<PAGE>
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 quarterly period ended June 30, 1996
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 1-13832
TERRA NOVA (BERMUDA) HOLDINGS LTD.
(Exact name of registrant as specified in its charter)
Bermuda N/A
------- ---
(State or other jurisdiction of (I.R.S. Employer
incorporation or organisation) Identification No)
Richmond House
12 Par-la-Ville Road
Hamilton HM08
Bermuda
------------------------
(Address of principal
executive offices)
(Zip code)
Telephone: (441) 292 7731
---------------------------------------------------
(Registrants telephone number, including area code)
N/A
(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 for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------ -------
The number of registrant's ordinary shares ($5.80 par value) outstanding as of
August 14, 1996 was 25,823,308.
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
INDEX TO FORM 10-Q
Part I - FINANCIAL INFORMATION
- ------------------------------
Page No.
--------
Item 1. Financial Statements:
Consolidated Balance Sheets
June 30, 1996 (Unaudited) and December 31, 1995 1
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1996 and 1995 2
Six Months Ended June 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity
(Unaudited) Six Months Ended June 30, 1996 and 1995 3
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1996 and 1995 4
Notes to the Interim Consolidated Financial 5
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 9
Part II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit 18
Index
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
At June 30, At December 31
1995 1995
---------- ----------
(Unaudited)
ASSETS
<S> <C> <C>
Investments and cash:
Fixed maturities, at market:
Bonds (amortized cost $1,011,009 and $938,146, respectively) $1,017,827 $ 998,901
Equity securities, at market:
Common stocks (cost $88,943 and $69,200, respectively) 112,288 80,410
Cash and cash equivalents 108,292 88,725
---------- ----------
Total investments and cash 1,238,407 1,168,036
Accrued investment income 24,489 23,781
Insurance balances receivable 46,258 28,277
Reinsurance recoverable on paid losses 39,608 62,289
Reinsurance recoverable on unpaid losses 300,719 354,417
Accrued premium income 188,744 111,061
Prepaid reinsurance premiums 17,429 3,943
Deferred acquisition costs 60,025 36,950
Goodwill 10,494 --
Receivable for securities sold -- 1,514
Other assets 31,775 27,652
---------- ----------
Total assets $1,957,948 $1,817,920
========== ==========
LIABILITIES
Unpaid losses and loss adjustment expenses $1,106,853 $1,168,652
Unearned premiums 236,239 139,993
Insurance balances payable 46,763 58,321
Payable for securities purchased 5,817 --
Income taxes payable 14,244 70
Deferred income taxes 12,456 14,931
Long-term debt 100,000 100,000
Net liabilities of Aviation business in run off 61,077 63,772
Other liabilities 21,614 21,041
---------- ----------
Total liabilities $1,605,063 $1,566,780
---------- ----------
Commitments and contingent liabilities (note 2) -- --
Convertible redeemable preferred shares -- 33,376
Minority interests in subsidiaries -- 20,756
---------- ----------
SHAREHOLDERS' EQUITY
Common shares 149,775 89,282
Additional capital 111,823 18,203
Unrealized appreciation of investments, net of minority interests and income tax 19,210 49,972
Retained earnings 72,077 39,551
---------- ----------
Total shareholders' equity 352,885 197,008
---------- ----------
Total liabilities, convertible redeemable preferred shares, ---------- ----------
minority interests and shareholders' equity $1,957,948 $1,817,920
========== ==========
</TABLE>
See accompanying notes to the interim consolidated financial statements.
1
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months and Six Months Ended June 30, 1996 and 1995
(Unaudited)
(dollars in thousands except share amounts)
<TABLE>
<CAPTION>
Three months Six months
Ended June 30, Ended June 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
<S> <C> <C> <C> <C>
Net premiums written $52,733 $50,546 $225,184 $191,432
Change in unearned premiums 14,350 26,479 (82,931) (36,750)
---------- ---------- ---------- ----------
Net premiums earned 67,083 77,025 142,253 154,682
Net investment income 20,288 21,308 38,826 38,860
Realized net capital gains on sales of investments 4,174 3,024 12,182 2,894
Foreign exchange gains (losses) 1,080 (789) (635) 3,505
Octavian agency income 2,294 - 4,235 -
---------- ---------- ---------- ----------
Total revenues 94,919 100,568 196,861 199,941
---------- ---------- ---------- ----------
Expenses:
Losses and loss adjustment expenses, net 42,681 57,436 94,801 115,666
Acquisition costs 20,817 19,962 40,983 39,267
Other operating expenses 1,717 2,239 3,948 4,576
Interest expense 2,687 2,003 5,375 4,006
Octavian agency expense 2,101 - 3,836 -
Other expenses 1,294 475 2,662 1,052
---------- ---------- ---------- ----------
Total expenses 71,297 82,115 151,605 164,567
---------- ---------- ---------- ----------
Income from operations before income taxes and minority interests 23,622 18,453 45,256 35,374
Income tax expense 4,978 5,740 10,142 9,288
Minority interests in income of consolidated subsidiaries - 480 985 1,211
---------- ---------- ---------- ----------
Net income $18,644 $12,233 $34,129 $24,875
========== ========== ========== ==========
Earnings per common share and common share equivalent $0.76 $0.75 $1.62 $1.55
Weighted average number of common shares and common
share equivalents outstanding (in thousands) 24,302 15,650 20,973 15,650
</TABLE>
See accompanying notes to the interim consolidated financial statements.
2
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1996 1995
---------- ----------
Common shares:
<S> <C> <C>
Balance, beginning of period $89,282 $59,057
Shares issued in initial public offering 42,195 -
Shares issued in exchange for minority interests in subsidiaries 11,826 -
Shares issued for conversion of convertible redeemable preferred shares 5,740 -
Other shares issued during the period 732 2,221
---------- ----------
Balance, end of period $149,775 $61,278
========== ==========
Additional capital:
Balance, beginning of period $18,203 $-
Surplus arising from initial public offering 72,037 -
Surplus arising from shares issued in exchange for minority interests in 8,655 -
subsidiaries
Surplus arising from conversion of convertible redeemable preferred
shares 12,108 -
Other capital contributed during period 820 -
---------- ----------
Balance, end of period $111,823 $-
========== ==========
Unrealized appreciation of investments:
Balance, beginning of period $49,972 $-
Changes during the period (40,175) 42,730
Deferred income tax benefit (expense) 9,413 (10,410)
---------- ----------
Balance, end of period $19,210 $32,320
========== ==========
Retained earnings:
Balance, beginning of period $39,551 $-
Net income 34,129 24,875
Dividends payable on convertible redeemable preferred shares (1,088) (1,898)
Dividends payable on ordinary shares (515) -
---------- ----------
Balance, end of period $72,077 $22,977
========== ==========
---------- ----------
Total shareholders' equity $352,885 $116,575
========== ==========
</TABLE>
See accompanying notes to the interim consolidated financial statements.
3
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1996 1995
------------ -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $35,114 $24,875
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortisation of goodwill 552 -
Bad debt charge - 2,000
Realized capital gains (12,182) (2,894)
Change in unpaid losses and loss adjustment expenses (60,803) (17,447)
Change in unearned premiums and prepaid reinsurance 82,760 48,103
Change in insurance balances payable (11,558) (1,986)
Change in insurance balances receivable, accrued premium income and
reinsurance recoverable on paid and unpaid losses (18,520) (4,396)
Change in deferred policy acquisition costs (23,075) (17,482)
Change in accrued investment income (708) (4,508)
Change in current and deferred income taxes 19,569 7,391
Change in other assets and liabilities - net (3,740) (2,243)
Change in net liabilities of Aviation business in run off (2,695) (1,094)
------------ -----------
Total adjustments (30,400) 5,444
------------ -----------
Net cash provided by operating activities 4,714 30,319
------------ -----------
Cash flows from investing activities:
Proceeds of fixed maturities matured 22,250 75,059
Proceeds of fixed maturities sold 229,061 8,670
Proceeds of equity securities sold 109,798 44,092
Purchase of fixed maturities (316,168) (258,008)
Purchase of equity securities (117,264) (56,026)
Payment consideration for Octavian (9,393) -
Acquisition expenses (644) -
------------ -----------
Net cash used in investing activities (82,360) (186,213)
------------ -----------
Cash flows from financing activities:
Proceeds from public debt offering - 100,000
Repayment of long term bank debt - (85,000)
Payment of fees for financing public debt offering - (3,526)
Net proceeds from initial public offering 114,228 -
Redemption of preferred shares (16,035) -
Preference dividends paid to stockholders (499) (1,898)
Ordinary dividends paid to stockholders (515) -
Proceeds from shares issued - 175
------------ -----------
Net cash provided by financing activities 97,179 9,751
------------ -----------
Change in cash and cash equivalents 19,533 (146,143)
Exchange on foreign currency cash balances 34 1,185
Cash and cash equivalents at beginning of period 88,725 242,206
------------ -----------
Cash and cash equivalents at end of period $108,292 $97,248
============ ===========
Supplemental disclosure of cash flow information
Income taxes (refunded) paid $(9,623) $1,109
------------ -----------
Interest paid $5,405 $4,006
============ ===========
</TABLE>
See accompanying notes to the interim consolidated financial statements.
4
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
Notes to the Interim Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying interim consolidated financial statements present information
in relation to Terra Nova (Bermuda) Holdings Ltd. ("The Company") and have been
prepared on the basis of accounting principles generally accepted in the United
States of America. All material intercompany accounts and transactions among the
companies included in the interim consolidated financial statements have been
eliminated. In the opinion of management, these unaudited interim consolidated
financial statements reflect all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the financial position, results
of operations and cash flows of the Company. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. Certain prior year amounts have been reclassified to conform with
the current year presentation.
These financial statements should be read in conjunction with the audited
consolidated financial statements as of December 31, 1995 and for each of the
three years prior to the period ended December 31, 1995, and related notes
thereto included in the Company's Annual Report as filed with the Securities and
Exchange Commission.
2. Contingencies
The Company is regularly involved, directly or indirectly, in litigation in the
ordinary course of conducting its insurance and reinsurance business. In a
number of cases, plaintiffs seek to establish coverage for liability under
environmental protection laws. While the nature and extent of insurance and
reinsurance coverage for environmental liability has widened since 1980, in the
judgement of management, none of these cases, individually or collectively, is
likely to result in judgements for amounts which, net of losses and loss
adjustment expense liabilities previously established and reinsurance
recoverables which management believes are probable of realization, would have a
material effect on the financial position of the Company, although there is no
assurance that such losses will not materially effect the Company's results of
operations for any period.
3. Reinsurance ceded
In the ordinary course of business, Terra Nova Insurance Company Limited ("Terra
Nova"), Terra Nova (Bermuda) Insurance Company Limited ("Terra Nova (Bermuda)")
and Terra Nova Capital Limited ("Terra Nova Capital") cede reinsurance to other
insurance companies. Ceded reinsurance arrangements facilitate greater
diversification of business and limit the net loss potential arising from large
risks. Reinsurance is effected under reinsurance treaties and by negotiation on
individual risks.
Terra Nova, Terra Nova (Bermuda) and Terra Nova Capital cede reinsurance to and
assume reinsurance from Lloyd's of London ("Lloyd's") syndicates. As of June 30,
1996, the aggregate exposure in respect of reinsurance ceded to Lloyd's
syndicates in respect of continuing operations, including estimated reinsurance
recoveries in respect of losses incurred but not reported, was approximately
$116.6 million.
5
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
Notes to the Interim Consolidated Financial Statements-(Continued)
(Unaudited)
<TABLE>
<CAPTION>
(a) Net premiums written are comprised of the following:
Six Months Ended
June 30,
--------------------------
1996 1995
---------- -----------
(dollars in thousands)
<S> <C> <C>
Direct business $78,593 $70,946
Reinsurance assumed 183,900 157,378
Reinsurance ceded (37,309) (36,892)
---------- -----------
Net premiums written $225,184 $191,432
========== ===========
(b) Net premiums earned are comprised of the following:
Six Months Ended
June 30,
--------------------------
1996 1995
---------- -----------
(dollars in thousands)
Direct business $47,479 $54,105
Reinsurance assumed 118,769 125,083
Reinsurance ceded (23,995) (24,506)
---------- -----------
Net premiums earned $142,253 $154,682
========== ===========
(c) Losses and loss adjustment expenses, net, are comprised of the following:
Six Months Ended
June 30,
--------------------------
1996 1995
---------- -----------
(dollars in thousands)
Losses and loss adjustment expenses $103,955 $122,535
Reinsurance ceded (9,154) (6,869)
---------- -----------
Losses and loss adjustment expenses, net $94,801 $115,666
========== ===========
</TABLE>
4. Earnings per common share and common share equivalent
Primary earnings per share are computed using the weighted average number of
common shares and common share equivalents outstanding during the period. Common
share equivalents consist of shares issuable upon exercise of share options and
prior to April 22, 1996 shares issuable at the option of Bermuda Holdings under
put agreements. For purposes of the calculation of primary earnings per share,
net income has been increased to reflect the elimination of minority interests
by exercise of the various put options and has been decreased to reflect the
dividend paid to convertible redeemable preferred shareholders.
In accordance with the SEC Staff Accounting Bulletin Topic 4-D, for purposes of
the earnings per share calculations reflected in these interim consolidated
financial statements, all shares of common stock issued and stock options
granted prior to the date of the Registration Statement filed with the SEC on
March 19, 1996 have been deemed to be outstanding since January 1, 1995.
6
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.,
AND SUBSIDIARIES
Notes to the Interim Consolidated Financial Statements-(Continued)
(Unaudited)
5. Public offering
On April 22, 1996 the Company completed an initial public offering of 6,600,000
Class A Ordinary shares at a price to the public of $17, of which 5,280,000
Shares were initially offered for sale in the United States, Bermuda and Canada
and 1,320,000 Shares were initially being offered for sale outside the United
States, Bermuda and Canada in a concurrent offering ("the offerings"). In
addition, the Company granted to the U.S. underwriters for the Offering an
option to purchase up to 990,000 additional Shares of which 675,000 were
purchased. The proceeds of the offerings were $114.2 million after expenses. Of
these net proceeds $16.0 million was used to redeem a portion of the Company's
non-voting convertible redeemable preferred shares, $75 million was contributed
to Terra Nova (Bermuda), to support its insurance operations, including
increasing the capacity potentially available to the Octavian Syndicates and
approximately $17 million is expected to be contributed to Terra Nova, with the
balance retained for general corporate purposes.
6. Capitalization changes
On March 25, 1996 the Company's shareholders approved an increase in the par
value of the Company's `A' and `B' ordinary shares to $5.80 per share and a
reverse split of the Company's ordinary shares on a one for 5.80 basis. The
shareholders also approved an amendment to the Bye-Laws which, among other
things, eliminated the Company's Class C ordinary shares.
In addition, the Company in connection with the offerings completed on April 22,
1996 performed the following:
(a) issued 1,951,899 ordinary shares in exchange for the ordinary shares and
preferred shares of Terra Nova and Terra Nova (Bermuda) which were held
by minority interests. Subsequent to the offering the Company issued a
further 86,970 shares in exchange for the ordinary shares and preferred
shares of Terra Nova and Terra Nova (Bermuda) which were held by minority
interests.
(b) converted 16,317,354 of the Company's convertible redeemable preferred
shares into 989,697 ordinary shares of the Company, and redeemed for cash
17,058,455 of the Company's convertible redeemable preferred shares at a
redemption price of $16,034,948 out of the proceeds of the offerings.
7. The Octavian Acquisition
On January 5, 1996, in continuation of its market diversification strategy, the
Company purchased the business and assets of Octavian, a Lloyd's managing agent,
consisting primarily of the rights to manage five Lloyd's syndicates (the
"Octavian Syndicates") for the 1996 and subsequent years of account (the
"Octavian Acquisition"), for a purchase price of $9.4 million and 126,268
Shares. The Octavian Syndicates, whose writings include primarily U.K. liability
and marine lines, have approximately $350 million of aggregate underwriting
capacity for the 1996 year of account, of which $38.8 million is provided by the
Company through Terra Nova Capital, a limited liability corporate member of
Lloyd's formed by the Company. The Company estimates that its share of the
Octavian syndicates' written premiums gross of commission for the 1996 year of
account will be approximately $35 to $40 million.
7
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.,
AND SUBSIDIARIES
Notes to the Interim Consolidated Financial Statements-(Continued)
(Unaudited)
These activities are not expected to contribute significantly to the Company's
earnings in 1996. The goodwill in the Company's balance sheet represents the
goodwill arising on the acquisition of Octavian which has been calculated using
the purchase method and is being amortized in a straight line over a 10 year
period. The Octavian results from the date of the acquisition are included in
the Consolidated Statements of Operations.
8. Summarized financial information for Terra Nova Insurance (UK) Holdings
plc ("UK Holdings")
Summarized consolidated balance sheet information as at June 30, 1996 and
December 31, 1995 and summarized consolidated statement of operations
information for the six months ended June 30, 1996 and 1995 relating to UK
Holdings is set out below. Separate financial statements of UK Holdings are not
presented because they would not be material to holders of UK Holdings 10 3/4
Senior Notes due 2005.
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- ------------
(dollars in thousands)
<S> <C> <C>
Investments and cash $825,722 $884,514
Reinsurance recoverable on unpaid losses 431,523 488,335
Accrued premium income 159,576 99,885
Other assets 225,092 188,367
------------- ------------
Total assets $1,641,913 $1,661,101
============= ============
Unpaid losses and loss adjustment expenses $1,036,209 $1,096,857
Unearned premiums 216,920 136,351
Net liabilities of Aviation business in run off 54,887 58,972
Long-term debt 100,000 100,000
Other liabilities 99,618 150,953
------------- ------------
Total liabilities 1,507,634 1,543,133
------------- ------------
Minority interests in subsidiary - 10,584
Total shareholders' equity 134,279 107,384
============= ============
Total liabilities, minority interests and shareholders'
equity $1,641,913 $1,661,101
============= ============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June,30
1996 1995
------------- ------------
(dollars in thousands)
<S> <C> <C>
Net premiums earned $126,959 $145,780
Net investment income 27,172 30,803
Realized investment gains 11,215 2,894
Foreign exchange(losses)/gains (690) 3,505
Octavian agency income 4,235 -
------------- ------------
Total revenues 168,891 182,982
------------- ------------
Underwriting costs and expenses 126,519 150,096
Interest expenses 5,375 4,006
Other expenses 1,326 151
Octavian agency expenses 3,836 -
------------- ------------
Income from operations before income taxes and minority interests 31,835 28,729
------------- ------------
Net income $21,185 $18,832
============= ============
</TABLE>
9. Dividends declared
On April 30, 1996 the Company declared a dividend of $0.02 per share paid on
June 28, 1996 to shareholders of record as of June 7, 1996. On August 5, 1996
the Company declared a dividend of $0.02 per share payable on September 27,
1996, to shareholders of record as of September 6, 1996.
8
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.,
AND SUBSIDIARIES
Notes to the Interim Consolidated Financial Statements-(Continued)
(Unaudited)
The Company
The following discussion addresses the principal factors affecting the earnings
and financial condition of the Company. All references herein to the "Company"
are to Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings") and all of its
direct and indirect subsidiaries, including Terra Nova Insurance (UK) Holdings
plc ("UK Holdings"), Terra Nova Insurance Company Limited ("Terra Nova"), Terra
Nova (Bermuda) Insurance Company Ltd. ("Terra Nova (Bermuda)"), Octavian
Syndicate Management Limited ("OSML") and Terra Nova Capital Limited ("Terra
Nova Capital"). This discussion should be read in conjunction with the audited
consolidated financial statements of Bermuda Holdings as of December 31, 1995
and for each of the three years for the period ended December 31, 1995 and
related notes thereto included in the Company's Annual Report as filed with the
Securities and Exchange Commission.
Mix of Business
The Company's mix of business and combined ratios for the three months ended
June 30, 1996 and 1995 are set forth in the following table:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------------------- ---------------------------------------------
1996 1995 1996 1995
--------------------- --------------------- -------------------- ----------------------
Amount Percent Amount Percent Amount Percent Amount Percent
Gross Premiums Written
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-marine property ........... $ 27,453 45.2% $ 14,535 26.5% $144,640 55.1% $110,618 48.4%
Non-marine casualty ........... 10,796 17.8 6,357 11.6 39,769 15.2 36,317 15.9
Marine & Aviation ............. 22,597 37.2 32,141 58.5 76,783 29.2 78,102 34.3
Life .......................... (129) (0.2) 1,852 3.4 1,301 0.5 3,287 1.4
-------- -------- -------- -------- -------- -------- -------- --------
Total ........... $ 60,717 100.0% $ 54,885 100.0% $262,493 100.0% $228,324 100.0%
======== ======== ======== ======== ======== ======== ======== ========
Net Premiums Written
Non-marine property ........... $ 23,715 45.0% $ 13,659 27.0% $123,666 54.9% $ 88,430 46.2%
Non-marine casualty ........... 8,696 16.5 3,959 7.9 34,625 15.4 29,329 15.3
Marine & Aviation ............. 20,478 38.8 31,144 61.6 65,652 29.1 70,551 36.9
Life .......................... (156) (0.3) 1,784 3.5 1,241 0.6 3,122 1.6
-------- -------- -------- -------- -------- -------- -------- --------
Total ........... $ 52,733 100.0% $ 50,546 100.0% $225,184 100.0% $191,432 100.0%
======== ======== ======== ======== ======== ======== ======== =======
Net Premiums Earned
Non-marine property ........... $ 30,162 44.9% $ 34,323 44.5% $ 62,242 43.7% $ 64,616 41.8%
Non-marine casualty ........... 13,411 20.0 11,824 15.4 25,625 18.0 25,330 16.4
Marine & Aviation ............. 23,666 35.3 29,094 37.8 53,145 37.4 61,614 39.8
Life .......................... (156) (0.2) 1,784 2.3 1,241 0.9 3,122 2.0
-------- -------- -------- -------- -------- -------- -------- --------
Total ........... $ 67,083 100.0% $ 77,025 100.0% $142,253 100.0% $154,682 100.0%
======== ======== ======== ======== ======== ======== ======== =======
Losses and Loss Adjustment
Expense Ratios
Non-marine property ........... 57.3% 63.1% 61.5% 62.1%
Non-marine casualty ........... 83.5 109.0 83.8 102.3
Marine & Aviation ............. 60.9 73.6 66.7 76.1
Life .......................... 128.1 82.1 73.7 89.1
-------- -------- -------- --------
Total ........... 63.6% 74.6% 66.6% 74.8%
======== ======== ======== ========
Underwriting Expense Ratios
Non-marine property ........... 35.0% 29.7% 32.3% 29.9%
Non-marine casualty ........... 26.5 26.3 26.0 26.6
Marine & Aviation ............. 35.2 29.8 33.5 28.1
Life .......................... (29.3) 12.8 26.5 16.3
-------- -------- -------- --------
Total ........... 33.6% 28.8% 31.6% 28.3%
-------- -------- -------- --------
Combined Ratios
Non-marine property ........... 92.3% 92.8% 93.8% 92.0%
Non-marine casualty ........... 110.0 135.3 109.8 128.9
Marine & Aviation ............. 96.1 103.4 100.2 104.2
Life .......................... 98.8 95.6 100.2 105.4
-------- -------- ------- --------
Total ........... 97.2% 103.4% 98.2% 103.1%
-------- -------- ------- --------
</TABLE>
9
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 1996 Compared with Three Months Ended June 30,
1995
Gross Premiums Written; Net Premiums Written; Net Premiums Earned. Gross
premiums written increased 10.6%, to $60.7 million in 1996 from $54.9 million in
1995. The increase in gross written premiums arises from a $12.9 million
increase in non-marine property business and a $4.4 million increase in
non-marine casualty business offset by a $9.5 million reduction in marine and
aviation business and a $2.0 million reduction in life business as a consequence
of Terra Nova ceasing writing new life business on March 1, 1996. The increase
in non-marine property premiums was primarily attributable to increased writings
of Terra Nova's overseas offices, which write predominately proportional treaty
and primary reinsurance business, increased writings in primary business, mainly
through Terra Nova's United States surplus lines business and increased writings
by Terra Nova (Bermuda). The reduction in marine and aviation premiums was a
consequence of Terra Nova writing less hull and energy business due to
competitive market conditions, partially offset by Terra Nova Capital's
participation on marine and aviation business written by the Octavian Syndicates
in 1996.
Reinsurance ceded increased by 84.0%, to $8.0 million in 1996 from $4.3
million in 1995. The increase is a consequence of an increase in prior year
reinsurance premiums, timing differences in the purchase of reinsurance in 1996
compared to 1995 and reinsurance ceded by Octavian in 1996. As a consequence of
the higher gross premiums written and higher reinsurance ceded, net premiums
written increased by 4.3%, to $52.7 million in 1996 from $50.5 million in 1995.
Net premiums earned decreased 12.9%, to $67.1 million in 1996 from $77.0
million in 1995. The marginal decrease in net premiums earned was attributable
to the greater volume of premiums written in 1994, which were earned in 1995,
compared to premiums written in 1995, and earned in 1996, and the slower
earnings patterns of business written in 1996 compared to 1995 as a consequence
of changes in the mix of business.
Net Investment Income. Net investment income decreased by 4.8%, to $20.3
million in 1996 from $21.3 million in 1995 resulting from lower portfolio yields
partially offset by an increase of 11.9% in average invested assets,
attributable to the rights issue in October 1995 and the IPO in April 1996. The
average investment yield before realized gains and losses was 6.7% and 7.9% in
1996 and 1995, respectively.
Realized Gains on Sale of Investments. Realized gains on sales of investments
increased $1.2 million to a gain of $4.2 million in 1996 from a gain of $3.0
million in 1995.
Foreign Exchange Gains (Losses). Foreign exchange gains of $1.1 million in
1996 and losses of $0.8 million in 1995 arose from foreign currency exchange
transactions during the quarter together with the translation of foreign
currency assets and liabilities into U.S. dollars, the Company's functional
currency. The foreign exchange gains and losses in the three months to June 30,
1996 and 1995 arose due to the weakening and strengthening of the US dollar
against other currencies in which business is transacted and shareholders' funds
invested.
Octavian Agency Income. This income consists of fees received by OSML in
respect of the managing of certain Lloyd's syndicates.
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses
decreased 25.7%, to $42.7 million in 1996 from $57.4 million in 1995. As a
percentage of net premiums earned, losses and LAE decreased 11.0 percentage
points, to 63.6% in 1996 from 74.6% in 1995. The decrease is due to an absence
of large losses, favourable overall loss experience and stable results for prior
years in 1996.
10
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Acquisition Costs. Acquisition costs, comprising commissions and other
underwriting expenses, increased 4.3%, to $20.8 million in 1996 from $20.0
million in 1995. Acquisition costs as a percentage of net premiums earned
increased 5.1 percentage points, to 31.0% in 1996 from 25.9% in 1995. The
increase in 1996 was a consequence of changes made to Terra Nova's mix of
business in order to protect earnings from price weakness in certain lines of
business, but this has been offset by lower claims costs.
Other Operating Expenses. Other operating expenses decreased 23.3%, to
$1.7 million in 1996 from $2.2 million in 1995.
Net Interest Expense. Net interest expense in 1996 relates to interest on the
$100 million 10 3/4% Senior Notes issued on June 30, 1995. The net interest
expense in 1995 relates to interest on a Credit Agreement which became effective
on December 21, 1994 and which was repaid in full out of the proceeds of the
Senior Notes issued on June 30, 1995.
Other Expenses. Other expenses increased to $1.3 million in 1996 from $0.5
million in 1995 mainly due to the inclusion of certain expense accruals that in
1995 were not made until the fourth quarter.
Income from Operations before Income Taxes and Minority Interests. Income
from operations before income taxes and minority interests increased 28.0%, to
$23.6 million in 1996 from $18.5 million in 1995. This increase was due to the
improved underwriting result, higher realized investment gains and a positive
foreign exchange movement in 1996.
Income Tax Expense. Income tax expense decreased 13.3%, to $5.0 million in
1996 from $5.7 million in 1995, as a consequence of a larger proportion of group
income being contributed by the Bermudan companies.
Net Income. Net income increased 52.4%, to $18.6 million in 1996 from
$12.2 million in 1995 as a result of the factors described above.
Combined Ratios. The Company's combined ratio was 97.2% for 1996 and 103.4%
for 1995. The decrease was attributable to an 11.0 percentage point reduction in
the overall loss ratio, offset by a 4.8 percentage point increase in the expense
ratio.
11
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1996 Compared with Six Months Ended June 30, 1995
Gross Premiums Written; Net Premiums Written; Net Premiums Earned. Gross
premiums written increased 15.0%, to $262.5 million in 1996 from $228.3 million
in 1995. The increase in gross written premiums arises from:
(a) increased writings by Terra Nova (Bermuda) to $24.3 million in 1996
from $2.4 million in 1995 resulting from a full year of marketing
prior to the January renewals.
(b) Terra Nova Capital writing gross premiums of $20.5 million in 1996.
Terra Nova Capital was established by the Company to participate in
business written by the Octavian Syndicates for the 1996 year of
account. The majority of the business written by the Octavian
Syndicates is UK casualty, marine and aviation business.
Reinsurance ceded increased by 1.1%, to $37.3 million from $36.9 million. The
increase was primarily attributable to Terra Nova Capital ceding $5.6 million of
reinsurance premiums in 1996 offset by lower reinsurance costs at Terra Nova in
1996 as a result of an increase in the retention of the non-marine property
catastrophe reinsurance programme and rate reductions obtained on the non-marine
property, non-marine casualty and marine reinsurance programs. As a consequence
of the higher gross premiums written and similar amounts of reinsurance ceded,
net premiums written increased by 17.6%, to $225.2 million in 1996 from $191.4
million in 1995.
Net premiums earned decreased 8.0%, to $142.3 million in 1996 from $154.7
million in 1995. The decrease in net premiums earned was attributable to the
greater volume of premiums written in 1994, which were earned in 1995, compared
to premiums written in 1995, and earned in 1996, and slower earnings patterns of
business written in 1996 compared to 1995.
Net Investment Income. Net investment income decreased by $0.1 million, to
$38.8 million in 1996 from $38.9 million in 1995, resulting from lower portfolio
yields partially offset by an increase of 10.8% in average invested assets,
attributable to the rights issue in October 1995 and the IPO in April 1996..
Realized Gains on Sale of Investments. Realized gains on sales of investments
increased $9.3 million to a gain of $12.2 million in 1996 from a gain of $2.9
million in 1995. The majority of gains in 1996 arose from equity securities sold
during the period.
Foreign Exchange (Losses) Gains. Foreign exchange losses of $0.6 million in
1996 and gains of $3.5 million in 1995 arose from foreign currency exchange
transactions during the half year together with the translation of foreign
currency assets and liabilities into U.S. dollars, the Company's functional
currency. The foreign exchange gains in the six months to June 30, 1995 arose
due to the weakening of the US dollar against other currencies in which business
is transacted and shareholders' funds invested.
Octavian Agency Income. This income consists of fees received by OSML in
respect of the managing of certain Lloyd's syndicates.
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses
decreased 18.0%, to $94.8 million in 1996 from $115.7 million in 1995. As a
percentage of net premiums earned, losses and LAE decreased
12
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
8.2 percentage points, to 66.6% in 1996 from 74.8% in 1995. The decrease is due
to an absence of large losses, favorable overall loss experience and stable
results for prior years in 1996.
Acquisition Costs. Acquisition costs, comprising commissions and other
underwriting expenses, increased 4.4%, to $41.0 million in 1996 from $39.3
million in 1995. Acquisition costs as a percentage of gross premiums earned
increased 3.4 percentage points, to 28.8% in 1996 from 25.4% in 1995. The
increase in 1996 was a consequence of changes made to Terra Nova's mix of
business in order to protect earnings from price weakness in certain lines of
business, but this has been offset by lower claims costs.
Other Operating Expenses. Other operating expenses decreased 13.7%, to
$3.9 million in 1996 from $4.6 million in 1995.
Net Interest Expense. Net interest expense in 1996 relates to interest on the
$100 million 10 3/4% Senior Notes issued on June 30, 1995. The net interest
expense in 1995 relates to interest on a Credit Agreement which became effective
on December 21, 1994 and which was repaid in full out of the proceeds of the
Senior Notes issued on June 30, 1995.
Other Expenses. Other expenses increased to $2.7 million in 1996 from $1.1
million in 1995, mainly due to the inclusion of certain expense accruals that in
1995 were not made until the fourth quarter.
Income from Operations before Income Taxes and Minority Interests. Income
from operations before income taxes and minority interests increased 27.9%, to
$45.3 million in 1996 from $35.4 million in 1995. The increase was due to the
improved underwriting result and higher realized investment gains.
Income Tax Expense. Income tax expense increased 9.2%, to $10.1 million in
1996 from $9.3 million in 1995, as a consequence of the increase in income of
the United Kingdom subsidiaries.
Net Income. Net income increased 37.2%, to $34.1 million in 1996 from
$24.9 million in 1995, as a result of the factors described above.
Combined Ratios. The Company's combined ratio was 98.2% for 1996 and 103.1%
for 1995. The decrease was attributable to an 8.2 percentage point reduction in
the overall loss ratio, offset by a 3.3 percentage point increase in the expense
ratio.
Taxation
Since 1983 the U.K. Inland Revenue had asserted the Terra Nova's loss
reserves should have been discounted in determining underwriting results for
corporation tax purposes, although Terra Nova did not accept discounting as an
appropriate accounting policy nor the U.K. Inland Revenue's assertion in this
regard. On January 26, 1996 the U.K. Inland Revenue withdrew their assertion and
have stated that they currently have no intention of raising the issue in
relation to the tax liability on all years prior to and including 1995. In March
1996, the Inland Revenue repaid all the taxes (including interest on the overdue
amount) due to Terra Nova relating to this dispute.
Liquidity and Capital Resources
On April 22, 1996 the Company completed an initial public offering of
6,600,000 Class A Ordinary shares at a price to the public of $17, of which
5,280,000 Shares were initially offered for sale in the United States, Bermuda
and Canada and 1,320,000 Shares were initially being offered for sale outside
the United States, Bermuda and
13
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Canada in a concurrent offering ("the offerings"). In addition, the Company
granted to the U.S. underwriters for the Offering an option to purchase up to
990,000 additional Shares of which 675,000 were purchased. The proceeds of the
offerings, including the additional 675,000 shares purchased, were $114.2
million after expenses. Of these net proceeds, $16.0 million was used to redeem
a portion of the Company's non-voting convertible redeemable preference shares,
$75 million contributed to Terra Nova (Bermuda) to support its insurance
operations, including increasing the capacity potentially available to the
Octavian Syndicates from the Company, and approximately $17 million is expected
to be contributed to Terra Nova, with the balance retained for general corporate
purposes.
In addition, the Company in connection with the offerings completed on April 22,
1996 performed the following:
(a) issued 1,951,899 ordinary shares in exchange for the ordinary shares
and preferred shares of Terra Nova and Terra Nova (Bermuda) which were
held by minority interests. Subsequent to the offering the Company
issued a further 86,970 shares in exchange for the ordinary shares and
preferred shares of Terra Nova and Terra Nova (Bermuda) which were
held by minority interests.
(b) converted 16,317,354 of the Company's convertible redeemable preferred
shares into 989,697 ordinary shares of the Company, and redeemed for
cash 17,058,455 of the Company's convertible redeemable preferred
shares.
The Company's assets consist primarily of the capital stock of UK Holdings
and Terra Nova (Bermuda), and UK Holdings' assets consist primarily of the
capital stock of Terra Nova, Terra Nova Capital and OSML. The ability of the
Company to pay dividends on its capital stock and to pay its obligations depends
primarily on dividends or other payments from Terra Nova, Terra Nova (Bermuda),
Terra Nova Capital and OSML. The payment of dividends and other payments by
Terra Nova, Terra Nova (Bermuda), Terra Nova Capital and OSML are subject to
restrictions under U.K. law and Bermuda law, respectively.
The sources of funds for the Company's subsidiaries consist primarily of net
premiums, investment income and proceeds from sales and redemptions of
investments. The funds are used primarily to pay claims and operating expenses
and for the purchase of investments, largely fixed income securities.
The consolidated shareholders' equity of the Company at June 30, 1996 of
$352.9 million represented the combined shareholders' equity in Terra Nova and
Terra Nova (Bermuda) of $413.6 million and other assets of $39.3 million,
reduced by $100.0 million of debt in UK Holdings.
The shareholders' equity of Terra Nova at June 30, 1996 was $215.7 million
compared to $211.9 million at December 31, 1995. The increase of $3.8 million in
the six months to June 30, 1996 was a consequence of net retained income of
$19.8 million, partially offset by unrealized losses on investments (net of tax)
of $16.0 million due to the weak bond markets in the first half of 1996. The
shareholders' equity of Terra Nova (Bermuda) at June 30, 1996 was $197.9 million
compared to $122.9 million at December 31, 1995. The increase of $75.0 million
in the six months to June 30, 1996 was due to a capital injection of $75.0
million with unrealised losses on investments of $14.1 million completely offset
by net income.
Total investments and cash were $1,238.4 million at June 30, 1996, comprising
fixed maturities - 82.2%, common stocks - 9.1% and cash and cash equivalents -
8.7%. At June 30, 1996, approximately 95% of the Company's fixed income
investments were rated AA or better by Moody's Investors Service Inc., or
Standard & Poor's Corporation with the balance of fixed income investments being
issued by political sub-divisions of governments outside the US and UK, which
have investment grade ratings. The Company's investment portfolio earned
interest and dividend income, net of investment management fees, of 6.5% and
7.2% in the six months ended June 30, 1996 and 1995, respectively. The Company
had realized investment gains and losses of $12.2 million and $2.9 million in
1996 and 1995, respectively.
14
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the six months ended June 30, 1996, the cashflow provided by operating
activities of the Company was $4.7 million compared to cashflow provided by
operating activities and available for investment of $30.3 million in 1995. The
decrease in cashflows provided by operating activities in 1996 was primarily
attributable to the following:
(a) higher insurance balances due at December 31, 1994 which were received
in 1995 compared to balances due at December 31, 1995 which were
received in 1996;
(b) larger net cash outflows in 1996 compared to 1995 on the discontinued
marine LMX, aviation and life businesses; and
(c) a higher percentage of proportional treaty and direct business written
in 1996 compared to 1995. The cash receipts for premiums written on
this business are received throughout the year while the majority of
cash receipts for catastrophe and excess of loss business are received
in the first half of the year. As a result insurance cash flows in
1996 will benefit from the higher percentage of proportional treaty
and direct business written during the second half of 1996 and
consequently cashflows for 1996 are expected to be positive, as was
the case with 1995, and are expected to be sufficient to meet the
company's foreseeable 1996 obligations.
Dividend Policy
On April 30, 1996 the company declared a dividend of $0.02 per share paid on
June 28, 1996, to shareholders of record as of June 7, 1996. On August 5, 1996
the Company declared a dividend of $0.02 per share payable on September 27,
1996, to shareholders of record as of September 6, 1996. The declaration and
payment of dividends is at the discretion of the Board of Directors of the
Company and will depend upon the Company's results of operations, the financial
position and capital requirements of the Company's operating subsidiaries,
general business conditions, legal, tax and regulatory restrictions on the
payment of dividends and other factors the Board of Directors of the Company
deems relevant. While the Company is not itself subject to any contractual
restrictions or significant legal prohibitions on dividend payments the
Company's subsidiaries are subject to regulatory and legal constraints on their
respective abilities to pay dividends. Accordingly, there is no assurance that
dividends will be declared or paid in the future.
15
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 11.1 Statement regarding Computation of Primary Earnings
Per Common Share and Common Share Equivalents.
b) Form 8K None.
16
<PAGE>
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
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 thereto duly authorized.
Date: August 14, 1996 By: /s/ WILLIAM O. BAILEY
------------------- --------------------------
William O. Bailey
Chairman, Chief Executive
Officer and Chief Financial
Officer
17
<PAGE>
EXHIBIT 11.1
------------
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS
<TABLE>
<CAPTION>
Six Months Six Months
Ended June 30, Ended June 30,
1996 1995
Earnings per common share and common share equivalents
- - Primary
<S> <C> <C>
Weighted average common shares outstanding 20,583,065 11,610,232
Weighted average common shares outstanding - -
(under as if converted method)
Average stock options and warrants outstanding 389,576 4,039,983
(net of repurchased shares under the treasury
stock method)
Other dilutive securities assumed to be outstanding
under regulatory rules (net of repurchased shares
under the treasury stock method) - -
------------- -------------
Weighted average common shares and common
share equivalents outstanding 20,972,641 15,650,215
============= =============
Net income $34,025,824 $24,187,000
============= =============
Primary earnings per common share $1.62 $1.55
and common share equivalent
============= =============
</TABLE>
19
<PAGE>
EXHIBIT 11.1
TERRA NOVA (BERMUDA) HOLDINGS LTD.
AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, Ended June 30,
1996 1995
Earnings per common share and common share equivalents
- - Primary
<S> <C> <C>
Weighted average common shares outstanding 23,859,257 11,610,232
Weighted average preferred shares outstanding
(under as of converted method) - -
Average stock options and warrants outstanding
(net of repurchased shares under the treasury 442,562 4,039,983
stock method)
Other dilutive securities assumed to be outstanding
under regulatory rules (net of repurchased shares
under the treasury stock method) -
---------- -----------
Weighted average common shares and common
share equivalents outstanding 24,301,819 15,650,215
=========== ============
Net income $18,401,824 $11,714,000
=========== ============
Primary earnings per common share
and common share equivalent $0.76 $0.75
=========== ============
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TERRA NOVA
(BERMUDA) HOLDINGS LTD. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 1,017,827
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 112,288
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,130,115
<CASH> 108,292
<RECOVER-REINSURE> 39,608
<DEFERRED-ACQUISITION> 60,025
<TOTAL-ASSETS> 1,957,948
<POLICY-LOSSES> 1,106,853
<UNEARNED-PREMIUMS> 236,239
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 100,000
0
0
<COMMON> 149,775
<OTHER-SE> 203,110
<TOTAL-LIABILITY-AND-EQUITY> 1,957,948
142,253
<INVESTMENT-INCOME> 38,826
<INVESTMENT-GAINS> 12,182
<OTHER-INCOME> 3,600
<BENEFITS> 94,801
<UNDERWRITING-AMORTIZATION> 40,983
<UNDERWRITING-OTHER> 3,948
<INCOME-PRETAX> 45,256
<INCOME-TAX> 10,142
<INCOME-CONTINUING> 35,114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,129
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.60
<RESERVE-OPEN> 814,235
<PROVISION-CURRENT> 94,801
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 2,542
<PAYMENTS-PRIOR> 100,360
<RESERVE-CLOSE> 806,134
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
