATIVE TRANSLATION ADJUSTMENTS,
NET OF DEFERRED INCOME TAXES:
Balance, beginning of period (354) (7,838)
Net (decrease) during the period (4,312) (1,517)
------------ ------------
Balance, end of period (4,666) (9,355)
------------ ------------
RETAINED EARNINGS:
Balance, beginning of period 626,501 520,541
Net income 34,464 27,751
Dividends declared ( $0.04 per
share in 1997 and $0.03 per share
in 1996) (2,020) (1,524)
------------ ------------
Balance, end of period 658,945 546,768
------------ ------------
TREASURY STOCK AT COST:
Balance, beginning of period (7,220) --
Treasury stock acquired during
period -- --
------------ ------------
Balance, end of period (7,220) --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY, END OF
PERIOD $ 1,072,679 $ 966,386
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
5
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited)
<S> <C> <C>
Net income $ 34,464 $ 27,751
Adjustments to reconcile net
income to net cash provided
by operating activities:
(Increase) in premiums receivable (28,549) (1,482)
Decrease in funds held by
reinsureds, net 16,776 24,527
(Increase) decrease in
reinsurance receivables 19,104 (33,448)
(Increase) in deferred tax asset (3,905) (3,105)
Increase in reserve for losses
and loss adjustment expenses 34,812 71,753
Increase in unearned premiums 6,730 9,399
Decrease in other assets and
liabilities 6,760 5,320
Non cash compensation expense 50 90
Accrual of bond discount/
amortization of bond premium (347) 756
Realized capital (gains) losses 199 (3,812)
--------- ---------
Net cash provided by operating
activities 86,094 97,749
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from fixed maturities
matured/called - held to maturity 2,155 4,393
Proceeds from fixed maturities
matured/called - available for sale 60,394 18,820
Proceeds from fixed maturities
sold - available for sale 291,262 99,191
Proceeds from equity securities sold 10,379 31,718
Cost of fixed maturities acquired -
held to maturity -- (25)
Cost of fixed maturities acquired -
available for sale (443,374) (171,735)
Cost of equity securities acquired (13,326) (30,171)
Cost of other invested assets
acquired (1,495) (192)
Net (purchases) of short-term
securities (1,611) (32,928)
Net increase (decrease) in unsettled
securities transactions 11,379 (1,214)
Net increase (decrease) in collateral
for loaned securities -- 1,777
--------- ---------
Net cash (used in) investing activities (84,237) (80,366)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued during the period 6 --
Dividends paid to stockholders (2,020) (1,524)
--------- ---------
Net cash (used in) financing
activities (2,014) (1,524)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH: (7,155) (1,154)
--------- ---------
Net increase (decrease) in cash (7,312) 14,705
Cash, beginning of period 52,595 50,912
--------- ---------
Cash, end of period $ 45,283 $ 65,617
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash transactions:
Income taxes paid, net $ 19,211 $ 11,858
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
6
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
1. GENERAL
Certain financial information which is normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
has been omitted since it is not required for interim reporting purposes. The
consolidated financial statements of Everest Reinsurance Holdings, Inc. (the
"Company") for the three months ended March 31, 1997 and 1996 include all
adjustments, consisting of normal recurring accruals, which, in the opinion of
management, are necessary for a fair presentation of results on an interim
basis. The year end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. The results for the three months ended March 31,
1997 and 1996 are not necessarily indicative of the results for a full year.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the years ended December
31, 1996, 1995 and 1994.
2. CONTINGENCIES
The Company continues to receive claims under expired contracts which assert
alleged injuries and/or damages relating to or resulting from toxic torts, toxic
waste and other hazardous substances, such as asbestos. The Company's asbestos
claims typically involve potential liability for bodily injury from exposure to
asbestos or for property damage resulting from asbestos or products containing
asbestos. The Company's environmental claims typically involve potential
liability for (i) the mitigation or remediation of environmental contamination
or (ii) bodily injury or property damages caused by the release of hazardous
substances into the land, air or water.
The Company's reserves include an estimate of the Company's ultimate liability
for asbestos and environmental claims for which ultimate value cannot be
estimated using traditional reserving techniques. There are significant
uncertainties in estimating the amount of the Company's potential losses from
asbestos and environmental claims. Among the complications are: (i) potentially
long waiting periods between exposure and manifestation of any bodily injury or
property damage; (ii) difficulty in identifying sources of asbestos or
environmental contamination; (iii) difficulty in properly allocating
responsibility and/or liability for asbestos or environmental damage; (iv)
changes in underlying laws and judicial interpretation of those laws; (v)
potential for an asbestos or environmental claim to involve many insurance
providers over many policy periods; (vi) long reporting delays, both from
insureds to insurance companies and ceding companies to reinsurers; (vii)
limited historical data concerning asbestos and environmental losses; (viii)
questions concerning interpretation and application of insurance and reinsurance
coverage; and (ix) uncertainty regarding the number and identity of insureds
with potential asbestos or environmental exposure.
7
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
Management believes that these issues are not likely to be resolved in the near
future. The Company establishes reserves to the extent that, in the judgment of
management, the facts and prevailing law reflect an exposure for the Company or
its ceding company. In connection with its initial public offering in October
1995, the Company purchased an aggregate stop loss retrocession agreement (the
"Stop Loss Agreement") from Gibraltar Casualty Company ("Gibraltar"), an
affiliate of the Company's former parent, The Prudential Insurance Company of
America ("The Prudential"). This coverage protects the Company's consolidated
earnings against up to $375.0 million of the first $400.0 million of adverse
development, if any, on the Company's consolidated reserves for losses,
allocated loss adjustment expenses and uncollectible reinsurance at June 30,
1995 (December 31, 1994 for catastrophe losses). Due to the uncertainties
discussed above, the ultimate losses may vary materially from current loss
reserves and, if coverage under the Stop Loss Agreement is exhausted, could have
a material adverse effect on the Company's future financial condition, results
of operations and cash flows.
The following table shows the development of prior year asbestos and
environmental reserves on both a gross and net of retrocessional basis for the
three months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
--------- ---------
Gross Basis:
<S> <C> <C>
Beginning of period reserves $ 423,336 $ 428,495
Incurred losses 11,198 2,596
Paid losses (5,849) (7,324)
--------- ---------
End of period reserves $ 428,685 $ 423,767
========= =========
Net Basis:
Beginning of period reserves $ 200,989 $ 197,668
Incurred losses -- --
Paid losses 896 (181)
--------- ---------
End of period reserves $ 201,885 $ 197,487
========= =========
</TABLE>
8
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
At March 31, 1997, the gross reserves for asbestos and environmental losses were
comprised of $105,459 representing case reserves reported by ceding companies,
$48,943 representing additional case reserves established by the Company on
assumed reinsurance claims, $56,254 representing case reserves established by
the Company on direct excess insurance claims and $218,029 representing IBNR
reserves. To the extent loss reserves on assumed reinsurance need to be
increased and were not ceded to unaffiliated reinsurers under existing
reinsurance agreements, the Company would be entitled to certain reimbursements
under the Stop Loss Agreement. To the extent loss reserves on direct excess
insurance policies needed to be increased and were not ceded to unaffiliated
reinsurers under existing reinsurance agreements, the Company would be entitled
to 100% protection from Gibraltar under a retrocessional agreement in place
since 1986. While there can be no assurance that reserves for and losses from
these claims would not increase in the future, management believes that the
Company's existing reserves and ceded reinsurance arrangements, including
reimbursements available under the Stop Loss Agreement, lessen the probability
that such increases, if any, would have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
The Company is also named in various legal proceedings incidental to its normal
business activities. In the opinion of management, none of these proceedings is
likely to have a material adverse effect upon the financial condition, results
of operations or cash flows of the Company.
The Prudential sells annuities which are purchased by property and casualty
insurance companies to settle certain types of claim liabilities. In 1993 and
prior, the Company, for a fee, accepted the claim payment obligation of the
property and casualty insurer, and, concurrently, became the owner of the
annuity or assignee of the annuity proceeds. In these circumstances, the Company
would be liable if The Prudential were unable to make the annuity payments. The
estimated cost to replace all such annuities for which the Company was
contingently liable at March 31, 1997 was $137,179.
The Company has purchased annuities from an unaffiliated life insurance company
to settle certain claim liabilities of the Company. Should the life insurance
company become unable to make the annuity payments, the Company would be liable.
The estimated cost to replace such annuities at March 31, 1997 was $9,393.
3. NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 establishes new standards for computing and presenting earnings per
share ("EPS"), including replacing primary EPS, as defined by APB Opinion No.
15, with basic EPS, requiring dual presentation of basic and diluted EPS on
the face of the statement of operations for all entities with complex capital
9
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(continued)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
structures and requiring certain disclosures. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997 and
requires restatement of all prior period EPS data presented.
The Company has calculated basic and diluted EPS, as defined by SFAS 128, and
determined that such amounts do not differ materially from primary EPS amounts
historically presented in the Company's statements of operations.
4. SUBSEQUENT EVENT
On April 15, 1997, the Company acquired 29,996 shares of its common stock at a
cost of $808 from the Company's Chief Executive Officer to fund the Chief
Executive Officer's remaining income tax liability resulting from the October
1995 grant of common stock under the Company's 1995 Stock Incentive Plan.
10
<PAGE>
PART I - ITEM 2
EVEREST REINSURANCE HOLDINGS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
PREMIUMS. Gross premiums written increased 7.0% to $246.0 million in the
three months ended March 31, 1997 from $230.0 million in the three months ended
March 31, 1996. Factors contributing to this increase included a 59.6% increase
(to $21.4 million) in U.S. facultative operations, reflecting growth in all
three lines of business (property, casualty and specialty casualty) as this unit
continues to do well following its 1995 restructuring and in light of
significant dislocation in the market, a 22.6% increase (to $45.4 million) in
U.S. direct treaty reinsurance and insurance operations, largely attributable to
growth in primary insurance written through Everest National, and a 9.1%
increase (to $85.3 million) in international operations, driven by the business
produced through the Company's London operations and modest growth in most other
areas of the world. Gross premiums written in marine, aviation and surety
operations were essentially flat (at $36.6 million) as marine acceptances were
scaled back in light of rate decline in that market and a change in reinsurance
buying among surety insurers adversely affected volume in that market. The
increases were partially offset by an 11.6% decrease (to $57.3 million) in U.S.
broker treaty operations, attributable to maintaining underwriting standards in
the face of a difficult competitive environment.
Ceded premiums increased 8.7% to $12.2 million in the three months ended
March 31, 1997 from $11.2 million in the three months ended March 31, 1996. This
increase was principally attributable to common account retrocessions by ceding
sources.
Net premiums written increased by 6.9% to $233.8 million in the three months
ended March 31, 1997 from $218.7 million in the three months ended March 31,
1996 as the increases in gross premiums written more than offset the increase in
ceded premiums.
REVENUES. Net premiums earned increased by 9.6% to $230.4 million in the
three months ended March 31, 1997 from $210.3 million in the three months ended
March 31, 1996, generally consistent with the growth in net premiums written
over the preceding year.
Net investment income increased 20.7% to $54.0 million in the three months
ended March 31, 1997 from $44.8 million in the three months ended March 31,
1996, reflecting principally the effect of investing the $402.3 million of cash
flow in the twelve months ended March 31, 1997 and an increase in the annualized
pre-tax yield on average cash and invested assets to 6.1% in the three months
ended March 31, 1997 from the 5.7% yield in the three months ended March 31,
1996.
11
<PAGE>
Net realized capital losses were ($0.2) million in the three months ended
March 31, 1997, compared to gains of $3.8 million in the three months ended
March 31, 1996. The net realized capital loss in the three months ended March
31, 1997 reflected realized capital gains on the Company's common stock
investments which were more than offset by realized capital losses on its fixed
maturity investments as the Company continued to seek enhanced yield on its
fixed maturity investment portfolio.
EXPENSES. Incurred losses and loss adjustment expenses ("LAE") increased by
7.6% to $166.8 million in the three months ended March 31, 1997 from $155.1
million in the three months ended March 31, 1996. The Company's loss and LAE
ratio decreased by 1.4 percentage points to 72.4% in the three months ended
March 31, 1997 from 73.8% in the three months ended March 31, 1996 principally
as a result of changes in business mix in line with the Company's disciplined
underwriting strategies. Net incurred losses and LAE for the three months ended
March 31, 1997 reflected ceded losses and LAE of $12.3 million, including $5.3
million ceded under the Stop Loss Agreement, compared to ceded losses and LAE of
$52.4 million, including $18.9 million ceded under the Stop Loss Agreement, in
the three months ended March 31, 1996.
Underwriting expenses increased by 9.4% to $74.8 million in the three months
ended March 31, 1997 from $68.4 million in the three months ended March 31,
1996. Commission and brokerage expenses increased by $6.6 million, principally
relating to premium growth as well as the impact of changes in the business mix.
Other underwriting expenses for the three months ended March 31, 1997 decreased
by $0.2 million to $13.7 million from the three months ended March 31, 1996
reflecting the impact of the Company's continuing expense reduction initiatives.
The Company's expense ratio decreased by 0.1 percentage points to 32.4% in the
three months ended March 31, 1997 from 32.5% in the three months ended March 31,
1996.
The Company's combined ratio decreased to 104.8% in the three months ended
March 31, 1997 from 106.3% in the three months ended March 31, 1996.
INCOME TAXES. The Company recognized income tax expense of $11.5 million in
the three months ended March 31, 1997 compared to $7.2 million in the three
months ended March 31, 1996 as pretax income in the three months ended March 31,
1997 increased to $45.9 million from $35.0 million in the three months ended
March 31, 1996, with tax-preferenced investment income comprising a smaller
percentage of pretax income.
NET INCOME. Net income was $34.5 million in the three months ended March 31,
1997 compared to $27.8 million in the three months ended March 31, 1996. This
mainly reflected improved underwriting results and higher investment income
partially offset by increased taxes and the absence of net realized capital
gains.
FINANCIAL CONDITION
INVESTED ASSETS. Aggregate invested assets, including cash and short-term
investments, were $3,637.9 million at March 31, 1997 and $3,624.6 million at
December 31, 1996. The increase in invested assets between December 31, 1996 and
March 31, 1997 resulted primarily from cash flow from operations of $86.1
million generated during the three months ended March 31, 1997 partially offset
by a decrease of $64.1 million in net appreciation on investments.
12
<PAGE>
STOCKHOLDERS' EQUITY. Holdings' stockholders' equity decreased to $1,072.7
million as of March 31,1997, from $1,086.0 million as of December 31, 1996
principally reflecting decreases of $41.5 million in net unrealized appreciation
on investments, net of deferred taxes, which were partially offset by net income
of $34.5 million for the three months ended March 31, 1997. Dividends of $2.0
million were declared and paid by Holdings in the three months ended March 31,
1997.
13
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
OTHER INFORMATION
Part II - ITEM 1. LEGAL PROCEEDINGS
The Company is subject to litigation and arbitration in the normal course of its
business. Management does not believe that any such pending litigation or
arbitration will have a material adverse effect on the Company's results of
operations, financial condition or cash flows.
Part II - ITEM 5. OTHER INFORMATION
Effective May 12, 1997, the address of the Company's principal executive office
will be Westgate Corporate Center, 477 Martinsville Road, P.O. Box 830, Liberty
Corner, N.J. 07938-0830 and the phone number will be (908) 604-3000.
Part II - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index:
Exhibit No. Description Location
----------- ----------- --------
11.1 Statement regarding computation
of per-share earnings Filed
herewith
27.1 Financial Data Schedule Filed
herewith
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the three months ended
March 31, 1997.
14
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
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.
Everest Reinsurance Holdings, Inc.
(Registrant)
- By: /s/ Robert P. Jacobson
------------------
Robert P. Jacobson
Duly Authorized Officer,
Senior Vice President,
Chief Financial Officer and
Comptroller
Dated: April 29, 1997
<PAGE>
EXHIBIT 11.1
EVEREST REINSURANCE HOLDINGS, INC.
COMPUTATION OF EARNINGS PER SHARE
TREASURY STOCK METHOD
MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRIMARY FULLY DILUTED
EARNINGS EARNINGS
PER SHARE PER SHARE
----------- -----------
<S> <C> <C>
Net income $ 34,464
Weighted average common shares
outstanding 50,490,384
Earnings per share based on
weighted average of common shares $ 0.68
===========
Dilutive effect of stock options 234,202 242,486
Average number of common shares
outstanding 50,490,384 50,490,384
Average number of common and common
equivalent shares outstanding 50,724,586 50,732,870
Net income $ 34,464 $ 34,464
Earnings per share $ 0.68 $ 0.68
=========== ===========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 3,285,285
<DEBT-CARRYING-VALUE> 78,974
<DEBT-MARKET-VALUE> 85,508
<EQUITIES> 161,585
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 3,592,589
<CASH> 45,283
<RECOVER-REINSURE> 730,089
<DEFERRED-ACQUISITION> 80,316
<TOTAL-ASSETS> 5,088,187
<POLICY-LOSSES> 3,265,220
<UNEARNED-PREMIUMS> 359,830
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 508
<OTHER-SE> 1,072,171
<TOTAL-LIABILITY-AND-EQUITY> 5,088,187
230,443
<INVESTMENT-INCOME> 54,042
<INVESTMENT-GAINS> (199)
<OTHER-INCOME> 3,234
<BENEFITS> 166,841
<UNDERWRITING-AMORTIZATION> (3,295)
<UNDERWRITING-OTHER> 71,459
<INCOME-PRETAX> 45,925
<INCOME-TAX> 11,461
<INCOME-CONTINUING> 34,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,464
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0
<RESERVE-OPEN> 3,246,858
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 3,265,220
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
