PXRE Group Ltd.
Unaudited Financial Highlights
(Dollars in thousands except per share amounts)
Unaudited Financial Highlights
(Dollars in thousands except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| Gross premiums written | $ | 6,952 | $ | 114,617 | $ | 138,776 | $ | 542,325 | ||||||||
| Net premiums written | $ | (18,169 | ) | $ | 130,665 | $ | 53,509 | $ | 407,005 | |||||||
| Revenues | $ | 1,776 | $ | 157,097 | $ | 137,802 | $ | 419,821 | ||||||||
| Losses and expenses | (20,889 | ) | (564,052 | ) | (108,703 | ) | (1,111,472 | ) | ||||||||
| (Loss) income before income taxes and convertible preferred share dividends | (19,113 | ) | (406,955 | ) | 29,099 | (691,651 | ) | |||||||||
| Income tax expense | (597 | ) | (39,510 | ) | (597 | ) | (5,907 | ) | ||||||||
| Net (loss) income before convertible preferred share dividends | $ | (19,710 | ) | $ | (446,465 | ) | $ | 28,502 | $ | (697,558 | ) | |||||
| Net (loss) income per diluted common share | $ | (0.29 | ) | $ | (8.45 | ) | $ | 0.37 | $ | (21.65 | ) | |||||
| Average diluted shares outstanding (000’s) | 77,156 | 73,555 | 77,072 | 43,517 | ||||||||||||
| Average diluted shares outstanding when antidilutive (000’s) | 72,006 | 52,987 | — | 32,541 | ||||||||||||
| Financial Position: | Dec. 31, 2006 | Dec. 31, 2005 | ||||||
| Cash and investments | $ | 1,216,392 | $ | 1,660,996 | ||||
| Total assets | 1,401,343 | 2,116,047 | ||||||
| Reserve for losses and loss expenses | 603,241 | 1,320,126 | ||||||
| Shareholders’ equity | 496,767 | 465,318 | ||||||
Book value per common share(1) | 6.41 | 6.01 | ||||||
| Statutory surplus: | ||||||||
| PXRE Reinsurance Ltd. | 564,209 | (2) | 530,775 | (3) | ||||
| PXRE Reinsurance Company | 137,974 | (4) | 126,991 | |||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
GAAP Ratios: | ||||||||||||||||
| Loss ratio | 1.8 | % | 340.2 | % | 14.7 | % | 260.5 | % | ||||||||
| Expense ratio | (78.2 | %) | 17.1 | % | 73.7 | % | 21.9 | % | ||||||||
| Combined ratio | (76.4 | %) | 357.3 | % | 88.4 | % | 282.4 | % | ||||||||
Losses Incurred by Segment: | ||||||||||||||||
| Cat & Risk Excess | $ | (3,847 | ) | $ | 532,815 | $ | 6,490 | $ | 1,004,771 | |||||||
| Exited | 3,606 | 187 | 5,953 | 6,752 | ||||||||||||
| $ | (241 | ) | $ | 533,002 | $ | 12,443 | $ | 1,011,523 | ||||||||
Commission and Brokerage, Net of Fee Income by Segment: | ||||||||||||||||
| Cat & Risk Excess | $ | 806 | $ | 17,831 | $ | 18,697 | $ | 49,256 | ||||||||
| Exited | — | (114 | ) | 186 | (297 | ) | ||||||||||
| $ | 806 | $ | 17,717 | $ | 18,883 | $ | 48,959 | |||||||||
Underwriting (Loss) Income by Segment:(5) | ||||||||||||||||
| Cat & Risk Excess | $ | (10,428 | ) | $ | (393,453 | ) | $ | 59,761 | $ | (664,445 | ) | |||||
| Exited | (3,620 | ) | (613 | ) | (6,558 | ) | (7,713 | ) | ||||||||
| $ | (14,048 | ) | $ | (394,066 | ) | $ | 53,203 | $ | (672,158 | ) | ||||||
6
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Underwriting (Loss) Income Reconciled to (Loss) Income Before Income Taxes and Convertible Preferred Share Dividends: | ||||||||||||||||
Underwriting (loss) income(5) | $ | (14,048 | ) | $ | (394,066 | ) | $ | 53,203 | $ | (672,158 | ) | |||||
| Net investment income | 14,893 | 14,643 | 60,654 | 45,292 | ||||||||||||
| Net realized investment gains (losses) | 172 | (14,370 | ) | (7,809 | ) | (14,736 | ) | |||||||||
| Other fee income | 185 | — | 185 | — | ||||||||||||
| Other reinsurance related expense | (7,124 | ) | (936 | ) | (17,862 | ) | (936 | ) | ||||||||
| Operating expenses | (9,732 | ) | (9,105 | ) | (43,373 | ) | (36,208 | ) | ||||||||
| Foreign exchange gains (losses) | 168 | 494 | (1,444 | ) | 1,547 | |||||||||||
| Interest expense | (3,627 | ) | (3,615 | ) | (14,455 | ) | (14,452 | ) | ||||||||
| (Loss) income before income taxes and convertible preferred share dividends | $ | (19,113 | ) | $ | (406,955 | ) | $ | 29,099 | $ | (691,651 | ) | |||||
| (1) | After considering convertible preferred shares. | |
| (2) | Estimated and before inter-company eliminations. | |
| (3) | Before inter-company eliminations. | |
| (4) | Estimated. | |
| (5) | Underwriting Income (Loss) by Segment (a GAAP financial measure): The Company’s reported underwriting results are its best measure of profitability for its individual underwriting segments and accordingly are disclosed in the footnotes to the Company’s financial statements required by SFAS 131,Disclosures about Segments of an Enterprise and Related Information. Underwriting Income (Loss) by Segment is calculated by subtracting losses and loss expenses incurred and commission and brokerage, net of fee income from net earned premiums. PXRE does not allocate net investment income, net realized investment gains (losses), other fee income, other reinsurance related expense, operating expenses, foreign exchange gains or losses, or interest expense to its respective underwriting segments. | |
| These preliminary financial statements are unaudited and do not include footnotes that customarily accompany a complete set of financial statements; these footnotes will be furnished when the Company makes its filing on Form 10-K for the year ended December 31, 2006. |
7
Exhibit 99.2
PXRE | Consolidated Balance Sheets | |
Group Ltd. | (Dollars in thousands, except par value per share) | |
| December 31, | ||||||||
| 2006 | 2005 | |||||||
Assets | ||||||||
| Investments: | ||||||||
| Fixed maturities, at fair value: | ||||||||
| Available-for-sale (amortized cost $502,307 and $1,212,299, respectively) | $ | 502,254 | $ | 1,208,248 | ||||
| Trading (cost $14,794 and $28,225, respectively) | 15,497 | 25,796 | ||||||
| Short-term investments, at fair value | 671,197 | 261,076 | ||||||
| Hedge funds, at fair value (cost $11,583 and $132,690, respectively) | 12,766 | 148,230 | ||||||
| Other invested assets, at fair value (cost $1,717 and $2,806, respectively) | 2,427 | 3,142 | ||||||
| Total investments | 1,204,141 | 1,646,492 | ||||||
| Cash | 12,251 | 14,504 | ||||||
| Accrued investment income | 3,830 | 10,809 | ||||||
| Premiums receivable, net | 93,325 | 217,446 | ||||||
| Other receivables | 7,321 | 17,000 | ||||||
| Reinsurance recoverable on paid losses | 3,324 | 4,223 | ||||||
| Reinsurance recoverable on unpaid losses | 35,327 | 107,655 | ||||||
| Ceded unearned premiums | — | 1,379 | ||||||
| Deferred acquisition costs | 8 | 5,487 | ||||||
| Income tax recoverable | — | 6,295 | ||||||
| Other assets | 41,816 | 84,757 | ||||||
| Total assets | $ | 1,401,343 | $ | 2,116,047 | ||||
Liabilities | ||||||||
| Losses and loss expenses | $ | 603,241 | $ | 1,320,126 | ||||
| Unearned premiums | 113 | 32,512 | ||||||
| Subordinated debt | 167,089 | 167,081 | ||||||
| Reinsurance balances payable | 34,649 | 30,244 | ||||||
| Deposit liabilities | 54,425 | 68,270 | ||||||
| Income tax payable | 597 | — | ||||||
| Other liabilities | 44,462 | 32,496 | ||||||
| Total liabilities | 904,576 | 1,650,729 | ||||||
Shareholders’ Equity | ||||||||
| Serial convertible preferred shares, $1.00 par value, $10,000 stated value — 30 million shares authorized, 0.01 million and 0.01 million shares issued and outstanding, respectively | 58,132 | 58,132 | ||||||
| Common shares, $1.00 par value — 350 million shares authorized, 72.4 million and 72.3 million shares issued and outstanding, respectively | 72,351 | 72,281 | ||||||
| Additional paid-in capital | 873,142 | 875,224 | ||||||
| Accumulated other comprehensive loss | (100 | ) | (5,468 | ) | ||||
| Accumulated deficit | (503,711 | ) | (527,349 | ) | ||||
| Restricted shares at cost (0.4 million and 0.5 million shares, respectively) | (3,047 | ) | (7,502 | ) | ||||
| Total shareholders’ equity | 496,767 | 465,318 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,401,343 | $ | 2,116,047 | ||||
PXRE | Consolidated Statements of Operations and Comprehensive Operations | |
Group Ltd. | (Dollars in thousands, except per share amounts) | |
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Revenues | ||||||||||||||||
| Net premiums earned | $ | (13,483 | ) | $ | 156,653 | $ | 84,529 | $ | 388,324 | |||||||
| Net investment income | 14,893 | 14,643 | 60,654 | 45,292 | ||||||||||||
| Net realized investment gains (losses) | 172 | (14,370 | ) | (7,809 | ) | (14,736 | ) | |||||||||
| Fee income | 194 | 171 | 428 | 941 | ||||||||||||
| 1,776 | 157,097 | 137,802 | 419,821 | |||||||||||||
Losses and Expenses | ||||||||||||||||
| Losses and loss expenses incurred | (241 | ) | 533,002 | 12,443 | 1,011,523 | |||||||||||
| Commission and brokerage | 815 | 17,888 | 19,126 | 49,900 | ||||||||||||
| Other reinsurance related expense | 7,124 | 936 | 17,862 | 936 | ||||||||||||
| Operating expenses | 9,732 | 9,105 | 43,373 | 36,208 | ||||||||||||
| Foreign exchange (gains) losses | (168 | ) | (494 | ) | 1,444 | (1,547 | ) | |||||||||
| Interest expense | 3,627 | 3,615 | 14,455 | 14,452 | ||||||||||||
| 20,889 | 564,052 | 108,703 | 1,111,472 | |||||||||||||
| (Loss) income before income taxes and convertible preferred share dividends | (19,113 | ) | (406,955 | ) | 29,099 | (691,651 | ) | |||||||||
| Income tax provision | 597 | 39,510 | 597 | 5,907 | ||||||||||||
| Net (loss) income before convertible preferred share dividends | $ | (19,710 | ) | $ | (446,465 | ) | $ | 28,502 | $ | (697,558 | ) | |||||
| Convertible preferred share dividends | 1,163 | 1,162 | 4,864 | 7,040 | ||||||||||||
| Net (loss) income to common shareholders | $ | (20,873 | ) | $ | (447,627 | ) | $ | 23,638 | $ | (704,598 | ) | |||||
Comprehensive Operations, Net of Tax | ||||||||||||||||
| Net (loss) income before convertible preferred share dividends | $ | (19,710 | ) | $ | (446,465 | ) | $ | 28,502 | $ | (697,558 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments | 84 | (4,435 | ) | (3,929 | ) | (12,061 | ) | |||||||||
| Reclassification adjustments for losses included in net (loss) income | 20 | 11,952 | 7,996 | 12,164 | ||||||||||||
| Minimum additional pension liability | 1,847 | (716 | ) | 1,970 | (716 | ) | ||||||||||
| Comprehensive (loss) income | $ | (17,759 | ) | $ | (439,664 | ) | $ | 34,539 | $ | (698,171 | ) | |||||
Per Share | ||||||||||||||||
| Basic: | ||||||||||||||||
| (Loss) income before convertible preferred share dividends | $ | (0.27 | ) | $ | (8.43 | ) | $ | 0.40 | $ | (21.43 | ) | |||||
| Convertible preferred share dividends | (0.02 | ) | (0.02 | ) | (0.07 | ) | (0.22 | ) | ||||||||
| Net (loss) income to common shareholders | $ | (0.29 | ) | $ | (8.45 | ) | $ | 0.33 | $ | (21.65 | ) | |||||
| Average shares outstanding (000’s) | 72,006 | 52,987 | 71,954 | 32,541 | ||||||||||||
| Diluted: | ||||||||||||||||
| Net (loss) income before cumulative effect of accounting change | $ | (0.29 | ) | $ | (8.45 | ) | $ | 0.37 | $ | (21.65 | ) | |||||
| Cumulative effect of accounting change | — | — | — | — | ||||||||||||
| Net (loss) income | $ | (0.29 | ) | $ | (8.45 | ) | $ | 0.37 | $ | (21.65 | ) | |||||
| Average shares outstanding (000’s) | 72,006 | 52,987 | 77,072 | 32,541 | ||||||||||||
PXRE | Consolidated Statements of Shareholders’ Equity | |
Group Ltd. | (Dollars in thousands) | |
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Convertible Preferred Shares | ||||||||||||||||
| Balance at beginning of period | $ | 58,132 | $ | 58,132 | $ | 58,132 | $ | 163,871 | ||||||||
| Conversion of convertible preferred shares | — | — | — | (109,108 | ) | |||||||||||
| Dividends to convertible preferred shareholders | — | — | — | 3,369 | ||||||||||||
| Balance at end of period | $ | 58,132 | $ | 58,132 | $ | 58,132 | $ | 58,132 | ||||||||
Common Shares | ||||||||||||||||
| Balance at beginning of period | $ | 72,346 | $ | 29,395 | $ | 72,281 | $ | 20,469 | ||||||||
| Issuance of common shares, net | 5 | 42,886 | 70 | 51,812 | ||||||||||||
| Balance at end of period | $ | 72,351 | $ | 72,281 | $ | 72,351 | $ | 72,281 | ||||||||
Additional Paid-in Capital | ||||||||||||||||
| Balance at beginning of period | $ | 873,009 | $ | 445,425 | $ | 875,224 | $ | 329,730 | ||||||||
| Issuance (cancellation) of common shares, net | 133 | 429,799 | (2,082 | ) | 544,430 | |||||||||||
| Tax effect of stock options exercised | — | — | — | 1,064 | ||||||||||||
| Balance at end of period | $ | 873,142 | $ | 875,224 | $ | 873,142 | $ | 875,224 | ||||||||
Accumulated Other Comprehensive Operations | ||||||||||||||||
| Balance at beginning of period | $ | (1,382 | ) | $ | (12,269 | ) | $ | (5,468 | ) | $ | (4,855 | ) | ||||
| Change in unrealized gains on investments | 104 | 7,517 | 4,067 | 103 | ||||||||||||
| Change in minimum additional pension liability | 1,847 | (716 | ) | 1,970 | (716 | ) | ||||||||||
| Incremental effect of applying FAS 158 | (669 | ) | — | (669 | ) | — | ||||||||||
| Balance at end of period | $ | (100 | ) | $ | (5,468 | ) | $ | (100 | ) | $ | (5,468 | ) | ||||
(Accumulated Deficit)/Retained Earnings | ||||||||||||||||
| Balance at beginning of period | $ | (482,838 | ) | $ | (71,041 | ) | $ | (527,349 | ) | $ | 194,081 | |||||
| Net (loss) income before convertible preferred share dividends | (19,710 | ) | (446,465 | ) | 28,502 | (697,558 | ) | |||||||||
| Dividends to convertible preferred shareholders | (1,163 | ) | (1,162 | ) | (4,864 | ) | (7,040 | ) | ||||||||
| Dividends to common shareholders | — | (8,681 | ) | — | (16,832 | ) | ||||||||||
| Balance at end of period | $ | (503,711 | ) | $ | (527,349 | ) | $ | (503,711 | ) | $ | (527,349 | ) | ||||
Restricted Shares | ||||||||||||||||
| Balance at beginning of period | $ | (3,598 | ) | $ | (9,683 | ) | $ | (7,502 | ) | $ | (6,741 | ) | ||||
| Cancellation (issuance) of restricted shares, net | — | 1,503 | 2,376 | (4,566 | ) | |||||||||||
| Amortization of restricted shares | 551 | 678 | 2,079 | 3,805 | ||||||||||||
| Balance at end of period | $ | (3,047 | ) | $ | (7,502 | ) | $ | (3,047 | ) | $ | (7,502 | ) | ||||
Total Shareholders’ Equity | ||||||||||||||||
| Balance at beginning of period | $ | 515,669 | $ | 439,959 | $ | 465,318 | $ | 696,555 | ||||||||
| Conversion of convertible preferred shares | — | — | — | (109,108 | ) | |||||||||||
| Issuance (cancellation) of common shares, net | 138 | 472,685 | (2,012 | ) | 596,242 | |||||||||||
| Restricted shares, net | 551 | 2,181 | 4,455 | (761 | ) | |||||||||||
| Unrealized appreciation on investments | 104 | 7,517 | 4,067 | 103 | ||||||||||||
| Minimum additional pension liability and effect of applying FAS 158 | 1,178 | (716 | ) | 1,301 | (716 | ) | ||||||||||
| Net (loss) income before convertible preferred share dividends | (19,710 | ) | (446,465 | ) | 28,502 | (697,558 | ) | |||||||||
| Dividends to convertible preferred shareholders | (1,163 | ) | (1,162 | ) | (4,864 | ) | (3,671 | ) | ||||||||
| Dividends to common shareholders | — | (8,681 | ) | — | (16,832 | ) | ||||||||||
| Tax effect of stock options exercised | — | — | — | 1,064 | ||||||||||||
| Balance at end of period | $ | 496,767 | $ | 465,318 | $ | 496,767 | $ | 465,318 | ||||||||
PXRE | Consolidated Statements of Cash Flows | |
Group Ltd. | (Dollars in thousands) | |
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||
| Premiums collected, net of reinsurance | $ | 17,302 | $ | 10,147 | $ | 182,035 | $ | 301,982 | ||||||||
| Losses and loss adjustment expenses paid, net of reinsurance | (123,585 | ) | (67,112 | ) | (620,947 | ) | (229,295 | ) | ||||||||
| Commission and brokerage received (paid), net of fee income | 412 | (14,617 | ) | (7,154 | ) | (28,727 | ) | |||||||||
| Operating expenses paid | (11,213 | ) | (6,971 | ) | (45,967 | ) | (31,666 | ) | ||||||||
| Net investment income received | 14,191 | 13,825 | 57,180 | 37,788 | ||||||||||||
| Interest paid | (1,385 | ) | (1,374 | ) | (14,338 | ) | (14,338 | ) | ||||||||
| Income taxes (paid) recovered | (31 | ) | (144 | ) | 6,295 | 18,328 | ||||||||||
| Trading portfolio purchased | (8,499 | ) | — | (38,392 | ) | (17,685 | ) | |||||||||
| Trading portfolio disposed | 7,222 | — | 50,139 | 3,369 | ||||||||||||
| Deposit paid | (1,736 | ) | (2,060 | ) | (13,845 | ) | (3,873 | ) | ||||||||
| Other | 473 | (11,464 | ) | 10,747 | (8,608 | ) | ||||||||||
| Net cash (used) provided by operating activities | (106,849 | ) | (79,770 | ) | (434,247 | ) | 27,275 | |||||||||
Cash Flows from Investing Activities | ||||||||||||||||
| Fixed maturities available for sale purchased | (23,068 | ) | (360,140 | ) | (90,510 | ) | (733,076 | ) | ||||||||
| Fixed maturities available for sale disposed or matured | 50,178 | 58,747 | 794,485 | 209,763 | ||||||||||||
| Hedge funds purchased | — | (9,500 | ) | (4,000 | ) | (129,388 | ) | |||||||||
| Hedge funds disposed | 6,017 | 8,170 | 145,097 | 123,219 | ||||||||||||
| Other invested assets purchased | — | — | (35 | ) | — | |||||||||||
| Other invested assets disposed | 186 | 1,494 | 1,577 | 3,738 | ||||||||||||
| Net change in short-term investments | 65,998 | (86,850 | ) | (410,121 | ) | 35,242 | ||||||||||
| Net cash provided (used) by investing activities | 99,311 | (388,079 | ) | 436,493 | (490,502 | ) | ||||||||||
Cash Flows from Financing Activities | ||||||||||||||||
| Proceeds from issuance of common shares | 138 | 474,222 | 628 | 483,169 | ||||||||||||
| Cash dividends paid to common shareholders | — | (8,681 | ) | — | (16,832 | ) | ||||||||||
| Cash dividends paid to preferred shareholders | (1,163 | ) | (1,162 | ) | (4,864 | ) | (3,671 | ) | ||||||||
| Cost of shares repurchased | — | (36 | ) | (263 | ) | (603 | ) | |||||||||
| Net cash (used) provided by financing activities | (1,025 | ) | 464,343 | (4,499 | ) | 462,063 | ||||||||||
| Net change in cash | (8,563 | ) | (3,506 | ) | (2,253 | ) | (1,164 | ) | ||||||||
| Cash, beginning of period | 20,814 | 18,010 | 14,504 | 15,668 | ||||||||||||
| Cash, end of period | $ | 12,251 | $ | 14,504 | $ | 12,251 | $ | 14,504 | ||||||||
Reconciliation of net (loss) income to net cash (used) provided by operating activities: | ||||||||||||||||
| Net (loss) income before convertible preferred share dividends | $ | (19,710 | ) | $ | (446,465 | ) | $ | 28,502 | $ | (697,558 | ) | |||||
| Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities: | ||||||||||||||||
| Losses and loss expenses | (124,525 | ) | 334,684 | (716,885 | ) | 860,041 | ||||||||||
| Unearned premiums | (4,709 | ) | (25,989 | ) | (31,020 | ) | 18,681 | |||||||||
| Deferred acquisition costs | 1,316 | 2,249 | 5,479 | (3,742 | ) | |||||||||||
| Receivables | 17,229 | (35,115 | ) | 133,800 | (106,015 | ) | ||||||||||
| Reinsurance balances payable | 18,504 | (91,242 | ) | 4,405 | 19,307 | |||||||||||
| Reinsurance recoverable | 698 | 166,359 | 73,228 | (42,661 | ) | |||||||||||
| Income taxes | 566 | 39,365 | 6,892 | 24,507 | ||||||||||||
| Equity in earnings of limited partnerships | (264 | ) | (2,432 | ) | (6,460 | ) | (13,000 | ) | ||||||||
| Trading portfolio purchased | (8,499 | ) | — | (38,392 | ) | (17,685 | ) | |||||||||
| Trading portfolio disposed | 7,222 | — | 50,139 | 3,369 | ||||||||||||
| Deposit liability | (1,736 | ) | (2,060 | ) | (13,845 | ) | (3,873 | ) | ||||||||
| Receivable on commutation | — | (35,154 | ) | 35,154 | (35,154 | ) | ||||||||||
| Other | 7,059 | 16,030 | 34,756 | 21,058 | ||||||||||||
| Net cash (used) provided by operating activities | $ | (106,849 | ) | $ | (79,770 | ) | $ | (434,247 | ) | $ | 27,275 | |||||