SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
PXRE Group Ltd.
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(Exact name of registrant as specified in its charter)
April 23, 2003
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Date of Report (Date of earliest event reported)
Bermuda 1-15259 98-0214717
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(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) Identification No.)
Swan Building, 26 Victoria Street, Hamilton HM 12 Bermuda
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(Address of principal executive offices) (Zip Code)
(441) 296-5858
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(Registrant's telephone number, including area code)
Item 5. Other Events and Required FD Disclosure
On April 23, 2003, PXRE Group Ltd. ("PXRE") commuted its quota share
reinsurance agreement with P-1 Re Ltd. ("P-1") in consideration of a
commutation fee of $1.8 million payable by P-1 to PXRE. The commutation is
effective as of January 1, 2003 and PXRE will retain all reinsurance premiums
that would have been ceded to P-1. PXRE elected to commute this reinsurance
facility because it believes that it will earn a higher risk adjusted profit
by retaining the business ceded to P-1 than it could earn from the management
fee that was payable under the P-1 reinsurance agreement.
PXRE had established the P-1 facility in December 2002 to manage the
potential for excess growth in PXRE's property-catastrophe peak zone
exposures. Under the P-1 reinsurance agreement, the quota share ceded to P-1
was determined based upon the amount of exposure PXRE wrote in excess of
certain minimum retained amounts established by PXRE. PXRE met planned
internal growth targets during the January 1, 2003 renewal season for its
property-catastrophe business, but it did not experience significant peak zone
exposure growth beyond its internal targets and the property catastrophe quota
share ceded to P-1 was only 2.74%. As a result, the bulk of the business ceded
to P-1 was well rated aviation, satellite and risk excess business. Such
aviation, satellite and risk excess business is not highly correlated to
PXRE's property-catastrophe exposures and reassumption of this business
improves the expected return on PXRE's reinsurance portfolio.
As a result of the commutation, PXRE is expected to retain an additional
$25 to $30 million of net premiums earned during 2003. PXRE had expected to
earn approximately $5.0 million of net fee income from the P-1 facility during
2003. Based upon PXRE's rate adjusted historical loss ratios, PXRE forecasts
that the reassumption of the business ceded to P-1 will likely result in
additional 2003 pre-tax underwriting profits of approximately $8 to $10
million, assuming normalized loss activity.
A copy of the Commutation Agreement, effective as of January 1, 2003,
between P-1 Re Ltd., PXRE Reinsurance Company and PXRE Reinsurance Ltd. is
attached as Exhibit 99.1 hereto.
Cautionary Statement Regarding Forward-Looking Statements
This report contains various forward-looking statements and includes
assumptions concerning our operations, future results and prospects.
Statements included herein, as well as statements made by or on our behalf in
press releases, written statements or other documents filed with the
Securities and Exchange Commission (the "SEC"), or in PXRE's communications
and discussions with investors and analysts in the normal course of business
through meetings, phone calls and conference calls, which are not historical
in nature are intended to be, and are hereby identified as, "forward-looking
statements" for purposes of the safe harbor provided by Section 21E of the
Securities Exchange Act of 1934 as amended. These forward-looking statements,
identified by words such as "intend," "forecast," "believe," "anticipate," or
"expects" or variations
of such words or similar expressions are based on current expectations and are
subject to risk and uncertainties. In light of the risks and uncertainties
inherent in all future projections, the inclusion of forward-looking
statements in this report should not be considered as a representation by PXRE
or any other person that our objectives or plans will be achieved. PXRE
cautions investors and analysts that actual results or events could differ
materially from those set forth or implied by the forward-looking statements
and related assumptions, depending on the outcome of certain important factors
including, but not limited to, the following:
(i) significant catastrophe losses or losses under other coverages,
the timing and extent of which are difficult to predict;
(ii) changes in the level of competition in the reinsurance or primary
insurance markets that impact the volume or profitability of
business (these changes include, but are not limited to, the
intensification of price competition, the entry of new
competitors, existing competitors exiting the market and
competitors' development of new products);
(iii) the lowering or loss of one of the financial or claims paying
ratings of PXRE or one or more of its subsidiaries;
(iv) changes in the demand for reinsurance, including changes in the
amount of risk that PXRE's clients elect to maintain for their own
account;
(v) risks associated with the termination and run-off of PXRE's
diversification initiatives;
(vi) adverse development on loss reserves related to business written
in current and prior years;
(vii) lower than estimated retrocessional recoveries on unpaid losses,
including the effects of losses due to a decline in the
creditworthiness of PXRE's retrocessionaires;
(viii) increases in interest rates, which cause a reduction in the market
value of PXRE's interest rate sensitive investments, including
PXRE's fixed income investment portfolio, and potential
underperformance in our finite coverages;
(ix) decreases in interest rates causing a reduction of income earned
on net cash flow from operations and the reinvestment of the
proceeds from sales, calls or maturities of existing investments
and shortfalls in cash flows necessary to pay fixed rate amounts
due to finite contract counterparties;
(x) market fluctuations in equity securities and with respect to our
portfolio of hedge funds and other privately held securities:
leverage, concentration of investments, lack of liquidity, market
fluctuations and direction (including as a result of interest
rate fluctuations and direction, with respect to price levels and
volatility thereof), currency fluctuations, credit risk, yield
curve risk, spread risk between two or more similar securities,
political risk, counterparty risk and risks relating to
settlements on foreign exchanges;
(xi) foreign currency fluctuations resulting in exchange gains or
losses;
(xii) a contention by the United States Internal Revenue Service that
PXRE or its offshore subsidiaries are subject to U.S. taxation;
and
(xiii) changes in tax laws, tax treaties, tax rules and interpretations.
In addition to the factors outlined above that are directly related to
PXRE's business, PXRE is also subject to general business risks, including,
but not limited to, adverse state, federal or foreign legislation and
regulation, adverse publicity or news coverage, changes in general economic
factors and the loss of key employees. The factors listed above should not be
construed as exhaustive.
PXRE undertakes no obligation to release publicly the results of any
future revisions PXRE may make to forward looking statements to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PXRE GROUP LTD.
Dated: April 24, 2003 By: /s/ Jeffrey L. Radke
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Jeffrey L. Radke
President & Chief Operating Officer