-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MppuRsawVn1HxHEWfCUY/GfhC6JTXfTBCplBm59EizXv2s2bApTeS+gSGVOnbg8v OeTBWxZyXTNHp0wix+ZRHQ== 0000898080-03-000170.txt : 20030331 0000898080-03-000170.hdr.sgml : 20030331 20030331160253 ACCESSION NUMBER: 0000898080-03-000170 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTEGON RE BARBADOS LTD CENTRAL INDEX KEY: 0001109711 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] STATE OF INCORPORATION: C8 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-34088 FILM NUMBER: 03630669 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL PLACE STREET 2: COLLYMORE ROCK ST MICHAEL BARBADOS WI CITY: ST MICHAEL BUSINESS PHONE: 2464364895 MAIL ADDRESS: STREET 1: ONE FINANCIAL PL COLLYMORE ROCK STREET 2: ST MICHAELS BARBADOS WI CITY: ST MICHAELS STATE: C8 10-K 1 form10k.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K |X| Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended December 31, 2002 or | | Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission file number 333-34088 INTEGON RE (BARBADOS), LIMITED (Exact name of registrant as specified in its charter) Barbados Not Applicable (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) One Financial Place Collymore Rock St. Michael, Barbados, W.I. Not Applicable (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (246) 436-4895 Securities registered pursuant to Section 12(b) of the Act: None Name of each Title of each class Exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: None Indicate by 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 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 | | Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |X| Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES | | No |X| Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class As of March 15, 2003 ----- -------------------- Common Stock, no-par value 1,000,000 Participating Stock, no-par value 600 Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2002 was 0.* * Based on current offering price of $250.00 per share. TABLE OF CONTENTS Page ITEM 1. BUSINESS.............................................................3 ITEM 2. PROPERTIES...........................................................9 ITEM 3. LEGAL PROCEEDINGS....................................................9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................9 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..............................................................9 ITEM 6. SELECTED FINANCIAL DATA.............................................10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................................10 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK...........13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................13 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................................................24 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................24 ITEM 11. EXECUTIVE COMPENSATION..............................................25 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......25 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................25 ITEM 14. CONTROLS AND PROCEDURES.............................................25 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K....26 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This document contains "forward-looking statements" that anticipate results based on management's plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like "plans," "will," "anticipates," "estimates," "intends," "believes" and other words with similar meanings. These statements may address, among other things, our strategy for growth, product development, regulatory approvals, market position, expenses, financial results and reserves. Forward-looking statements are based on management's current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate. However, we believe that our forward-looking statements are based on reasonable, current expectations and assumptions. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable risks and uncertainties, some of which relate particularly to our business, such as our ability to set adequate premium rates and maintain adequate reserves, our ability to compete effectively and our ability to grow our business through internal growth as well as though acquisitions. Other risks and uncertainties may be related to the insurance industry generally or the overall economy, such as regulatory developments, industry consolidation and general economic conditions and interest rates. We assume no obligation to update any forward-looking statements as a result of new information or future events or developments. If the expectations or assumptions underlying our forward-looking statements prove inaccurate or if risks or uncertainties arise, actual results could differ materially from those predicted in our forward-looking statements. PART I ITEM 1. BUSINESS INTRODUCTION Integon Re (Barbados), Limited (the "Company") was incorporated in Barbados on January 10, 2000. The Company became registered in Barbados as an insurer on March 31, 2000 and commenced reinsurance operations on August 1, 2002. The business of the Company is the assumption of risks under insurance policies, including primarily automobile and motorcycle insurance policies, sold through independent insurance agencies and then reinsured by Motors Insurance Corporation ("MIC"). The Company only assumes risk on policies that are reinsured by MIC and are attributable to an Integon Account (the "Policies"). The Policies are issued by subsidiaries or affiliates of Integon Corporation ("Integon"), reinsured by MIC, and retroceded to the Company. Shares of the Company's Participating Stock (the "Shares") are sold to persons or entities designated by the insurance agency or agencies with respect to which Integon maintains an Integon Account. A separate series of Shares is created for each Integon Account, and a separate "Subsidiary Capital Account" is maintained for each such series. The financial results of the Company reflect both underwriting and investment experience, which is allocated among the Subsidiary Capital Accounts. See "Business--Allocations To Subsidiary Capital Accounts." THE RETROCESSION The Retroceding Company MIC, the retroceding company under the Retrocession Agreement described below, is a stock insurance company organized under the laws of Michigan. All of MIC's outstanding stock is owned by GMAC Insurance Holdings, Inc., a wholly owned subsidiary of General Motors Acceptance Corporation which, in turn, is a wholly owned subsidiary of General Motors. MIC, directly and through its subsidiaries, offers property and casualty coverages in all 50 states and the District of Columbia, Canada, Europe, Latin America and Asia Pacific. MIC's A.M. Best Company's insurance financial rating is currently A + (Superior), one of the highest possible ratings. 3 The Retrocession Agreement The Company entered into a "quota share" retrocession agreement with MIC (the "Retrocession Agreement") which became effective as of March 31, 2000. Pursuant to the Retrocession Agreement, MIC retrocedes to the Company, and the Company is obligated to assume, a portion (the "Retrocession Percentage") of MIC's risks in respect of automobile and motorcycle insurance policies reinsured by MIC, to the extent that such policies are attributable to an Integon Account in respect of which a series of Shares is issued, outstanding and in good standing (the "Policies"), and such Policies are issued or renewed on or after the effective date of the Retrocession Agreement. The Retrocession Percentage, which can be either 20%, 30%, 40% or 50%, is established for each Integon Account with respect to which a series of Shares is issued, outstanding and in good standing. In return for the Company assuming risks retroceded to it by MIC under the Retrocession Agreement, MIC will pay to the Company an amount equal to the Retrocession Percentage multiplied by the gross premiums MIC receives with respect to the retroceded business, after cancellations reduced by (i) a ceding commission of 26.5% of such premiums, reduced by the amount of certain service fees paid to MIC, (ii) any related agents' and brokers' commissions, and (iii) any U.S. premium excise taxes imposed on such premiums. Net settlements between the Company and MIC will be made quarterly and will fluctuate from quarter to quarter. The Retrocession Agreement provides that in the event that the Company redeems or repurchases a series of Shares, no further risks will be retroceded to the Company with respect to new or renewal Policies attributable to the Integon Account related to the redeemed or repurchased Shares that become effective on or after the effective date of redemption or repurchase. In addition, MIC will recapture, as of that date, the business retroceded to the Company with respect to the Integon Account related to such Shares. In consideration of that recapture, the Company will pay a termination premium to MIC in an amount equal to the unearned premiums and unpaid losses (discounted under applicable U.S. tax rules) less deferred acquisition costs (the "Termination Premium") on the recaptured business. This recapture will relieve the Company of any obligations in respect of risks retroceded to the Company with respect to the Integon Account related to the Shares before the date of the repurchase or redemption. The Retrocession Agreement may be terminated as of the beginning of any month by either party upon not less than 30 days written notice. Upon termination of the Retrocession Agreement, no further risks will be retroceded to the Company with respect to new or renewal Policies that become effective on or after the effective date of termination, and MIC will recapture the retroceded business as of that date. In consideration of that recapture, the Company will pay a Termination Premium to MIC on the recaptured business. Termination of the Retrocession Agreement will relieve the Company of any obligations in respect of risks retroceded to the Company before the date that the Reinsurance Agreement terminated. Reallocation of Insurance Losses; Retention of Insurance Losses by MIC The Company's Articles of Incorporation provide that losses the Company incurs on the business the Company reinsures that are attributable to an Integon Account will be allocated to the Subsidiary Capital Account for the Shares issued with respect to that Integon Account and therefore will reduce the value of such Shares. However, in certain situations, losses on the business will not be allocated in this manner. Under the Company's Articles of Incorporation, to the extent that the allocation of losses incurred under the Agreement would result in a "Combined Ratio" for a Subsidiary Capital Account in excess of 108% for any calendar year, such losses will be reallocated among the other Subsidiary Capital Accounts ("Unrelated Accounts"), pro rata, based on relative earned premium. The Combined Ratio for a Subsidiary Capital Account is equal to the sum of losses incurred, commission expense, ceding fee and U.S. premium excise taxes divided by earned premium, to the extent that such amounts are attributable to the business allocated to the Subsidiary Capital Account. In the event that the Combined Ratio for each Subsidiary Capital Account for each series of Shares issued and outstanding is 108% after reallocation of losses, any additional losses will be reallocated to the Subsidiary Capital Account for the Common Stock. The Agreement provides that MIC will retain losses that would otherwise be reallocated to an Unrelated Account pursuant to such reallocation provisions to the extent that the reallocation of losses would increase the Combined Ratio for the Unrelated Account for any calendar year by more than 5 percentage points. 4 Types of Risks Subject to Retrocession Risks assumed under the Agreement are limited to insurance policies issued by subsidiaries or affiliates of Integon and reinsured by MIC. These policies provide liability, physical damage, and/or other types of insurance coverage that a consumer may elect. INVESTMENT INCOME A major source of income to an insurance company is income earned on the investment of amounts not currently required to meet losses or expenses. The principal funds available for investment by the Company will come from accumulated capital and the cumulative excess of premiums collected over losses and operating expenses paid. The Company's funds are invested in a manner consistent with investment guidelines established by the Board of Directors of the Company (the "Board"). The Company is currently permitted to invest in U.S. Treasury and agency securities, agency and non-agency mortgage-backed securities, obligations of domestic and foreign corporations, asset-backed securities, municipal securities and money market instruments. The Board reviews on a regular basis and, where appropriate, revises the investment objectives and guidelines for management of the Company's funds. There can be no assurance, however, as to whether a particular investment objective, once adopted, can be achieved or that adverse factors would not cause a decrease in the overall value of the Company's investment portfolio. Effective February 8, 2000, the Company entered into an investment management agreement with BlackRock International, Ltd. ("BlackRock") pursuant to which BlackRock manages the investment and reinvestment of the Company's fixed income portfolio in accordance with the Company's investment guidelines. BlackRock is a subsidiary of BlackRock, Inc. which had approximately $273 billion of assets under management as of December 31, 2002. BlackRock, Inc. manages assets on behalf of institutions and individuals through a variety of equity, fixed income, liquidity and alternative investment, and mutual fund products. Under the terms of the investment management agreement, BlackRock charges the Company a management fee calculated as a percentage of the net asset value of the Company's portfolio managed by BlackRock. The applicable percentage is based on the aggregate amount of assets managed by BlackRock on behalf of the Company and certain other related entities. The applicable percentage on the first $50 million of assets under management on behalf of the foregoing entities is higher than the percentage that is applicable on assets in excess of $50 million. ALLOCATIONS TO SUBSIDIARY CAPITAL ACCOUNTS The Company has established a Subsidiary Capital Account with respect to the Common Stock as a class, and will establish such an account with respect to each series of Shares at the time a series is issued. Subsidiary Capital Accounts are maintained solely for the purpose of the allocations described below, and do not serve any other legal or accounting function. None of the Company's assets are segregated or earmarked with respect to those accounts. The consideration received by the Company upon the issuance of a particular series of Shares and the Common Stock as a class, including any interest earned on funds while held in the escrow account is allocated to the particular Subsidiary Capital Account for that series or class. Except as otherwise set forth below, items of income and expense, and losses, attributable to insurance underwriting activities are determined and allocated to the Subsidiary Capital Accounts as of the end of each quarter. Investment experience, and other items of income and expense, gains and losses and distributions with respect to the Shares and the Common Stock (collectively, "Capital Stock"), are determined and allocated to the Subsidiary Capital Accounts as of the end of each quarter. For purposes of the following discussion, items shall be "related" to the Subsidiary Capital Account for the series identified with the Integon Account to which such items can be attributed. (1) Allocations with respect to underwriting activities are made as follows: (a) With respect to premiums ceded to the Company, 100% to the related Subsidiary Capital Account. 5 (b) With respect to any agents' or brokers' commissions, ceding fees and commissions, commissions recaptured, unearned premiums, reinsurance premiums ceded, and any United States excise tax, 100% to the related Subsidiary Capital Account. (c) With respect to losses incurred and any amount of losses recovered through salvage, subrogation, reinsurance recoveries, reimbursement or otherwise, 100% to the related Subsidiary Capital Account. (d) With respect to return premiums, 100% to the related Subsidiary Capital Account. (e) With respect to any recapture premium or termination premium paid by the Company to MIC upon partial or complete termination of the Retrocession Agreement, and with respect to any fees, expenses, or losses recaptured in connection with such termination, 100% shall be allocated to the related Subsidiary Capital Account. (f) Notwithstanding the foregoing, for any calendar year for which a Subsidiary Capital Account has any earned premium, the amount of losses incurred on the business retroceded to the Company under the Retrocession Agreement (the "Business") which losses would otherwise be allocable to the Subsidiary Capital Account in accordance with the preceding paragraphs for such calendar year shall be allocated, or reallocated, to other Subsidiary Capital Accounts in accordance with the terms of this paragraph so as to prevent the Combined Ratio for such Subsidiary Capital Account for such year from exceeding 108%. Any losses incurred on the Business that would otherwise be allocable to a Subsidiary Capital Account for a calendar year and would result in a Combined Ratio for such Subsidiary Capital Account in excess of 108% shall be allocated to other Subsidiary Capital Accounts, pro rata, based upon the relative earned premiums of each Subsidiary Capital Account for the calendar year; provided, however, that only those Subsidiary Capital Accounts for Shares that each have a Combined Ratio of less than 108% for the year without regard to this paragraph will be taken into account for this purpose. If, as a result of an allocation of losses incurred on the Business as described in the preceding sentence, a Combined Ratio in excess of 108% otherwise would be created in one or more Subsidiary Capital Accounts, then the losses incurred on the Business above a 108% Combined Ratio will be reallocated in the manner provided in the preceding sentence until all losses incurred on the Business for the year have been allocated to Subsidiary Capital Accounts for the Shares or until each Subsidiary Capital Account for the Shares has a Combined Ratio for the year of 108%. In the event that the Combined Ratio of each Subsidiary Capital for the Shares is 108% after the application of the preceding sentences of this paragraph, the losses incurred on the Business for the calendar year above a Combined Ratio of 108% will be allocated to the Subsidiary Capital Account for the Common Stock. No adjustments will be made to the Subsidiary Capital Accounts rendered for prior quarters during the calendar year to reflect any allocation of losses required pursuant to this provision, and any such allocation shall be taken into account solely through entries to the Subsidiary Capital Accounts for the final quarter of the calendar year. All allocations and reallocations pursuant to this paragraph shall be made without giving effect to any allocations made pursuant to paragraph (g). (g) With respect to any recovery or offset for losses retained by MIC pursuant to the terms of the Retrocession Agreement, 100% shall be allocated to the related Subsidiary Capital Account. (2) Any expenses or liabilities attributable to the Company's day-to-day operations, excluding any United States Federal income taxes, are allocated among all Subsidiary Capital Accounts for the Shares pro rata in accordance with the relative earned premiums allocated to those accounts for the fiscal quarter in which the expense or liability is incurred, provided that for purposes of such allocation, series of Shares issued at any time during the twelve calendar months preceding the end of the fiscal quarter in which the expense or liability is incurred and series with respect to which the unearned premium is zero as of such fiscal quarter end, shall be excluded. The allocations set forth here will not be made for a period of up to twelve months after the Company first issues Shares because Integon has agreed to bear all of the expenses identified in this paragraph for the period from the date that Shares are first issued (the "Issue Date") until the last day of the Company's fiscal quarter that immediately precedes the twelve month anniversary of the Issue Date. 6 (3) Any United States Federal income tax liability (and any interest thereon or any penalties related thereto) is allocated among the Subsidiary Capital Accounts based upon the relative contribution of each of those accounts to the Company's taxable income upon which the tax (or any interest or penalties) is imposed. (4) Any expenses or liabilities attributable to the sale and issuance of Shares, including but not limited to the costs of compliance with regulations and requirements of the U.S. Securities and Exchange Commission and state securities laws (but not including ongoing periodic reporting costs), are allocated to the Subsidiary Capital Account for the Common Stock; however, Integon may undertake to pay such expenses. (5) Any of the Company's expenses or liabilities not allocable in the manner described in paragraphs 2 through 4 above are allocated among the Subsidiary Capital Accounts on the basis of the relative amount of capital and surplus attributable to those accounts as of the end of the quarter preceding the date on which the expense or liability is incurred, provided that for purposes of such allocation, Subsidiary Capital Accounts with balances that are less than zero as of the end of the preceding quarter shall be excluded. (6) (a) Investment income, net of any direct investment expense, is allocated among the Subsidiary Capital Accounts, pro rata, based upon the relative Investment Asset Balance (as defined in subparagraph (b) below), provided that for purposes of such allocation, Subsidiary Capital Accounts with Investment Asset Balances that are less than zero shall be excluded. For purposes of these allocations, net investment income includes realized (but not unrealized) gains and losses. (b) The Investment Asset Balance of each Subsidiary Capital Account is equal to the sum of the beginning cash balance in a Subsidiary Capital Account and the ending cash balance (excluding allocation of any investment income for the quarter then ending) in such account for a quarter divided by two. The cash balance in a Subsidiary Capital Account is equal to the sum of the loss reserves, unearned premium reserves and capital and surplus less deferred expenses. (7) (a) Dividends, payments upon redemption or liquidation (described below), and any other distributions with respect to the Capital Stock are allocated to the Subsidiary Capital Account for the class or series with respect to which the dividend, payment or distribution was made. (b) Where all Shares of a series are redeemed in accordance with our procedures for redemption, any deficit in the Subsidiary Capital Account for that series is allocated first to the Subsidiary Capital Account for the Common Shares and then, any remaining unallocated deficit is allocated among the Subsidiary Capital Accounts for Shares with positive balances, pro rata, based upon such balances. (c) Where all Shares of a series are repurchased by the Company pursuant to its right of first refusal or redeemed in accordance with our procedures for redemption, the Subsidiary Capital Account for that series is terminated and the business previously allocated to the Subsidiary Capital Account is recaptured by MIC pursuant to the terms of the Retrocession Agreement. (8) The Company's Articles of Incorporation also provide that if the Company is liquidated, any deficit existing in any Subsidiary Capital Account is allocated first to the Subsidiary Capital Account for the Common Stock and then, any remaining unallocated deficit is allocated among the Subsidiary Capital Accounts for Shares with positive balances, pro rata, based upon such balances. The allocations of income and expense, gains and losses, and distributions described above are subject to approval by the Company's Board, and when finally so approved are considered final and conclusive and will be binding on all holders of Shares for all purposes including without limitation any redemption of Shares pursuant to our procedures for redemption. 7 The Company's Board is authorized to interpret and apply the above allocation provisions and to adopt additional rules and guidelines as the Board deems appropriate to carry out the intent of these provisions. The Board's interpretations and any additional rules and guidelines adopted will also be binding on all shareholders. Barbados insurance law requires that the Company maintain certain levels of net assets, which for this purpose are calculated without taking into account unrealized gains or losses. The Company is currently in compliance with these requirements. However, in the event that the Company is unable to comply with such requirements in the future, it has the right to reduce the business related to a Subsidiary Capital Account by retrocession or any other means to the extent necessary to permit the Subsidiary Capital Account to meet its pro rata share of the Company's required capital and surplus. EMPLOYEES The Company does not have any full-time employees. Rather, the Company relies on Aon Insurance Managers (Barbados) Ltd. (the "Manager") to handle its day-to-day operations. (See "Business of the Company-- Insurance Management Agreement," below.) In addition, corporate secretarial services for the Company are provided by Colybrand Company Services Limited of St. Michael, Barbados. The Company's Board and the committees thereof, however, remain responsible for the management of the business and affairs of the Company. COMPETITION The business of insuring automobile and motorcycle risks is highly competitive, with many companies seeking to underwrite automobile and motorcycle insurance. All of the Company's business is currently derived from its retrocession agreement with MIC. Under this agreement, the Company reinsures insurance policies issued by subsidiaries and affiliates of Integon. Accordingly, the volume of the Company's business is dependent on the ability of those companies to market insurance products. Integon, through its subsidiaries and affiliates, competes with both large national writers and smaller regional companies in each state in which they operate. Some of these competitors have, from time to time, decreased prices in order to gain market share. INSURANCE MANAGEMENT AGREEMENT The Company has entered into an Insurance Management Agreement (the "Management Agreement") with the Manager, pursuant to which the Manager collects and disburses funds on behalf of the Company, provides accounting, clerical, telephone, facsimile, information management and other services for the Company, and advises and consults with the Company in regard to all aspects of the Company's retrocession activities. The current Management Agreement is for a continuous term subject to termination by either party upon 90 days advance written notice. Pursuant to the Management Agreement, the Manager has undertaken to maintain an office in Barbados to perform its duties. Further, during the term of the Management Agreement and for a period of one year thereafter, the Manager has agreed not to provide management or accounting services for any other company which, by the nature of its operations, is offering, insuring or reinsuring automobile insurance policies on a multi-state basis in the United States. Under the terms of the Management Agreement, the Company is to pay the Manager a fixed annual fee plus a monthly variable fee based on the number of outstanding series of Shares at each calendar month end. The Company and the Manager agreed that until the Company became operational, the Company would pay the Manager on an hourly basis for services performed on behalf of the Company. For the year ended December 31, 2002, the Company incurred fees payable to the Manager in the amount of $30,404. The Manager is responsible for the payment of the salaries of its officers and employees and all office and staff overhead and other costs attributable to the services it provides on the Company's behalf. However, out-of-pocket expenses, such as telephone, facsimile, postage, courier delivery, travel and other items are borne by the Company on an expense reimbursement basis. The Manager performs services similar to those performed for the Company for several other entities. The Manager has thirteen employees. In addition, the Manager may draw upon the resources of its affiliates as needed to provide 8 the services contemplated under the Management Agreement. No employee of the Manager devotes all of his or her time to the business of the Company. However, the Manager is obligated to devote all employee time necessary to ensure the performance of the Manager's duties under the Management Agreement. The Manager is subject to the control and direction of the Company's Board. The Manager was incorporated in Barbados in 1984, and is an affiliate of the Aon Group of Companies ("Aon"), an international insurance brokerage and insurance consulting firm. Aon, through its subsidiaries, offers and insures motor vehicle mechanical service agreements, extended warranty and related coverages with respect to vehicles sold by automobile dealerships in the United States. Under the terms of the Management Agreement, the Manager will treat all information concerning the business of the Company as confidential and will not disclose such information to Aon or any Aon affiliate without consent of the Company. BARBADOS REGULATION AND TAXES The Company's business is subject to regulation under the Barbados Exempt Insurance Act, 1983, as amended (the "Exempt Insurance Act"). The principal requirements of the Exempt Insurance Act require the Company to maintain its principal office in Barbados, appoint various professional advisors, and to meet certain capitalization and annual reporting requirements with respect to its operating activities and solvency requirements. Under the Exempt Insurance Act, no income tax, capital gains tax or other direct tax or impost is levied in Barbados on the results of the Company's operations (except as noted below), or on transfers of securities or assets of the Company to any person who is not a resident of Barbados. The Company has received a guarantee from the Minister of Finance of Barbados that such benefits and exemptions will be available until at least December 31, 2029. Until December 31, 2014 the Company will be required to pay an annual licensing fee, which is currently $2,500, to obtain such guarantee. Thereafter, the Company will be subject to tax at a rate of 2% on its taxable income provided that the amount of such tax will not exceed $2,500 per annum. FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS During the last three fiscal years, we have depended entirely on revenue from sources located in the United States. ITEM 2. PROPERTIES The Company does not own any office space or facilities. Rather, the business office for the Company is provided by the Manager and is located at One Financial Place, Collymore Rock, St. Michael, Barbados. The Company believes that these facilities are adequate for its current and anticipated future needs. In addition, the Manager supplies all equipment for the Company. ITEM 3. LEGAL PROCEEDINGS The Company is not currently involved in any legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the quarter ended December 31, 2002. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (a) There is no public market for the Shares or the shares of the Capital Stock of the Company, and none is expected to develop. Transfer of the Shares is restricted by the terms of a Stock Purchase Agreement and requires approval by the Supervisor of Insurance in Barbados. 9 (b) All of the Common Stock of the Company is held by Integon. As of March 15, 2003, 600 Shares had been issued, with 6 holders of Shares, representing 6 series of Shares. (c) Under the Articles of Incorporation, the holders of Shares are entitled to receive minimum dividends equal to their pro-rata share of 20% of net income attributable to their associated Subsidiary Capital Account provided (i) the Company meets the Barbados regulatory requirements without regard to any letter of credit or guarantee, and (ii) the related Subsidiary Capital Account would also meet those requirements after giving effect to the dividend. As of March 15, 2003, the Company has not declared any dividends. (d) In determining the amount of dividends to pay, the Board considers the minimum regulatory capital requirement, fluctuations in the value of the Company's investment portfolio and adverse development of loss experience to determine an appropriate minimum capital level. The Board's objective is to maintain adequate capital to provide capacity for growth in premium so that dividends may be paid annually. There can be no assurance that any dividends will be paid in the future. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data for the years ended December 31, 2002 and December 31, 2001, and the period from March 20, 2000 (date of incorporation) to December 31, 2000 have been derived from the Company's audited financial statements. December 31, --------------------------------------------- 2002 2001 2000 Interest $ 9,357 $ 32,595 $ 43,667 ----------- ----------- ----------- Net Income $ 23,409 $ 32,595 $ 43,667 =========== =========== =========== Total Assets $ 1,722,546 $ 1,076,262 $ 1,043,667 Shareholders' Equity 1,249,671 1,076,262 1,043,667 Dividends Paid 0 0 0 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policies The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of our financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of assets and liabilities reported by us at the date of the financial statements and the revenues and expenses reported during the reporting period. As additional information becomes available or actual amounts become determinable, the recorded estimates may be revised and reflected in operating results. Actual results could differ from those estimates. Accounts that, in our judgment, are most critical to the preparation of our financial statements include policy liabilities and accruals, deferred policy acquisition costs, valuation of certain investments and deferred taxes. The liability for losses and loss expenses represents the accumulation of estimates for reported losses and a provision for losses incurred but not reported. For purposes of establishing loss reserves, the Company relies upon the advice of Integon. Loss reserve projections are used to estimate loss reporting patterns, loss payment patterns and ultimate claim costs. An inherent assumption in such projections is that historical patterns can be used to 10 predict future patterns with reasonable accuracy. Because many variables can affect past and future loss patterns, the effect of changes in such variables on the results of loss projections must be carefully evaluated. The evaluation of these factors involves complex, subjective judgments, which may significantly impact the financial statements. Insurance liabilities are, therefore, necessarily based on estimates, and the ultimate liability may vary from such estimates. Establishing reserves is an uncertain process, and it is possible that actual claims will materially exceed reserves and have a material adverse effect on our results of operations and financial condition. These estimates are regularly reviewed by management and adjustments to such estimates are included in income on a current basis. Insurance premiums are earned over the terms of the policies. The portion of premiums written applicable to the unexpired term of policies is recorded as unearned premiums. Commissions paid to independent agents writing policies are deferred and amortized over the term of the related policies on the same basis as premiums are earned. The Company provides for unsettled, reported losses based on estimates of the final settlement, with an experience factor added to provide for losses incurred, but not reported. The final settlement may be greater or lesser than the amounts provided. Any such differences when they become known are recognised in current operations and can potentially be significant to the financial statements. The Company has received an undertaking from the Barbados Government exempting it from all local income, profits and gains taxes for a period of fifteen (15) years from the date of incorporation. Thereafter, for a further fifteen (15) years, the Company will be subject to tax at a rate of 2% on its taxable income, but the amount of such tax will not exceed $2,500 per annum. Liquidity The Company was incorporated on March 20, 2000 and commenced operations on August 1, 2002. The Company's liquidity requirements are related to payment of insurance losses, administrative expenses, and dividends. Premiums generated by the Company's reinsurance business, combined with investment earnings plus proceeds from the sale of the Company's Shares, are its principal sources of funds. The Company believes that such funds will be sufficient to meet its liquidity requirements in 2003 and in future years to which its reinsurance liabilities will extend. No significant capital expenditures are expected during the next few years. The Company had unearned premium reserves of $398,793 as of December 31, 2002, compared to $0 as of December 31, 2001. Unearned premium amounts are attributable to the difference in timing between premiums assumed and premiums earned. Premiums are earned over the term of a policy, usually six or twelve months. The increase in unearned premiums reserves reflects that we commenced our reinsurance operations on August 1, 2002. Capital Resources The Company's capitalization on December 31, 2002, 2001, and 2000 consisted of paid-in capital with respect to the Common Stock of $1,000,000, and earnings retained for use in its business in the amount of $99,671 and $76,262 and 43,667, respectively. The Company's capitalization also includes paid-in capital with respect to the Participating Shares of $$150,000 (compared with $0 as of December 31, 2001 and 2000). The increase in the amount of pain-in capital with respect to the Participating Shares is attributable to the issuance of six series of Participating Shares. Barbados insurance law requires that the Company maintain a minimum capitalization of $125,000 and, in addition, that the recorded value of the Company's assets exceed its liabilities by: (a) $125,000 where the Company's earned premium in the preceding financial year did not exceed $750,000; (b) an amount equal to 20% of the Company's earned premium for the preceding financial year, where such income exceeded $750,000 but did not exceed $5,000,000; and (c) an amount equal to the aggregate of $1,000,000 and 10% of the amount by which the Company's earned premium for the preceding financial year exceeded $5,000,000. If the Company's net assets are less than mandated by Barbados law, the Company has the right to reduce the business related to a Subsidiary Capital Account by retrocession or any other means to the extent necessary to permit the Subsidiary Capital Account to meet its pro rata share of the Company's required capital and surplus. Currently, the Company's net assets are not less than the amount mandated by Barbados law. 11 Results of Operation For the year ended December 31, 2002, the Company had net income of $23,409, down from $32,595 in 2001. The decrease in net income is attributable to reduced investment income due to lower interest rates prevailing during the year ended December 31, 2002 compared to the prior period, partially offset by underwriting gains. During 2002, the first year of the Company's reinsurance operations, the Company earned premiums of $213,536, incurred losses of $121,624, and incurred other expenses of $77,859 for an underwriting gain of $14,052. The incurred loss ratio for the year was 57%. Total premiums assumed by the Company were $612,329. Under the terms of the Stock Purchase Agreement between Integon Corporation and the Company, Integon has agreed to bear (i) all organizational expenses and liabilities of the Company, (ii) expenses attributable to the registration of the Shares and initial compliance with federal and state securities and insurance laws, and (iii) all operational expenses and liabilities attributable to the Company's day-to day operations for the first year after Shares are first issued. As of December 31, 2002, the total amount of such expenses borne by Integon has totaled $681,092. Reserves for Unpaid Losses Loss reserves are balance sheet liabilities representing estimates of amounts needed in the future to pay claims under Policies with respect to insured events which have occurred as of the balance sheet dates. For purposes of establishing loss reserves, the Company relies upon the advice of Integon. Loss reserves are established after periodic actuarial reviews, based on historical claim experience, industry statistics and other factors. Consequently, the determination of loss reserves is an estimate and a process inherently subject to a number of highly variable factors. Consequently, ultimate losses could exceed loss reserves and cause us to have to adjust our loss reserves. Any adjustments to reserves are reflected in the operating results for the periods in which they become known. The Company's incurred loss ratios (losses incurred as a percentage of net premium earned) on all business for the year ended December 31, 2002 was 57%. At December 31, 2002, the reserves for unpaid losses was $74,082. Recently Issued Accounting Standards SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", issued in July 2002, addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between Statement 146 and Issue 94-3 relates to Statement 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. Statement 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit costs as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. Therefore, this Statement eliminates the definition and requirements for recognition of exit costs in Issue 94-3. This Statement also established that fair value is the objective for initial measurement of the liability. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of this statement did not have a material impact on our results of operations or financial position. FASB Interpretation No. 45, "Guarantor Accounting," will significantly change current practice in the accounting for, and disclosure of, guarantees. Most guarantees are to be recognized and initially measured at fair value, which is a change from current practice. In addition, guarantors will be required to make significant new disclosures, even when the likelihood of the guarantor making payments under the guarantee is remote. In general, the Interpretation applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or an equity security of the guaranteed party. The Interpretation's disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002, while the initial recognition and initial measurement provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of this statement did not have a material impact on our results of operations or financial position. 12 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK As of December 31, 2002, all of the Company's assets were in the form of U.S. dollar cash deposits and accordingly, the Company's exposure to risk of loss from changes in exchange rates, interest rates or equity prices was not material. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page 1. Independent Auditors' Report 14 2. Balance Sheets, December 31, 2002 and 2001 15 3. Statements of Operations and Retained Earnings for the years ended December 31, 2002, 2001 and 2000 16 4. Statement of Changes in Stockholders' Equity for the years ended December 31, 2002, 2001 and 2000 17 5. Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000 18 6. Notes to Financial Statements 19 13 INDEPENDENT AUDITORS' REPORT To the Shareholders of INTEGON RE (BARBADOS), LIMITED One Financial Place Collymore Rock St. Michael, Barbados We have audited the accompanying balance sheets of Integon Re (Barbados), Limited (the "Company") as of December 31, 2002 and 2001 and the related statements of operations and retained earnings, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2002 and for the period March 20, 2000 (commencement of operations) to December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, these financial statements present fairly, in all material respects, the financial position of Integon Re (Barbados), Limited as of December 31, 2002 and 2001 and the results of its operations, changes in shareholders' equity and cash flows for each of the two years in the period ended December 31, 2002 and for the period March 20, 2000 (commencement of operations) to December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. CHARTERED ACCOUNTANTS Deloitte & Touche LLP Bridgetown, Barbados March 4, 2003 14 INTEGON RE (BARBADOS), LIMITED BALANCE SHEETS DECEMBER 31, 2002 AND 2001 (Expressed in United States dollars)
Note 2002 2001 ---- ---- ---- ASSETS - ------ Cash and cash equivalents $1,261,920 $1,012,372 Due from shareholder (Note 3) 3 97,784 63,804 Due from Motors Insurance Corporation (Note 3) 3 221,477 - Deferred acquisition costs 140,982 - Accrued interest 383 86 ---------- ---------- Total assets 1,722,546 1,076,262 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ LIABILITIES Unearned premium 4 398,793 - Reserves for unpaid losses 5 74,082 - ---------- ---------- 472,875 - ---------- ---------- STOCKHOLDERS' EQUITY Share capital 6 Common shares - no par value; Authorized - an unlimited number of shares; Issued and outstanding 1,000,000 shares at December 31, 2002 and 2001 1,000,000 1,000,000 Participating shares - no par value; Authorized - 30,000 shares Issued and Outstanding - no shares at December 31, 2001 and 600 at December 31, 2002 150,000 - ---------- ---------- 1,150,000 1,000,000 Retained earnings 99,671 76,262 ---------- ---------- 1,249,671 1,076,262 ---------- ---------- Total Shareholder's Equity $1,722,546 $1,076,262 ========== ==========
See accompanying notes to the financial statements. APPROVED ON BEHALF OF THE BOARD /s/ Peter R. P. Evelyn ---------------------- Director 15 INTEGON RE (BARBADOS), LIMITED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars) 2002 2001 2000 ---- ---- ---- INCOME Reinsurance premiums assumed $612,329 $ - $ - Increase in unearned premiums (398,793) - - ---------- ---------- --------- Premiums earned 213,536 - - ---------- ---------- --------- Investment income 9,357 32,595 43,667 ---------- ---------- --------- TOTAL INCOME 222,892 32,595 43,667 ---------- ---------- --------- EXPENSES Acquisition and other underwriting 77,859 - - Losses 121,624 - - ---------- ---------- --------- 199,483 - - ---------- ---------- --------- NET INCOME for the year/period 23,409 32,595 43,667 RETAINED EARNINGS, beginning of year/period 76,262 43,667 - ---------- ---------- --------- RETAINED EARNINGS, end of year/period $99,671 $76,262 $43,667 ========== ========== ========= See accompanying notes to the financial statements. 16 INTEGON RE (BARBADOS), LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars) Total Shareholders' Retained Common Participating Equity Earnings Shares Shares ------------- --------- ---------- ------------- BALANCE, at December 31, 2000 $1,043,667 $43,667 $1,000,000 $ - Net income for the year 32,595 32,595 - - ---------- --------- ---------- --------- BALANCE, at December 31, 2001 1,076,262 76,262 1,000,000 - Participating shares issued 150,000 - - 150,000 Net Income for the year 23,409 23,409 - - ---------- --------- ---------- --------- BALANCE, at December 31, 2002 $1,249,671 $99,671 $1,000,000 $150,000 ========== ========= ========== ========= See accompanying notes to the financial statements. 17 INTEGON RE (BARBADOS), LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars)
2002 2001 2000 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Reinsurance premiums collected $ 124,469 $ - $ - Interest income received 9,059 32,999 43,177 Expenses paid and recoverable (33,980) (26,128) (37,676) ------------ ----------- ----------- Net cash provided by operating activities 99,548 6,871 5,501 ------------ ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common shares - - 1,000,000 Issuance of participating shares 150,000 - - ------------ ----------- ----------- Net cash received from financing activities 150,000 - 1,000,000 ------------ ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 249,548 6,871 1,005,501 CASH AND CASH EQUIVALENTS, beginning of year/period 1,015,372 1,005,501 - ------------ ----------- ----------- CASH AND CASH EQUIVALENTS, end of year/period $ 1,264,920 $1,012,372 $1,005,501 ============ =========== =========== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $23,409 $32,595 $43,667 Changes in: Accrued interest (296) 404 (490) Due from shareholder (33,980) (26,128) (37,676) Due from Motors Insurance Corporation (221,477) - - Deferred acquisition costs (140,982) - - Unearned premiums 398,793 - - Reserves for unpaid losses 74,082 - - ------------ ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 99,549 $ 6,871 $ 5,501 ============ =========== ===========
See accompanying notes to the financial statements. 18 INTEGON RE (BARBADOS), LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars) Note 1. NATURE OF BUSINESS The Company was incorporated on January 10, 2000 under the Laws of Barbados and is licensed under the Barbados Exempt Insurance Act. The Company's principal activity is the assumption of risks with respect to property and casualty insurance policies (primarily automobile and motorcycle) sold to consumers in the United States through independent insurance agencies. The policies are reinsured by Motors Insurance Corporation (MIC) and attributable to MIC subsidiary accounts in respect of which shares of participating stock are issued and outstanding. All premiums received were assumed by MIC. The Company commenced its reinsurance operations in the third quarter ending September 30, 2002. All of the common shares of the Company are owned by Integon Corporation (Integon). Integon is an indirect wholly-owned subsidiary of General Motors Corporation. Note 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation These financial statements are stated in United States dollars and prepared in conformity with accounting principles generally accepted in the United States of America. Revenue and Income Recognition Insurance premiums are earned over the terms of the policies. The portion of premiums written applicable to the unexpired terms of policies is recorded as unearned premiums. Deferred Acquisition Costs Commissions paid to independent agents writing policies are deferred and amortized over the terms of the related policies on the same basis as premiums are earned. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. 19 INTEGON RE (BARBADOS), LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars) Reserves for Unpaid Losses The Company provides for unsettled, reported losses based on estimates of the final settlement, with an experience factor added to provide for losses incurred, but not reported. The final settlement may be greater or lesser than the amounts provided. Any such differences when they become known are recognised in current operations and can potentially be significant to the financial statements. Taxation The Company has received an undertaking from the Barbados Government exempting it from all local income, profits and gains taxes for a period of fifteen (15) years from the date of incorporation. Thereafter, for a further fifteen (15) years, the Company will be subject to tax at a rate of 2% on its taxable income, but the amount of such tax will not exceed $2,500 per annum. Note 3. RELATED PARTY TRANSACTIONS Total costs incurred on the formation of the Company and other operating expenses were paid by Integon Corporation and totaled $681,092 (2002 - $176,224, 2001-$104,493 and 2000-$400,375). The Company is not obligated to repay these amounts to Integon Corporation. The amount due from Motor Insurance Corporation relates to premiums ceded to the Company. Note 4. UNEARNED PREMIUMS Activity in the unearned premiums is summarized below: 2002 2001 ---- ---- Balance at January 1, $ - $ - Assumed premiums 612,328 - Revenue earned (213,535) - ----------- --------- Balance at December 31, $398,793 $ - =========== ========= 20 INTEGON RE (BARBADOS), LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars) Note 5. RESERVES FOR UNPAID LOSSES The following table sets forth an analysis of changes in the reserves for unpaid losses for the years ended December 31, 2002 and 2001. 2002 2001 Beginning balance of reserves for losses $ - $ - -------- ------- Add provision for losses incurred related to: Current claim year 121,624 - -------- ------- Total 121,624 - -------- ------- Deduct paid losses attributable to: Current claim year 47,842 - -------- ------- Ending balance in reserves for losses $74,082 $ - ======== ======= Note 6. SHAREHOLDERS' CAPITAL All of the common shares of the Company are owned by Integon Corporation (Integon). The Company is authorized to issue an unlimited number of shares of one class without par value to be designated common shares and 30,000 shares of one class without par value to be designated participating shares. During 2002, the Company issued 600 shares to six individuals for $150,000. During the year 2002, the Company issued six series of 100 Participating Shares each for aggregate consideration of $150,000 as compared to nil for the year ended December 31, 2001. The holder of the common shares shall be entitled to elect five directors of the Company, one of whom must be a resident citizen in Barbados. The holders of the participating shares shall be entitled to elect one director of the Company. Note 7. SIGNIFICANT AGREEMENTS Retrocession Agreement Motors Insurance Corporation (MIC) and the Company are related parties. All of the common shares of the Company are owned by Integon. Integon and MIC are both wholly owned subsidiaries of GMAC Insurance Holdings, Inc., which is a wholly owned subsidiary of General Motors Acceptance Corporation (GMAC). Under the Retrocession Agreement, MIC retrocedes to the Company, a portion (the "Retrocession Percentage") of MIC's risk in respect of certain property and casualty insurance policies that are reinsured by MIC. The amount of the Company's liability for any loss paid on a policy is equal to the Retrocession Percentage multiplied by the amount of the loss. The Retrocession Percentage, which can 21 INTEGON RE (BARBADOS), LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars) be either 20%, 30%, 40% or 50%, is established for each Integon account with respect to which a series of participating shares are issued, outstanding and in good standing. In return for the Company assuming the risk retroceded to the Company by MIC under the Retrocession Agreement, MIC pays the Company an amount equal to the Retrocession Percentage multiplied by the gross premiums MIC receives with respect to the retroceded business, after cancellations, reduced by: (i) a ceding commission which is equal to the amount of such premiums multiplied by 26.5%, reduced by the amount of certain service fees paid to MIC; (ii) any related agents' or brokers' commissions; and (iii) any U.S. premium excise tax imposed on such premiums. The Retrocession Agreement may be terminated as of the beginning of any month by either party upon not less than 30 days written notice. Generally, liquidation of the Company requires approval by at least 75% of the participating shares issued and outstanding. The Company believes that the Retrocession Agreement contains terms that are no less favorable to the Company than would be obtained in an arms-length transaction. The Retrocession Agreement provides that business will be ceded to the company by MIC on a proportional basis subject to a ceding commission of 26.5% which the Company believes is commercially reasonable. The components of the ceding fee are the following: (iv) 3.5% for premium taxes; (v) 11.9% for loss adjustment expenses; (vi) 10.0% for other operating expenses; (vii) 1.1% for cash flow adjustments. Investment Management Agreement The Company has entered into an investment management agreement with BlackRock International, Ltd. ("BlackRock"). The management agreement provides that BlackRock will charge a management fee calculated as a percentage of the net asset value of the Company's portfolio managed by BlackRock with the applicable percentage based on the aggregate amount of assets managed by BlackRock on behalf of the Company and certain other related entities. The applicable percentage is tiered on the first $50 million of aggregate assets under management and lower on all assets in excess of $50 million. Insurance Management Agreement The Company has entered into an Insurance Management Agreement (the "Management Agreement") with Aon Insurance Managers (Barbados) Ltd. (the "Manager"). 22 INTEGON RE (BARBADOS), LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND FOR THE PERIOD MARCH 20, 2000 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 2000 (Expressed in United States dollars) Note 7. SIGNIFICANT AGREEMENTS (CONTINUED) Under the Management Agreement, the Manager collects and disburses funds on the Company's behalf, provides accounting, clerical, telephone, facsimile, information management and other services for the Company and advises and consults with the Company about all aspects of the Company's reinsurance activities. Under the terms of the Management Agreement, the Company will pay the Manager a fixed annual fee of $70,000 and a variable monthly fee of approximately $44 per series of Shares outstanding. The Manager is responsible for the payment of the salaries of its officers and employees and all office and staff overhead and other costs attributable to its services on the Company's behalf. However, the Company will pay all out-of-pocket expenses, such as telephone, facsimile, postage, travel and other items on an expense reimbursement basis. The Management Agreement may be terminated by either party upon 90 days advance written notice. 23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following is a list of our current officers and directors:
POSITION WITH US (AND OTHER NAME AGE EMPLOYMENT DURING PAST FIVE YEARS) Gary Y. Kusumi................. 56 Chairman and Chief Executive Officer, President and Director (Director, Integon, March 1998; President Windsor Insurance, 1996-1998; President Leader National Insurance, 1993-1996). Bernard J. Buselmeier.......... 47 Vice-President and Director (Executive Vice-President and Chief Financial Officer, Integon, April 1998; Vice-President and Treasurer, MIC, 1993-1998, Treasurer, MIC 1989-1993). Kenneth J. Jakubowski.......... 46 Vice-President and Director (Vice-President, Integon, May 1997; Assistant Treasurer, Alexander & Alexander 1992-1997). Peter R. P. Evelyn............. 61 Director (Attorney, Evelyn, Gittens & Farmer, a Barbados law firm, 1987). Ronald W. Jones................ 50 Vice-President, Finance (Managing Director, Aon Insurance Managers (Barbados) Ltd. (previously Alexander Insurance Managers), 1987). Michael R. Boyce............... 63 Secretary (Principal, Colybrand Company Services, Limited, Barbados, 1993; previously principal, Price Waterhouse, Eastern Caribbean). Mitchell F. White.............. 36 Director (Vice President and Chief Marketing Officer, Integon, October 1999; Vice President, Atlanta Casualty Group 1996-1999).
The directors and officers named above will serve in those capacities until the annual meeting of shareholders scheduled for May 2003. Prior to such meeting, the directors named above may, but are not obligated to, select an 24 additional director from among the holders of Shares. Thereafter, all directors will serve until the annual meeting of shareholders following their election. ITEM 11. EXECUTIVE COMPENSATION No director or officer of the Company is compensated directly for services as such. However, each director and officer of the Company is reimbursed for expenses incurred for attendance at Board, committee, and shareholder meetings. In addition, Mr. Jones is an officer of the Manager. The Manager receives management fees and compensation for financial and administrative services that it provides to the Company. Mr. Evelyn is a member of the law firm of Evelyn, Gittens & Farmer, which serves as the Company's Barbados counsel; and Mr. Boyce is affiliated with Colybrand Company Services Limited, St. Michael, Barbados, which receives compensation for corporate secretarial services provided to the Company. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Certain Beneficial Owners
- --------------------------------------------------------------------------------------------- Name And Address Of Amount And Nature Of Title Of Class Beneficial Owner Beneficial Ownership Percent Of Class - --------------------------------------------------------------------------------------------- Common Stock Integon Corporation 1,000,000 shares 100% 500 West Fifth Street Winston-Salem, NC 27152 - ---------------------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See ITEM 1, THE RETROCESSION, INSURANCE MANAGEMENT AGREEMENT and ITEM 11, EXECUTIVE COMPENSATION. ITEM 14. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and executed, can provide only reasonable assurance of achieving the desired control objectives. Within the 90 days prior to the date of this report, the Company's Chief Executive Officer and Chief Financial Officer evaluated, with the participation of the Company's management, the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, which disclosed no significant deficiencies or material weakness, the Company's Chief Executive Officer and Chief Financial Officer concluded that he Company's disclosure controls and procedures are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation. 25 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Index to Document List (1) Financial Statements The following are included in Item 8: (i) Independent Auditors' Report. (ii) Balance Sheets, December 31, 2002 and 2001. (iii) Statements of Income and Retained Earnings for the years ended December 31, 2002 and December 31, 2001 and the period from March 20, 2000 to December 31, 2000. (iv) Statements of Cash Flows for the years ended December 31, 2002 and December 31, 2001 and the period March 20, 2000 to December 31, 2000. (v) Statement of Changes in Shareholders' Equity for the years ended December 31, 2002 and December 31, 2001 and the period from March 20, 2000 to December 31, 2000. (vi) Notes to Financial Statements. (2) Financial Statement Schedules. Schedules are omitted because of the absence of the conditions under which they are required or because the information required is presented in the financial statements or related notes. (3) Exhibits. The following exhibits are included in response to Item 15(c): 3(a) Articles of Incorporation.* 3(b) By-Laws. 4 Instruments defining rights of security holders. See Exhibits 3(a), 3(b) and 10(c). 10(a) Retrocession Agreement between Motors Insurance Corporation and Registrant.* 10(c) Specimen Stock Purchase Agreement.* 26 10(d) Stock Purchase Agreement between Registrant and Integon Corporation.* 10(e) Insurance Management Agreement between Registrant and Aon Insurance Managers (Barbados) Ltd.* 10(f) Investment Management Agreement between Registrant and BlackRock International, Ltd.* 99(a) Certification of Gary Y. Kusumi pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99(b) Certification of Ronald W. Jones pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99(c) Guarantee issued by the Minister of Finance of Barbados. * Previously filed as an exhibit to the Registrant's Registration Statement on Form S-1, File No. 333-34088. (b) Reports on Form 8-K. No reports on Form 8-K for the quarter ended December 31, 2002 have been filed. 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. INTEGON RE (Barbados), LIMITED (Registrant) By: /s/Ronald W. Jones ---------------------------- Ronald W. Jones Vice-President, Finance Date: March 31, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated. Signature Title Date - --------- ----- ---- /s/Gary Y. Kusumi Chairman, Chief Executive Officer, March 31, 2003 - ------------------------- President and Director Gary Y. Kusumi Executive Vice-President and Director - ------------------------- Bernard J. Buselmeier /s/Kenneth J. Jakubowski Vice-President and Director March 31, 2003 - ------------------------- Kenneth J. Jakubowski /s/Peter R. P. Evelyn Director March 31, 2003 - ------------------------- Peter R. P. Evelyn /s/Ronald W. Jones Vice-President Finance, Principal March 31, 2003 - -------------------------- Financial and Accounting Officer Ronald W. Jones /s/Mitchell F. White Director March 31, 2003 - -------------------------- Mitchell F. White SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, BY THE REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. No annual report with respect to 2001 was distributed to shareholders. No proxy solicitation materials were sent to shareholders prior to the filing of this report. The Registrant does not intend to send an annual report with respect to 2002 to shareholders and the Registrant has not sent proxy solicitation materials with respect to the Registrant's annual meeting to be held May 19, 2003, as of the filing of this report. CERTIFICATIONS I, Gary Y. Kusumi, Chief Executive Officer of Integon Re (Barbados), Limited, certify that: 1. I have reviewed this annual report on Form 10-K of Integon Re (Barbados), Limited; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidate subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this annual report out conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any correction actions with regard to significant deficiencies and material weaknesses. Date: March 31, 2003 /s/Gary Y. Kusumi ------------------------------ Gary Y. Kusumi Chairman, Chief Executive Officer, President and Director I, Ronald W. Jones, Principal Financial Officer of Integon Re (Barbados), Limited, certify that: 1. I have reviewed this annual report on Form 10-K of Integon Re (Barbados), Limited; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidate subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this annual report out conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any correction actions with regard to significant deficiencies and material weaknesses. Date: March 31, 2003 /s/Ronald W. Jones ----------------------------- Ronald W. Jones Vice President, Finance and Principal Financial Officer EX-3 3 ex3b.txt EXHIBIT 3(B) BARBADOS. The Companies Act - Cap. 308 By-Law No. 1 A By-Law relating generally to the conduct of the affairs of Integon Re (Barbados), Limited Be it enacted as the general by-law of Integon Re (Barbados), Limited (hereinafter called the "Company") as follows: 1. INTERPRETATION 1.1 In this by-law and all other by-laws of the Company, unless the context otherwise requires (a) "Act" means the Companies Act 1982 as from time to time amended and every statute substituted therefor and, in the case of such substitution, any references in the by-laws of the Company to provisions of the Act shall be read as references to the substituted provisions therefor in the new statute or statutes; (b) "Regulations" means any Regulations made under the Act, and every regulation substituted therefor and, in the case of such substitution, any references in the bylaws of the Company to provisions of the Regulations shall be read as references to the substituted provisions therefor in the new Regulations; (c) "By-laws" means any by-law of the Company from time to time in force; (d) all terms contained in the by-laws and defined in the Act or the Regulations shall have the meanings given to such terms in the Act or the Regulations; and (e) the singular includes the plural and the plural includes the singular, the masculine gender includes the feminine and neuter genders; the word "person" includes bodies corporate, companies, partnerships, syndicates, trusts and any association of persons and the word "individual" means a natural person. 2. REGISTERED OFFICE 2.1 The registered office of the Company shall be in Barbados at such address as the directors may fix from time to time by resolution. 3. SEAL 3.1 The common seal of the Company shall be such as the directors may by resolution from time to time adopt. 4. DIRECTORS 4.1 Powers: Subject to any unanimous shareholders agreement, the business and affairs of the Company shall be managed by the directors. General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- 4.2 Number: There shall be six directors one of whom must be a resident citizen of Barbados. If there is no series of participating shares issued, the number of directors shall be five. At any time after the first series of participating shares is issued and prior to the election of a director by the holders of participating shares, the directors then serving may, put are not bound to, appoint a person who is a holder of participating shares as a director. 4.3 Nomination of director to represent participating shareholders: There shall be a nominating committee of the directors consisting of the director representing the holders of the participating shares and two of the directors elected by the holders of common shares. The duties of such committee shall be limited to the nomination of a person who may not be an incumbent director to stand for election as a director by the holders of the participating shares at the next annual meeting. The nominating committee shall notify the secretary of the name of its nominee not less than thirty days prior to the meeting at which such nominee shall be considered for election. Holders of at least two series of participating shares also can nominate a holder of participating shares to stand for election as director, subject also to the requirement that such nominee not be an incumbent director and that the secretary be notified in writing of such nomination not less than 10 ten days prior to meeting at which such nominee shall be considered for election. 4.4 Election: Five directors shall be elected by the holders of the common shares and one director shall be elected by the holders of the participating shares. The directors shall be elected on a show of hands unless a ballot is demanded in which case such election shall be by ballot. 4.5 Tenure: Unless his tenure is sooner determined, a director shall hold office from the date on which he is elected or appointed until the close of the annual meeting of the shareholders next following or until his successors are elected or appointed, whichever shall last occur, but a director elected by holders of the common shares shall be eligible for reelection if qualified. 4.5.1 A director shall cease to be a director: (a) if he becomes bankrupt or compounds with his creditors or is declared insolvent; (b) if he is found to be of unsound mind; or (c) if by notice in writing to the Company he resigns his office and any such resignation shall be effective at the time it is sent to the Company or at the time specified in the notice, whichever is later. 4.5.2 The shareholders of a class of shares of the Company may, by ordinary resolution passed at a special meeting of such shareholders, remove any director elected by the holders of that class of shares from office and a vacancy created by the removal of a director may be filled at the meeting of the shareholders of such class at which the director is removed. 4.6 Casual vacancy among the directors: Where there is any vacancy or vacancies among the directors, the directors then in office may exercise all of the powers of the directors so long as a quorum of the directors remain in office. Any vacancy occurring among the directors may be filled, for the remainder of the term, by such directors. 4.7 Committee of directors: The directors may appoint from among their number a committee or committees and subject to section 80(2) of the Act may delegate to such committee or committees any of the powers of the directors. Non-directors may be appointed to serve on such committees. Page 2 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- 5. BORROWING POWERS OF DIRECTORS 5.1 The directors may from time to time pursuant to a duly adopted resolution: (a) borrow money upon the credit of the Company; (b) issue, reissue, sell or pledge debentures of the Company; (c) subject to section 53 of the Act, give a guarantee on behalf of the Company to secure performance of an obligation of any person and; (d) mortgage, charge, pledge or otherwise create a security interest in all or any property of the Company, owned or subsequently acquired, to secure any obligation of the Company. 5.2 The directors may from time to time by resolution delegate to any officer of the Company all or any of the powers conferred on the directors by paragraph 5.1 hereof to the full extent thereof or such lesser extent as the directors may in any such resolution provide. 5.3 The powers conferred by paragraph 5.1 hereof shall be in supplement of and not in substitution for any powers to borrow money for the purposes of the Company possessed by its directors or officers independently of a borrowing by-law. 6. MEETINGS OF DIRECTORS 6.1 Place of meeting: Meetings of the directors and of any committee of the directors may be held within or outside Barbados provided that no such meeting shall be held in the United States of America and a majority of meetings held each year shall be in Barbados. 6.2 Notice: A meeting of the directors may be convened at any time by any director or the secretary, when directed or authorised by any director. Subject to subsection 76(1) of the Act the notice of any such meeting need not specify the purpose of or the business to be transacted at the meeting. Notice of any such meeting shall be served in the manner specified in paragraph 18.1 hereof not less than fifteen days exclusive of the day on which the notice is delivered or sent but inclusive of the day for which notice is given before the meeting is to take place. A director may in any manner waive notice of a meeting of the directors and attendance of a director at a meeting of the directors shall constitute a waiver or notice of the meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. 6.2 It shall not be necessary to give notice of a meeting of the directors to a newly elected or appointed director for a meeting held immediately following the election of directors by the shareholders or the appointment to fill a vacancy among the directors. 6.3 Quorum: Two directors elected by the holders of the common shares of the Company shall form a quorum for the transaction of business and, notwithstanding any vacancy among the directors, a quorum may exercise all the powers of the directors. No business shall be transacted at a meeting of directors unless a quorum is present. 6.3.1 A director may, if all the directors consent, participate in a meeting of directors or of any committee of the directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other and a director participating in such a meeting by such means is deemed to be present at that meeting and such meeting shall be deemed to be held in Barbados, provided that at least two directors are together in Barbados. Page 3 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- 6.4 Voting: Questions arising at any meeting of the directors shall be decided by a majority of votes. In case of an equality of votes the Chairman of the meeting in addition to his original vote shall have a second or casting vote. 6.5 Resolution in lieu of meeting: Notwithstanding any of the foregoing provisions of this by-law a resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of the directors or any committee of the directors is as valid as if it had been passed at a meeting of the directors or any committee of the directors. 7. REMUNERATION OF DIRECTORS 7.1 The directors, other than the director who is a resident citizen of Barbados, shall serve without remuneration. The remuneration to be paid to the director who is a resident citizen of Barbados shall be such as the shareholders may from time to time determine. The directors may award special remuneration to any director undertaking any special services on the Company's behalf other than the routine work ordinarily required of a director and the confirmation of any such resolution or resolutions by the shareholders shall not be required. The directors shall also be entitled to be paid their reasonable travelling and other expenses properly incurred by them in connection with the affairs of the Company as the Board may from time to time determine. 8. SUBMISSION OF CONTRACTS OR TRANSACTIONS To SHAREHOLDERS FOR APPROVAL 8.1 The directors in their discretion may submit any contract, act or transaction for approval or ratification at any annual meeting of the shareholders or at any special meeting of the shareholders called for the purpose of considering the same and, subject to the provisions of section 89 of the Act, any such contract, act or transaction that is approved or ratified or confirmed by a resolution passed by a majority of the votes cast at any such meeting unless any different or additional requirement is imposed by the Act or by the Company's articles or any other by-law shall be as valid and as binding upon the Company and upon all the shareholders as though it had been approved, ratified or confirmed by every shareholder of the Company. 9. FOR THE PROTECTION OF THE DIRECTORS AND OFFICERS 9.1 No director or officer of the Company shall be liable to the Company for: (a) the acts, receipts, neglects or defaults of any other director or officer or employee or for joining in any receipt or act for conformity; (b) any loss, damage or expense incurred by the Company through the insufficiency or deficiency of title to any property acquired by the Company or for or on behalf of the Company; (c) the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to the Company shall be placed out or invested; (d) any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, including any person with whore any moneys, securities or effects shall be lodged or deposited; (e) any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to the Company; Page 4 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- (f) any other loss, damage or misfortune whatever which may happen in the execution of the duties of his respective office or trust or in relation thereto; unless the same happens by or through his failure to exercise the powers and to discharge the duties of his office honestly and in good faith with a view to the best interests of the Company and in connection therewith to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. 9.2 Nothing herein contained shall relieve a director or officer from the duty to act in accordance with the Act or regulations made thereunder or relieve him from liability for a breach thereof. 9.2.1 The directors for the time being of the Company shall not be under any duty or responsibility in respect of any contract, act or transaction whether or not made, done or entered into in the name or on behalf of the Company, except such as are submitted to and authorised or approved by the directors. 9.2.2 If any director or officer of the Company is employed by or performs services for the Company otherwise than as a director or officer or is a member of a firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the Company, the fact of his being a shareholder, director or officer of the Company shall not disentitle such director or officer of such firm or body corporate, as the case may be, from receiving proper remuneration for such services. 10. INDEMNITIES TO DIRECTORS AND OFFICERS 10.1 The Company shall indemnify and advance expenses to every director, officer and employee in the manner and to the full extent permitted by the Act, against any and all judgments, fines, amounts paid in settlement, and reasonable expenses, including attorneys-at-law fees, incurred by such person in connection with any claim, action, suit or proceeding whether civil, criminal, administrative or investigative by reason of the fact that such person is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, employee, fiduciary or shareholder of any other corporation, partnership, joint venture, trust, enterprise or organisation. 10.2 The rights of indemnification provided by paragraph 10 hereof shall not be exclusive to any rights to which any such director, officer or employee may otherwise be entitled by reason of contract or statute. Nor shall the indemnification provided herein be deemed to limit the right of the Company to indemnify any other person to the full extent permitted by law. 10.3 The directors may, to the full extent permitted by the Act, authorise an appropriate officer or officers to purchase and maintain at the Company's expense insurance (i) to indemnify the Company for any obligation which it incurs as a result of the indemnification of the directors, officers and employees under the provisions of paragraph 10 hereof, and (ii) to indemnify directors, officers and employees in the instances in which they may not otherwise be indemnified by the Company under the provisions of paragraph 10 hereof. 10.4 Nothing contained in paragraph 10 hereof shall be construed to permit indemnification of any director, officer or employee for any costs, losses and expenses which any such person may incur or become liable for by reason of any contract entered into, or act or thing done or omitted to be done by him in performance of his office or in any way in the discharge of his duties, if the same happens through his not acting in good faith and in the best interests of the Company. Page 5 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- 11. OFFICERS 11.1 Appointment: The directors shall as often as maybe required appoint a Secretary and, if deemed advisable, may as often as may be required appoint any or all of the following officers: a Chairman, a Deputy-Chairman, a Managing Director, a President, one or more Executive Vice-Presidents, one or more Vice-Presidents, a Treasurer, one or more Assistant Secretaries or one or more Assistant Treasurers. A director may be appointed to any office of the Company but none of the officers except the Chairman, the Deputy-Chairman, the Managing Director, and the President need be a director. Two or more of the aforesaid offices may be held by the same person In case and whenever the same person holds the offices of Secretary and Treasurer he may but need not be known as the Secretary-Treasurer. The directors may from time to time appoint such other officers and agents as they deem necessary who shall have such authority and shall perform such duties as may from time to time be prescribed by the directors. 11.2 Remuneration: The remuneration of all officers appointed by the directors shall be determined from time to time by resolution of the directors. The fact that any officer or employee is a director or shareholder of the Company shall not disqualify him from receiving such remuneration as may be determined. 11.3 Powers and Duties: All officers shall sign such contracts, documents or instruments in writing as require their respective signatures and shall respectively have and perform all powers and duties incident to their respective offices and such other powers and duties respectively as may from time to time be assigned to them by the directors. 11.4 Delegation: In case of the absence or inability to act of any officer of the Company except a Managing Director or for any other reason that the directors may deem sufficient the directors may delegate all or any of the powers of such officer to any other officer or to any director. 11.5 Chairman: A Chairman shall be the chief executive officer of the Company and shall, when present, preside at all meetings of the directors, and any committee of the directors or the shareholders. 11.6 Deputy-Chairman: If the Chairman is absent or is unable or refuses to act, the Deputy-Chairman if any shall, when present, preside at all meetings of the directors, and any committee of the directors or the shareholders. 11.7 Managing Director: A Managing Director shall exercise such powers and have such authority as may be delegated to him by the directors in accordance with the provisions of section 80 of the Act. 11.8 President: A President shall be vested with and may exercise all the powers and shall perform all the duties of a Chairman and Deputy-Chairman if none be appointed or If the Chairman and Deputy-Chairman are absent or are unable or refuse to act. 11.9 Executive Vice-President: An Executive Vice-President shall be vested with all the powers and shall perform all the duties of the President in the absence or inability or refusal to act of the president. 11.10 Vice-President: A Vice-President shall be vested with such powers and shall perform such duties as the directors may prescribe. 11.11 Secretary: The Secretary shall give or cause to be given notices for all meetings of the directors, any committee of the directors and the shareholders when directed to do so and shall have charge of the minute books and seal of the Company and, subject to the provisions of paragraph 14.1 hereof, of the records other than accounting records referred to in section 170 of the Act. Page 6 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- 11.12 Treasurer: Subject to the provisions of any resolution of the directors, a Treasurer shall have the care and custody of ail the funds and securities of the Company and shall deposit the same in the name of the Company in such bank or banks or with such other depository or depositories as the directors may direct. He shall keep or cause to be kept the accounting records referred to in section 172 of the Act. He may be required to give such bond for the faithful performance of his duties as the directors in their uncontrolled discretion may require but no director shall be liable for failure to require any such bond or for the insufficiency of any such bond or for any loss by reason of the failure of the Company to receive any indemnity thereby provided. 11.13 Assistant Secretary and Assistant Treasurer: The Assistant Secretary or, if more than one, the Assistant Secretaries in order of seniority, and the Assistant Treasurer or, if more than one, the Assistant Treasurers in order of seniority, shall respectively perform all the duties of the Secretary and the Treasurer, respectively, in the absence or inability or refusal to act of the Secretary or the Treasurer, as the case may be. 11.14 General Manager or Manager: The directors may from time to time appoint one or more General Managers or Managers and may delegate to him or them full power to manage and direct the business and affairs of the Company except such matters and duties as by law must be transacted or performed by the directors or by the shareholders and to employ and discharge agents and employees of the Company or may delegate to him or them any lesser authority. A General Manager or Manager shall conform to all lawful orders given to him by the directors of the Company and shall at all reasonable times give to the directors or any of them all information they may require regarding the affairs of the Company. Any agent or employee appointed by the General Manager or Manager may be discharged by the directors. 11.15 Vacancies: If the office of any officer of the Company becomes vacant by reason of death, resignation, disqualification or otherwise, the directors by resolution shall, in the case of the Secretary, and may, in the case of any other office, appoint a person to till such vacancy. 12. SHAREHOLDERS' MEETINGS 12.1 Annual Meeting: Subject to the provisions of section 105 of the Act, the annual meeting of the shareholders shall be held on such day in each year and at such time as the directors may by resolution determine at any place within Barbados. 12.2 Special Meetings: Special meetings of the shareholders may be convened by order of the Chairman, the Deputy-Chairman, the Managing Director, the President, an Executive Vice-President, a Vice-President or by the directors at any date and time and at any place within Barbados. 12.2.1 The directors shall, on the requisition of the holders of not less than five percent of the issued shares of the Company that carry a right to vote at the meeting requisitioned, forthwith convene a meeting of shareholders, and in the case of such requisition the following provisions shall have effect: (1) The requisition must state the purposes of the meeting and must be signed by the requisitionists and deposited at the Registered Office, and may consist of several documents in like form each signed by one or more of the requisitionists. (2) If the directors do not, within twenty-one days from the date of the requisition being so deposited, proceed to convene a meeting, the requisitionists or any of them may themselves convene the meeting, but any meeting so convened shall not be held after three months from the date of such deposit. Page 7 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- (3) Unless subsection 3 of section 129 of the Act applies, the directors shall be deemed not to have duly convened the meeting if they do not give such notice as is required by the Act within fourteen days from the deposit of the requisition. (4) Any meeting convened under this paragraph by the requisitionists shall be called as nearly as possible in the manner in which meetings are to be called pursuant to the by-laws and divisions E and F of Part 1 of the Act. (5) A requisition by joint holders of shares must be signed by all such holders. 12.3 Notice: A printed, written or typewritten notice stating the day, hour and place or meeting shall be given by serving such notice on each shareholder entitled to vote at such meeting, on each director and on the auditor of the Company in the manner specified in paragraph 18.1 hereof, not less than twenty-one days or more than fifty days in each case exclusive of the day on which the notice is delivered or sent and of the day for which notice is given before the date of the meeting. Notice of a meeting at which special business is to be transacted shall state (a) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon, and (b) the text of any special resolution to be submitted to the meeting. 12.4 Waiver of Notice: A shareholder and any other person entitled to attend a meeting of shareholders may in any manner waive notice of a meeting of shareholders and attendance of any such person at a meeting of shareholders shall constitute a waiver of notice of the meeting except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. 12.5 Omission of Notice: The accidental omission to give notice of any meeting or any irregularity in the notice of any meeting or the non-receipt of any notice by any shareholder, director or the auditor of the Company shall not invalidate any resolution passed or any proceedings taken at any meeting of the shareholders. 12.6 Votes: Every question submitted to any meeting of shareholders shall be decided in the first instance by a show of hands unless a person entitled to vote on the question has demanded a ballot and, if the articles so provide, in the case of an equality of votes the Chairman of the meeting shall on a ballot have a casting vote in addition to any votes to which he may be otherwise entitled. 12.6.1 On every question on which he is entitled to vote, every shareholder, proxy holder or individual authorised to represent a shareholder who is present in person shall have one vote on a show of hands. Upon a ballot at which he is entitled to vote, every shareholder, proxy holder or individual authorised to represent a shareholder shall, subject to the articles, have one vote for every share held by the shareholder. 12.6.2 At any meeting unless a ballot is demanded, a declaration by the Chairman of the meeting that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact. 12.6.3 When the Chairman, the Deputy-Chairman, the President, the Executive Vice-President and the Vice-President are absent, the persons who are present and entitled to vote shall choose another director as Chairman of the meeting but if no director is present or all the directors present decline to take the chair, the persons who are present and entitled to vote shall choose one of their number to be Chairman. 12.6.4 A ballot may, either before or after any vote by a show of hands, be demanded by any person entitled to vote on the question. If at any meeting a ballot is demanded on the election of a Chairman or Page 8 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- on the question of adjournment it shall be taken forthwith without adjournment. If at any meeting a ballot is demanded on any other question or as to the election of directors, the vote shall be taken by ballot in such manner and either at once, later in the meeting or after adjournment as the Chairman of the meeting directs. The result of a ballot shall be deemed to be the resolution of the meeting at which the ballot was demanded. A demand for a ballot may be withdrawn. 12.6.5 If two or more persons hold shares jointly, one of those holders present at a meeting of shareholders may, in the absence of the other, vote the shares but if two or more of those persons who are present, in person or by proxy, vote, they must vote as one on the shares jointly held by them. 12.7 Proxies: Votes at meeting of shareholders may be given either personally or by proxy or, in the case of a shareholder who is a body corporate or association, by an individual authorised by a resolution of the directors or governing body of that body corporate or association to represent it at meetings of shareholders of the Company. 12.7.1 A proxy shall be executed by the shareholder of his attorney authorised in writing and is valid only at the meeting in respect of which it is given or any adjournment thereof. 12.7.2 A person appointed by proxy need not be a shareholder. 12.7.3 Subject to the provisions of part v of the regulations, a proxy may be in the following form: The undersigned shareholder or Integon Re (Barbados), Limited hereby appoints of , or failing him, of as the nominee of the undersigned to attend and act for the undersigned and on behalf of the undersigned at the meeting of the shareholders of the said Company to be held on the day of 20 and at any adjournment or adjournments thereof in the same manner, to the same extent and with the same powers as if the undersigned were present at the said meeting or such adjournment or adjournments thereof Dated this day of 20 Signature of Shareholder 12.8 Adjournment: The Chairman of any meeting may with the consent of the meeting adjourn the same from time to time to a fixed time and place and no notice of such adjournment need be given to the shareholders unless the meeting is adjourned by one or more adjournments for an aggregate of thirty days or more in which case notice of the adjourned meeting shall be given as for an original meeting. Any business that might have been brought before or dealt with at the original meeting in accordance with the notice calling the same may be brought before or dealt with at any adjourned meeting for which no notice is required. 12.9 Quorum: Holders of the majority of the common shares issued and outstanding, present in person or by proxy, shall constitute a quorum for any meeting of the shareholders, except for a meeting at which the sole question to be considered is the liquidation for the Company by vote of the participating shares, in which case the holders of at least 75 percent of the issued and outstanding participating shares shall constitute a quorum. Page 9 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- If a quorum is present at the opening of any meeting of the shareholders, the shareholders present of represented may proceed with the business of the meeting notwithstanding a quorum is not present throughout the meeting. If a quorum is not present within 30 minutes of the time fixed for a meeting of shareholders, the persons present and entitled to vote may adjourn the meeting to a fixed time and place but may not transact any other business. 12.10 Resolution in lieu of meeting: Notwithstanding any of the foregoing provisions of this by-laws a resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of the shareholders is, subject to section 128 of the Act, as valid as if it had been passed at a meeting of the shareholders. 13. SHARES 13.1 Allotment and Issuance: Subject to the Act, the articles and any unanimous shareholders agreement, shares in the capital of the Company may be allotted and issued by resolution of the directors at such time and on such terms and conditions and to such persons or class of persons as the directors determine. 13.2 Certificates: Share certificates and the form of share transfer shall subject to section 181 of the Act be in such form as the directors may by resolution approve and such certificates shall be signed by a Chairman or a Deputy-Chairman or a Managing Director or a President or an Executive Vice-President or a Vice-President and the Secretary or an Assistant Secretary holding office at the time of signing. 13.2.1 The directors or any agent designated by the directors may in their or his discretion direct the Issuance of a new share or other such certificate in lieu of and upon cancellation of a certificate that has been mutilated or in substitution for a certificate claimed to have been lost, destroyed or wrongfully taken, upon payment of such reasonable fee and upon such terms as to Indemnity, reimbursement or expenses and evidence of loss and of title as the directors may from time to time prescribe, whether generally or in any particular case. 14. TRANSFER OF SHARES AND DEBENTURES 14.1 Transfer: Subject to the Articles, the shares or debentures of the Company may be transferred by a written instrument of transfer signed by the transferor and naming the transferee. 14.2 Registers: Registers of shares and debentures issued by the Company shall be kept at the registered office of the Company or at such other place in Barbados as may from time to time be designated by resolution of the directors. 14.3 Surrender of certificates: Subject to Section 179 of the Act, no transfer of shares shall be registered unless or until the certificate representing the shares or debentures to be transferred has been surrendered for cancellation. 14.4 Shareholder indebted to the Company: If so provided in the Articles, the Company has a lien on a share registered in the name of a shareholder or his personal representative for a debt of that shareholder to the Company. By way of enforcement of such lien the directors may refuse to permit the registration of a transfer of such share. Page 10 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- 15. DIVIDENDS 15.1 The directors may from time to time by resolution declare and the Company may pay dividends on the issued and outstanding shares in the capital of the Company subject to the provisions of the articles and sections 51 and 52 of the Act. 15.1.1 In case several persons are registered as the joint holders of any shares, any one of such persons may give effectual receipts for all dividends and payments on account of dividends. 16. VOTING IN OTHER COMPANIES 16.1 All shares or debentures carrying voting rights in any other body corporate that are held from time to time by the Company may be voted at any and all meetings of shareholders, debenture holders as the case may be of such other body corporate arid in such manner and by such person or persons as the directors of the Company shall from time to time determine. The officers of the Company may for and on behalf of the Company from time to time (a) execute and deliver proxies; and (b) arrange for the issuance of voting certificates or other evidence of the right to vote; in such names as they may determine without the necessity of a resolution or other action by the directors. 17. INFORMATION AVAILABLE TO SHAREHOLDERS 17.1 The directors may from time to time, subject to rights conferred by the Act, determine whether and to what extent and at what time and place and under what conditions or regulations the documents, books and registers and accounting records of the Company or any of them shall be open to the inspection of shareholders and no shareholder shall have any right to inspect any document or book or register or accounting record of the Company except as conferred by statute or authorised by the directors or by a resolution of the shareholders. 18. NOTICES 18.1 Methods of giving notice: Any notice or other document required by the Act, the regulations, the articles or the by-laws to be sent to any shareholder, debenture holder, director or auditor may be delivered personally or sent by prepaid air mail, cable or telex to any such person at his latest address as shown in the records of the Company or its transfer agent and to any such director at his latest address as shown in the records of the Company or in the latest notice filed under Section 66 or 74 of the Act, and to the auditor at his business address. 18.2 Waiver of notice: Notice may be waived or the time for the notice may be waived or abridged at any time with the consent in writing of the person entitled thereto. 18.3 Undelivered notices: If a notice or document is sent to a shareholder or debenture holder by prepaid mail in accordance with this paragraph and the notice or document is returned on three consecutive occasions because the shareholder or debenture holder cannot be found, it shall not be necessary to send any further notices or documents to the shareholder or debenture holder until he informs the Company in writing of his new address. 18.4 Shares and debentures registered in wore than one name: All notices or other documents with respect to any shares or debentures registered in more than one name shall be given to whichever of Page 11 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- such persons is named first in the records of the Company and any notice or other document so given shall be sufficient notice or delivery to all the holders of such shares or debentures. 18.5 Persons becoming entitled by operation of law: Subject to Section 184 of the Act, every person who by operation of law, transfer or by any other means whatsoever becomes entitled to any share is bound by every notice or other document in respect of such share that, previous to his name and address being entered in the records of the Company, is duly given to the person from whom he derives his title to such share. 18.6 Deceased shareholders: Subject to Section 184 of the Act, any notice or other document delivered or sent by prepaid mail, cable or telex or left at the address of any shareholder as the same appears in the records of the Company shall, notwithstanding that such shareholder is deceased, and whether or not the Company has notice of his death, be deemed to have been duly served in respect of the shares held by him whether held solely or with any other person until some other person is entered in his stead in the records of the Company as the holder or one of the holders thereof and such service shall for all purposes be deemed a sufficient service of such notice or document on his personal representatives and on all persons, if any, interested with him in such shares. 18.7 Signature to notices: The signature of any director or officer of the Company to any notice or document to be given by the Company may be written, stamped, typewritten or printed or partly written, stamped, typewritten or printed. 18.8 Computation of time: here a notice extending over a number of days or other period is required under any provisions of the articles or the by-laws the day of sending the notice shall, unless it is otherwise provided, be counted in such number of days or other period. 18.9 Proof of service: Where a notice required under paragraph 18.1 hereof is delivered personally to the person to whom it is addressed or delivered to his address as mentioned in paragraph 18.1 hereof, service shall be deemed to be at the time of delivery of such notice. 18.9.1 Where such notice is sent by post, service of the notice shall be deemed to be effected seventy-six hours after posting if the notice was properly addressed and posted by prepaid air mail. 18.9.2 Where the notice is sent by cable or telex, service is deemed to be effected on the date on which the notice is so sent. 18.9.3 A certificate of an officer of the Company in office at the time of the making of the certificate or of any transfer agent of shares of any class of the Company as to facts in relation to the delivery or sending of any notice shall be conclusive evidence of those facts. 19. Cheques, drafts and notes 19.1 All cheques, drafts or orders for the payment of money and all notes and acceptances and bills of exchange shall be signed by such officers or persons and in such manner as the directors may from time to time designate by resolution. 20. Execution of instruments 20.1 Contracts, documents or instruments in writing requiring the signatures of two officers of the Company may be signed by: Page 12 General By-Law No.1 Integon Re (Barbados), Limited - -------------------------------------------------------------------------------- (a) a Chairman, a Deputy Chairman, a Managing Director, a President, an Executive Vice-President or a Vice-President together with the Secretary or the Treasurer, or (b) any two directors and all contracts, documents and instruments in writing so signed shall be binding upon the Company without any further authorization or formality. The directors shall have power from time to time by resolution to appoint any officers or persons on behalf of the Company either to sign certificates for shares in the Company and contracts, documents and instruments in writing generally or to sign specific contracts, documents or instruments in writing. 20.1.2 The common seal of the Company may be affixed to contracts, documents and instruments in writing signed as aforesaid or by any officers or persons appointed pursuant to paragraph 20.1 hereof. 20.1.3 Subject to Section 134 of the Act (a) The Chairman together with the Secretary, or (b) any two directors shall have authority to sign and execute under the seal of the Company or otherwise all instruments that may be necessary for the purpose of selling, assigning, transferring, exchanging, converting or conveying any shares, stocks, bonds, debentures, rights, warrants or other securities. 21. Signatures 21.1 The signature of a Chairman, a Deputy-Chairman, a Managing Director, a President, an Executive Vice-President, a Vice-President, the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer or any director of the Company or of any officer or person, appointed pursuant to paragraph 20 hereof by resolution of the directors may, if specifically authorised by resolution of the directors, be printed, engraved, lithographed or otherwise mechanically reproduced upon any certificate for shares in the Company or contract, document or instrument in writing, bond, debenture or other security of the Company executed or issued by or on behalf of the Company. Any document or instrument in writing on which the signature of any such officer or person is so reproduced shall be deemed to have been manually signed by such officer or person whose signature is so reproduced and shall be as valid to all intents and purposes as if such document or instrument in writing had been signed manually and notwithstanding that the officer or person whose signature is so reproduced has ceased to hold office at the date on which such document or instrument in writing is delivered or issued. 22. Financial year 22.1 The directors may from time to time by resolution establish the financial year of the Company. Enacted this 13th day of March, 2000. /s/ Ronald W. Jones -------------------------- Ronald W. Jones Secretary Vice President-Finance Page 13 EX-99.1 4 ex991.txt EXHIBIT 99(A) Exhibit 99(a) CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Gary Y. Kusumi, Chairman and Chief Executive Officer of Integon Re (Barbados), Limited (the "Company"), hereby certify, to the best of my knowledge, that the Company's annual report on Form 10-K for the period ending December 31, 2002 ("the Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Gary Y. Kusumi ------------------------------ Gary Y. Kusumi March 31, 2003 A signed original of this written statement required by Section 906 has been provided to Integon Re (Barbados) Limited and will be retained by Integon Re (Barbados) Limited and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.2 5 ex992.txt EXHIBIT 99(B) Exhibit 99(b) CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Ronald W. Jones, Principal Financial Officer of Integon Re (Barbados), Limited (the "Company"), hereby certify, to the best of my knowledge, that the Company's annual report on Form 10-K for the period ending December 31, 2002 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Ronald W. Jones ------------------------------ Ronald W. Jones March 31, 2003 A signed original of this written statement required by Section 906 has been provided to Integon Re (Barbados) Limited and will be retained by Integon Re (Barbados) Limited and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.3 6 ex993.txt EXHIBIT 99(C) [official seal] MINISTRY OF FINANCE GOVERNMENT OF BARBADOS GUARANTEE The Exempt Insurance Act 1983 Section 32 BARBADOS THIS GUARANTEE is given this 21st day of June, Two Thousand by THE GOVERNMENT OF BARBADOS acting herein by the Minister of Finance to INTEGON RE (BARBADOS), LIMITED, a company incorporated and registered under the provisions of the Companies Act, Cap. 308 of the laws of Barbados and having its registered office situate at c/o Colybrand Company Services Limited, The Financial Services Centre, Bishop's Court Hill, St. Michael (hereinafter called "the company") pursuant to section 32 of the Exempt Insurance Act 1983. WHEREBY IT IS AGREED AND DECLARED as follows: 1. The Company is entitled to all benefits and exemptions at present set forth in sections 29, 30, 31 and 33 of the Act for a period of thirty (30) years, that Is to say, a period commencing with the date of issue of the licence to the company and ending with the close of the Company's fiscal period in the thirtieth year following the year of its incorporation. 2. Subject to paragraph 1 hereof, this Guarantee will continue to apply with full effect and shall during its term be subject to any amendments made to the Act. 3. This Guarantee will continue to apply notwithstanding any changes in the Company's name, Articles of Incorporation, place of business, directors or ownership in accordance with the Exempt Insurance Act 1983 and other laws of Barbados, and the Guarantee will also apply to any successor corporation of the Company: Provided that the successor corporation is at all material times duly licensed and approved under the act as amended or future legislation of a substantially similar nature. 4. If at any time during the term of this Guarantee, the Act or similar legislation is amended to provide tax rates or exemptions which are more favourable to the Company, the Company shall be entitled to those tax rates or exemptions and shall inform the Minister in writing of its intention to claim the benefits thereof and the Guarantee shall then continue to apply for the remainder of the thirty (30) year term. IN WITNESS whereof this Guarantee has been executed the day and year first before written. SIGNED for and on behalf of the GOVERNMENT OF BARBADOS by the Minister of Finance in the presence of: /s/ Minister of Finance ......................................... Witness: /s/ Shirley H. King Name: ...................................... Abode: 17 Clermont-Close, St. Michael Calling: Executive Secretary -----END PRIVACY-ENHANCED MESSAGE-----