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Platinum Underwriters Finance, Inc. | Platinum Underwriters Holdings, Ltd. | |
(Exact name of Registrant as Specified in its Charter) | (Exact name of Registrant as Specified in its Charter) |
Delaware | 6719 | 81-0566888 | Bermuda | 6719 | 98-0416483 | |||||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) | (State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
2 World Financial Center | The Belvedere Building | |
225 Liberty Street | 69 Pitts Bay Road | |
Suite 2300 | Pembroke, HM 08 | |
New York, New York 10281 | Bermuda | |
(212) 238-9600 | (441) 295-7195 |
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The Exchange Offer | ||
• | We will exchange all outstanding Notes that are validly tendered and not validly withdrawn for an equal principal amount of Exchange Notes that are freely tradeable, except in limited circumstances described below. | |
• | You may withdraw tenders of outstanding Notes at any time prior to the expiration of the exchange offer. | |
• | The exchange offer expires at 5:00 p.m., New York City time, on October 28, 2005, unless extended. We currently do not intend to extend the expiration date. | |
• | The exchange of outstanding Notes for Exchange Notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. | |
• | We will not receive any proceeds from the exchange offer. | |
The Exchange Notes | ||
• | The Exchange Notes are being offered to satisfy certain of our obligations under the Exchange and Registration Rights Agreement entered into in connection with the placement of the outstanding Notes. | |
• | The terms of the Exchange Notes to be issued in the exchange offer are substantially identical to the outstanding Notes, except that the Exchange Notes will be freely tradeable, except in limited circumstances described below. | |
Resales of Exchange Notes | ||
• | The Exchange Notes may be sold in the over-the-counter market, in negotiated transactions or through a combination of such methods. |
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EX-5.1: OPINION OF DEWEY BALLANTINE LLP | ||||||||
EX-5.2: OPINION OF CONYERS DILL & PEARMAN | ||||||||
EX-23.1: CONSENT OF KPMG (NEW YORK, NEW YORK) | ||||||||
EX-23.2: CONSENT OF KPMG (MINNEAPOLIS, MINNESOTA) | ||||||||
EX-99.1: FORM OF LETTER OF TRANSMITTAL |
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(1) conducting operations in a competitive environment; | |
(2) our ability to maintain our A.M. Best Company rating; |
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(3) significant weather-related or other natural or man-made disasters over which the Company has no control; | |
(4) the effectiveness of our loss limitation methods and pricing models; | |
(5) the adequacy of the Company’s liability for unpaid losses and loss adjustment expenses; | |
(6) the availability of retrocessional reinsurance on acceptable terms; | |
(7) our ability to maintain our business relationships with reinsurance brokers; | |
(8) general political and economic conditions, including the effects of civil unrest, war or a prolonged U.S. or global economic downturn or recession; | |
(9) the cyclicality of the property and casualty reinsurance business; | |
(10) market volatility and interest rate and currency exchange rate fluctuation; | |
(11) tax, regulatory or legal restrictions or limitations applicable to the Company or the property and casualty reinsurance business generally; and | |
(12) changes in the Company’s plans, strategies, objectives, expectations or intentions, which may happen at any time at the Company’s discretion. |
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SEC Filings (File No. 001-31341) | Period | |
Annual Report on Form 10-K and as amended on Form 10-K/A | Year Ended December 31, 2004 (including information specifically incorporated by reference into Platinum Holdings’ Form 10-K from Platinum Holdings’ definitive Proxy Statement for its 2005 annual general meeting of shareholders). | |
Quarterly Report on Form 10-Q | Quarter Ended March 31, 2005. | |
Quarterly Report on Form 10-Q and as amended on Form 10-Q/A | Quarter Ended June 30, 2005. | |
Current Reports on Form 8-K | (i) filed on January 11, 2005; February 23, 2005, April 14, 2005, April 28, 2005, May 18, 2005 and August 9, 2005 under Items 1.01 and 9.01; (ii) filed on February 23, 2005 and June 23, 2005 under Item 5.02; (iii) filed on May 13, 2005 under Items 1.01 and 1.02; (iv) filed on May 24, 2005 and filed on September 22, 2005 under Items 1.01, 8.01 and 9.01;(v) filed on May 27, 2005 and August 17, 2005 under Items 1.01, 2.03, 8.01 and 9.01; (vi) filed on June 15, 2005, August 2, 2005 and September 15, 2005 under Items 8.01 and 9.01 and (vii) filed on July 29, 2005 only with respect to information filed under Item 8.01 and only Exhibit 99.3 under Item 9.01. |
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Six Months Ended | ||||||||||||||||||||||||||||||||||
June 30, | Years Ended December 31, | |||||||||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | 2002 Period | ||||||||||||||||||||||||||||||
Property and Marine | ||||||||||||||||||||||||||||||||||
Excess-of-loss | $ | 214,048 | $ | 205,854 | $ | 366,184 | 22% | $ | 224,715 | 19% | $ | 56,549 | 19% | |||||||||||||||||||||
Proportional | 105,954 | 67,281 | 138,255 | 8% | 128,193 | 11% | 32,792 | 11% | ||||||||||||||||||||||||||
Total Property and Marine | 320,002 | 273,135 | 504,439 | 30% | 352,908 | 30% | 89,341 | 30% | ||||||||||||||||||||||||||
Casualty | ||||||||||||||||||||||||||||||||||
Excess-of-loss | 337,033 | 291,779 | 593,752 | 37% | 389,992 | 33% | 155,377 | 52% | ||||||||||||||||||||||||||
Proportional | 67,526 | 44,947 | 83,647 | 5% | 84,008 | 7% | 9,552 | 3% | ||||||||||||||||||||||||||
Total Casualty | 404,559 | 336,726 | 677,399 | 42% | 474,000 | 40% | 164,929 | 55% | ||||||||||||||||||||||||||
Finite Risk | ||||||||||||||||||||||||||||||||||
Excess-of-loss | 43,237 | 75,176 | 270,629 | 16% | 250,634 | 22% | 43,844 | 15% | ||||||||||||||||||||||||||
Proportional | 148,960 | 125,596 | 193,546 | 12% | 94,600 | 8% | — | 0% | ||||||||||||||||||||||||||
Total Finite Risk | 192,197 | 200,772 | 464,175 | 28% | 345,234 | 30% | 43,844 | 15% | ||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||
Excess-of-loss | 594,318 | 572,809 | 1,230,565 | 75% | 865,341 | 74% | 255,770 | 86% | ||||||||||||||||||||||||||
Proportional | 322,440 | 237,824 | 415,448 | 25% | 306,801 | 26% | 42,344 | 14% | ||||||||||||||||||||||||||
Total | $ | 916,758 | $ | 810,633 | $ | 1,646,013 | 100% | $ | 1,172,142 | 100% | $ | 298,114 | 100% | |||||||||||||||||||||
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• | Operate as a Multi-Class Reinsurer. We seek to offer a broad range of reinsurance coverage to our ceding companies. We believe that this approach enables us to more effectively serve our clients, diversify our risk and leverage our capital. | |
• | Focus on profitability, not market share. Our management team pursues a strategy that emphasizes profitability rather than market share. Key elements of this strategy are prudent risk selection, appropriate pricing and adjustment of our business mix to respond to changing market conditions. | |
• | Exercise disciplined underwriting and risk management. We exercise underwriting and risk management discipline by (i) maintaining a diverse spread of risk in our book of business across product lines and geographic zones, (ii) emphasizing excess-of-loss contracts over proportional contracts, (iii) managing our aggregate catastrophe exposure through the application of sophisticated property catastrophe modeling tools and (iv) monitoring our accumulating exposures on our non-property catastrophe exposed coverages. | |
• | Operate from a position of financial strength. As of June 30, 2005, we had a total capitalization of $1,660,228,000. Our capital position is unencumbered by any potential adverse development of unpaid losses for business written prior to January 1, 2002. Our investment strategy focuses on security and stability in our investment portfolio by maintaining a diversified portfolio that consists primarily of investment grade fixed-income securities. We believe these factors, combined with our strict underwriting discipline, allow us to maintain our strong financial position and to be opportunistic when market conditions are most attractive. |
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• | the Exchange Notes have been registered under the Securities Act; and | |
• | the Exchange Notes will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to fulfill certain obligations under the Exchange and Registration Rights Agreement to file and cause to be effective a registration statement. |
The Exchange Offer | Platinum Finance is offering to exchange up to $250,000,000 aggregate principal amount of outstanding Notes for up to $250,000,000 aggregate principal amount of Exchange Notes. Outstanding Notes may be exchanged only in integral multiples of $1,000. | |
Resale | Based on an interpretation by the Staff of the SEC, set forth in no-action letters issued to third parties, Platinum Finance and Platinum Holdings believe that the Exchange Notes issued pursuant to the exchange offer in exchange for outstanding Notes may be offered for resale, resold and otherwise transferred by you (unless you are an “affiliate” of Platinum Finance or Platinum Holdings within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that you are acquiring the Exchange Notes in the ordinary course of your business and that you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes. Each participating broker-dealer that receives Exchange Notes for its own account pursuant to the exchange offer in exchange for outstanding Notes that were acquired as a result of market-making or other trading activity must acknowledge that it will deliver a prospectus in connection with any resale of the Exchange Notes. See “Plan of Distribution.” You must also not |
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act on behalf of any person who could not truthfully make the foregoing representations. | ||
Any holder of outstanding Notes who: | ||
• is an affiliate of Platinum Finance or Platinum Holdings; | ||
• does not acquire Exchange Notes in the ordinary course of its business; or | ||
• tenders in the exchange offer with the intention to participate, or for the purpose of participating, in a distribution of Exchange Notes | ||
cannot rely on the position of the staff of the SEC enunciated in no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the Exchange Notes. Platinum Finance and Platinum Holdings have not obtained, and do not plan to request, a no-action letter from the Staff of the SEC with respect to this exchange offer. | ||
Expiration Date; Withdrawal of Tender | The exchange offer will expire at 5:00 p.m., New York City time, on October 28, 2005, or such later date and time to which Platinum Finance extends it, which date we refer to as the “expiration date.” Platinum Finance does not currently intend to extend the expiration date. A tender of outstanding Notes pursuant to the exchange offer may be withdrawn at any time prior to the expiration date. Any outstanding Notes not accepted for exchange for any reason will be returned without expense to the tendering holder promptly after the expiration or termination of the exchange offer. | |
Certain Conditions to the Exchange Offer | The exchange offer is subject to customary conditions which Platinum Finance and Platinum Holdings may waive. Please read the section of this prospectus captioned “The Exchange Offer — Certain Conditions to the Exchange Offer” for more information regarding the conditions to the exchange offer. | |
Procedures for Tendering Outstanding Notes | If you wish to participate in the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must also mail or otherwise deliver the letter of transmittal, or a facsimile of the letter of transmittal, together with the outstanding Notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. If you hold outstanding Notes through The Depository Trust Company, or DTC, and wish to participate in the exchange offer, you must comply with the Automated Tender Offer Program, or ATOP, procedures of DTC, by which you will agree to be bound by the letter of transmittal. If you hold outstanding Notes through Clearstream Banking Luxembourg, or Clearstream Banking, or Euroclear Bank S.A./N.V., | |
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or, as operator of the Euroclear system, Euroclear, and wish to participate in the exchange offer, you must comply with the established procedures between DTC and Clearstream Banking or Euroclear. By signing, or agreeing to be bound by, the letter of transmittal, you will represent to Platinum Finance and Platinum Holdings that, among other things: | ||
• any Exchange Notes that you receive will be acquired in the ordinary course of your business; | ||
• you have no arrangement or understanding with any person or entity to participate in a distribution of the Exchange Notes; | ||
• you are not an “affiliate,” as defined in Rule 405 of the Securities Act, of Platinum Finance or Platinum Holdings, or, if you are an affiliate, you will comply with any applicable registration and prospectus delivery requirements of the Securities Act; | ||
• if you are not a broker-dealer, you are not engaged in and do not intend to engage in the distribution of the Exchange Notes; | ||
• if you are a broker-dealer that will receive Exchange Notes for your own account in exchange for outstanding Notes that were acquired as a result of market-making activities, that you will deliver a prospectus, as required by law, in connection with any resale of such Exchange Notes; and | ||
• you are not acting on behalf of any person who could not truthfully make the foregoing representations. | ||
Special Procedures for Beneficial Owners | If you are a beneficial owner of outstanding Notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender such outstanding Notes in the exchange offer, you should contact such registered holder promptly and instruct such registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your outstanding Notes, either make appropriate arrangements to register ownership of the outstanding Notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date. | |
Guaranteed Delivery Procedures | If you wish to tender your outstanding Notes and (i) your outstanding Notes are not immediately available or (ii) you cannot deliver your outstanding Notes, the letter of transmittal or any other documents required by the letter of transmittal or (iii) you cannot comply with the applicable procedures under DTC’s ATOP, or Euroclear’s or Clearstream Banking’s respective standard operating procedures for electronic tender, prior to the expiration date, you must tender your outstanding Notes according to the guaranteed delivery procedures set forth in this |
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prospectus under “The Exchange Offer — Guaranteed Delivery Procedures.” | ||
Effect on Holders of Outstanding Notes | As a result of the making of, and upon acceptance for exchange of all validly tendered outstanding Notes pursuant to the terms of, the exchange offer, Platinum Finance and Platinum Holdings will have fulfilled a covenant contained in the Exchange and Registration Rights Agreement and, accordingly, there will be no increase in the interest rate on the outstanding Notes under the circumstances described in the Exchange and Registration Rights Agreement. If you are a holder of outstanding Notes and you do not tender your outstanding Notes in the exchange offer, you will continue to hold such outstanding Notes and you will be entitled to all the rights and limitations applicable to the outstanding Notes in the Indenture, except for any rights under the Indenture or the Exchange and Registration Rights Agreement that by their terms terminate upon the consummation of the exchange offer. The tender of outstanding Notes under the exchange offer will reduce the principal amount of the outstanding Notes, which may have an adverse effect upon, and increase the volatility of, the market price of the outstanding Notes due to a reduction in liquidity. | |
The trading market for outstanding Notes not exchanged in the exchange offer may be more limited than it is at present. Therefore, if your outstanding Notes are not exchanged in the exchange offer, it may become more difficult for you to sell or transfer your unexchanged outstanding Notes. | ||
Consequences of Failure to Exchange | All untendered outstanding Notes will continue to be subject to the restrictions on transfer provided for in the outstanding Notes and in the Indenture. In general, the outstanding Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Other than in connection with the exchange offer, Platinum Finance and Platinum Holdings do not currently anticipate that Platinum Finance or Platinum Holdings will register the outstanding Notes under the Securities Act. | |
Material U.S. Income Tax Considerations | The exchange of outstanding Notes for Exchange Notes in the exchange offer will not be a taxable event for United States federal income tax purposes. See “Material U.S. Federal Income Tax Considerations.” | |
Use of Proceeds | We will not receive any cash proceeds from the issuance of Exchange Notes pursuant to the exchange offer. | |
Exchange Agent | JPMorgan Chase Bank, N.A. is the exchange agent for the exchange offer. The address and telephone number of the exchange agent are set forth in the section of this prospectus captioned “The Exchange Offer — Exchange Agent.” |
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Issuer | Platinum Underwriters Finance, Inc. | |
Guarantor | Platinum Underwriters Holdings, Ltd. | |
The Exchange Notes | $250,000,000 principal amount of Series B 7.50% Notes due 2017. | |
Maturity | June 1, 2017. | |
Interest Rate | 7.50% per annum. | |
Interest Payment Dates | June 1 and December 1 of each year, commencing on December 1, 2005. | |
Ranking | The Exchange Notes and the guarantee will not be secured by any property or assets of Platinum Finance or Platinum Holdings, and will rank junior to any senior secured debt that Platinum Finance or Platinum Holdings, respectively, may incur in the future. The Exchange Notes will not be subordinated to any of Platinum Finance’s other debt obligations and therefore will rank equally with all of Platinum Finance’s other existing and future unsecured and unsubordinated indebtedness, including the $137.5 million aggregate principal amount of its outstanding Remarketed Notes. The guarantee will not be subordinated to any of Platinum Holdings’ other debt obligations and therefore will rank equally with all of Platinum Holdings’ other existing and future senior unsecured and unsubordinated indebtedness, including its guarantee of $137.5 million aggregate principal amount of Remarketed Notes of Platinum Finance. | |
Both Platinum Finance and Platinum Holdings conduct substantially all of their operations through their subsidiaries and their subsidiaries generate substantially all of the operating income and cash flow of Platinum Finance and Platinum Holdings. The Exchange Notes will not be guaranteed by any of their subsidiaries and will be effectively subordinated to all existing and future indebtedness and other liabilities of their subsidiaries. As of June 30, 2005, Platinum Finance’s subsidiaries had approximately $1,270 million in liabilities and obligations that would have effectively ranked senior to the Exchange Notes, and Platinum Holdings’ subsidiaries had approximately $1,559 million in liabilities and obligations (including the liabilities and obligations of Platinum Finance’s subsidiaries) that would have effectively ranked senior to the guarantee. See “Description of the Exchange Notes — Ranking.” | ||
Optional Redemption | Platinum Finance may redeem the Exchange Notes at any time, in whole or in part, at a “make-whole” redemption price equal to the greater of: | |
• 100% of the principal amount being redeemed; or | ||
• the sum of the present values of the remaining scheduled payments of principal and interest (other than accrued interest to the date of redemption) on the Exchange Notes being redeemed, discounted to the redemption date on a semi-annual |
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basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined in “Description of the Exchange Notes — Optional Redemption”) plus 50 basis points, | ||
plus, in either case, accrued and unpaid interest to the redemption date. See “Description of the Exchange Notes — Optional Redemption.” | ||
Guarantee | The Exchange Notes will be irrevocably and unconditionally guaranteed on a senior, unsecured basis by Platinum Holdings. | |
Form and Denomination | The Exchange Notes will be issuable in denominations of $1,000 or any integral multiples of $1,000 in excess thereof. | |
Covenants | Subject to certain exceptions, so long as any of the Exchange Notes remain outstanding, each of Platinum Finance and Platinum Holdings has agreed that neither they nor any of their subsidiaries will (i) create a lien on any shares of capital stock of any Designated Subsidiary (as defined in “Description of the Exchange Notes — Limitations on Liens on Stock of Designated Subsidiaries”), or (ii) issue, sell, assign, transfer or otherwise dispose of any shares of capital stock of any Designated Subsidiary. See “Description of Notes — Limitations on Liens on Stock of Designated Subsidiaries,” and “— Limitations on Disposition of Stock of Designated Subsidiaries.” In addition, unless certain conditions are met, each of Platinum Finance and Platinum Holdings has agreed not to consolidate or amalgamate or merge with, or transfer its properties and assets, as an entirety or substantially as an entirety, to any person, or permit any person to consolidate or amalgamate or merge with it, or transfer such person’s properties and assets, as an entirety or substantially as an entirety, to it. See “Description of the Exchange Notes — Consolidation, Amalgamation, Merger and Sale of Assets.” | |
Additional Amounts | Subject to certain limitations and exceptions, Platinum Finance and Platinum Holdings, as guarantor, will make all payments of principal of and premium, if any, interest and any other amounts on, or in respect of, the guarantee and the Exchange Notes without withholding or deduction at source for, or on account of, any present or future taxes, fees, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of the U.S., Bermuda or any other jurisdiction in which Platinum Holdings or Platinum Finance is organized or otherwise considered to be a resident for tax purposes or any other jurisdiction from which or through which a payment on the Exchange Notes is made by Platinum Holdings or Platinum Finance. See “Description of the Exchange Notes — Payment of Additional Amounts.” | |
Tax Redemption | Platinum Finance may redeem the Exchange Notes at its option, in whole but not in part, at a redemption price equal to 100% of the principal amount, together with accrued and unpaid interest and additional amounts, if any, at any time certain tax events occur as described in “Description of the Exchange Notes — Redemption for Tax Purposes.” |
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Trustee | JPMorgan Chase Bank, N.A. | |
Governing Law | The Indenture is, and the Exchange Notes will be, governed by, and construed in accordance with, the laws of the State of New York. | |
ERISA Considerations | Holders of outstanding Notes who exchange such outstanding Notes for the Exchange Notes must carefully consider the restrictions on purchases of notes set forth under “ERISA Considerations.” | |
Risk Factors | See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the Exchange Notes. | |
Listing | The Exchange Notes will not be listed on an exchange. |
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Increased competition could adversely affect our profitability. |
A downgrade in the rating assigned by A.M. Best to our operating subsidiaries could adversely affect our ability to write new business. |
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The occurrence of severe catastrophic events could have a material adverse effect on our financial condition or results of operations. |
Uncertainty related to estimated losses related to Hurricane Katrina may further impact our financial results. |
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If the loss limitation methods and pricing models we employ are not effective, our financial condition or results of operations could be materially adversely affected. |
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If we are required to increase our liabilities for losses and LAE, our operating results may be adversely affected. |
Retrocessional reinsurance may become unavailable on acceptable terms. |
We are dependent on the business provided to us by reinsurance brokers and we may be exposed to liability for brokers’ failure to make payments to clients for their claims; in addition, there are ongoing industry-wide investigations relating to the conduct of insurance and reinsurance brokers. |
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The current investigations into certain non-traditional, or loss mitigation, insurance products could have a material adverse effect on our financial condition or results of operations. |
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The property and casualty reinsurance business is historically cyclical, and we expect to experience periods with excess underwriting capacity and unfavorable pricing. |
Our invested assets are subject to market volatility and interest rate and currency exchange rate fluctuation. |
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Your investment could be materially adversely affected if we are deemed to be engaged in business in the U.S. |
The regulatory system under which we operate, and potential changes thereto, could significantly and adversely affect our business. |
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General market conditions and unpredictable factors could adversely affect market prices for the Exchange Notes. |
• | our creditworthiness; | |
• | the market for similar securities; and | |
• | economic, financial, geopolitical, regulatory or judicial events that affect us, the insurance and reinsurance markets, or the financial markets generally. |
The Exchange Notes will not be listed on any public securities exchange or automated quotation system, and there is no assurance that any private trading market will exist or that it will be liquid. |
Because Platinum Holdings and Platinum Finance are each holding companies with no operations of their own, Platinum Finance’s obligations under the Exchange Notes and Platinum Holdings’ obligations under the guarantee are effectively subordinated to the debt and other obligations of their respective subsidiaries and their cash flow is dependent on dividends, interest and other permissible payments from their subsidiaries. |
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The Indenture under which the Exchange Notes are being issued contains only limited protection for holders of the Exchange Notes in the event we are involved in a highly leveraged transaction, reorganization, restructuring, merger or similar transaction in the future. |
Platinum Finance will not accept your outstanding Notes for exchange if you fail to follow the exchange offer procedures. |
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The issuance of the Exchange Notes may adversely affect the market price for and volatility of the outstanding Notes. |
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As of | ||||||
June 30, 2005 | ||||||
($ in millions) | ||||||
Cash and cash equivalents | $ | 409.5 | ||||
Debt obligations | ||||||
Senior Guaranteed Notes due 2007(1) | 137.5 | |||||
Series A 7.50% Notes due 2017(2) | 250.0 | |||||
Total debt obligations | 387.5 | |||||
Common shares | .4 | |||||
Additional paid-in capital | 921.3 | |||||
Unearned share grant compensation | (2.2 | ) | ||||
Accumulated other comprehensive income | 10.6 | |||||
Retained earnings | 342.6 | |||||
Total shareholders’ equity | 1,272.7 | |||||
Total capitalization(3) | $ | 1,660.2 | ||||
(1) | Represents the notes which had formed a part of our equity security units. On August 16, 2005, we completed the remarketing of these notes, and the Remarketed Notes no longer form a part of our equity security units. |
(2) | Represents the issuance by Platinum Finance of $250,000,000 aggregate principal amount of Notes guaranteed by Platinum Holdings. |
(3) | Total capitalization is comprised of shareholders’ equity and total debt. |
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Reinsurance Underwriting | |||||||||||||||||||||||||||||||||
Segment Information of | |||||||||||||||||||||||||||||||||
Platinum | St. Paul (Predecessor) | ||||||||||||||||||||||||||||||||
Period from | |||||||||||||||||||||||||||||||||
Six Months Ended | Year Ended | January 1, | Years Ended | ||||||||||||||||||||||||||||||
June 30, | December 31, | 2002 through | December 31, | ||||||||||||||||||||||||||||||
2002 | November 1, | ||||||||||||||||||||||||||||||||
2005 | 2004 | 2004 | 2003 | Period | 2002 | 2001 | 2000 | ||||||||||||||||||||||||||
($ in millions, except per share amounts) | ($ in millions, except per | ||||||||||||||||||||||||||||||||
share amounts) | |||||||||||||||||||||||||||||||||
Statement of income data: | |||||||||||||||||||||||||||||||||
Net premiums written | $ | 916.8 | 810.6 | 1,646.0 | 1,172.1 | $ | 298.1 | $ | 1,007 | 1,677 | $ | 1,073 | |||||||||||||||||||||
Net premiums earned | 842.5 | 631.9 | 1,447.9 | 1,067.5 | 107.1 | 1,102 | 1,593 | 1,121 | |||||||||||||||||||||||||
Net investment income | 55.8 | 36.9 | 84.5 | 57.6 | 5.2 | ||||||||||||||||||||||||||||
Losses and LAE | 478.6 | 351.4 | 1,019.8 | 584.2 | 60.4 | 791 | 1,922 | 811 | |||||||||||||||||||||||||
Underwriting expenses | 232.3 | 182.5 | 381.0 | 320.7 | 37.6 | 319 | 397 | 424 | |||||||||||||||||||||||||
Underwriting loss | $ | (8) | (726) | $ | (114 | ) | |||||||||||||||||||||||||||
Net income | 141.1 | 104.6 | 84.8 | 144.8 | 6.4 | ||||||||||||||||||||||||||||
Basic earnings per share | 3.26 | 2.42 | 1.96 | 3.37 | 0.15 | ||||||||||||||||||||||||||||
Diluted earnings per share | 2.88 | 2.12 | 1.81 | 3.09 | 0.15 | ||||||||||||||||||||||||||||
Dividends declared per share | 0.16 | 0.16 | .32 | .32 | — | ||||||||||||||||||||||||||||
Balance sheet data: | |||||||||||||||||||||||||||||||||
Total investments and cash | $ | 3,138.2 | 2,154.4 | 2,456.9 | 1,790.5 | $ | 1,346.7 | ||||||||||||||||||||||||||
Premiums receivable | 576.5 | 549.7 | 580.0 | 487.4 | 5.6 | ||||||||||||||||||||||||||||
Total assets | 4,199.2 | 2,958.0 | 3,422.0 | 2,485.6 | 1,644.9 | ||||||||||||||||||||||||||||
Net unpaid losses and LAE | 1,548.8 | 893.3 | 1,379.2 | 731.9 | 281.7 | ||||||||||||||||||||||||||||
Net unearned premiums | 569.5 | 477.1 | 499.5 | 299.9 | 191.0 | ||||||||||||||||||||||||||||
Debt obligations | 387.5 | 137.5 | 137.5 | 137.5 | 137.5 | ||||||||||||||||||||||||||||
Shareholders’ equity | 1,272.7 | 1,137.7 | 1,133.0 | 1,067.2 | 921.2 | ||||||||||||||||||||||||||||
Book value per share | $ | 29.32 | 26.29 | 26.30 | 24.79 | $ | 21.42 |
24
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Period Ended | ||||||||||||||||
Period Ended | December 31, | |||||||||||||||
June 30, | ||||||||||||||||
2005 | 2004 | 2003 | 2002(1) | |||||||||||||
Ratio of Earnings to Fixed Charges | 27.9 | 13.4 | 21.4 | 8.7 |
(1) | In 2002, we only had two months of operations following our Initial Public Offering on November 1, 2002. |
25
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26
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27
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28
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Property | |||||||||||||||||
and Marine | Casualty | Finite Risk | Total | ||||||||||||||
Case reserves | $ | 130,185 | 120,536 | 26,449 | $ | 277,170 | |||||||||||
IBNR | 228,944 | 794,253 | 258,725 | 1,281,922 | |||||||||||||
Total unpaid losses and LAE | $ | 359,129 | 914,789 | 285,174 | $ | 1,559,092 | |||||||||||
29
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30
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31
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32
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Three Months Ended June 30, 2005 as Compared with the Three Months Ended June 30, 2004 |
2005 | 2004 | Increase | ||||||||||
Net income | $ | 67,985 | 49,799 | $ | 18,186 |
2005 | 2004 | Increase | ||||||||||
Net premiums written | $ | 422,959 | 330,527 | $ | 92,432 | |||||||
Net premiums earned | $ | 431,470 | 310,867 | $ | 120,603 |
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Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Losses and LAE | $ | 240,852 | 189,466 | $ | 51,386 | |||||||
Losses and LAE ratios | 55.8 | % | 60.9 | % | (5.1) points |
2005 | 2004 | Increase | ||||||||||
Acquisition expenses | $ | 103,928 | 62,694 | $ | 41,234 | |||||||
Acquisition expense ratios | 24.1 | % | 20.2 | % | 3.9 points |
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2005 | 2004 | Increase | ||||||||||
Income tax expense | $ | 19,828 | 4,857 | $ | 14,971 | |||||||
Effective income tax rates | 22.6 | % | 8.9 | % | 13.7 points |
Six Months Ended June 30, 2005 as Compared with the Six Months Ended June 30, 2004 |
2005 | 2004 | Increase | ||||||||||
Net income | $ | 141,073 | 104,613 | $ | 36,460 |
2005 | 2004 | Increase | ||||||||||
Net premiums written | $ | 916,758 | 810,633 | $ | 106,125 | |||||||
Net premiums earned | $ | 842,510 | 631,909 | $ | 210,601 |
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2005 | 2004 | Increase | ||||||||||
Losses and LAE | $ | 478,550 | 351,435 | $ | 127,115 | |||||||
Loss and LAE ratios | 56.8 | % | 55.6 | % | 1.2 points |
Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Acquisition expenses | $ | 197,177 | 151,615 | $ | 45,562 | |||||||
Acquisition expense ratios | 23.4 | % | 24.0 | % | (0.6) points |
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2005 | 2004 | Increase | ||||||||||
Income tax expense | $ | 29,775 | 18,428 | $ | 11,347 | |||||||
Effective income tax rates | 17.4 | % | 15.0 | % | 2.4 points |
Year Ended December 31, 2004 as Compared with the Year Ended December 31, 2003 |
2004 | 2003 | Decrease | ||||||||||
Net income | $ | 84,783 | 144,823 | $ | (60,040 | ) |
Losses | $ | 230,475 | ||||
Less: | ||||||
Additional premiums earned | (29,265 | ) | ||||
Profit commissions | (10,243 | ) | ||||
Net adverse impact before income tax benefit | 190,967 | |||||
Income tax benefit | (14,537 | ) | ||||
Net adverse impact after income tax benefit | $ | 176,430 | ||||
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2004 | 2003 | Increase | ||||||||||
Net premiums written | $ | 1,646,013 | 1,172,142 | $ | 473,871 | |||||||
Net premiums earned | $ | 1,447,935 | 1,067,527 | $ | 380,408 |
2004 | 2003 | Increase | ||||||||||
Losses and LAE | $ | 1,019,804 | 584,171 | $ | 435,633 | |||||||
Loss and LAE ratios | 70.4 | % | 54.7 | % | 15.7 points |
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Increase | ||||||||||||
2004 | 2003 | (Decrease) | ||||||||||
Acquisition expenses | $ | 327,821 | 251,226 | $ | 76,595 | |||||||
Acquisition expense ratios | 22.6 | % | 23.5 | % | (0.9) points |
Increase | ||||||||||||
2004 | 2003 | (Decrease) | ||||||||||
Income taxes | $ | 30,349 | 48,875 | $ | (18,526 | ) | ||||||
Effective income tax rate | 26.4 | % | 25.2 | % | 1.2 points |
Year Ended December 31, 2003 as Compared with the Period Ended December 31, 2002 |
2002 | ||||||||||||
2003 | Period | Increase | ||||||||||
Net income | $ | 144,823 | 6,438 | $ | 138,385 |
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Table of Contents
2002 | ||||||||||||
2003 | Period | Increase | ||||||||||
Net premiums written | $ | 1,172,142 | 298,114 | $ | 874,028 | |||||||
Net premiums earned | $ | 1,067,527 | 107,098 | $ | 960,429 |
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2002 | Increase | |||||||||||
2003 | Period | (Decrease) | ||||||||||
Losses and LAE | $ | 584,171 | 60,356 | $ | 523,815 | |||||||
Loss and LAE ratios | 54.7 | % | 56.4 | % | (1.7) points |
2002 | Increase | |||||||||||
2003 | Period | (Decrease) | ||||||||||
Acquisition expenses | $ | 251,226 | 25,474 | $ | 225,752 | |||||||
Acquisition expense ratios | 23.5 | % | 23.8 | % | (0.3) points |
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2002 | Increase | |||||||||||
2003 | Period | (Decrease) | ||||||||||
Income taxes | $ | 48,875 | 4,655 | $ | 44,220 | |||||||
Effective income tax rate | 25.2 | % | 42.0 | % | (16.8) points |
Property | ||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | |||||||||||||||
Three months ended June 30, 2005: | ||||||||||||||||||
Net premiums written | $ | 134,953 | 188,890 | 99,116 | $ | 422,959 | ||||||||||||
Net premiums earned | 140,669 | 198,723 | 92,078 | 431,470 | ||||||||||||||
Losses and LAE | 58,499 | 127,531 | 54,822 | 240,852 | ||||||||||||||
Acquisition expenses | 29,695 | 47,963 | 26,270 | 103,928 | ||||||||||||||
Other underwriting expenses | 8,240 | 8,972 | 1,333 | 18,545 | ||||||||||||||
Segment underwriting income | $ | 44,235 | 14,257 | 9,653 | $ | 68,145 | ||||||||||||
Corporate expenses not allocated to segments | (4,935 | ) | ||||||||||||||||
Net foreign currency exchange losses | (160 | ) | ||||||||||||||||
Interest expense | (4,174 | ) | ||||||||||||||||
Other income | 588 | |||||||||||||||||
Net investment income and net realized losses on investments | 28,349 | |||||||||||||||||
Income before income tax expense | $ | 87,813 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Losses and LAE | 41.6 | % | 64.2 | % | 59.5 | % | 55.8 | % | ||||||||||
Acquisition expense | 21.1 | % | 24.1 | % | 28.5 | % | 24.1 | % | ||||||||||
Other underwriting expense | 5.9 | % | 4.5 | % | 1.4 | % | 4.3 | % | ||||||||||
Combined | 68.6 | % | 92.8 | % | 89.4 | % | 84.2 | % | ||||||||||
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Property | ||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | |||||||||||||||
Three months ended June 30, 2004: | ||||||||||||||||||
Net premiums written | $ | 101,841 | 112,761 | 115,925 | $ | 330,527 | ||||||||||||
Net premiums earned | 99,928 | 132,230 | 78,709 | 310,867 | ||||||||||||||
Losses and LAE | 40,974 | 93,391 | 55,101 | 189,466 | ||||||||||||||
Acquisition expenses | 14,905 | 31,994 | 15,795 | 62,694 | ||||||||||||||
Other underwriting expenses | 7,174 | 5,305 | 2,567 | 15,046 | ||||||||||||||
Segment underwriting income | $ | 36,875 | 1,540 | 5,246 | $ | 43,661 | ||||||||||||
Corporate expenses not allocated to segments | (4,216 | ) | ||||||||||||||||
Net foreign currency exchange losses | (1,168 | ) | ||||||||||||||||
Interest expense | (2,324 | ) | ||||||||||||||||
Other income | 605 | |||||||||||||||||
Net investment income and net realized losses on investments | 18,098 | |||||||||||||||||
Income before income tax expense | $ | 54,656 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Losses and LAE | 41.0 | % | 70.6 | % | 70.0 | % | 60.9 | % | ||||||||||
Acquisition expense | 14.9 | % | 24.2 | % | 20.1 | % | 20.2 | % | ||||||||||
Other underwriting expense | 7.2 | % | 4.0 | % | 3.3 | % | 4.8 | % | ||||||||||
Combined | 63.1 | % | 98.8 | % | 93.4 | % | 85.9 | % | ||||||||||
Property | ||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | |||||||||||||||
Six months ended June 30, 2005: | ||||||||||||||||||
Net premiums written | $ | 320,002 | 404,559 | 192,197 | $ | 916,758 | ||||||||||||
Net premiums earned | 268,866 | 383,491 | 190,153 | 842,510 | ||||||||||||||
Losses and LAE | 118,539 | 245,969 | 114,042 | 478,550 | ||||||||||||||
Acquisition expenses | 51,684 | 93,165 | 52,328 | 197,177 | ||||||||||||||
Other underwriting expenses | 15,963 | 16,285 | 2,904 | 35,152 | ||||||||||||||
Segment underwriting income | $ | 82,680 | 28,072 | 20,879 | 131,631 | |||||||||||||
Corporate expenses not allocated to segments | (8,336 | ) | ||||||||||||||||
Net foreign currency exchange loss | (1,958 | ) | ||||||||||||||||
Interest expense | (6,347 | ) | ||||||||||||||||
Other income | 232 | |||||||||||||||||
Net investment income and net realized losses on investments | 55,626 | |||||||||||||||||
Income before income tax expense | $ | 170,848 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Loss and LAE | 44.1 | % | 64.1 | % | 60.0 | % | 56.8 | % | ||||||||||
Acquisition expense | 19.2 | % | 24.3 | % | 27.5 | % | 23.4 | % | ||||||||||
Other underwriting expense | 5.9 | % | 4.2 | % | 1.5 | % | 4.2 | % | ||||||||||
Combined | 69.2 | % | 92.6 | % | 89.0 | % | 84.4 | % | ||||||||||
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Property | ||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | |||||||||||||||
Six months ended June 30, 2004: | ||||||||||||||||||
Net premiums written | $ | 273,135 | 336,726 | 200,772 | $ | 810,633 | ||||||||||||
Net premiums earned | 217,993 | 268,452 | 145,464 | 631,909 | ||||||||||||||
Losses and LAE | 89,552 | 188,175 | 73,708 | 351,435 | ||||||||||||||
Acquisition expenses | 36,657 | 66,830 | 48,128 | 151,615 | ||||||||||||||
Other underwriting expenses | 15,324 | 10,362 | 5,164 | 30,850 | ||||||||||||||
Segment underwriting income | $ | 76,460 | 3,085 | 18,464 | 98,009 | |||||||||||||
Corporate expenses not allocated to segments | (7,186 | ) | ||||||||||||||||
Net foreign currency exchange gains | (302 | ) | ||||||||||||||||
Interest expense | (4,630 | ) | ||||||||||||||||
Other income | 1,116 | |||||||||||||||||
Net investment income and net realized losses on investments | 36,034 | |||||||||||||||||
Income before income tax expense | $ | 123,041 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Loss and LAE | 41.1 | % | 70.1 | % | 50.7 | % | 55.6 | % | ||||||||||
Acquisition expense | 16.8 | % | 24.9 | % | 33.1 | % | 24.0 | % | ||||||||||
Other underwriting expense | 7.0 | % | 3.9 | % | 3.6 | % | 4.9 | % | ||||||||||
Combined | 64.9 | % | 98.9 | % | 87.4 | % | 84.5 | % | ||||||||||
Property and | Finite | |||||||||||||||||
Marine | Casualty | Risk | Total | |||||||||||||||
Year ended December 31, 2004: | ||||||||||||||||||
Net premiums written | $ | 504,439 | 677,399 | 464,175 | $ | 1,646,013 | ||||||||||||
Net premiums earned | 485,135 | 611,893 | 350,907 | 1,447,935 | ||||||||||||||
Losses and LAE | 349,557 | 418,355 | 251,892 | 1,019,804 | ||||||||||||||
Acquisition expenses | 76,360 | 151,649 | 99,812 | 327,821 | ||||||||||||||
Other underwriting expenses | 27,827 | 19,086 | 6,224 | 53,137 | ||||||||||||||
Segment underwriting income (loss) | $ | 31,391 | 22,803 | (7,021 | ) | 47,173 | ||||||||||||
Corporate expenses not allocated to segments | (13,196 | ) | ||||||||||||||||
Net foreign currency exchange gains | 725 | |||||||||||||||||
Interest expense | (9,268 | ) | ||||||||||||||||
Other income | 3,211 | |||||||||||||||||
Net investment income and net realized gain on investments | 86,487 | |||||||||||||||||
Income before income tax expense | $ | 115,132 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Loss and LAE | 72.1 | % | 68.4 | % | 71.8 | % | 70.4 | % | ||||||||||
Acquisition expense | 15.7 | % | 24.8 | % | 28.4 | % | 22.6 | % | ||||||||||
Other underwriting expense | 5.7 | % | 3.1 | % | 1.8 | % | 3.7 | % | ||||||||||
Combined | 93.5 | % | 96.3 | % | 102.0 | % | 96.7 | % | ||||||||||
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Property and | Finite | |||||||||||||||||
Marine | Casualty | Risk | Total | |||||||||||||||
Year ended December 31, 2003: | ||||||||||||||||||
Net premiums written | $ | 352,908 | 474,000 | 345,234 | $ | 1,172,142 | ||||||||||||
Net premiums earned | 355,556 | 391,170 | 320,801 | 1,067,527 | ||||||||||||||
Losses and LAE | 169,944 | 266,836 | 147,391 | 584,171 | ||||||||||||||
Acquisition expenses | 52,154 | 101,005 | 98,067 | 251,226 | ||||||||||||||
Other underwriting expenses | 35,598 | 21,060 | 12,870 | 69,528 | ||||||||||||||
Segment underwriting income | $ | 97,860 | 2,269 | 62,473 | 162,602 | |||||||||||||
Corporate expenses not allocated to segments | (23,067 | ) | ||||||||||||||||
Net foreign currency exchange losses | (114 | ) | ||||||||||||||||
Interest expense | (9,492 | ) | ||||||||||||||||
Other income | 3,343 | |||||||||||||||||
Net investment income and net realized gain on investments | 60,426 | |||||||||||||||||
Income before income tax expense | $ | 193,698 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Loss and LAE | 47.8 | % | 68.2 | % | 45.9 | % | 54.7 | % | ||||||||||
Acquisition expense | 14.7 | % | 25.8 | % | 30.6 | % | 23.5 | % | ||||||||||
Other underwriting expense | 10.0 | % | 5.4 | % | 4.0 | % | 6.5 | % | ||||||||||
Combined | 72.5 | % | 99.4 | % | 80.5 | % | 84.7 | % | ||||||||||
Property and | Finite | |||||||||||||||||
Marine | Casualty | Risk | Total | |||||||||||||||
2002 Period: | ||||||||||||||||||
Net premiums written | $ | 89,341 | 164,929 | 43,844 | $ | 298,114 | ||||||||||||
Net premiums earned | 43,047 | 39,320 | 24,731 | 107,098 | ||||||||||||||
Losses and LAE | 21,558 | 29,498 | 9,300 | 60,356 | ||||||||||||||
Acquisition expenses | 7,798 | 9,269 | 8,407 | 25,474 | ||||||||||||||
Other underwriting expenses | 5,960 | 4,136 | 2,068 | 12,164 | ||||||||||||||
Segment underwriting income (loss) | $ | 7,731 | (3,583 | ) | 4,956 | 9,104 | ||||||||||||
Corporate expenses not allocated to segment | (4,170 | ) | ||||||||||||||||
Net foreign currency exchange gains | 2,017 | |||||||||||||||||
Interest expense | (1,261 | ) | ||||||||||||||||
Other income | 167 | |||||||||||||||||
Net investment income and net realized gain on investments | 5,236 | |||||||||||||||||
Income before income taxes | $ | 11,093 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Loss and LAE | 50.1 | % | 75.0 | % | 37.6 | % | 56.4 | % | ||||||||||
Acquisition expense | 18.1 | % | 23.6 | % | 34.0 | % | 23.8 | % | ||||||||||
Other underwriting expense | 13.8 | % | 10.5 | % | 8.4 | % | 11.4 | % | ||||||||||
Combined | 82.0 | % | 109.1 | % | 80.0 | % | 91.6 | % | ||||||||||
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Table of Contents
Three Months Ended June 30, 2005 as Compared with the Three Months Ended June 30, 2004 |
2005 | 2004 | Increase | ||||||||||
Net premiums written | $ | 134,953 | 101,841 | $ | 33,112 | |||||||
Net premiums earned | $ | 140,669 | 99,928 | $ | 40,741 |
2005 | 2004 | Increase | ||||||||||
Losses and LAE | $ | 58,499 | 40,974 | $ | 17,525 | |||||||
Loss and LAE ratios | 41.6 | % | 41.0 | % | 0.6 points |
2005 | 2004 | Increase | ||||||||||
Acquisition expenses | $ | 29,695 | 14,905 | $ | 14,790 | |||||||
Acquisition expense ratios | 21.1 | % | 14.9 | % | 6.2 points |
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Table of Contents
Six Months Ended June 30, 2005 as Compared with the Six Months Ended June 30, 2004 |
2005 | 2004 | Increase | ||||||
Net premiums written | $320,002 | 273,135 | $ | 46,867 | ||||
Net premiums earned | $268,866 | 217,993 | $ | 50,873 |
2005 | 2004 | Increase | ||||||||||
Losses and LAE | $ | 118,539 | 89,552 | $ | 28,987 | |||||||
Loss and LAE ratios | 44.1 | % | 41.1 | % | 3.0 points |
2005 | 2004 | Increase | ||||||||||
Acquisition expenses | $ | 51,684 | 36,657 | $ | 15,027 | |||||||
Acquisition expense ratios | 19.2 | % | 16.8 | % | 2.4 points |
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Table of Contents
Year Ended December 31, 2004 as Compared with the Year Ended December 31, 2003 |
2004 | 2003 | Increase | ||||||||||
Net premiums written | $ | 504,439 | 352,908 | $ | 151,531 | |||||||
Net premiums earned | $ | 485,135 | 355,556 | $ | 129,579 |
2004 | 2003 | Increase | ||||||||||
Losses and LAE | $ | 349,557 | 169,944 | $ | 179,613 | |||||||
Loss and LAE ratios | 72.1 | % | 47.8 | % | 24.3 points |
2004 | 2003 | Increase | ||||||||||
Acquisition expenses | $ | 76,360 | 52,154 | $ | 24,206 | |||||||
Acquisition expense ratios | 15.7 | % | 14.7 | % | 1.0 point |
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Table of Contents
Year Ended December 31, 2003 as Compared with the Period Ended December 31, 2002 |
2002 | ||||||||||||
2003 | Period | Increase | ||||||||||
Net premiums written | $ | 352,908 | 89,341 | $ | 263,567 | |||||||
Net premiums earned | $ | 355,556 | 43,047 | $ | 312,509 |
2002 | Increase | |||||||||||
2003 | Period | (Decrease) | ||||||||||
Losses and LAE | $ | 169,944 | 21,558 | $ | 148,386 | |||||||
Loss and LAE ratios | 47.8 | % | 50.1 | % | (2.3) points |
2002 | Increase | |||||||||||
2003 | Period | (Decrease) | ||||||||||
Acquisition expenses | $ | 52,154 | 7,798 | $ | 44,356 | |||||||
Acquisition expense ratios | 14.7 | % | 18.1 | % | (3.4) points |
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Table of Contents
Three Months Ended June 30, 2005 as Compared with the Three Months Ended June 30, 2004 |
2005 | 2004 | Increase | ||||||||||
Net premiums written | $ | 188,890 | 112,761 | $ | 76,129 | |||||||
Net premiums earned | $ | 198,723 | 132,230 | $ | 66,493 |
Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Losses and LAE | $ | 127,531 | 93,391 | $ | 34,140 | |||||||
Loss and LAE ratios | 64.2 | % | 70.6 | % | (6.4) points |
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Table of Contents
Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Acquisition expenses | $ | 47,963 | 31,994 | $ | 15,969 | |||||||
Acquisition expense ratios | 24.1 | % | 24.2 | % | (0.1) points |
Six Months Ended June 30, 2005 as Compared with the Six Months Ended June 30, 2004 |
2005 | 2004 | Increase | ||||||||||
Net premiums written | $ | 404,559 | 336,726 | $ | 67,833 | |||||||
Net premiums earned | $ | 383,491 | 268,452 | $ | 115,039 |
Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Losses and LAE | $ | 245,969 | 188,175 | $ | 57,794 | |||||||
Loss and LAE ratios | 64.1 | % | 70.1 | % | (6.0) points |
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Table of Contents
Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Acquisition expenses | $ | 93,165 | 66,830 | $ | 26,335 | |||||||
Acquisition expense ratios | 24.3 | % | 24.9 | % | (0.6) points |
Year Ended December 31, 2004 as Compared with the Year Ended December 31, 2003 |
2004 | 2003 | Increase | ||||||||||
Net premiums written | $ | 677,399 | 474,000 | $ | 203,399 | |||||||
Net premiums earned | $ | 611,893 | 391,170 | $ | 220,723 |
2004 | 2003 | Increase | ||||||||||
Losses and LAE | $ | 418,355 | 266,836 | $ | 151,519 | |||||||
Loss and LAE ratios | 68.4 | % | 68.2 | % | 0.2 points |
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Table of Contents
Increase | ||||||||||||
2004 | 2003 | (Decrease) | ||||||||||
Acquisition expenses | $ | 151,649 | 101,005 | $ | 50,644 | |||||||
Acquisition expense ratios | 24.8 | % | 25.8 | % | (1.0) point |
Year Ended December 31, 2003 as Compared with the Period Ended December 31, 2002 |
2002 | ||||||||||||
2003 | Period | Increase | ||||||||||
Net premiums written | $ | 474,000 | 164,929 | $ | 309,071 | |||||||
Net premiums earned | $ | 391,170 | 39,320 | $ | 351,850 |
2002 | Increase | |||||||||||
2003 | Period | (Decrease) | ||||||||||
Losses and LAE | $ | 266,836 | 29,498 | $ | 237,338 | |||||||
Loss and LAE ratios | 68.2 | % | 75.0 | % | (6.8) points |
53
Table of Contents
2002 | ||||||||||||
2003 | Period | Increase | ||||||||||
Acquisition expenses | $ | 101,005 | 9,269 | $ | 91,736 | |||||||
Acquisition expense ratios | 25.8 | % | 23.6 | % | 2.2 points |
Three Months Ended June 30, 2005 as Compared with the Three Months Ended June 30, 2004 |
Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Net premiums written | $ | 99,116 | 115,925 | $ | (16,809 | ) | ||||||
Net premiums earned | $ | 92,078 | 78,709 | $ | 13,369 |
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Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Losses and LAE | $ | 54,822 | 55,101 | $ | (279 | ) | ||||||
Loss and LAE ratios | 59.5 | % | 70.0 | % | (10.5) points | |||||||
Acquisition expenses | $ | 26,270 | 15,795 | $ | 10,475 | |||||||
Acquisition expense ratios | 28.5 | % | 20.1 | % | 8.4 points | |||||||
Losses, LAE and acquisition expenses | $ | 81,092 | 70,896 | $ | 10,196 | |||||||
Loss, LAE and acquisition expense ratios | 88.0 | % | 90.1 | % | (2.1) points |
Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Net premiums written | $ | 192,197 | 200,772 | $ | (8,575 | ) | ||||||
Net premiums earned | $ | 190,153 | 145,464 | $ | 44,689 |
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Increase | ||||||||||||
2005 | 2004 | (Decrease) | ||||||||||
Losses and LAE | $ | 114,042 | 73,708 | $ | 40,334 | |||||||
Loss and LAE ratios | 60.0 | % | 50.7 | % | 9.3 points | |||||||
Acquisition expenses | $ | 52,328 | 48,128 | $ | 4,200 | |||||||
Acquisition expense ratios | 27.5 | % | 33.1 | % | (5.6) points | |||||||
Losses, LAE and acquisition expenses | $ | 166,370 | 121,836 | $ | 44,534 | |||||||
Loss, LAE and acquisition expense ratios | 87.5 | % | 83.8 | % | 3.7 points |
2004 | 2003 | Increase | ||||||||||
Net premiums written | $ | 464,175 | 345,234 | $ | 118,941 | |||||||
Net premiums earned | $ | 350,907 | 320,801 | $ | 30,106 |
2004 | 2003 | Increase | ||||||||||
Losses and LAE | $ | 251,892 | 147,391 | $ | 104,501 | |||||||
Acquisition expenses | 99,812 | 98,067 | 1,745 | |||||||||
Losses, LAE and acquisition expenses | $ | 351,704 | 245,458 | $ | 106,246 | |||||||
Loss, LAE and acquisition expense ratios | 100.2 | % | 76.5 | % | 23.7 points |
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2002 | ||||||||||||
2003 | Period | Increase | ||||||||||
Net premiums written | $ | 345,234 | 43,844 | $ | 301,390 | |||||||
Net premiums earned | $ | 320,801 | 24,731 | $ | 296,070 |
2002 | ||||||||||||
2003 | Period | Increase | ||||||||||
Losses and LAE | $ | 147,391 | 9,300 | $ | 138,091 | |||||||
Acquisition expenses | 98,067 | 8,407 | 89,660 | |||||||||
Losses, LAE and acquisition expenses | $ | 245,458 | 17,707 | $ | 227,751 | |||||||
Loss, LAE and acquisition expense ratios | 76.5 | % | 71.6 | % | 4.9 points |
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Financial Condition |
Sources of Liquidity |
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Liquidity Requirements |
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Less than | More than | |||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
Equity Security Units(1) | $ | 137,500 | 137,500 | — | — | $ | — | |||||||||||||
Operating Leases(2) | 17,255 | 2,570 | 4,121 | 3,794 | 6,770 | |||||||||||||||
Gross unpaid losses and LAE(3) | $ | 1,380,955 | 496,189 | 327,172 | 164,267 | $ | 393,327 |
(1) | See note 6 of the notes to the Consolidated Financial Statements. |
(2) | See note 11 of the notes to the Consolidated Financial Statements. |
(3) | There are generally no stated amounts related to reinsurance contracts. Both the amounts and timing of future loss and LAE payments are estimates and subject to the inherent variability of legal and market conditions affecting the obligations and make the timing of cash outflows uncertain. The ultimate amount and timing of unpaid losses and LAE could differ materially from the amounts in the table above. Further, the gross unpaid losses and LAE do not represent all of the obligations that will arise under the contracts, but rather only the estimated liability incurred through December 31, 2004. There are reinsurance contracts that have terms extending into 2005 under which additional obligations will be incurred. |
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Market and Credit Risk |
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Interest Rate Risk |
Interest Rate Shift in Basis Points | ||||||||||||||||||||
- 100 bp | - 50 bp | Current | + 50 bp | + 100 bp | ||||||||||||||||
Total market value | $ | 2,819,694 | 2,771,576 | 2,722,692 | 2,673,066 | $ | 2,623,055 | |||||||||||||
Percent change in market value | 3.6 | % | 1.8 | % | — | (1.8 | )% | (3.7 | )% | |||||||||||
Resulting unrealized appreciation/ (depreciation) | $ | 107,332 | 59,214 | 10,330 | (39,296 | ) | $ | (89,307 | ) |
Foreign Currency Risk |
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Sources of Fair Value |
Carrying | |||||||||
Amount | Fair Value | ||||||||
Financial assets: | |||||||||
Fixed maturities | $ | 2,722,692 | $ | 2,722,692 | |||||
Other invested asset | 6,000 | 6,000 | |||||||
Financial liabilities: | |||||||||
Debt obligations | $ | 387,500 | $ | 412,855 |
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![Flowchart](https://capedge.com/proxy/S-4A/0000950123-05-011426/y10146a2y1014601.gif)
• | Operate as a Multi-Class Reinsurer. We seek to offer a broad range of reinsurance coverage to our ceding companies. We believe that this approach enables us to more effectively serve our clients, diversify our risk and leverage our capital. | |
• | Focus on profitability, not market share. Our management team pursues a strategy that emphasizes profitability rather than market share. Key elements of this strategy are prudent risk selection, appropriate pricing and adjustment of our business mix to respond to changing market conditions. | |
• | Exercise disciplined underwriting and risk management. We exercise underwriting and risk management discipline by (i) maintaining a diverse spread of risk in our book of business across product lines and geographic zones, (ii) emphasizing excess-of-loss contracts over proportional contracts, (iii) managing our aggregate catastrophe exposure through the application of sophisticated property catastrophe modeling tools and (iv) monitoring our accumulating exposures on our non-property catastrophe exposed coverages. | |
• | Operate from a position of financial strength. As of June 30, 2005, we had a total capitalization of $1,660,228,000. Our capital position is unencumbered by any potential adverse development of unpaid losses for business written prior to January 1, 2002. Our investment strategy focuses on security and stability in our investment portfolio by maintaining a diversified portfolio that consists |
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primarily of investment grade fixed-income securities. We believe these factors, combined with our strict underwriting discipline, allow us to maintain our strong financial position and to be opportunistic when market conditions are most attractive. |
Years Ended December 31, | ||||||||||||||||||||||||||
2004 | 2003 | 2002 Period | ||||||||||||||||||||||||
Property and Marine | ||||||||||||||||||||||||||
Excess-of-loss | $ | 366,184 | 22 | % | 224,715 | 19 | % | $ | 56,549 | 19 | % | |||||||||||||||
Proportional | 138,255 | 8 | % | 128,193 | 11 | % | 32,792 | 11 | % | |||||||||||||||||
Total Property and Marine | 504,439 | 30 | % | 352,908 | 30 | % | 89,341 | 30 | % | |||||||||||||||||
Casualty | ||||||||||||||||||||||||||
Excess-of-loss | 593,752 | 37 | % | 389,992 | 33 | % | 155,377 | 52 | % | |||||||||||||||||
Proportional | 83,647 | 5 | % | 84,008 | 7 | % | 9,552 | 3 | % | |||||||||||||||||
Total Casualty | 677,399 | 42 | % | 474,000 | 40 | % | 164,929 | 55 | % | |||||||||||||||||
Finite Risk | ||||||||||||||||||||||||||
Excess-of-loss | 270,629 | 16 | % | 250,634 | 22 | % | 43,844 | 15 | % | |||||||||||||||||
Proportional | 193,546 | 12 | % | 94,600 | 8 | % | — | 0 | % | |||||||||||||||||
Total Finite Risk | 464,175 | 28 | % | 345,234 | 30 | % | 43,844 | 15 | % | |||||||||||||||||
Total | ||||||||||||||||||||||||||
Excess-of-loss | 1,230,565 | 75 | % | 865,341 | 74 | % | 255,770 | 86 | % | |||||||||||||||||
Proportional | 415,448 | 25 | % | 306,801 | 26 | % | 42,344 | 14 | % | |||||||||||||||||
Total | $ | 1,646,013 | 100 | % | 1,172,142 | 100 | % | $ | 298,114 | 100 | % | |||||||||||||||
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Years Ended December 31, | ||||||||||||||||||||||||||
2004 | 2003 | 2002 Period | ||||||||||||||||||||||||
Property and Marine | ||||||||||||||||||||||||||
United States | $ | 320,506 | 19 | % | 211,324 | 18 | % | $ | 37,523 | 13 | % | |||||||||||||||
International | 183,933 | 11 | % | 141,584 | 12 | % | 51,818 | 17 | % | |||||||||||||||||
Total Property and Marine | 504,439 | 30 | % | 352,908 | 30 | % | 89,341 | 30 | % | |||||||||||||||||
Casualty | ||||||||||||||||||||||||||
United States | 601,878 | 37 | % | 436,789 | 37 | % | 87,412 | 29 | % | |||||||||||||||||
International | 75,521 | 5 | % | 37,211 | 3 | % | 77,517 | 26 | % | |||||||||||||||||
Total Casualty | 677,399 | 42 | % | 474,000 | 40 | % | 164,929 | 55 | % | |||||||||||||||||
Finite Risk | ||||||||||||||||||||||||||
United States | 428,024 | 26 | % | 264,473 | 23 | % | 28,937 | 10 | % | |||||||||||||||||
International | 36,151 | 2 | % | 80,761 | 7 | % | 14,907 | 5 | % | |||||||||||||||||
Total Finite Risk | 464,175 | 28 | % | 345,234 | 30 | % | 43,844 | 15 | % | |||||||||||||||||
Total | ||||||||||||||||||||||||||
United States | 1,350,408 | 82 | % | 912,586 | 78 | % | 153,872 | 52 | % | |||||||||||||||||
International | 295,605 | 18 | % | 259,556 | 22 | % | 144,242 | 48 | % | |||||||||||||||||
Total | $ | 1,646,013 | 100 | % | 1,172,142 | 100 | % | $ | 298,114 | 100 | % | |||||||||||||||
• | Property. We provide reinsurance coverage for damage to property and crops. Our catastrophe excess-of-loss reinsurance contracts provide a defined limit of liability, permitting us to quantify our aggregate maximum loss exposure for various catastrophe events. Quantification of loss exposure is fundamental to our ability to manage our loss exposure through geographical zone limits and program limits. In addition, when our pricing standards are met, we write other property coverages, including per-risk excess-of-loss or proportional treaties. We have also entered into an agreement with an underwriting manager to underwrite property facultative and program reinsurance risks. | |
• | Marine. We provide reinsurance coverage for marine and offshore energy insurance programs. Coverages reinsured include hull damage, protection and indemnity, cargo damage, satellite damage and general marine liability. Within Marine, we also write commercial and general aviation reinsurance. Marine reinsurance treaties include excess-of-loss as well as proportional treaties. We emphasize excess-of-loss treaties that allow our evaluation using experience and exposure pricing models. |
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• | Umbrella Liability. An umbrella policy is an excess insurance policy that provides coverage, typically for general liability or automobile liability, when claims, individually or in the aggregate, exceed the limit of the original policy underlying the excess policy. A claim must exceed the limit of some underlying policy for the claim to be considered under an umbrella policy. We primarily reinsure commercial umbrella liability policies. | |
• | General and Product Liability. We provide reinsurance of third party liability coverages for commercial and personal insureds. We provide, predominantly on an excess-of-loss basis, various coverages of both small and large companies, including commercial, farmowners and homeowners policies as well as third party liability coverages such as product liability. | |
• | Professional Liability. We write reinsurance treaties for professional liability programs, including directors and officers, employment practices liability, and errors and omissions for professionals such as lawyers, medical professionals, architects, engineers and other professionals. In most circumstances, the underlying insurance products for these lines of business are written on a claims made basis, which requires claims related to the liabilities insured under the policy to be submitted to the insurer during a specified coverage period. | |
• | Accident and Health. We provide accident and health reinsurance, often in the form of quota share reinsurance of a ceding company writing aggregate and per-person stop loss coverage of self-insured employer medical plans. We also write reinsurance of first dollar health insurance, student health insurance, Medicare and Medicare supplement, and other forms of accident and health insurance. | |
• | Workers’ Compensation. We reinsure workers’ compensation on a catastrophic basis as well as on a per-claimant basis. We may provide full statutory coverage or coverage that is subject to specific carve-outs. Our predominant exposure to workers’ compensation would generally arise from a single claims occurrence, such as a factory explosion, involving more than one claimant. | |
• | Casualty Clash. Casualty clash reinsurance responds to claims arising from a single set of circumstances covered by more than one insurance policy or multiple claimants on one policy. This type of reinsurance is analogous to property catastrophe reinsurance, but written for casualty lines of business. Our casualty clash treaties are generally excess-of-loss contracts with both occurrence limits and aggregate limits. | |
• | Automobile Liability. Automobile insurance policies provide first party coverage for damage to the insured’s vehicle and third party coverage for the insured’s liability to other parties for injuries and for damage to their property due to the use of the insured vehicle. These insurance policies may also provide coverage for uninsured motorists and medical payments. We generally reinsure automobile liability on an excess-of-loss basis, generally for claims greater than $100,000. Our predominant exposure arises from third party liability claims and the related legal defense costs. |
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• | Surety. Our surety business relates to the reinsurance of risks associated with commercial and contract surety bonds issued to third parties to guarantee the performance of an obligation by the principal under the bond. Commercial bonds guarantee the performance of compliance obligations arising out of regulatory or statutory requirements. Contract bonds guarantee the performance of contractual obligations between two parties and include payment and performance bonds. The majority of our surety treaties are written on an excess-of-loss basis with an aggregate limit. | |
• | Trade Credit. Trade credit insurance is purchased by companies to ensure that invoices for goods and services provided to their customers are paid on time. Our trade credit coverages provide reinsurance for financial losses sustained through the failure of an insured’s customers to pay for goods or services supplied to them. We reinsure trade credit both on a proportional and an excess-of-loss basis. |
• | Finite quota share. Under finite quota share reinsurance contracts, the reinsurer agrees to indemnify a ceding company for a percentage of its losses up to an aggregate maximum or cap in return for a percentage of the ceding company’s premium, less a ceding commission. The expected benefit to the ceding company provided by finite quota share reinsurance is a sharing of losses with the reinsurer and increased underwriting capacity of the ceding company. These contracts often provide broad protection and may cover multiple classes of a ceding company’s business. Unlike a typical traditional quota share reinsurance agreement, these contracts often provide for profit commissions which take into account investment income for purposes of calculating the reinsurer’s profit on business ceded. Unlike traditional quota share reinsurance agreements, finite quota share contracts are often written on a funds withheld basis, meaning the parties agree that funds that would normally be remitted to a reinsurer are withheld by the ceding company. | |
• | Multi-year excess-of-loss. These reinsurance contracts often complement ceding companies’ traditional excess-of-loss reinsurance programs. This type of contract often carries an up-front premium plus additional premiums which are dependent on the magnitude of losses claimed by the ceding company under the contract. The expected benefit to the ceding company on multi-year excess-of-loss reinsurance is that the ceding company has the ability to negotiate specific terms and conditions that remain applicable over multiple years of coverage. These contracts may cover multiple classes of a ceding company’s business and typically provide the benefit of reducing the impact of large losses on a ceding company’s underwriting results. In general, these contracts are designed so that the ceding company funds the expected level of loss activity over the multi-year period. The reinsurer incorporates a profit margin to cover its costs and the risk that losses are worse than expected. The payment of premiums based on the magnitude of losses claimed is intended to benefit the ceding company by linking its own loss experience to the actual cost of reinsurance over time. The multiple year term and premium structure of multi-year excess-of-loss reinsurance contracts are not typically found in traditional reinsurance contracts. | |
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• | Whole account aggregate stop loss. Aggregate stop loss reinsurance contracts provide broad protection against a wide range of contingencies that are difficult to address with traditional reinsurance, including inadequate pricing by a ceding company or higher frequency of claims than the ceding company expected. The reinsurer on a whole account aggregate stop loss contract agrees to indemnify a ceding company for aggregate losses in excess of a deductible specified in the contract. These contracts can be offered on a single or multi-year basis, and may provide catastrophic and attritional loss protection. The benefit of whole account aggregate stop loss contracts to ceding companies is that such contracts provide the broadest possible protection of a ceding company’s underwriting results which is not generally available in the traditional reinsurance market. Unlike traditional reinsurance contracts, these contracts often contain sub-limits of coverage for losses on certain classes of business or exposures. These contracts are often written on a funds withheld basis. In addition, these contracts often include provisions for profit commissions which take into account investment income for purposes of calculating the reinsurer’s profit on business ceded. |
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2002 | ||||||||||||||
2004 | 2003 | Period | ||||||||||||
Net unpaid losses and LAE as of the beginning of period | $ | 731,918 | $ | 281,659 | $ | — | ||||||||
Net incurred related to: | ||||||||||||||
Current year | 1,101,820 | 648,137 | 60,356 | |||||||||||
Prior years | (82,016 | ) | (63,966 | ) | — | |||||||||
Total net incurred losses and LAE | 1,019,804 | 584,171 | 60,356 | |||||||||||
Unpaid losses and LAE assumed from St. Paul | — | — | 221,303 | |||||||||||
Net paid losses and LAE: | ||||||||||||||
Current year | 174,870 | 102,669 | — | |||||||||||
Prior years | 205,889 | 41,709 | — | |||||||||||
Total net paid losses and LAE | 380,759 | 144,378 | — | |||||||||||
Effects of foreign currency exchange rate changes | 8,264 | 10,466 | — | |||||||||||
Net unpaid losses and LAE as of the end of period | 1,379,227 | 731,918 | 281,659 | |||||||||||
Reinsurance recoverable | 1,728 | 5,016 | — | |||||||||||
Gross unpaid losses and LAE at end of period | $ | 1,380,955 | $ | 736,934 | $ | 281,659 | ||||||||
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2002 | 2003 | 2004 | |||||||||||
Net unpaid losses and LAE | $ | 281,659 | $ | 731,918 | $ | 1,379,227 | |||||||
Net unpaid losses and LAE re-estimated as of: | |||||||||||||
One year later | 224,693 | 680,173 | |||||||||||
Two years later | 194,422 | ||||||||||||
Net cumulative redundancy | 87,237 | 51,745 | |||||||||||
Less deficiency due to foreign currency exchange | 8,986 | 7,000 | |||||||||||
Cumulative redundancy excluding foreign currency exchange | 96,223 | 58,745 | |||||||||||
Net cumulative paid losses and LAE paid as of: | |||||||||||||
One year later | 41,709 | 287,663 | |||||||||||
Two years later | 62,604 | ||||||||||||
Gross liability — end of year | 281,659 | 736,934 | 1,380,955 | ||||||||||
Reinsurance recoverable | — | 5,016 | 1,728 | ||||||||||
Net liability — end of year | 281,659 | 731,918 | $ | 1,379,227 | |||||||||
Gross liability — re-estimated | 194,422 | 685,189 | |||||||||||
Gross cumulative redundancy | $ | 87,237 | $ | 51,745 | |||||||||
Investment Management Agreement |
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General Guidelines |
Classification |
Valuation |
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U.S. Government and U.S. Government agencies | $ | 4,203 | |||
Corporate bonds | 1,158,797 | ||||
Mortgage and asset-backed securities | 511,069 | ||||
Municipal bonds | 215,251 | ||||
Foreign governments, states and foreign corporate | 347,206 | ||||
Total bonds | 2,236,526 | ||||
Redeemable preferred stocks | 3,676 | ||||
Total fixed maturities | $ | 2,240,202 | |||
Quality |
Fair Value | % of Total | ||||||||
Aaa | $ | 764,002 | 34.1 | % | |||||
Aa - Aa3 | 447,071 | 20.0 | % | ||||||
A - A3 | 909,403 | 40.6 | % | ||||||
Baa | 119,726 | 5.3 | % | ||||||
Total | $ | 2,240,202 | 100.0 | % | |||||
Duration |
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Amortized | |||||||||
Cost | Fair Value | ||||||||
Due in one year or less | $ | 54,567 | $ | 54,390 | |||||
Due from one to five years | 929,647 | 932,655 | |||||||
Due from five to ten years | 411,388 | 415,697 | |||||||
Due in ten or more years | 236,181 | 240,042 | |||||||
Mortgage and asset backed securities | 508,757 | 511,069 | |||||||
Total bonds | 2,140,540 | 2,153,853 | |||||||
Redeemable preferred stocks | 3,750 | 3,676 | |||||||
Total available-for-sale fixed maturities | $ | 2,144,290 | $ | 2,157,529 | |||||
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General |
Bermuda Regulation |
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(1) is required, with respect to its general business, to maintain a minimum solvency margin equal to the greatest of: |
(A) $100,000,000; | |
(B) 50% of net premiums written (being gross premiums written less any premiums ceded by Platinum Bermuda, but Platinum Bermuda may not deduct more than 25% of gross premiums when computing net premiums written); and | |
(C) 15% of loss and other insurance reserves; |
(2) is prohibited from declaring or paying any dividends during any financial year if it is in breach of its minimum solvency margin or minimum liquidity ratio or if the declaration or payment of such dividends would cause it to fail to meet such margin or ratio (and if it has failed to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, Platinum Bermuda is prohibited, without the approval of the Authority, from declaring or paying any dividends during the next financial year); | |
(3) is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files with the Authority (at least seven days before payment of such dividends) an affidavit stating that it will continue to meet the required margins; | |
(4) is prohibited, without the approval of the Authority, from reducing by 15% or more its total statutory capital as set out in its previous year’s financial statements, and any application for such approval must include an affidavit stating that it will continue to meet the required margins; and | |
(5) is required, at any time it fails to meet its solvency margin, within 30 days (45 days where total statutory capital and surplus falls to $75 million or less) after becoming aware of that failure or having reason to believe that such failure has occurred, to file with the Authority a written report containing certain information. |
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(1) all or any part of the long-term business, other than long-term business that is reinsurance business, may be transferred only with and in accordance with the sanction of the applicable Bermuda court; and | |
(2) an insurer or reinsurer carrying on long-term business may only be wound-up or liquidated by order of the applicable Bermuda court, and this may increase the length of time and costs incurred in the winding-up of Platinum Bermuda when compared with a voluntary winding-up or liquidation. |
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U.S. Regulation |
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(1) 10% of Platinum US’ statutory policyholders’ surplus (as determined under statutory accounting principles) as of December 31 of the prior year; or | |
(2) Platinum US’ net investment income excluding realized capital gains (as determined under statutory accounting principles) for the twelve-month period ending on December 31 of the prior year and pro rata distribution of any class of Platinum US’ own securities, plus any amounts of net investment income (excluding realized capital gains) in the three calendar years prior to the preceding year which have not been distributed. |
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U.K. Regulation |
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Ireland Regulation |
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Steven H. Newman Age: 62 Director since 2002 Chairman of the Board of Directors and Chairman of the Executive Committee | Mr. Newman has been Chairman of the Board of Directors of the Company since June 2002 and a consultant to Platinum US since March 2002. Mr. Newman was Chairman of the Board of Directors of St. Paul Re from March 2002 until he became Chairman of the Company. Mr. Newman was Chairman of the Board of Directors of Swiss Re America Holding Company, a reinsurance holding company, from May 2000 to October 2000. Prior thereto, Mr. Newman served as Chairman of the Board and Chief Executive Officer of Underwriters Re Group, Inc., a reinsurance holding company. | |
Gregory E.A. Morrison Age: 47 Director since 2003 Member of the Executive Committee | Mr. Morrison has been President and Chief Executive Officer of the Company since June 2003. Mr. Morrison was President and Chief Executive Officer of London Reinsurance Group Inc. (“LRG”), a Canadian reinsurance company that he founded, from 1989 until 1998 and again from September 2000 until May 2003. Mr. Morrison also served as the Chairman of LRG operating subsidiaries in the United States, Barbados and Ireland and as a member of the LRG Board of Directors. From January 1999 to June 2000, Mr. Morrison served as President of Unum Reinsurance, the reinsurance division of Unum Provident Corporation. | |
H. Furlong Baldwin Age: 73 Director since 2002 Chairman of the Audit Committee and member of the Governance Committee | Mr. Baldwin was Chairman of Mercantile Bankshares Corporation, a bank holding corporation, from March 2001 until his retirement in March 2003. Prior thereto, Mr. Baldwin was Chairman and Chief Executive Officer of Mercantile Bankshares Corporation. Mr. Baldwin is the Chairman of the Board of Directors of Nasdaq Stock Market, Inc. and a director of W.R. Grace & Company and Allegheny Energy, Inc. | |
Jonathan F. Bank Age: 62 Director since 2002 Member of the Compensation, Audit and Governance Committees | Mr. Bank has been counsel to Lord Bissell & Brook LLP, a law firm, since May 2004. From May 2000 until May 2004, he was Senior Vice President of Tawa Associates Ltd., which is engaged in the acquisition, restructuring and management of property and casualty companies in run-off. From September 1999 until May 2000, Mr. Bank was the Insurance Practice Leader of PricewaterhouseCoopers’ U.S. insurance/reinsurance regulatory and restructuring practice group. Prior thereto, Mr. Bank was a partner at Chadbourne & Parke LLP, a law firm. | |
Dan R. Carmichael Age: 60 Director since 2002 Chairman of the Governance Committee and member of the Audit Committee | Mr. Carmichael has been President, Chief Executive Officer and a director of Ohio Casualty Corporation, a property and casualty insurance company, since December 2000. Prior thereto, Mr. Carmichael served as President and Chief Executive Officer of IVANS, Inc., an industry-owned organization that provides electronic communications services to insurance, healthcare and related organizations. Mr. Carmichael is a director of Alleghany Corporation. |
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Robert V. Deutsch Age: 45 Director since April 2005 Member of the Audit Committee and Compensation Committee | Mr. Deutsch has been a consultant to CNA Financial Corporation since October 2004. From September 1999 until October 2004, Mr. Deutsch served as Executive Vice President and Chief Financial Officer of CNA Financial Corporation. Prior thereto, Mr. Deutsch was Executive Vice President, Chief Financial Officer and Chief Actuary of Executive Risk Inc. Mr. Deutsch serves as a board member of Chaucer Holdings PLC. | |
Peter T. Pruitt Age: 72 Director since 2002 Chairman of the Compensation Committee and member of the Audit Committee | Mr. Pruitt was Chairman of Willis Re Inc., a reinsurance intermediary, from June 1995 until his retirement in December 2001. He also served as Chief Executive Officer of Willis Re Inc. from June 1995 through September 1999. Prior thereto, Mr. Pruitt was President and a director of Frank B. Hall & Co., Inc., a global insurance broker. Mr. Pruitt is a director of Poe Financial Group, Inc., a privately held property and casualty insurance holding company. |
Gregory E.A. Morrison Age: 47 President and Chief Executive Officer | Mr. Morrison has been President and Chief Executive Officer of the Company since June 2003. Mr. Morrison was President and Chief Executive Officer of LRG, a Canadian reinsurance company that he founded, from 1989 until 1998 and again from September 2000 until May 2003. During these periods, Mr. Morrison also served as the Chairman of LRG operating subsidiaries in the United States, Barbados and Ireland and as a member of the LRG board of directors. From January 1999 to June 2000, Mr. Morrison served as President of Unum Reinsurance, the reinsurance division of Unum Provident Corporation. | |
Michael D. Price Age: 38 Chief Operating Officer | Mr. Price was appointed to serve as Chief Operating Officer of the Company in August 2005, subject to the approval of the Bermuda Department of Immigration. Mr. Price was President and Chief Underwriting Officer of Platinum US from November 2002 until July 2005. Prior thereto, Mr. Price was Chief Underwriting Officer of St. Paul Re from June 2002 until November 2002. Mr. Price served as Chief Operating Officer of Associated Aviation Underwriters Incorporated, a subsidiary of Global Aerospace Underwriting Managers Ltd. specializing in aerospace insurance, from March 2001 through June 2002. From May 2000 to September 2000, Mr. Price was Chief Underwriting Officer at Swiss Re America Holding Corporation, a reinsurance holding company. He was Senior Vice President and Chief Underwriting Officer of Underwriters Re Group, Inc., a reinsurance holding company, from April 1998 until May 2000. |
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Joseph F. Fisher Age: 50 Executive Vice President and Chief Financial Officer | Mr. Fisher has been Executive Vice President and Chief Financial Officer of the Company since July 2004. Mr. Fisher was Chief Financial Officer of the U.S. operations of Royal & Sun Alliance Insurance Group PLC from December 1995 until June 2004. Prior thereto, Mr. Fisher was a partner at Coopers & Lybrand, where he provided audit services to a variety of insurance clients from 1984 until 1995. | |
Michael E. Lombardozzi Age: 43 Executive Vice President, General Counsel and Chief Administrative Officer | Mr. Lombardozzi was appointed to serve as Chief Administrative Officer of the Company in August 2005, subject to the approval of the Bermuda Department of Immigration. Mr. Lombardozzi has been Executive Vice President and General Counsel of the Company since September 2002 and Secretary of the Company since November 2002. Prior thereto, Mr. Lombardozzi was Executive Vice President and General Counsel of St. Paul Re from August 2002 until November 2002. Mr. Lombardozzi was Senior Vice President — Planning and Operations of W.R. Berkley Corporation, an insurance holding company, from December 2001 to July 2002, and Senior Vice President, Secretary and General Counsel of Orius Corp., a telecommunications infrastructure company, from January 2001 to September 2001. From January 1994 to January 2001, Mr. Lombardozzi was Senior Vice President, Secretary and General Counsel of Berkley Insurance Company. | |
H. Elizabeth Mitchell Age: 43 President of Platinum US | Ms. Mitchell was appointed to serve as President of Platinum US in August 2005. Ms. Mitchell was Executive Vice President of Platinum US from November 2002 until July 2005 and was Chief Operating Officer of Platinum US from September 2003 until July 2005. Prior thereto, she was Executive Vice President — North American Casualty of St. Paul Re, where she worked for nine years. | |
Neal J. Schmidt Age: 48 Executive Vice President and Chief Actuary of Platinum US | Mr. Schmidt has been Executive Vice President and Chief Actuary of Platinum US since November 2002. Prior thereto, he was Executive Vice President and Chief Actuary of St. Paul Re, where he worked for sixteen years. |
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Amount and Nature of | Percent | ||||||||
Name and Address of Beneficial Owner | Beneficial Ownership | of Class | |||||||
RenaissanceRe Holdings Ltd. | 4,302,652 | (1) | 9.9 | ||||||
Renaissance House 8-12 East Broadway Pembroke HM 19 Bermuda | |||||||||
Wellington Management Company, LLP | 4,243,628 | (2) | 9.8 | ||||||
75 State Street Boston, MA 02109 | |||||||||
Perry Corp. Richard C. Perry | 3,197,135 | (3) | 7.4 | ||||||
599 Lexington Avenue New York, NY 10022 | |||||||||
Shapiro Capital Management Company, Inc | 2,285,675 | (4) | 5.3 | ||||||
3060 Peachtree Road NW Suite 1555 Atlanta, GA 30305 |
(1) | Concurrently with the completion of the Initial Public Offering, the Company sold 3,960,000 common shares to RenaissanceRe. In addition, RenaissanceRe received an option to purchase up to 2,500,000 additional common shares at any time during the ten years following the Initial Public Offering at a purchase price of $27.00 per share (the “RenaissanceRe Option”). The RenaissanceRe Option was amended on November 18, 2004 to provide that, in lieu of paying $27.00 per share, any exercise by RenaissanceRe of the RenaissanceRe Option will be settled on a net share basis, which would result in the Company issuing to RenaissanceRe a number of common shares equal to the excess of the market price per share, determined in accordance with the amendment, over $27.00 less the par value per share multiplied by the number of common shares issuable upon exercise of the options, divided by that market price per share. Based on the closing price per share on March 1, 2005, RenaissanceRe had the right to acquire pursuant to the RenaissanceRe Option 342,652 common shares as of such date, resulting in the beneficial ownership by RenaissanceRe of 4,302,652 common Shares (or 9.9% of the then outstanding common shares) as of such date. Pursuant to a limitation on voting rights in Platinum Holdings’ Bye-laws, as amended by a resolution adopted on May 6, 2004 (the “Bye-laws”), RenaissanceRe’s voting power with respect to the common shares owned by it is limited to 9.9% of the voting power of the outstanding common shares. |
(2) | In a Schedule 13G statement filed on February 14, 2005, Wellington Management Company, LLP (“Wellington”) reported shared voting power over 3,680,648 common shares and shared dispositive power over 4,243,628 common shares. Wellington is an investment adviser registered under the Investment Advisers Act of 1940. This Schedule 13G statement indicated that the securities reported therein were owned of record by clients of Wellington who had the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities, and that no such client was known to have such right or power with respect to more than 5% of the class of such securities. |
(3) | In a Schedule 13G statement filed on February 9, 2005, Perry Corp. and Richard C. Perry (the president and sole stockholder of Perry Corp.) jointly reported sole voting power and sole dispositive power over 3,197,135 common shares of the Company. Perry Corp. is an investment adviser registered under the Investment Advisers Act of 1940. This Schedule 13G statement indicated that the limited partners of (or investors in) each of two or more private investment funds for which Perry Corp. acts as general partner and/or investment adviser had the right to participate in the receipt of dividends |
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from, and proceeds from the sale of, the common shares held for the accounts of such funds in accordance with their respective limited partnership interests (or investment percentages) in such funds. Mr. Perry disclaimed any beneficial ownership interest of the common shares owned beneficially by Perry Corp., except for that portion of such common shares that related to his economic interest in Perry Corp. | |
(4) | In a Schedule 13G statement filed on February 15, 2005, Shapiro Capital Management Company, Inc. (“Shapiro”) reported sole voting power over 2,035,620 common shares, shared voting power over 250,055 common shares and sole dispositive power over 2,285,675 common shares of the Company. Shapiro is an investment adviser registered under the Investment Advisers Act of 1940. |
Amount and Nature of | Percent | |||||||
Name of Beneficial Owner | Beneficial Ownership | of Class | ||||||
Steven H. Newman | 730,000 | (1)(2) | 1.7 | |||||
Gregory E.A. Morrison | 134,073 | (2) | * | |||||
H. Furlong Baldwin | 26,668 | (1)(2) | * | |||||
Jonathan F. Bank | 23,668 | (1)(2) | * | |||||
Dan R. Carmichael | 24,194 | (1)(2) | * | |||||
Neill A. Currie(3) | 28,334 | (1)(2) | * | |||||
Robert V. Deutsch | 2,000 | * | ||||||
Peter T. Pruitt | 25,668 | (1)(2) | * | |||||
Joseph F. Fisher | 1,000 | * | ||||||
Michael E. Lombardozzi | 84,845 | (2) | * | |||||
H. Elizabeth Mitchell | 43,634 | (2) | * | |||||
Michael D. Price | 222,356 | (2) | * | |||||
Neal J. Schmidt | 86,261 | (2) | * | |||||
All directors and executive officers as a group (13 persons) | 1,432,701 | 3.3 | % |
* | Represents less than 1% of the outstanding common shares. |
(1) | Does not include share units. Under the Share Unit Plan, 50% of all fees earned by a director who is not an employee of the Company or any of its affiliates (including retainer fees, meeting fees and committee fees) during each calendar quarter (or such higher percentage as elected by a director) are automatically converted into that number of share units equal to the number of common shares which could have been purchased with such fees, based upon the closing price of the common shares on the last day of the calendar quarter, as more fully described under “Director Compensation.” As of March 1, 2005, the following nonemployee directors had been credited with the following number of share units: Mr. Newman: 3,634 share units; Mr. Bank: 5,176 share units; Mr. Carmichael: 4,777 share units; Mr. Pruitt: 3,114 share units; Mr. Baldwin: 3,128 share units; and Mr. Currie: 2,415 share units. |
(2) | Includes common shares issuable upon exercise of options as follows: Mr. Newman: 650,000 common shares; Mr. Morrison: 100,000 common shares; Mr. Baldwin: 21,668 common shares; Mr. Bank: 21,668 common shares; Mr. Carmichael: 21,668 common shares; Mr. Currie: 13,334 common shares; Mr. Pruitt: 21,668 common shares; Mr. Lombardozzi: 75,000 common shares; Ms. Mitchell: 37,500 common shares; Mr. Price: 100,000 common shares; and Mr. Schmidt: 75,000 common shares. |
(3) | Mr. Currie resigned as a member of our board of directors effective July 5, 2005. |
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• | any Exchange Notes will be acquired in the ordinary course of its business; | |
• | the holder will have no arrangements or understanding with any person to participate in the distribution of the outstanding Notes or the Exchange Notes within the meaning of the Securities Act; | |
• | the holder is not an “affiliate,” as defined in Rule 405 of the Securities Act, of Platinum Finance or of Platinum Holdings, or if it is an affiliate, that it will comply with applicable registration and prospectus delivery requirements of the Securities Act to the extent applicable; | |
• | if the holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes; | |
• | if the holder is a broker-dealer, that it will receive Exchange Notes for its own account in exchange for outstanding Notes that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of the Exchange Notes (See “Plan of Distribution”); and | |
• | the holder is not acting on behalf of any person who could not truthfully make the foregoing representations. |
• | the holder is not an “affiliate” of Platinum Finance or of Platinum Holdings within the meaning of Rule 405 under the Securities Act; | |
• | the Exchange Notes are acquired in the ordinary course of the holder’s business; and | |
• | the holder does not intend to participate in the distribution of the Exchange Notes. |
• | cannot rely on the position of the SEC staff enunciated in interpretive letters; and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
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• | to delay accepting for exchange any outstanding Notes; | |
• | to extend the exchange offer or to terminate the exchange offer and to refuse to accept outstanding Notes not previously accepted if any of the conditions set forth below under “— Certain Conditions to the Exchange Offer” have not been satisfied, by giving oral (promptly confirmed in writing) or written notice of the delay, extension or termination to the exchange agent; or | |
• | to amend the terms of the exchange offer, in any manner, under the terms of the exchange offer and the Exchange and Registration Rights Agreement. |
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• | the Exchange Notes to be received will not be tradable by the holder, without restriction under the Securities Act, the Exchange Act and without material restrictions under the blue sky or securities laws of substantially all of the states of the United States; | |
• | the exchange offer, or the making of any exchange by a holder of outstanding Notes, would violate applicable law or any applicable interpretation of the staff of the SEC; or | |
• | any action or proceeding has been instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer that, in its judgment, would reasonably be expected to impair its ability to proceed with the exchange offer. |
• | the representations described under “— Purpose and Effect of the Exchange Offer,” “— Procedures for Tendering” and “Plan of Distribution;” and | |
• | such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to make available to it an appropriate form for registration of the Exchange Notes under the Securities Act. |
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• | a holder must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal; have the signature on the letter of transmittal guaranteed if the letter of transmittal so requires; and mail or deliver the letter of transmittal or facsimile to the exchange agent prior to the expiration date; or | |
• | holders of outstanding Notes who are DTC participants may follow the procedures for book-entry transfer as provided for below under “— Book-Entry Transfer” and in a letter of transmittal; or | |
• | holders of outstanding Notes who are Euroclear participants and Clearstream Banking participants on behalf of the beneficial owners of outstanding Notes are required to use book-entry transfer pursuant to the standard operating procedures of Euroclear or Clearstream Banking, as the case may be, which include transmission of a computer-generated message to Euroclear or Clearstream Banking, as the case may be, in lieu of a letter of transmittal. Euroclear or Clearstream Banking, as the case may be, will then transfer the appropriate notice to DTC in accordance with established procedures between DTC and Euroclear or Clearstream Banking. See the term “agent’s message” below in this section. |
• | the exchange agent must receive the outstanding Notes along with the accompanying letter of transmittal; | |
• | the exchange agent must receive, prior to the expiration date, a timely confirmation of book-entry transfer of the outstanding Notes into the exchange agent’s account at DTC, including confirmations transmitted by Euroclear or Clearstream Banking to DTC according to the standard operating procedures for book-entry transfer described below and a properly transmitted agent’s message; or | |
• | the holder must comply with the guaranteed delivery procedures described below. |
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• | make appropriate arrangements to register ownership of the outstanding Notes in such owner’s name; or | |
• | obtain a properly completed bond power from the registered holder of outstanding Notes. |
• | by a registered holder who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the accompanying letter of transmittal; or | |
• | for the account of an eligible guarantor institution. |
• | DTC has received an express acknowledgment, which may be through Euroclear or Clearstream Banking, from a participant in its ATOP that is tendering outstanding Notes that are the subject of the book-entry confirmation; | |
• | the participant has received and agrees to be bound by the terms of the accompanying letter of transmittal, or, in the case of an agent’s message relating to guaranteed delivery, that the participant has received and agrees to be bound by the applicable notice of guaranteed delivery; and | |
• | the agreement may be enforced against that participant. |
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• | outstanding Notes or a timely book-entry confirmation of the outstanding Notes into the exchange agent’s account at DTC; and | |
• | a properly completed and duly executed letter of transmittal and all other required documents or a properly transmitted agent’s message. |
• | any Exchange Notes that the holder receives will be acquired in the ordinary course of its business; | |
• | the holder has no arrangement or understanding with any person or entity to participate in the distribution of the Exchange Notes; | |
• | if the holder is not a broker-dealer, that it is not engaged in and does not intend to engage in the distribution of the Exchange Notes; | |
• | if the holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for outstanding Notes that were acquired as a result of market-making activities or other trading activities, that it will deliver a prospectus, as required by law, in connection with any resale of any Exchange Notes. See “Plan of Distribution;” | |
• | the holder is not an “affiliate,” as defined in Rule 405 of the Securities Act, of Platinum Finance or Platinum Holdings or, if the holder is an affiliate, it will comply with any applicable registration and prospectus delivery requirements of the Securities Act; and | |
• | the holder is not acting on behalf of any person who could not truthfully make the foregoing representations. |
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• | the tender is made through an eligible guarantor institution; | |
• | prior to the expiration date, the exchange agent receives from the eligible guarantor institution either a properly completed and duly executed notice of guaranteed delivery, by facsimile transmission, mail or hand delivery, or a properly transmitted agent’s message relating to guaranteed delivery: |
1. | setting forth the name and address of the holder, the registered number(s) of the outstanding Notes and the principal amount of outstanding Notes tendered; | |
2. | stating that the tender is being made thereby; and | |
3. | guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the accompanying letter of transmittal, or facsimile thereof, together with the outstanding Notes or a book-entry confirmation, and any other documents required by the accompanying letter of transmittal will be deposited by the eligible guarantor institution with the exchange agent; and |
• | the exchange agent receives the properly completed and executed letter of transmittal, or facsimile thereof, as well as all tendered outstanding Notes in proper form for transfer or a book-entry confirmation, and all other documents required by the accompanying letter of transmittal, within three New York Stock Exchange trading days after the expiration date. |
• | the exchange agent must receive a written notice of withdrawal, which notice may be by facsimile transmission or letter of withdrawal at the address set forth below under “— Exchange Agent;” or | |
• | for DTC, Euroclear or Clearstream Banking participants, holders must comply with their respective standard operating procedures for electronic tenders and the exchange agent must receive an electronic notice of withdrawal from DTC. |
• | specify the name of the person who tendered the outstanding Notes to be withdrawn; |
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• | identify the outstanding Notes to be withdrawn, including the principal amount of the outstanding Notes; | |
• | where certificates for outstanding Notes have been transmitted, specify the name in which the outstanding Notes were registered, if different from that of the withdrawing holder; and | |
• | contain a statement that the holder is withdrawing its election to have the outstanding Notes exchanged. |
• | the serial numbers of the particular certificates to be withdrawn; and | |
• | a signed notice of withdrawal with signatures guaranteed by an eligible guarantor institution unless the holder is an eligible guarantor institution. |
By Regular, Registered or Certified Mail or Overnight Delivery: JPMorgan Chase Bank, N.A. 2001 Bryant Street — 10th Floor Dallas, Texas 75201 Attention: Worldwide Securities Services | By Facsimile Transmission (for Eligible Guarantor Institutions only): (214) 468-6494 Attention: Frank Ivins | |
To Confirm by Telephone: | By Hand: | |
(214) 468-6464 Attention: Frank Ivins For Information Call: 1-800-275-2048 Attention: Customer Service | JPMorgan Chase Bank, N.A. 4 New York Plaza Ground Floor Window New York, NY 10004 Attention: Worldwide Securities Services |
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• | SEC registration fees; | |
• | fees and expenses of the exchange agent and trustee; | |
• | accounting and legal fees and printing costs; and | |
• | related fees and expenses. |
• | certificates representing outstanding Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding Notes tendered; | |
• | tendered outstanding Notes are registered in the name of any person other than the person signing the letter of transmittal; or | |
• | a transfer tax is imposed for any reason other than the exchange of outstanding Notes under the exchange offer. |
• | as set forth in the legend printed on the outstanding Notes as a consequence of the issuance of the outstanding Notes under the exemption from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws; and |
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• | otherwise as set forth in the offering memorandum distributed in connection with the private offering of the outstanding Notes. |
• | cannot rely on the applicable interpretations of the SEC; and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
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• | initially be issued in the aggregate principal amount of up to $250 million in exchange for up to $250 million aggregate principal amount of outstanding Notes; | |
• | bear interest, payable semi-annually in arrears, at the annual rate of 7.50%; | |
• | be entitled to payments of additional amounts (as defined below), subject to certain exceptions and limitations, if a withholding or deduction for tax purposes is required with respect to payments under the notes; | |
• | be redeemable at the option of Platinum Finance, subject to a Treasury “make-whole” call (see “— Optional Redemption”); | |
• | mature on June 1, 2017, unless previously redeemed; | |
• | constitute the senior unsecured general obligations of Platinum Finance; | |
• | rank equally in right of payment with all of the senior unsecured obligations of Platinum Finance; | |
• | be irrevocably and unconditionally guaranteed on a senior unsecured basis by Platinum Holdings; and | |
• | be issued in fully registered form in denominations of $1,000 and integral multiples of $1,000 in excess of $1,000. |
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• | accrue at an annual rate of 7.50%; | |
• | accrue from and including May 26, 2005, or, if interest has already been paid, from the date it was most recently paid, as applicable, to but excluding the applicable interest payment date or the maturity date, as the case may be; | |
• | be computed on the basis of a 360-day year comprised of twelve 30-day months; and | |
• | be payable semiannually in arrears on June 1 and December 1, commencing December 1, 2005, to the persons who are the registered holders of the Exchange Notes on the immediately preceding May 15 and November 15. |
“Treasury Rate” means, for any redemption date, the rate per year equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue (as defined below), assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date. | |
“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker (as defined below) as having a maturity comparable to the remaining term of the Exchange Notes being redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate notes of comparable maturity to the remaining term of such Exchange Notes. | |
“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by Platinum Finance. |
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“Comparable Treasury Price” means, for any redemption date, (1) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third business day preceding the redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (2) if that release (or any successor release) is not published or does not contain those prices on that business day, (A) the average of the Reference Treasury Dealer Quotations (as defined below) for the redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations for that redemption date, or (B) if Platinum Finance obtains fewer than four Reference Treasury Dealer Quotations, the average of all the Reference Treasury Dealer Quotations obtained. | |
“Reference Treasury Dealer Quotations” means, for each Reference Treasury Dealer and any redemption date, the average, as determined by the trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the trustee by a Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding the redemption date for the Exchange Notes being redeemed. | |
“Reference Treasury Dealer” means (1) Goldman, Sachs & Co. or its successor; provided, however, that if they cease to be a primary U.S. Government securities dealer in New York City, Platinum Finance will appoint another primary U.S. Government securities dealer as a substitute and (2) any other U.S. Government securities dealers selected by Platinum Finance. |
• | interest, and additional interest, payments that are required to be paid on the Exchange Notes; | |
• | the principal amount of the Exchange Notes; | |
• | interest payments on overdue interest payments and principal amounts due on the Exchange Notes, to the extent permitted by law; and | |
• | any other payments due to holders of Exchange Notes under the Exchange Notes and the Indenture. |
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(1) the principal of and any premium and interest on (a) indebtedness of such person for money borrowed or (b) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such person is responsible or liable; | |
(2) all capitalized lease obligations of such person; | |
(3) all obligations of such person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); | |
(4) all obligations of such person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (1) through (3) above) entered into in the ordinary course of business of such person to the extent such letters of credit are not drawn upon); | |
(5) all obligations of the type referred to in clauses (1) through (4) of other persons and all dividends of other persons for the payment of which, in either case, such person is responsible or liable as obligor, guarantor or otherwise, the amount thereof being deemed to be the lesser of the stated recourse, if limited, and the amount of the obligations or dividends of the other person; | |
(6) all obligations of the type referred to in clauses (1) through (5) of other persons secured by any mortgage, pledge, lien, security interest or other encumbrance on any property or asset of such person (whether or not such obligation is assumed by such person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and | |
(7) any amendments, modifications, refundings, renewals or extensions of any indebtedness or obligation described as Indebtedness in clauses (1) through (6) above. |
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(1) default in the payment of any interest on the notes, or any additional amounts payable with respect thereto, when such interest becomes or such additional amounts become due and payable, and continuance of such default for a period of 30 days; | |
(2) default in the payment of the principal of or any premium, if any, on the notes, or any additional amounts payable with respect thereto, when such principal or premium becomes or such additional amounts become due and payable either at maturity, upon any redemption, by declaration of acceleration or otherwise; | |
(3) default in the performance, or breach, of any covenant or warranty (other than the covenant relating to amalgamation, consolidation, merger or sale of assets), of Platinum Holdings or Platinum Finance contained in the Indenture, and the continuance of such default or breach for a period of 60 days after there has been given written notice as provided in the Indenture; | |
(4) default in the payment at maturity of Indebtedness of Platinum Holdings, Platinum Finance or any Designated Subsidiary in excess of $50 million, or if any event of default (as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness of Platinum Holdings, Platinum Finance or any Designated Subsidiary) happens and results in acceleration of more than $50 million in principal amount of such Indebtedness of Platinum Holdings, Platinum Finance or any Designated Subsidiary (after giving effect to any applicable grace period); | |
(5) Platinum Holdings, Platinum Finance or any Designated Subsidiary shall fail within 60 days to pay, bond or otherwise discharge any uninsured judgment or court order for the payment of money in excess of $50 million, which is not stayed on appeal or is not otherwise being appropriately contested in good faith; | |
(6) certain events relating to the bankruptcy, insolvency or reorganization of Platinum Holdings, Platinum Finance or a Designated Subsidiary; | |
(7) default by Platinum Holdings or Platinum Finance in the performance or breach of the conditions relating to amalgamation, consolidation, merger or sale of assets; or | |
(8) the guarantee ceases to be in full force and effect or Platinum Holdings, or any person acting on its behalf, denies or disaffirms the obligations of Platinum Holdings under the Indenture or the guarantee. |
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• | change the stated maturity of the principal of, or any premium or installment of interest on, or any additional amounts with respect to, the Exchange Notes; | |
• | reduce the principal amount of, or the rate (or modify the calculation of such principal amount or rate) of interest on, or any additional amounts with respect to, or any premium payable upon the redemption of, the Exchange Notes; | |
• | change the obligation to pay additional amounts with respect to the Exchange Notes; | |
• | change the redemption provisions of the Exchange Notes; | |
• | change the place of payment or the coin or currency in which the principal of, any premium or interest on or any additional amounts with respect to, the Exchange Notes is payable; | |
• | modify the guarantee in any way adverse to the holders; | |
• | impair the right to institute suit for the enforcement of any payment on or after the stated maturity of the Exchange Notes (or, in the case of redemption, on or after the redemption date); | |
• | reduce the percentage in principal amount of the Exchange Notes, the consent of whose holders is required in order to take specific actions; | |
• | reduce the requirements for quorum or voting by holders of the Exchange Notes in the applicable section of the Indenture; | |
• | modify any of the provisions in the Indenture regarding the waiver of past defaults and the waiver of certain covenants by the holders of the Exchange Notes except to increase any percentage vote |
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required or to provide that other provisions of the Indenture cannot be modified or waived without the consent of the holder of each Exchange Note affected thereby; or | ||
• | modify any of the above provisions. |
• | provide for a successor pursuant to a consolidation, amalgamation, merger or sale of assets that complies with the merger covenant; | |
• | add to the covenants for the benefit of the holders of the Exchange Notes or to surrender any right or power conferred upon Platinum Holdings or Platinum Finance by the Indenture; | |
• | provide for a successor trustee with respect to the Exchange Notes; | |
• | cure any ambiguity or correct or supplement any provision in the Indenture which may be defective or inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the Indenture which will not adversely affect the interests of the holders of the Exchange Notes; | |
• | change the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of the Exchange Notes under the Indenture; | |
• | add any additional events of default with respect to the Exchange Notes; | |
• | add any additional guarantees with respect to the Exchange Notes; | |
• | provide for conversion or exchange rights of the holders of the Exchange Notes; or | |
• | make any other change that does not adversely affect the interests of the holders of the Exchange Notes. |
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(1) the applicable defeasance or covenant defeasance does not result in a breach or violation of, or constitute a default under, any material agreement or instrument, other than the Indenture, to which Platinum Holdings or Platinum Finance are a party or by which they are bound; | |
(2) no event of default or event which with notice or lapse of time or both would become an event of default with respect to the Exchange Notes to be defeased will have occurred and be continuing on the date of establishment of such a trust after giving effect to such establishment and, with respect to defeasance only, no bankruptcy proceeding will have occurred and be continuing at any time during the period ending on the 91st day after such date; | |
(3) Platinum Holdings and Platinum Finance have delivered to the trustee an opinion of counsel (as specified in the Indenture) to the effect that the holders of the Exchange Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such opinion of counsel, in the case of defeasance, must refer to and be based upon a letter ruling of the Internal Revenue Service received by us, a Revenue Ruling published by the Internal Revenue Service or a change in applicable U.S. federal income tax law occurring after the date of the Indenture; and | |
(4) with respect to defeasance, Platinum Holdings and Platinum Finance have delivered to the trustee an officers’ certificate as to solvency and the absence of intent of preferring holders over their other creditors. |
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(1) any tax, fee, duty, assessment or governmental charge of whatever nature which would not have been imposed but for the fact that such holder (a) was a resident, domiciliary or national of, or engaged in business or maintained a permanent establishment or was physically present in, the relevant taxing jurisdiction or any political subdivision thereof or otherwise had some connection with the relevant taxing jurisdiction other than by reason of the mere ownership of, or receipt of payment under, or enforcement of rights with respect to, such Exchange Note, (b) presented, where presentation is required, such note for payment in the relevant taxing jurisdiction or any political subdivision thereof, unless such Exchange Note could not have been presented for payment elsewhere, or (c) presented, where presentation is required, such note for payment more than 30 days after the date on which the payment in respect of such Exchange Note became due and payable or provided for, whichever is later, except to the extent that the holder would have been entitled to such additional amounts if it had presented such Exchange Note for payment on any day within that 30-day period; |
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(2) any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge; | |
(3) any tax, assessment or other governmental charge that is imposed or withheld by reason of the failure by the holder of such Exchange Note to comply with any reasonable request by Platinum Finance addressed to the holder within 90 days of such request (a) to provide information concerning the nationality, residence or identity of the holder or (b) to make any declaration or other similar claim or satisfy any information or reporting requirement, which is required or imposed by statute, treaty, regulation or administrative practice of the relevant taxing jurisdiction or any political subdivision thereof as a precondition to exemption from all or part of such tax, assessment or other governmental charge; | |
(4) any withholding or deduction required to be made pursuant to any EU Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meetings of 26-27 November 2000, 3 June 2003 or any law implementing or complying with, or introduced in order to conform to, such EU Directive; or | |
(5) any combination of items (1), (2), (3) and (4). |
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• | DTC notifies us that it is unwilling or unable to continue as depository for such global exchange note or if DTC has ceased to be a clearing agency registered under the Exchange Act; | |
• | an Event of Default has occurred and is continuing with respect to the Exchange Debentures; or | |
• | we, in our sole discretion, notify DTC in writing that we no longer wish to have the Exchange Debentures represented by a global exchange note. |
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Where: (1) “T” is the aggregate number of votes conferred by all the issued common shares immediately prior to that application of the formula with respect to such issued Controlled Shares, adjusted to take into account any prior reduction taken with respect to any issued Controlled Shares pursuant to the “sequencing provision” described below; and | |
(2) “C” is the number of issued Controlled Shares attributable to that person. “Controlled Shares” of any person refers to all common shares, and all shares of any other class of shares of the Company conferring voting rights, owned by that person, whether (i) directly, (ii) with respect to persons who are U.S. persons, by application of the attribution and constructive ownership rules of Sections 958(a) and 958(b) of the Code, or (iii) beneficially, directly or indirectly, within the meaning of Section 13(d)(3) of the Exchange Act, and the rules and regulations thereunder. |
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F-7 | ||||
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F-1
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KPMG LLP |
F-2
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2004 | 2003 | |||||||||
ASSETS | ||||||||||
Investments: | ||||||||||
Fixed maturities available-for-sale at fair value (amortized cost — $2,144,290 and $1,560,807, respectively) | $ | 2,157,529 | $ | 1,583,505 | ||||||
Fixed maturity trading securities at fair value (amortized cost — $82,931 and $95,926, respectively) | 82,673 | 94,633 | ||||||||
Other invested asset | 6,769 | 6,910 | ||||||||
Total investments | 2,246,971 | 1,685,048 | ||||||||
Cash and cash equivalents | 209,897 | 105,461 | ||||||||
Accrued investment income | 23,663 | 17,492 | ||||||||
Reinsurance premiums receivable | 580,048 | 487,441 | ||||||||
Reinsurance recoverable on ceded losses and loss adjustment expenses | 2,005 | 5,102 | ||||||||
Prepaid reinsurance premiums | 2,887 | 6,129 | ||||||||
Funds held by ceding companies | 198,048 | 65,060 | ||||||||
Deferred acquisition costs | 136,038 | 79,307 | ||||||||
Income tax recoverable | 1,325 | 9,360 | ||||||||
Deferred tax assets | 8,931 | 3,711 | ||||||||
Other assets | 12,182 | 21,461 | ||||||||
Total assets | $ | 3,421,995 | $ | 2,485,572 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Liabilities | ||||||||||
Unpaid losses and loss adjustment expenses | $ | 1,380,955 | $ | 736,934 | ||||||
Unearned premiums | 502,423 | 305,985 | ||||||||
Reinsurance deposit liabilities | 20,189 | 5,699 | ||||||||
Debt obligations | 137,500 | 137,500 | ||||||||
Ceded premiums payable | 2,384 | 6,205 | ||||||||
Commissions payable | 181,925 | 176,310 | ||||||||
Funds withheld | 11,999 | — | ||||||||
Deferred tax liabilities | 10,404 | 5,503 | ||||||||
Other liabilities | 41,213 | 44,233 | ||||||||
Total liabilities | 2,288,992 | 1,418,369 | ||||||||
Shareholders’ Equity | ||||||||||
Preferred shares, $.01 par value, 25,000,000 shares authorized, no shares issued or outstanding | — | — | ||||||||
Common shares, $.01 par value, 200,000,000 shares authorized, 43,087,407 and 43,054,125 shares issued and outstanding, respectively | 430 | 430 | ||||||||
Additional paid-in capital | 911,851 | 910,505 | ||||||||
Accumulated other comprehensive income | 12,252 | 18,774 | ||||||||
Retained earnings | 208,470 | 137,494 | ||||||||
Total shareholders’ equity | 1,133,003 | 1,067,203 | ||||||||
Total liabilities and shareholders’ equity | $ | 3,421,995 | $ | 2,485,572 | ||||||
F-3
Table of Contents
2004 | 2003 | 2002 | |||||||||||||
Revenue: | |||||||||||||||
Net premiums earned | $ | 1,447,935 | 1,067,527 | $ | 107,098 | ||||||||||
Net investment income | 84,532 | 57,645 | 5,211 | ||||||||||||
Net realized gains on investments | 1,955 | 2,781 | 25 | ||||||||||||
Other income | 3,211 | 3,343 | 167 | ||||||||||||
Total revenue | 1,537,633 | 1,131,296 | 112,501 | ||||||||||||
Expenses: | |||||||||||||||
Losses and loss adjustment expenses | 1,019,804 | 584,171 | 60,356 | ||||||||||||
Acquisition expenses | 327,821 | 251,226 | 25,474 | ||||||||||||
Operating expenses | 66,333 | 92,595 | 16,334 | ||||||||||||
Net foreign currency exchange losses (gains) | (725 | ) | 114 | (2,017 | ) | ||||||||||
Interest expense | 9,268 | 9,492 | 1,261 | ||||||||||||
Total expenses | 1,422,501 | 937,598 | 101,408 | ||||||||||||
Income before income tax expense | 115,132 | 193,698 | 11,093 | ||||||||||||
Income tax expense | 30,349 | 48,875 | 4,655 | ||||||||||||
Net income | $ | 84,783 | 144,823 | $ | 6,438 | ||||||||||
Earnings per share: | |||||||||||||||
Basic earnings per share | $ | 1.96 | 3.37 | $ | 0.15 | ||||||||||
Diluted earnings per share | $ | 1.81 | 3.09 | $ | 0.15 | ||||||||||
Comprehensive income: | |||||||||||||||
Net income | $ | 84,783 | 144,823 | $ | 6,438 | ||||||||||
Other comprehensive income: | |||||||||||||||
Unrealized gains on available-for-sale securities, net of deferred tax | (6,910 | ) | 7,570 | 10,581 | |||||||||||
Cumulative translation adjustments, net of deferred tax | 388 | 623 | — | ||||||||||||
Comprehensive income | $ | 78,261 | 153,016 | $ | 17,019 | ||||||||||
Shareholder dividends: | |||||||||||||||
Dividends declared | $ | 13,807 | 13,767 | $ | — | ||||||||||
Dividends declared per share | $ | 0.32 | 0.32 | $ | — |
F-4
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2004 | 2003 | 2002 | ||||||||||||
Preferred shares: | ||||||||||||||
Balances at beginning and end of period | $ | — | — | $ | — | |||||||||
Common shares: | ||||||||||||||
Balances at beginning of period | 430 | 430 | ||||||||||||
Initial capitalization | — | — | 12 | |||||||||||
Redemption of shares issued in initial capitalization | — | — | (12 | ) | ||||||||||
Exercise of share options | 2 | — | — | |||||||||||
Issuance of common shares | 1 | — | 430 | |||||||||||
Purchase of common shares | (3 | ) | — | — | ||||||||||
Balances at end of period | 430 | 430 | 430 | |||||||||||
Additional paid-in-capital: | ||||||||||||||
Balances at beginning of period | 910,505 | 903,797 | — | |||||||||||
Initial capitalization | — | — | 108 | |||||||||||
Redemption of shares issued in initial capitalization | — | — | (108 | ) | ||||||||||
Exercise of share options | 7,405 | 678 | — | |||||||||||
Share based compensation | 2,358 | 5,510 | — | |||||||||||
Issuance of common shares | 1,565 | 520 | 904,658 | |||||||||||
Purchase of common shares | (9,982 | ) | — | — | ||||||||||
Purchase contract adjustment payments | — | — | (6,639 | ) | ||||||||||
Assets contributed by St. Paul | — | — | 5,778 | |||||||||||
Balances at end of period | 911,851 | 910,505 | 903,797 | |||||||||||
Accumulated other comprehensive income (loss): | ||||||||||||||
Balances at beginning of period | 18,774 | 10,581 | — | |||||||||||
Net change in unrealized (losses) gains and losses on available-for-sale securities, net of deferred tax | (6,910 | ) | 7,570 | 10,581 | ||||||||||
Net change in cumulative translation adjustments, net of deferred tax | 388 | 623 | — | |||||||||||
Balances at end of period | 12,252 | 18,774 | 10,581 | |||||||||||
Retained earnings: | ||||||||||||||
Balances at beginning of period | 137,494 | 6,438 | — | |||||||||||
Net income | 84,783 | 144,823 | 6,438 | |||||||||||
Dividends paid to shareholders | (13,807 | ) | (13,767 | ) | — | |||||||||
Balances at end of period | 208,470 | 137,494 | 6,438 | |||||||||||
Total shareholders’ equity | $ | 1,133,003 | 1,067,203 | $ | 921,246 | |||||||||
F-5
Table of Contents
2004 | 2003 | 2002 | |||||||||||||
Operating Activities: | |||||||||||||||
Net income | $ | 84,783 | 144,823 | $ | 6,438 | ||||||||||
Adjustments to reconcile net income to cash used in operations: | |||||||||||||||
Depreciation and amortization | 20,642 | 23,321 | 2,469 | ||||||||||||
Net realized gains on investments | (1,955 | ) | (2,781 | ) | (25 | ) | |||||||||
Net foreign currency exchange (gains) losses | (725 | ) | 114 | — | |||||||||||
Share based compensation | 2,358 | 5,510 | — | ||||||||||||
Trading securities activities | 16,510 | (85,861 | ) | — | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Increase in accrued investment income | (6,171 | ) | (7,499 | ) | (9,993 | ) | |||||||||
Increase in reinsurance premiums receivable | (92,607 | ) | (481,843 | ) | (5,599 | ) | |||||||||
(Increase) decrease in amounts receivable from St. Paul | — | 54,096 | (39,750 | ) | |||||||||||
Increase in funds held by ceding companies | (132,988 | ) | (10,158 | ) | — | ||||||||||
(Increase) decrease in deferred acquisition costs | (56,731 | ) | (29,975 | ) | 4,058 | ||||||||||
Increase in net unpaid losses and loss adjustment expenses | 641,062 | 440,859 | 60,356 | ||||||||||||
Increase (decrease) in net unearned premiums | 199,680 | 108,840 | (52,984 | ) | |||||||||||
Increase (decrease) in reinsurance deposit liabilities | 14,490 | (17,962 | ) | (167 | ) | ||||||||||
Increase (decrease) in ceded premiums payable | (3,821 | ) | 6,205 | — | |||||||||||
Increase in commissions payable | 5,615 | 138,749 | 6,595 | ||||||||||||
Increase in funds withheld | 11,999 | — | — | ||||||||||||
Changes in other assets and liabilities | 12,210 | (12,094 | ) | 19,152 | |||||||||||
Cash from St. Paul related to the November 1, 2002 assumption of liabilities on reinsurance contracts becoming effective in 2002 | — | 108,336 | 288,648 | ||||||||||||
Other net | 382 | 627 | 2,195 | ||||||||||||
Net cash provided by operating activities | 714,733 | 383,307 | 281,393 | ||||||||||||
Investing Activities: | |||||||||||||||
Proceeds from sale of available-for-sale fixed maturities | 498,945 | 393,245 | 120,421 | ||||||||||||
Proceeds from maturity or paydown of available-for-sale fixed maturities | 136,472 | 132,979 | — | ||||||||||||
Acquisition of available-for-sale fixed maturities | (1,230,895 | ) | (1,066,077 | ) | (1,157,416 | ) | |||||||||
Other invested asset acquired | — | (6,910 | ) | — | |||||||||||
Net cash used in investing activities | (595,478 | ) | (546,763 | ) | (1,036,995 | ) | |||||||||
Financing Activities: | |||||||||||||||
Net proceeds from shares issued in initial capitalization | — | — | 120 | ||||||||||||
Redemption of shares issued in initial capitalization | — | — | (120 | ) | |||||||||||
Dividends paid to shareholders | (13,807 | ) | (13,767 | ) | — | ||||||||||
Proceeds from exercise of share options | 7,406 | 678 | — | ||||||||||||
Proceeds from issuance of common shares | 1,567 | 520 | 905,088 | ||||||||||||
Net proceeds from issuance of debt securities | — | — | 132,000 | ||||||||||||
Purchase of common shares | (9,985 | ) | — | — | |||||||||||
Net cash (used in) provided by financing activities | (14,819 | ) | (12,569 | ) | 1,037,088 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 104,436 | (176,025 | ) | 281,486 | |||||||||||
Cash and cash equivalents at beginning of period | 105,461 | 281,486 | — | ||||||||||||
Cash and cash equivalents at end of period | $ | 209,897 | 105,461 | $ | 281,486 | ||||||||||
Supplemental disclosures of cash flow information: | |||||||||||||||
Income taxes paid | $ | 8,549 | 65,912 | $ | — | ||||||||||
Interest paid | $ | 7,442 | 7,888 | $ | — |
F-6
Table of Contents
1. | Basis of Presentation and Summary of Significant Accounting Policies |
Basis of Presentation and Consolidation |
Summary of Significant Accounting Policies |
Investments |
F-7
Table of Contents
Short-Term Investments and Cash Equivalents |
Premium Revenues |
F-8
Table of Contents
Funds Held by Ceding Companies |
Deferred Acquisition Costs |
Debt Obligations and Deferred Debt Issuance Costs |
Unpaid Losses and LAE |
F-9
Table of Contents
Reinsurance Deposit Liabilities |
Earnings Per Share |
Reinsurance Ceded |
Income Taxes |
Stock-Based Compensation |
F-10
Table of Contents
2004 | 2003 | 2002 Period | |||||||||||
Share based compensation expense: | |||||||||||||
As reported | $ | 2,358 | 5,510 | $ | — | ||||||||
Pro forma | 7,026 | 14,774 | 1,070 | ||||||||||
Net income: | |||||||||||||
As reported | 84,783 | 144,823 | 6,438 | ||||||||||
Pro forma | 80,115 | 135,559 | 5,368 | ||||||||||
Basic earnings per share: | |||||||||||||
As reported | 1.96 | 3.37 | 0.15 | ||||||||||
Pro forma | 1.86 | 3.15 | 0.12 | ||||||||||
Diluted earnings per share: | |||||||||||||
As reported | 1.81 | 3.09 | 0.15 | ||||||||||
Pro forma | $ | 1.72 | 2.90 | $ | 0.12 |
Foreign Currency Exchange |
F-11
Table of Contents
Organizational Cost |
Use of Estimates |
Reclassifications |
2. | Separation From and Continuing Relationship With St. Paul |
Liabilities assumed: | |||||
Net unpaid losses and LAE | $ | 221,303 | |||
Net unearned premiums | 244,000 | ||||
Reinsurance deposit liabilities | 23,828 | ||||
Profit commission liabilities | 16,145 | ||||
505,276 | |||||
Ceding commission to St. Paul | (53,390 | ) | |||
451,886 | |||||
Assets received: | |||||
Cash | 288,648 | ||||
Funds held | 54,902 | ||||
343,550 | |||||
Amount due from St. Paul | $ | 108,336 | |||
F-12
Table of Contents
3. | Investments |
Gross | Gross | ||||||||||||||||
Amortized | Unrealized | Unrealized | |||||||||||||||
Cost | Gains | Losses | Fair Value | ||||||||||||||
December 31, 2004: | |||||||||||||||||
U.S. Government and U.S. Government agencies | $ | 4,227 | — | 24 | $ | 4,203 | |||||||||||
Corporate bonds | 1,349,167 | 14,960 | 4,775 | 1,359,352 | |||||||||||||
Mortgage and asset-backed securities | 508,757 | 3,898 | 1,586 | 511,069 | |||||||||||||
Municipal bonds | 214,088 | 1,751 | 588 | 215,251 | |||||||||||||
Foreign governments and states | 64,301 | 57 | 380 | 63,978 | |||||||||||||
Total bonds | 2,140,540 | 20,666 | 7,353 | 2,153,853 | |||||||||||||
Redeemable preferred stocks | 3,750 | — | 74 | 3,676 | |||||||||||||
Total available-for-sale fixed maturities | $ | 2,144,290 | 20,666 | 7,427 | $ | 2,157,529 | |||||||||||
December 31, 2003: | |||||||||||||||||
U.S. Government and U.S. Government agencies | $ | 5,065 | 22 | 55 | $ | 5,032 | |||||||||||
Corporate bonds | 1,077,399 | 20,412 | 1,856 | 1,095,955 | |||||||||||||
Mortgage and asset-backed securities | 267,774 | 1,386 | 785 | 268,375 | |||||||||||||
Municipal bonds | 91,019 | 1,130 | 106 | 92,043 | |||||||||||||
Foreign governments and states | 115,800 | 2,891 | 273 | 118,418 | |||||||||||||
Total bonds | 1,557,057 | 25,841 | 3,075 | 1,579,823 | |||||||||||||
Redeemable preferred stocks | 3,750 | — | 68 | 3,682 | |||||||||||||
Total available-for-sale fixed maturities | $ | 1,560,807 | 25,841 | 3,143 | $ | 1,583,505 | |||||||||||
F-13
Table of Contents
Amortized | |||||||||
Cost | Fair Value | ||||||||
Due in one year or less | $ | 54,567 | $ | 54,390 | |||||
Due from one to five years | 929,647 | 932,655 | |||||||
Due from five to ten years | 411,388 | 415,697 | |||||||
Due in ten or more years | 236,181 | 240,042 | |||||||
Mortgage and asset backed securities | 508,757 | 511,069 | |||||||
Total bonds | 2,140,540 | 2,153,853 | |||||||
Redeemable preferred stocks | 3,750 | 3,676 | |||||||
Total available-for-sale fixed maturities | $ | 2,144,290 | $ | 2,157,529 | |||||
2002 | |||||||||||||
2004 | 2003 | Period | |||||||||||
Fixed maturities | $ | 82,038 | 55,727 | $ | 4,389 | ||||||||
Cash and cash equivalents | 2,261 | 3,133 | 1,183 | ||||||||||
Funds held | 2,651 | 776 | — | ||||||||||
86,950 | 59,636 | 5,572 | |||||||||||
Less investment expenses | 2,418 | 1,991 | 361 | ||||||||||
Net investment income | $ | 84,532 | 57,645 | $ | 5,211 | ||||||||
2002 | |||||||||||||
2004 | 2003 | Period | |||||||||||
Gross realized gains | $ | 5,706 | 4,639 | $ | 423 | ||||||||
Gross realized losses | 3,751 | 1,858 | 398 | ||||||||||
Net realized gains | $ | 1,955 | 2,781 | $ | 25 | ||||||||
F-14
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2002 | |||||||||||||
2004 | 2003 | Period | |||||||||||
Fixed maturities available for sale | $ | (9,459 | ) | 10,405 | $ | 12,293 | |||||||
Less deferred tax | 2,549 | 2,835 | 1,712 | ||||||||||
Net change in unrealized gains | $ | (6,910 | ) | 7,570 | $ | 10,581 | |||||||
Unrealized | |||||||||
Fair Value | Loss | ||||||||
Less than twelve months: | |||||||||
U.S. Government and U.S. Government agencies | $ | 4,203 | $ | 24 | |||||
Corporate bonds | 526,856 | 4,396 | |||||||
Mortgage and asset-backed securities | 150,597 | 1,131 | |||||||
Municipal bonds | 50,227 | 588 | |||||||
Foreign governments and states | 38,574 | 337 | |||||||
Redeemable preferred stock | 3,677 | 74 | |||||||
Total | $ | 774,134 | $ | 6,550 | |||||
Twelve months or more: | |||||||||
Corporate bonds | $ | 13,758 | $ | 422 | |||||
Mortgage and asset-backed securities | 29,124 | 455 | |||||||
Total | $ | 42,882 | $ | 877 | |||||
Total unrealized losses: | |||||||||
U.S. Government and U.S. Government agencies | $ | 4,203 | $ | 24 | |||||
Corporate bonds | 540,614 | 4,818 | |||||||
Mortgage and asset-backed securities | 179,721 | 1,586 | |||||||
Municipal bonds | 50,227 | 588 | |||||||
Foreign governments and states | 38,574 | 337 | |||||||
Redeemable preferred stocks | 3,677 | 74 | |||||||
Total | $ | 817,016 | $ | 7,427 | |||||
F-15
Table of Contents
December 31, 2004 | December 31, 2003 | ||||||||||||||||
Carrying | Carrying | ||||||||||||||||
Amount | Fair Value | Amount | Fair Value | ||||||||||||||
Financial assets: | |||||||||||||||||
Fixed maturities | $ | 2,240,202 | 2,240,202 | 1,678,138 | $ | 1,678,138 | |||||||||||
Other invested asset | 6,769 | 6,769 | 6,910 | 6,910 | |||||||||||||
Financial liabilities: | |||||||||||||||||
Debt obligations | $ | 137,500 | 165,000 | 137,500 | $ | 170,445 |
4. | Unpaid Losses and LAE |
Losses | $ | 230,475 | ||||
Less: | ||||||
Additional premiums earned | (29,265 | ) | ||||
Profit commissions | (10,243 | ) | ||||
Net adverse impact before income tax benefit | $ | 190,967 | ||||
F-16
Table of Contents
2002 | ||||||||||||||
2004 | 2003 | Period | ||||||||||||
Net unpaid losses and LAE as of the beginning of period | $ | 731,918 | 281,659 | $ | — | |||||||||
Net incurred related to: | ||||||||||||||
Current year | 1,101,820 | 648,137 | 60,356 | |||||||||||
Prior year | (82,016 | ) | (63,966 | ) | — | |||||||||
Total net incurred losses and LAE | 1,019,804 | 584,171 | 60,356 | |||||||||||
Unpaid losses and LAE assumed from St. Paul | — | — | 221,303 | |||||||||||
Net paid losses and LAE: | ||||||||||||||
Current year | 174,870 | 102,669 | — | |||||||||||
Prior year | 205,889 | 41,709 | — | |||||||||||
Total net paid losses and LAE | 380,759 | 144,378 | — | |||||||||||
Effects of foreign currency exchange rate changes | 8,264 | 10,466 | — | |||||||||||
Net unpaid losses and LAE as of the end of period | 1,379,227 | 731,918 | 281,659 | |||||||||||
Reinsurance recoverable | 1,728 | 5,016 | — | |||||||||||
Gross unpaid losses and LAE at end of period | $ | 1,380,955 | 736,934 | $ | 281,659 | |||||||||
F-17
Table of Contents
5. | Retrocessional Reinsurance |
Assumed | Ceded | Net | ||||||||||
As of and for the year ended December 31, 2004: | ||||||||||||
Premiums written | $ | 1,659,790 | 13,777 | $ | 1,646,013 | |||||||
Premiums earned | 1,465,058 | 17,123 | 1,447,935 | |||||||||
Losses and LAE | 1,018,106 | (1,698 | ) | 1,019,804 | ||||||||
Unpaid losses and LAE | $ | 1,380,955 | 1,728 | $ | 1,379,227 | |||||||
As of and for the year ended December 31, 2003: | ||||||||||||
Premiums written | $ | 1,198,473 | 26,331 | $ | 1,172,142 | |||||||
Premiums earned | 1,088,109 | 20,582 | 1,067,527 | |||||||||
Losses and LAE | 589,656 | 5,485 | 584,171 | |||||||||
Unpaid losses and LAE | $ | 736,934 | 5,016 | $ | 731,918 | |||||||
As of December 31, 2002 and the 2002 Period: | ||||||||||||
Premiums written | $ | 298,114 | — | $ | 298,114 | |||||||
Premiums earned | 107,098 | — | 107,098 | |||||||||
Losses and LAE | 60,356 | — | 60,356 | |||||||||
Unpaid losses and LAE | $ | 281,659 | — | $ | 281,659 |
F-18
Table of Contents
2004 | 2003 | ||||||||
Retroceded by Platinum US to Platinum Bermuda: | |||||||||
Premiums earned | $ | 515,869 | $ | 270,913 | |||||
Incurred losses and LAE | 562,193 | 214,796 | |||||||
Retroceded by Platinum UK to Platinum Bermuda: | |||||||||
Premiums earned | 89,394 | 43,998 | |||||||
Incurred losses and LAE | $ | 57,830 | $ | 17,542 |
6. | Equity Security Units and Credit Agreements |
Credit Agreement |
F-19
Table of Contents
7. | Income Taxes |
2004 | 2003 | 2002 Period | |||||||||||
United States | $ | 73,020 | 122,485 | $ | 13,858 | ||||||||
Bermuda | 19,423 | 48,191 | (1,735 | ) | |||||||||
Other | 22,689 | 23,022 | (1,030 | ) | |||||||||
Income before income taxes | $ | 115,132 | 193,698 | $ | 11,093 | ||||||||
2004 | 2003 | 2002 Period | |||||||||||
Current | $ | 28,133 | 56,681 | $ | (129 | ) | |||||||
Deferred | 2,216 | (7,806 | ) | 4,784 | |||||||||
Total | $ | 30,349 | 48,875 | $ | 4,655 | ||||||||
2004 | 2003 | 2002 Period | |||||||||||
Expected income tax expense at 35% | $ | 40,296 | 67,794 | $ | 3,883 | ||||||||
Effect of foreign income or loss subject to tax at rates other than 35% | (8,222 | ) | (18,316 | ) | 712 | ||||||||
Tax exempt investment income | (1,084 | ) | (740 | ) | — | ||||||||
Other, net | (641 | ) | 137 | 60 | |||||||||
Income tax expense | $ | 30,349 | 48,875 | $ | 4,655 | ||||||||
F-20
Table of Contents
2004 | 2003 | |||||||||
Deferred tax assets: | ||||||||||
Unpaid losses and LAE | $ | 31,314 | $ | 27,492 | ||||||
Unearned premiums | 15,095 | 11,142 | ||||||||
Other deferred tax assets | 188 | 325 | ||||||||
Total deferred tax assets | 46,597 | 38,959 | ||||||||
Deferred tax liabilities: | ||||||||||
Deferred acquisition costs | 36,892 | 25,783 | ||||||||
Difference in tax basis carrying value of assets | — | 5,337 | ||||||||
Timing differences in recognition of expenses | 558 | 1,172 | ||||||||
Unrealized net foreign currency exchange losses | 7,766 | 3,625 | ||||||||
Net unrealized gains on investments | 1,999 | 4,547 | ||||||||
Other deferred tax liabilities | 855 | 287 | ||||||||
Total deferred tax liabilities | 48,070 | 40,751 | ||||||||
Total net deferred tax liabilities | $ | 1,473 | $ | 1,792 | ||||||
2004 | 2003 | ||||||||
Platinum US deferred tax assets | $ | 49,254 | $ | 39,848 | |||||
Platinum US deferred tax liabilities | 40,323 | 36,137 | |||||||
Net Platinum US deferred tax assets | $ | 8,931 | $ | 3,711 | |||||
Platinum UK deferred tax assets | — | 28 | |||||||
Platinum UK deferred tax liabilities | $ | 10,404 | $ | 5,531 | |||||
Net Platinum UK deferred tax liabilities | 10,404 | 5,503 | |||||||
Total net deferred tax liabilities | $ | 1,473 | $ | 1,792 | |||||
8. | Shareholders’ Equity and Regulation |
F-21
Table of Contents
F-22
Table of Contents
2004 | 2003 | 2002 Period | ||||||||||
Statutory capital and surplus | $ | 1,124,446 | 1,096,398 | $ | 965,956 | |||||||
Statutory net income | $ | 51,803 | 117,172 | $ | 32,093 |
9. | Earnings Per Share |
Weighted | |||||||||||||
Average | Earnings | ||||||||||||
Shares | Per | ||||||||||||
Net Income | Outstanding | Share | |||||||||||
Year Ended December 31, 2004: | |||||||||||||
Basic earnings per share: | |||||||||||||
Net income | $ | 84,783 | 43,158 | $ | 1.96 | ||||||||
Effect of dilutive securities: | |||||||||||||
Share options and restricted shares | — | 2,094 | |||||||||||
Interest expense related to ESU’s | 6,097 | — | |||||||||||
Common share conversion of ESU’s | — | 5,009 | |||||||||||
Diluted earnings per share: | |||||||||||||
Income available to common shareholders | $ | 90,880 | 50,261 | $ | 1.81 | ||||||||
F-23
Table of Contents
Weighted | |||||||||||||
Average | Earnings | ||||||||||||
Shares | Per | ||||||||||||
Net Income | Outstanding | Share | |||||||||||
Year Ended December 31, 2003: | |||||||||||||
Basic earnings per share: | |||||||||||||
Net income | $ | 144,823 | 43,019 | $ | 3.37 | ||||||||
Effect of dilutive securities: | |||||||||||||
Share options | — | 717 | |||||||||||
Interest expense related to ESU’s | 6,290 | — | |||||||||||
Common share conversion of ESU’s | — | 5,137 | |||||||||||
Diluted earnings per share: | |||||||||||||
Income available to common shareholders | $ | 151,113 | 48,873 | $ | 3.09 | ||||||||
2002 Period: | |||||||||||||
Basic earnings per share: | |||||||||||||
Net income | $ | 6,438 | 43,004 | $ | 0.15 | ||||||||
Effect of dilutive securities: | |||||||||||||
Share options | — | 518 | |||||||||||
Diluted earnings per share: | |||||||||||||
Income available to common shareholders | $ | 6,438 | 43,522 | $ | 0.15 | ||||||||
10. | Share Incentive Compensation and Employee Benefit Plans |
Share Incentive Compensation |
As and for the | As and for the | As and for the | |||||||||||||||||||||||
Year Ended | Year Ended | Period Ended | |||||||||||||||||||||||
December 31, 2004 | December 31, 2003 | December 31, 2002 | |||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||||
Average | Average | Average | |||||||||||||||||||||||
Exercise | Exercise | Exercise | |||||||||||||||||||||||
Options | Price | Options | Price | Options | Price | ||||||||||||||||||||
Outstanding — beginning of the period | 4,614 | $ | 22.92 | 4,347 | $ | 22.50 | — | $ | — | ||||||||||||||||
Granted | 227 | 31.43 | 670 | 25.41 | 4,352 | 22.50 | |||||||||||||||||||
Exercised | 329 | 22.50 | 30 | 22.50 | — | — | |||||||||||||||||||
Forfeited | 84 | 22.50 | 373 | 22.50 | 5 | 22.50 | |||||||||||||||||||
Outstanding — end of the period | 4,428 | $ | 23.40 | 4,614 | $ | 22.92 | 4,347 | $ | 22.50 | ||||||||||||||||
Options exercisable at year-end | 3,636 | 1,834 | — | ||||||||||||||||||||||
Weighted average exercise price of options exercisable at year-end | $ | 22.99 | $ | 22.50 |
F-24
Table of Contents
Exercisable | |||||||||||||||||||||
Weighted | |||||||||||||||||||||
Average | Weighted | Weighted | |||||||||||||||||||
Remaining | Average | Average | |||||||||||||||||||
Number | Contractual | Exercise | Number | Exercise | |||||||||||||||||
Range of Exercise Prices | Outstanding | Life | Price | Outstanding | Price | ||||||||||||||||
$22.50 | 3,530 | 7.8 | $ | 22.50 | 3,198 | $ | 22.50 | ||||||||||||||
22.51 - 25.00 | 165 | 8.2 | 22.79 | 91 | 22.76 | ||||||||||||||||
25.01 - 30.00 | 520 | 8.2 | 26.32 | 269 | 26.31 | ||||||||||||||||
$30.01 - $35.00 | 213 | 9.4 | $ | 31.67 | 78 | $ | 31.74 |
Dividend yield | 1.4% | |||
Risk free interest rate | 3.0% | |||
Expected volatility | 30.0% | |||
Expected option life | 7 years |
2004 | 2003 | 2002 Period | ||||||||||
Stock-based compensation expense, net of tax | $ | 6,640 | 14,511 | $ | 1,070 | |||||||
Stock-based compensation expense, net of tax included in financial statements | $ | 1,814 | 5,175 | $ | — |
Defined Contribution Plan |
F-25
Table of Contents
11. | Lease Commitments |
Years Ending December 31, | |||||
2005 | $ | 2,570 | |||
2006 | 2,336 | ||||
2007 | 1,785 | ||||
2008 | 1,860 | ||||
2009 | 1,934 | ||||
Thereafter | 6,770 | ||||
Total | $ | 17,255 | |||
12. | Related Party Transactions and Agreements |
F-26
Table of Contents
13. | Operating Segment Information |
F-27
Table of Contents
Property | ||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | |||||||||||||||
Year ended December 31, 2004: | ||||||||||||||||||
Net premiums written | $ | 504,439 | 677,399 | 464,175 | $ | 1,646,013 | ||||||||||||
Net premiums earned | 485,135 | 611,893 | 350,907 | 1,447,935 | ||||||||||||||
Losses and LAE | 349,557 | 418,355 | 251,892 | 1,019,804 | ||||||||||||||
Acquisition expenses | 76,360 | 151,649 | 99,812 | 327,821 | ||||||||||||||
Other underwriting expenses | 27,827 | 19,086 | 6,224 | 53,137 | ||||||||||||||
Segment underwriting income (loss) | $ | 31,391 | 22,803 | (7,021 | ) | $ | 47,173 | |||||||||||
Corporate expenses not allocated to segments | (13,196 | ) | ||||||||||||||||
Net foreign currency exchange gains | 725 | |||||||||||||||||
Interest expense | (9,268 | ) | ||||||||||||||||
Other income | 3,211 | |||||||||||||||||
Net investment income and net realized gains on investments | 86,487 | |||||||||||||||||
Income before income taxes | $ | 115,132 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Losses and LAE | 72.1 | % | 68.4 | % | 71.8 | % | 70.4 | % | ||||||||||
Acquisition expense | 15.7 | % | 24.8 | % | 28.4 | % | 22.6 | % | ||||||||||
Other underwriting expense | 5.7 | % | 3.1 | % | 1.8 | % | 3.7 | % | ||||||||||
Combined | 93.5 | % | 96.3 | % | 102.0 | % | 96.7 | % | ||||||||||
F-28
Table of Contents
Property | |||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | ||||||||||||||||
Year ended December 31, 2003: | |||||||||||||||||||
Net premiums written | $ | 352,908 | 474,000 | 345,234 | $ | 1,172,142 | |||||||||||||
Net premiums earned | 355,556 | 391,170 | 320,801 | 1,067,527 | |||||||||||||||
Losses and LAE | 169,944 | 266,836 | 147,391 | 584,171 | |||||||||||||||
Acquisition expenses | 52,154 | 101,005 | 98,067 | 251,226 | |||||||||||||||
Other underwriting expenses | 35,598 | 21,060 | 12,870 | 69,528 | |||||||||||||||
Segment underwriting income | $ | 97,860 | 2,269 | 62,473 | $ | 162,602 | |||||||||||||
Corporate expenses not allocated to segments | (23,067 | ) | |||||||||||||||||
Net foreign currency exchange losses | (114 | ) | |||||||||||||||||
Interest expense | (9,492 | ) | |||||||||||||||||
Other income | 3,343 | ||||||||||||||||||
Net investment income and net realized gains on investments | 60,426 | ||||||||||||||||||
Income before income taxes | $ | 193,698 | |||||||||||||||||
Ratios: | |||||||||||||||||||
Losses and LAE | 47.8 | % | 68.2 | % | 45.9 | % | 54.7 | % | |||||||||||
Acquisition expense | 14.7 | % | 25.8 | % | 30.6 | % | 23.5 | % | |||||||||||
Other underwriting expense | 10.0 | % | 5.4 | % | 4.0 | % | 6.5 | % | |||||||||||
Combined | 72.5 | % | 99.4 | % | 80.5 | % | 84.7 | % | |||||||||||
2002 Period: | |||||||||||||||||||
Net premiums written | $ | 89,341 | 164,929 | 43,844 | $ | 298,114 | |||||||||||||
Net premiums earned | 43,047 | 39,320 | 24,731 | 107,098 | |||||||||||||||
Losses and LAE | 21,558 | 29,498 | 9,300 | 60,356 | |||||||||||||||
Acquisition expenses | 7,798 | 9,269 | 8,407 | 25,474 | |||||||||||||||
Other underwriting expenses | 5,960 | 4,136 | 2,068 | 12,164 | |||||||||||||||
Segment underwriting income (loss) | $ | 7,731 | (3,583 | ) | 4,956 | $ | 9,104 | ||||||||||||
Corporate expenses not allocated to segments | (4,170 | ) | |||||||||||||||||
Net foreign currency exchange gains | 2,017 | ||||||||||||||||||
Interest expense | (1,261 | ) | |||||||||||||||||
Other income | 167 | ||||||||||||||||||
Net investment income and net realized gains on investments | 5,236 | ||||||||||||||||||
Income before income taxes | $ | 11,093 | |||||||||||||||||
Ratios: | |||||||||||||||||||
Losses and LAE | 50.1 | % | 75.0 | % | 37.6 | % | 56.4 | % | |||||||||||
Acquisition expense | 18.1 | % | 23.6 | % | 34.0 | % | 23.8 | % | |||||||||||
Other underwriting expense | 13.8 | % | 10.5 | % | 8.4 | % | 11.4 | % | |||||||||||
Combined | 82.0 | % | 109.1 | % | 80.0 | % | 91.6 | % | |||||||||||
F-29
Table of Contents
2004 | 2003 | 2002 Period | |||||||||||
United States | $ | 1,350,408 | 912,586 | $ | 153,872 | ||||||||
International | 295,605 | 259,556 | 144,242 | ||||||||||
Total | $ | 1,646,013 | 1,172,142 | $ | 298,114 | ||||||||
14. | Comprehensive Income |
2004 | 2003 | 2002 Period | ||||||||||||
Before tax amounts: | ||||||||||||||
Foreign currency translation adjustment | $ | 555 | 890 | $ | — | |||||||||
Net unrealized holding gains (losses) arising during the period | (12,054 | ) | 13,388 | 12,293 | ||||||||||
Less: reclassification adjustment for net (gains) losses realized in net income | 2,594 | (2,982 | ) | — | ||||||||||
Other comprehensive income before tax | (8,905 | ) | 11,296 | 12,293 | ||||||||||
Deferred income tax expense: | ||||||||||||||
Foreign currency translation adjustment | (167 | ) | (267 | ) | — | |||||||||
Net unrealized holding gains (losses) arising during the period | 2,763 | (2,983 | ) | 1,712 | ||||||||||
Less: reclassification adjustment for net (gains) losses realized in net income | (213 | ) | 147 | — | ||||||||||
Deferred tax on other comprehensive income (loss) | 2,383 | (3,103 | ) | 1,712 | ||||||||||
Net of tax amounts: | ||||||||||||||
Net foreign currency translation adjustment | 388 | 623 | — | |||||||||||
Net unrealized holding gains (losses) arising during the period | (9,291 | ) | 10,405 | 10,581 | ||||||||||
Less: reclassification adjustment for net (gains) losses realized in net income | 2,381 | (2,835 | ) | — | ||||||||||
Other comprehensive income (loss), net of tax | $ | (6,522 | ) | 8,193 | $ | 10,581 | ||||||||
15. | Quarterly Financial Data (Unaudited) |
F-30
Table of Contents
Three Months Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
2004 | 2004 | 2004 | 2004 | ||||||||||||||
Net premiums earned | $ | 321,042 | 310,867 | 383,090 | $ | 432,936 | |||||||||||
Net investment income | 17,484 | 19,377 | 21,429 | 26,242 | |||||||||||||
Losses and LAE | 161,969 | 189,466 | 384,724 | 283,645 | |||||||||||||
Acquisition expenses | 88,921 | 62,694 | 81,271 | 94,935 | |||||||||||||
Operating expenses | 18,774 | 19,262 | 15,400 | 12,897 | |||||||||||||
Net income | 54,814 | 49,799 | (69,752 | ) | 49,922 | ||||||||||||
Net income per share: | |||||||||||||||||
Basic | 1.27 | 1.15 | (1.62 | ) | 1.16 | ||||||||||||
Diluted | $ | 1.10 | 1.01 | (1.62 | ) | $ | 1.03 | ||||||||||
Average common shares outstanding: | |||||||||||||||||
Basic | 43,143 | 43,290 | 43,127 | 43,073 | |||||||||||||
Diluted | 50,984 | 50,788 | 43,127 | 49,819 |
Three Months Ended | |||||||||||||||||
March 31, | June 30, | September 30, | December 31, | ||||||||||||||
2003 | 2003 | 2003 | 2003 | ||||||||||||||
Net premiums earned | $ | 238,069 | 279,376 | 272,265 | $ | 277,817 | |||||||||||
Net investment income | 14,203 | 13,431 | 14,780 | 15,231 | |||||||||||||
Losses and LAE | 138,803 | 156,801 | 157,208 | 131,359 | |||||||||||||
Acquisition expenses | 51,719 | 60,376 | 60,408 | 78,723 | |||||||||||||
Operating expenses | 20,169 | 32,995 | 18,499 | 20,932 | |||||||||||||
Net income | 30,586 | 26,605 | 37,817 | 49,815 | |||||||||||||
Net income per share: | |||||||||||||||||
Basic | 0.71 | 0.62 | 0.88 | 1.16 | |||||||||||||
Diluted | $ | 0.66 | 0.57 | 0.81 | $ | 1.03 | |||||||||||
Average common shares outstanding: | |||||||||||||||||
Basic | 43,004 | 43,004 | 43,022 | 43,043 | |||||||||||||
Diluted | 49,008 | 48,871 | 48,876 | 49,868 |
16. | Investigations by the SEC and the New York Attorney General |
F-31
Table of Contents
17. | Condensed Consolidating Financial Information |
F-32
Table of Contents
Platinum | Platinum | Non-guarantor | Consolidating | |||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||||
ASSETS | ||||||||||||||||||||||
Investments: | ||||||||||||||||||||||
Fixed maturities available-for-sale, at fair value | $ | — | 3,740 | 2,153,789 | — | $ | 2,157,529 | |||||||||||||||
Fixed maturity trading securities at fair value | — | — | 82,673 | — | 82,673 | |||||||||||||||||
Other invested asset | — | — | 6,769 | — | 6,769 | |||||||||||||||||
Total investments | — | 3,740 | 2,243,231 | — | 2,246,971 | |||||||||||||||||
Investment in subsidiaries | 1,135,434 | 414,105 | 470,776 | (2,020,315 | ) | — | ||||||||||||||||
Cash and cash equivalents | 1,945 | 8,204 | 199,748 | — | 209,897 | |||||||||||||||||
Reinsurance assets | — | — | 2,009,245 | (1,090,219 | ) | 919,026 | ||||||||||||||||
Other assets | 1,648 | 1,502 | 142,951 | (100,000 | ) | 46,101 | ||||||||||||||||
Total assets | $ | 1,139,027 | 427,551 | 5,065,951 | (3,210,534 | ) | $ | 3,421,995 | ||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||
Reinsurance liabilities | $ | — | — | 3,233,233 | (1,133,358 | ) | $ | 2,099,875 | ||||||||||||||
Debt obligations | — | 137,500 | — | — | 137,500 | |||||||||||||||||
Other liabilities | 6,024 | 928 | 1,525 | 43,140 | 51,617 | |||||||||||||||||
Total liabilities | 6,024 | 138,428 | 3,234,758 | (1,090,218 | ) | 2,288,992 | ||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||
Common shares | 430 | — | 1,250 | (1,250 | ) | 430 | ||||||||||||||||
Additional paid-in capital | 911,851 | 147,238 | 1,417,032 | (1,564,270 | ) | 911,851 | ||||||||||||||||
Accumulated other comprehensive income | 12,252 | 3,309 | 17,068 | (20,377 | ) | 12,252 | ||||||||||||||||
Retained earnings | 208,470 | 138,576 | 395,843 | (534,419 | ) | 208,470 | ||||||||||||||||
Total shareholders’ equity | 1,133,003 | 289,123 | 1,831,193 | (2,120,316 | ) | 1,133,003 | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,139,027 | 427,551 | 5,065,951 | (3,210,534 | ) | $ | 3,421,995 | ||||||||||||||
F-33
Table of Contents
Non- | ||||||||||||||||||||||
Platinum | Platinum | Guarantor | Consolidating | |||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||||
ASSETS | ||||||||||||||||||||||
Investments: | ||||||||||||||||||||||
Fixed maturities available-for-sale, at fair value | $ | — | 2,464 | 1,581,041 | — | $ | 1,583,505 | |||||||||||||||
Fixed maturity trading securities at fair value | — | — | 94,633 | — | 94,633 | |||||||||||||||||
Other invested asset | — | — | 6,910 | — | 6,910 | |||||||||||||||||
Total investments | — | 2,464 | 1,682,584 | — | 1,685,048 | |||||||||||||||||
Investment in subsidiaries | 1,069,521 | 363,038 | 414,511 | (1,847,070 | ) | — | ||||||||||||||||
Cash and cash equivalents | 3,413 | 9,917 | 92,131 | — | 105,461 | |||||||||||||||||
Reinsurance assets | — | — | 1,292,394 | (649,355 | ) | 643,039 | ||||||||||||||||
Income tax recoverable | — | 3,757 | 5,603 | — | 9,360 | |||||||||||||||||
Other assets | 1,740 | 3,415 | 140,416 | (102,907 | ) | 42,664 | ||||||||||||||||
Total assets | $ | 1,074,674 | 382,591 | 3,627,639 | (2,599,332 | ) | $ | 2,485,572 | ||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||
Reinsurance liabilities | $ | — | — | 1,858,185 | (627,052 | ) | $ | 1,231,133 | ||||||||||||||
Debt obligations | — | 137,500 | — | — | 137,500 | |||||||||||||||||
Other liabilities | 7,471 | 1,029 | 66,745 | (25,509 | ) | 49,736 | ||||||||||||||||
Total liabilities | 7,471 | 138,529 | 1,924,930 | (652,561 | ) | 1,418,369 | ||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||
Common shares | 430 | — | — | — | 430 | |||||||||||||||||
Additional paid-in capital | 910,505 | 147,238 | 1,422,482 | (1,569,720 | ) | 910,505 | ||||||||||||||||
Accumulated other comprehensive income | 18,774 | 7,289 | 28,140 | (35,429 | ) | 18,774 | ||||||||||||||||
Retained earnings | 137,494 | 89,535 | 252,087 | (341,622 | ) | 137,494 | ||||||||||||||||
Total shareholders’ equity | 1,067,203 | 244,062 | 1,702,709 | (1,946,771 | ) | 1,067,203 | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,074,674 | 382,591 | 3,627,639 | (2,599,332 | ) | $ | 2,485,572 | ||||||||||||||
F-34
Table of Contents
Non- | ||||||||||||||||||||||
Platinum | Platinum | Guarantor | Consolidating | |||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||||
Revenue: | ||||||||||||||||||||||
Net premiums earned | $ | — | — | 1,447,935 | — | $ | 1,447,935 | |||||||||||||||
Net investment income | 53 | 164 | 84,315 | — | 84,532 | |||||||||||||||||
Net realized gains on investments | — | 6 | 1,949 | — | 1,955 | |||||||||||||||||
Other income | 2,944 | — | 48 | 219 | 3,211 | |||||||||||||||||
Total revenue | 2,997 | 170 | 1,534,247 | 219 | 1,537,633 | |||||||||||||||||
Expenses: | ||||||||||||||||||||||
Losses and loss adjustment expenses | — | — | 1,019,804 | — | 1,019,804 | |||||||||||||||||
Acquisition expenses | — | — | 331,754 | (3,933 | ) | 327,821 | ||||||||||||||||
Operating expenses | 12,725 | 288 | 49,387 | 3,933 | 66,333 | |||||||||||||||||
Net foreign currency exchange gains | (3 | ) | — | (722 | ) | — | (725 | ) | ||||||||||||||
Interest expense | 207 | 9,061 | — | — | 9,268 | |||||||||||||||||
Total expenses | 12,929 | 9,349 | 1,400,223 | — | 1,422,501 | |||||||||||||||||
Income (loss) before income tax expense | (9,932 | ) | (9,179 | ) | 134,024 | 219 | 115,132 | |||||||||||||||
Income tax expense (benefit) | — | (3,213 | ) | 33,562 | — | 30,349 | ||||||||||||||||
Net income (loss) before equity in earnings of subsidiaries | (9,932 | ) | (5,966 | ) | 100,462 | 219 | 84,783 | |||||||||||||||
Equity in earnings of subsidiaries | 94,715 | 55,006 | 60,799 | (210,520 | ) | — | ||||||||||||||||
Net income | $ | 84,783 | 49,040 | 161,261 | (210,301 | ) | $ | 84,783 | ||||||||||||||
F-35
Table of Contents
Non- | ||||||||||||||||||||||
Platinum | Platinum | Guarantor | Consolidating | |||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||||
Revenue: | ||||||||||||||||||||||
Net premiums earned | $ | — | — | 1,067,527 | — | $ | 1,067,527 | |||||||||||||||
Net investment income | 46 | 121 | 57,478 | — | 57,645 | |||||||||||||||||
Net realized gains on investments | — | — | 2,781 | — | 2,781 | |||||||||||||||||
Other income | — | — | 3,343 | — | 3,343 | |||||||||||||||||
Total revenue | 46 | 121 | 1,131,129 | — | 1,131,296 | |||||||||||||||||
Expenses: | ||||||||||||||||||||||
Losses and loss adjustment expenses | — | — | 584,171 | — | 584,171 | |||||||||||||||||
Acquisition expenses | — | — | 256,248 | (5,022 | ) | 251,226 | ||||||||||||||||
Operating expenses | 22,657 | 338 | 64,373 | 5,227 | 92,595 | |||||||||||||||||
Net foreign currency exchange losses | 4 | — | 110 | — | 114 | |||||||||||||||||
Interest expense | 344 | 9,148 | — | — | 9,492 | |||||||||||||||||
Total expenses | 23,005 | 9,486 | 904,902 | 205 | 937,598 | |||||||||||||||||
Income (loss) before income tax expense | (22,959 | ) | (9,365 | ) | 226,227 | (205 | ) | 193,698 | ||||||||||||||
Income tax expense (benefit) | — | (3,278 | ) | 52,153 | — | 48,875 | ||||||||||||||||
Net income (loss) before equity in earnings of subsidiaries | (22,959 | ) | (6,087 | ) | 174,074 | (205 | ) | 144,823 | ||||||||||||||
Equity in earnings of subsidiaries | 167,782 | 86,576 | 92,374 | (346,732 | ) | — | ||||||||||||||||
Net income | $ | 144,823 | 80,489 | 266,448 | (346,937 | ) | $ | 144,823 | ||||||||||||||
F-36
Table of Contents
Non- | ||||||||||||||||||||||
Platinum | Platinum | guarantor | Consolidating | |||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||||
Revenue: | ||||||||||||||||||||||
Net premiums earned | $ | — | — | 107,098 | — | $ | 107,098 | |||||||||||||||
Net investment income | 179 | 36 | 6,065 | (1,069 | ) | 5,211 | ||||||||||||||||
Net realized gains on investments | — | — | 25 | — | 25 | |||||||||||||||||
Other income | — | — | 167 | — | 167 | |||||||||||||||||
Total revenue | 179 | 36 | 113,355 | (1,069 | ) | 112,501 | ||||||||||||||||
Expenses: | ||||||||||||||||||||||
Losses and loss adjustment expenses | — | — | 60,356 | — | 60,356 | |||||||||||||||||
Acquisition expenses | — | — | 25,474 | — | 25,474 | |||||||||||||||||
Operating expenses | 3,986 | 204 | 12,144 | — | 16,334 | |||||||||||||||||
Net foreign currency exchange gains | — | — | (2,017 | ) | — | (2,017 | ) | |||||||||||||||
Interest expense | 58 | 1,202 | 1,001 | (1,000 | ) | 1,261 | ||||||||||||||||
Total expenses | 4,044 | 1,406 | 96,958 | (1,000 | ) | 101,408 | ||||||||||||||||
Income (loss) before income tax expense | (3,865 | ) | (1,370 | ) | 16,397 | (69 | ) | 11,093 | ||||||||||||||
Income tax expense (benefit) | — | (480 | ) | 5,135 | — | 4,655 | ||||||||||||||||
Net income (loss) before equity in earnings of subsidiaries | (3,865 | ) | (890 | ) | 11,262 | (69 | ) | 6,438 | ||||||||||||||
Equity in earnings of subsidiaries | 10,303 | 9,938 | 7,524 | (27,765 | ) | — | ||||||||||||||||
Net income | $ | 6,438 | 9,048 | 18,786 | (27,834 | ) | $ | 6,438 | ||||||||||||||
F-37
Table of Contents
Non- | |||||||||||||||||||||
Platinum | Platinum | guarantor | Consolidating | ||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
Net cash provided by (used in) operating activities | $ | (8,400 | ) | (436 | ) | 723,569 | — | $ | 714,733 | ||||||||||||
Investing Activities: | |||||||||||||||||||||
Proceeds from sale of available-for-sale fixed maturities | — | 998 | 497,947 | — | 498,945 | ||||||||||||||||
Proceeds from maturity or paydown of available-for-sale fixed maturities | — | 697 | 135,775 | — | 136,472 | ||||||||||||||||
Acquisition of available-for-sale fixed maturities | — | (2,972 | ) | (1,227,923 | ) | — | (1,230,895 | ) | |||||||||||||
Dividends from subsidiaries | 22,000 | — | — | (22,000 | ) | — | |||||||||||||||
Contributions to subsidiaries | (250 | ) | — | — | 250 | — | |||||||||||||||
Net cash provided by (used in) investing activities | 21,750 | (1,277 | ) | (594,201 | ) | (21,750 | ) | (595,478 | ) | ||||||||||||
Financing Activities: | |||||||||||||||||||||
Dividends paid to shareholders | (13,807 | ) | — | (22,000 | ) | 22,000 | (13,807 | ) | |||||||||||||
Proceeds from exercise of share options | 7,406 | — | — | — | 7,406 | ||||||||||||||||
Proceeds from issuance of common shares | 1,567 | — | — | — | 1,567 | ||||||||||||||||
Purchase of common shares | (9,985 | ) | — | — | — | (9,985 | ) | ||||||||||||||
Capital contribution from parent | — | — | 250 | (250 | ) | — | |||||||||||||||
Net cash used in financing activities | (14,819 | ) | — | (21,750 | ) | 21,750 | (14,819 | ) | |||||||||||||
Net increase (decrease) in cash and cash equivalents | (1,469 | ) | (1,713 | ) | 107,618 | — | 104,436 | ||||||||||||||
Cash and cash equivalents at beginning of year | 3,413 | 9,917 | 92,131 | — | 105,461 | ||||||||||||||||
Cash and cash equivalents at end of year | $ | 1,944 | 8,204 | 199,749 | — | $ | 209,897 | ||||||||||||||
F-38
Table of Contents
Non- | |||||||||||||||||||||
Platinum | Platinum | guarantor | Consolidating | ||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
Net cash provided by (used in) operating activities | $ | (21,103 | ) | (7,571 | ) | 411,981 | — | $ | 383,307 | ||||||||||||
Investing Activities: | |||||||||||||||||||||
Proceeds from sale of available-for-sale fixed maturities | — | — | 393,245 | — | 393,245 | ||||||||||||||||
Proceeds from maturity or paydown of available-for-sale fixed maturities | — | 1,624 | 131,355 | — | 132,979 | ||||||||||||||||
Acquisition of available-for-sale fixed maturities | — | (4,152 | ) | (1,061,925 | ) | — | (1,066,077 | ) | |||||||||||||
Other invested asset acquired | — | (6,910 | ) | — | (6,910 | ) | |||||||||||||||
Dividends from subsidiaries | 33,150 | — | — | (33,150 | ) | — | |||||||||||||||
Net cash provided by (used in) investing activities | 33,150 | (2,528 | ) | (544,235 | ) | (33,150 | ) | (546,763 | ) | ||||||||||||
Financing Activities: | |||||||||||||||||||||
Dividends paid to shareholders | (13,767 | ) | — | (33,150 | ) | 33,150 | (13,767 | ) | |||||||||||||
Proceeds from exercise of share options | 678 | — | — | — | 678 | ||||||||||||||||
Proceeds from issuance of common shares | 520 | — | — | — | 520 | ||||||||||||||||
Net cash used in financing activities | (12,569 | ) | — | (33,150 | ) | 33,150 | (12,569 | ) | |||||||||||||
Net decrease in cash and cash equivalents | (522 | ) | (10,099 | ) | (165,404 | ) | — | (176,025 | ) | ||||||||||||
Cash and cash equivalents at beginning of year | 3,935 | 20,016 | 257,535 | — | 281,486 | ||||||||||||||||
Cash and cash equivalents at end of year | $ | 3,413 | 9,917 | 92,131 | — | $ | 105,461 | ||||||||||||||
F-39
Table of Contents
Non- | |||||||||||||||||||||
Platinum | Platinum | guarantor | Consolidating | ||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
Net cash provided by (used in) operating activities | $ | (5,153 | ) | 16 | 286,530 | — | $ | 281,393 | |||||||||||||
Investing Activities: | |||||||||||||||||||||
Proceeds from sale of available-for-sale fixed maturities | — | — | 120,421 | — | 120,421 | ||||||||||||||||
Acquisition of available-for-sale fixed maturities | — | — | (1,157,416 | ) | (1,157,416 | ) | |||||||||||||||
Contributions to subsidiaries | (896,000 | ) | (250,000 | ) | (296,007 | ) | 1,442,007 | — | |||||||||||||
Net cash used in investing activities | (896,000 | ) | (250,000 | ) | (1,333,002 | ) | 1,442,007 | (1,036,995 | ) | ||||||||||||
Financing Activities: | |||||||||||||||||||||
Net proceeds from shares issued in initial capitalization | 120 | — | — | — | 120 | ||||||||||||||||
Redemption of shares issued in initial capitalization | (120 | ) | — | — | — | (120 | ) | ||||||||||||||
Net proceeds from issuance of common shares | 905,088 | — | — | — | 905,088 | ||||||||||||||||
Net proceeds from issuance of debt securities | — | 132,000 | 132,000 | ||||||||||||||||||
Capital contribution from parent | — | 138,000 | 1,304,007 | (1,442,007 | ) | — | |||||||||||||||
Net cash provided by financing activities | 905,088 | 270,000 | 1,304,007 | (1,442,007 | ) | 1,037,088 | |||||||||||||||
Net increase in cash and cash equivalents | 3,935 | 20,016 | 257,535 | — | 281,486 | ||||||||||||||||
Cash and cash equivalents at beginning of period | — | — | — | — | — | ||||||||||||||||
Cash and cash equivalents at end of period | $ | 3,935 | 20,016 | 257,535 | — | $ | 281,486 | ||||||||||||||
F-40
Table of Contents
P-1
Table of Contents
/s/ KPMG LLP |
P-2
Table of Contents
($ in millions) | ||||||
Net premiums | ||||||
Net premiums written | $ | 1,007 | ||||
Net change in unearned premiums | 95 | |||||
Net premiums earned | 1,102 | |||||
Underwriting deductions | ||||||
Losses and loss adjustment expenses incurred | 791 | |||||
Policy acquisition costs | 257 | |||||
Other underwriting expenses | 62 | |||||
Total underwriting deductions | 1,110 | |||||
Net underwriting loss | $ | (8 | ) | |||
P-3
Table of Contents
($ in millions) | |||||
Premiums collected, net | $ | 1,348 | |||
Losses and loss adjustment expenses paid | (1,057 | ) | |||
Policy acquisition expenses paid | (275 | ) | |||
Other underwriting expenses paid | (62 | ) | |||
Net cash used by underwriting | $ | (46 | ) | ||
P-4
Table of Contents
1. | Summary of Significant Accounting Policies |
P-5
Table of Contents
Insurance Losses and Loss Adjustment Expenses |
Insurance Reserves |
P-6
Table of Contents
Reinsurance |
Policy Acquisition Expenses |
Foreign Currency Translation |
2. | Related Party Transactions |
Reinsurance Transactions with Affiliates |
P-7
Table of Contents
Management Agreements with Affiliates |
3. | September 11, 2001 Terrorist Attack |
P-8
Table of Contents
Period from | |||||||||
January 1, 2002 | |||||||||
through | Year Ended | ||||||||
November 1, | December 31, | ||||||||
2002 | 2001 | ||||||||
Net premiums earned | $ | (5 | ) | $ | 141 | ||||
Losses and LAE | (19 | ) | (788 | ) | |||||
Other underwriting expenses | — | 91 | |||||||
Total underwriting loss | $ | (24 | ) | $ | (556 | ) | |||
Period from | |||||
January 1, 2002 | |||||
through | |||||
November 1, | |||||
2002 | |||||
North American Property | $ | 18 | |||
North American Casualty | 2 | ||||
International | 10 | ||||
Finite Risk | (6 | ) | |||
Total underwriting loss | $ | 24 | |||
4. | Reserves for Losses and LAE |
Reconciliation of Loss Reserves |
Loss and LAE reserves at beginning of year, as reported | $ | 4,949 | ||||
Less reinsurance recoverables on unpaid losses at beginning of year | (1,256 | ) | ||||
Net loss and LAE reserves at beginning of year | 3,693 | |||||
Provision for losses and LAE for claims incurred: | ||||||
Current period | 736 | |||||
Prior years | 55 | |||||
Total incurred | 791 | |||||
Losses and LAE payment for claims incurred: | ||||||
Current period | (114 | ) | ||||
Prior years | (839 | ) | ||||
Total paid | (953 | ) | ||||
Net loss and LAE reserves at end of year | 3,531 | |||||
Plus reinsurance recoverables on unpaid losses at end of year | 1,249 | |||||
Loss and LAE reserves at end of year, as reported | $ | 4,780 | ||||
P-9
Table of Contents
Environmental and Asbestos Reserves |
5. | Employee Benefit Plans |
Retirement Plans | $ | 3.3 | |||
Post Retirement Plans | (0.5 | ) | |||
Variable Stock Option Plan | (1.4 | ) | |||
Total | $ | 1.4 | |||
6. | Commitments and Contingencies |
Lease Commitments |
Legal Matters |
P-10
Table of Contents
7. | Fourth Quarter 2001 Strategic Review |
Net premiums earned | $ | 277 | ||
Underwriting results | (52 | ) |
8. | Reinsurance |
P-11
Table of Contents
Period from | ||||||
January 1, | ||||||
2002 | ||||||
through | ||||||
November 1, | ||||||
2002 | ||||||
St. Paul corporate aggregate excess-of-loss reinsurance program: | ||||||
Ceded premiums written | $ | (4 | ) | |||
Ceded losses and LAE | (9 | ) | ||||
Ceded premiums earned | (4 | ) | ||||
Net underwriting (detriment) benefit | $ | (5 | ) | |||
Predecessor aggregate treaty: | ||||||
Ceded premiums written | $ | (1 | ) | |||
Ceded losses and LAE | (35 | ) | ||||
Ceded premiums earned | (2 | ) | ||||
Net underwriting (detriment) benefit | $ | (33 | ) | |||
Combined total: | ||||||
Ceded premiums written | $ | (5 | ) | |||
Ceded losses and LAE | (44 | ) | ||||
Ceded premiums earned | (6 | ) | ||||
Net underwriting (detriment) benefit | $ | (38 | ) | |||
P-12
Table of Contents
Period from | |||||
January 1, | |||||
2002 | |||||
through | |||||
November 1, | |||||
2002 | |||||
Premiums written: | |||||
Assumed | $ | 1,056 | |||
Ceded | 49 | ||||
Net premiums written | 1,007 | ||||
Premiums earned: | |||||
Assumed | $ | 1,160 | |||
Ceded | 58 | ||||
Net premiums earned | $ | 1,102 | |||
Insurance losses and LAE: | |||||
Assumed | $ | 903 | |||
Ceded | 112 | ||||
Total insurance losses and LAE | $ | 791 | |||
9. | Segment Information |
P-13
Table of Contents
Geographic Areas |
U.S. | $ | 701 | |||
Non-U.S. | 401 | ||||
Total net premium earned | $ | 1,102 | |||
Segment Information |
Premium earned: | ||||||
North American Property | $ | 205 | ||||
North American Casualty | 451 | |||||
International | 206 | |||||
Finite Risk | 240 | |||||
Total net premiums earned | $ | 1,102 | ||||
Underwriting gain (loss): | ||||||
North American Property | $ | 33 | ||||
North American Casualty | (79 | ) | ||||
International | 51 | |||||
Finite Risk | (13 | ) | ||||
Total Underwriting gain (loss) | $ | (8 | ) | |||
P-14
Table of Contents
10. | Quarterly Results of Operations (Unaudited) |
First | Second | Third | Fourth | ||||||||||||||
Quarter | Quarter | Quarter | Quarter | ||||||||||||||
2002: | |||||||||||||||||
Net premiums written | $ | 463 | $ | 200 | 234 | 110 | |||||||||||
Net premiums earned | 377 | 305 | 307 | 113 | |||||||||||||
Underwriting gain (loss) | 15 | (6 | ) | (21 | ) | 4 |
* | Fourth quarter of 2002 represents the period from October 1, 2002 through November 1, 2002. |
11. | September 11, 2001 Terrorist Attack — Legal Matters (Unaudited) |
P-15
Table of Contents
Page | ||||
Consolidated Balance Sheets as June 30, 2005 (Unaudited) and December 31, 2004 | Q-2 | |||
Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2005 and 2004 (Unaudited) | Q-3 | |||
Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2005 and 2004 (Unaudited) | Q-4 | |||
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (Unaudited) | Q-5 | |||
Notes to Condensed Consolidated Financial Statements for the Three and Six Months Ended June 30, 2005 and 2004 (Unaudited) | Q-6 |
Q-1
Table of Contents
Item 1. | Condensed Consolidated Financial Statements |
(Unaudited) | ||||||||||
June 30, | December 31, | |||||||||
2005 | 2004 | |||||||||
ASSETS | ||||||||||
Investments: | ||||||||||
Fixed maturities available-for-sale, at fair value (amortized cost — $2,639,061 and $2,144,290, respectively) | $ | 2,649,121 | $ | 2,157,529 | ||||||
Fixed maturities — trading, at fair value (amortized cost — $73,301 and $82,931, respectively) | 73,571 | 82,673 | ||||||||
Other invested asset | 6,000 | 6,769 | ||||||||
Total investments | 2,728,692 | 2,246,971 | ||||||||
Cash and cash equivalents | 409,539 | 209,897 | ||||||||
Accrued investment income | 28,316 | 23,663 | ||||||||
Reinsurance premiums receivable | 576,457 | 580,048 | ||||||||
Reinsurance recoverable on ceded losses and loss adjustment expenses | 10,447 | 2,005 | ||||||||
Prepaid reinsurance premiums | 6,241 | 2,887 | ||||||||
Funds held by ceding companies | 271,795 | 198,048 | ||||||||
Deferred acquisition costs | 144,844 | 136,038 | ||||||||
Income tax recoverable | — | 1,325 | ||||||||
Deferred tax assets | 12,849 | 8,931 | ||||||||
Other assets | 10,056 | 12,182 | ||||||||
Total assets | $ | 4,199,236 | $ | 3,421,995 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Liabilities: | ||||||||||
Unpaid losses and loss adjustment expenses | $ | 1,559,092 | $ | 1,380,955 | ||||||
Unearned premiums | 575,727 | 502,423 | ||||||||
Reinsurance deposit liabilities | 5,821 | 20,189 | ||||||||
Debt obligations | 387,500 | 137,500 | ||||||||
Ceded premiums payable | 18,119 | 2,384 | ||||||||
Commissions payable | 216,459 | 181,925 | ||||||||
Funds withheld | 13,224 | 11,999 | ||||||||
Deferred taxes | 10,545 | 10,404 | ||||||||
Other liabilities | 140,021 | 41,213 | ||||||||
Total liabilities | 2,926,508 | 2,288,992 | ||||||||
Shareholders’ Equity: | ||||||||||
Preferred shares, $.01 par value, 25,000,000 shares authorized, no shares issued or outstanding | — | — | ||||||||
Common shares, $.01 par value, 200,000,000 shares authorized, 43,406,788 and 43,087,407 shares issued and outstanding, respectively | 434 | 430 | ||||||||
Additional paid-in capital | 921,271 | 911,851 | ||||||||
Unearned share grant compensation | (2,246 | ) | — | |||||||
Accumulated other comprehensive income | 10,637 | 12,252 | ||||||||
Retained earnings | 342,632 | 208,470 | ||||||||
Total shareholders’ equity | 1,272,728 | 1,133,003 | ||||||||
Total liabilities and shareholders’ equity | $ | 4,199,236 | $ | 3,421,995 | ||||||
Q-2
Table of Contents
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||||
Revenue: | |||||||||||||||||||
Net premiums earned | $ | 431,470 | 310,867 | 842,510 | $ | 631,909 | |||||||||||||
Net investment income | 28,904 | 19,377 | 55,809 | 36,861 | |||||||||||||||
Net realized losses on investments | (555 | ) | (1,279 | ) | (183 | ) | (827 | ) | |||||||||||
Other income | 588 | 605 | 232 | 1,116 | |||||||||||||||
Total revenue | 460,407 | 329,570 | 898,368 | 669,059 | |||||||||||||||
Expenses: | |||||||||||||||||||
Losses and loss adjustment expenses | 240,852 | 189,466 | 478,550 | 351,435 | |||||||||||||||
Acquisition expenses | 103,928 | 62,694 | 197,177 | 151,615 | |||||||||||||||
Operating expenses | 23,480 | 19,262 | 43,488 | 38,036 | |||||||||||||||
Net foreign currency exchange losses | 160 | 1,168 | 1,958 | 302 | |||||||||||||||
Interest expense | 4,174 | 2,324 | 6,347 | 4,630 | |||||||||||||||
Total expenses | 372,594 | 274,914 | 727,520 | 546,018 | |||||||||||||||
Income before income tax expense | 87,813 | 54,656 | 170,848 | 123,041 | |||||||||||||||
Income tax expense | 19,828 | 4,857 | 29,775 | 18,428 | |||||||||||||||
Net income | $ | 67,985 | 49,799 | 141,073 | $ | 104,613 | |||||||||||||
Earnings per share: | |||||||||||||||||||
Basic earnings per share | $ | 1.57 | 1.15 | 3.26 | $ | 2.42 | |||||||||||||
Diluted earnings per share | $ | 1.39 | 1.01 | 2.88 | $ | 2.12 | |||||||||||||
Comprehensive income (loss): | |||||||||||||||||||
Net income | $ | 67,985 | 49,799 | 141,073 | $ | 104,613 | |||||||||||||
Other comprehensive income: | |||||||||||||||||||
Net change in unrealized gains and losses on available-for-sale securities, net of deferred taxes | 33,051 | (52,356 | ) | (1,578 | ) | (33,183 | ) | ||||||||||||
Cumulative translation adjustments, net of deferred taxes | (46 | ) | (123 | ) | (37 | ) | (152 | ) | |||||||||||
Comprehensive income (loss) | $ | 100,990 | (2,680 | ) | 139,458 | $ | 71,278 | ||||||||||||
Shareholder dividends: | |||||||||||||||||||
Dividends declared | $ | 3,462 | 3,464 | 6,911 | $ | 6,925 | |||||||||||||
Dividends declared per share | $ | 0.08 | 0.08 | 0.16 | $ | 0.16 |
Q-3
Table of Contents
2005 | 2004 | |||||||||
Preferred shares: | ||||||||||
Balances at beginning and end of period | $ | — | $ | — | ||||||
Common shares: | ||||||||||
Balances at beginning of period | 430 | 430 | ||||||||
Exercise of share options | 3 | 3 | ||||||||
Issuance of restricted shares | 1 | — | ||||||||
Balances at end of period | 434 | 433 | ||||||||
Additional paid-in-capital: | ||||||||||
Balances at beginning of period | 911,851 | 910,505 | ||||||||
Exercise of share options | 4,981 | 5,046 | ||||||||
Issuance of restricted shares | 2,750 | — | ||||||||
Share based compensation | 1,689 | 1,087 | ||||||||
Balances at end of period | 921,271 | 916,638 | ||||||||
Unearned share grant compensation: | ||||||||||
Balances at beginning of period | — | — | ||||||||
Shares issued | (2,750 | ) | — | |||||||
Amortization | 504 | — | ||||||||
Balances at end of period | (2,246 | ) | — | |||||||
Accumulated other comprehensive income (loss): | ||||||||||
Balances at beginning of period | 12,252 | 18,774 | ||||||||
Net change in unrealized gains and losses on available-for-sale securities, net of deferred taxes | (1,578 | ) | (33,183 | ) | ||||||
Net change in cumulative translation adjustments, net of deferred tax | (37 | ) | (152 | ) | ||||||
Balances at end of period | 10,637 | (14,561 | ) | |||||||
Retained earnings: | ||||||||||
Balances at beginning of period | 208,470 | 137,494 | ||||||||
Net income | 141,073 | 104,613 | ||||||||
Dividends paid to shareholders | (6,911 | ) | (6,925 | ) | ||||||
Balances at end of period | 342,632 | 235,182 | ||||||||
Total shareholders’ equity | $ | 1,272,728 | $ | 1,137,692 | ||||||
Q-4
Table of Contents
2005 | 2004 | |||||||||||
Operating Activities: | ||||||||||||
Net income | $ | 141,073 | $ | 104,613 | ||||||||
Adjustments to reconcile net income to cash used in operations: | ||||||||||||
Depreciation and amortization | 10,231 | 10,551 | ||||||||||
Net realized losses on investments | 183 | 827 | ||||||||||
Net foreign currency exchange losses | 1,958 | 302 | ||||||||||
Share-based compensation | 2,193 | 1,087 | ||||||||||
Trading securities activities | 4,329 | 41,978 | ||||||||||
Changes in assets and liabilities: | ||||||||||||
Increase in accrued investment income | (4,653 | ) | (3,215 | ) | ||||||||
(Increase) decrease in reinsurance premiums receivable | 3,591 | (62,291 | ) | |||||||||
Increase in funds held by ceding companies | (73,747 | ) | (16,202 | ) | ||||||||
Increase in deferred acquisition costs | (8,806 | ) | (42,839 | ) | ||||||||
Increase in net unpaid losses and loss adjustment expenses | 173,745 | 161,108 | ||||||||||
Increase in net unearned premiums | 69,950 | 177,244 | ||||||||||
Increase (decrease) in reinsurance deposit liabilities | (14,368 | ) | 14,214 | |||||||||
Increase (decrease) in ceded premiums payable | 15,735 | (840 | ) | |||||||||
Increase in commissions payable | 34,534 | 30,996 | ||||||||||
Increase in funds withheld | 1,225 | — | ||||||||||
Changes in other assets and liabilities | 19,002 | 20,030 | ||||||||||
Other net | 227 | (621 | ) | |||||||||
Net cash provided by operating activities | 376,402 | 436,942 | ||||||||||
Investing Activities: | ||||||||||||
Proceeds from sale of available-for-sale fixed maturities | 207,840 | 190,589 | ||||||||||
Proceeds from maturity or paydown of available-for-sale fixed maturities | 66,796 | 43,927 | ||||||||||
Acquisition of available-for-sale fixed maturities | (696,372 | ) | (602,816 | ) | ||||||||
Net cash used in investing activities | (421,736 | ) | (368,300 | ) | ||||||||
Financing Activities: | ||||||||||||
Dividends paid to shareholders | (6,911 | ) | (6,925 | ) | ||||||||
Proceeds from exercise of share options | 4,984 | 5,049 | ||||||||||
Proceeds from issuance of debt | 246,900 | — | ||||||||||
Net cash used in financing activities | 244,973 | (1,876 | ) | |||||||||
Net increase in cash and cash equivalents | 199,639 | 66,766 | ||||||||||
Cash and cash equivalents at beginning of period | 209,900 | 105,461 | ||||||||||
Cash and cash equivalents at end of period | $ | 409,539 | $ | 172,227 | ||||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Income taxes paid | $ | 28,573 | $ | 4,799 | ||||||||
Interest paid | $ | 3,671 | $ | 3,729 |
Q-5
Table of Contents
(1) | Basis of Presentation |
Q-6
Table of Contents
Share-Based Compensation |
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
Share-based compensation expense: | |||||||||||||||||
As reported | $ | 507 | 583 | 1,802 | $ | 1,087 | |||||||||||
Pro forma | 1,595 | 1,587 | 4,116 | 3,345 | |||||||||||||
Net income: | |||||||||||||||||
As reported | 67,985 | 49,799 | 141,073 | 104,613 | |||||||||||||
Pro forma | 66,897 | 48,795 | 138,759 | 102,355 | |||||||||||||
Basic earnings per share: | |||||||||||||||||
As reported | 1.57 | 1.15 | 3.26 | 2.42 | |||||||||||||
Pro forma | 1.55 | 1.11 | 3.21 | 2.40 | |||||||||||||
Diluted earnings per share: | |||||||||||||||||
As reported | 1.39 | 1.01 | 2.88 | 2.12 | |||||||||||||
Pro forma | $ | 1.37 | 0.98 | 2.83 | $ | 2.10 |
Q-7
Table of Contents
Reclassifications |
(2) | Investments |
2005 | 2004 | ||||||||
Fixed maturities | $ | (3,179 | ) | $ | (41,134 | ) | |||
Less — deferred taxes | 1,601 | 7,951 | |||||||
Net change in unrealized gains (losses) | $ | (1,578 | ) | $ | (33,183 | ) | |||
Q-8
Table of Contents
Unrealized | |||||||||
Fair Value | Loss | ||||||||
Less than twelve months: | |||||||||
U.S. Government and U.S. Government agencies | $ | 132,689 | $ | 58 | |||||
Corporate bonds | 589,711 | 5,456 | |||||||
Mortgage and asset backed securities | 205,043 | 614 | |||||||
Municipal bonds | 96,504 | 489 | |||||||
Foreign governments and states | 18,646 | 109 | |||||||
Redeemable preferred stocks | 8,441 | 294 | |||||||
Total | 1,051,034 | 7,020 | |||||||
Twelve months or more: | |||||||||
Corporate bonds | 109,388 | 2,274 | |||||||
Mortgage and asset backed securities | 69,749 | 938 | |||||||
Municipal bonds | 40,678 | 713 | |||||||
Foreign governments and states | 11,290 | 270 | |||||||
Total | 231,105 | 4,195 | |||||||
Total of securities with unrealized losses: | |||||||||
U.S. Government and U.S. Government agencies | 132,689 | 58 | |||||||
Corporate bonds | 699,099 | 7,730 | |||||||
Mortgage and asset backed securities | 274,792 | 1,552 | |||||||
Municipal bonds | 137,182 | 1,202 | |||||||
Foreign governments and states | 29,936 | 379 | |||||||
Redeemable preferred stocks | 8,441 | 294 | |||||||
Total | $ | 1,282,139 | $ | 11,215 | |||||
Q-9
Table of Contents
(3) | Earnings Per Share |
Weighted | |||||||||||||||
Average | |||||||||||||||
Net | Shares | Earnings | |||||||||||||
Income | Outstanding | Per Share | |||||||||||||
Three Months Ended June 30, 2005: | |||||||||||||||
Basic earnings per share | $ | 67,985 | 43,293 | $ | 1.57 | ||||||||||
Diluted earnings per share: | |||||||||||||||
Share options and restricted share units | — | 1,707 | |||||||||||||
Interest expense related to ESU’s, net of related income tax benefit | 1,506 | — | |||||||||||||
Common share conversion of ESU’s | 5,009 | ||||||||||||||
Diluted earnings per share: | $ | 69,491 | 50,009 | $ | 1.39 | ||||||||||
Three Months Ended June 30, 2004: | |||||||||||||||
Basic earnings per share | $ | 49,799 | 43,290 | $ | 1.15 | ||||||||||
Diluted earnings per share: | |||||||||||||||
Share options and restricted share units | — | 2,489 | |||||||||||||
Interest expense related to ESU’s, net of related income tax benefit | 1,530 | — | |||||||||||||
Common share conversion of ESU’s | — | 5,009 | |||||||||||||
Diluted earnings per share: | $ | 51,329 | 50,788 | $ | 1.01 | ||||||||||
Six Months Ended June 30, 2005: | |||||||||||||||
Basic earnings per share | $ | 141,073 | 43,224 | $ | 3.26 | ||||||||||
Diluted earnings per share: | |||||||||||||||
Share options and restricted share units | — | 1,807 | |||||||||||||
Interest expense related to ESU’s, net of related income tax benefit | 2,929 | — | |||||||||||||
Common share conversion of ESU’s | — | 5,009 | |||||||||||||
Diluted earnings per share: | $ | 144,002 | 50,040 | $ | 2.88 | ||||||||||
Six Months Ended June 30, 2004: | |||||||||||||||
Basic earnings per share | $ | 104,613 | 43,216 | $ | 2.42 | ||||||||||
Diluted earnings per share: | |||||||||||||||
Share options and restricted share units | — | 2,616 | |||||||||||||
Interest expense related to ESU’s, net of related income tax benefit | 3,052 | — | |||||||||||||
Common share conversion of ESU’s | — | 5,009 | |||||||||||||
Diluted earnings per share: | $ | 107,665 | 50,841 | $ | 2.12 | ||||||||||
Q-10
Table of Contents
(4) | Operating Segment Information |
Q-11
Table of Contents
Property | ||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | |||||||||||||||
Three months ended June 30, 2005: | ||||||||||||||||||
Net premiums written | $ | 134,953 | 188,890 | 99,116 | $ | 422,959 | ||||||||||||
Net premiums earned | 140,669 | 198,723 | 92,078 | 431,470 | ||||||||||||||
Losses and LAE | 58,499 | 127,531 | 54,822 | 240,852 | ||||||||||||||
Acquisition expenses | 29,695 | 47,963 | 26,270 | 103,928 | ||||||||||||||
Other underwriting expenses | 8,240 | 8,972 | 1,333 | 18,545 | ||||||||||||||
Segment underwriting income | $ | 44,235 | 14,257 | 9,653 | $ | 68,145 | ||||||||||||
Corporate expenses not allocated to segments | (4,935 | ) | ||||||||||||||||
Net foreign currency exchange losses | (160 | ) | ||||||||||||||||
Interest expense | (4,174 | ) | ||||||||||||||||
Other income | 588 | |||||||||||||||||
Net investment income and net realized losses on investments | 28,349 | |||||||||||||||||
Income before income tax expense | $ | 87,813 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Losses and LAE | 41.6 | % | 64.2 | % | 59.5 | % | 55.8 | % | ||||||||||
Acquisition expense | 21.1 | % | 24.1 | % | 28.5 | % | 24.1 | % | ||||||||||
Other underwriting expense | 5.9 | % | 4.5 | % | 1.4 | % | 4.3 | % | ||||||||||
Combined | 68.6 | % | 92.8 | % | 89.4 | % | 84.2 | % | ||||||||||
Three months ended June 30, 2004: | ||||||||||||||||||
Net premiums written | $ | 101,841 | 112,761 | 115,925 | $ | 330,527 | ||||||||||||
Net premiums earned | 99,928 | 132,230 | 78,709 | 310,867 | ||||||||||||||
Losses and LAE | 40,974 | 93,391 | 55,101 | 189,466 | ||||||||||||||
Acquisition expenses | 14,905 | 31,994 | 15,795 | 62,694 | ||||||||||||||
Other underwriting expenses | 7,174 | 5,305 | 2,567 | 15,046 | ||||||||||||||
Segment underwriting income | $ | 36,875 | 1,540 | 5,246 | $ | 43,661 | ||||||||||||
Corporate expenses not allocated to segments | (4,216 | ) | ||||||||||||||||
Net foreign currency exchange losses | (1,168 | ) | ||||||||||||||||
Interest expense | (2,324 | ) | ||||||||||||||||
Other income | 605 | |||||||||||||||||
Net investment income and net realized losses on investments | 18,098 | |||||||||||||||||
Income before income tax expense | $ | 54,656 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Losses and LAE | 41.0 | % | 70.6 | % | 70.0 | % | 60.9 | % | ||||||||||
Acquisition expense | 14.9 | % | 24.2 | % | 20.1 | % | 20.2 | % | ||||||||||
Other underwriting expense | 7.2 | % | 4.0 | % | 3.3 | % | 4.8 | % | ||||||||||
Combined | 63.1 | % | 98.8 | % | 93.4 | % | 85.9 | % | ||||||||||
Q-12
Table of Contents
Property | ||||||||||||||||||
and Marine | Casualty | Finite Risk | Total | |||||||||||||||
Six months ended June 30, 2005: | ||||||||||||||||||
Net premiums written | $ | 320,002 | 404,559 | 192,197 | $ | 916,758 | ||||||||||||
Net premiums earned | 268,866 | 383,491 | 190,153 | 842,510 | ||||||||||||||
Losses and LAE | 118,539 | 245,969 | 114,042 | 478,550 | ||||||||||||||
Acquisition expenses | 51,684 | 93,165 | 52,328 | 197,177 | ||||||||||||||
Other underwriting expenses | 15,963 | 16,285 | 2,904 | 35,152 | ||||||||||||||
Segment underwriting income | $ | 82,680 | 28,072 | 20,879 | $ | 131,631 | ||||||||||||
Corporate expenses not allocated to segments | (8,336 | ) | ||||||||||||||||
Net foreign currency exchange losses | (1,958 | ) | ||||||||||||||||
Interest expense | (6,347 | ) | ||||||||||||||||
Other income | 232 | |||||||||||||||||
Net investment income and net realized losses on investments | 55,626 | |||||||||||||||||
Income before income tax expense | $ | 170,848 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Losses and LAE | 44.1 | % | 64.1 | % | 60.0 | % | 56.8 | % | ||||||||||
Acquisition expense | 19.2 | % | 24.3 | % | 27.5 | % | 23.4 | % | ||||||||||
Other underwriting expense | 5.9 | % | 4.2 | % | 1.5 | % | 4.2 | % | ||||||||||
Combined | 69.2 | % | 92.6 | % | 89.0 | % | 84.4 | % | ||||||||||
Six months ended June 30, 2004: | ||||||||||||||||||
Net premiums written | $ | 273,135 | 336,726 | 200,772 | $ | 810,633 | ||||||||||||
Net premiums earned | 217,993 | 268,452 | 145,464 | 631,909 | ||||||||||||||
Losses and LAE | 89,552 | 188,175 | 73,708 | 351,435 | ||||||||||||||
Acquisition expenses | 36,657 | 66,830 | 48,128 | 151,615 | ||||||||||||||
Other underwriting expenses | 15,324 | 10,362 | 5,164 | 30,850 | ||||||||||||||
Segment underwriting income | $ | 76,460 | 3,085 | 18,464 | $ | 98,009 | ||||||||||||
Corporate expenses not allocated to segments | (7,186 | ) | ||||||||||||||||
Net foreign currency exchange losses | (302 | ) | ||||||||||||||||
Interest expense | (4,630 | ) | ||||||||||||||||
Other income | 1,116 | |||||||||||||||||
Net investment income and net realized losses on investments | 36,034 | |||||||||||||||||
Income before income tax expense | $ | 123,041 | ||||||||||||||||
Ratios: | ||||||||||||||||||
Losses and LAE | 41.1 | % | 70.1 | % | 50.7 | % | 55.6 | % | ||||||||||
Acquisition expense | 16.8 | % | 24.9 | % | 33.1 | % | 24.0 | % | ||||||||||
Other underwriting expense | 7.0 | % | 3.9 | % | 3.6 | % | 4.9 | % | ||||||||||
Combined | 64.9 | % | 98.9 | % | 87.4 | % | 84.5 | % | ||||||||||
(5) | Income Taxes |
Q-13
Table of Contents
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Expected income tax expense at 35% | $ | 30,735 | 19,130 | 59,797 | $ | 43,064 | ||||||||||
Effect of foreign income subject to tax at rates other than 35% | (19,635 | ) | (14,233 | ) | (38,258 | ) | (24,341 | ) | ||||||||
Tax exempt investment income | (438 | ) | (567 | ) | (964 | ) | (961 | ) | ||||||||
U.S. withholding tax on deemed taxable transfer to foreign affiliate | 9,150 | — | 9,150 | — | ||||||||||||
Other, net | 16 | 527 | 50 | 666 | ||||||||||||
Income tax expense | $ | 19,828 | 4,857 | 29,775 | $ | 18,428 | ||||||||||
(6) | Condensed Consolidating Financial Information |
Q-14
Table of Contents
Non- | ||||||||||||||||||||||
Platinum | Platinum | guarantor | Consolidating | |||||||||||||||||||
Condensed Consolidating Balance Sheet June 30, 2005 | Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
ASSETS | ||||||||||||||||||||||
Investments: | ||||||||||||||||||||||
Fixed maturities available-for-sale, at fair value | $ | — | 7,088 | 2,642,033 | — | $ | 2,649,121 | |||||||||||||||
Fixed maturity trading securities at fair value | — | — | 73,571 | — | 73,571 | |||||||||||||||||
Other invested asset | — | — | 6,000 | — | 6,000 | |||||||||||||||||
Total investments | — | 7,088 | 2,721,604 | — | 2,728,692 | |||||||||||||||||
Investment in subsidiaries | 1,270,760 | 472,597 | 413,539 | (2,156,896 | ) | — | ||||||||||||||||
Cash and cash equivalents | 6,137 | 36,179 | 367,223 | — | 409,539 | |||||||||||||||||
Reinsurance assets | — | — | 2,193,584 | (1,183,800 | ) | 1,009,784 | ||||||||||||||||
Other assets | 908 | 4,082 | 146,231 | (100,000 | ) | 51,221 | ||||||||||||||||
Total assets | $ | 1,277,805 | 519,946 | 5,842,181 | (3,440,696 | ) | $ | 4,199,236 | ||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||
Reinsurance liabilities | $ | — | — | 3,582,576 | (1,194,134 | ) | $ | 2,388,442 | ||||||||||||||
Debt obligations | — | 387,500 | — | — | 387,500 | |||||||||||||||||
Other liabilities | 5,079 | 6,981 | 128,172 | 10,334 | 150,566 | |||||||||||||||||
Total liabilities | 5,079 | 394,481 | 3,710,748 | (1,183,800 | ) | 2,926,508 | ||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||
Common shares | 434 | — | 1,250 | (1,250 | ) | 434 | ||||||||||||||||
Additional paid-in capital | 921,269 | 51,533 | 1,442,034 | (1,493,565 | ) | 921,271 | ||||||||||||||||
Unearned share based comp | (2,246 | ) | — | — | — | (2,246 | ) | |||||||||||||||
Accumulated other comprehensive income | 10,637 | 176 | 12,512 | (12,688 | ) | 10,637 | ||||||||||||||||
Retained earnings | 342,632 | 73,756 | 675,637 | (749,393 | ) | 342,632 | ||||||||||||||||
Total shareholders’ equity | 1,272,726 | 125,465 | 2,131,433 | (2,256,896 | ) | 1,272,728 | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,277,805 | 519,946 | 5,842,181 | (3,440,696 | ) | $ | 4,199,236 | ||||||||||||||
Q-15
Table of Contents
Platinum | Platinum | Non-guarantor | Consolidating | |||||||||||||||||||
Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||||
ASSETS | ||||||||||||||||||||||
Investments: | ||||||||||||||||||||||
Fixed maturities available-for-sale, at fair value | $ | — | 3,740 | 2,153,789 | — | $ | 2,157,529 | |||||||||||||||
Fixed maturity trading securities at fair value | — | — | 82,673 | — | 82,673 | |||||||||||||||||
Other invested asset | — | — | 6,769 | — | 6,769 | |||||||||||||||||
Total investments | — | 3,740 | 2,243,231 | — | 2,246,971 | |||||||||||||||||
Investment in subsidiaries | 1,135,434 | 414,105 | 470,776 | (2,020,315 | ) | — | ||||||||||||||||
Cash and cash equivalents | 1,945 | 8,204 | 199,748 | — | 209,897 | |||||||||||||||||
Reinsurance assets | — | — | 2,009,245 | (1,090,219 | ) | 919,026 | ||||||||||||||||
Other assets | 1,648 | 1,502 | 142,951 | (100,000 | ) | 46,101 | ||||||||||||||||
Total assets | $ | 1,139,027 | 427,551 | 5,065,951 | (3,210,534 | ) | $ | 3,421,995 | ||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||
Reinsurance liabilities | $ | — | — | 3,233,233 | (1,133,358 | ) | $ | 2,099,875 | ||||||||||||||
Debt obligations | — | 137,500 | — | — | 137,500 | |||||||||||||||||
Other liabilities | 6,024 | 928 | 1,525 | 43,140 | 51,617 | |||||||||||||||||
Total liabilities | 6,024 | 138,428 | 3,234,758 | (1,090,218 | ) | 2,288,992 | ||||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||||
Preferred shares | — | — | — | — | — | |||||||||||||||||
Common shares | 430 | — | 1,250 | (1,250 | ) | 430 | ||||||||||||||||
Additional paid-in capital | 911,851 | 147,238 | 1,417,032 | (1,564,270 | ) | 911,851 | ||||||||||||||||
Accumulated other comprehensive income | 12,252 | 3,309 | 17,068 | (20,377 | ) | 12,252 | ||||||||||||||||
Retained earnings | 208,470 | 138,576 | 395,843 | (534,419 | ) | 208,470 | ||||||||||||||||
Total shareholders’ equity | 1,133,003 | 289,123 | 1,831,193 | (2,120,316 | ) | 1,133,003 | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,139,027 | 427,551 | 5,065,951 | (3,210,534 | ) | $ | 3,421,995 | ||||||||||||||
Q-16
Table of Contents
Non- | ||||||||||||||||||||||
Consolidating Statement of Income | Platinum | Platinum | guarantor | Consolidating | ||||||||||||||||||
For the Six Months Ended June 30, 2005 | Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
Revenue: | ||||||||||||||||||||||
Net premiums earned | $ | — | — | 842,510 | — | $ | 842,510 | |||||||||||||||
Net investment income | 72 | 257 | 55,480 | — | 55,809 | |||||||||||||||||
Net realized gains on investments | — | 1 | (184 | ) | — | (183 | ) | |||||||||||||||
Other income, net | — | — | 97,528 | (97,296 | ) | 232 | ||||||||||||||||
Total revenue | 72 | 258 | 995,334 | (97,296 | ) | 898,368 | ||||||||||||||||
Expenses: | ||||||||||||||||||||||
Losses and loss adjustment expenses | — | — | 478,550 | — | 478,550 | |||||||||||||||||
Acquisition expenses | — | — | 200,214 | (3,037 | ) | 197,177 | ||||||||||||||||
Operating expenses | 7,873 | 308 | 32,270 | 3,037 | 43,488 | |||||||||||||||||
Net foreign currency exchange loss | 1 | — | 1,957 | — | 1,958 | |||||||||||||||||
Interest expense | 53 | 6,294 | — | — | 6,347 | |||||||||||||||||
Total expenses | 7,927 | 6,602 | 712,991 | — | 727,520 | |||||||||||||||||
Income (loss) before income tax expense | (7,855 | ) | (6,344 | ) | 282,343 | (97,296 | ) | 170,848 | ||||||||||||||
Income tax expense (benefit) | — | (2,221 | ) | 31,996 | — | 29,775 | ||||||||||||||||
Net income (loss) before equity in earnings of subsidiaries | (7,855 | ) | (4,123 | ) | 250,347 | (97,296 | ) | 141,073 | ||||||||||||||
Equity in earnings of subsidiaries | 148,928 | 36,600 | 41,444 | (226,972 | ) | — | ||||||||||||||||
Net income | $ | 141,073 | 32,477 | 291,791 | (324,268 | ) | $ | 141,073 | ||||||||||||||
Q-17
Table of Contents
Non- | ||||||||||||||||||||||
Consolidating Statement of Income | Platinum | Platinum | guarantor | Consolidating | ||||||||||||||||||
For the Six Months Ended June 30, 2004 | Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
Revenue: | ||||||||||||||||||||||
Net premiums earned | $ | — | — | 631,907 | 2 | $ | 631,909 | |||||||||||||||
Net investment income | 31 | 79 | 36,751 | — | 36,861 | |||||||||||||||||
Net realized gains on investments | — | — | (827 | ) | — | (827 | ) | |||||||||||||||
Other income, net | 4,500 | — | (3,603 | ) | 219 | 1,116 | ||||||||||||||||
Total revenue | 4,531 | 79 | 664,228 | 221 | 669,059 | |||||||||||||||||
Expenses: | ||||||||||||||||||||||
Losses and loss adjustment expenses | — | — | 351,435 | — | 351,435 | |||||||||||||||||
Acquisition expenses | — | — | 154,090 | (2,475 | ) | 151,615 | ||||||||||||||||
Operating expenses | 6,949 | 139 | 28,473 | 2,475 | 38,036 | |||||||||||||||||
Net foreign currency exchange (gain) loss | (2 | ) | — | 304 | — | 302 | ||||||||||||||||
Interest expense | 120 | 4,510 | — | — | 4,630 | |||||||||||||||||
Total expenses | 7,067 | 4,649 | 534,302 | — | 546,018 | |||||||||||||||||
Income (loss) before income tax expense | (2,536 | ) | (4,570 | ) | 129,926 | 221 | 123,041 | |||||||||||||||
Income tax expense (benefit) | — | (1,599 | ) | 20,027 | — | 18,428 | ||||||||||||||||
Net income (loss) before equity in earnings of subsidiaries | (2,536 | ) | (2,971 | ) | 109,899 | 221 | 104,613 | |||||||||||||||
Equity in earnings of subsidiaries | 107,149 | 32,646 | 34,499 | (174,294 | ) | — | ||||||||||||||||
Net income | $ | 104,613 | 29,675 | 144,398 | (174,073 | ) | $ | 104,613 | ||||||||||||||
Q-18
Table of Contents
Non- | ||||||||||||||||||||||
Consolidating Statement of Income | Platinum | Platinum | guarantor | Consolidating | ||||||||||||||||||
For the Three Months Ended June 30, 2005 | Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
Revenue: | ||||||||||||||||||||||
Net premiums earned | $ | — | — | 431,470 | — | $ | 431,470 | |||||||||||||||
Net investment income | 47 | 180 | 28,677 | — | 28,904 | |||||||||||||||||
Net realized gains on investments | — | — | (555 | ) | — | (555 | ) | |||||||||||||||
Other income, net | — | — | 97,884 | (97,296 | ) | 588 | ||||||||||||||||
Total revenue | 47 | 180 | 557,476 | (97,296 | ) | 460,407 | ||||||||||||||||
Expenses: | ||||||||||||||||||||||
Losses and loss adjustment expenses | — | — | 240,852 | — | 240,852 | |||||||||||||||||
Acquisition expenses | — | — | 105,433 | (1,505 | ) | 103,928 | ||||||||||||||||
Operating expenses | 4,633 | 231 | 17,111 | 1,505 | 23,480 | |||||||||||||||||
Net foreign currency exchange loss | 1 | — | 159 | — | 160 | |||||||||||||||||
Interest expense | 22 | 4,152 | — | — | 4,174 | |||||||||||||||||
Total expenses | 4,656 | 4,383 | 363,555 | — | 372,594 | |||||||||||||||||
Income (loss) before income tax expense | (4,609 | ) | (4,203 | ) | 193,921 | (97,296 | ) | 87,813 | ||||||||||||||
Income tax expense (benefit) | — | (1,471 | ) | 21,299 | — | 19,828 | ||||||||||||||||
Net income (loss) before equity in earnings of subsidiaries | (4,609 | ) | (2,732 | ) | 172,622 | (97,296 | ) | 67,985 | ||||||||||||||
Equity in earnings of subsidiaries | 72,594 | 18,647 | 21,555 | (112,796 | ) | — | ||||||||||||||||
Net income | $ | 67,985 | 15,915 | 194,177 | (210,092 | ) | $ | 67,985 | ||||||||||||||
Q-19
Table of Contents
Non- | ||||||||||||||||||||||
Consolidating Statement of Income | Platinum | Platinum | guarantor | Consolidating | ||||||||||||||||||
For the Three Months Ended June 30, 2004 | Holdings | Finance | Subsidiaries | Adjustments | Consolidated | |||||||||||||||||
Revenue: | ||||||||||||||||||||||
Net premiums earned | $ | — | — | 310,865 | 2 | $ | 310,867 | |||||||||||||||
Net investment income | 14 | 29 | 19,334 | — | 19,377 | |||||||||||||||||
Net realized gains on investments | — | — | (1,279 | ) | — | (1,279 | ) | |||||||||||||||
Other income, net | — | — | 605 | — | 605 | |||||||||||||||||
Total revenue | 14 | 29 | 329,525 | 2 | 329,570 | |||||||||||||||||
Expenses: | ||||||||||||||||||||||
Losses and loss adjustment expenses | — | — | 189,466 | — | 189,466 | |||||||||||||||||
Acquisition expenses | — | — | 63,783 | (1,089 | ) | 62,694 | ||||||||||||||||
Operating expenses | 4,058 | 60 | 14,055 | 1,089 | 19,262 | |||||||||||||||||
Net foreign currency loss | — | — | 1,168 | — | 1,168 | |||||||||||||||||
Interest expense | 56 | 2,268 | — | — | 2,324 | |||||||||||||||||
Total expenses | 4,114 | 2,328 | 268,472 | — | 274,914 | |||||||||||||||||
Income (loss) before income tax expense | (4,100 | ) | (2,299 | ) | 61,053 | 2 | 54,656 | |||||||||||||||
Income tax expense (benefit) | — | (805 | ) | 5,662 | — | 4,857 | ||||||||||||||||
Net income (loss) before equity in earnings of subsidiaries | (4,100 | ) | (1,494 | ) | 55,391 | 2 | 49,799 | |||||||||||||||
Equity in earnings of subsidiaries | 53,899 | 7,336 | 9,174 | (70,409 | ) | — | ||||||||||||||||
Net income | $ | 49,799 | 5,842 | 64,565 | (70,407 | ) | 49,799 | |||||||||||||||
Q-20
Table of Contents
Non- | |||||||||||||||||||||
Condensed Consolidating Statement of Cash Flows | Platinum | Platinum | guarantor | Consolidating | |||||||||||||||||
For the Six Months Ended June 30, 2005 | Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | (5,880 | ) | (1,157 | ) | 480,732 | (97,293 | ) | $ | 376,402 | |||||||||||
Investing Activities: | |||||||||||||||||||||
Proceeds from sale of available-for-sale fixed maturities | — | — | 207,840 | — | 207,840 | ||||||||||||||||
Proceeds from maturity or paydown of available-for-sale fixed maturities | — | 221 | 66,575 | — | 66,796 | ||||||||||||||||
Acquisition of available-for-sale fixed maturities | — | 12 | (696,384 | ) | — | (696,372 | ) | ||||||||||||||
Dividends from subsidiaries | 12,000 | — | — | (12,000 | ) | — | |||||||||||||||
Contributions to subsidiaries | — | (25,000 | ) | 25,000 | — | — | |||||||||||||||
Net cash provided by (used in) investing activities | 12,000 | (24,767 | ) | (396,969 | ) | (12,000 | ) | (421,736 | ) | ||||||||||||
Financing Activities: | |||||||||||||||||||||
Dividends paid to shareholders | (6,911 | ) | — | (12,000 | ) | 12,000 | (6,911 | ) | |||||||||||||
Proceeds from exercise of share options | 4,984 | — | — | — | 4,984 | ||||||||||||||||
Proceeds from issuance of debt | — | 53,900 | 193,000 | — | 246,900 | ||||||||||||||||
Net cash provided by (used in) financing activities | (1,927 | ) | 53,900 | 181,000 | 12,000 | 244,973 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | 4,193 | 27,976 | 264,763 | (97,293 | ) | 199,639 | |||||||||||||||
Cash and cash equivalents at beginning of year | 1,945 | 8,204 | 199,751 | — | 209,900 | ||||||||||||||||
Cash and cash equivalents at end of year | $ | 6,138 | 36,180 | 464,514 | (97,293 | ) | $ | 409,539 | |||||||||||||
Q-21
Table of Contents
Non- | |||||||||||||||||||||
Condensed Consolidating Statement of Cash Flows | Platinum | Platinum | guarantor | Consolidating | |||||||||||||||||
For the Six Months Ended June 30, 2004 | Holdings | Finance | Subsidiaries | Adjustments | Consolidated | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | (449 | ) | (3,844 | ) | 441,234 | — | $ | 436,941 | ||||||||||||
Investing Activities: | |||||||||||||||||||||
Proceeds from sale of available-for-sale fixed maturities | — | — | 190,589 | — | 190,589 | ||||||||||||||||
Proceeds from maturity or paydown of available-for-sale fixed maturities | — | 441 | 43,486 | — | 43,927 | ||||||||||||||||
Acquisition of available-for-sale fixed maturities | — | (2,973 | ) | (599,842 | ) | — | (602,815 | ) | |||||||||||||
Net cash (used in) investing activities | — | (2,532 | ) | (365,767 | ) | — | (368,299 | ) | |||||||||||||
Financing Activities: | |||||||||||||||||||||
Dividends paid to shareholders | (6,925 | ) | — | — | — | (6,925 | ) | ||||||||||||||
Proceeds from exercise of share options | 5,049 | — | — | — | 5,049 | ||||||||||||||||
Net cash (used in) financing activities | (1,876 | ) | — | — | — | (1,876 | ) | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | (2,325 | ) | (6,376 | ) | 75,467 | — | 66,766 | ||||||||||||||
Cash and cash equivalents at beginning of year | 3,414 | 9,917 | 92,130 | — | 105,461 | ||||||||||||||||
Cash and cash equivalents at end of year | $ | 1,089 | 3,541 | 167,597 | — | $ | 172,227 | ||||||||||||||
(7) | Series A Notes |
Q-22
Table of Contents
(8) | Regulatory Examination |
Q-23
Table of Contents
Item 20. | Indemnification of Directors and Officers |
II-1
Table of Contents
Item 21. | Exhibits and Financial Statement Schedules |
Exhibit No. | Description | |||
*3 | .1 | Memorandum of Association of Platinum Holdings — incorporated by reference to Exhibit 3.1 of Amendment No. 2 to the Registration Statement of Platinum Holdings on Form S-1 dated June 3, 2002. | ||
*3 | .2 | Bye-Laws of Platinum Holdings — incorporated by reference to Exhibit 3.1 to the Platinum Holdings Quarterly Report on Form 10-Q dated August 6, 2004. | ||
*3 | .3 | Certificate of Incorporation of Platinum Finance — incorporated by reference to Exhibit 3.3 to the Registration Statement of Platinum Holdings and Platinum Finance, as Registrants, on Form S-1 dated August 30, 2002. | ||
*3 | .4 | By-Laws of Platinum Finance — incorporated by reference to Exhibit 3.4 to the Registration Statement of Platinum Holdings and Platinum Finance, as Registrants, on Form S-1 dated August 30, 2002. | ||
*4 | .1 | Indenture, dated as of May 26, 2005, among Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc. and JPMorgan Chase Bank, N.A., as Trustee — incorporated by reference to Exhibit 4.1 to the Platinum Holdings Form 8-K dated May 27, 2005. | ||
*4 | .2 | First Supplemental Indenture, dated as of May 26, 2005, among Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc. and JPMorgan Chase Bank, N.A., as Trustee — incorporated by reference to Exhibit 4.2 to the Platinum Holdings’ Form 8-K dated May 27, 2005. | ||
*4 | .3 | Exchange and Registration Rights Agreement, dated as of May 26, 2005 among Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc. and Goldman, Sachs & Co., as Initial Purchaser — incorporated by reference to Exhibit 4.3 to the Platinum Holdings’ Form 8-K dated May 27, 2005. | ||
*4 | .4 | Exchange and Registration Rights Agreement dated August 16, 2005 between Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc. and Goldman, Sachs & Co. and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as remarketing agents — incorporated by reference to Exhibit 4.1 to the Platinum Holdings’ Form 8-K dated August 17, 2005. | ||
*4 | .5 | Second Supplemental Indenture dated as of August 16, 2005 between Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc. and JPMorgan Chase Bank, N.A. — incorporated by reference to Exhibit 4.2 to the Platinum Holdings’ Form 8-K dated August 17, 2005. | ||
5 | .1 | Opinion of Dewey Ballantine LLP as to the legality of the Exchange Notes and the Guarantee. | ||
5 | .2 | Opinion of Conyers Dill & Pearman. | ||
*10 | .1 | Purchase Agreement, dated May 20, 2005, by and among Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc. and Goldman, Sachs & Co., as initial purchaser — incorporated by reference to Exhibit 10.1 to the Platinum Holdings’ Form 8-K dated May 24, 2005. | ||
*10 | .2 | Jurisdiction Agreement, dated May 20, 2005, by and among Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc. and Goldman, Sachs & Co., as initial purchaser — incorporated by reference to Exhibit 10.2 to the Platinum Holdings’ Form 8-K dated May 24, 2005. | ||
*10 | .3 | Remarketing Agreement, dated August 8, 2005, by and among Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc., Goldman, Sachs & Co., and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated — incorporated by reference to Exhibit 10.1 to the Platinum Holdings’ Form 8-K dated August 9, 2005 |
II-2
Table of Contents
Exhibit No. | Description | |||
*10 | .4 | Jurisdiction Agreement, dated August 8, 2005, by and among Platinum Underwriters Holdings, Ltd., Platinum Underwriters Finance, Inc., Goldman, Sachs & Co., and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated — incorporated by reference to Exhibit 10.2 to the Platinum Holdings’ Form 8-K dated August 9, 2005 | ||
**12 | .1 | Statement re: Computations of Ratios. | ||
*21 | .1 | Subsidiaries of Platinum Holdings — incorporated by reference to Exhibit 21.1 to the 2004 Annual Report on Form 10-K of Platinum Holdings dated March 16, 2005. | ||
23 | .1 | Consent of KPMG (New York, New York). | ||
23 | .2 | Consent of KPMG (Minneapolis, Minnesota). | ||
23 | .3 | Consent of Dewey Ballantine LLP (included in Exhibit 5.1). | ||
23 | .4 | Consent of Conyers Dill & Pearman (included in Exhibit 5.2). | ||
**24 | .1 | Power of Attorney for Platinum Holdings (included in signature page) | ||
**24 | .2 | Power of Attorney for Platinum Finance (included in signature page) | ||
**24 | .3 | Power of Attorney for Joseph F. Fisher — Platinum Holdings | ||
**24 | .4 | Power of Attorney for Joseph F. Fisher — Platinum Finance | ||
**25 | .1 | Form T-1 re: eligibility of JPMorgan Chase Bank, N.A. to act as Trustee under the Indenture. | ||
99 | .1 | Form of Letter of Transmittal. | ||
**99 | .2 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees. | ||
**99 | .3 | Form of Letter to Clients. | ||
**99 | .4 | Form of Notice of Guaranteed Delivery. |
* | Incorporated by reference from other documents filed with the SEC as indicated. |
** | Previously filed. |
II-3
Page | ||||
II-5 | ||||
II-6 | ||||
II-7 | ||||
II-10 | ||||
II-11 |
II-4
Table of Contents
/s/KPMG LLP |
II-5
Table of Contents
Amount at | ||||||||||||||||
Which | ||||||||||||||||
Shown in | ||||||||||||||||
Balance | ||||||||||||||||
Cost | Fair Value | Sheet | ||||||||||||||
Fixed maturities: | ||||||||||||||||
Bonds: | ||||||||||||||||
United States Government and government agencies and authorities | $ | 124,844 | 124,954 | $ | 124,954 | |||||||||||
State, municipalities and political subdivisions | 156,427 | 157,337 | 157,337 | |||||||||||||
Foreign governments | 65,285 | 64,923 | 64,923 | |||||||||||||
Foreign corporate | 280,270 | 282,284 | 282,284 | |||||||||||||
Public utilities | 136,173 | 136,848 | 136,848 | |||||||||||||
All other corporate | 1,460,472 | 1,470,180 | 1,470,180 | |||||||||||||
Total bonds | 2,223,471 | 2,236,526 | 2,236,526 | |||||||||||||
Redeemable preferred stock | 3,750 | 3,676 | 3,676 | |||||||||||||
Total fixed maturities | 2,227,221 | 2,240,202 | 2,240,202 | |||||||||||||
Other long term investments | 6,749 | 6,769 | 6,769 | |||||||||||||
Total investments | $ | 2,233,970 | 2,246,971 | $ | 2,246,971 | |||||||||||
* | Original cost of fixed maturities reduced by repayments and adjusted for amortization of premiums and discounts. |
II-6
Table of Contents
2004 | 2003 | |||||||||
ASSETS | ||||||||||
Investment in affiliates | $ | 1,135,434 | $ | 1,069,521 | ||||||
Cash | 1,945 | 3,413 | ||||||||
Other assets | 1,648 | 1,740 | ||||||||
Total assets | $ | 1,139,027 | $ | 1,074,674 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Liabilities | ||||||||||
Contract adjustment payments | $ | 2,335 | $ | 4,535 | ||||||
Accrued expenses and other liabilities | 3,689 | 2,936 | ||||||||
Total liabilities | 6,024 | 7,471 | ||||||||
Shareholders’ equity | ||||||||||
Preferred share, $.01 par value, 25,000,000 shares authorized, no shares issued or outstanding | — | — | ||||||||
Common shares, $.01 par value, 200,000,000 shares authorized, 43,087,407 and 43,054,125 shares issued and outstanding respectively | 430 | 430 | ||||||||
Additional paid-in capital | 911,851 | 910,505 | ||||||||
Accumulated other comprehensive income | 12,252 | 18,774 | ||||||||
Retained earnings | 208,470 | 137,494 | ||||||||
Total shareholders’ equity | 1,133,003 | 1,067,203 | ||||||||
Total liabilities and shareholders’ equity | $ | 1,139,027 | $ | 1,074,674 | ||||||
II-7
Table of Contents
2002 | |||||||||||||
2004 | 2003 | Period | |||||||||||
Revenues: | |||||||||||||
Net investment income | $ | 53 | 46 | $ | 179 | ||||||||
Other income | 2,944 | — | — | ||||||||||
2,997 | 46 | 179 | |||||||||||
Expenses: | |||||||||||||
Interest expenses | 207 | 344 | 58 | ||||||||||
Operating expenses | 12,722 | 22,661 | 3,986 | ||||||||||
Total expenses | 12,929 | 23,005 | 4,044 | ||||||||||
Net loss before equity in earnings of affiliate | (9,932 | ) | (22,959 | ) | (3,865 | ) | |||||||
Equity in earnings of affiliates | 94,715 | 167,782 | 10,303 | ||||||||||
Net income | $ | 84,783 | 144,823 | $ | 6,438 | ||||||||
II-8
Table of Contents
2004 | 2003 | 2002 | |||||||||||||
Operating Activities: | |||||||||||||||
Net loss before equity in earnings of affiliates | $ | (9,932 | ) | (22,959 | ) | $ | (3,865 | ) | |||||||
Adjustments to reconcile net income to net cash provided in operations: | |||||||||||||||
Share based compensation | 1,777 | 5,510 | — | ||||||||||||
Depreciation and amortization | 125 | — | — | ||||||||||||
Net increase in other assets and liabilities | 1,830 | (1,550 | ) | 2,226 | |||||||||||
Net cash used in operating activities | (6,200 | ) | (18,999 | ) | (1,639 | ) | |||||||||
Investing Activities: | |||||||||||||||
Dividends and distributions from subsidiaries | 22,000 | 33,150 | — | ||||||||||||
Contributions to subsidiaries | (250 | ) | — | (896,000 | ) | ||||||||||
Net cash provided by (used in) investing activities | 21,750 | 33,150 | (896,000 | ) | |||||||||||
Financing Activities: | |||||||||||||||
Net proceeds from shares issued in initial capitalization | — | — | 120 | ||||||||||||
Redemption of shares issued in initial capitalization | — | — | (120 | ) | |||||||||||
Net proceeds from issuance of common shares | 1,566 | 520 | 693,314 | ||||||||||||
Net proceeds from issuance of common shares in private placements | — | — | 208,260 | ||||||||||||
Proceeds from exercise of options | 7,406 | 678 | — | ||||||||||||
Purchase of common shares | (9,985 | ) | — | — | |||||||||||
Change in contract adjustment payment liability | (2,199 | ) | (2,104 | ) | — | ||||||||||
Dividends paid to shareholders | (13,807 | ) | (13,767 | ) | — | ||||||||||
Net cash provided by (used in) financing activities | (17,019 | ) | (14,673 | ) | 901,574 | ||||||||||
Net increase (decrease) in cash and cash equivalents | (1,469 | ) | (522 | ) | 3,935 | ||||||||||
Cash and cash equivalents at beginning of period | 3,413 | 3,935 | — | ||||||||||||
Cash and cash equivalents at end of period | $ | 1,944 | 3,413 | $ | 3,935 | ||||||||||
II-9
Table of Contents
Unpaid | Other | Losses and | Amortization | |||||||||||||||||||||||||||||||||||||||
Deferred | Losses and | Policy | Loss | of Deferred | ||||||||||||||||||||||||||||||||||||||
Policy | Loss | Claims and | Net | Net | Adjustment | Policy | Other | Net | ||||||||||||||||||||||||||||||||||
Acquisition | Adjustment | Unearned | Benefits | Earned | Investment | Expenses | Acquisition | Operating | Written | |||||||||||||||||||||||||||||||||
Period | Costs | Expenses | Premiums | Payable | Premium | Income | Incurred | Costs | Expenses | Premiums | ||||||||||||||||||||||||||||||||
Year ended December 31, 2004: | ||||||||||||||||||||||||||||||||||||||||||
Property and Marine | $ | 15,747 | 410,347 | 64,985 | 485,135 | 349,557 | 58,792 | $ | 504,439 | |||||||||||||||||||||||||||||||||
Casualty | 72,454 | 715,314 | 278,634 | 611,893 | 418,355 | 118,734 | 677,399 | |||||||||||||||||||||||||||||||||||
Finite Risk | 47,837 | 253,566 | 155,917 | 350,907 | 251,892 | 46,781 | 464,175 | |||||||||||||||||||||||||||||||||||
Total | 136,038 | 1,379,227 | 499,536 | — | 1,447,935 | 84,532 | 1,019,804 | 224,307 | 13,196 | 1,646,013 | ||||||||||||||||||||||||||||||||
Year ended December 31, 2003: | ||||||||||||||||||||||||||||||||||||||||||
Property and Marine | 9,076 | 231,719 | 44,667 | 355,556 | 169,944 | 48,756 | 352,908 | |||||||||||||||||||||||||||||||||||
Casualty | 61,181 | 320,585 | 224,611 | 391,170 | 266,836 | 87,620 | 474,000 | |||||||||||||||||||||||||||||||||||
Finite Risk | 9,050 | 179,614 | 30,578 | 320,801 | 147,391 | 90,864 | 345,234 | |||||||||||||||||||||||||||||||||||
Total | 79,307 | 731,918 | 299,856 | — | 1,067,527 | 57,645 | 584,171 | 227,240 | 92,595 | 1,172,142 | ||||||||||||||||||||||||||||||||
Period from November 1, 2002 through December 31, 2002: | ||||||||||||||||||||||||||||||||||||||||||
Property and Marine | 11,307 | 101,473 | 46,294 | 43,047 | 21,558 | 6,206 | 89,341 | |||||||||||||||||||||||||||||||||||
Casualty | 33,568 | 121,586 | 125,609 | 39,320 | 29,498 | 5,699 | 164,929 | |||||||||||||||||||||||||||||||||||
Finite Risk | 4,457 | 58,600 | 19,113 | 24,731 | 9,300 | 2,544 | 43,844 | |||||||||||||||||||||||||||||||||||
Total | $ | 49,332 | 281,659 | 191,016 | — | $ | 107,098 | 5,211 | 60,356 | 14,449 | 16,334 | $ | 298,114 | |||||||||||||||||||||||||||||
II-10
Table of Contents
Percentage | |||||||||||||||||||||
Ceded to | Assumed | of Amount | |||||||||||||||||||
Direct | Other | from Other | Assumed | ||||||||||||||||||
Description | Amount | Companies | Companies | Net Amount | to Net | ||||||||||||||||
Property and liability premiums written: | |||||||||||||||||||||
Year ended December 31, 2004: | |||||||||||||||||||||
Property and Marine | — | $ | 13,029 | 517,468 | $ | 504,439 | 102.6% | ||||||||||||||
Casualty | — | 748 | 678,147 | 677,399 | 100.1% | ||||||||||||||||
Finite Risk | — | — | 464,175 | 464,175 | 100.0% | ||||||||||||||||
Total | — | 13,777 | 1,659,790 | 1,646,013 | 100.8% | ||||||||||||||||
Year ended December 31, 2003: | |||||||||||||||||||||
Property and Marine | — | $ | 25,156 | 378,064 | $ | 352,908 | 107.1% | ||||||||||||||
Casualty | — | 1,175 | 475,175 | 474,000 | 100.2% | ||||||||||||||||
Finite Risk | — | — | 345,234 | 345,234 | 100.0% | ||||||||||||||||
Total | — | 26,331 | 1,198,473 | 1,172,142 | 102.2% | ||||||||||||||||
Period ended December 31, 2002: | |||||||||||||||||||||
Property and Marine | — | — | 89,341 | 89,341 | 100.0% | ||||||||||||||||
Casualty | — | — | 164,929 | 164,929 | 100.0% | ||||||||||||||||
Finite Risk | — | — | 43,844 | 43,844 | 100.0% | ||||||||||||||||
Total | — | $ | — | 298,114 | $ | 298,114 | 100.0% | ||||||||||||||
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Item 22. | Undertakings |
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act; | |
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; | |
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. | |
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
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PLATINUM UNDERWRITERS HOLDINGS, LTD. |
By | /s/Gregory E.A. Morrison |
Gregory E.A. Morrison | |
President, Chief Executive Officer and | |
Director |
Signature | Title | Date | ||||
* | Chairman of the Board of Directors | September 22, 2005 | ||||
/s/Gregory E.A. Morrison | President, Chief Executive Officer, and Director (Principal Executive Officer) | September 22, 2005 | ||||
* | Executive Vice President and Chief Financial Officer (Principal Financial & Accounting Officer) | September 22, 2005 | ||||
* | Director | September 22, 2005 | ||||
* | Director | September 22, 2005 | ||||
* | Director | September 22, 2005 | ||||
* | Director | September 22, 2005 | ||||
* | Director | September 22, 2005 | ||||
* | Authorized Representative in the United States | September 22, 2005 | ||||
*BY: | /s/Gregory E.A. Morrison ATTORNEY-IN-FACT |
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PLATINUM UNDERWRITERS FINANCE, INC. |
By | /s/Gregory E.A. Morrison |
Gregory E.A. Morrison | |
President, Chief Executive Officer and | |
Director |
Signature | Title | Date | ||||
* | Chairman of the Board of Directors | September 22, 2005 | ||||
/s/Gregory E.A. Morrison | President, Chief Executive Officer and Director (Principal Executive Officer) | September 22, 2005 | ||||
* | Executive Vice President, Chief Financial Officer and Director (Principal Financial & Accounting Officer) | September 22, 2005 | ||||
*BY: | /s/Gregory E.A. Morrison ATTORNEY-IN-FACT |
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