1
EXHIBIT 17(b)(2)
1996 BUDGET HIGHLIGHTS
1995 is on budget in total revenue and ahead of budget in total net income.
The premium revenue is providing most of the increase from 1994, but a rebound
in interest rates and the resurgent investment market has allowed more income
to reach the bottom line in the form of investment income and capital gains.
Our expenses are at budget, and the underwriting results have continued to
develop per plan for both discontinued programs and our ongoing insurance and
reinsurance programs.
The 1996 budget calls for a 38.49% increase in net premium revenue but a
reduced amount of capital gains. The underwriting is going to benefit from the
lower commissions paid when we use First Re and the other expenses are
projected to be flat with 1995. We will increase our net income marginally
because of investment income, and if the investment markets allow capital
gains, we should exceed the budget by a higher margin.
Financial Institutions Insurance Group
Proforma Financial Results
(000 Omitted)
Actual Actual Actual Actual Projected Budget
Yr. Ended Yr. Ended Yr. Ended Yr. Ended Yr. Ended Yr. Ended
1991 12/31/92 12/31/93 12/31/94 1995 1996
---------------------------------------------------------------------------------
Revenue
Premiums earned 8,872 7,344 7,434 7,820 11,800 16,342
Net Investment Income 3,936 3,344 3,470 3,535 4,400 5,105
Net realized gains on Investments 831 1,032 1,275 570 1,000 500
Goodwill Amortization 139 427 414 466 465 465
Other Income 168 277 150 50
---------------------------------------------------------------------------------
Total revenue 13,778 12,147 12,762 12,667 17,815 22,462
Losses and Expenses
Losses and loss adjustment expenses 5,622 4,597 4,924 2,613 5,600 8,983
Commissions Expenses 2,605 1,762 1,864 1,787 2,800 3,859
Other operating and management expenses 1,963 2,229 2,886 3,725 3,859 3,573
---------------------------------------------------------------------------------
Total losses and expenses 10,190 8,588 9,674 8,125 12,259 16,415
---------------------------------------------------------------------------------
Income before income taxes 3,588 3,560 3,088 4,543 5,556 6,046
Provision for income taxes 1,178 614 (124) 804 1,300 1,350
---------------------------------------------------------------------------------
Net Income 2,410 2,946 3,212 3,739 4,256 4,696
=================================================================================
Net Income increase 22.2% 9.0% 16.4% 13.8% 10.4%
Expense Ratios
Loss Ratio 63.4% 62.6% 66.2% 33.4% 47.5% 55.0%
Acquisition Ratio 29.4% 24.0% 25.1% 22.8% 23.7% 23.6%
Expense Ratio 22.1% 30.3% 38.8% 47.6% 32.7% 21.9%
Combined Ratio 114.9% 116.9% 130.1% 103.9% 103.9% 100.4%
% Budget
Chg 1995
---------------------------
Revenue
Premiums earned 38% 11,417
Net Investment Income 16% 4,628
Net realized gains on Investments -50% 250
Goodwill Amortization 0% 425
Other Income -67% 250
--------
Total revenue 26% 16,970
Losses and Expenses
Losses and loss adjustment expenses 60% 5,004
Commissions Expenses 38% 2,898
Other operating and management expenses -7% 3,831
--------
Total losses and expenses 34% 11,733
--------
Income before income taxes 9% 5,238
Provision for income taxes 4% 1,001
--------
Net Income 10% 4,236
========
Net Income increase 13.3%
Expense Ratios
Loss Ratio 43.8%
Acquisition Ratio 25.4%
Expense Ratio 33.6%
Combined Ratio 102.8%
2
FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
UNDERWRITING RECAP
ACTUAL ACTUAL PROJECTED BUDGET FORECAST FORECAST FORECAST FORECAST
1993 1994 1995 1996 1997 1998 1999 2000
Premium Earned 7,434,000 7,820,000 11,114,468 16,332,751 19,344,028 21,062,430 22,952,674 25,031,941
Losses 4,924,000 2,613,000 5,029,325 9,235,804 11,387,006 13,063,707 15,858,078 17,281,885
Acquisition Cost 1,864,000 1,787,000 2,669,727 3,859,946 4,377,636 4,557,226 4,907,654 5,288,563
UW Profit 646,000 3,420,000 3,415,416 3,237,001 3,579,386 3,441,497 2,186,942 2,461,493
Loss Ratio 66.2% 33.4% 45.3% 56.5% 58.9% 62.0% 69.1% 69.0%
Acquisition Ratio 25.1% 22.9% 24.0% 23.6% 22.6% 21.6% 21.4% 21.1%
Combined loss and
Acquisition Ratio 91.3% 56.3% 69.3% 80.2% 81.5% 83.7% 90.5% 90.2%