-----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, U1OzGFRGB7D/6PPXDaJY8kZmY9tHpj3+OhDFKk5Wb1u3EVPwtftgY4Bx394heMbc zjJDX3P+2BE2I9WaLQ/zcQ== 0000798363-95-000015.txt : 19951120 0000798363-95-000015.hdr.sgml : 19951120 ACCESSION NUMBER: 0000798363-95-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCOR US CORP CENTRAL INDEX KEY: 0000798363 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 751791342 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09940 FILM NUMBER: 95593430 BUSINESS ADDRESS: STREET 1: 110 WILLIAM ST STE 1800 STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038-3995 BUSINESS PHONE: 2129788200 MAIL ADDRESS: STREET 1: 110 WILLIAM STREET STREET 2: 18TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10038 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the period ended September 30, 1995 0R [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file no. 0-15176 SCOR U.S. CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-1791342 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Two World Trade Center, New York, New York 10048-0178 (Address of principal executive offices) (212) 390-5200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] At November 14, 1995 there were 18,170,971 shares of Common Stock, $.30 par value, outstanding. SCOR U.S. CORPORATION INDEX PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Independent Auditors' Review Report 3 Consolidated Balance Sheets September 30, 1995 and December 31, 1994 4 Consolidated Statement of Operations Three Months and Nine Months ended September 30, 1995 and 1994 5 Consolidated Statement of Stockholders' Equity Nine Months ended September 30, 1995 and 1994 6 Consolidated Statements of Cash Flows Three Months and Nine Months Ended September 30, 1995 and 1994 7 Notes to Consolidated Financial Statements 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-17 PART II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 Signatures 18 2 INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors SCOR U.S. Corporation: We have reviewed the consolidated balance sheet of SCOR U.S. Corporation and subsidiaries (the Company) as of September 30, 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for the three month and nine month periods ended September 30, 1995 and 1994. These consolidated financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of SCOR U.S. Corporation and subsidiaries as of December 31, 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 2, 1995 we expressed an unqualified opinion on those consolidated financial statements. KPMG Peat Marwick LLP October 24, 1995 3
SCOR U.S. CONSOLIDATED BALANCE SHEETS Corporation (in thousands) September 30, December 31, 1995 1994 (Unaudited) Assets Investments Fixed maturities: Available for sale, at fair value (amortized cost: $556,300 and $596,791) $ 563,515 $ 563,656 Held to maturity, at amortized cost (fair value: $22,609 and $22,274) 22,155 22,871 Equity securities, at fair value (cost: $108 and $1,897) 204 1,738 Short-term investments, at cost 122,794 83,303 Other long-term investments 1,374 1,225 --------------- --------------- 710,042 672,793 Cash 13,318 4,763 Accrued investment income 9,608 10,339 Premiums receivable 80,996 72,018 Reinsurance recoverable on paid losses Affiliates 9,525 4,399 Other 10,414 19,356 Reinsurance recoverable on unpaid losses Affiliates 135,803 127,096 Other 90,741 95,576 Prepaid reinsurance premiums Affiliates 5,835 10,504 Other 4,086 8,803 Deferred policy acquisition costs 22,471 22,844 Deferred Federal income tax benefits 22,542 34,818 Investment in affiliates 12,360 11,232 Other assets 53,431 49,174 --------------- --------------- $ 1,181,172 $ 1,143,715 =============== =============== Liabilities Losses and loss expenses $ 618,738 $ 604,787 Unearned premiums 99,955 110,082 Funds held under reinsurance treaties Affiliates 1,323 3,654 Other 17,248 17,104 Reinsurance balances payable Affiliates 11,990 15,328 Other 15,010 28,357 Convertible subordinated debentures 75,950 82,350 Notes payable 25,000 20,000 Commercial paper 20,639 11,310 Other liabilities 17,933 11,348 --------------- --------------- 903,786 904,320 --------------- --------------- Stockholders' Preferred stock, no par value, 5,000 Equity shares authorized; no shares issued Common stock, $.30 par value, 50,000 shares authorized; 18,364 and 18,356 shares issued 5,509 5,507 Additional paid-in capital 114,669 114,556 Unrealized appreciation (depreciation) of investments, net of deferred tax effect 4,752 (21,640) Foreign currency translation adjustment (252) (414) Retained earnings 154,482 143,153 Treasury stock, at cost (193 and 192 shares) (1,774) (1,767) --------------- --------------- 277,386 239,395 --------------- --------------- $ 1,181,172 $ 1,143,715 =============== =============== See notes to consolidated financial statements.
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SCOR U.S. CONSOLIDATED STATEMENTS OF OPERATIONS Corporation (Unaudited) (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues Net premiums earned $ 53,536 $ 55,542 $ 182,340 $ 173,210 Net investment income 10,679 10,157 31,751 30,363 Net realized investment gains 121 323 713 1,059 ------------- ------------- ------------- ------------- 64,336 66,022 214,804 204,632 ------------- ------------- ------------- ------------- Losses Losses and loss expenses, net 36,452 39,060 121,952 152,558 and Commissions, net 10,345 14,144 46,896 46,019 expenses Other underwriting and administration expenses 7,616 6,799 20,783 19,586 Other expenses 1,016 1,590 1,040 3,065 Interest expense 2,596 2,454 6,906 6,982 ------------- ------------- ------------- ------------- 58,025 64,047 197,577 228,210 ------------- ------------- ------------- ------------- Income (loss) from operations before Federal income taxes benefit 6,311 1,975 17,227 (23,578) Federal income taxes (benefit) 1,485 (472) 3,726 (12,210) ------------- ------------- ------------- ------------- Income (loss) from operations 4,826 2,447 13,501 (11,368) Extraordinary gain on redemption of debentures, net of tax -0- -0- 552 -0- ------------- ------------- ------------- ------------- Net income (loss) $ 4,826 $ 2,447 $ 14,053 $ (11,368) ============= ============= ============= ============== Per share Average common and common data equivalent shares outstanding 18,372 18,212 18,255 18,146 Primary ============= ============= ============= ============= Income (loss) from operations $ 0.26 $ 0.13 $ 0.74 $ (0.63) Extraordinary item -0- -0- 0.03 -0- ------------- ------------- ------------- ------------- Net income (loss) $ 0.26 $ 0.13 $ 0.77 $ (0.63) ============= ============= ============= ============ Fully Average common and common Diluted equivalent shares outstanding 21,513 18,212 21,317 18,146 ============= ============= ============= ============= Income (loss) from operations $ 0.26 $ 0.13 $ 0.73 $ (0.63) Extraordinary item -0- -0- 0.03 -0- ------------- ------------- ------------- ------------- Net income (loss) $ 0.26 $ 0.13 $ 0.76 $ (0.63) ============= ============ ============= ============ See notes to consolidated financial statements.
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SCOR U.S. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Corporation Nine Months Ended September 30, (Unaudited) (in thousands, except per share data) 1995 1994 Common Stock Balance at beginning of year $ 5,507 $ 5,490 Issuance of common stock 2 17 --------------- ---------------- Balance at end of period 5,509 5,507 --------------- ---------------- Additional Paid-in Capital Balance at beginning of year 114,556 112,670 Issuance of common stock 86 700 Change in unpaid stock options exercised 19 72 Deferred compensation 8 -0- --------------- ---------------- Balance at end of period 114,669 113,442 --------------- ---------------- Unrealized Appreciation (Depreciation) of Investments Balance at beginning of year (21,640) 16,634 Unrealized appreciation (depreciation) for period 26,392 (30,002) --------------- ---------------- Balance at end of period 4,752 (13,368) --------------- ---------------- Foreign Currency Translation Adjustment Balance at beginning of year (414) 12 Change in foreign currency translation adjustment 162 152 --------------- ---------------- Balance at end of period (252) 164 --------------- ---------------- Retained Earnings Balance at beginning of year 143,153 157,532 Net income (loss) 14,053 (11,368) Dividends ($.15 and $.27 per share) (2,724) (4,903) --------------- ---------------- Balance at end of period 154,482 141,261 --------------- ---------------- Treasury Stock Balance at beginning of year (1,767) (1,649) Net (purchases) reissuance of treasury stock (7) 165 --------------- ---------------- Balance at end of period (1,774) (1,484) --------------- ---------------- Total Stockholders' Equity At End of Period $ 277,386 $ 245,522 =============== ================ Common stock shares Balance at beginning of year 18,356 18,299 Issuance of common stock 8 57 --------------- ---------------- Balance at end of period 18,364 18,356 =============== ================ Treasury stock shares Balance at beginning of year 192 190 Net purchases (reissuance) of treasury stock 1 (30) --------------- ---------------- Balance at end of period 193 160 =============== ================ See notes to consolidated financial statements.
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SCOR U.S. CONSOLIDATED STATEMENT OF CASH FLOWS Corporation (Unaudited) (in thousands) Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Cash flows Net income (loss) $ 4,826 $ 2,447 $ 14,053 $ (11,368) from operating Adjustments to reconcile net income activities (loss) to net cash provided by (used in) operating activities: Extraordinary gain on redemption of debentures -0- -0- (552) -0- Realized investment gains (121) (323) (713) (1,059) Changes in assets and liabilities: Accrued investment income 538 (154) 731 (260) Premium balances, net 6,869 29,185 (25,663) 9,019 Prepaid reinsurance premiums 1,218 797 9,386 4,774 Reinsurance recoverable on paid losses (8,118) (10,820) 3,816 (29,881) Deferred policy acquisition costs 257 (36) 373 (1,505) Losses and loss expenses (14,577) (15,879) 13,951 44,741 Unearned premiums (179) (548) (10,127) 6,709 Reinsurance recoverable on unpaid losses 10,516 7,052 (3,872) 4,827 Funds held under reinsurance treaties 714 (321) (2,187) (16,719) Federal income taxes (4,715) (472) (5,473) (14,010) Other 7,477 (3,967) 9,270 (3,766) ------------- ------------- ------------- ------------- Net cash provided by (used in) operating activities 4,705 6,961 2,993 (8,498) ------------- ------------- ------------- ------------- Cash flows Sales, maturities or redemptions from of fixed maturities 44,922 54,168 140,362 192,956 investing Sales of equity securities (58) 207 1,157 4,723 activities Net sales (purchases) of short-term investments (2,070) 1,792 (35,105) 38,526 Investments in fixed maturities (42,971) (66,279) (102,762) (225,947) Investments in equity securities -0- (1,685) -0- (3,900) Other (4,935) (381) (5,430) (3,361) -------------- ------------- ------------- ------------- Net cash provided by (used in) investing activities (5,112) (12,178) (1,778) 2,997 ------------- ------------- ------------- ------------- Cash flows Dividends paid (908) (1,638) (2,724) (4,903) from Redemption of convertible subordinated financing debentures -0- -0- (8,907) -0- activities Proceeds of notes payable -0- -0- 5,000 -0- Proceeds from issuance of commercial paper-net (461) 3 8,473 30 Proceeds from stock options exercised 12 565 19 610 Other 3,570 1,372 5,479 1,747 ------------- ------------- ------------- ------------- Net cash provided by (used in) financing activities 2,213 302 7,340 (2,516) ------------- ------------- ------------- ------------- Net increase (decrease) in cash 1,806 (4,915) 8,555 (8,017) Cash at beginning of period 11,512 13,994 4,763 17,096 ------------- ------------- ------------- ------------- Cash at end of period $ 13,318 $ 9,079 $ 13,318 $ 9,079 ============= ============= ============= ============= See notes to consolidated financial statements.
7 SCOR U.S. CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General SCOR U.S. Corporation ("SCOR U.S.") or, collectively with its subsidiaries, the ("Company") is a holding company, the principal operating subsidiary of which is SCOR Reinsurance Company ("SCOR Re"). The Company also operates through SCOR Re's wholly owned subsidiaries, General Security Insurance Company ("GSIC"), The Unity Fire and General Insurance Company ("Unity Fire") and General Security Indemnity Company ("GSIND"). (SCOR Re, GSIC, Unity Fire and GSIND are collectively referred to as the "Operating Subsidiaries"). The Company, through its subsidiaries, provides property and casualty insurance and reinsurance. Reinsurance is provided to primary insurance companies on both a treaty and facultative basis. SCOR Re specializes in underwriting treaties covering standard and non-standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. SCOR Re writes treaty business almost exclusively through reinsurance intermediaries and writes facultative business directly with primary insurance companies and through reinsurance intermediaries. GSIC and Unity Fire provide commercial property and casualty insurance on both a primary and excess basis and underwrite alternative risk market coverages. GSIND provides commercial property and casualty coverages on a surplus lines basis. The unaudited consolidated financial statements have been prepared on the basis of Generally Accepted Accounting Principles ("GAAP") and in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company's 1994 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. Per Share Data Primary earnings per share are based on the weighted average number of common shares outstanding during the period and, if dilutive, common shares assumed to be outstanding which are issuable under stock option plans. Fully diluted earnings per share are based on the additional assumption that the Company's Convertible Subordinated Debentures are converted into common shares, if dilutive. 3. Income Taxes The Company's effective income tax rate differs from the current statutory federal income tax rate of 35% principally due to tax-exempt interest income and dividends received deductions. 8 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts reported for income tax purposes and relate principally to loss reserve discounting, unearned premiums and unrealized appreciation (depreciation) of investments. A valuation allowance is provided when it is more likely than not that some portion of the deferred income tax benefits will not be realized. Management believes that the deferred tax benefits will be fully realized in the future. 4. Reinsurance The effect of ceded reinsurance on the Statement of Operations for the three and nine months ended September 30, 1995 and 1994 are as follows (in thousands): Loss and Loss Premiums Premiums Expenses Written Earned Incurred Three Months Ended September 30, 1995 Direct $ 3,322 $ 3,118 $ 5,335 Assumed 65,679 66,062 39,941 Ceded - affiliate (3,771) (4,565) (4,543) Ceded - other (10,656) (11,079) (4,281) --------- --------- --------- Net $ 54,574 $ 53,536 $ 36,452 ========= ========= ========= Three Months Ended September 30, 1994 Direct $ 5,183 $ 3,395 $ 2,108 Assumed 70,142 72,478 42,679 Ceded - affiliate (8,131) (7,912) 1,218 Ceded - other (11,403) (12,419) (6,945) --------- --------- --------- Net $ 55,791 $ 55,542 $ 39,060 ========= ========= ========= Nine Months Ended September 30, 1995 Direct $ 13,323 $ 12,708 $ 21,328 Assumed 218,665 229,408 150,823 Ceded - affiliate (20,076) (25,575) (27,596) Ceded - other (30,313) (34,201) (22,603) --------- --------- --------- Net $ 181,599 $ 182,340 $ 121,952 ========= ========= ========= Nine Months Ended September 30, 1994 Direct $ 11,138 $ 10,218 $ 7,744 Assumed 228,128 222,339 205,724 Ceded - affiliate (25,061) (28,845) (24,461) Ceded - other (29,512) (30,502) (36,449) --------- --------- --------- Net $ 184,693 $ 173,210 $ 152,558 ========= ========= ========= 9 5. Subsequent Event On November 2, 1995 the Company entered into an Agreement and Plan of Merger with SCOR S.A., its majority shareholder, and SCOR Merger Sub Corporation ("Merger Sub"), a newly formed Delaware corporation and wholly-owned subsidiary of SCOR S.A., which provides, among other things, that upon certain terms and conditions, that Merger Sub will be merged with and into the Company upon consummation of the tender offer made by SCOR S.A., through Merger Sub, to purchase all of the outstanding shares of Common Stock of the Company not held by it. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS General SCOR U.S. Corporation ("SCOR U.S.") or, collectively with its subsidiaries, the ("Company") is a holding company, the principal operating subsidiary of which is SCOR Reinsurance Company ("SCOR Re"). The Company also operates through SCOR Re's wholly owned subsidiaries, General Security Insurance Company ("GSIC"), The Unity Fire and General Insurance Company ("Unity Fire") and General Security Indemnity Company ("GSIND"). (SCOR Re, GSIC, Unity Fire and GSIND are collectively referred to as the "Operating Subsidiaries"). The Company, through its subsidiaries, provides property and casualty insurance and reinsurance. Reinsurance is provided to primary insurance companies on both a treaty and facultative basis. SCOR Re specializes in underwriting treaties covering standard and non-standard automobile, commercial and technical risks and provides property, casualty and special risk coverages on a facultative basis. SCOR Re writes treaty business almost exclusively through reinsurance intermediaries and writes facultative business directly with primary insurance companies and through reinsurance intermediaries. GSIC and Unity Fire provide commercial property and casualty insurance on both a primary and excess basis and underwrite alternative risk market coverages. GSIND provides commercial property and casualty coverages on a surplus lines basis. The operating results of the property and casualty insurance and reinsurance industry are subject to significant fluctuations due to competition, catastrophic events, general economic conditions, interest rates and other factors such as changes in tax laws and regulations. The operating results of SCOR U.S. historically have been influenced by these cycles. Underwriting Results The underwriting results of a property and casualty insurer or reinsurer are discussed frequently by reference to its loss ratio, underwriting expense ratio and combined ratio. The loss ratio is the result of dividing losses and loss expenses incurred by net premiums earned. The underwriting expense ratio is the result of dividing underwriting expenses by net premiums written for purposes of Statutory Accounting Practices ("SAP") and net premiums 10 earned for purposes of Generally Accepted Accounting Principles ("GAAP"). The combined ratio is the sum of the loss ratio and the underwriting expense ratio. A combined ratio under 100% generally indicates underwriting profits and a combined ratio exceeding 100% generally indicates underwriting losses. Underwriting profit is only one element of overall profitability, which also includes investment results, interest expense and the effects of income taxation. Accordingly, the combined ratio alone should not be used to measure overall profitability. Except as indicated, the ratios discussed below have been calculated on a GAAP basis. The following table sets forth the Company's GAAP combined ratios and the components thereof for the periods indicated, and the SAP combined ratio for the Operating Subsidiaries. The GAAP ratios include the operating expenses of the holding company and the operations of the non-insurance subsidiaries, in addition to the operating expenses of the Operating Subsidiaries. The SAP expense ratios includes only the operating expenses of the Operating Subsidiaries. In addition, the GAAP loss ratio takes into consideration recoveries under certain retrocessional agreements with SCOR S.A., the Company's majority shareholder, whereas these recoveries are included in other income for SAP purposes. Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 GAAP Ratios (Total Company) Loss ratio 68.1% 70.3% 66.9% 88.1% Commission ratio 19.3% 25.5% 25.7% 26.6% U/W, administration and other expense ratio 16.1% 15.1% 12.0% 13.1% Expense ratio 35.4% 40.6% 37.7% 39.7% Combined ratio 103.5% 110.9% 104.6% 127.8% SAP Combined Ratio * Combined ratio 100.7% 107.2% 104.2% 122.8% * Operating Subsidiaries Only Comparison of Third Quarter Results for 1995 and 1994 Gross premiums written for 1995 decreased 8% to $69.0 million from $75.3 million in 1994. Net premiums written for 1995 decreased 2% to $54.6 million 11 from $55.8 million for 1994. Net premiums written for 1995 were reduced by $19,000 for additional ceded premiums to reinstate catastrophe reinsurance protections primarily related to the January 1994 Northridge earthquake. Net premiums written for 1994 were increased by $180,000 relating to reinstatement premiums. Excluding reinstatement premiums, net premiums written for 1995 were virtually unchanged compared with 1994. The Company's premium volume was adversely affected by its continued withdrawal from certain property and casualty lines of business where the Company believes rates and/or conditions are inadequate. More specifically, the Company has been reducing its treaty property business written on a pro rata basis. However, the Company's increased premium writings in targeted market segments, such as nonstandard automobile, alternative risk and facultative offset most of the decline in property pro rata treaty business. Net losses and loss expenses incurred decreased 7% in 1995 to $36.5 million from $39.1 million in 1994. The loss ratio was 68.1% for 1995 as compared with 70.3% for 1994. During 1995 the Company incurred $249,000 of net gains ($849,000 gross) resulting from pre-1995 property catastrophe events, which reduced the loss ratio by 0.4 points. Of these amounts, development from the Northridge earthquake accounted for $45,000 of net incurred losses. During 1994 the Company incurred $2.3 million of net losses ($2.0 million of gross losses) resulting from property catastrophe events, which added to the loss ratio by 3.9 points. During 1995 and 1994, the Company ceded $15.6 million and $20.3 million of earned premiums, respectively. The Company recovered from retrocessionnaires $8.8 million and $5.7 million of losses during 1995 and 1994, respectively. Ceded premiums in 1995 included $19,000 of reinstatement premiums incurred by the Company. Commission expenses decreased 27% to $10.3 million in 1995 from $14.1 million in 1994. The commission ratio was 19.3% for 1995, compared with 25.5% for 1994. Underwriting, administration and other expenses increased 2% in 1995 to $8.6 million from $8.4 million in 1994. The underwriting and other expense ratio was 16.1% for 1995 as compared with 15.1% for 1994. The effect of net reinstatement premiums related primarily to the Northridge earthquake reduced the 1994 ratio by 0.1 points. The increase in underwriting, administration and other expenses in 1995 was principally caused by the Company's relocation in the third quarter of 1995. The combined ratio was 103.5% for 1995, compared with 110.9% for 1994. The effect of property catastrophe events on the 1995 and 1994 combined ratio was (0.4) points and 3.8 points, respectively. Net investment income increased 5% to $10.7 million for 1995 compared with $10.2 million for 1994. The increase in net investment income (pre-tax) primarily resulted from an increase in the Company's short-term investments and cash position. On an after-tax basis, net investment income for 1995 was $7.8 million virtually unchanged from 1994. Net realized investment gains for 1995 were $121,000, compared with $323,000 for 1994. Interest expense increased 6% to $2.6 million in 1995 from $2.5 million in 1994. 12 The Company's net income for 1995 was $4.8 million, or $0.26 per share, on a primary basis, compared with $2.4 million, or $0.13 per share, on a primary basis, for 1994. The 1995 results were affected by after-tax benefit to operations, net of reinsurance, of $150,000, or $0.01 per share, for pre-1995 property catastrophe events. The 1994 results were affected by after-tax charges to operations of $1.4 million, or $0.08 per share, for property catastrophe events. Average common and common equivalent shares outstanding (on a primary basis) for 1995 were 18.4 million, compared with 18.2 million for 1994. Comparison of Year to Date Results for 1995 and 1994 Gross premiums written for 1995 decreased 3% to $232.0 million from $239.3 million in 1994. Net premiums written for 1995 decreased 2% to $181.6 million from $184.7 million for 1994. Gross premiums written for 1995 and 1994 were increased by $900,000 and $1.0 million respectively, and net premiums written were reduced by $1.2 million and $5.0 million, respectively, for additional premiums to reinstate catastrophe reinsurance protections primarily related to the January 1994 Northridge earthquake. Excluding these reinstatement premiums, gross premiums written and net premiums written for 1995 decreased by 3% and 4%, respectively, compared with 1994. The Company's premium volume was adversely affected by its continued withdrawal from certain property and casualty lines of business where the Company believes rates and/or conditions are inadequate. More specifically, the Company has been reducing its treaty property business written on a pro rata basis. However, the Company's increased premium writings in targeted market segments, such as nonstandard automobile, alternative risk and facultative offset most of the decline in property pro rata business. Net losses and loss expenses incurred decreased 20% in 1995 to $122.0 million from $152.6 million in 1994. The loss ratio was 66.9% for 1995 as compared with 88.1% for 1994. During 1995 the Company incurred $3.1 million of net losses ($12.5 million gross) resulting from pre-1995 property catastrophe events, which added 2.1 points to the loss ratio. Of these amounts, development from the Northridge earthquake accounted for $2.5 million of net incurred losses and $12.6 million of gross incurred losses. During 1994 the Company incurred $33.7 million of net losses ($63.0 million of gross losses) resulting from property catastrophe events, primarily the Northridge earthquake and the early 1994 winter freeze, which added 21.4 points to the loss ratio. Of these amounts, the Northridge earthquake accounted for $26.1 million of net incurred losses and $54.8 million of gross incurred losses. During 1995 and 1994, the Company ceded $59.8 million and $59.3 million of earned premiums, respectively. The Company recovered from retrocessionnaires $50.2 million and $60.9 million of losses during 1995 and 1994, respectively. Ceded premiums in 1995 and 1994 included $2.1 million and $6.0 million of reinstatement premiums incurred by the Company primarily relating to the Northridge earthquake. Ceded losses in 1995 and 1994 included $10.1 million and $29.3 million of losses relating to the Northridge earthquake. Commission expenses increased 2% to $46.9 million in 1995 from $46.0 million in 1994. The commission ratio was 25.7% for 1995, compared with 26.6% for 1994. The effect of net reinstatement premiums primarily related to the Northridge earthquake added 0.2 points and 0.8 points to the 1995 and 1994 commission ratio, respectively. 13 Underwriting, administration and other expenses decreased 4% in 1995 to $21.8 million from $22.7 million in 1994. The underwriting and other expense ratio was 12.0% for 1995 as compared with 13.1% for 1994. The effect of net reinstatement premiums related primarily to the Northridge earthquake added 0.1 points and 0.4 points to the 1995 and 1994 ratio. The decrease in underwriting administration and other expenses in 1995 was principally caused by an improvement in the results reported by an entity in which the Company is a minority shareholder, offset in part by the Company's relocation in the third quarter of 1995. The combined ratio was 104.6% for 1995, compared with 127.8% for 1994. The effect of property catastrophe events on the 1995 and 1994 combined ratio was 2.4 points and 22.6 points, respectively. Net investment income increased 5% to $31.8 million for 1995 compared with $30.4 million for 1994. The increase in net investment income (pre-tax) primarily resulted from an increase in the proportion of taxable investments in the Company's portfolio and positive operating cash flow over the past twelve months. On an after-tax basis, net investment income decreased 2% to $23.4 million for 1995, compared with $23.9 million in 1994. Net realized investment gains for 1995 were $713,000, compared with $1.1 million for 1994. Interest expense decreased 1% to $6.9 million in 1995 from $7.0 million in 1994. During 1995 the Company repurchased in the open market $6.4 million in principal amount of the Debentures and recognized an extraordinary gain of $552,000 or $0.03 per share, net of tax. The Company's net income for 1995 was $14.1 million, or $0.77 per share, on a primary basis, compared with a net loss of $11.4 million, or $0.63 per share, on a primary basis, for 1994. The 1994 results were affected by after-tax charges to operations, net of reinsurance, of $25.2 million, or $1.39 per share, for property catastrophe events. The 1995 results include after-tax charges to operations of $2.8 million, or $0.15 per share, for pre-1995 property catastrophe events. Average common and common equivalent shares outstanding (on a primary basis) for 1995 were 18.3 million, compared with 18.1 million for 1994. Income Taxes Statement of Financial Accounting Standards No. 109 requires the establishment of a valuation allowance for deferred income tax benefits where it is more likely than not that some portion of the deferred income tax benefits will not be realized. Management believes, based on the Company's historical record of generating taxable income and its expectations of future earnings, that the Company's taxable income in the future periods will be sufficient to realize the net deferred income tax benefits reflected on its consolidated balance sheet as of September 30, 1995. In addition, management believes certain tax planning strategies exist, including its ability to alter the mix of its investment portfolio to taxable investments from tax-exempt investments, which could be implemented if necessary to ensure sufficient taxable income to realize fully its net deferred income tax benefits. Accordingly, SCOR U.S. has not established a valuation allowance with respect to its net deferred income tax benefits. 14 Liquidity and Capital Resources SCOR U.S. is a holding company. Its principal sources of cash are dividends from its operating subsidiaries, borrowings, and the issuance of equity securities. Generally, dividends that can be paid by insurers domiciled in New York State without prior approval of the New York Insurance Superintendent are limited for any twelve-month period to the lesser of 10% of statutory surplus or adjusted net investment income (as defined by the New York Insurance Law) for the previous twelve months. During the nine months ended September 30, 1995, $7.0 million of dividends were declared by SCOR Re to SCOR U.S. At September 30, 1995, the aggregate statutory surplus of the Operating Subsidiaries was $256.8 million. During 1995, the Company repurchased in the open market $6.4 million in principal amount of the Debentures and recognized an extraordinary gain of $552,000, or $0.03 per share, net of tax. The majority of these purchases, along with the December 1994 repurchase of $3.9 million in principal amount of the Debentures, were executed under a $10 million program authorized by the Board of Directors. Funding for the aggregate amount of repurchased Debentures, which purchases settled in January 1995, was provided by the issuance of the Company's commercial paper. In January 1995, the Board of Directors authorized the Company to repurchase up to an additional $20 million of Debentures in the open market, as market conditions permit. In connection with this additional authorization, SCOR U.S. has established a $20 million credit agreement with SCOR S.A., the proceeds of which are restricted to the repurchase of the Debentures or the repayment of any debt incurred to repurchase Debentures. At September 30, 1995, the Company utilized $5.0 million of this credit line. On October 1, 1990 SCOR U.S. renewed a $20.0 million bank note which was payable on that date. This note is due and payable on October 3, 1995 and bears interest at a fixed annual rate of 9.575%. The Company has entered into an interest rate swap agreement related to this note with a commercial bank. The swap agreement has a maturity date of October 1, 1995 and provides for the Company to make floating rate payments in exchange for fixed rate payments due on the loan. The floating rate, which resets every six months and is capped at 12.380%, was 11.818% as of the final reset date in April 1995. In October 1995, the Company refinanced this note with a $20 million borrowing from SCOR S.A. SCOR U.S. has established a commercial paper program which allows it to raise up to $50.0 million. At September 30, 1995, $20.6 million of commercial paper was outstanding. SCOR U.S. has a $30.0 million revolving line of credit with a bank which serves as a backstop for its commercial paper program. No borrowings have been made under this facility. At September 30, 1995, the amount remaining under the Company's existing stock repurchase program is approximately $1.5 million, which may be utilized as market conditions permit. The Company has not repurchased any shares under this program during 1995. 15 The primary sources of liquidity for the SCOR U.S. insurance and reinsurance subsidiaries are net cash flow from operating activities, the maturity or sale of investments, and capital contributions from SCOR U.S. Net cash provided by operating activities was $3.0 million for 1995 compared with cash used in operations of $8.5 million for 1994. Cash flow from operating activities during 1994 was adversely affected by continued property catastrophe paid loss activity as well as the payment of several large casualty claims. The Company has not suffered an adverse effect due to the recent catastrophe activity in the timing of recoveries or credit worthiness of retrocessionnaires. Loss payments associated with the recent catastrophe activity are not expected to have an adverse material effect on the Company's short-term or long-term liquidity. At September 30, 1995, total investments and cash at carrying value were $723.4 million compared with $677.6 million at December 31, 1994. The increased level of investments and cash is primarily attributable to the increase during the period in the fair value of investments carried at fair value. SCOR U.S. fixed maturity investments are substantially all investment grade, liquid securities with a weighted average maturity of 5.8 years. Approximately 99% of the fixed maturity portfolio is rated A or better. SCOR U.S. does not have any investments in real estate or high yield bonds. At September 30, 1995, the Company did not have any non-income producing investments. SCOR U.S. believes that cash and short-term investments are maintained at an adequate level for payment of claims and expenses as they become due. In addition, SCOR U.S. maintains a maturity distribution profile of fixed maturity investments sufficient to fund anticipated loss and loss expense obligations as they become due. The Company's long-term obligations primarily consist of the Debentures and the claims liabilities of the principal operating subsidiaries, which at September 30, 1995 averaged approximately 4.5 years. The Company may be subject to gains and losses resulting from currency fluctuations because some of its investments are denominated in currencies other than United States dollars, as are some of its net loss reserve liabilities. The Company makes investments denominated in foreign currencies to mitigate, in part, the effects of currency fluctuations on its results of operations. Investments denominated in foreign currencies do not constitute a material portion of the Company's investment portfolio and, in the opinion of management, are sufficient to meet its foreign currency obligations. Net gains resulting from foreign currency transactions during the periods ending September 30, 1995 and 1994 were $126,000 and $200,000, respectively. Stockholders' equity at September 30, 1995 was $277.4 million, an increase of $38.0 million compared with December 31, 1994. This increase resulted primarily from net income of $14.1 million for the period and unrealized appreciation of investments carried at fair value, net of tax effect, of $26.4 million, less cash dividends declared of $2.7 million. On March 10, 1995 the Company's Board of Directors reduced the regular quarterly dividend to $.05 per share from the previous quarterly rate of $.09 per share. The ratio of net premiums written to surplus, sometimes referred to as "insurance exposure", relates to the amount of risk to which an insurer's statutory capital and surplus can be exposed, as measured by the amount of premiums written in relation to such surplus. Insurance practice and regulatory 16 guidelines suggest that property and casualty insurance companies maintain a net premiums written ratio of less than 3 to 1. For the reinsurance industry, a ratio of 2 to 1 or less is generally considered prudent. SCOR U.S.'s net premiums written to surplus ratios were .94 to 1 and 1.03 to 1 for 1995 and 1994, respectively. Subsequent Event On November 2, 1995 the Company entered into an Agreement and Plan of Merger with SCOR S.A., its majority shareholder, and SCOR Merger Sub Corporation ("Merger Sub"), a newly formed Delaware corporation and wholly-owned subsidiary of SCOR S.A., which provides, among other things, that upon certain terms and conditions, that Merger Sub will be merged with and into the Company upon consummation of the tender offer made by SCOR S.A., through Merger Sub, to purchase all of the outstanding shares of Common Stock of the Company not held by it. 17 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to various lawsuits arising in the normal course of its business. The Company does not believe that any of the litigation to which it is currently a party will have a material adverse effect on the operating results or financial condition of SCOR U.S. and its subsidiaries. ITEM 5. OTHER INFORMATION On November 2, 1995 the Company entered into an Agreement and Plan of Merger with SCOR S.A., its majority shareholder, and SCOR Merger Sub Corporation ("Merger Sub"), a newly formed Delaware corporation and wholly-owned subsidiary of SCOR S.A., which provides, among other things, that upon certain terms and conditions, that Merger Sub will be merged with and into the Company upon consummation of the tender offer made by SCOR S.A., through Merger Sub, to purchase all of the outstanding shares of the Company not held by it. Reference is made to the Form 8-K Current Report filed with the Securities and Exchange Commission (the "Commission") on November 6, 1995. On November 9, 1995 the Company filed with the Commission a Schedule 14D-9 Solicitation/Recommendation Statement with respect to SCOR S.A.'s Offer to Purchase all of the outstanding shares of Common Stock of the Company not already held by it. Reference is made to the Schedule 14D-9 filed with the Commission on November 9, 1995. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 10(v) Loan Agreement between SCOR U.S. Corporation and SCOR S.A dated January 24, 1995. 10(w) Loan Agreement between SCOR U.S. Corporation and SCOR S.A. dated October 2, 1995. 11 Computation of Earnings per Share 15 Letter re Unaudited Interim Financial Information b) Reports on Form 8-K None. 18 Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SCOR U.S. Corporation (Registrant) Dated: November 14, 1995 /s/ Jeffrey D. Cropsey Jeffrey D. Cropsey Senior Vice President and Chief Financial Officer 19 EX-10 2 EX-10(V) EXHIBIT 10(v) CREDIT AGREEMENT US $20,000,000 SCOR U.S. CORPORATION Borrower SCOR S.A. Lender January 24, 1995 This Credit AGREEMENT, dated January 24, 1995, between SCOR U.S. Corporation, a Delaware Corporation, with its principal office at 110 William Street, New York, NY., (the "Borrower"), and SCOR S.A. a company incorporated in France with its head office in PUTEAUX - Hauts de Seine- France, Avenue du President Wilson, (the "Lender"), sets forth the binding Agreement of the parties. SECTION 1. INTERPRETATIONS AND DEFINITIONS 1.01 Definitions The following terms, as used herein, shall have the following respective meanings: "Commitment" means the obligation of the Lender to lend the amount set forth in Section 2.1 hereof. "Convertible Subordinated Debentures" means the 5 1/4% convertible subordinated debentures due April 1, 2000 issued by Borrower. "Control" (including, with its correlative meanings, "controlled by" and "under common control with") means, with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of the management or policies of such Person. "Debt" means at any date, without duplication, (i) all obligations for borrowed money, including, without limitation, reimbursement obligations related to letters of credit, and (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time, or both, would unless cured or waived become an Event of Default. "Dollars" and the sign "$" mean lawful money of the United States of America. "Business Day" means any day, except a Saturday or Sunday or other day on which commercial banks in New York City are open. "Interest Period" means: with respect to each Loan, the period commencing on the date of such Loan and ending 3 months thereafter, with a new Interest Period commencing at the end of each such 3 month period and each succeeding 3 month period thereafter. 2 "London Interbank Offered Rate" has the meaning set forth in Section 2.04 hereof. "Note" means the promissory note of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans. "Notice" shall mean notice delivered by a party to this Agreement to the other party hereto in the manner provided in Section 7.06. "Repayment Date" shall mean the earlier of the period ending 5 years from the date of each Loan, or the end of the applicable Interest Period immediately preceding December 31, 2000. "Revolving Credit Period" means the period from and including the date of the execution of this Agreement to and including the Termination Date. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Termination Date" means the earlier of December 31, 2000, or termination of the Commitment pursuant to Section 2.06 or 2.07 hereof. SECTION 2. THE LOAN 2.01 Agreement to Lend During the Revolving Credit Period the Lender agrees, on the terms and conditions set forth in this Agreement, to make Loans to the Borrower from time to time in amounts not exceeding in the aggregate at any one time outstanding $20,000,000 ( the "Commitment"). The initial Loan under this Section 2.01 shall be in the minimum principal amount of $5,000,000 and each Loan thereafter shall be in the minimum principal amount of $2,000,000 or any $1,000,000 multiple in excess thereof (except that any such Loan may be in the amount of the unused Commitment). During such Period and within the foregoing limits, the Borrower may borrow under this Section 2.01, repay or, to the extent permitted by Section 2.05 hereof, prepay Loans and reborrow under this Section 2.01. 2.02 Method of Borrowing (a) With respect to each Loan made pursuant to Section 2.01 hereof, the borrower shall give the Lender written notice not later than 10:00 a.m. (New York City time) five (5) Business Days before each Loan, specifying: (i) the date of such Loan, which shall be a Business Day; and (ii) the principal amount of such Loan. 3 (b) On the date of each Loan the Lender will make the proceeds thereof available to the Borrower by depositing the proceeds of such Loan in the account of the Borrower, at the Bank designated by the Borrower from time to time, by the time requested by the Borrower; provided, however, that such time is not earlier than 9:00 a.m. (New York City time). 2.03 The Note The Loans shall be evidenced by a single Note in the form of Exhibit A hereto, payable to the order of the Lender. Such Note shall be dated on or before the date of the first Loan and shall set forth the Commitment as the maximum principal amount thereof. 2.04 Interest Each Loan shall bear interest on the principal amount thereof, for each day from the date such Loan is made to the date on which it becomes due. Interest for each Loan during the applicable Interest Period shall be at a rate equal to the sum of the Margin plus the applicable three (3) month London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof; provided, however, if not less than two (2) days prior to the end of such Interest Period, Borrower has given Lender notice of its intent to include such interest in the outstanding principal balance of the applicable Loan, then any interest on any Loan shall be added to the outstanding principal balance and shall bear interest at the rate of interest applicable to such Loan. The "Margin" means 1/2 of 1%. The "London Interbank Offered Rate" applicable to any Interest Period means the rate at which 3 month deposits in Dollars are offered in the London Interbank market based on quotations at five major banks at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. 2.05 Optional Prepayments. The Borrower may, at the end of an Interest Period and upon at least two (2) Business Day's notice to the Lender, prepay any Loan without premium or penalty in whole or in part in amounts aggregating $1,000,000 or any multiple thereof by paying the principal amount being prepaid together with accrued interest thereon to the date of prepayment. 2.06 Mandatory Termination The Commitment shall terminate on the Termination Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. 4 2.07 Optional Termination or Reduction of Commitment During the Revolving Credit Period the Borrower may, upon at least three Business Days' notice to the Lender terminate the Commitment at any time, if no Loans are outstanding at such time; or may reduce the Commitment to an amount not less than the aggregate amount of Loans outstanding. 2.08 General Provisions as to Payments Except as permitted by Section 2.05 hereof payment of principal of, and interest on, the Loans shall be due on the Repayment Date. The Borrower shall make each payment of principal of, and interest on, the Loans hereunder not later than 11:00 a.m. (New York City time) on the date when due by depositing the funds in the account of Lender at the New York City branch of a bank designated by Lender. Whenever any payment of principal of, or interest on, the Loans shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day unless as a result thereof it would fall in the next calendar month, in which case it shall be advanced to the next preceding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest shall be payable for such extended time. SECTION 3. CONDITIONS 3.01 Initial Loan. The obligation of the Lender to make the initial Loan hereunder shall be subject to the satisfaction by the Borrower of the following conditions: (a)receipt by the Lender of counterparts hereof signed by the Borrower; (b) receipt by the Lender of a duly executed Note dated on or before the date of the initial Loan complying with the provisions of Section 2.03 hereof. 3.02 All Loans The obligation of the Lender to make a Loan on the occasion of any borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Lender of the notice from the Borrower required by Section 2.02 hereof; and 5 (b) the fact that, immediately after such Loan, no Default shall have occurred and be continuing. SECTION 4. PURPOSES OF LOANS 4.01 Use of Proceeds The Borrower will not use the proceeds of any Loans for any purposes other than: (a) the redemption of Convertible Subordinated Debentures issued by the Borrower; or (b) to refund any Debt incurred by Borrower, including but not limited to a Loan, for such redemption. SECTION 5. EVENTS OF DEFAULT 5.01 Events of Default Each of the following events and occurrences shall constitute an Event of Default under this Agreement: (a) Payment Default. The Borrower fails for any reason whatsoever to make payment of any amount under this Agreement on the date on which such amount is due and payable whether by the terms hereof or by acceleration and continuance of such failure for five business days. Acceptance of partial payment shall not constitute a waiver of the failure to make payment in full. (b) Representation Default. If any one or more of the following events ("Events of Default") shall have occurred and be continuing: (i) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement other than that covered by Section 5.01(a) for 30 days after written notice thereof has been given to the Borrower by the Lender; or (ii) the Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make case or other proceeding commenced against it, or shall make a general assignment for the benefit of 6 creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (iii) an involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect. 5.02 Consequences of Default If an Event of Default shall occur and be continuing beyond any grace period permitted therefor, the Lender may, by Notice to the Borrower, declare the outstanding amount of the Commitment together with accrued interest and other sums payable hereunder to be immediately due and payable without presentment, demand or notice of any kind other than the Notice specifically required by this Section, all other notice being expressly waived by the Borrower. If an Event of Default shall occur, such default may be waived by Notice from the Lender. SECTION 6. LOAN ADMINISTRATION 6.01 Term The term of this Agreement shall commence on January 24, 1995 and shall end upon payment in full of all principal, interest and other sums payable by the Borrower in respect of this Agreement which payment in full shall occur at the latest on December 31, 2000. SECTION 7. MISCELLANEOUS 7.01 Legal Action and Governmental and Corporate Approvals Borrower and Lender each represent and warrant that they have taken all necessary legal and corporate action to authorize the execution and delivery of this Agreement, and there are no governmental approvals required on the part of either in connection therewith or for the performance by the Borrower or Lender of its obligations under this Agreement. This Agreement constitutes a valid and binding agreement of the parties. 7 7.02 Entire Agreement and Amendment This Agreement, together with the Note of even date constitute the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior expressions of intent or understanding with respect to this transaction. This Agreement may be amended, or the benefit of any provisions hereof may be waived, only by an instrument in writing executed by both parties hereto. 7.03 Cumulative Rights and Waiver The failure or delay of the Lender to require performance by the Borrower or to enforce its rights under any provision of this Agreement shall not affect its right to require performance and to enforce its rights with respect to such provision unless and until such performance has been waived in writing by the Lender. Any waiver of an Event of Default shall be effective only in accordance with its terms and may be restricted or conditioned in any way. No waiver of any event of Default shall constitute a waiver of continuance or reoccurrence of such Event of Default or of any other Event of Default except as provided in such waiver. The rights granted to the Lender hereunder or under any other document or instrument delivered hereunder and any rights available to it at law or in equity shall be cumulative and may be exercised in part or in whole from time to time. 7.04 Assignment This Agreement and the Note shall be binding upon and shall be enforceable by the Borrower and the Lender and their respective successors, except that neither party has any right to assign or transfer its rights or obligations hereunder. 7.05 Governing Law This Agreement shall be governed by and interpreted in accordance with the Laws of the Republic of France. The Borrower irrevocably submits to the non-exclusive jurisdiction of the Tribunal de Commerce of Nanterre (Hauts de Seine) over any suit, action or proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and waives, to the fullest extent it may effectively do so under applicable law, any objection which it may have or hereafter have to the laying of the venue of any such suit, action, proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that a final judgment in any such suit, action or proceeding may be enforced in the above courts and any other court of the jurisdiction of which the Borrower is or may be subject by a suit upon such judgment, provided that service of process is effected on the Borrower in the manner specified below or as otherwise permitted by law. 8 The Borrower consents to process being served in any suit, action or proceeding of the nature referred to above by the mailing of a copy thereof by registered or certified airmail postage prepaid, return receipt requested, to its address, set forth in Section 7.06, or to any other address of which the Borrower shall have given written notice to the Lender. Nothing herein shall affect the right of the Lender to serve process in any other manner permitted by law, or limit the right of the Lender to bring proceedings against the Borrower in the court of any other jurisdiction. 7.06 Notices (a) Any Notice required or permitted to be given hereunder shall be in writing and shall be (i) personally delivered, (ii) transmitted by postage prepaid mail (airmail if international), or (iii) transmitted by telex or telefax to the parties as follows, as elected by the party giving such Notice: To the Borrower: SCOR U.S. Corporation 110 William Street New York, New York 10038 Attn: Treasurer To the Lender: SCOR S.A. - Immeuble SCOR One Avenue du President Wilson Cedex 39 92074 Paris La Defense 8, France Attn: Francois Reach (b) All Notices and other communications shall be effective on (i) the date of receipt if delivered personally, (ii) the date of receipt if transmitted by telex or telefax, whichever shall first occur. Any party may change its address for purposes hereof by Notice to the other party. 9 7.07 Headings The section and subsection headings used herein have been inserted for convenience of reference only and do not constitute matters to be considered in interpreting this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized signatories in New York on the date first written above. BORROWER: SCOR U.S. CORPORATION By: /s/ Jeffrey D. Cropsey Name: Jeffrey D. Cropsey Title: Senior VP & Chief Financial Officer LENDER: SCOR S.A. By: /s/ Francois Reach Name: Francois Reach Title: Deputy General Manager 10 Exhibit A NOTE U.S. $20,000,000 January 24, 1995 New York, New York FOR VALUE RECEIVED, SCOR U.S. CORPORATION, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of SCOR S.A. (the "Lender"), the unpaid principal amount of each Loan made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the Repayment Date relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States of America in Federal or other immediately available funds at One Avenue du President Wilson, Cedex 39, 92074 Paris La Defense 8, France or such other place as may be designated in writing from time to time by Lender. All Loans made by the Lender, the respective maturities thereof and all of the principal thereof shall be recorded by the Lender and, with respect to each such Loan then outstanding shall be endorsed by the Lender on the schedule attached hereto and made a part hereof; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is the Note referred to in the Credit Agreement dated as of January 24, 1995, between the Borrower and the Lender (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. SCOR U.S. CORPORATION By: /s/ Jeffrey D. Cropsey Title: Senior V.P. and Chief Financial Officer 11 EX-10 3 EX-10(W) Exhibit 10 (w) LOAN AGREEMENT U.S. $20,0000,000 SCOR U.S. CORPORATION Borrower SCOR S.A. Lender October 2, 1995 This Loan AGREEMENT, dated October 2, 1995, between SCOR U.S. Corporation, a Delaware Corporation, with its principal office at 2 World Trade Center, New York, N.Y., (the "Borrower"), and SCOR S.A. a company incorporated in France with its head office in PUTEAUX-Hauts de Seine - France, Avenue du President Wilson, (the "Lender"), sets forth the binding Agreement of the parties. SECTION 1. INTERPRETATIONS AND DEFINITIONS 1.01 Definitions The following terms, as used herein, shall have the following respective meanings: "Borrower" means SCOR U.S. Corporation. "Business Day" means any day, except a Saturday or Sunday or other day on which commercial banks in New York City are not open. "Control" (including, with its correlative meanings, "controlled by" and "under common control with") means, with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of the management or policies of such Person. "Debt" means at any date, without duplication, (I) all obligations for borrowed money, including, without limitation, reimbursement obligations related to letters of credit, and (ii) all obligations evidenced by bonds, debentures, notes or other similar instruments. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time, or both, would unless cured or waived become an Event of Default. "Dollars" and the sign "$" mean lawful money of the United States of America. "Interest Period" means the period commencing on the date of this Agreement and ending 3 months thereafter, with a new Interest Period commencing at the end of each such 3 month period and each succeeding 3 month period thereafter until the principal is repaid. "Lender" means SCOR S.A. "Loan" shall mean the aggregate principal amount advanced by the Lender as a loan to the Borrower hereunder or, where the context so requires, the amount thereof then outstanding. 2 "London Interbank Offered Rate" has the meaning set forth in Section 2.04 hereof. "Note" means the promissory note of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loan. "Notice shall mean notice delivered by a party to this Agreement to the other party hereto in the manner provided in Section 7.06 "Original Period" means the period commencing October 2, 1995 and ending October 2, 1996. "Renewal Period" means the one (1) year period commencing October 2nd 1996 and ending October 2, 1997. "Repayment Date" shall mean October 2, 1996 or October 2, 1997. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. SECTION 2. THE LOAN 2.01 Agreement to Lend The Lender hereby agrees, on the terms and conditions set forth in this Agreement, to lend to the Borrower and Borrower hereby agrees to borrow, the principal sum of $20,000,000 (the "Loan"). 2.02 Method of Borrowing On the date of this Agreement the Lender will make the proceeds of the Loan available to the Borrower by depositing the proceeds of such Loan in the account of the Borrower, at the Bank designated by the Borrower as of the date hereof by the time requested by the Borrower; provided, however, that such time is not earlier than 2:00 p.m. (New York time). 2.03 The Note The Loan shall be evidenced by a single Note in the form of Exhibit A hereto, payable to the order of the Lender. Such Note shall be dated as of the date hereof. 3 2.04 Interest The Loan shall bear interest on the outstanding principal amount for each day from the date the Loan is a made to the date on which it is repaid in full. Interest for the Loan during the applicable Interest Period shall be at a rate equal to the sum of the Margin plus the applicable three (3) month London Interbank Offered Rate. Such interest shall be payable for each Interest Period on the last day thereof; provided, however, if not less than two (2) days prior to the end of such Interest Period, Borrower has given Lender notice of its intent to include such interest in the outstanding principal balance of the Loan, then any interest on the Loan shall be added to the outstanding principal balance and shall bear interest at the applicable rate of interest. The "Margin" means 2/10 of 1%. The "London Interbank Offered Rate" applicable to any Interest Period means the rate at which 3 month deposits in Dollars are offered in the London Interbank market based on quotations at five major banks at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. 2.05 Repayment of the Loan The Borrower shall repay the Loan (together with accrued interest thereon) on the Repayment Date. 2.06 Optional Prepayment The Borrower may, at the end of an Interest Period and upon at least thirty (30) day's notice to the Lender, prepay the Loan without premium or penalty in whole or in part in amounts aggregating $1,000,000 or any multiple thereof by paying the principal amount being prepaid together with accrued interest thereon to the date of prepayment. 2.07 Loan Termination and Renewal The term of the Loan shall be a period of one (1) year commencing October 2, 1995 and ending October 2, 1996, subject to renewal for an additional term of one (1) year upon not less than sixty (60) days written notice prior to the expiration of the Original Period from Borrower to Lender of its intention to renew the Loan. In the event such notice is not given the Loan shall terminate. Upon termination of the Loan Borrower shall repay the Loan in accordance with Sections 2.05 and 2.08 hereof. 4 2.08 General Provisions as to Payments Except as permitted by Section 2.06 hereof payment of principal of, and interest on, the Loan shall be due on the Repayment Date. The Borrower shall make payments of principal of, and interest on, the Loan not later than 11:00 a.m. (New York City time) on the date when due by depositing the funds in the account of Lender at the New York City branch of a bank designated by Lender. Whenever any payment of principal of, or interest on, the Loan shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day unless as a result thereof it would fall in the next calendar month, in which case it shall be advanced to the next preceding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest shall be payable for such extended time. SECTION 3. CONDITIONS 3.01 Initial Loan. The obligation of the Lender to make the Loan hereunder shall be subject to the satisfaction by the Borrower of the following conditions: (a) receipt by the Lender of counterparts hereof signed by the Borrower; (b) receipt by the Lender of a duly executed Note dated on or before the date of the initial Loan complying with the provisions of Section 2.03 hereof. SECTION 4. PURPOSES OF LOAN 4.01 Use of Proceeds The Borrower will not use the Loan proceeds for any purposes other than repayment of its Debt to Banque Worms under an agreement dated October 4, 1990. SECTION 5. EVENTS OF DEFAULT 5.01 Events of Default Each of the following events and occurrences shall constitute an Event of Default under this Agreement: (a) Payment Default. The Borrower fails for any reason whatsoever to make payment of any amount under this Agreement on the date on which such amount 5 is due and payable whether by the terms hereof or by acceleration and continuance of such failure for five business days. Acceptance of partial payment shall not constitute a waiver of the failure to make payment in full. (b) Representation Default. If any one or more of the following events ("Events of Default") shall have occurred and be continuing: (i) the borrower shall fail to observe or perform any covenant or agreement contained in this Agreement other than that covered by Section 5.01 (a) for 30 days after written notice thereof has been given to the Borrower by the Lender; or (ii) the Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (iii) an involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect. SECTION 6. CONSEQUENCES OF DEFAULT 6.01 Consequences of Default If an Event of Default shall occur and be continuing beyond any grace period permitted thereof, the Lender may, by Notice to the Borrower, declare the outstanding amount of the Commitment together with accrued interest and other sums payable hereunder to be immediately due and payable without presentment, demand or notice of any kind other than the Notice specifically required by this Section, all other notice being expressly waived by the Borrower. If an Event of Default shall occur, such default may be waived by Notice from the Lender. 6 SECTION 7. LOAN ADMINISTRATION 7.01 Term of Agreement The term of this Agreement shall commence on October 2, 1995 and shall end upon payment in full of all principal, interest and other sums payable by the Borrower in respect of this Agreement, but in no event later than October 2, 1997. SECTION 7. MISCELLANEOUS 7.01 Legal Action and Governmental and Corporate Approvals Borrower and Lender each represent and warrant that they have taken all necessary legal and corporate action to authorize the execution and delivery of this Agreement, and there are not governmental approvals required on the part of either in connection with or for the performance by the Borrower or Lender of its obligations under this Agreement. This Agreement constitutes a valid and binding agreement of the parties. 7.02 Entire Agreement and Amendment This Agreement, together with the Note of even date constitute the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior expressions of intent or understanding with respect to this transaction. This Agreement may be amended, or the benefit of any provisions hereof may be waived, only by an instrument in writing executed by both parties hereto. 7.03 Cumulative Rights and Waiver The failure or delay of the Lender to require performance by the Borrower or to enforce its rights under any provision of this s Agreement shall not affect its right to require performance and to enforce its rights with respect to such provision unless and until such performance has been waived in writing by the Lender. Any waiver of an Event of Default shall be effective only in accordance with its terms and may be restricted or conditioned in any way. No waiver of any event of Default shall constitute a waiver of continuance or reoccurrence of such Event of Default or of any other Event of Default except as provided in such waiver. The rights granted to the Lender hereunder or under any other document or instrument delivered hereunder and any rights available to it at law or in equity shall be cumulative and may be exercised in part or in whole from time to time. 7.04 Assignment This Agreement and the Note shall be binding upon and shall be enforceable by the Borrower and the Lender and their respective successors, except that neither party has any right to assign or transfer its rights or obligations hereunder. 7 7.05 Governing Law This Agreement shall be governed by and interpreted in accordance with the Laws of the Republic of France. The Borrower irrevocably submits to the non-exclusive jurisdiction of the Tribunal de Commerce of Nanterre (Hauts de Seine) over any suit, action or proceedings arising out of or relating to this Agreement or the transactions contemplated hereby, and waives, to the fullest extent it may effectively do so under applicable law, any objection which it may have or hereafter have to the laying of the venue of any such suit, action, proceeding brought in any such court has been brought in any inconvenient forum. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that a final judgment in any such suit, action or proceeding may be enforced in the above courts and any other court of the jurisdiction of which the Borrower is or may be subject by a suit upon such judgment, provided that service of process is effected on the Borrower in the manner specified below or as otherwise permitted by law. The Borrower consents to process being served in any suit, action or proceeding of the nature referred to above by the mailing of a copy thereof by registered or certified airmail postage prepaid, return receipt requested, to its address, set forth in Section 7.06, or to any other address of which the Borrower shall have given written notice to the Lender. Nothing herein shall effect the right of the Lender to serve process in any other manner permitted by law, or limit the right of the Lender to bring proceedings against the Borrower in the court of any other jurisdiction. (a) Any Notice required or permitted to be given hereunder shall be in writing and shall be (I) personally delivered, (ii) transmitted by postage prepaid mail (airmail if international), or (iii) transmitted by telex or telefax to the parties as follows, as elected by the party giving such Notice; To the Borrower: SCOR U.S. Corporation 2 World Trade Center New York, New York 10048 Att: Treasurer To the Lender: SCOR S.A. - Immueble SCOR One Avenue du President Wilson Cedex 39 92074 Paris La Defense 8, France Att: Francois Reach 8 (b) All Notices and other communications shall be effective on (I) the date of receipt if delivered personally, (ii) the date of receipt if transmitted by telex of telefax, whichever shall first occur. Any party may change its address for purposes hereof by Notice to the other party. 7.07 Headings The section and subsection headings used herein have been inserted for convenience of reference only and do not constitute matters to be considered in interpreting this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized signatories in New York on the date first written above. BORROWER: SCOR U.S. CORPORATION By: /s/ Jeffrey D. Cropsey Name: Jeffrey D. Cropsey Title: Senior V.P. & Chief Financial Officer LENDER: SCOR S.A. By: /s/ Francois Reach Name: Francois Reach Title: Deputy General Manager 9 EXHIBIT A NOTE U.S. $20,000,000 October 2, 1995 New York, New York FOR VALUE RECEIVED, SCOR U.S. CORPORATION, a Delaware corporation (the "Borrower") hereby unconditionally promises to pay to the order of SCOR S.A. (the "Lender"), the unpaid principal amount of the Loan made by the Lender to the Borrower pursuant to the Loan Agreement referred to below on the Repayment Date. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Loan Agreement. All such payments of principal and interest shall be made in lawful money of the United States of America in Federal or other immediately available funds at One Avenue du President Wilson, Cedex 39, 92074 Paris La Defense 8, France or such other place as may be designated in writing from time to time by Lender. This note is the Note referred to in the Loan Agreement dated as of October 2, 1995, between the Borrower and the Lender (as the same may be amended from time to time, the "Loan Agreement"). Terms defined in the Loan Agreement are used herein with the same meanings. Reference is made to the Loan Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. SCOR U.S. CORPORATION By: Jeffrey D. Cropsey Title: Senior V.P. and Chief Financial Officer 10 EX-11 4 EX-11
Exhibit 11 SCOR U.S. CORPORATION COMPUTATION OF EARNINGS PER SHARE (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Primary: Net income (loss) applicable to common stock $ 4,826 $ 2,447 $ 14,053 $ (11,368) ============= ============= ============= ============= Average number of common shares outstanding 18,167 18,168 18,171 18,146 Add: Assumed exercise of stock options 205 44 84 -0- ------------- ------------- ------------- ------------ Common and common equivalent shares outstanding 18,372 18,212 18,255 18,146 ============= ============= ============= ============= Net income (loss) per share assuming excercise of common stock equivalents $ 0.26 $ 0.13 $ 0.77 $ (0.63) ============= ============= ============= ============ Fully diluted: Net income (loss) applicable to common stock $ 5,700 $ 2,447 $ 16,216 $ (11,368) ============= ============= ============= ============= Average number of common shares outstanding 18,167 18,168 18,171 18,146 Add: Assumed exercise of stock options 302 44 153 -0- Assumed exercise of convertible bonds 3,044 -0- 2,993 -0- ------------- ------------ ------------- ------------ Common and common equivalent shares outstanding assuming full dilution 21,513 18,212 21,317 18,146 ============= ============= ============= ============= Net income (loss) per share assuming full dilution $ 0.26 $ 0.13 $ 0.76 $ (0.63) ============= ============= ============= ============
EX-15 5 EX-15 EXHIBIT 15 SCOR U.S. Corporation New York, New York Gentlemen: We acknowledge our awareness that our report dated October 24, 1995 related to our review of interim financial information of SCOR U.S. Corporation for the three month and nine month periods ended September 30, 1995 and included in the quarterly report on Form 10-Q is incorporated by reference in the Company's Registration Statements on Form S-8 (Registration Nos. 33-12604, 33-44577, and 33-46753). Pursuant to Rule 436(c) under the Securities Act, such report is not considered a part of a Registration Statement prepared or certified by an accountant within the meaning of Section 7 and 11 of the Act. Very truly yours, KPMG Peat Marwick LLP October 24, 1995 EX-27 6 EX-27
7 1,000 9-MOS DEC-31-1994 SEP-30-1995 0 22,155 563,515 204 0 0 710,042 13,318 19,939 22,471 1,181,172 392,194 90,034 27,000 18,571 121,589 5,509 0 0 271,877 1,181,172 182,340 31,751 713 0 121,952 46,896 21,823 17,227 3,726 13,501 0 552 0 14,053 0.77 0.76 382,115 117,768 4,184 20,895 90,979 392,194 4,184 Reserve for losses and loss expenses at September 30, 1995 is presented net of reinsurance recoverable on unpaid losses of $226,544. Unearned premiums at September 30, 1995 is presented net of ceded unearned premiums of $9,921. Reserve for losses and loss expenses at December 31, 1994 is presented net of recoverable on unpaid losses of $222,672.
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