U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from: to
Commission file number 0-23178
Equisure, Inc.
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(Exact name of small business issuer as specified in its charter)
Minnesota 41-1309882
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
701 Fourth Avenue South, Minneapolis, Minnesota 55415
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(Address of principal executive offices)
(612) 338-3738
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(Issuer's telephone number)
527 Marquette Avenue, Suite 1800
Minneapolis, Minnesota 55402
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 October 31, 1997, there were 11,709,250 shares of the issuer's common
stock, par value $0.001 per share.
Transitional Small Business Disclosure Format (check one):
Yes ____; No __X__
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Required by Form 10-QSB 2
Condensed Consolidated Balance Sheets of Equisure, Inc.
and Subsidiaries of June 30, 1997 and December
31, 1996 2
Condensed Consolidated Statements of Operations
of Equisure, Inc. and Subsidiaries for the Three
Months Ended June 30, 1997 and 1996 and the Six
Months Ended June 30, 1997 and 1996 3
Condensed Consolidated Statement of Stockholders'
Equity for the Six Months Ended June 30, 1997 4
Condensed Consolidated Statements of Cash Flows
of Equisure, Inc. and Subsidiaries for the Six
Months Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Exhibits and Reports 15
Item 6. Other Information 15
Signatures 16
<PAGE>
PART I
EQUISURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Assets:
Investments, available for sale $ -- $ 39,743,785
Cash and cash equivalents 61,901,585 20,489,623
Accrued interest and dividends 900,553 158,162
Premiums receivable 6,574,940 2,246,581
Prepaid reinsurance 1,757,509 765,834
Due from related parties 16,427,311 12,972,037
Deferred acquisition costs 808,991 292,870
Other assets -- 22,878
Intangible assets 353,081 --
----------- ------------
Total assets $88,723,970 $ 76,691,770
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Loss reserves $31,383,748 $ 30,033,795
Unearned premiums 3,416,867 2,209,994
Reinsurance premiums payable 697,353 --
Due to related parties 3,141,141 5,169,092
Income taxes payable 2,500,000 200,000
Accounts payable and accrued expenses 999,158 837,943
Deferred income taxes 2,850,000 1,210,000
----------- ------------
Total liabilities 44,988,267 39,660,824
----------- ------------
Stockholders' equity:
Common stock, par value $0.001, authorized 50,000,000 shares,
issued and outstanding 11,709,250 11,710 11,152
Additional paid-in capital 35,634,526 35,635,084
Retained earnings 8,089,467 2,953,153
Net unrealized depreciation on investments available for sale,
net of deferred taxes -- (1,568,443)
----------- ------------
Total stockholders' equity 43,735,703 37,030,946
----------- ------------
Total liabilities and stockholders' equity $88,723,970 $ 76,691,770
=========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Earned premiums assumed 9,997,664 1,162,007 14,290,543 2,278,960
Ceded premiums (1,877,747) -- (2,341,424) --
------------ ------------ ------------ ------------
Net premiums 8,119,917 1,162,007 11,949,119 2,278,960
Realized gains on investments -- 2,118,112 142,362 2,118,112
Net investment income 985,748 383,982 1,306,460 852,261
Brokerage income 137,207 -- 172,429 --
------------ ------------ ------------ ------------
Total revenues 9,242,872 3,664,101 13,570,370 5,249,333
------------ ------------ ------------ ------------
Expenses:
Losses incurred 1,549,182 -- 2,010,752 --
Net acquisition costs 1,342,877 116,201 1,803,590 227,896
Administrative expenses 1,136,379 654,517 2,136,790 1,441,722
Foreign currency exchange loss (838,859) 48,283 (679,252) 302,187
Amortization of goodwill 6,088 -- 12,176 --
------------ ------------ ------------ ------------
Total expenses 3,195,667 819,001 5,284,056 1,971,805
------------ ------------ ------------ ------------
Income before income taxes 6,047,205 2,845,100 8,286,314 3,277,528
Income taxes (2,295,000) (1,050,000) (3,150,000) (1,050,000)
------------ ------------ ------------ ------------
Net income $ 3,752,205 $ 1,795,100 $ 5,136,314 $ 2,227,528
============ ============ ============ ============
Net income per share $ .33 $ .16 $ .45 $ .20
============ ============ ============ ============
Weighted average number of common
shares outstanding 11,335,484 10,910,046 11,244,084 10,752,064
============ ============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Net Unrealized
(Depreciation) On
Investments, Net Retained
Common Stock Additional Paid-In Available For Earnings
Shares Amount Capital Sale (Deficit) Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 11,151,666 $11,152 $ 35,635,084 $(1,568,443) $2,953,153 $37,030,946
Change in unrealized appreciation
on investments, available for sale -- -- -- 1,568,443 -- 1,568,443
Issue of stock dividend 557,584 558 (558) -- -- --
Net income -- -- -- -- 5,136,314 5,136,314
---------- ------- ------------ ----------- ---------- -----------
BALANCE, June 30, 1997 11,709,250 $11,710 $ 35,634,526 -- $8,089,467 $43,735,703
========== ======= ============ =========== ========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
INCREASE (DECREASE) IN CASH OR CASH EQUIVALENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,136,314 $ 2,227,528
Adjustments to reconcile net income to net cash flows from
operating activities:
Amortization of goodwill 12,176 --
Gains on sale of investments (142,362) (2,118,112)
Foreign currency exchange (gain) loss (679,252) 302,187
Deferred income taxes 550,000 850,000
Change in:
Premiums receivable (4,328,359) (1,459,910)
Prepaid reinsurance (991,675) (4,125,000)
Underwriting reserves 1,349,953 9,493,074
Due from/due to related parties (5,483,225) (1,615,540)
Premiums payable 697,353 977,106
Accrued income taxes 2,300,000 --
Other 109,576 (663,529)
------------ ------------
Net cash flows from operating activities (1,469,501) 3,867,804
------------ ------------
Cash flows from investing activities:
Proceeds from sale of investments 46,473,678 7,117,868
Purchases of investments (3,929,088) (13,895,107)
Acquisition of subsidiary (342,379) --
------------ ------------
Net cash flows from investing activities 42,202,211 (6,777,239)
------------ ------------
Effect of foreign currency exchange rate changes on cash
679,252 (302,187)
------------ ------------
Net change in cash and cash equivalents 41,411,962 (3,211,622)
Cash and cash equivalents, beginning of period 20,489,623 32,216,805
------------ ------------
Cash and cash equivalents, end of period $ 61,901,585 $ 29,005,183
============ ============
</TABLE>
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements have been
prepared by the Company. Certain information and note disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. In the opinion of the Company's management, the disclosures
made are adequate to make the information presented not misleading, and
the condensed consolidated financial statements contain all adjustments
(consisting of normal recurring accruals) necessary to present fairly
the financial position as of June 30, 1997, results of operations for
the three months ended June 30, 1997 and 1996 and for the six months
ended June 30, 1997 and 1996 and cash flows for the six months ended
June 30, 1997 and 1996.
The results of operations for the three and six months ended June 30,
1997 are not necessarily indicative of the results to be expected for
the full year.
The condensed consolidated financial statements are stated in United
States dollars and are prepared in conformity with accounting
principles generally accepted in the United States of America.
The preparation of condensed consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Equihot Herverzekering
N.V., and partly owned subsidiary Aviation Maritime Transportation
(Insurance Brokers)S.A.M. in which the Company has a 65% holding. The
financial statements of Aviation Maritime Transportation (Insurance
Brokers) S.A.M. are included in total in the consolidated financial
statements of the Company ,less provision for the minority interest. To
the extent that a subsidiary reports a loss, losses are allocated until
the minority interest is nil. Goodwill arising on consolidation is
amortized on a straight line basis over 15 years. All material
inter-company transactions have been eliminated.
Investments
There are no investments available for sale held at June 30, 1997.
Investments at December 31, 1996 consist primarily of marketable equity
securities available for sale representing approximately 49% of total
assets and a holding of certificates of gold deposit available for sale
representing less than 4% of total assets (see Note 3). They were
carried at fair value based on quoted market prices. Unrealized
appreciation (depreciation) is excluded from operations and reported as
a separate component of stockholders' equity. Realized gains and losses
are determined on the specific identification method.
Cash and Cash Equivalents
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the purpose of presentation in the Company's condensed consolidated
statements of cash flows, cash equivalents are short-term, highly
liquid investments that are both (1) readily converted into known
amounts of cash and (2) so near to maturity that they present
insignificant risk of changes in value due to changing interest rates.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Premiums and Determination of Underwriting Results and Reserves
Premium income on short-duration reinsurance contracts is accounted for
using the periodic method. Premiums that commence within the current
underwriting year are taken into revenues as earned. Retrocession and
acquisition costs together with claims incurred are matched against
premiums. Calculations are made to determine the unearned premiums and
deferred acquisition costs as necessary.
The Company reviews short duration contracts to establish whether
premium deficiencies exists. No account is taken of anticipated
investment income in this review.
Long-duration foreign reinsurance contracts are accounted for using the
open-year method. Premiums, retrocession and acquisition costs together
with claims incurred are allocated to underwriting year accounts
according to the inception of the contracts. The aggregation of the
underwriting year accounts form the basis of the underwriting reserves
on the balance sheet. The loss reserves, relating to the open year
method, will be disaggregated and reported on the statement of
operations as premiums, claims and expenses only when earned premiums
become reasonably determinable. If at any time an underwriting year or
class of business within an underwriting year shows a deficiency, this
loss will be recognized immediately.
Reinsurance Ceded
In the normal course of business, the Company seeks to reduce the loss
that may arise from events that cause unfavorable underwriting results
by reinsuring (ceding) certain levels of risk in various areas of
exposure with other reinsurance enterprises.
Deferred Acquisition Costs
Commissions and other costs of acquiring insurance that vary with and
are primarily related to the production of new and renewal business are
deferred and amortized over the terms of the policies or reinsurance
treaties to which they relate.
Loss Reserves
The liability for losses and loss adjustment expenses includes amounts
determined from loss reports and individual cases and amounts, based on
past experience, for losses incurred but not reported. Such liabilities
are necessarily based on estimates and, while management believes that
the amount is adequate, the ultimate liability may be in excess of or
less than the amounts provided. The methods for making such estimates
and for establishing the resulting liability are continually reviewed,
and any adjustments are reflected in earnings currently.
Income Taxes
Income tax provisions are based on the asset and liability method.
Deferred income taxes have been provided for temporary differences
between the tax bases of assets and liabilities and their reported
amounts in the condensed consolidated financial statements. Such
differences relate principally to the unrealized appreciation
(depreciation) on investments, available for sale and differences in
the recognition of premiums, losses and acquisition costs.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. INTANGIBLE ASSETS
Intangible assets consist of goodwill arising on consolidation in
respect of the acquisition of Aviation Maritime Transportation
(Insurance Brokers) S.A.M. This comprises the following:
Purchase price in excess of identifiable assets 365,257
Less amortization (12,176)
--------
$353,081
========
3. INVESTMENTS, AVAILABLE FOR SALE
The aggregate fair value, gross unrealized holding gains, gross
unrealized holding losses and cost are as follows:
June 30, December 31,
1997 1996
---- ----
Marketable equity securities:
Cost - $38,941,200
Gross unrealized holding gains - 615,012
Gross unrealized holding losses - (3,137,027)
-----------
Fair value - 36,419,185
-----------
Marketable certificates of gold deposit:
Cost - 3,461,028
Gross unrealized holding losses - (136,428)
Fair value - 3,324,600
-----------
Total fair value - $39,743,785
===========
Investments available for sale were liquidated during the three months
to June 30, 1997. The funds generated contributed to the purchase of
884 Managed Units at price $60,774.88 each. The units yield an annual
return of 7.685%. The units are readily realizable and are treated as
cash and cash equivalents.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. LOSS RESERVES
Loss reserves consisted of the following:
June 30, December 31,
1997 1996
---- ----
Balance at January 1 $30,033,795 $18,227,498
----------- -----------
Add - provision for losses incurred:
Current claim years 7,769,305 11,898,357
Prior claim years - -
----------- -----------
7,768,305 11,898,357
----------- -----------
Less - paid losses:
Current claim years (508,697) (92,060)
Prior claim years (5,910,655) -
------------ -----------
(6,419,352) (92,060)
----------- -----------
Balance at June 30, 1997 $31,383,748 $30,033,795
=========== ===========
Included in loss reserves in respect of transactions under the open
year method are the following:
June 30, December 31,
1997 1996
---- ----
Written premiums assumed $85,593,724 $70,836,550
Ceded premiums (42,570,807) (35,531,807)
Acquisition costs (8,897,131) (6,937,510)
Paid losses (5,910,655) -
------------ ------------
$ 28,215,131 $ 28,367,233
============ ============
5. INCOME TAXES
June 30, December 31,
1997 1996
---- ----
Current:
Foreign $ 2,600,000 $ 200,000
Federal, net of foreign tax credit - -
$ 2,600,000 $ 200,000
----------- ---------
Deferred:
Federal 506,000 2,108,000
State 44,000 192,000
----------- -----------
550,000 2,300,000
----------- -----------
$ 3,150,000 $ 2,500,000
=========== ===========
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company is subject to corporate income taxes in Belgium. Effective
May 10, 1996, the Company became subject to United States federal
income taxes.
Prior to May 10, 1996 there are no tax liabilities or deferred taxes
because of expenses for tax purposes in Belgium that are considered
equity transactions for financial reporting purposes in the United
States.
6. RELATED PARTY TRANSACTIONS
Transactions or balances with related parties included in the condensed
consolidated financial statements are as follows:
Statements of Operations
Earned premiums assumed and ceded premiums include transactions with
Equihot Verzekering N.V. Net acquisition costs include transactions
with Equihot Verzekering N.V. and Equihot Delfstoffen N.V.
Balance Sheets
All amounts due from and due to related parties represent non-interest
bearing obligations, receivable from or payable to either Equihot
Delfstoffen N.V. or one of its wholly-owned subsidiaries, and are due
within one year.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
Cash and cash equivalents are carried at their face amount.
Investments, available for sale are carried at fair value as determined
based on quoted market prices.
8. CONTINGENCIES
Loss reserves are provisions for the future losses based on individual
underwriting years. To the extent that an open underwriting year
becomes fully developed and earned premiums can be ascertained, credit
can be taken to the income statement comprising the loss provision no
longer required.
Belgian fiscal authorities have examined the records for the year ended
December 31, 1994, the first year of activity as a reinsurer. By their
letter on May 13, 1996, they contested the basis on which the Company
has compiled its underwriting reserves. Directors believe that the
authorities have misunderstood the nature and the time frame of the
risks provided against. A formal rejection of authorities' assertions
was drawn up and submitted. At June 30, 1997, the authorities had not
initiated any further correspondence.
The underwriting reserves for 1994 now stand at $2,578,042 as a result
of losses in respect of 1994, amounting to $5,910,655, paid in the six
months to June 30, 1997. If no further losses are incurred for the 1994
underwriting year, taxation of approximately $1,100,000 will become
payable in 1998. The 1995 and 1996 underwriting reserves give rise to
similar considerations.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Any change in the revenue recognition policy for tax purposes would
result in gross temporary timing differences, the proposed adjustments
would be substantially offset by deferred income taxes and would not be
material to the condensed consolidated financial statements taken as a
whole.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following information should be read in conjunction with the unaudited
condensed consolidated financial statements included herein, see Item 1.
OVERVIEW
Equisure, Inc. has a wholly-owned subsidiary, Equihot Herverzekering N.V.,
a Belgian reinsurer, incorporated in Belgium and operating principally
from Antwerp, the main commercial Flemish city of Belgium. The word
"Herverzekering" is Dutch-Flemish for reinsurance.
Equisure, Inc has acquired a 65% investment in a new subsidiary, Aviation
Maritime Transportation (Insurance Brokers) S.A.M., an insurance and
reinsurance broker. Equisure utilizes the reinsurance brokering services
of AMT which replaces the Company's previously outsourced underwriting
administration services.
Equihot Herverzekering N.V. has been underwriting reinsurance since
January 1, 1994, and specializes in financial risk and political risk
reinsurance, as well as underwriting a general reinsurance account.
The Company at present limits its business to the following classes of
risk: Political, Financial, Marine, Aviation, Accident & Health, and
Casualty.
Political and financial risks are primarily located in African countries
with new accounts in the financial risk sector emanating from North
America and Europe. Other classes of risk are located in North America,
South America and Europe.
The majority of financial risk business is at present obtained from
African historic sources and is renewable. The Company believes that there
is potential for growth in this sector from new sources and new accounts
have been written, emanating from Europe and North America.
Equihot Verzekering N.V. (EV), an insurance company, fronts for the
insurance which the Company provides with respect to political and
financial risk business. Since a reinsurer does not directly insure the
underlying risk, a reinsurer must enter into fronting arrangements with
other insurance companies. Fronting arrangements are defined as
reinsurance in which the ceding (reinsuring) insurance company issues a
policy and reinsures all or substantially all of the insurance risk with
the reinsurer. EV provides this fronting service for a fee of 5% on such
premiums.
Related party transactions with the former parent, Equihot Delfstoffen
N.V. are commission payments on business introduced. This agreement is in
keeping with market levels of 10%, and will continue up until December 31,
2005.
The majority of other general business written for the second quarter of
1997 was aviation and casualty. This business, together with that of
marine and accident & health, is located in North America, South America
and Europe.
The Company is continuing to focus on broadening its portfolio of mixed
commercial reinsurance business in specific areas that fall within the
Company's established criteria of risk management. This will also
contribute to establishing a balanced book of business to minimize
dependence upon any one particular area or class.
The Company has continued to increase its operational profitability with
increases in earned premiums assumed.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
The capacity of a reinsurance company to write reinsurance is based upon
maintaining liquidity and capital resources sufficient to pay claims and
expenses as they become due. The Company has historically generated
adequate capital resources to support its current operations and believes
it will continue to do so for the foreseeable future. The primary sources
of the Company's liquidity are funds generated from reinsurance premiums
and investment income. The principal application of such funds are
payments of losses and loss adjustment expenses, acquisition of
investments and operating expenses.
Cash outflows from operating activities of $1,469,501 for the six months
ended June 30, 1997 compared with cash flows of $3,867,804 for the six
months ended June 30, 1996.
Cash flows from investing activities reflect the Company's decision to
liquidate its investments held for sale in favor of holding cash and cash
equivalents.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Results of Operations
Three Months Ended June 30, 1997, Compared to Three Months Ended June 30,
1996
Total revenues of $9,242,872 increased $5,578,771 or 252% for the three
month period ended June 30, 1997 as compared to total revenues of
$3,664,101 for the same three month period in 1996.
Earned premiums assumed on the completion of short-duration reinsurance
contracts for the three months ended June 30, 1997, of $9,997,664 showed a
860% increase on the comparative quarters figure of $1,162,007 and is
reflective of the continued growth of business in respect of short term
reinsurance contracts.
Ceded premiums in the second quarter of 1997 of $1,877,747, compared to
nil in the comparative quarter is due to retrocession protection now being
sought as a matter of Company policy.
No realized gains on the disposal of quoted investments were made in the
current quarter. The comparative period in 1996 produced $2,118,112.
Net investment income, comprising dividend and interest income showed an
increase to $985,748 for the three months ended June 30, 1997 from
$383,982 for the three months ended June 30, 1996. This is primarily due
to the increase in the amounts held as cash and cash equivalents in favor
of quoted marketable securities.
Brokerage income of $137,207 for the three months ended June 30, 1997
emanates from the activities of Aviation Maritime Transportation
(Insurance Brokers) S.A.M., a subsidiary acquired during the quarter ended
March 31, 1997.
Losses incurred comprising claims paid, outstanding claims and estimates
of future liabilities of $1,549,182 are provided for the three months
ended June 30, 1997. No such provision was necessary for the three months
ended June 30, 1996 as no losses were incurred.
Net acquisition costs of $1,342,877 for the three months ended June 30,
1997 were up by 1156% compared to $116,201 for the comparative period.
This is primarily due to the 860% increase in premiums assumed and an
increase within this of the general reinsurance business, which has
substantially higher acquisition costs than that of the political and
financial risk sector.
Administrative expenses for the current quarter are up 174% at $1,136,379,
compared with $654,517 for the three months ended June 30, 1996. This
increase is attributable to expansion of business generally and to the
increased costs of regulatory compliance.
Foreign currency exchange gains and losses occur due to the fluctuations
in the rate of exchange between the U.S. dollar and other major
currencies, where transactions occur and where balances are held in those
currencies.
Amortization of goodwill arising on consolidation of $6,088 for the three
months ended June 30, 1997 is in respect of the acquisition of Aviation
Maritime Transportation (Insurance Brokers) S.A.M. on February 14, 1997.
Income taxes of $2,295,000 are provided in respect of the results for the
three months ended June 30, 1997. This compares
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
to income taxes of $1,050,000 provided in respect of the results for the
three months ended June 30, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Results of Operations
Six Months Ended June 30, 1997, Compared to Six Months Ended June 30, 1996
Total revenues of $13,570,370 increased $8,321,037 or 259% for the six
month period ended June 30, 1997 as compared to total revenues of
$5,249,333 for the same six month period in 1996.
Earned premiums assumed on the completion of short-duration reinsurance
contracts for the six months ended June 30, 1997, of $14,290,543 showed a
627% increase on the comparative six months figure of $2,278,960 and is
reflective of the continued growth of business in respect of short term
reinsurance contracts.
Ceded premiums in the first six months of 1997 of $2,341,424, compared to
nil in the comparative six months is due to retrocession protection now
being sought as a matter of Company policy.
Realized gains on the sale of quoted investments produced $142,362 in the
six months to June 30, 1997. The comparative period in 1996 produced
$2,118,112.
Net investment income, comprising dividend and interest income showed an
increase to $1,306,460 for the six months ended June 30, 1997 from
$852,261 for the six months ended June 30, 1996. This is primarily due to
the increase in the amounts held as cash and cash equivalents in favor of
quoted marketable securities.
Brokerage income of $172,429 for the six months ended June 30, 1997
emanates from the activities of Aviation Maritime Transportation
(Insurance Brokers) S.A.M., a subsidiary acquired during the six months
ended June 30, 1997.
Losses incurred comprising claims paid, outstanding claims and estimates
of future liabilities of $2,010,752 are provided for the six months ended
June 30, 1997. No such provision was necessary for the six months ended
June 30, 1996 as no losses were incurred.
Net acquisition costs of $1,803,590 for the six months ended June 30, 1997
were up by 791% compared to $227,896 for the comparative period. This is
primarily due to the 627% increase in premiums assumed and an increase
within this of the general reinsurance business, which has substantially
higher acquisition costs than that of the political and financial risk
sector.
Administrative expenses for the current six months are up 148% at
$2,136,790, compared with $1,441,722 for the six months ended June 30,
1996. This increase is attributable to expansion of business generally and
to the increased costs of regulatory compliance.
Foreign currency exchange gains and losses occur due to the fluctuations
in the rate of exchange between the U.S. dollar and other major
currencies, where transactions occur and where balances are held in those
currencies.
Amortization of goodwill arising on consolidation of $12,176 for the six
months ended June 30, 1997 is in respect of the
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
acquisition of Aviation Maritime Transportation (Insurance Brokers) S.A.M.
on February 14, 1997.
Income taxes of $3,150,000 are provided in respect of the results for the
six months ended June 30, 1997. This compares to income taxes of
$1,050,000 provided in respect of the results for the six months ended
June 30, 1996.
ITEM 1. LEGAL PROCEEDINGS
None.
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. EXHIBITS AND REPORTS
During the quarter ended June 30, 1997, the Company was not required to
file any reports on Form 8-K.
ITEM 6. OTHER INFORMATION
None.
<PAGE>
EQUISURE, INC. AND SUBSIDIARIES
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 3, 1997
/S/ Barrie Harding
Barrie Harding
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