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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ______________ to _________________.
Commission file number 0-13891.
NAC Re Corp.
(Exact name of registrant as specified in its charter)
Delaware 13-3297840
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Greenwich Plaza, Greenwich, CT 06836-2568
(Address of principal executive offices)
(203) 622-5200
(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
------- -------
There were 19,167,084 shares outstanding of the Registrant's Common Stock,
$.10 par value, as of March 31, 1996.
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NAC RE CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
Independent Accountants' Review Report 3
Consolidated Balance Sheet -
March 31, 1996 and December 31, 1995 4
Consolidated Statement of Income -
Three Months Ended March 31, 1996 and 1995 5
Consolidated Statement of Stockholders' Equity -
Three Months Ended March 31, 1996 and 1995 6
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis
of Financial Condition and Results of Operations 9-12
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 11-1 15
Exhibit 11-2 16
Exhibit 15 17
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
Board of Directors and Shareholders
NAC Re Corporation
We have reviewed the accompanying consolidated balance sheet of NAC Re
Corporation and subsidiaries as of March 31, 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for the three months
ended March 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquires of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted audited
standards, the consolidated balance sheet of NAC Re Corporation as of December
31, 1995, and the related consolidated statements of income, stockholders'
equity and cash flows for the year then ended (not presented herein) and in our
report dated January 30, 1996, we expressed an unqualified opinion on those
consolidated financial statements.
New York, New York ERNST & YOUNG LLP
April 22, 1996
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NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
March 31, December 31,
1996 1995
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ASSETS
Investments:
Available for sale:
Fixed maturities (amortized cost: 1996,
$1,591,752;1995, $1,551,848 ) $1,600,344 $1,593,543
Equity securities (cost: 1996,
$107,806; 1995, $114,818) 124,307 127,257
Short-term investments 133,915 132,406
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TOTAL INVESTMENTS 1,858,566 1,853,206
Cash 20,446 10,320
Accrued investment income 26,167 26,955
Premiums receivable 168,335 154,974
Reinsurance recoverable balances, net 269,497 257,136
Reinsurance recoverable on unearned premiums 27,094 28,111
Investment accounts receivable 4,941 43
Deferred policy acquisition costs 72,306 70,466
Excess of cost over net assets acquired 3,920 4,011
Deferred tax asset, net 39,940 27,688
Other assets 45,466 29,221
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TOTAL ASSETS $2,536,678 $2,462,131
========== ==========
LIABILITIES
Claims and claims expenses $1,328,438 $1,292,415
Unearned premiums 235,828 230,738
8% Notes due 1999 100,000 100,000
7.15% Notes due 2005 99,929 99,927
5.25% Convertible Subordinated
Debentures due 2002 100,000 100,000
Investment accounts payable 73,179 50,580
Other liabilities 90,705 76,715
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TOTAL LIABILITIES 2,028,079 1,950,375
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STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value:
1,000 shares authorized, none issued
(Includes 90 shares of Series A
Junior Participating Preferred Stock) - -
Common stock, $.10 par value:
25,000 shares authorized (1996,
21,391; 1995, 21,341 issued) 2,139 2,134
Additional paid-in capital 247,554 246,356
Unrealized appreciation of investments,
net of tax 15,309 35,187
Currency translation adjustments,
net of tax (475) 1,017
Retained earnings 289,475 269,660
Less treasury stock, at cost (1996, 2,224;
1995, 2,137 shares) (45,403) (42,598)
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TOTAL STOCKHOLDERS' EQUITY 508,599 511,756
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,536,678 $2,462,131
========== ==========
See Notes to Consolidated Financial Statements
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NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three months ended March 31,
----------------------------
1996 1995
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PREMIUMS AND OTHER REVENUES
Net premiums written $123,139 $110,521
Increase in unearned premiums (6,318) (5,043)
-------- --------
Premiums earned 116,821 105,478
Net investment income 25,743 22,210
Net investment gains 9,817 3,142
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Total revenues 152,381 130,830
OPERATING COSTS AND EXPENSES
Claims and claims expenses 73,689 73,603
Commissions and brokerage 33,519 29,577
Acquisition and operating expenses 12,650 10,293
Interest expense 5,571 3,551
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Total operating costs and expenses 125,429 117,024
INCOME
Operating income before income taxes 26,952 13,806
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Federal and foreign income taxes:
Current 8,720 4,591
Deferred (2,540) (2,160)
-------- --------
Income tax expense (benefit) 6,180 2,431
-------- --------
Operating income/net income $20,772 $11,375
======== ========
PER SHARE DATA
Primary:
Average shares outstanding 19,562 17,898
======== ========
Operating income/net income $1.06 $0.64
======== ========
Fully Diluted (assuming conversion of
dilutive convertible securities):
Average shares outstanding 21,582 19,918
======== ========
Operating income/net income $1.00 $0.62
======== ========
See Notes to Consolidated Financial Statements
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NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
(Unaudited)
Three months ended March 31,
----------------------------
1996 1995
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COMMON STOCK
Balance at beginning of year $2,134 $1,964
Issuance of shares 5 2
--------- ---------
Balance at end of period $2,139 $1,966
========= =========
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year $246,356 $194,231
Issuance of shares 1,198 961
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Balance at end of period $247,554 $195,192
========= =========
UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENTS, NET OF TAX
Balance at beginning of year $35,187 $(46,030)
Unrealized (depreciation) appreciation (19,878) 34,898
--------- ---------
Balance at end of period $15,309 $(11,132)
========= =========
CURRENCY TRANSLATION ADJUSTMENTS, NET OF TAX
Balance at beginning of year $1,017 $1,059
Translation adjustments (1,492) 789
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Balance at end of period $(475) $1,848
========= =========
RETAINED EARNINGS
Balance at beginning of year $269,660 $210,255
Net income 20,772 11,375
Dividends (957) (701)
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Balance at end of period $289,475 $220,929
========= =========
TREASURY STOCK
Balance at beginning of year $(42,598) $(42,394)
Purchase of treasury shares (2,805) (37)
--------- ---------
Balance at end of period $(45,403) $(42,431)
========= =========
TOTAL STOCKHOLDERS' EQUITY
Balance at beginning of year $511,756 $319,085
Issuance of shares 1,203 963
Unrealized (depreciation) appreciation (19,878) 34,898
Translation adjustments (1,492) 789
Net income 20,772 11,375
Dividends (957) (701)
Purchase of treasury shares (2,805) (37)
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Balance at end of period $508,599 $366,372
========= =========
See Notes to Consolidated Financial Statements
- 6 -
NAC RE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended March 31,
----------------------------
1996 1995
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OPERATING ACTIVITIES
Net income $20,772 $11,375
Adjustments to reconcile net income to net cash
provided by operating activities:
Reserve for claims and claims
expenses, net 30,029 30,636
Unearned premiums, net 6,318 5,041
Premiums receivable (13,566) (12,068)
Accrued investment income 734 (131)
Reinsurance balances, net (2,648) (12,576)
Deferred policy acquisition costs (1,879) (1,382)
Net investment gains (9,817) (3,142)
Deferred tax asset, net (2,540) (2,160)
Other liabilities 7,815 (6,971)
Other items, net (10,154) (5,186)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 25,064 3,436
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INVESTING ACTIVITIES
Sales of fixed maturity investments 501,443 247,503
Maturities of fixed maturity investments 5,391 5,773
Purchases of fixed maturity investments (526,508) (294,196)
Net (purchases) sales of short-term
investments (1,778) 20,254
Sales of equity securities 31,822 29,949
Purchases of equity securities (21,420) (13,124)
Purchases of furniture and equipment (1,124) (274)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (12,174) (4,115)
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FINANCING ACTIVITIES
Issuance of shares 1,000 975
Purchase of treasury shares (2,805) (37)
Cash dividends paid to stockholders (959) (700)
-------- --------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (2,764) 238
-------- --------
Increase (decrease) in cash 10,126 (441)
Cash - beginning of year 10,320 9,624
-------- --------
Cash - end of period $20,446 $9,183
======== ========
See Notes to Consolidated Financial Statements
- 7 -
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements have been prepared on
the basis of generally accepted accounting principles and in the opinion of
management, reflect all adjustments necessary (consisting of normal
recurring accruals) for a fair presentation of results for such periods.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's Annual Report to Shareholders.
2. Per Share Data
Primary earnings per share data are based on weighted average common shares
and common share equivalents outstanding during the period. Fully diluted
earnings per share data assumes conversion of dilutive convertible
securities and the assumed exercise of all dilutive stock options.
Weighted average common shares includes the effect of the Company's
issuance of 1,530,000 shares of Common Stock through a public offering in
November 1995.
3. Retrocession
The Company's balance sheet as of March 31, 1996 and December 31, 1995
reflects reinsurance recoverable balances as assets, the components of
which are as follows (in thousands):
Reinsurance Recoverable Balances, Net
-------------------------------------
March 31, 1996 December 31, 1995
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Paid Claims $17,374 $19,051
Unpaid Claims and Claims Expenses 345,436 338,746
Ceded Balances Payable (48,157) (56,792)
Funds Held Liability (45,156) (43,869)
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Net $269,497 $257,136
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The effect of retrocessional activity on premiums written, premiums earned
and claims expenses is as follows (in thousands):
Three months ended
March 31,
----------------------
1996 1995
----------------------
Ceded premiums written $37,207 $40,369
Ceded premiums earned $38,360 $37,700
Ceded claims and claims expenses $20,507 $25,394
- 8 -
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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NAC Re Corporation ("NAC Re") is the holding company for NAC Reinsurance
Corporation ("NAC") and its wholly owned insurance and reinsurance domestic and
foreign subsidiaries. NAC Re and its subsidiaries are collectively referred to
as the Company.
Results of Operations
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Operating income, excluding investment gains increased 53.8% to $14.4 million or
$.73 per share for the quarter ended March 31, 1996, compared with $9.3 million
or $.52 per share for the 1995 first quarter. Net income for the 1996 first
quarter increased 82.6% to $20.8 million or $1.06 per share compared to $11.4
million or $.64 per share for the same prior year period.
Net property catastrophe claim activity for the 1996 first quarter was minimal,
as it included $1.7 million of domestic claim activity from the January 1996
winter storms. The 1995 first quarter included $5.3 million of net property
catastrophe claim activity, of which $3.3 million and $2.0 million were from the
domestic and international operations, respectively.
Premium Revenues
The Company's growth in premium revenue, as indicated below, has been impacted
by several different factors, including both external market influences and
internal initiatives:
(In millions)
Three months ended March 31,
------------------------------------------------------
Domestic International Total
-------------- -------------- ---------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
Net Premiums Written:
Casualty $69.1 $64.0 $5.2 $4.9 $74.3 $68.9
Property 29.1 23.9 8.4 6.6 37.5 30.5
Specialty/Other 11.3 11.1 - - 11.3 11.1
------ ------ ------ ------ ------ ------
Total $109.5 $99.0 $13.6 $11.5 $123.1 $110.5
====== ====== ====== ====== ====== ======
The Company's worldwide net premiums written for the 1996 first quarter were
$123.1 million, an increase of 11.4% over the comparable 1995 period.
Domestic net premiums written for the 1996 first quarter reflected an increase
of 10.6% over the comparable 1995 period. Casualty net premiums increased 7.9%
for the 1996 first quarter. Casualty growth for the first quarter can be
primarily attributed to new business and increased participations from existing
treaty client relationships and increased opportunities in our facultative
individual risk business. Property net premiums written increased 22.1% for
the 1996 first quarter. Contributing to the property growth were business
opportunities from new clients coupled with new business and increased
opportunities from existing treaty and facultative client relationships. Net
premiums written for our specialty lines, which consist of fidelity/surety,
aviation and ocean marine business, increased 1.8% for the 1996 first quarter.
NAC Reinsurance International Limited reported net premiums written of $13.6
million, an increase of 18.2% over the comparable 1995 first quarter period.
Casualty premiums were $5.2 million for the 1996 first quarter, an increase of
4.9% over the 1995 period. Property premiums for the 1996 first quarter were
$8.4 million, an increase of 28.1% over the 1995 period.
Reduced ceded premium charges favorably impacted the premium growth across all
profit centers due primarily to a more cost efficient retrocessional program and
a moderate increase in the Company's retention levels. The Company increased
its maximum retention on any one claim for non-catastrophe losses in 1996,
principally for the casualty lines in consideration of the Company's increased
size and financial capacity, as well as the continued positive contribution of
business written since 1986.
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Operating Costs and Expenses
Claims and claims expenses represent our most significant and uncertain cost.
This expense is only an estimate at a given point in time of what the insurer or
reinsurer expects to pay on claims, based upon facts and circumstances then
known. We would generally expect to refine such an estimate in subsequent
accounting periods by modest amounts with adjustments possible in either
direction as additional information becomes known.
One traditional means of measuring the underwriting performance of a
property/casualty insurer is the statutory composite ratio. The composite
ratio, based upon statutory accounting practices which differ from generally
accepted accounting principles in several respects, reflects underwriting
experience, but does not reflect income from investments. A composite ratio of
under 100% indicates underwriting profitability while a composite ratio
exceeding 100% indicates an underwriting loss.
The following chart sets forth statutory composite ratios and the relevant
components for the periods indicated for the Company's domestic reinsurance
subsidiary. The consolidated statutory composite ratio combines the results of
our international subsidiary on a U.S. statutory basis:
Three months ended Year ended
March 31, December 31,
------------------- ------------
1996 1995 1995
---- ---- ------------
Claims and Claims Expenses 62.2% 67.3% 65.1%
Commissions and Brokerage 29.6 29.1 29.7
Other Underwriting Expenses 9.7 8.7 8.3
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Domestic Statutory Composite Ratio 101.5% 105.1% 103.1%
====== ====== ======
Consolidated Statutory Composite Ratio 101.9% 107.2% 103.7%
====== ====== ======
The Company's domestic statutory composite ratio for the 1996 first quarter
reflects significant improvements in underwriting results compared to the 1995
first quarter and full year. Such improvement is due in part to the favorable
development of prior year claim reserves and minimal property catastrophe claim
activity. Net property catastrophe claim activity was minimal for the 1996
first quarter, increasing the 1996 first quarter domestic composite ratio by 1.6
percentage points. The 1995 first quarter and full year domestic composite
ratios were increased by 3.5 percentage points and .9 percentage points,
respectively, as a result of the 1995 net property catastrophe claim activities.
The Company experienced net favorable claim development for the 1996 three month
period which was principally attributable to casualty business written since
1985. This favorable development in casualty reflects the strength of the
pricing assumptions underlying the business written, particularly with respect
to the consideration given to social and economic inflation. The pricing
assumptions are utilized to establish the initial expected target loss ratio
employed in the actuarial methodologies used to establish the reserves for
claims and claims expenses. Such loss ratios are periodically adjusted to
reflect actuarially computed comparisons of expected to actual claims and claims
expense development, inflation and other considerations. Such favorable
development was partly offset by unfavorable experience on business written
prior to 1985, principally related to asbestos and environmental claims.
The pricing of the Company's reinsurance contracts contemplates many factors,
including exposure to claims and the expenses of both the client company and
broker. The Company's actuaries and underwriters evaluate the adequacy of
premium revenue net of these expenses, thereby mitigating the effect of
variations in these expenses to overall underwriting results. The Company's
commission and brokerage ratio for the 1996 first quarter reflects a slight
increase compared to the 1995 first quarter, principally due to increased
commissions in pro rata contracts written in our specialty lines of business,
which generally carry a higher commission rate.
Other underwriting expenses for the 1996 first quarter have increased as
compared to the 1995 prior year period, reflecting continued business expansion,
investments in technology and the building of our facultative and international
infrastructure. However, the Company will continue to seek measures to contain
underwriting expenses that are not central to its underwriting activities, and
to better utilize its resources.
- 10 -
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Investments
Cash and invested assets at March 31, 1996 and December 31, 1995 were
approximately $1.8 billion, excluding net investment payables of $68.2 million
and $50.5 million for 1996 and 1995, respectively.
Net investment income for the 1996 first quarter was $25.7 million, an increase
of 15.9% over the 1995 comparable period. The increase is primarily attributed
to our growth in invested assets, including the net proceeds of approximately
$147 million related to the Company's public debt and equity offerings in
November 1995. The Company's pretax investment yield was 5.8% for the 1996
first quarter, compared to 6.2% for the 1995 first quarter. The after-tax
investment yield for the 1996 first quarter was 4.6%, compared to 4.8% for the
comparable prior year period.
Net investment gains, net of tax for the 1996 first quarter were $6.4 million or
$.33 per share, compared to net investment gains of $2.0 million or $.12 per
share for the 1995 first quarter. Gains and losses on the sale of investments
are recognized as a component of operating income, but the timing and
recognition of such gains and losses are unpredictable and are not indicative of
future operating results.
The Company's investment strategy is focused principally on income
predictability and asset value stability. This strategy results in an emphasis
on high quality fixed maturity investments. Tactical shifts between taxable and
tax-exempt bonds may occur in order to maximize after-tax investment returns.
At March 31, 1996, our fixed maturity investments amounted to $1.6 billion,
which approximates 85% of cash and invested assets, and 96% of such investments
are rated investment grade by Moody's Investor Services, Inc. or Standard &
Poor's.
While uncertainties exist regarding interest rate and inflation variability, the
Company attempts to minimize such risks and exposures by balancing the duration
of its assets with the expected duration of its liabilities. Consistent with
the payment profile of the Company's claim liabilities, as of March 31, 1996 the
Company's investment portfolio had an average duration of 4.8 years.
The balance of the Company's investment portfolio at March 31, 1996, consisting
of cash, short-term investments and equity securities, amounted to $278.7
million. The Company's equity investment strategy is designed to build a
quality equity portfolio by specifically investing a portion of cash flow from
operations in equity securities. As of March 31, 1996, the Company held $124.3
million or 6.6% of cash and invested assets in equity securities which
represented 19.6% of statutory surplus.
Liquidity and Capital Resources
NAC Re is a holding company and has no revenue producing operations of its own.
Cash flow within NAC Re consists of investment income, operating and interest
expenses, dividends to stockholders, rental income and dividends from NAC which
are subject to statutory restrictions.
In November 1995, the Company issued $100 million principal amount of its 7.15%
Notes due November 15, 2005, and raised approximately $49 million on the
issuance of 1.53 million shares of Common Stock. The Company contributed the
majority of the net proceeds from the Company's debt and equity offering to NAC
in late 1995.
The statutory surplus of the reinsurance subsidiary, NAC Reinsurance Corporation
was $633.5 million at March 31, 1996 which ranks among the largest domestic
reinsurers measured on this basis.
Consolidated stockholders' equity at March 31, 1996 totaled $508.6 million or
$26.54 per share compared to $511.8 million or $26.65 per share at December 31,
1995. The unrealized appreciation of investments, net of tax, was $15.3 million
at March 31, 1996 compared to an unrealized appreciation of investments of $35.2
million at December 31, 1995, resulting in a decrease in stockholders' equity of
$19.9 million or $1.04 per share.
Cash flow from operations was $25.1 million for the 1996 first quarter, compared
to $3.4 million for the same prior year period. This increase in cash flow was
principally due to increases in premium and investment income receipts.
- 11 -
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In April 1996, the Company modified its existing $35 million revolving credit
facility. The principal modification of the agreement replaced the required
payment of outstanding balances beginning in June 1996 with a scheduled
reduction of the credit facility beginning in July 1998 and ending July 2001.
Outstanding borrowings at March 31, 1996 were $17.8 million, which were
principally utilized to finance the Company's periodic repurchase of its Common
Stock. The Company repurchased approximately 108,000 shares of NAC Re Common
Stock during 1996. Approximately 386,000 shares are available for repurchase
under the Company's repurchase program.
NAC maintains a $15 million line of credit facility which is available for
catastrophe claim payments or working capital purposes. There have been no
borrowings under this facility.
Regulatory Initiatives
NAC Re and its domestic subsidiaries are subject to regulatory scrutiny under
the insurance statutes and regulations of the jurisdictions in which they
conduct business, including all states of the United States and Canada. NAC
Re's international subsidiary is subject to the regulatory authority of the
United Kingdom Department of Trade and Industry. These regulations vary from
jurisdiction to jurisdiction, and are generally designed to protect ceding
insurance companies and policyholders by ensuring each company's financial
integrity and solvency in its business transactions and operations. Many of the
insurance statutes and regulations applicable to the Company may be categorized
as reporting and disclosure standards which allow insurance regulators to
closely monitor the Company's performance. Typical required reports include
information concerning the Company's capital structure, ownership, financial
strength and general business operations.
In 1993, the National Association of Insurance Commissioners (the "NAIC")
adopted a model risk-based capital act intended to provide an additional tool
for regulators to evaluate the capital of property and casualty insurers and
reinsurers with respect to the risks assumed by them and determine whether there
is a perceived need for possible corrective action. The nature of the
corrective action depends upon the extent of the calculated risk-based capital
deficiency and ranges from requiring the company to submit a comprehensive plan
to placing the insurer under regulatory control. While the model risk-based
capital act has not yet been adopted in New York, NAC's domicile or California,
NAC's commercial domicile, New York has issued a circular letter requiring the
filing of risk-based capital reports and a bill is pending in California to
adopt a risk-based capital act. In a related action, the NAIC adopted a
proposal that requires property and casualty insurers and reinsurers to report
the results of their risk-based capital calculations as part of the statutory
annual statements filed with state regulatory authorities. Surplus (as
calculated for statutory annual statement purposes) for each of the Company's
domestic property and casualty insurance and reinsurance subsidiaries is well
above the risk-based capital thresholds that would require either company or
regulatory action.
Various other regulatory and legislative initiatives have been discussed from
time to time that could impact reinsurers. The thrust of regulatory efforts at
all levels is to improve the solvency of reinsurers and create strong incentives
for insurers to do business with well capitalized, prompt paying reinsurers
operating under U.S. jurisdiction. These initiatives, and the overall focus on
solvency, may intensify the restructuring of the reinsurance industry. While we
cannot quantify the impact of these regulatory efforts on the Company's
operations, we believe the Company is adequately positioned to compete in an
environment of more stringent regulation.
- 12 -
PART II. OTHER INFORMATION
Item 6. Exhibits
- ------------------
(a) Exhibit Index:
Exhibit Description Page
- ------- ----------------------------------------------- ----
11-1 Statement Re: Computation of Primary Per Share
Earnings 16
11-2 Statement Re: Computation of Fully Diluted Per Share
Earnings 17
15 Letter Re: Unaudited Interim Financial Information 18
(b) There were no reports filed on Form 8-K for the three months
ended March 31, 1996.
Omitted from this Part II are items which are inapplicable or
to which the answer is negative for the period covered.
- 13 -
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 thereunto duly authorized.
NAC Re CORP.
------------
(Registrant)
Date: May 10, 1996 JOHN N. ADIMARI
---------------------------- ----------------------------------
John N. Adimari
Acting Chief Financial Officer
and Acting Treasurer
Date: May 10, 1996 RONALD L. BORNHUETTER
---------------------------- ----------------------------------
Ronald L. Bornhuetter
Chairman of the Board, President
and Chief Executive Officer
- 14 -