EX-99.2 3 y31972kexv99w2.htm EX-99.2: PRELIMINARY UNAUDITED CONSOLIDATED BALANCE SHEETS EX-99.2
 

PXRE Group Ltd.
Unaudited Financial Highlights
(Dollars in thousands except per share amounts)
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
Gross premiums written
   $ 6,952     $ 114,617     $ 138,776     $ 542,325  
 
                        
Net premiums written
   $ (18,169 )   $ 130,665     $ 53,509     $ 407,005  
 
                        
Revenues
   $ 1,776     $ 157,097     $ 137,802     $ 419,821  
Losses and expenses
     (20,889 )     (564,052 )     (108,703 )     (1,111,472 )
 
                        
(Loss) income before income taxes and convertible preferred share dividends
     (19,113 )     (406,955 )     29,099       (691,651 )
Income tax expense
     (597 )     (39,510 )     (597 )     (5,907 )
 
                        
Net (loss) income before convertible preferred share dividends
   $ (19,710 )   $ (446,465 )   $ 28,502     $ (697,558 )
 
                        
Net (loss) income per diluted common share
   $ (0.29 )   $ (8.45 )   $ 0.37     $ (21.65 )
 
                        
Average diluted shares outstanding (000’s)
     77,156       73,555       77,072       43,517  
Average diluted shares outstanding when antidilutive (000’s)
     72,006       52,987       —       32,541  
                 
Financial Position:   Dec. 31, 2006     Dec. 31, 2005  
Cash and investments
   $ 1,216,392     $ 1,660,996  
Total assets
     1,401,343       2,116,047  
Reserve for losses and loss expenses
     603,241       1,320,126  
Shareholders’ equity
     496,767       465,318  
Book value per common share (1)
     6.41       6.01  
Statutory surplus:
                
PXRE Reinsurance Ltd.
     564,209 (2)     530,775 (3)
PXRE Reinsurance Company
     137,974 (4)     126,991  
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
GAAP Ratios:
                                
Loss ratio
     1.8 %     340.2 %     14.7 %     260.5 %
Expense ratio
     (78.2 %)     17.1 %     73.7 %     21.9 %
 
                        
Combined ratio
     (76.4 %)     357.3 %     88.4 %     282.4 %
 
                        
Losses Incurred by Segment:
                                
Cat & Risk Excess
   $ (3,847 )   $ 532,815     $ 6,490     $ 1,004,771  
Exited
     3,606       187       5,953       6,752  
 
                        
 
   $ (241 )   $ 533,002     $ 12,443     $ 1,011,523  
 
                        
Commission and Brokerage, Net of Fee Income by Segment:
                                
Cat & Risk Excess
   $ 806     $ 17,831     $ 18,697     $ 49,256  
Exited
     —       (114 )     186       (297 )
 
                        
 
   $ 806     $ 17,717     $ 18,883     $ 48,959  
 
                        
Underwriting (Loss) Income by Segment: (5)
                                
Cat & Risk Excess
   $ (10,428 )   $ (393,453 )   $ 59,761     $ (664,445 )
Exited
     (3,620 )     (613 )     (6,558 )     (7,713 )
 
                        
 
   $ (14,048 )   $ (394,066 )   $ 53,203     $ (672,158 )
 
                        

6

 

                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
Underwriting (Loss) Income Reconciled to (Loss) Income Before Income Taxes and Convertible Preferred Share Dividends:
                                
Underwriting (loss) income (5)
   $ (14,048 )   $ (394,066 )   $ 53,203     $ (672,158 )
Net investment income
     14,893       14,643       60,654       45,292  
Net realized investment gains (losses)
     172       (14,370 )     (7,809 )     (14,736 )
Other fee income
     185       —       185       —  
Other reinsurance related expense
     (7,124 )     (936 )     (17,862 )     (936 )
Operating expenses
     (9,732 )     (9,105 )     (43,373 )     (36,208 )
Foreign exchange gains (losses)
     168       494       (1,444 )     1,547  
Interest expense
     (3,627 )     (3,615 )     (14,455 )     (14,452 )
 
                        
(Loss) income before income taxes and convertible preferred share dividends
   $ (19,113 )   $ (406,955 )   $ 29,099     $ (691,651 )
 
                        
 
(1)   After considering convertible preferred shares.
 
(2)   Estimated and before inter-company eliminations.
 
(3)   Before inter-company eliminations.
 
(4)   Estimated.
 
(5)   Underwriting Income (Loss) by Segment (a GAAP financial measure): The Company’s reported underwriting results are its best measure of profitability for its individual underwriting segments and accordingly are disclosed in the footnotes to the Company’s financial statements required by SFAS 131, Disclosures about Segments of an Enterprise and Related Information. Underwriting Income (Loss) by Segment is calculated by subtracting losses and loss expenses incurred and commission and brokerage, net of fee income from net earned premiums. PXRE does not allocate net investment income, net realized investment gains (losses), other fee income, other reinsurance related expense, operating expenses, foreign exchange gains or losses, or interest expense to its respective underwriting segments.
 
    These preliminary financial statements are unaudited and do not include footnotes that customarily accompany a complete set of financial statements; these footnotes will be furnished when the Company makes its filing on Form 10-K for the year ended December 31, 2006.

7

 

Exhibit 99.2
     
PXRE
  Consolidated Balance Sheets
Group Ltd.
  (Dollars in thousands, except par value per share)
 
                 
    December 31,  
    2006     2005  
 
                
Assets
                
Investments:
                
Fixed maturities, at fair value:
                
Available-for-sale (amortized cost $502,307 and $1,212,299, respectively)
   $ 502,254     $ 1,208,248  
Trading (cost $14,794 and $28,225, respectively)
     15,497       25,796  
Short-term investments, at fair value
     671,197       261,076  
Hedge funds, at fair value (cost $11,583 and $132,690, respectively)
     12,766       148,230  
Other invested assets, at fair value (cost $1,717 and $2,806, respectively)
     2,427       3,142  
 
            
Total investments
     1,204,141       1,646,492  
Cash
     12,251       14,504  
Accrued investment income
     3,830       10,809  
Premiums receivable, net
     93,325       217,446  
Other receivables
     7,321       17,000  
Reinsurance recoverable on paid losses
     3,324       4,223  
Reinsurance recoverable on unpaid losses
     35,327       107,655  
Ceded unearned premiums
     —       1,379  
Deferred acquisition costs
     8       5,487  
Income tax recoverable
     —       6,295  
Other assets
     41,816       84,757  
 
            
Total assets
   $ 1,401,343     $ 2,116,047  
 
            
 
                
Liabilities
                
Losses and loss expenses
   $ 603,241     $ 1,320,126  
Unearned premiums
     113       32,512  
Subordinated debt
     167,089       167,081  
Reinsurance balances payable
     34,649       30,244  
Deposit liabilities
     54,425       68,270  
Income tax payable
     597       —  
Other liabilities
     44,462       32,496  
 
            
Total liabilities
     904,576       1,650,729  
 
            
 
                
Shareholders’ Equity
                
Serial convertible preferred shares, $1.00 par value, $10,000 stated value — 30 million shares authorized, 0.01 million and 0.01 million shares issued and outstanding, respectively
     58,132       58,132  
Common shares, $1.00 par value — 350 million shares authorized, 72.4 million and 72.3 million shares issued and outstanding, respectively
     72,351       72,281  
Additional paid-in capital
     873,142       875,224  
Accumulated other comprehensive loss
     (100 )     (5,468 )
Accumulated deficit
     (503,711 )     (527,349 )
Restricted shares at cost (0.4 million and 0.5 million shares, respectively)
     (3,047 )     (7,502 )
 
            
Total shareholders’ equity
     496,767       465,318  
 
            
Total liabilities and shareholders’ equity
   $ 1,401,343     $ 2,116,047  
 
            

 

 

     
PXRE
  Consolidated Statements of Operations and Comprehensive Operations
Group Ltd.
  (Dollars in thousands, except per share amounts)
 
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
 
                                
Revenues
                                
Net premiums earned
   $ (13,483 )   $ 156,653     $ 84,529     $ 388,324  
Net investment income
     14,893       14,643       60,654       45,292  
Net realized investment gains (losses)
     172       (14,370 )     (7,809 )     (14,736 )
Fee income
     194       171       428       941  
 
                        
 
     1,776       157,097       137,802       419,821  
 
                        
 
                                
Losses and Expenses
                                
Losses and loss expenses incurred
     (241 )     533,002       12,443       1,011,523  
Commission and brokerage
     815       17,888       19,126       49,900  
Other reinsurance related expense
     7,124       936       17,862       936  
Operating expenses
     9,732       9,105       43,373       36,208  
Foreign exchange (gains) losses
     (168 )     (494 )     1,444       (1,547 )
Interest expense
     3,627       3,615       14,455       14,452  
 
                        
 
     20,889       564,052       108,703       1,111,472  
 
                        
(Loss) income before income taxes and convertible preferred share dividends
     (19,113 )     (406,955 )     29,099       (691,651 )
Income tax provision
     597       39,510       597       5,907  
 
                        
Net (loss) income before convertible preferred share dividends
   $ (19,710 )   $ (446,465 )   $ 28,502     $ (697,558 )
 
                        
Convertible preferred share dividends
     1,163       1,162       4,864       7,040  
 
                        
Net (loss) income to common shareholders
   $ (20,873 )   $ (447,627 )   $ 23,638     $ (704,598 )
 
                        
 
                                
Comprehensive Operations, Net of Tax
                                
Net (loss) income before convertible preferred share dividends
   $ (19,710 )   $ (446,465 )   $ 28,502     $ (697,558 )
Net change in unrealized appreciation (depreciation) on investments
     84       (4,435 )     (3,929 )     (12,061 )
Reclassification adjustments for losses included in net (loss) income
     20       11,952       7,996       12,164  
Minimum additional pension liability
     1,847       (716 )     1,970       (716 )
 
                        
Comprehensive (loss) income
   $ (17,759 )   $ (439,664 )   $ 34,539     $ (698,171 )
 
                        
 
                                
Per Share
                                
Basic:
                                
(Loss) income before convertible preferred share dividends
   $ (0.27 )   $ (8.43 )   $ 0.40     $ (21.43 )
Convertible preferred share dividends
     (0.02 )     (0.02 )     (0.07 )     (0.22 )
 
                        
Net (loss) income to common shareholders
   $ (0.29 )   $ (8.45 )   $ 0.33     $ (21.65 )
 
                        
Average shares outstanding (000’s)
     72,006       52,987       71,954       32,541  
 
                        
Diluted:
                                
Net (loss) income before cumulative effect of accounting change
   $ (0.29 )   $ (8.45 )   $ 0.37     $ (21.65 )
Cumulative effect of accounting change
     —       —       —       —  
 
                        
Net (loss) income
   $ (0.29 )   $ (8.45 )   $ 0.37     $ (21.65 )
 
                        
Average shares outstanding (000’s)
     72,006       52,987       77,072       32,541  
 
                        

 

 

     
PXRE
  Consolidated Statements of Shareholders’ Equity
Group Ltd.
  (Dollars in thousands)
 
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
 
                                
Convertible Preferred Shares
                                
Balance at beginning of period
   $ 58,132     $ 58,132     $ 58,132     $ 163,871  
Conversion of convertible preferred shares
     —       —       —       (109,108 )
Dividends to convertible preferred shareholders
     —       —       —       3,369  
 
                        
Balance at end of period
   $ 58,132     $ 58,132     $ 58,132     $ 58,132  
 
                        
 
                                
Common Shares
                                
Balance at beginning of period
   $ 72,346     $ 29,395     $ 72,281     $ 20,469  
Issuance of common shares, net
     5       42,886       70       51,812  
 
                        
Balance at end of period
   $ 72,351     $ 72,281     $ 72,351     $ 72,281  
 
                        
 
                                
Additional Paid-in Capital
                                
Balance at beginning of period
   $ 873,009     $ 445,425     $ 875,224     $ 329,730  
Issuance (cancellation) of common shares, net
     133       429,799       (2,082 )     544,430  
Tax effect of stock options exercised
     —       —       —       1,064  
 
                        
Balance at end of period
   $ 873,142     $ 875,224     $ 873,142     $ 875,224  
 
                        
 
                                
Accumulated Other Comprehensive Operations
                                
Balance at beginning of period
   $ (1,382 )   $ (12,269 )   $ (5,468 )   $ (4,855 )
Change in unrealized gains on investments
     104       7,517       4,067       103  
Change in minimum additional pension liability
     1,847       (716 )     1,970       (716 )
Incremental effect of applying FAS 158
     (669 )     —       (669 )     —  
 
                        
Balance at end of period
   $ (100 )   $ (5,468 )   $ (100 )   $ (5,468 )
 
                        
 
                                
(Accumulated Deficit)/Retained Earnings
                                
Balance at beginning of period
   $ (482,838 )   $ (71,041 )   $ (527,349 )   $ 194,081  
Net (loss) income before convertible preferred share dividends
     (19,710 )     (446,465 )     28,502       (697,558 )
Dividends to convertible preferred shareholders
     (1,163 )     (1,162 )     (4,864 )     (7,040 )
Dividends to common shareholders
     —       (8,681 )     —       (16,832 )
 
                        
Balance at end of period
   $ (503,711 )   $ (527,349 )   $ (503,711 )   $ (527,349 )
 
                        
 
                                
Restricted Shares
                                
Balance at beginning of period
   $ (3,598 )   $ (9,683 )   $ (7,502 )   $ (6,741 )
Cancellation (issuance) of restricted shares, net
     —       1,503       2,376       (4,566 )
Amortization of restricted shares
     551       678       2,079       3,805  
 
                        
Balance at end of period
   $ (3,047 )   $ (7,502 )   $ (3,047 )   $ (7,502 )
 
                        
 
                                
Total Shareholders’ Equity
                                
Balance at beginning of period
   $ 515,669     $ 439,959     $ 465,318     $ 696,555  
Conversion of convertible preferred shares
     —       —       —       (109,108 )
Issuance (cancellation) of common shares, net
     138       472,685       (2,012 )     596,242  
Restricted shares, net
     551       2,181       4,455       (761 )
Unrealized appreciation on investments
     104       7,517       4,067       103  
Minimum additional pension liability and effect of applying FAS 158
     1,178       (716 )     1,301       (716 )
Net (loss) income before convertible preferred share dividends
     (19,710 )     (446,465 )     28,502       (697,558 )
Dividends to convertible preferred shareholders
     (1,163 )     (1,162 )     (4,864 )     (3,671 )
Dividends to common shareholders
     —       (8,681 )     —       (16,832 )
Tax effect of stock options exercised
     —       —       —       1,064  
 
                        
Balance at end of period
   $ 496,767     $ 465,318     $ 496,767     $ 465,318  
 
                        

 

 

     
PXRE
  Consolidated Statements of Cash Flows
Group Ltd.
  (Dollars in thousands)
 
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2006     2005     2006     2005  
 
                                
Cash Flows from Operating Activities
                                
Premiums collected, net of reinsurance
   $ 17,302     $ 10,147     $ 182,035     $ 301,982  
Losses and loss adjustment expenses paid, net of reinsurance
     (123,585 )     (67,112 )     (620,947 )     (229,295 )
Commission and brokerage received (paid), net of fee income
     412       (14,617 )     (7,154 )     (28,727 )
Operating expenses paid
     (11,213 )     (6,971 )     (45,967 )     (31,666 )
Net investment income received
     14,191       13,825       57,180       37,788  
Interest paid
     (1,385 )     (1,374 )     (14,338 )     (14,338 )
Income taxes (paid) recovered
     (31 )     (144 )     6,295       18,328  
Trading portfolio purchased
     (8,499 )     —       (38,392 )     (17,685 )
Trading portfolio disposed
     7,222       —       50,139       3,369  
Deposit paid
     (1,736 )     (2,060 )     (13,845 )     (3,873 )
Other
     473       (11,464 )     10,747       (8,608 )
 
                        
Net cash (used) provided by operating activities
     (106,849 )     (79,770 )     (434,247 )     27,275  
 
                        
 
                                
Cash Flows from Investing Activities
                                
Fixed maturities available for sale purchased
     (23,068 )     (360,140 )     (90,510 )     (733,076 )
Fixed maturities available for sale disposed or matured
     50,178       58,747       794,485       209,763  
Hedge funds purchased
     —       (9,500 )     (4,000 )     (129,388 )
Hedge funds disposed
     6,017       8,170       145,097       123,219  
Other invested assets purchased
     —       —       (35 )     —  
Other invested assets disposed
     186       1,494       1,577       3,738  
Net change in short-term investments
     65,998       (86,850 )     (410,121 )     35,242  
 
                        
Net cash provided (used) by investing activities
     99,311       (388,079 )     436,493       (490,502 )
 
                        
 
                                
Cash Flows from Financing Activities
                                
Proceeds from issuance of common shares
     138       474,222       628       483,169  
Cash dividends paid to common shareholders
     —       (8,681 )     —       (16,832 )
Cash dividends paid to preferred shareholders
     (1,163 )     (1,162 )     (4,864 )     (3,671 )
Cost of shares repurchased
     —       (36 )     (263 )     (603 )
 
                        
Net cash (used) provided by financing activities
     (1,025 )     464,343       (4,499 )     462,063  
 
                        
Net change in cash
     (8,563 )     (3,506 )     (2,253 )     (1,164 )
Cash, beginning of period
     20,814       18,010       14,504       15,668  
 
                        
Cash, end of period
   $ 12,251     $ 14,504     $ 12,251     $ 14,504  
 
                        
Reconciliation of net (loss) income to net cash (used) provided by operating activities:
                                
Net (loss) income before convertible preferred share dividends
   $ (19,710 )   $ (446,465 )   $ 28,502     $ (697,558 )
Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities:
                                
Losses and loss expenses
     (124,525 )     334,684       (716,885 )     860,041  
Unearned premiums
     (4,709 )     (25,989 )     (31,020 )     18,681  
Deferred acquisition costs
     1,316       2,249       5,479       (3,742 )
Receivables
     17,229       (35,115 )     133,800       (106,015 )
Reinsurance balances payable
     18,504       (91,242 )     4,405       19,307  
Reinsurance recoverable
     698       166,359       73,228       (42,661 )
Income taxes
     566       39,365       6,892       24,507  
Equity in earnings of limited partnerships
     (264 )     (2,432 )     (6,460 )     (13,000 )
Trading portfolio purchased
     (8,499 )     —       (38,392 )     (17,685 )
Trading portfolio disposed
     7,222       —       50,139       3,369  
Deposit liability
     (1,736 )     (2,060 )     (13,845 )     (3,873 )
Receivable on commutation
     —       (35,154 )     35,154       (35,154 )
Other
     7,059       16,030       34,756       21,058  
 
                        
Net cash (used) provided by operating activities
   $ (106,849 )   $ (79,770 )   $ (434,247 )   $ 27,275