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SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
Ireland (State or other jurisdiction of incorporation or organization) | 98-0664891 (I.R.S. Employer Identification No.) |
EARLSFORT TERRACE
DUBLIN 2
IRELAND
(Address of principal executive office including zip code)
(Registrant’s telephone number, including area code)
Large accelerated filero; | Accelerated filerþ; | Non-accelerated filero; | Smaller reporting companyo |
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Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
1) | “Global Indemnity” refers to Global Indemnity plc, an exempted company incorporated with limited liability under the laws of Ireland, and its U.S. and Non-U.S. Subsidiaries; |
2) | “we,” “us,” “our,” and the “Company” refer to Global Indemnity and its subsidiaries or, prior to July 2, 2010, to United America Indemnity; |
3) | “United America Indemnity” refers to United America Indemnity, Ltd., a Cayman Islands exempted company that, on that date, became a direct, wholly-owned subsidiary of Global Indemnity plc, and its subsidiaries; |
4) | our “U.S. Subsidiaries” refers to Global Indemnity Group, Inc., Global Indemnity Services, LLC, AIS, Penn-America Group, Inc., and our Insurance Operations; |
5) | our “United States Based Insurance Operations” and “Insurance Operations” refer to the insurance and related operations conducted by the U.S. Insurance Companies, American Insurance Adjustment Agency, Inc., Global Indemnity Collectibles Insurance Services, LLC, and J.H. Ferguson & Associates, LLC; |
6) | our “U.S. Insurance Companies” refers to the insurance and related operations conducted by United National Insurance Company, Diamond State Insurance Company, United National Casualty Insurance Company, United National Specialty Insurance Company, Penn-America Insurance Company, Penn-Star Insurance Company and Penn-Patriot Insurance Company; |
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7) | our “Predecessor Insurance Operations” refers to Wind River Investment Corporation, which was dissolved on May 31, 2006, AIS, American Insurance Adjustment Agency, Inc., Emerald Insurance Company, which was dissolved on March 24, 2008, the United National Insurance Company, Diamond State Insurance Company, United National Casualty Insurance Company, United National Specialty Insurance Company, and J.H. Ferguson & Associates, LLC; |
8) | “Wind River Reinsurance” refers to Wind River Reinsurance Company, Ltd.; |
9) | our “Non-U.S. Subsidiaries” refers to Global Indemnity Services Ltd., Global Indemnity (Gibraltar) Limited, Global Indemnity (Cayman) Limited, Wind River Reinsurance, the Luxembourg Companies, and U.A.I. (Ireland) Limited; |
10) | our “International Reinsurance Operations” and “Reinsurance Operations” refer to the reinsurance and related operations of Wind River Reinsurance; |
11) | the “Luxembourg Companies” refers to Global Indemnity (Luxembourg) Limited, U.A.I. (Luxembourg) I S.à r.l., U.A.I. (Luxembourg) II S.à r.l., U.A.I. (Luxembourg) III S.à r.l., U.A.I. (Luxembourg) IV S.à r.l., U.A.I. (Luxembourg) Investment S.à r.l., and Wind River (Luxembourg) S.à r.l.; |
12) | “Global Indemnity Group” refers to Global Indemnity Group, Inc., (fka United America Indemnity Group, Inc.); |
13) | “AIS” refers to American Insurance Service, Inc.; |
14) | “Penn-America” refers to our product classification that includes property and general liability products for small commercial businesses distributed through a select network of wholesale general agents with specific binding authority; |
15) | “United National” refers to our product classification that includes property, general liability, and professional liability lines products distributed through program administrators with specific binding authority; |
16) | “Diamond State” refers to our product classification that includes property, casualty, and professional liability lines products distributed through wholesale brokers and program administrators with specific binding authority; |
17) | the “Statutory Trusts” refers to United National Group Capital Trust I, United National Group Capital Statutory Trust II, Penn-America Statutory Trust I, whose registration was cancelled effective January 15, 2008, and Penn-America Statutory Trust II, whose registration was cancelled effective February 2, 2009; |
18) | “Fox Paine & Company” refers to Fox Paine & Company, LLC and affiliated investment funds; |
19) | “GAAP” refers to accounting principles generally accepted in the United States of America; and |
20) | “$” or “dollars” refers to U.S. dollars. |
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(Unaudited) | ||||||||
September 30, 2010 | December 31, 2009 | |||||||
ASSETS | ||||||||
Fixed maturities: | ||||||||
Available for sale, at fair value (amortized cost: $1,409,580 and $1,423,050) | $ | 1,477,061 | $ | 1,471,572 | ||||
Equity securities: | ||||||||
Preferred stocks: | ||||||||
Available for sale, at fair value (cost: $930 and $1,509) | 2,408 | 2,599 | ||||||
Common stocks: | ||||||||
Available for sale, at fair value (cost: $117,654 and $50,709) | 130,472 | 63,057 | ||||||
Other invested assets | ||||||||
Available for sale, at fair value (cost: $4,255 and $4,323) | 4,115 | 6,854 | ||||||
Securities classified as trading, at fair value (cost: $1,100 and $1,145) | 1,100 | 1,145 | ||||||
Total investments | 1,615,156 | 1,545,227 | ||||||
Cash and cash equivalents | 94,397 | 186,087 | ||||||
Accounts receivable, net | 68,600 | 69,711 | ||||||
Reinsurance receivables | 463,111 | 543,351 | ||||||
Federal income taxes receivable | 7,785 | 3,521 | ||||||
Deferred federal income taxes | 6,926 | 13,819 | ||||||
Deferred acquisition costs | 36,095 | 33,184 | ||||||
Goodwill | 4,820 | — | ||||||
Intangible assets | 19,177 | 9,236 | ||||||
Prepaid reinsurance premiums | 12,064 | 16,546 | ||||||
Other assets | 24,898 | 25,098 | ||||||
Total assets | $ | 2,353,029 | $ | 2,445,780 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Unpaid losses and loss adjustment expenses | $ | 1,120,463 | $ | 1,257,741 | ||||
Unearned premiums | 145,733 | 131,582 | ||||||
Ceded balances payable | 5,175 | 16,009 | ||||||
Contingent commissions | 6,720 | 11,169 | ||||||
Payable for securities purchased | 10,857 | 37,258 | ||||||
Notes and debentures payable | 121,356 | 121,569 | ||||||
Other liabilities | 31,491 | 38,476 | ||||||
Total liabilities | 1,441,795 | 1,613,804 | ||||||
Commitments and contingencies (Note 10) | — | — | ||||||
Shareholders’ equity: | ||||||||
Ordinary shares, $0.0001 par value, 900,000,000 ordinary shares authorized; Class A ordinary shares issued: 21,340,821 and 21,243,345, respectively; Class A ordinary shares outstanding: 18,302,058 and 18,215,239, respectively; Class B ordinary shares issued and outstanding: 12,061,370 and 12,061,370, respectively | 3 | 3 | ||||||
Additional paid-in capital | 621,965 | 619,473 | ||||||
Accumulated other comprehensive income | 62,235 | 48,481 | ||||||
Retained earnings | 327,914 | 264,739 | ||||||
Class A ordinary shares in treasury, at cost: 3,038,763 and 3,028,106 shares, respectively | (100,883 | ) | (100,720 | ) | ||||
Total shareholders’ equity | 911,234 | 831,976 | ||||||
Total liabilities and shareholders’ equity | $ | 2,353,029 | $ | 2,445,780 | ||||
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(Unaudited) | (Unaudited) | |||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues: | ||||||||||||||||
Gross premiums written | $ | 86,235 | $ | 75,806 | $ | 271,138 | $ | 266,474 | ||||||||
Net premiums written | $ | 73,206 | $ | 62,932 | $ | 234,210 | $ | 227,023 | ||||||||
Net premiums earned | $ | 70,089 | $ | 72,893 | $ | 215,579 | $ | 226,165 | ||||||||
Net investment income | 14,089 | 15,267 | 42,609 | 54,049 | ||||||||||||
Net realized investment gains: | ||||||||||||||||
Other-than-temporary impairment losses on investments | (15 | ) | (2,108 | ) | (467 | ) | (5,689 | ) | ||||||||
Other-than-temporary impairment losses on investments recognized in other comprehensive income | — | 8 | 43 | 133 | ||||||||||||
Other net realized investment gains | 1,833 | 8,713 | 22,043 | 8,971 | ||||||||||||
Total net realized investment gains | 1,818 | 6,613 | 21,619 | 3,415 | ||||||||||||
Other income | 173 | — | 515 | — | ||||||||||||
Total revenues | 86,169 | 94,773 | 280,322 | 283,629 | ||||||||||||
Losses and Expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 29,789 | 38,887 | 104,253 | 130,674 | ||||||||||||
Acquisition costs and other underwriting expenses | 28,541 | 27,564 | 87,697 | 88,350 | ||||||||||||
Corporate and other operating expenses | 5,106 | 4,676 | 15,065 | 12,314 | ||||||||||||
Interest expense | 1,825 | 1,776 | 5,397 | 5,462 | ||||||||||||
Income before income taxes | 20,908 | 21,870 | 67,910 | 46,829 | ||||||||||||
Income tax expense (benefit) | 1,146 | (2,673 | ) | 4,706 | 808 | |||||||||||
Income before equity in net income (loss) of partnerships | 19,762 | 24,543 | 63,204 | 46,021 | ||||||||||||
Equity in net income (loss) of partnerships, net of taxes | — | 2,809 | (29 | ) | 4,742 | |||||||||||
Net income | $ | 19,762 | $ | 27,352 | $ | 63,175 | $ | 50,763 | ||||||||
Per share data: | ||||||||||||||||
Net income | ||||||||||||||||
Basic | $ | 0.65 | $ | 0.91 | $ | 2.09 | $ | 2.08 | ||||||||
Diluted | $ | 0.65 | $ | 0.91 | $ | 2.09 | $ | 2.08 | ||||||||
Weighted-average number of shares outstanding | ||||||||||||||||
Basic | 30,273,757 | 30,144,896 | 30,222,074 | 24,403,005 | ||||||||||||
Diluted | 30,308,489 | 30,155,553 | 30,245,890 | 24,423,029 | ||||||||||||
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(Unaudited) | (Unaudited) | |||||||||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income | $ | 19,762 | $ | 27,352 | $ | 63,175 | $ | 50,763 | ||||||||
Other comprehensive income, net of taxes: | ||||||||||||||||
Unrealized holding gains arising during period | 19,607 | 30,337 | 29,728 | 39,532 | ||||||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive loss, net of taxes | 23 | 394 | 135 | 3,069 | ||||||||||||
Recognition of previously unrealized holding gains | (1,272 | ) | (5,046 | ) | (16,066 | ) | (2,274 | ) | ||||||||
Unrealized foreign currency translation gains (losses) | 175 | 137 | (43 | ) | 214 | |||||||||||
Other comprehensive income, net of taxes | 18,533 | 25,822 | 13,754 | 40,541 | ||||||||||||
Comprehensive income, net of taxes | $ | 38,295 | $ | 53,174 | $ | 76,929 | $ | 91,304 | ||||||||
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(Unaudited) | ||||||||
Nine Months Ended | Year Ended | |||||||
September 30, 2010 | December 31, 2009 | |||||||
Number of Class A ordinary shares issued: | ||||||||
Number at beginning of period | 21,243,345 | 12,516,308 | ||||||
Ordinary shares issued under share incentive plans | 58,015 | 36,064 | ||||||
Ordinary shares issued to directors | 39,461 | 101,762 | ||||||
Ordinary shares issued under Rights Offering | — | 8,589,211 | ||||||
Number at end of period | 21,340,821 | 21,243,345 | ||||||
Number of Class B ordinary shares issued: | ||||||||
Number at beginning of period | 12,061,370 | 6,343,750 | ||||||
Ordinary shares issued under Rights Offering | — | 5,717,620 | ||||||
Number at end of period | 12,061,370 | 12,061,370 | ||||||
Par value of Class A ordinary shares: | ||||||||
Balance at beginning of period | $ | 2 | $ | 2 | ||||
Ordinary shares issued under Rights Offering | — | — | ||||||
Balance at end of period | $ | 2 | $ | 2 | ||||
Par value of Class B ordinary shares: | ||||||||
Balance at beginning of period | $ | 1 | $ | 1 | ||||
Ordinary shares issued under Rights Offering | — | — | ||||||
Balance at end of period | $ | 1 | $ | 1 | ||||
Additional paid-in capital: | ||||||||
Balance at beginning of period | $ | 619,473 | $ | 524,346 | ||||
Share compensation plans | 2,492 | 3,294 | ||||||
Ordinary shares issued under Rights Offering | — | 91,833 | ||||||
Balance at end of period | $ | 621,965 | $ | 619,473 | ||||
Accumulated other comprehensive income, net of deferred income tax: | ||||||||
Balance at beginning of period | $ | 48,481 | $ | 25,108 | ||||
Other comprehensive income: | ||||||||
Unrealized holding gains arising during the period | 13,662 | 29,554 | ||||||
Unrealized foreign currency translation gains (losses) | (43 | ) | 140 | |||||
Other comprehensive income | 13,619 | 29,694 | ||||||
Change in other-than-temporary impairment losses recognized in other comprehensive income, net of taxes | 135 | (1 | ) | |||||
Cumulative effect adjustment per new impairment accounting guidance | — | (6,320 | ) | |||||
Balance at end of period | $ | 62,235 | $ | 48,481 | ||||
Retained earnings: | ||||||||
Balance at beginning of period | $ | 264,739 | $ | 182,982 | ||||
Net income | 63,175 | 75,437 | ||||||
Cumulative effect adjustment per new impairment accounting guidance | — | 6,320 | ||||||
Balance at end of period | $ | 327,914 | $ | 264,739 | ||||
Number of Treasury Shares: | ||||||||
Number at beginning of period | 3,028,106 | 3,009,577 | ||||||
Class A ordinary shares purchased | 10,657 | 18,529 | ||||||
Number at end of period | 3,038,763 | 3,028,106 | ||||||
Treasury Shares, at cost: | ||||||||
Balance at beginning of period | $ | (100,720 | ) | $ | (100,446 | ) | ||
Class A ordinary shares purchased, at cost | (163 | ) | (274 | ) | ||||
Balance at end of period | $ | (100,883 | ) | $ | (100,720 | ) | ||
Total shareholders’ equity | $ | 911,234 | $ | 831,976 | ||||
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(Unaudited) | ||||||||
Nine Months Ended September 30, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 63,175 | $ | 50,763 | ||||
Adjustments to reconcile net income to net cash used for operating activities: | ||||||||
Amortization of trust preferred securities issuance costs | 62 | 62 | ||||||
Amortization and depreciation | 1,825 | 55 | ||||||
Restricted stock expense | 2,713 | 3,119 | ||||||
Deferred federal income taxes | 3,560 | 7,874 | ||||||
Amortization of bond premium and discount, net | 2,579 | 1,545 | ||||||
Net realized investment gains | (21,619 | ) | (3,415 | ) | ||||
Equity in net (income) loss of partnerships | 29 | (4,742 | ) | |||||
Changes in: | ||||||||
Accounts receivable, net | 1,111 | (16,955 | ) | |||||
Reinsurance receivables | 80,240 | 101,454 | ||||||
Unpaid losses and loss adjustment expenses | (137,278 | ) | (165,835 | ) | ||||
Unearned premiums | 14,151 | (4,921 | ) | |||||
Ceded balances payable | (10,834 | ) | (7,026 | ) | ||||
Other assets and liabilities, net | (8,464 | ) | (506 | ) | ||||
Contingent commissions | (4,449 | ) | 2,927 | |||||
Federal income taxes receivable | (4,264 | ) | 5,785 | |||||
Deferred acquisition costs | (2,911 | ) | 11,122 | |||||
Prepaid reinsurance premiums | 4,482 | (837 | ) | |||||
Net cash used for operating activities | (15,892 | ) | (19,531 | ) | ||||
Cash flows from investing activities: | ||||||||
Proceeds from sale of fixed maturities | 560,306 | 231,258 | ||||||
Proceeds from sale of stocks | 30,442 | 68,834 | ||||||
Proceeds from maturity of fixed maturities | 36,245 | 41,085 | ||||||
Proceeds from sale of other invested assets | 68 | 16,699 | ||||||
Purchases of fixed maturities | (595,832 | ) | (421,040 | ) | ||||
Purchases of stocks | (91,417 | ) | (65,242 | ) | ||||
Purchases of other invested assets | — | (30,687 | ) | |||||
Other | (14,970 | ) | — | |||||
Net cash used for investing activities | (75,158 | ) | (159,093 | ) | ||||
Cash flows from financing activities: | ||||||||
Tax expense associated with share-based compensation plans | (221 | ) | (171 | ) | ||||
Issuance of ordinary shares | — | 99,168 | ||||||
Purchases of Class A ordinary shares | (163 | ) | (247 | ) | ||||
Principal payments of term debt | (213 | ) | (205 | ) | ||||
Net cash provided by (used for) financing activities | (597 | ) | 98,545 | |||||
Effect of exchange rates on cash and cash equivalents | (43 | ) | 214 | |||||
Net change in cash and cash equivalents | (91,690 | ) | (79,865 | ) | ||||
Cash and cash equivalents at beginning of period | 186,087 | 292,604 | ||||||
Cash and cash equivalents at end of period | $ | 94,397 | $ | 212,739 | ||||
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(Unaudited)
Other-than- | ||||||||||||||||||||
temporary | ||||||||||||||||||||
Gross | Gross | impairments | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | recognized in | ||||||||||||||||
(Dollars in thousands) | Cost | Gains | Losses | Fair Value | AOCI (1) | |||||||||||||||
As of September 30, 2010 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
U.S. treasury and agency obligations | $ | 198,483 | $ | 14,191 | $ | — | $ | 212,674 | $ | — | ||||||||||
Obligations of states and political subdivisions | 239,026 | 9,201 | (97 | ) | 248,130 | — | ||||||||||||||
Mortgage-backed securities | 274,572 | 11,715 | (57 | ) | 286,230 | (26 | ) | |||||||||||||
Commercial mortgage-backed securities | 1,618 | 8 | — | 1,626 | — | |||||||||||||||
Asset-backed securities | 118,810 | 3,234 | (80 | ) | 121,964 | (43 | ) | |||||||||||||
Corporate notes and loans | 514,784 | 26,471 | (714 | ) | 540,541 | (134 | ) | |||||||||||||
Foreign corporate bonds | 62,287 | 3,609 | — | 65,896 | — | |||||||||||||||
Total fixed maturities | 1,409,580 | 68,429 | (948 | ) | 1,477,061 | (203 | ) | |||||||||||||
Common stock | 117,654 | 14,429 | (1,611 | ) | 130,472 | — | ||||||||||||||
Preferred stock | 930 | 1,478 | — | 2,408 | — | |||||||||||||||
Other invested assets | 5,355 | — | (140 | ) | 5,215 | — | ||||||||||||||
Total | $ | 1,533,519 | $ | 84,336 | $ | (2,699 | ) | $ | 1,615,156 | $ | (203 | ) | ||||||||
(1) | Represents the total amount of other-than-temporary impairment losses recognized in accumulated other comprehensive income (“AOCI”) since the date of adoption of the recent guidance on other-than-temporary impairments. Per the accounting guidance, these items were not included in earnings as of September 30, 2010. |
Other-than- | ||||||||||||||||||||
temporary | ||||||||||||||||||||
Gross | Gross | impairments | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | recognized in | ||||||||||||||||
(Dollars in thousands) | Cost | Gains | Losses | Fair Value | AOCI (1) | |||||||||||||||
As of December 31, 2009 | ||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||
U.S. treasury and agency obligations | $ | 228,386 | $ | 7,936 | $ | (234 | ) | $ | 236,088 | $ | — | |||||||||
Obligations of states and political subdivisions | 217,713 | 8,255 | (370 | ) | 225,598 | — | ||||||||||||||
Mortgage-backed securities | 349,287 | 15,219 | (506 | ) | 364,000 | (72 | ) | |||||||||||||
Asset-backed securities | 112,287 | 2,322 | (446 | ) | 114,163 | (10 | ) | |||||||||||||
Corporate notes and loans | 446,570 | 15,419 | (1,259 | ) | 460,730 | (698 | ) | |||||||||||||
Foreign corporate bonds | 68,809 | 2,354 | (170 | ) | 70,993 | — | ||||||||||||||
Total fixed maturities | 1,423,052 | 51,505 | (2,985 | ) | 1,471,572 | (780 | ) | |||||||||||||
Common stock | 50,709 | 12,473 | (125 | ) | 63,057 | — | ||||||||||||||
Preferred stock | 1,509 | 1,090 | — | 2,599 | — | |||||||||||||||
Other invested assets | 5,468 | 2,531 | — | 7,999 | — | |||||||||||||||
Total | $ | 1,480,738 | $ | 67,599 | $ | (3,110 | ) | $ | 1,545,227 | $ | (780 | ) | ||||||||
(1) | Represents the total amount of other-than-temporary impairment losses recognized in AOCI since the date of adoption of the recent guidance on other-than-temporary impairments. Per the accounting guidance, these items were not included in earnings as of December 31, 2009. |
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(Unaudited)
Amortized | Estimated | |||||||
(Dollars in thousands) | Cost | Fair Value | ||||||
Due in one year or less | $ | 79,696 | $ | 80,887 | ||||
Due after one year through five years | 655,574 | 689,759 | ||||||
Due after five years through ten years | 203,893 | 214,506 | ||||||
Due after ten years through fifteen years | 30,171 | 33,417 | ||||||
Due after fifteen years | 45,246 | 48,672 | ||||||
Mortgaged-backed securities | 274,572 | 286,230 | ||||||
Commercial mortgage-backed securities | 1,618 | 1,626 | ||||||
Asset-backed securities | 118,810 | 121,964 | ||||||
$ | 1,409,580 | $ | 1,477,061 | |||||
Less than 12 months | 12 months or longer (1) | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
Obligations of states and political subdivisions | $ | 8,017 | $ | (61 | ) | $ | 2,405 | $ | (36 | ) | $ | 10,422 | $ | (97 | ) | |||||||||
Mortgage-backed securities | 5,256 | (5 | ) | 546 | (52 | ) | 5,802 | (57 | ) | |||||||||||||||
Asset-backed securities | 1,766 | (13 | ) | 935 | (67 | ) | 2,701 | (80 | ) | |||||||||||||||
Corporate notes and loans | 46,210 | (714 | ) | — | — | 46,210 | (714 | ) | ||||||||||||||||
Total fixed maturities | 61,249 | (793 | ) | 3,886 | (155 | ) | 65,135 | (948 | ) | |||||||||||||||
Common stock | 23,147 | (1,611 | ) | — | — | 23,147 | (1,611 | ) | ||||||||||||||||
Other invested assets | 4,115 | (140 | ) | — | — | 4,115 | (140 | ) | ||||||||||||||||
Total | $ | 88,511 | $ | (2,544 | ) | $ | 3,886 | $ | (155 | ) | $ | 92,397 | $ | (2,699 | ) | |||||||||
(1) | Fixed maturities in a gross unrealized loss position for twelve months or longer are primarily comprised of non-credit losses on investment grade securities where management does not intend to sell, and it is more likely than not that the Company will not be forced to sell the security before recovery. The Company has analyzed these securities and has determined that they are not impaired. |
Less than 12 months | 12 months or longer (1) | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. treasury and agency obligations | $ | 56,445 | $ | (234 | ) | $ | — | $ | — | $ | 56,445 | $ | (234 | ) | ||||||||||
Obligations of states and political subdivisions | 26,488 | (239 | ) | 6,403 | (131 | ) | 32,891 | (370 | ) | |||||||||||||||
Mortgage-backed securities | 23,612 | (217 | ) | 5,020 | (289 | ) | 28,632 | (506 | ) | |||||||||||||||
Asset-backed securities | 31,255 | (246 | ) | 1,625 | (200 | ) | 32,880 | (446 | ) | |||||||||||||||
Corporate notes and loans | 87,286 | (1,166 | ) | 3,556 | (93 | ) | 90,842 | (1,259 | ) | |||||||||||||||
Foreign corporate bonds | 11,835 | (170 | ) | — | — | 11,835 | (170 | ) | ||||||||||||||||
Total fixed maturities | 236,921 | (2,272 | ) | 16,604 | (713 | ) | 253,525 | (2,985 | ) | |||||||||||||||
Common stock | 3,184 | (73 | ) | 1,107 | (52 | ) | 4,291 | (125 | ) | |||||||||||||||
Total | $ | 240,105 | $ | (2,345 | ) | $ | 17,711 | $ | (765 | ) | $ | 257,816 | $ | (3,110 | ) | |||||||||
(1) | Fixed maturities in a gross unrealized loss position for twelve months or longer are primarily comprised of non-credit losses on investment grade securities where management does not intend to sell, and it is more likely than not that the Company will not be forced to sell the security before recovery. The Company has analyzed these securities and has determined that they are not impaired. |
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(1) | the issuer is in financial distress; |
(2) | the investment is secured; |
(3) | a significant credit rating action occurred; |
(4) | scheduled interest payments were delayed or missed; |
(5) | changes in laws or regulations have affected an issuer or industry; |
(6) | the investment has an unrealized loss and was identified by the Company’s Investment Manager as an investment to be sold before recovery or maturity; and |
(7) | the investment failed cash flow projection testing to determine if anticipated principal and interest payments will be realized. |
(1) | persisted for more than twelve consecutive months or |
(2) | the value of the investment has been 20% or more below cost for six continuous months or more to determine if the security should be impaired. |
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Quarters Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Fixed maturities: | ||||||||||||||||
OTTI losses, gross | $ | 15 | $ | 2,108 | $ | 121 | $ | 4,449 | ||||||||
Portion of loss recognized in other comprehensive income (pre-tax) | — | (8 | ) | (43 | ) | (133 | ) | |||||||||
Net impairment losses on fixed maturities recognized in earnings | 15 | 2,100 | 78 | 4,316 | ||||||||||||
Common stock | — | — | 346 | 593 | ||||||||||||
Preferred stock | — | — | — | 647 | ||||||||||||
Total | $ | 15 | $ | 2,100 | $ | 424 | $ | 5,556 | ||||||||
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Quarters Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Balance at beginning of period | $ | 113 | $ | 21 | $ | 50 | $ | — | ||||||||
Additions where no OTTI was previously recorded | — | 3 | 47 | 33 | ||||||||||||
Additions where an OTTI was previously recorded | 15 | 9 | 31 | — | ||||||||||||
Reductions for securities for which the company intends to sell or more likely than not will be required to sell before recovery | — | — | — | — | ||||||||||||
Reductions reflecting increases in expected cash flows to be collected | — | — | — | — | ||||||||||||
Reductions for securities sold during the period | — | — | — | — | ||||||||||||
Balance at end of period | $ | 128 | $ | 33 | $ | 128 | $ | 33 | ||||||||
(Dollars in thousands) | September 30, 2010 | December 31, 2009 | ||||||
Net unrealized gains (losses) from: | ||||||||
Fixed maturities | $ | 67,481 | $ | 48,522 | ||||
Preferred stocks | 1,478 | 1,090 | ||||||
Common stocks | 12,818 | 12,348 | ||||||
Partnerships < 3% owned | (140 | ) | 2,531 | |||||
Foreign currency fluctuations | — | 43 | ||||||
Deferred taxes | (19,402 | ) | (16,053 | ) | ||||
Accumulated other comprehensive income | $ | 62,235 | $ | 48,481 | ||||
Quarters Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Fixed maturities | $ | 846 | $ | 487 | $ | 16,225 | $ | (4,659 | ) | |||||||
Convertibles | — | 4,021 | 3 | 7,121 | ||||||||||||
Common stock | 972 | 2,105 | 5,391 | 2,030 | ||||||||||||
Preferred stock | — | — | — | (1,077 | ) | |||||||||||
Total | $ | 1,818 | $ | 6,613 | $ | 21,619 | $ | 3,415 | ||||||||
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Nine Months Ended | ||||||||
September 30, | ||||||||
(Dollars in thousands) | 2010 | 2009 | ||||||
Fixed maturities | $ | 560,306 | $ | 231,258 | ||||
Equity securities | 30,442 | 68,834 |
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Fixed maturities | $ | 14,885 | $ | 15,808 | $ | 45,597 | $ | 46,485 | ||||||||
Preferred and common stocks | 613 | 351 | 1,419 | 1,281 | ||||||||||||
Cash and cash equivalents | 32 | 225 | 141 | 1,077 | ||||||||||||
Other invested assets | — | — | 4 | 8,647 | ||||||||||||
Total investment income | 15,530 | 16,384 | 47,161 | 57,490 | ||||||||||||
Investment expense | (1,441 | ) | (1,117 | ) | (4,552 | ) | (3,441 | ) | ||||||||
Net investment income | $ | 14,089 | $ | 15,267 | $ | 42,609 | $ | 54,049 | ||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net investment income | $ | 12,039 | $ | 12,586 | $ | 36,109 | $ | 43,494 | ||||||||
Net realized investment gains: | ||||||||||||||||
Invested assets excluding partnerships | 1,272 | 4,763 | 16,066 | 1,991 | ||||||||||||
Partnerships | — | 2,809 | (29 | ) | 4,742 | |||||||||||
Total net realized investment gains | 1,272 | 7,572 | 16,037 | 6,733 | ||||||||||||
Net unrealized investment gains | 18,358 | 25,685 | 13,797 | 40,328 | ||||||||||||
Net investment gains | 19,630 | 33,257 | 29,834 | 47,061 | ||||||||||||
Total investment return | $ | 31,669 | $ | 45,843 | $ | 65,943 | $ | 90,555 | ||||||||
Total investment return %(1) | 1.9 | % | 2.7 | % | 3.9 | % | 5.4 | % | ||||||||
Average investment portfolio(2) | $ | 1,686,638 | $ | 1,710,395 | $ | 1,696,376 | $ | 1,670,782 | ||||||||
(1) | Not annualized. | |
(2) | Average of total cash and invested assets, net of payable for securities purchased, as of the beginning and ending of the period. |
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Ratings | Ratings | |||||||
(Dollars in thousands) | with | without | ||||||
Rating | Insurance | Insurance | ||||||
AAA | $ | 13,497 | $ | — | ||||
AA | 12,849 | 8,435 | ||||||
A | 1,630 | 17,415 | ||||||
BBB | — | 1,777 | ||||||
BB | — | 349 | ||||||
NR | 3,316 | 3,316 | ||||||
Total | $ | 31,292 | $ | 31,292 | ||||
Exposure Net | ||||||||||||||||
of Pre-refunded | ||||||||||||||||
Government | & Government | |||||||||||||||
(Dollars in thousands) | Pre-refunded | Guaranteed | Guaranteed | |||||||||||||
Financial Guarantor | Total | Securities | Securities | Securities | ||||||||||||
Ambac Financial Group | $ | 13,515 | $ | 5,839 | $ | — | $ | 7,676 | ||||||||
Financial Guaranty Insurance Company | 2,502 | 2,502 | — | — | ||||||||||||
Financial Security Assurance, Inc. | 42,591 | 16,481 | — | 26,110 | ||||||||||||
Municipal Bond Insurance Association | 44,592 | 12,200 | — | 32,392 | ||||||||||||
Federal Housing Association | 2,295 | — | 2,295 | — | ||||||||||||
Federal National Housing Association | 780 | — | 780 | — | ||||||||||||
Government National Housing Association | 4,164 | 898 | 3,266 | — | ||||||||||||
Permanent School Fund Guaranty | 3,349 | 1,630 | 1,719 | — | ||||||||||||
Total backed by financial guarantors | 113,788 | 39,550 | 8,060 | 66,178 | ||||||||||||
Other credit enhanced municipal bonds | 10,060 | 10,060 | — | — | ||||||||||||
Total | $ | 123,848 | $ | 49,610 | $ | 8,060 | $ | 66,178 | ||||||||
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Estimated Fair Value | ||||||||
(Dollars in thousands) | September 30, 2010 | December 31, 2009 | ||||||
On deposit with governmental authorities | $ | 44,663 | $ | 41,336 | ||||
Intercompany trusts held for the benefit of U.S. policyholders | 637,328 | 653,500 | ||||||
Held in trust pursuant to third party requirements | 64,738 | 29,884 | ||||||
Held in trust pursuant to U.S. regulatory requirements for the benefit of U.S. policyholders | 5,959 | 6,169 | ||||||
Total | $ | 752,688 | $ | 730,889 | ||||
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Limited partnership > 3% ownership | $ | — | $ | 2,809 | $ | (29 | ) | $ | 4,742 |
• | Level 1 — inputs utilize quoted prices (unadjusted) in active markets for identical assets that the Company has the ability to access at the measurement date. |
• | Level 2 — inputs utilize other than quoted prices included in Level 1 that are observable for the similar assets, either directly or indirectly. |
• | Level 3 — inputs are unobservable for the asset, and include situations where there is little, if any, market activity for the asset. |
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As of September 30, 2010 | Fair Value Measurements | |||||||||||||||
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. treasury and agency obligations | $ | 96,253 | $ | 116,421 | $ | — | $ | 212,674 | ||||||||
Obligations of states and political subdivisions | — | 248,130 | — | 248,130 | ||||||||||||
Mortgage-backed securities | — | 286,230 | — | 286,230 | ||||||||||||
Commercial mortgage-backed securities | — | 1,626 | 1,626 | |||||||||||||
Asset-backed securities | — | 121,964 | — | 121,964 | ||||||||||||
Corporate notes and loans | — | 540,541 | — | 540,541 | ||||||||||||
Foreign corporate bonds | — | 65,896 | — | 65,896 | ||||||||||||
Total fixed maturities | 96,253 | 1,380,808 | — | 1,477,061 | ||||||||||||
Preferred shares | — | 2,408 | — | 2,408 | ||||||||||||
Common shares | 130,472 | — | — | 130,472 | ||||||||||||
Other invested assets | — | — | 5,215 | 5,215 | ||||||||||||
Total invested assets | $ | 226,725 | $ | 1,383,216 | $ | 5,215 | $ | 1,615,156 | ||||||||
As of December 31, 2009 | Fair Value Measurements | |||||||||||||||
(Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Fixed maturities: | ||||||||||||||||
U.S. treasury and agency obligations | $ | 82,021 | $ | 154,067 | $ | — | $ | 236,088 | ||||||||
Obligations of states and political subdivisions | — | 225,598 | — | 225,598 | ||||||||||||
Mortgage-backed securities | — | 364,000 | — | 364,000 | ||||||||||||
Asset-backed securities | — | 114,163 | — | 114,163 | ||||||||||||
Corporate notes and loans | — | 460,730 | — | 460,730 | ||||||||||||
Foreign corporate bonds | — | 70,993 | — | 70,993 | ||||||||||||
Total fixed maturities | 82,021 | 1,389,551 | — | 1,471,572 | ||||||||||||
Preferred shares | 579 | 2,020 | — | 2,599 | ||||||||||||
Common shares | 63,057 | — | — | 63,057 | ||||||||||||
Other invested assets | — | — | 7,999 | 7,999 | ||||||||||||
Total invested assets | $ | 145,657 | $ | 1,391,571 | $ | 7,999 | $ | 1,545,227 | ||||||||
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Other | ||||
Quarter Ended September 30, 2010 | Invested | |||
(Dollars in thousands) | Assets | |||
Beginning balance at July 1, 2010 | $ | 6,490 | ||
Total losses (realized / unrealized): | ||||
Included in accumulated other comprehensive income | (1,275 | ) | ||
Ending balance at September 30, 2010 | $ | 5,215 | ||
Net unrealized losses included in net income for the period related to assets still held at September 30, 2010 | $ | — | ||
Other | ||||
Nine Months Ended September 30, 2010 | Invested | |||
(Dollars in thousands) | Assets | |||
Beginning balance at January 1, 2010 | $ | 7,999 | ||
Total losses (realized / unrealized): | ||||
Included in equity in net loss of partnership | (44 | ) | ||
Included in accumulated other comprehensive income | (2,672 | ) | ||
Distribution | (68 | ) | ||
Ending balance at September 30, 2010 | $ | 5,215 | ||
Net unrealized losses included in net income for the period related to assets still held at September 30, 2010 | $ | (44 | ) | |
Other | ||||
Quarter Ended September 30, 2009 | Invested | |||
(Dollars in thousands) | Assets | |||
Beginning balance at July 1, 2009 | $ | 50,817 | ||
Total gains (losses) (realized / unrealized): | ||||
Included in equity in net income of partnership | 3,638 | |||
Included in accumulated other comprehensive income | (1,995 | ) | ||
Purchases | 32 | |||
Ending balance at September 30, 2009 | $ | 52,492 | ||
Net unrealized gains included in net income for the period related to assets still held at September 30, 2009 | $ | 3,638 | ||
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Other | ||||
Nine Months Ended September 30, 2009 | Invested | |||
(Dollars in thousands) | Assets | |||
Beginning balance at January 1, 2009 | $ | 46,672 | ||
Total gains (losses) (realized / unrealized): | ||||
Included in equity in net income of partnership | 6,375 | |||
Included in accumulated other comprehensive income | (5,879 | ) | ||
Purchases | 30,687 | |||
Sales | (25,363 | ) | ||
Ending balance at September 30, 2009 | $ | 52,492 | ||
Net unrealized gains included in net income for the period related to assets still held at September 30, 2009 | $ | 6,375 | ||
Future | ||||||||
Funding | ||||||||
(Dollars in thousands) | Fair Value | Commitments | ||||||
Equity Fund, LP(1) | $ | 4,115 | $ | 2,569 | ||||
High Yield Convertible Securities Fund, LP(2) | 1,100 | — | ||||||
Total | $ | 5,215 | $ | 2,569 | ||||
(1) | This limited partnership invests in companies, from various business sectors, whereby the partnership has acquired control of the operating business as a lead or organizing investor. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. | |
(2) | This limited partnership is a registered mutual fund which invests in a portfolio of high yield convertible securities issued by companies with small to medium market capitalizations and lower credit ratings (generally below investment grade). In accordance with the partnership agreement, the Company has exercised its right to submit a capital withdrawal request effective December 31, 2009. As of December 31, 2009, the Company was unable to redeem a portion of its ownership interest in this limited partnership with a fair market value of $1.1 million. This is related to convertible preferred securities of one company which are subject to an Appraisal Action in Delaware Court. The partnership decided to participate in the Appraisal Action to maximize the value of its preferred share. Until the appraisal action is resolved, the claim relating to the preferred share is wholly illiquid. |
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• | Equity prices are received from all primary and secondary exchanges. |
• | Corporate notes are individually evaluated on a nominal spread or an option adjusted spread basis depending on how the market trades a security or sector. Spreads are updated each day and compared with those from the broker/dealer community and contributing firms. Issues are generally benchmarked off of the U.S. treasuries or LIBOR. |
• | For CMOs, which are categorized with mortgage-backed securities in the tables listed above, a volatility-driven, multi-dimensional single cash flow stream model or option-adjusted spread model is used. For ABSs, a single expected cash flow stream model is utilized. For both asset classes, evaluations utilize standard inputs plus new issue data, monthly payment information, and collateral performance. The evaluated pricing models incorporate security set-up, prepayment speeds, cash flows, treasury, swap curves and spread adjustments. |
• | For municipals, a series of matrices are used to evaluate securities within this asset class. The evaluated pricing models for this asset class incorporate security set-up, sector curves, yield to worst, ratings updates, and adjustments for material events notices. |
• | U.S. Treasuries are priced on the bid side by a market maker. |
• | For MBSs, the pricing vendor utilizes a matrix model correlation to TBA (a forward MBS trade) or benchmarking to value a security. |
• | Corporate loans are priced using averages of bids and offers obtained from the broker/dealer community involved in trading such loans. |
• | Examining market value changes on an overall portfolio basis to determine if the market value reported by the pricing vendors appears reasonable. Duration of the portfolio and changes to benchmark yields are compared to the market value change reported by the Investment Manager to make this determination. The fair values reported are reviewed by management. |
• | Reviewing periodic reports provided by the Investment Manager that provides information regarding rating changes and securities placed on watch. This procedure allows the Company to understand why a particular security’s market value may have changed. |
• | Understanding and periodically evaluating the various pricing methods and procedures used by the Company’s pricing vendors to ensure that investments are properly classified within the fair value hierarchy. |
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(Dollars in thousands) | September 30, 2010 | �� | December 31, 2009 | |||||
Reinsurance receivables | $ | 463,111 | $ | 543,351 | ||||
Collateral securing reinsurance receivables | (316,492 | ) | (378,056 | ) | ||||
Reinsurance receivables, net of collateral | $ | 146,619 | $ | 165,295 | ||||
Allowance for uncollectible reinsurance receivables | $ | 12,947 | $ | 12,947 | ||||
Prepaid reinsurance premiums | 12,064 | 16,546 |
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Quarter Ended September 30, 2010: | Non-U.S. | U.S. | ||||||||||||||
(Dollars in thousands) | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||
Revenues: | ||||||||||||||||
Gross premiums written | $ | 47,586 | $ | 66,213 | $ | (27,564 | ) | $ | 86,235 | |||||||
Net premiums written | $ | 47,586 | $ | 25,620 | $ | — | $ | 73,206 | ||||||||
Net premiums earned | $ | 47,225 | $ | 22,864 | $ | — | $ | 70,089 | ||||||||
Net investment income | 11,089 | 7,648 | (4,648 | ) | 14,089 | |||||||||||
Net realized investment gains | 258 | 1,560 | — | 1,818 | ||||||||||||
Other income | — | 173 | — | 173 | ||||||||||||
Total revenues | 58,572 | 32,245 | (4,648 | ) | 86,169 | |||||||||||
Losses and Expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 24,412 | 5,377 | — | 29,789 | ||||||||||||
Acquisition costs and other underwriting expenses | 17,243 | 11,298 | — | 28,541 | ||||||||||||
Corporate and other operating expenses | 2,802 | 2,304 | — | 5,106 | ||||||||||||
Interest expense | — | 6,473 | (4,648 | ) | 1,825 | |||||||||||
Income before income taxes | $ | 14,115 | $ | 6,793 | $ | — | $ | 20,908 | ||||||||
Quarter Ended September 30, 2009: | Non-U.S. | U.S. | ||||||||||||||
(Dollars in thousands) | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||
Revenues: | ||||||||||||||||
Gross premiums written | $ | 37,943 | $ | 67,368 | $ | (29,505 | ) | $ | 75,806 | |||||||
Net premiums written | $ | 37,928 | $ | 25,004 | $ | — | $ | 62,932 | ||||||||
Net premiums earned | $ | 45,656 | $ | 27,237 | $ | — | $ | 72,893 | ||||||||
Net investment income | 10,229 | 9,686 | (4,648 | ) | 15,267 | |||||||||||
Net realized investment gains | 1,327 | 5,286 | — | 6,613 | ||||||||||||
Total revenues | 57,212 | 42,209 | (4,648 | ) | 94,773 | |||||||||||
Losses and Expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 23,823 | 15,064 | — | 38,887 | ||||||||||||
Acquisition costs and other underwriting expenses | 17,472 | 10,092 | — | 27,564 | ||||||||||||
Corporate and other operating expenses | 4,116 | 560 | — | 4,676 | ||||||||||||
Interest expense | — | 6,424 | (4,648 | ) | 1,776 | |||||||||||
Income before income taxes | $ | 11,801 | $ | 10,069 | $ | — | $ | 21,870 | ||||||||
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Nine Months Ended September 30, 2010: | Non-U.S. | U.S. | ||||||||||||||
(Dollars in thousands) | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||
Revenues: | ||||||||||||||||
Gross premiums written | $ | 165,372 | $ | 181,815 | $ | (76,049 | ) | $ | 271,138 | |||||||
Net premiums written | $ | 164,588 | $ | 69,622 | $ | — | $ | 234,210 | ||||||||
Net premiums earned | $ | 145,724 | $ | 69,855 | $ | — | $ | 215,579 | ||||||||
Net investment income | 32,760 | 23,641 | (13,792 | ) | 42,609 | |||||||||||
Net realized investment gains | 5,754 | 15,865 | — | 21,619 | ||||||||||||
Other income | — | 515 | — | 515 | ||||||||||||
Total revenues | 184,238 | 109,876 | (13,792 | ) | 280,322 | |||||||||||
Losses and Expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 76,485 | 27,768 | — | 104,253 | ||||||||||||
Acquisition costs and other underwriting expenses | 56,292 | 31,405 | — | 87,697 | ||||||||||||
Corporate and other operating expenses | 7,795 | 7,270 | — | 15,065 | ||||||||||||
Interest expense | — | 19,189 | (13,792 | ) | 5,397 | |||||||||||
Income before income taxes | $ | 43,666 | $ | 24,244 | $ | — | $ | 67,910 | ||||||||
Nine Months Ended September 30, 2009: | Non-U.S. | U.S. | ||||||||||||||
(Dollars in thousands) | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||
Revenues: | ||||||||||||||||
Gross premiums written | $ | 149,934 | $ | 207,675 | $ | (91,135 | ) | $ | 266,474 | |||||||
Net premiums written | $ | 149,389 | $ | 77,634 | $ | — | $ | 227,023 | ||||||||
Net premiums earned | $ | 135,845 | $ | 90,320 | $ | — | $ | 226,165 | ||||||||
Net investment income | 31,156 | 36,685 | (13,792 | ) | 54,049 | |||||||||||
Net realized investment gains (losses) | (655 | ) | 4,070 | — | 3,415 | |||||||||||
Total revenues | 166,346 | 131,075 | (13,792 | ) | 283,629 | |||||||||||
Losses and Expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 73,615 | 57,059 | — | 130,674 | ||||||||||||
Acquisition costs and other underwriting expenses | 54,001 | 34,349 | — | 88,350 | ||||||||||||
Corporate and other operating expenses | 7,635 | 4,679 | — | 12,314 | ||||||||||||
Interest expense | — | 19,254 | (13,792 | ) | 5,462 | |||||||||||
Income before income taxes | $ | 31,095 | $ | 15,734 | $ | — | $ | 46,829 | ||||||||
Quarters Ended September 30, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
% of Pre- | % of Pre- | |||||||||||||||
(Dollars in thousands) | Amount | Tax Income | Amount | Tax Income | ||||||||||||
Expected tax provision at weighted average rate | $ | 2,379 | 11.4 | % | $ | 3,544 | 16.2 | % | ||||||||
Adjustments: | ||||||||||||||||
Tax exempt interest | (504 | ) | -2.4 | (616 | ) | -2.8 | ||||||||||
Dividend exclusion | (123 | ) | -0.6 | (79 | ) | -0.4 | ||||||||||
Effective tax rate adjustment | 150 | 0.7 | (3,447 | ) | -15.8 | |||||||||||
Other | (756 | ) | -3.6 | (2,075 | ) | -9.4 | ||||||||||
Income tax expense (benefit) | $ | 1,146 | 5.5 | % | $ | (2,673 | ) | -12.2 | % | |||||||
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Nine Months Ended September 30, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
% of Pre- | % of Pre- | |||||||||||||||
(Dollars in thousands) | Amount | Tax Income | Amount | Tax Income | ||||||||||||
Expected tax provision at weighted average rate | $ | 8,564 | 12.6 | % | $ | 5,567 | 11.9 | % | ||||||||
Adjustments: | ||||||||||||||||
Tax exempt interest | (1,488 | ) | -2.2 | (1,996 | ) | -4.3 | ||||||||||
Dividend exclusion | (286 | ) | -0.4 | (289 | ) | -0.6 | ||||||||||
Effective tax rate adjustment | (1,376 | ) | -2.0 | (496 | ) | -1.1 | ||||||||||
Other | (708 | ) | -1.1 | (1,978 | ) | -4.2 | ||||||||||
Income tax expense | $ | 4,706 | 6.9 | % | $ | 808 | 1.7 | % | ||||||||
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Quarters Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Balance at beginning of period | $ | 1,168,759 | $ | 1,394,818 | $ | 1,257,741 | $ | 1,506,429 | ||||||||
Less: Ceded reinsurance receivables | 484,344 | 613,664 | 527,413 | 670,591 | ||||||||||||
Net balance at beginning of period | 684,415 | 781,154 | 730,328 | 835,838 | ||||||||||||
Incurred losses and loss adjustment expenses related to: | ||||||||||||||||
Current year | 44,854 | 40,527 | 137,974 | 135,224 | ||||||||||||
Prior years | (15,065 | ) | (1,640 | ) | (33,721 | ) | (4,550 | ) | ||||||||
Total incurred losses and loss adjustment expenses | 29,789 | 38,887 | 104,253 | 130,674 | ||||||||||||
Paid losses and loss adjustment expenses related to: | ||||||||||||||||
Current year | 10,429 | 12,892 | 22,021 | 28,962 | ||||||||||||
Prior years | 43,068 | 42,941 | 151,853 | 173,342 | ||||||||||||
Total paid losses and loss adjustment expenses | 53,497 | 55,833 | 173,874 | 202,304 | ||||||||||||
Net balance at end of period | 660,707 | 764,208 | 660,707 | 764,208 | ||||||||||||
Plus: Ceded reinsurance receivables | 459,756 | 576,386 | 459,756 | 576,386 | ||||||||||||
Balance at end of period | $ | 1,120,463 | $ | 1,340,594 | $ | 1,120,463 | $ | 1,340,594 | ||||||||
• | Property:The $1.6 million reduction primarily consisted of net reductions of $1.7 million related to accident years 2009, 2008, and 2006 and prior due to decreases in expected unallocated loss adjustment expenses and lower than anticipated severity. This reduction was offset by an increase of $0.1 million related to accident year 2007. |
• | General liability:The $14.2 million reduction primarily consisted of reductions of $16.3 million related to accident years 2004 through 2009 due to lower than anticipated frequency and severity. Incurred losses for these segments have developed at a rate lower than the Company’s historical averages. This reduction was offset by a net increase of $2.1 million related to accident years 2003 and prior primarily due to increases in expected unallocated loss adjustment expenses, as well as, higher than expected claim frequency and severity. |
• | Umbrella:The $1.3 million reduction primarily consisted of net reductions of $1.5 million related to accident years 2009 and 2007 and prior due to lower than anticipated severity. As these accident years have matured, more weight has been given to experience based methods which continue to develop favorably compared to the Company’s initial indications. This reduction was offset by an increase of $0.2 million related to accident year 2008 due to an increase in severity. |
• | Professional liability:The $0.1 million increase primarily consisted of an increase of $1.9 million related to accident years 2007 and 2009 where the Company experienced higher than expected claim frequency and severity. This increase was offset by a reduction of $1.8 million related to accident years 2008 and 2006 and prior driven by lower than expected paid and incurred activity during the quarter. |
• | Commercial auto:The $1.7 million increase consisted of an increase of $1.9 million related to accident year 2009 due to increased frequency on two non-standard auto treaties. This increase was offset by net reductions of $0.2 million related to accident years 2008 and prior. Programs related to these accident years are in run-off, and loss severity has been lower than the Company’s prior projections. |
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(Unaudited)
• | Property:The $0.2 million reduction consisted of net reductions of $0.5 million related to accident years 2007 and prior, offset by an increase of $0.3 million related to accident year 2008. |
• | General liability:The $2.7 million reduction consisted of net reductions of $5.1 million related to accident years 2005 and prior, offset by increases of $2.4 million related to accident years 2006 through 2008. |
• | Umbrella:The $0.4 million reduction related to accident years 2003 and 2001. |
• | Professional liability:The $1.3 million increase primarily consisted of increases of $1.6 million related to accident years 2004 through 2008, offset by net reductions of $0.3 million related to accident years 2003 and prior. |
• | Property:The $1.9 million reduction primarily consisted of net reductions of $2.4 million related to accident years 2008 and prior primarily due to lower than anticipated severity. This reduction was offset by an increase of $0.5 million to accident year 2009 that was driven by higher than expected claim frequency and severity. |
• | General liability:The $26.9 million reduction primarily consisted of net reductions of $30.2 million related to accident years 2002 through 2009 due to severity that was lower than originally anticipated. Incurred losses have developed at a rate lower than the Company’s historical averages. This reduction was partially offset by a net increase of $3.3 million related to accident years 2001 and prior where the Company experienced higher than expected claim frequency and severity. |
• | Professional liability:The $2.9 million reduction primarily consisted of net reductions of $6.1 million related to accident years 2008 and prior due to severity that was lower than originally anticipated, partially offset by an increase of $3.2 million related to accident year 2009 where the Company experienced higher than expected claim frequency and severity. |
• | Umbrella:The $3.7 million reduction primarily consisted of net reductions related to accident years 2009 and prior primarily due to lower than anticipated severity. As these accident years have matured, more weight has been given to experience based methods which continue to develop favorably compared to the Company’s initial indications. |
• | Commercial auto:The $1.5 million increase primarily consisted of a net increase of $2.1 million related to accident years 2008 and 2009 where losses were higher than anticipated. This increase was offset by net reductions of $0.6 million related to accident years 2007 and prior. Programs related to these accident years are in run-off, and loss severity has been lower than the Company’s prior projections. |
• | Property:The $2.4 million reduction primarily consisted of reductions related to accident year 2007 and 2008. |
• | General liability:The $5.2 million reduction primarily consisted of net reductions of $9.7 million related to accident years 2006 and prior, offset by increase of $4.5 million to accident years 2007 and 2008. |
• | Umbrella:The $0.4 million reduction primarily related to accident years 2003 and 2001. |
• | Professional liability:The $3.8 million increase primarily related to increases of $6.1 million related to accident years 2007 and 2008, offset by net reductions of $2.3 million primarily to accident years 2005 and prior. |
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(Unaudited)
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Ceded written premium | $ | — | $ | — | $ | (2,401 | )(1) | $ | 2,748 | |||||||
Ceded losses | — | — | 644 | 972 |
(1) | Includes an adjustment made in the first quarter to true up the Company’s estimated amount of ceded premium to actual. |
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(Unaudited)
(Dollars in thousands, | Quarters Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
except per share data) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net income | $ | 19,762 | $ | 27,352 | $ | 63,175 | $ | 50,763 | ||||||||
Basic earnings per share: | ||||||||||||||||
Weighted average shares outstanding — basic | 30,273,757 | 30,144,896 | 30,222,074 | 23,588,613 | ||||||||||||
Adjustment for bonus element of Rights Offering | — | — | — | 814,392 | ||||||||||||
Adjusted weighted average shares outstanding — basic | 30,273,757 | 30,144,896 | 30,222,074 | 24,403,005 | ||||||||||||
Net income per share | $ | 0.65 | $ | 0.91 | $ | 2.09 | $ | 2.08 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Weighted average shares outstanding — diluted | 30,308,489 | 30,155,553 | 30,245,890 | 23,608,637 | ||||||||||||
Adjustment for bonus element of Rights Offering | — | — | — | 814,392 | ||||||||||||
Adjusted weighted average shares outstanding — diluted | 30,308,489 | 30,155,553 | 30,245,890 | 24,423,029 | ||||||||||||
Net income per share | $ | 0.65 | $ | 0.91 | $ | 2.09 | $ | 2.08 | ||||||||
Quarters Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted average shares for basic earnings per share | 30,273,757 | 30,144,896 | 30,222,074 | 24,403,005 | ||||||||||||
Non-vested restricted stock | 34,732 | 10,657 | 23,816 | 20,024 | ||||||||||||
Options | — | — | — | — | ||||||||||||
Weighted average shares for diluted earnings per share | 30,308,489 | 30,155,553 | 30,245,890 | 24,423,029 | ||||||||||||
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(Unaudited)
Quarter Ended September 30, 2010: | Insurance | Reinsurance | ||||||||||
(Dollars in thousands) | Operations (1) | Operations (2) | Total | |||||||||
Revenues: | ||||||||||||
Gross premiums written | $ | 66,213 | $ | 20,022 | $ | 86,235 | ||||||
Net premiums written | $ | 53,185 | $ | 20,021 | $ | 73,206 | ||||||
Net premiums earned | $ | 47,932 | $ | 22,157 | $ | 70,089 | ||||||
Other income | 173 | — | 173 | |||||||||
Total revenues | 48,105 | 22,157 | 70,262 | |||||||||
Losses and Expenses: | ||||||||||||
Net losses and loss adjustment expenses | 13,584 | 16,205 | 29,789 | |||||||||
Acquisition costs and other underwriting expenses | 22,556 | (3) | 5,985 | (4) | 28,541 | |||||||
Income (loss) from segments | $ | 11,965 | $ | (33 | ) | 11,932 | ||||||
Unallocated Items: | ||||||||||||
Net investment income | 14,089 | |||||||||||
Net realized investment gains | 1,818 | |||||||||||
Corporate and other operating expenses | (5,106 | ) | ||||||||||
Interest expense | (1,825 | ) | ||||||||||
Income before income taxes | 20,908 | |||||||||||
Income tax expense | 1,146 | |||||||||||
Net income | $ | 19,762 | ||||||||||
Total assets | $ | 1,698,557 | $ | 654,472 | (5) | $ | 2,353,029 | |||||
(1) | Includes business ceded to Reinsurance Operations. | |
(2) | External business only, excluding business assumed from Insurance Operations. | |
(3) | Includes federal excise tax of $251 relating to the quota share and stop loss agreements. | |
(4) | Includes all Wind River Reinsurance expenses other than federal excise tax. | |
(5) | Comprised of Wind River Reinsurance’s total assets less its investment in subsidiaries. |
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(Unaudited)
Quarter Ended September 30, 2009: | Insurance | Reinsurance | ||||||||||
(Dollars in thousands) | Operations (1) | Operations (2) | Total | |||||||||
Revenues: | ||||||||||||
Gross premiums written | $ | 67,368 | $ | 8,438 | $ | 75,806 | ||||||
Net premiums written | $ | 54,510 | $ | 8,422 | $ | 62,932 | ||||||
Net premiums earned | $ | 58,971 | $ | 13,922 | $ | 72,893 | ||||||
Losses and Expenses: | ||||||||||||
Net losses and loss adjustment expenses | 33,292 | 5,595 | 38,887 | |||||||||
Acquisition costs and other underwriting expenses | 24,028 | (3) | 3,536 | (4) | 27,564 | |||||||
Income from segments | $ | 1,651 | $ | 4,791 | 6,442 | |||||||
Unallocated Items: | ||||||||||||
Net investment income | 15,267 | |||||||||||
Net realized investment gains | 6,613 | |||||||||||
Corporate and other operating expenses | (4,676 | ) | ||||||||||
Interest expense | (1,776 | ) | ||||||||||
Income before income taxes | 21,870 | |||||||||||
Income tax benefit | (2,673 | ) | ||||||||||
Income before equity in net income of partnership | 24,543 | |||||||||||
Equity in net income of partnership, net of tax | 2,809 | |||||||||||
Net income | $ | 27,352 | ||||||||||
Total assets | $ | 1,868,061 | $ | 632,266 | (5) | $ | 2,500,327 | |||||
(1) | Includes business ceded to Reinsurance Operations. | |
(2) | External business only, excluding business assumed from Insurance Operations. | |
(3) | Includes federal excise tax of $317 relating to the quota share and stop loss agreements. | |
(4) | Includes all Wind River Reinsurance expenses other than federal excise tax. | |
(5) | Comprised of Wind River Reinsurance’s total assets less its investment in subsidiaries. |
Nine Months Ended September 30, 2010: | Insurance | Reinsurance | ||||||||||
(Dollars in thousands) | Operations (1) | Operations (2) | Total | |||||||||
Revenues: | ||||||||||||
Gross premiums written | $ | 181,815 | $ | 89,323 | $ | 271,138 | ||||||
Net premiums written | $ | 145,674 | $ | 88,536 | $ | 234,210 | ||||||
Net premiums earned | $ | 146,412 | $ | 69,167 | $ | 215,579 | ||||||
Other income | 515 | — | 515 | |||||||||
Total revenues | 146,927 | 69,167 | 216,094 | |||||||||
Losses and Expenses: | ||||||||||||
Net losses and loss adjustment expenses | 59,582 | 44,671 | 104,253 | |||||||||
Acquisition costs and other underwriting expenses | 67,666 | (3) | 20,031 | (4) | 87,697 | |||||||
Income from segments | $ | 19,679 | $ | 4,465 | 24,144 | |||||||
Unallocated Items: | ||||||||||||
Net investment income | 42,609 | |||||||||||
Net realized investment gains | 21,619 | |||||||||||
Corporate and other operating expenses | (15,065 | ) | ||||||||||
Interest expense | (5,397 | ) | ||||||||||
Income before income taxes | 67,910 | |||||||||||
Income tax expense | 4,706 | |||||||||||
Income before equity in net loss of partnership | 63,204 | |||||||||||
Equity in net loss of partnership, net of tax | (29 | ) | ||||||||||
Net income | $ | 63,175 | ||||||||||
Total assets | $ | 1,698,557 | $ | 654,472 | (5) | $ | 2,353,029 | |||||
(1) | Includes business ceded to the Company’s Reinsurance Operations. | |
(2) | External business only, excluding business assumed from the Company’s Insurance Operations. | |
(3) | Includes federal excise tax of $766 relating to the quota share and stop loss agreements. | |
(4) | Includes all Wind River Reinsurance expenses other than federal excise tax. | |
(5) | Comprised of Wind River Reinsurance’s total assets less its investment in subsidiaries. |
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(Unaudited)
Nine Months Ended September 30, 2009: | Insurance | Reinsurance | ||||||||||
(Dollars in thousands) | Operations (1) | Operations (2) | Total | |||||||||
Revenues: | ||||||||||||
Gross premiums written | $ | 207,675 | $ | 58,799 | $ | 266,474 | ||||||
Net premiums written | $ | 168,770 | $ | 58,253 | $ | 227,023 | ||||||
Net premiums earned | $ | 194,137 | $ | 32,028 | $ | 226,165 | ||||||
Losses and Expenses: | ||||||||||||
Net losses and loss adjustment expenses | 115,583 | 15,091 | 130,674 | |||||||||
Acquisition costs and other underwriting expenses | 80,408 | (3) | 7,942 | (4) | 88,350 | |||||||
Income (loss) from segments | $ | (1,854 | ) | $ | 8,995 | 7,141 | ||||||
Unallocated Items: | ||||||||||||
Net investment income | 54,049 | |||||||||||
Net realized investment gains | 3,415 | |||||||||||
Corporate and other operating expenses | (12,314 | ) | ||||||||||
Interest expense | (5,462 | ) | ||||||||||
Income before income taxes | 46,829 | |||||||||||
Income tax expense | 808 | |||||||||||
Income before equity in net income of partnership | 46,021 | |||||||||||
Equity in net income of partnership, net of tax | 4,742 | |||||||||||
Net income | $ | 50,763 | ||||||||||
Total assets | $ | 1,868,061 | $ | 632,266 | (5) | $ | 2,500,327 | |||||
(1) | Includes business ceded to the Company’s Reinsurance Operations. | |
(2) | External business only, excluding business assumed from the Company’s Insurance Operations. | |
(3) | Includes federal excise tax of $1,038 relating to the quota share and stop loss agreements. | |
(4) | Includes all Wind River Reinsurance expenses other than federal excise tax. | |
(5) | Comprised of Wind River Reinsurance’s total assets less its investment in subsidiaries. |
Quarters Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net U.S. federal income taxes paid (recovered) | $ | 1,650 | $ | (10,957 | ) | $ | 3,704 | $ | (18,019 | ) | ||||||
Interest paid | 3,182 | 3,058 | 6,625 | 6,830 |
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• | Paid Development method; |
• | Incurred Development method; |
• | Expected Loss Ratio method; |
• | Bornhuetter-Ferguson method using premiums and paid loss; |
• | Bornhuetter-Ferguson method using premiums and incurred loss; and |
• | Average Loss method. |
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Gross Reserves | ||||||||||||
(Dollars in thousands) | Case | IBNR (1) | Total | |||||||||
Insurance Operations | $ | 356,937 | $ | 695,151 | $ | 1,052,088 | ||||||
Reinsurance Operations | 17,252 | 51,123 | 68,375 | |||||||||
Total | $ | 374,189 | $ | 746,274 | $ | 1,120,463 | ||||||
Net Reserves (2) | ||||||||||||
(Dollars in thousands) | Case | IBNR (1) | Total | |||||||||
Insurance Operations | $ | 212,355 | $ | 380,845 | $ | 593,200 | ||||||
Reinsurance Operations | 17,128 | 50,379 | 67,507 | |||||||||
Total | $ | 229,483 | $ | 431,224 | $ | 660,707 | ||||||
(1) | Losses incurred but not reported, including the expected future emergence of case reserves. | |
(2) | Does not include reinsurance receivable on paid losses or reserve for uncollectible reinsurance. |
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Severity Change | ||||||||||||||||||||||||
(Dollars in thousands) | -10% | -5% | 0% | 5% | 10% | |||||||||||||||||||
Frequency Change | -5 | % | $ | (20,006 | ) | $ | (13,452 | ) | $ | (6,899 | ) | $ | (345 | ) | $ | 6,209 | ||||||||
-3 | % | (17,523 | ) | (10,831 | ) | (4,139 | ) | 2,553 | 9,244 | |||||||||||||||
-2 | % | (16,281 | ) | (9,520 | ) | (2,759 | ) | 4,001 | 10,762 | |||||||||||||||
-1 | % | (15,039 | ) | (8,209 | ) | (1,380 | ) | 5,450 | 12,280 | |||||||||||||||
0 | % | (13,797 | ) | (6,899 | ) | — | 6,899 | 13,797 | ||||||||||||||||
1 | % | (12,556 | ) | (5,588 | ) | 1,380 | 8,347 | 15,315 | ||||||||||||||||
2 | % | (11,314 | ) | (4,277 | ) | 2,759 | 9,796 | 16,833 | ||||||||||||||||
3 | % | (10,072 | ) | (2,966 | ) | 4,139 | 11,245 | 18,351 | ||||||||||||||||
5 | % | (7,589 | ) | (345 | ) | 6,899 | 14,142 | 21,386 |
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Quarters Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Insurance Operations premiums written: | ||||||||||||||||
Gross premiums written | $ | 66,213 | $ | 67,368 | $ | 181,815 | $ | 207,675 | ||||||||
Ceded premiums written | 13,028 | 12,858 | 36,141 | 38,905 | ||||||||||||
Net premiums written | $ | 53,185 | $ | 54,510 | $ | 145,674 | $ | 168,770 | ||||||||
Reinsurance Operations premiums written: | ||||||||||||||||
Gross premiums written | $ | 20,022 | $ | 8,438 | $ | 89,323 | $ | 58,799 | ||||||||
Ceded premiums written | 1 | 16 | 787 | 546 | ||||||||||||
Net premiums written | $ | 20,021 | $ | 8,422 | $ | 88,536 | $ | 58,253 | ||||||||
Revenues:(1) | ||||||||||||||||
Insurance Operations | $ | 48,105 | $ | 58,971 | $ | 146,927 | $ | 194,137 | ||||||||
Reinsurance Operations | 22,157 | 13,922 | 69,167 | 32,028 | ||||||||||||
Total revenues | $ | 70,262 | $ | 72,893 | $ | 216,094 | $ | 226,165 | ||||||||
Expenses:(2) | ||||||||||||||||
Insurance Operations(3) | $ | 36,140 | $ | 57,320 | $ | 127,248 | $ | 195,991 | ||||||||
Reinsurance Operations(4) | 22,190 | 9,131 | 64,702 | 23,033 | ||||||||||||
Total expenses | $ | 58,330 | $ | 66,451 | $ | 191,950 | $ | 219,024 | ||||||||
Income (loss) from segments: | ||||||||||||||||
Insurance Operations | $ | 11,965 | $ | 1,651 | $ | 19,679 | $ | (1,854 | ) | |||||||
Reinsurance Operations | (33 | ) | 4,791 | 4,465 | 8,995 | |||||||||||
Total income from segments | $ | 11,932 | $ | 6,442 | $ | 24,144 | $ | 7,141 | ||||||||
Insurance combined ratio analysis:(5) | ||||||||||||||||
Insurance Operations | ||||||||||||||||
Loss ratio | 28.4 | 56.4 | 40.7 | 59.5 | ||||||||||||
Expense ratio | 47.1 | 40.7 | 46.2 | 41.4 | ||||||||||||
Combined ratio | 75.5 | 97.1 | 86.9 | 100.9 | ||||||||||||
Reinsurance Operations | ||||||||||||||||
Loss ratio | 73.1 | 40.2 | 64.6 | 47.1 | ||||||||||||
Expense ratio | 27.0 | 25.4 | 29.0 | 24.8 | ||||||||||||
Combined ratio | 100.1 | 65.6 | 93.6 | 71.9 | ||||||||||||
Consolidated | ||||||||||||||||
Loss ratio | 42.5 | 53.4 | 48.4 | 57.8 | ||||||||||||
Expense ratio | 40.7 | 37.8 | 40.7 | 39.1 | ||||||||||||
Combined ratio | 83.2 | 91.2 | 89.1 | 96.9 | ||||||||||||
(1) | Excludes net investment income and net realized investment gains, which are not allocated to our segments. | |
(2) | Excludes corporate and other operating expenses and interest expense, which are not allocated to our segments. | |
(3) | Includes excise tax of $251 and $317 for the quarters ended September 30, 2010 and 2009, respectively, and excise tax of $766 and $1,038 for the nine months ended September 30, 2010 and 2009, respectively, related to the quota share and stop loss agreements. | |
(4) | Includes all Wind River Reinsurance expenses other than excise tax related to the quota share and stop loss agreements. | |
(5) | Our insurance combined ratios are non-GAAP financial measures that are generally viewed in the insurance industry as indicators of underwriting profitability. The loss ratio is the ratio of net losses and loss adjustment expenses to net premiums earned. The expense ratio is the ratio of acquisition costs and other underwriting expenses to net premiums earned. The combined ratio is the sum of the loss and expense ratios. |
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Quarters Ended September 30, | Increase / (Decrease) | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | $ | % | ||||||||||||
Gross premiums written | $ | 66,213 | $ | 67,368 | $ | (1,155 | ) | -1.7 | % | |||||||
Net premiums written | $ | 53,185 | $ | 54,510 | $ | (1,325 | ) | -2.4 | % | |||||||
Net premiums earned | $ | 47,932 | $ | 58,971 | $ | (11,039 | ) | -18.7 | % | |||||||
Other income | 173 | — | 173 | 100.0 | % | |||||||||||
Losses and expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 13,584 | 33,292 | (19,708 | ) | -59.2 | % | ||||||||||
Acquisition costs and other underwriting expenses(1) | 22,556 | 24,028 | (1,472 | ) | -6.1 | % | ||||||||||
Income from segment | $ | 11,965 | $ | 1,651 | $ | 10,314 | 624.7 | % | ||||||||
Underwriting Ratios: | ||||||||||||||||
Loss ratio: | ||||||||||||||||
Current accident year | 63.6 | 59.2 | 4.4 | |||||||||||||
Prior accident year | (35.2 | ) | (2.8 | ) | (32.4 | ) | ||||||||||
Calendar year | 28.4 | 56.4 | (28.0 | ) | ||||||||||||
Expense ratio | 47.1 | 40.7 | 6.4 | |||||||||||||
Combined ratio | 75.5 | 97.1 | (21.6 | ) | ||||||||||||
(1) | Includes excise tax of $251 and $317 related to cessions from our U.S. Insurance Companies to Wind River Reinsurance for the quarters ended September 30, 2010 and 2009, respectively. |
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• | The current accident year property loss ratio increased 7.1 points from 49.3% in the quarter ended September 30, 2009 to 56.4% in the quarter ended September 30, 2010, which consists of a 8.5 point increase in the non-catastrophe loss ratio from 45.1% in the quarter ended September 30, 2009 to 53.6% in the quarter ended September 30, 2010 and a 1.4 point decrease in the catastrophe loss ratio from 4.2% in the quarter ended September 30, 2009 to 2.8% in the quarter ended September 30, 2010. The increase in the non-catastrophe loss ratio is primarily due to higher reinsurance costs. Non-catastrophe losses were $9.9 million and $11.0 million for the quarters ended September 30, 2010 and 2009, respectively. The decrease in the catastrophe loss ratio is primarily due to less than expected frequency and severity. Catastrophe losses were $0.5 million and $1.0 million for the quarters ended September 30, 2010 and 2009, respectively. Property net premiums earned for the quarters ended September 30, 2010 and 2009 were $18.4 million and $24.5 million, respectively. |
• | The current accident year casualty loss ratio increased 1.7 points from 66.3% in the quarter ended September 30, 2009 to 68.0% in the quarter ended September 30, 2010 primarily due to changes in our mix of business. Casualty net premiums earned for the quarters ended September 30, 2010 and 2009 were $29.5 million and $34.5 million, respectively. |
• | In 2010, we reduced our prior accident year loss reserves by $16.9 million, which reduced our loss ratio by 35.2 points. The reduction of our prior accident year loss reserves primarily consisted of a $1.6 million reduction in our property lines, a $14.2 million reduction in our general liability lines, and a $1.3 million reduction in our umbrella lines. |
1. | Property:The $1.6 million reduction is primarily due to a net reduction of $1.7 million related to accident years 2009, 2008, and 2006 and prior due to decreases in expected unallocated loss adjustment expenses, and lower than anticipated severity. This reduction was offset by an increase of $0.1 million related to accident year 2007. |
2. | General liability:The $14.2 million reduction primarily consisted of reductions of $16.3 million related to accident years 2004 through 2009 due to lower than anticipated severity. Incurred losses for these segments have developed at a rate lower than our historical averages. This reduction was offset by a net increase of $2.1 million related to accident years 2003 and prior primarily due to increases in expected unallocated loss adjustment expense, as well as higher than expected claim frequency and severity. |
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3. | Umbrella:The $1.3 million reduction primarily consisted of net reductions of $1.5 million related to accident years 2009 and 2007 and prior primarily due to lower than anticipated severity. As these accident years have matured, more weight has been given to experience based methods which continue to develop favorably compared to our initial indications. This reduction was offset by an increase of $0.2 million related to accident year 2008 due to an increase in severity. |
• | In 2009, we reduced our prior accident year loss reserves by $2.0 million and increased our allowance for uncollectible reinsurance by $0.4 million, which reduced our loss ratio by 2.8 points. The loss reserves reduction of $2.0 million primarily consisted of a $0.2 million reduction in our property lines, a $2.7 million reduction in our general liability lines, and a $0.4 million reduction in our umbrella lines, offset by a $1.3 million increase in our professional liability lines: |
1. | Property:The $0.2 million reduction consisted of net reductions primarily related to accident years 2007 and prior. |
2. | General liability:The $2.7 million reduction consisted of net reductions of $5.1 million related to accident years 2005 and prior, offset by increases of $2.4 million related to accident years 2006 through 2008. |
3. | Umbrella:The $0.4 million reduction related to accident years 2003 and 2001. |
4. | Professional liability:The $1.3 million increase primarily consisted of increases of $1.6 million related to accident years 2004 through 2008, offset by net reductions of $0.3 million related to accident years 2003 and prior. |
• | The $2.4 million decrease in acquisition costs is primarily due to a decrease in commissions resulting from a decrease in net premiums earned partially offset by an increase in contingent commissions due to improved prior year results. |
• | The $1.0 million increase in other underwriting expenses is primarily due to an increase in total compensation and other miscellaneous expenses. |
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Quarters Ended September 30, | Increase / (Decrease) | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | $ | % | ||||||||||||
Gross premiums written | $ | 20,022 | $ | 8,438 | $ | 11,584 | 137.3 | % | ||||||||
Net premiums written | $ | 20,021 | $ | 8,422 | $ | 11,599 | 137.7 | % | ||||||||
Net premiums earned | $ | 22,157 | $ | 13,922 | $ | 8,235 | 59.2 | % | ||||||||
Losses and expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 16,205 | 5,595 | 10,610 | 189.6 | % | |||||||||||
Acquisition costs and other underwriting expenses | 5,985 | 3,536 | 2,449 | 69.3 | % | |||||||||||
Income (losses) from segment | $ | (33 | ) | $ | 4,791 | $ | (4,824 | ) | NM | |||||||
Underwriting Ratios: | ||||||||||||||||
Loss ratio: | ||||||||||||||||
Current accident year | 64.9 | 40.2 | 24.7 | |||||||||||||
Prior accident year | 8.2 | — | 8.2 | |||||||||||||
Calendar year loss ratio | 73.1 | 40.2 | 32.9 | |||||||||||||
Expense ratio | 27.0 | 25.4 | 1.6 | |||||||||||||
Combined ratio | 100.1 | 65.6 | 34.5 | |||||||||||||
NM — Not meaningful |
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• | The current accident year property loss ratio increased 43.9 points from 9.3% in the quarter ended September 30, 2009 to 53.2% in the quarter ended September 30, 2010. This increase was primarily due to an increase in severity. Current accident year property losses for the quarters ended September 30, 2010 and 2009 were $7.7 million and $0.7 million, respectively. |
• | The current accident year casualty loss ratio increased 5.7 points from 81.6% in the quarter ended September 30, 2009 to 87.3% in the quarter ended September 30, 2010. This increase was primarily due to an increase in our professional liability lines where losses were higher than anticipated. |
• | In 2010, we increased our prior accident year loss reserves by $1.8 million, which increased our loss ratio by 8.2 points. This increase is primarily related to our commercial auto liability lines and is due to increased frequency on two non-standard auto treaties. |
• | There were no significant changes to prior accident year loss reserves in 2009. |
• | The $2.2 million increase in acquisition costs is primarily due to an increase in commissions resulting from an increase in net premiums earned. |
• | The $0.3 million increase in other underwriting expenses is primarily due to an increase in total compensation expenses and professional services expenses. |
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Quarters Ended September 30, | Increase / (Decrease) | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | $ | % | ||||||||||||
Net investment income | $ | 14,089 | $ | 15,267 | $ | (1,178 | ) | -7.7 | % | |||||||
Net realized investment gains | 1,818 | 6,613 | (4,795 | ) | -72.5 | % | ||||||||||
Corporate and other operating expenses | (5,106 | ) | (4,676 | ) | (430 | ) | 9.2 | % | ||||||||
Interest expense | (1,825 | ) | (1,776 | ) | (49 | ) | 2.8 | % | ||||||||
Income tax benefit (expense) | (1,146 | ) | 2,673 | (3,819 | ) | NM | ||||||||||
Equity in net income of partnership, net of tax | — | 2,809 | (2,809 | ) | -100.0 | % |
NM — Not meaningful |
• | Gross investment income, excluding realized gains and losses, was $15.5 million for the quarter ended September 30, 2010, compared with $16.4 million for the quarter ended September 30, 2009, a decrease of $0.9 million or 5.2%. The decrease was primarily due to lower yields on fixed maturities when compared to the corresponding period in 2009. In addition, there was negative net operating cash flow during the twelve month period ending September 30, 2010. |
• | Investment expenses were $1.4 million for the quarter ended September 30, 2010, compared with $1.1 million for the quarter ended September 30, 2009, an increase of $0.3 million or 29.0%. The increase was primarily due to additional fees related to our investment in corporate loans. |
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Nine Months Ended | ||||||||||||||||
September 30, | Increase / (Decrease) | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | $ | % | ||||||||||||
Gross premiums written | $ | 181,815 | $ | 207,675 | $ | (25,860 | ) | -12.5 | % | |||||||
Net premiums written | $ | 145,674 | $ | 168,770 | $ | (23,096 | ) | -13.7 | % | |||||||
Net premiums earned | $ | 146,412 | $ | 194,137 | $ | (47,725 | ) | -24.6 | % | |||||||
Other income | 515 | — | 515 | 100.0 | % | |||||||||||
Losses and expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 59,582 | 115,583 | (56,001 | ) | -48.5 | % | ||||||||||
Acquisition costs and other underwriting expenses(1) | 67,666 | 80,408 | (12,742 | ) | -15.8 | % | ||||||||||
Income (loss) from segment | $ | 19,679 | $ | (1,854 | ) | $ | 21,533 | NM | ||||||||
Underwriting Ratios: | ||||||||||||||||
Loss ratio: | ||||||||||||||||
Current accident year | 64.4 | 61.9 | 2.5 | |||||||||||||
Prior accident year | (23.7 | ) | (2.4 | ) | (21.3 | ) | ||||||||||
Calendar year | 40.7 | 59.5 | (18.8 | ) | ||||||||||||
Expense ratio | 46.2 | 41.4 | 4.8 | |||||||||||||
Combined ratio | 86.9 | 100.9 | (14.0 | ) | ||||||||||||
(1) | Includes excise tax of $766 and $1,038 related to cessions from our U.S. Insurance Companies to Wind River Reinsurance for the nine months ended September 30, 2010 and 2009, respectively. | |
NM — Not meaningful. |
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• | The current accident year property loss ratio increased 6.1 points from 54.8% in the nine months ended September 30, 2009 to 60.9% in the nine months ended September 30, 2010, which consists of a 5.1 point increase in the non-catastrophe loss ratio from 50.0% in the nine months ended September 30, 2009 to 55.1% in the nine months ended September 30, 2010 and a 1.0 point increase in the catastrophe loss ratio from 4.8% in the nine months ended September 30, 2009 to 5.8% in the nine months ended September 30, 2010. The increase in the non-catastrophe loss ratio is primarily due to higher reinsurance costs. Non-catastrophe losses were $31.1 million and $39.9 million for the nine months ended September 30, 2010 and 2009, respectively. Catastrophe losses were $3.3 million and $3.8 million for the nine months ended September 30, 2010 and 2009, respectively. Property net premiums earned for the nine months ended September 30, 2010 and 2009 were $56.5 million and $79.8 million, respectively. |
• | The current accident year casualty loss ratio decreased 0.2 points from 66.9% in the nine months ended September 30, 2009 to 66.7% in the nine months ended September 30, 2010 primarily due to changes in our mix of business. Casualty net premiums earned for the nine months ended September 30, 2010 and 2009 were $89.9 million and $114.3 million, respectively. |
• | In 2010, we reduced our prior accident year loss reserves by $34.8 million, which reduced our loss ratio by 23.7 points. The reduction of our prior accident year loss reserves primarily consisted of a $1.2 million reduction in our property lines, a $26.8 million reduction in our general liability lines, a $3.0 million reduction in our professional liability lines, a $3.7 million reduction in our umbrella lines, and a $0.3 million reduction in our commercial auto lines: |
1. | Property:The $1.2 million reduction primarily consisted of net reductions of $2.6 million related to accident years 2008 and prior primarily due to incurred loss emergence during the period that was lower than our historical averages. This reduction was offset by an increase of $1.4 million to accident year 2009 due to higher than expected claim frequency and severity. |
2. | General liability:The $26.8 million reduction primarily consisted of net reductions of $30.1 million related to accident years 2002 through 2009 where incurred losses have developed at a rate lower than our historical averages. This reduction was partially offset by a net increase of $3.3 million related to accident yeas 2001 and prior where we experienced higher than expected claim frequency and severity. |
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3. | Professional liability:The $3.0 million reduction primarily consisted of net reductions of $6.5 million related to accident years 2008 and prior due to severity that was lower than originally anticipated, partially offset by an increase of $3.5 million related to accident year 2009 where we experienced higher than expected claim frequency and severity. |
4. | Umbrella:The $3.7 million reduction primarily consisted of net reductions related to accident years 2009 and prior primarily due to lower than anticipated severity. As these accident years have matured, more weight has been given to experience based methods which continue to develop favorably compared to our initial indications. |
5. | Commercial auto:The $0.3 million reduction primarily consisted of net reductions of $0.6 million related to accident years 2008 and prior. Programs related to these accident years are in run-off, and loss severity has been lower than our prior projections. This reduction was offset by an increase of $0.3 million to accident year 2009 where losses were higher than anticipated. |
• | In 2009, we reducedour prior accident year loss reserves by $4.2 million and reduced our allowance for uncollectible reinsurance by $0.4 million, which reduced our loss ratio by 2.4 points. The reduction of our prior accident year loss reserves primarily consisted of a $2.4 million reduction in our property lines, a $5.2 million reduction in our general liability lines, and a $0.4 million reduction in our umbrella lines, offset by a $3.8 million increase in our professional liability lines: |
1. | Property:The $2.4 million reduction primarily consisted of reductions related to accident year 2007 and 2008. |
2. | General liability:The $5.2 million reduction primarily consisted of net reductions of $9.7 million related to accident years 2006 and prior, offset by increase of $4.5 million to accident years 2007 and 2008. |
3. | Umbrella:The $0.4 million reduction primarily related to accident years 2003 and 2001. |
4. | Professional liability:The $3.8 million increase primarily related to increases of $6.1 million related to accident years 2007 and 2008, offset by net reductions of $2.3 million primarily to accident years 2005 and prior. |
• | The $10.6 million decrease in acquisition costs is primarily due to a decrease in commissions resulting from a decrease in net premiums earned offset by an increase in contingent commissions due to improved prior year results. |
• | The $2.1 million decrease in other underwriting expenses is primarily due to a decrease in total compensation expenses and professional services expenses, offset by an increase in infrastructure costs related to new product development, information technology upgrades, and additional office locations. |
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Nine Months Ended | ||||||||||||||||
September 30, | Increase / (Decrease) | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | $ | % | ||||||||||||
Gross premiums written | $ | 89,323 | $ | 58,799 | $ | 30,524 | 51.9 | % | ||||||||
Net premiums written | $ | 88,536 | $ | 58,253 | $ | 30,283 | 52.0 | % | ||||||||
Net premiums earned | $ | 69,167 | $ | 32,028 | $ | 37,139 | 116.0 | % | ||||||||
Losses and expenses: | ||||||||||||||||
Net losses and loss adjustment expenses | 44,671 | 15,091 | 29,580 | 196.0 | % | |||||||||||
Acquisition costs and other underwriting expenses | 20,031 | 7,942 | 12,089 | 152.2 | % | |||||||||||
Income from segment | $ | 4,465 | $ | 8,995 | $ | (4,530 | ) | -50.4 | % | |||||||
Underwriting Ratios: | ||||||||||||||||
Loss ratio: | ||||||||||||||||
Current accident year | 63.1 | 47.0 | 16.1 | |||||||||||||
Prior accident year | 1.5 | 0.1 | 1.4 | |||||||||||||
Calendar year loss ratio | 64.6 | 47.1 | 17.5 | |||||||||||||
Expense ratio | 29.0 | 24.8 | 4.2 | |||||||||||||
Combined ratio | 93.6 | 71.9 | 21.7 | |||||||||||||
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• | The current accident year property loss ratio increased 37.2 points from 15.1% in the nine months ended September 30, 2009 to 52.3% in the nine months ended September 30, 2010. This increase was primarily due to an increase in severity and favorable catastrophe results in 2009. Current accident year property losses for the nine months ended September 30, 2010 and 2009 were $20.5 million and $2.5 million, respectively. |
• | The current accident year casualty loss ratio decreased 4.7 points from 81.8% in the nine months ended September 30, 2009 to 77.1% in the nine months ended September 30, 2010. This decrease was primarily due to a decrease in our professional liability lines where losses were lower than anticipated. |
• | In 2010, we increased our prior accident year loss reserves by $1.0 million, which increased our loss ratio by 1.5 points. This increase is primarily due to a $1.8 million increase in our commercial auto lines related to accident years 2008 and 2009 due to increased frequency on two non-standard auto treaties. This increase was partially offset by a net $0.7 million reduction in our property lines that was driven by lower than expected loss severity on a 2009 treaty partially offset by adverse loss development on a 2008 treaty. |
• | In 2009, we increased our prior accident year loss reserves by $0.03 million, which primarily consisted of increases in our general liability lines. The increase to the general liability lines were related to accident years 2007 and 2008. |
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• | The $12.0 million increase in acquisition costs is primarily due to an increase in commissions resulting from an increase in net premiums earned. |
• | The $0.1 million increase in other underwriting expenses is primarily due to an increase in professional services expenses, partially offset by a decrease in total compensation expenses. |
Nine Months Ended | ||||||||||||||||
September 30, | Increase / (Decrease) | |||||||||||||||
(Dollars in thousands) | 2010 | 2009 | $ | % | ||||||||||||
Net investment income | $ | 42,609 | $ | 54,049 | $ | (11,440 | ) | -21.2 | % | |||||||
Net realized investment gains | 21,619 | 3,415 | 18,204 | 533.1 | % | |||||||||||
Corporate and other operating expenses | (15,065 | ) | (12,314 | ) | (2,751 | ) | 22.3 | % | ||||||||
Interest expense | (5,397 | ) | (5,462 | ) | 65 | -1.2 | % | |||||||||
Income tax expense | (4,706 | ) | (808 | ) | (3,898 | ) | 482.4 | % | ||||||||
Equity in net income (loss) of partnership, net of tax | (29 | ) | 4,742 | (4,771 | ) | NM |
NM — Not meaningful. |
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• | Gross investment income, excluding realized gains and losses, was $47.2 million for the nine months ended September 30, 2010, compared with $57.5 million for the nine months ended September 30, 2009, a decrease of $10.3 million or 18.0%. The decrease was primarily due to less income from our limited partnership investments which had generated gross investment income of $8.6 million for the nine months ended September 30, 2009 due to liquidations of some of those investments. Excluding limited partnership distributions, gross investment income for the nine months ended September 30, 2010 decreased 3.5% compared to the nine months ended September 30, 2009 primarily due to lower yields on fixed maturities when compared to the corresponding period in 2009. In addition, there was negative net operating cash flow during the twelve month period ending September 30, 2010. |
• | Investment expenses were $4.6 million for the nine months ended September 30, 2010, compared with $3.4 million for the nine months ended September 30, 2009, an increase of $1.2 million or 32.3%. The increase was primarily due to additional fees related to our investment in corporate loans. |
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• | the fact that we collect premiums in advance of losses paid; |
• | the timing of our settlements with our reinsurers; and |
• | the timing of our loss payments. |
Nine Months Ended September 30, | ||||||||||||
(Dollars in thousands) | 2010 | 2009 | Change | |||||||||
Net premiums collected | $ | 223,012 | $ | 203,767 | $ | 19,245 | ||||||
Net losses paid(1) | (161,291 | ) | (195,055 | )(2) | 33,764 | |||||||
Acquisition costs and other underwriting expenses | (112,304 | ) | (98,904 | ) | (13,400 | ) | ||||||
Net investment income | 46,746 | 59,337 | (12,591 | ) | ||||||||
Net federal income taxes recovered (paid) | (5,410 | ) | 18,188 | (23,598 | ) | |||||||
Interest paid | (6,625 | ) | (6,828 | ) | 203 | |||||||
Other | (20 | ) | (36 | ) | 16 | |||||||
Net cash used for operating activities | $ | (15,892 | ) | $ | (19,531 | ) | $ | 3,639 | ||||
(1) | Includes change in reinsurance receivable on paid losses of $12,583 and $7,249 for the nine months ended September 30, 2010 and 2009, respectively. | |
(2) | Includes losses resulting from Hurricane Ike, which made landfall in August 2008. |
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Some of the statements under “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this report may include forward-looking statements that reflect our current views with respect to future events and financial performance that are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “plan,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of identified transactions, and statements about the future performance, operations, products and services of the companies, including statements regarding projected annual savings and costs resulting from the restructuring plan.
Our business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: (1) the ineffectiveness of our business strategy due to changes in current or future market conditions; (2) the effects of competitors’ pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products; (3) greater frequency or severity of claims and loss activity than our underwriting, reserving or investment practices have anticipated; (4) decreased level of demand for our insurance products or increased competition due to an increase in capacity of property and casualty insurers; (5) risks inherent in establishing loss and loss adjustment expense reserves; (6) uncertainties relating to the financial ratings of our insurance subsidiaries; (7) uncertainties arising from the cyclical nature of our business; (8) changes in our relationships with, and the capacity of, our general agents; (9) the risk that our reinsurers may not be able to fulfill obligations; (10) investment performance and credit risk; (11) risks associated with our completed redomestication to Ireland, which may include encountering difficulties moving jurisdictions and opening new offices and functions, tax and financial expectations and advantages not materializing or changing, our stock price could decline, and Irish corporate governance and regulatory schemes could prove different or more challenging than currently expected; (12) new tax legislation or interpretations that could lead to an increase in our tax burden; (13) uncertainties relating to governmental and regulatory policies; (14) foreign currency fluctuations; (15) impact of catastrophic events; and (16) estimates of the projected annual savings and costs for the restructuring plan, which were made based on information available at the time the charges were recorded.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are set forth in “Risk Factors” in Item 1A and elsewhere in our 2009 Annual Report on Form 10-K. Our forward-looking statements speak only as of the date of this report or as of the date they were made. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
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Approximate | ||||||||||||||||
Total Number of | Dollar Value | |||||||||||||||
Shares Purchased | of Shares That | |||||||||||||||
Total Number | Average | as Part of Publicly | May Yet Be | |||||||||||||
of Shares | Price Paid | Announced Plan | Purchased Under the | |||||||||||||
Period (1) | Purchased | Per Share | or Program | Plan or Program (2) | ||||||||||||
July 1-31, 2010 | 3 | (3) | $ | — | — | $ | — | |||||||||
August 1-31, 2010 | — | $ | — | — | $ | — | ||||||||||
September 1-30, 2010 | — | $ | — | — | $ | — | ||||||||||
Total | 3 | $ | — | — | N/A | |||||||||||
(1) | Based on settlement date. | |
(2) | Approximate dollar value of shares is as of the last date of the applicable month. | |
(3) | This amount represents an adjustment of fractional shares that resulted from the one-for-two stock exchange of Global Indemnity plc shares for United America Indemnity, Ltd. shares as part of the redomestication to Ireland. (See Note 2 of the notes to the consolidated financial statements in Item 1 of Part II of this report for more information regarding the redomestication.) |
3.1 | Memorandum and Articles of Association of Global Indemnity plc (incorporated herein by reference to Exhibit 3.1 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.1 | Global Indemnity plc Share Incentive Plan, amended and restated effective July 2, 2010 (incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.2 | Amendment to Global Indemnity plc Share Incentive Plan dated July 2, 2010 (incorporated herein by reference to Exhibit 10.2 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.3 | Deed Poll of Assumption for United America Indemnity, Ltd. Share Incentive Plan by Global Indemnity plc, dated July 2, 2010 (incorporated herein by reference to Exhibit 10.3 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.4 | Global Indemnity plc Annual Incentive Award Program, amended and restated effective July 2, 2010 (incorporated herein by reference to Exhibit 10.4 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.5 | Deed Poll of Assumption for United America Indemnity, Ltd. Annual Incentive Award Program by Global Indemnity plc, dated July 2, 2010 (incorporated herein by reference to Exhibit 10.5 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.6 | Amended and Restated Shareholders Agreement, dated July 2, 2010, by and among Global Indemnity plc (as successor to United America Indemnity, Ltd.) and the signatories thereto (incorporated herein by reference to Exhibit 10.6 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.7 | Assignment and Assumption Agreement relating to the Amended and Restated Shareholders Agreement, dated July 2, 2010 (incorporated herein by reference to Exhibit 10.7 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.8 | Indemnification Agreement between United America Indemnity Ltd. and Fox Paine Capital Fund II International L.P., dated July 2, 2010 (incorporated herein by reference to Exhibit 10.8 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
10.9 | Form of Indemnification Agreement between United America Indemnity Ltd. and certain directors and officers of Global Indemnity plc, dated July 2, 2010( incorporated herein by reference to Exhibit 10.9 of our Current Report on Form 8-K12B dated July 2, 2010 (File No. 001-34809)) | |||
31.1 | + | Certification of Chief Executive Officer pursuant to Rule 13a-14 (a) / 15d-14 (a) of the Securities Exchange of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | + | Certification of Chief Financial Officer pursuant to Rule 13a-14 (a) / 15d-14 (a) of the Securities Exchange of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | + | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32.2 | + | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
+ | Filed herewith. |
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GLOBAL INDEMNITY PLC Registrant | ||||||
November 9, 2010 | By: | /s/ Thomas M. McGeehan | ||||
Date: November 9, 2010 | ||||||
Chief Financial Officer | ||||||
(Authorized Signatory and Principal Financial and Accounting Officer) |
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