-----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, S4/go4g/xgw482HyfQ4vb8/MF34Jkd6Tk8qmxpvxTed2BkcD3VBhRk4FaiDKUg9M Hp+BykVXZWKEJ4T6fTAUyg== 0001047469-98-012154.txt : 19980330 0001047469-98-012154.hdr.sgml : 19980330 ACCESSION NUMBER: 0001047469-98-012154 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19980327 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCC INSURANCE HOLDINGS INC/DE/ CENTRAL INDEX KEY: 0000888919 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 760336636 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 001-13790 FILM NUMBER: 98576818 BUSINESS ADDRESS: STREET 1: 13403 NORTHWEST FRWY CITY: HOUSTON STATE: TX ZIP: 77040-6094 BUSINESS PHONE: 7136907300 10-Q/A 1 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended September 30, 1997 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from _______ to __________ Commission file number 0-20766 --------- HCC Insurance Holdings, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 76-0336636 -------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 13403 Northwest Freeway, Houston, Texas 77040-6094 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (713) 690-7300 ---------------------------------------------------- (Registrant's telephone number, including area code) 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 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 ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. On November 7, 1997, there were 46,127,457 shares of Common Stock, $1 par value issued and outstanding. HCC INSURANCE HOLDINGS, INC. INDEX PAGE NO. -------- Part I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Balance Sheets September 30, 1997 and December 31, 1996................. 3 Condensed Consolidated Statements of Earnings Nine months Ended September 30, 1997 and Nine months Ended September 30, 1996..................... 4 Condensed Consolidated Statements of Earnings Three Months Ended September 30, 1997 and Three Months Ended September 30, 1996.................... 5 Condensed Consolidated Statements of Changes in Shareholders' Equity Nine months Ended September 30, 1997 and Year Ended December 31, 1996............................. 6 Condensed Consolidated Statements of Cash Flows Nine months Ended September 30, 1997 and Nine months Ended September 30, 1996..................... 8 Notes to Condensed Consolidated Financial Statements....... 9 Item 2. Management's Discussion and Analysis.......................16 Part II. OTHER INFORMATION..................................................19 2 HCC Insurance Holdings, Inc. and Subsidiaries --------- Condensed Consolidated Balance Sheets (Unaudited) -------- September 30, 1997 December 31, 1996 ------------------ ----------------- ASSETS Investments available for sale: Fixed income securities, at market (cost: 1997 $379,451,000, 1996 $371,844,000) $ 390,199,000 $ 377,555,000 Marketable equity securities, at market (cost: 1997 $7,606,000, 1996 $12,661,000) 7,311,000 12,477,000 ------------------ ----------------- Total investments 397,510,000 390,032,000 Cash and short-term investments: Cash 4,827,000 9,171,000 Short-term investments, at cost, which approximates market 132,629,000 78,693,000 ------------------ ----------------- Total cash and short-term investments 137,456,000 87,864,000 Restricted cash and cash investments 53,213,000 44,363,000 Reinsurance recoverables 184,893,000 132,328,000 Premium, claims and other receivables 227,782,000 167,168,000 Ceded unearned premium 91,102,000 71,758,000 Deferred policy acquisition costs 24,727,000 24,809,000 Property and equipment, net 17,918,000 16,665,000 Deferred income tax 8,999,000 12,636,000 Other assets, net 41,034,000 16,476,000 ------------------ ----------------- TOTAL ASSETS $ 1,184,634,000 $ 964,099,000 ------------------ ----------------- ------------------ ----------------- LIABILITIES Loss and loss adjustment expense payable $ 267,488 000 $ 229,049,000 Reinsurance balances payable 66,503,000 45,449,000 Unearned premium 162,366,000 156,268,000 Deferred ceding commissions 22,046,000 16,901,000 Premium and claims payable 214,037,000 123,118,000 Notes payable 82,084,000 72,917,000 Accounts payable and accrued liabilities 17,459,000 23,984,000 ------------------ ----------------- Total liabilities 831,983,000 667,686,000 SHAREHOLDERS' EQUITY Common Stock, $1.00 par value; 100,000,000 shares authorized, (issued: 1997 46,007,058 shares; 1996 47,416,643 shares) 46,007,000 47,417,000 Additional paid-in capital 153,974,000 139,971,000 Retained earnings 146,032,000 162,163,000 Unrealized investment gain, net 6,834,000 3,623,000 Foreign currency translation adjustment (196,000) (91,000) Treasury stock (1996 3,301,741 shares) - (56,670,000) ------------------ ----------------- Total shareholders' equity 352,651,000 296,413,000 ------------------ ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,184,634,000 $ 964,099,000 ------------------ ----------------- ------------------ -----------------
See Notes to Condensed Consolidated Financial Statements. 3 HCC Insurance Holdings, Inc. and Subsidiaries -------- Condensed Consolidated Statements of Earnings (Unaudited) -------- For the nine months ended September 30, 1997 1996 --------------- --------------- REVENUE Net earned premium $ 124,431,000 $ 125,636,000 Fee and commission income 50,145,000 39,274,000 Net investment income 20,424,000 17,326,000 Computer products and services 5,374,000 6,756,000 Net realized investment gain (loss) (258,000) 6,654,000 Gain on sale of subsidiary - 3,307,000 --------------- --------------- Total revenue 200,116,000 198,953,000 EXPENSE Loss and loss adjustment expense 70,537,000 83,812,000 Operating expense: Policy acquisition costs 38,241,000 34,416,000 Compensation expense 30,488,000 28,157,000 Other operating expense 22,323,000 19,176,000 Merger expense 7,582,000 26,160,000 Ceding commissions (32,032,000) (25,158,000) --------------- --------------- Net operating expense 66,602,000 82,751,000 Interest expense 4,021,000 3,775,000 --------------- --------------- Total expense 141,160,000 170,338,000 --------------- --------------- Earnings before income tax provision 58,956,000 28,615,000 Income tax provision 19,825,000 4,379,000 --------------- --------------- NET EARNINGS $ 39,131,000 $ 24,236,000 --------------- --------------- --------------- --------------- EARNINGS PER SHARE DATA: Primary: Earnings per share $ 0.84 $ 0.55 --------------- --------------- --------------- --------------- Weighted average shares outstanding 46,471,000 44,350,000 --------------- --------------- --------------- --------------- Fully diluted: Earnings per share $ 0.84 $ 0.54 --------------- --------------- --------------- --------------- Weighted average shares outstanding 46,649,000 44,553,000 --------------- --------------- --------------- --------------- Cash dividends declared, per share $ 0.09 $ 0.04 --------------- --------------- --------------- ---------------
See Notes to Condensed Consolidated Financial Statements. 4 HCC Insurance Holdings, Inc. and Subsidiaries -------- Condensed Consolidated Statements of Earnings (Unaudited) -------- For the three months ended September 30, 1997 1996 --------------- --------------- REVENUE Net earned premium $ 31,622,000 $ 41,394,000 Fee and commission income 17,946,000 13,143,000 Net investment income 7,695,000 5,892,000 Computer products and services 1,773,000 2,658,000 Net realized investment gain 36,000 1,447,000 Gain on sale of subsidiary - 3,307,000 --------------- --------------- Total revenue 59,072,000 67,841,000 EXPENSE Loss and loss adjustment expense 14,467,000 30,155,000 Operating expense: Policy acquisition costs 12,153,000 11,286,000 Compensation expense 10,335,000 8,906,000 Other operating expense 6,748,000 6,622,000 Merger expense 305,000 - Ceding commissions (11,671,000) (8,812,000) --------------- --------------- Net operating expense 17,870,000 18,002,000 Interest expense 1,211,000 1,111,000 --------------- --------------- Total expense 33,548,000 49,268,000 --------------- --------------- Earnings before income tax provision 25,524,000 18,573,000 Income tax provision 8,406,000 5,394,000 --------------- --------------- NET EARNINGS $ 17,118,000 $ 13,179,000 --------------- --------------- --------------- --------------- EARNINGS PER SHARE DATA: Primary: Earnings per share $ 0.36 $ 0.30 --------------- --------------- --------------- --------------- Weighted average shares outstanding 47,122,000 44,356,000 --------------- --------------- --------------- --------------- Fully diluted: Earnings per share $ 0.36 $ 0.30 --------------- --------------- --------------- --------------- Weighted average shares outstanding 47,201,000 44,419,000 --------------- --------------- --------------- --------------- Cash dividends declared, per share $ 0.03 $ 0.02 --------------- --------------- --------------- ---------------
See Notes to Condensed Consolidated Financial Statements. 5 HCC Insurance Holdings, Inc. and Subsidiaries -------- Condensed Consolidated Statements of Changes in Shareholders' Equity For the nine months ended September 30, 1997 and for the year ended December 31, 1996 (Unaudited) -------- Foreign Additional Unrealized currency Common paid-in Retained investment translation Stock capital earnings gain (loss) adjustment ----------- ------------ ------------ ----------- ----------- BALANCE AS OF DECEMBER 31, 1995 $18,460,000 $138,084,000 $140,341,000 $ 9,296,000 $(186,000) 27,688,869 shares of Common Stock issued for 150% stock dividend 27,689,000 (27,689,000) - - - 132,108 shares of Common Stock issued for exercise of options, including tax benefit of $366,000 132,000 837,000 - - - Net earnings - - 38,530,000 - - Cash dividends declared, $0.06 per share - - (2,104,000) - - Compensatory grant of pooled company stock prior to merger - 23,682,000 - - - Dividends to shareholders of pooled companies prior to merger - - (7,705,000) - - Capitalize undistributed earnings of pooled company upon conversion from S Corporation - 3,840,000 (3,840,000) - - 1,136,400 shares of Common Stock issued for NASRA combination 1,136,000 - (1,452,000) - - Repurchase of 520,000 shares of Common Stock by pooled company prior to merger - - - - - Unrealized investment loss on fixed income securities, net of deferred tax benefit of $857,000 - - - (1,594,000) - Unrealized investment loss on marketable equity securities, net of deferred tax benefit of $2,144,000 - - - (4,079,000) - Other - 1,217,000 (1,607,000) - 95,000 ----------- ------------ ------------ ----------- --------- BALANCE AS OF DECEMBER 31, 1996 $47,417,000 $139,971,000 $162,163,000 $ 3,623,000 $ (91,000) Total Treasury shareholders' stock equity ------------- ------------ BALANCE AS OF DECEMBER 31, 1995 $(50,570,000) $255,425,000 27,688,869 shares of Common Stock issued for 150% stock dividend - - 132,108 shares of Common Stock issued for exercise of options, including tax benefit of $366,000 - 969,000 Net earnings - 38,530,000 Cash dividends declared, $0.06 per share - (2,104,000) Compensatory grant of pooled company stock prior to merger - 23,682,000 Dividends to shareholders of pooled companies prior to merger - (7,705,000) Capitalize undistributed earnings of pooled company upon conversion from S Corporation - - 1,136,400 shares of Common Stock issued for NASRA combination - (316,000) Repurchase of 520,000 shares of Common Stock by pooled company prior to merger (7,909,000) (7,909,000) Unrealized investment loss on fixed income securities, net of deferred tax benefit of $857,000 - (1,594,000) Unrealized investment loss on marketable equity securities, net of deferred tax benefit of $2,144,000 - (4,079,000) Other 1,809,000 1,514,000 ------------ ------------ BALANCE AS OF DECEMBER 31, 1996 $(56,670,000) $296,413,000
See Notes to Condensed Consolidated Financial Statements. 6 HCC Insurance Holdings, Inc. and Subsidiaries -------- Condensed Consolidated Statements of Changes in Shareholders' Equity For the nine months ended September 30, 1997 and for the year ended December 31, 1996 (Unaudited) (continued) -------- Foreign Additional Unrealized currency Common paid-in Retained investment translation Stock capital earnings gain (loss) adjustment ----------- ------------ ------------ ----------- ----------- BALANCE AS OF DECEMBER 31, 1996 $47,417,000 $139,971,000 $162,163,000 $ 3,623,000 $ (91,000) 575,027 shares of Common Stock issued for exercise of options, including tax benefit of $1,474,000 575,000 7,628,000 - - - 382,024 shares of Common Stock issued for purchased companies 382,000 9,805,000 - - - 950,000 shares of Common Stock issued for combinations with pooled companies 950,000 - (1,507,000) - - Net earnings - - 39,131,000 - - Cash dividends declared, $0.09 per share - - (3,833,000) - - Repurchase of 14,895 shares of Common Stock by pooled company prior to combination - - - - - Retirement of 3,316,636 shares of treasury stock (3,317,000) (3,430,000) (50,247,000) - - Unrealized investment gain on fixed income securities, net of deferred tax charge of $1,883,000 - - - 3,268,000 - Unrealized investment loss on marketable equity securities, net of deferred tax benefit of $54,000 - - - (57,000) - Other - - 325,000 - (105,000) ----------- ------------ ------------ ----------- --------- BALANCE AS OF SEPTEMBER 30, 1997 $46,007,000 $153,974,000 $146,032,000 $ 6,834,000 $(196,000) ----------- ------------ ------------ ----------- --------- ----------- ------------ ------------ ----------- --------- Total Treasury shareholders' stock equity ------------- ------------ BALANCE AS OF DECEMBER 31, 1996 $(56,670,000) $296,413,000 575,027 shares of Common Stock issued for exercise of options, including tax benefit of $1,474,000 - 8,203,000 382,024 shares of Common Stock issued for purchased companies - 10,187,000 950,000 shares of Common Stock issued for combinations with pooled companies - (557,000) Net earnings - 39,131,000 Cash dividends declared, $0.09 per share - (3,833,000) Repurchase of 14,895 shares of Common Stock by pooled company prior to combination (324,000) (324,000) Retirement of 3,316,636 shares of treasury stock 56,994,000 - Unrealized investment gain on fixed income securities, net of deferred tax charge of $1,883,000 - 3,268,000 Unrealized investment loss on marketable equity securities, net of deferred tax benefit of $54,000 - (57,000) Other - 220,000 ------------ ------------ BALANCE AS OF SEPTEMBER 30, 1997 - $352,651,000 ------------ ------------ ------------ ------------
See Notes to Condensed Consolidated Financial Statements. 7 HCC Insurance Holdings, Inc. and Subsidiaries -------- Condensed Consolidated Statements of Cash Flows (Unaudited) -------- For the nine months ended September 30, 1997 1996 ------------ ------------ Cash flows from operating activities: Net earnings $ 39,131,000 $ 24,236,000 Adjustments to reconcile net earnings to net cash provided by operating activities: Change in reinsurance recoverables (52,565,000) (20,061,000) Change in premium, claims and other receivables (60,614,000) (16,407,000) Change in ceded unearned premium (19,344,000) 3,403,000 Change in deferred income tax, net of tax effect of unrealized gain or loss......... 1,922,000 (9,935,000) Change in loss and loss adjustment expense payable 38,439,000 26,512,000 Change in reinsurance balances payable 21,054,000 (24,552,000) Change in unearned premium 6,098,000 9,103,000 Change in premium and claims payable, net of restricted cash 82,069,000 20,370,000 Net realized investment (gain) loss 258,000 (9,961,000) Non cash compensation expense - 23,975,000 Depreciation and amortization expense 3,586,000 3,023,000 Other, net (3,016,000) (9,184,000) ------------ ------------ Cash provided by operating activities 57,018,000 20,522,000 Cash flows from investing activities: Sales of fixed income securities 27,090,000 21,312,000 Maturity or call of fixed income securities 15,024,000 16,481,000 Sales of equity securities 17,631,000 31,357,000 Proceeds from sale of subsidiary - 13,957,000 Cash paid for companies acquired (12,948,000) - Cost of investments acquired (64,417,000) (72,096,000) Purchases of property and equipment (3,682,000) (1,750,000) ------------ ------------ Cash provided (used) by investing activities (21,302,000) 9,261,000 Cash flows from financing activities: Proceeds from notes payable 15,298,000 29,000,000 Sale of Common Stock 8,203,000 798,000 Payments on notes payable (6,131,000) (28,985,000) Dividends paid (3,170,000) (7,406,000) Repurchase Common Stock (324,000) (7,478,000) ------------ ------------ Cash provided (used) by financing activities 13,876,000 (14,071,000) ------------ ------------ Net change in cash and short-term investments 49,592,000 15,712,000 Cash and short-term investments at beginning of period 87,864,000 78,437,000 ------------ ------------ CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $137,456,000 $ 94,149,000 ------------ ------------ ------------ ------------ Supplemental cash flow information: Interest paid $ 5,076,000 $ 4,146,000 ------------ ------------ ------------ ------------ Income tax paid $ 16,635,000 $ 12,703,000 ------------ ------------ ------------ ------------
See Notes to Condensed Consolidated Financial Statements. 8 HCC Insurance Holdings, Inc. and Subsidiaries -------- Notes to Condensed Consolidated Financial Statements (Unaudited) (1) GENERAL INFORMATION HCC Insurance Holdings, Inc. ("the Company" or "HCCH") and its subsidiaries include domestic and foreign property and casualty insurance companies and managing general underwriters, surplus lines insurance brokers and wholesale insurance and reinsurance brokers. The Company, through its subsidiaries, provides specialized property, casualty, accident and health insurance, underwritten on both a direct and reinsurance basis, and insurance agency services. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles and include all adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim periods. All adjustments made to the interim periods are of a normal recurring nature. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. The condensed consolidated financial statements for periods reported should be read in conjunction with the annual consolidated financial statements and notes related thereto. The condensed consolidated balance sheet as of December 31, 1996, and the statement of shareholders' equity for the year then ended were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. The combination with AVEMCO Corporation ("AVEMCO") was accounted for as a pooling-of-interests. The Company's condensed consolidated financial statements have been restated to include the accounts and operations of AVEMCO for all periods presented (see prior period adjustment below and note 3). INCOME TAX For the nine months ended September 30, 1997 and 1996, the income tax provision has been calculated based on an estimated effective tax rate for each of the fiscal years. The difference between the Company's effective tax rate and the Federal statutory rate is primarily the result of nontaxable municipal bond interest included in pretax income. In addition, during 1996, prior to its merger with the Company, LDG Management Company Incorporated ("LDG") was an S Corporation and thus exempt from Federal income tax until May 21, 1996. 9 HCC Insurance Holdings, Inc. and Subsidiaries -------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (1) GENERAL INFORMATION, CONTINUED EARNINGS PER SHARE Earnings per share are based on the weighted average number of common and common equivalent shares outstanding during the period divided into net earnings. Weighted average shares outstanding have been adjusted to include shares and options issued in connection with the combination of AVEMCO. Outstanding common stock options, when dilutive, are considered to be common stock equivalents for the purpose of this calculation. The treasury stock method is used to calculate common stock equivalents due to options. PRIOR PERIOD ADJUSTMENTS OF AVEMCO The 1996 and prior financial statements of AVEMCO, which was acquired in 1997 in a transaction accounted for as a pooling-of-interests (see note 3), have been restated prior to their inclusion in the Company's historical consolidated financial statements to reflect certain prior period adjustments discovered in 1997. The adjustments relate to a restatement of the method of accounting for certain short-duration insurance contracts and to the correction of accounting errors. The adjustments had the following effects with respect to amounts previously reported in AVEMCO's 1996 and prior consolidated financial statements. For the three For the nine months ended months ended September 30, 1996 September 30, 1996 ------------------ ------------------ Earnings before income tax provision as previously reported $3,059,000 $12,888,000 Effects of adjustments (747,000) (3,159,000) ---------- ----------- EARNINGS BEFORE INCOME TAX PROVISION, AS RESTATED $2,312,000 $ 9,729,000 ---------- ----------- ---------- ----------- Net earnings as previously reported $2,419,000 $ 9,808,000 Effects of adjustments (570,000) (2,306,000) ---------- ----------- NET EARNINGS, AS RESTATED $1,849,000 $ 7,502,000 ---------- ----------- ---------- -----------
AVEMCO's retained earnings as of December 31, 1995 was decreased by $1,793,000, net of tax effect of $489,000, as a result of the adjustments. 10 HCC Insurance Holdings, Inc. and Subsidiaries -------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (1) GENERAL INFORMATION, CONTINUED PRIOR PERIOD ADJUSTMENT, CONTINUED The prior period adjustments to AVEMCO's financial statements affected the unaudited previously reported amounts for the Company as shown below: For the three For the nine months ended months ended September 30, 1996 September 30, 1996 ------------------ ------------------ Earnings before income tax provision as previously reported $19,320,000 $31,774,000 Effects of adjustments (747,000) (3,159,000) ----------- ----------- Earnings before income tax provision as restated $18,573,000 $28,615,000 ----------- ----------- ----------- ----------- Net earnings as previously reported $13,749,000 $26,542,000 Effects of adjustments (570,000) (2,306,000) ----------- ----------- Net earnings, as restated $13,179,000 $24,236,000 ----------- ----------- ----------- ----------- Primary earnings per share as previously reported $ 0.31 $ 0.60 Effects of adjustments (0.01) (0.05) ----------- ----------- Primary earnings per share as restated $ 0.30 $ 0.55 ----------- ----------- ----------- ----------- Fully diluted earnings per share as previously reported $ 0.31 $ 0.60 Effects of adjustments (0.01) (0.06) ----------- ----------- Fully diluted earnings per share as restated $ 0.30 $ 0.54 ----------- ----------- ----------- -----------
EFFECTS ON RECENT ACCOUNTING PRONOUNCEMENTS In February, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share". SFAS No. 128 is effective for fiscal periods ending after December 15, 1997. Early application is not permitted. SFAS No. 128 modifies the denominator to be used in the earnings per share calculations, and requires additional disclosures of the calculations. The statement will have no effect on the Company's net earnings, shareholders' equity or cash flows and an insignificant effect on earnings per share. In June, 1997, the Financial Accounting Standards Board issued SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information". Both statements are effective for fiscal years beginning after December 15, 1997. These SFAS's require that additional information be included in a complete set of financial statements, but will have no effect on the Company's net earnings, shareholders' equity or cash flows. 11 HCC Insurance Holdings, Inc. and Subsidiaries -------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (1) GENERAL INFORMATION, CONTINUED RECLASSIFICATIONS Certain amounts in the 1996 condensed consolidated financial statements have been reclassified to conform to the 1997 presentation. Such reclassifications had no effect on the Company's net earnings, shareholders' equity, or cash flows. (2) REINSURANCE In the normal course of business the Company's insurance company subsidiaries cede a substantial portion of their premium to unrelated domestic and foreign reinsurers through quota share, surplus, excess of loss and facultative reinsurance agreements. Although the ceding of reinsurance does not discharge the primary insurer from liability to its policyholder, the subsidiaries participate in such agreements for the purpose of limiting their loss exposure and diversifying their business. Substantially all of the reinsurance assumed by the Company's insurance company subsidiaries was underwritten directly by the Company but issued by other unrelated companies in order to satisfy licensing or other requirements. The following tables represent the effect of such reinsurance transactions on net premium and loss and loss adjustment expense: Loss and Loss Written Earned Adjustment Premium Premium Expense ------------- ------------- -------------- For the nine months ended September 30, 1997: Direct business $ 136,769,000 $ 131,323,000 $ 90,419,000 Reinsurance assumed 130,703,000 132,408,000 126,165,000 Reinsurance ceded (159,034,000) (139,300,000) (146,047,000) ------------- ------------- -------------- NET AMOUNTS $ 108,438,000 $ 124,431,000 $ 70,537,000 ------------- ------------- -------------- ------------- ------------- -------------- For the nine months ended September 30, 1996: Direct business $ 138,310,000 $ 140,543,000 $ 92,939,000 Reinsurance assumed 116,327,000 105,065,000 78,132,000 Reinsurance ceded (115,336,000) (119,972,000) (87,259,000) ------------- ------------- -------------- NET AMOUNTS $ 139,301,000 $ 125,636,000 $ 83,812,000 ------------- ------------- -------------- ------------- ------------- -------------- For the three months ended September 30, 1997: Direct business $ 44,149,000 $ 44,764,000 $ 40,857,000 Reinsurance assumed 38,123,000 44,283,000 35,441,000 Reinsurance ceded (70,583,000) (57,425,000) (61,831,000) ------------- ------------- -------------- NET AMOUNTS $ 11,689,000 $ 31,622,000 $ 14,467,000 ------------- ------------- -------------- ------------- ------------- --------------
12 HCC Insurance Holdings, Inc. and Subsidiaries -------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (2) REINSURANCE, CONTINUED Loss and Loss Written Earned Adjustment Premium Premium Expense ------------ ------------ ------------- For the three months ended September 30, 1996: Direct business $ 41,113,000 $ 47,325,000 $ 33,946,000 Reinsurance assumed 35,957,000 36,670,000 23,413,000 Reinsurance ceded (37,999,000) (42,601,000) (27,204,000) ------------ ------------ ------------ NET AMOUNTS $ 39,071,000 $ 41,394,000 $ 30,155,000 ------------ ------------ ------------ ------------ ------------ ------------
The table below represents the approximate composition of reinsurance recoverables in the accompanying condensed consolidated balance sheets: September 30, 1997 December 31, 1996 ------------------ ----------------- Reinsurance recoverable on paid losses $ 28,516,000 $ 22,977,000 Reinsurance recoverable on outstanding losses 145,943,000 102,350,000 Reinsurance recoverable on IBNR 12,939,000 9,416,000 Reserve for uncollectible reinsurance (2,505,000) (2,415,000) ------------ ------------ TOTAL REINSURANCE RECOVERABLES $184,893,000 $132,328,000 ------------ ------------ ------------ ------------
The insurance company subsidiaries require reinsurers not authorized by their respective states of domicile to collateralize their reinsurance obligations to the Company with letters of credit or cash deposits. At September 30, 1997, the Company held letters of credit and cash deposits in the amounts of $85.7 million and $8.2 million, respectively, to collateralize certain reinsurance balances. The Company has established a reserve of $2.5 million as of September 30, 1997, to reduce the effects of any recoverable problems. In order to minimize its exposure to reinsurance credit risk, the Company evaluates the financial condition of its reinsurers and places its reinsurance with a diverse group of financially sound companies. (3) ACQUISITIONS TRM On January 24, 1997, the Company acquired all of the occupational accident business of the TRM International, Inc. group of companies in exchange for 266,667 shares of the Company's Common Stock and $6.55 million in cash. This acquisition has been accounted for as a purchase and results of operations of the business acquired has been included in the consolidated statements of earnings beginning in January 1997. Cost in excess of net assets acquired (goodwill) of approximately $13.5 million was recorded from this acquisition. Goodwill is being amortized over twenty years. The results of operations of TRM for the periods prior to the acquisition are immaterial to the Company's consolidated results of operations. 13 HCC Insurance Holdings, Inc. and Subsidiaries -------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (3) ACQUISITIONS, CONTINUED INTERWORLD On April 30, 1997, the Company acquired all of the outstanding shares of Interworld Corporation in exchange for 725,000 shares of the Company's Common Stock. This business combination has been accounted for as a pooling-of-interests. However, the Company's consolidated financial statements have not been restated due to immateriality. AVEMCO On June 17, 1997, the Company issued 8,511,625 shares of its Common Stock and 604,575 options to purchase its Common Stock to acquire all of the outstanding common stock and options of AVEMCO. This business combination has been accounted for as a pooling-of-interests and, accordingly, the Company's condensed consolidated financial statements have been restated to include the accounts and operations of AVEMCO for all periods presented. Separate total revenue and net earnings amounts of the merged entities are presented for the periods prior to the merger in the following table: For the six For the nine months ended months ended June 30, 1997 September 30, 1996 ------------- ------------------ Total revenue: HCCH $ 81,598,000 $110,822,000 AVEMCO 59,446,000 88,131,000 ------------ ------------ TOTAL REVENUE $141,044,000 $198,953,000 ------------ ------------ ------------ ------------ Net earnings: HCCH $ 21,295,000 $ 16,734,000 AVEMCO 718,000 7,502,000 ------------ ------------ NET EARNINGS $ 22,013,000 $ 24,236,000 ------------ ------------ ------------ ------------
AVEMCO's net earnings for the six months ended June 30, 1997, include merger expenses of approximately $3.5 million. 14 HCC Insurance Holdings, Inc. and Subsidiaries -------- Notes to Condensed Consolidated Financial Statements (Unaudited) (Continued) (3) ACQUISITIONS, CONTINUED MGU On June 26, 1997, the Company acquired all of the outstanding shares of Managed Group Underwriting, Inc. in exchange for 98,003 shares of the Company's Common Stock and a cash payment of $3.6 million. This acquisition has been accounted for as a purchase and the results of operations has been included in the consolidated statements of earnings beginning in July, 1997. Cost in excess of net assets acquired (goodwill) of approximately $6.2 million was recorded from this acquisition. Goodwill is being amortized over twenty years. The results of operations of MGU for the periods prior to the acquisition are immaterial to the Company's consolidated results of operations. CONTINENTAL On July 31, 1997, the Company acquired all of the outstanding shares of Continental Aviation Underwriters, Inc. in exchange for 17,354 shares of the Company's Common Stock and a cash payment of $2.8 million. This acquisition has been accounted for as a purchase and the results of operations have been included in the consolidated statements of earnings beginning in August, 1997. Cost in excess of net assets acquired (goodwill) of approximately $3.4 million was recorded from this acquisition. Goodwill is being amortized over twenty years. The results of operations of Continental for the periods prior to the acquisition are immaterial to the Company's consolidated results of operations. SOUTHERN On August 8, 1997, the Company acquired all of the outstanding shares of Southern Aviation Insurance Underwriters, Inc. and Aviation Claims Administrators, Inc. in exchange for 225,000 shares of the Company's Common Stock. These business combinations have been accounted for as poolings-of-interests. However, the Company's consolidated financial statements have not been restated due to immateriality. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS The Company completed the acquisition of Interworld Corporation on April 30, 1997 (pooling-of-interests), of AVEMCO Corporation on June 17, 1997 (pooling-of-interests), of Managed Group Underwriting, Inc. on June 26, 1997 (purchase), of Continental Aviation Underwriters, Inc. on July 31, 1997 (purchase) and of Southern Aviation Insurance Underwriters, Inc. and Aviation Claims Administrators, Inc. on August 8, 1997 (poolings-of-interests). Amounts in Management's Discussion and Analysis for 1996 have been restated for prior period adjustments to AVEMCO's financial statements as discussed in note 1 to the notes to condensed consolidated financial statements. THREE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS THREE MONTHS ENDED SEPTEMBER 30, 1996. Gross written premium increased 7% to $82.3 million for the third quarter of 1997 from $77.1 million for the same period in 1996. Aviation and accident and health premium increased during the quarter offset by a reduction in property and marine business as competition increases. Net written premium for the third quarter of 1997 decreased to $11.7 million from $39.1 million for the same period in 1996. The implementation of a significant reinsurance program covering AVEMCO's business caused a decline of $36 million in net written premium, of which $17 million was due to a portfolio transfer of inforce policies. However, accident and health net written premium increased during the third quarter. Net earned premium decreased to $31.6 million for the third quarter of 1997 compared to $41.4 million for the same period in 1996 reflecting increased reinsurance, particularly the new reinsurance program at AVEMCO. Fee and commission income increased 37% to $17.9 million for the third quarter of 1997, compared to $13.1 million for the same period in 1996 due to the increased agency activity in light of recent acquisitions. The Company expects fee and commission income to continue to increase due to the effects of recent acquisitions and internal growth. Net investment income increased 31% to $7.7 million for the third quarter of 1997 compared to $5.9 million for the same period in 1996 reflecting increased cash flow and, therefore, a higher level of investments. Net realized investment losses from sales of equity securities were $104,000 during the third quarter of 1997, compared to gains of $1.6 million for the same period in 1996. During 1996, the Company systematically liquidated the majority of its equity portfolio. Net realized investment gains from disposition of fixed income securities were $140,000 during the third quarter of 1997, compared to losses of $112,000 for the same period in 1996. During the third quarter of 1996, AVEMCO consummated the sale of National Assurance Underwriters, Inc., which was a subsidiary of AVEMCO prior to the pooling-of-interests combination. This sale generated an after tax gain of $2.2 million or $0.05 per share. Loss and LAE decreased during the third quarter of 1997, to $14.5 million, reflecting unusually good underwriting results and the effects of increased ceded reinsurance, particularly the new reinsurance program covering AVEMCO's business. Other operating expense increased 2% to $6.7 million for the third quarter of 1997. These expenses reflect increased expenditures required to meet the overall growth in business. Currency conversion losses amounted to $107,000 for the third quarter of 1997, compared to losses of $30,000 during the same period in 1996. Net earnings increased 30% to $17.1 million for the third quarter of 1997 from $13.2 for the same period in 1996. This increase was principally a result of higher underwriting profits and increased fee and commission income. Earnings per share increased 20% to $0.36 for the third quarter of 1997 from $0.30 for the third quarter of 1996. This reflects the increase in net earnings, offset by a 6% increase in weighted average shares outstanding due to shares issued for acquisitions and the exercise of options. 16 The Company's insurance company subsidiaries' GAAP combined ratio was 62.7% for the third quarter of 1997, as compared to 93.5% for the same period in 1996, principally due to reduced loss and LAE. The Company's book value per share was $7.67 as of September 30, 1997, up from $7.26 as of June 30, 1997. Earnings added $0.36 per share to book value during the third quarter of 1997. NINE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS NINE MONTHS ENDED SEPTEMBER 30, 1996. Gross written premium increased 5% to $267.5 million for the first nine months of 1997 from $254.6 million for the same period in 1996, due primarily to increased aviation and accident and health premiums partially offset by decreased property and marine premium. Net written premium for the first nine months of 1997 decreased to $108.4 million from $139.3 million for the same period in 1996, due to the implementation of a significant reinsurance program covering AVEMCO's business. Net earned premium decreased to $124.4 million for the first nine months of 1997 compared to $125.6 million for the same period in 1996 reflecting increased reinsurance, particularly the new reinsurance program at AVEMCO. Fee and commission income increased 28% to $50.1 million for the first nine months of 1997, compared to $39.3 million for the same period in 1996 due to the increased agency activity. The Company expects fee and commission income to continue to increase due to the effects of recent acquisitions and internal growth. Net investment income increased 18% to $20.4 million for the first nine months of 1997 compared to $17.3 million for the same period in 1996 reflecting increased cash flow and, therefore, a higher level of investments. Net realized investment losses from sales of equity securities were $154,000 during the first nine months of 1997, compared to gains of $6.8 million for the same period in 1996. During 1996, the Company systematically liquidated the majority of its equity portfolio. Net realized investment losses from disposition of fixed income securities were $104,000 during the first nine months of 1997, compared to losses of $176,000 for the same period in 1996. During the third quarter of 1996, AVEMCO consummated the sale of National Assurance Underwriters, Inc., which was a subsidiary of AVEMCO prior to the pooling-of-interests combination. This sale generated an after tax gain of $2.2 million or $0.05 per share. Loss and LAE decreased during the first nine months of 1997, to $70.5 million, as the Company's GAAP loss ratio decreased to 56.7% from 66.7%, due to the decrease experienced during the third quarter of 1997. Other operating expense increased 16% to $22.3 million for the first nine months of 1997. These expenses reflect increased expenditures required to meet the overall growth in business. Currency conversion losses amounted to $649,000 for the first nine months of 1997, compared to losses of $203,000 for the same period in 1996. Merger expense represents non-recurring items incurred to consummate the acquisitions and mergers which are accounted for as poolings-of-interests. The amounts incurred during the first nine months of 1996 were due to the combination with LDG and included a compensatory stock grant of $24.0 million to certain key LDG employees immediately prior to the merger. The amounts incurred during 1997 were due to the combinations with AVEMCO Corporation, Interworld Corporation and Southern Aviation Insurance Underwriters, Inc. Income tax expense was $19.8 million for the first nine months of 1997, compared to $4.4 million during the first nine months of 1996. The 1996 amount included a deferred tax benefit of $9.6 million which was recorded in connection with the compensatory stock grant to certain key LDG employees. Most of the other merger expenses are not deductible for income tax purposes. Also, as an S Corporation, LDG was exempt from Federal income taxes through May 21, 1996. Had LDG been subject to Federal income tax during the period January 1, 1996 to May 21, 1996, additional income tax expense of $2.3 million would have been recorded for the nine months ended September 30, 1996. Net earnings increased 61% to $39.1 million for the first nine months of 1997 from $24.2 million for the same period in 1996. This increase was principally a result of higher underwriting profits and increased fee and commission income during 1997, and higher merger expenses during 1996, which included the non-recurring compensation charge. 17 Earnings per share increased 53% to $0.84 for the first nine months of 1997 from $0.55 for the first nine months of 1996. This reflects a 61% increase in net earnings, partially offset by a 5% increase in weighted average shares outstanding due to shares issued for acquisitions and the exercise of options. The Company's insurance company subsidiaries' GAAP combined ratio was 76.9% for the first nine months of 1997, as compared to 88.7% for the same period in 1996. The Company's book value per share was $7.67 as of September 30, 1997, up from $6.72 as of December 31, 1996. Earnings added $0.84 per share to book value during the first nine months of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's consolidated cash and investment portfolio increased $57.1 million or 12% since December 31, 1996, and totaled $535.0 million as of September 30, 1997, of which $137.5 million was cash and short-term investments. Total assets increased to $1.2 billion as of September 30, 1997, from $964.1 million as of December 31, 1996. The increase in premium and claims receivables and payables is due to the growth in agency operations during the year. The increase in reinsurance balances is primarily due to the new reinsurance program at AVEMCO. AVEMCO's line of credit has been extended through December 31, 1997. As the year 2000 approaches, the Company recognizes the need to ensure its operations will not be adversely impacted by year 2000 computer software failures. The Company is presently addressing this issue to ensure the availability and integrity of its financial systems and the reliability of its operational systems. The Company has established processes for evaluating and managing the risks and costs associated with this problem. The Company has and will continue to make certain investments in its software systems and applications to ensure the Company's systems are year 2000 compliant. THIS REPORT ON FORM 10-Q/A (THE "REPORT") CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE INTENDED TO BE COVERED BY THE SAFE HARBORS CREATED THEREBY. INVESTORS ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS NECESSARILY INVOLVE RISKS AND UNCERTAINTY, INCLUDING, WITHOUT LIMITATION, THE RISK OF A SIGNIFICANT NATURAL DISASTER, THE INABILITY OF THE COMPANY TO REINSURE CERTAIN RISKS, THE ADEQUACY OF ITS LOSS RESERVES, THE FINANCIAL VIABILITY OF REINSURERS, THE EXPANSION OR CONTRACTION IN ITS VARIOUS LINES OF BUSINESS, THE IMPACT OF INFLATION, CHANGING LICENSING REQUIREMENTS AND REGULATIONS IN THE UNITED STATES AND IN FOREIGN COUNTRIES, THE ABILITY OF THE COMPANY TO INTEGRATE ITS RECENTLY ACQUIRED BUSINESSES, THE EFFECT OF PENDING OR FUTURE ACQUISITIONS AS WELL AS ACQUISITIONS WHICH HAVE RECENTLY BEEN CONSUMMATED, GENERAL MARKET CONDITIONS, COMPETITION, LICENSING AND PRICING. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED OR INCORPORATED BY REFERENCE IN THIS REPORT THAT ADDRESS ACTIVITIES, EVENTS OR DEVELOPMENTS THAT THE COMPANY EXPECTS OR ANTICIPATES WILL OR MAY OCCUR IN THE FUTURE, INCLUDING, WITHOUT LIMITATION, SUCH THINGS AS FUTURE CAPITAL EXPENDITURES (INCLUDING THE AMOUNT AND NATURE THEREOF), BUSINESS STRATEGY AND MEASURES TO IMPLEMENT SUCH STRATEGY, COMPETITIVE STRENGTHS, GOALS, EXPANSION AND GROWTH OF THE COMPANY'S BUSINESSES AND OPERATIONS, PLANS, REFERENCES TO FUTURE SUCCESS, AS WELL AS OTHER STATEMENTS WHICH INCLUDES WORDS SUCH AS "ANTICIPATE," "BELIEVE," "PLAN," "ESTIMATE," "EXPECT," AND "INTEND" AND OTHER SIMILAR EXPRESSIONS, CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD OVER TIME PROVE TO BE INACCURATE AND THEREFORE, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT WILL THEMSELVES PROVE TO BE ACCURATE. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN, THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS OF THE COMPANY WILL BE ACHIEVED. 18 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits: The exhibits listed on the accompanying Index to Exhibits on the following page are filed as part of this report. (b) Reports on Form 8-K: On September 26, 1997, the Company filed a report on Form 8-K reporting that the Company would employ John N. Molbeck as the Company's President. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HCC Insurance Holdings, Inc. ------------------------------------------- (Registrant) March 26, 1998 /s/ Frank J. Bramanti - ------------------ ------------------------------------------- (Date) Frank J. Bramanti, Executive Vice President March 26, 1998 /s/ Edward H. Ellis, Jr. - ------------------ ------------------------------------------- (Date) Edward H. Ellis, Jr., Senior Vice President and Chief Financial Officer 19 INDEX TO EXHIBITS 11 - Statements Regarding Computation of Earnings Per Share. 27 - EDGAR Financial Data Schedule - Restated September 30, 1997. 27.1 - EDGAR Financial Data Schedule - Restated September 30, 1996. 20 EX-11 2 EXHIBIT 11 EXHIBIT 11 HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) ======================================================================================================== For the nine months ended September 30, 1997 1996 - -------------------------------------------------------------------------------------------------------- Net earnings $ 39,131,000 $ 24,236,000 ---------------- --------------- ---------------- --------------- Primary: Weighted average Common Stock and common stock equivalents outstanding 46,471,000 44,350,000 ---------------- --------------- ---------------- --------------- Earnings per share $ 0.84 $ 0.55 ---------------- --------------- ---------------- --------------- Reconciliation of number of shares outstanding: Common Stock outstanding at period end 46,007,000 42,970,000 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,312,000 1,212,000 Net changes in Common Stock for issuance (848,000) 168,000 ---------------- --------------- Weighted average Common Stock and common stock equivalents outstanding 46,471,000 44,350,000 ---------------- --------------- ---------------- --------------- Fully Diluted: Weighted average Common Stock and common stock equivalents outstanding 46,649,000 44,553,000 ---------------- --------------- ---------------- --------------- Earnings per share $ 0.84 $ 0.54 ---------------- --------------- ---------------- --------------- Reconciliation of number of shares outstanding: Common Stock outstanding at period end 46,007,000 42,970,000 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,291,000 1,398,000 Net changes in Common Stock for issuance (649,000) 185,000 ---------------- --------------- Weighted average Common Stock and common stock equivalents outstanding 46,649,000 44,553,000 ---------------- --------------- ---------------- --------------- Note: Share and option amounts have been restated for all periods presented to include the shares and options of AVEMCO Corporation prior to its combination with the Company (see notes 1 and 3 to the condensed consolidated financial statements).
EXHIBIT 11 HCC INSURANCE HOLDINGS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) ======================================================================================================== For the three months ended September 30, 1997 1996 - -------------------------------------------------------------------------------------------------------- Net earnings $ 17,118,000 $ 13,179,000 ---------------- --------------- ---------------- --------------- Primary: Weighted average Common Stock and common stock equivalents outstanding 47,122,000 44,356,000 ---------------- --------------- ---------------- --------------- Earnings per share $ 0.36 $ 0.30 ---------------- --------------- ---------------- --------------- Reconciliation of number of shares outstanding: Common Stock outstanding at period end 46,007,000 42,970,000 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,292,000 1,370,000 Net changes in Common Stock for issuance (177,000) 16,000 ---------------- --------------- Weighted average Common Stock and common stock equivalents outstanding 47,122,000 44,356,000 ---------------- --------------- ---------------- --------------- Fully Diluted: Weighted average Common Stock and common stock equivalents outstanding 47,201,000 44,419,000 ---------------- --------------- ---------------- --------------- Earnings per share $ 0.36 $ 0.30 ---------------- --------------- ---------------- --------------- Reconciliation of number of shares outstanding: Common Stock outstanding at period end 46,007,000 42,970,000 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 1,292,000 1,431,000 Net changes in Common Stock for issuance (98,000) 18,000 ---------------- --------------- Weighted average Common Stock and common stock equivalents outstanding 47,201,000 44,419,000 ---------------- --------------- ---------------- --------------- Note: Share and option amounts have been restated for all periods presented to include the shares and options of AVEMCO Corporation prior to its combination with the Company (see notes 1 and 3 to the condensed consolidated financial statements).
EX-27 3 EXHIBIT 27
7 THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S 10-Q/A FOR THE QUARTER ENDED SEPTEMBER 30, 1997. AMOUNTS HAVE BEEN RESTATED DUE TO CERTAIN PRIOR PERIOD ADJUSTMENTS (SEE NOTE 1) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 390,199,000 0 0 7,311,000 0 0 530,139,000 4,827,000 184,893,000 2,681,000 1,184,634,000 267,488,000 162,366,000 0 0 82,084,000 0 0 46,007,000 306,644,000 1,184,634,000 124,431,000 20,424,000 (258,000) 55,519,000 70,537,000 6,209,000 60,393,000 58,956,000 19,825,000 39,131,000 0 0 0 39,131,000 0.84 0.84 117,283,000 0 0 0 0 108,606,000 0
EX-27.1 4 EXHIBIT 27.1
7 THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL STATEMENTS OF THE COMPANY'S FORM 10-Q/A FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE AMOUNTS SHOWN BELOW HAVE BEEN STATED DUE TO THE MERGER WITH AVEMCO ON SEPTEMBER 17, 1997, WHICH WAS ACCOUNTED FOR AS A POOLING-OF-INTERESTS (SEE NOTE 1). 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 354,491,000 0 0 19,702,000 0 0 454,658,000 13,684,000 137,761,000 7,415,00000 965,434,000 227,268,000 161,079,000 0 0 71,643,000 0 0 46,245,000 236,236,000 965,434,000 125,636,000 17,326,000 6,654,000 49,337,000 83,812,000 9,258,000 73,493,000 28,615,000 4,379,000 24,236,000 0 0 0 24,236,000 0.55 0.54 99,259,000 0 0 0 0 112,168,000 0
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