-----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, AyCbs3hbyTAkHquZGLEvL8z7NgvAy2fjfc5FhhcV1W3guQ8sGwPUYaeZ+bYuD39+ SAmGmfmMA2vnodgtgfSAFA== 0000940180-97-001027.txt : 19971113 0000940180-97-001027.hdr.sgml : 19971113 ACCESSION NUMBER: 0000940180-97-001027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TERRA NOVA BERMUDA HOLDING LTD CENTRAL INDEX KEY: 0000935937 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13834 FILM NUMBER: 97716123 BUSINESS ADDRESS: STREET 1: RICHMOND HOUSE 2ND FLOOR STREET 2: 12 PAR-LA-VILLE ROAD CITY: HAMILTON HM 11 BERMU STATE: D0 BUSINESS PHONE: 4112927731 MAIL ADDRESS: STREET 1: RICHMOND HOUSE 2ND FLOOR STREET 2: 12 PAR-LA-VILLE ROAD CITY: HAMILTON HM 11 BERMU STATE: D0 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission File number 1-13832 TERRA NOVA (BERMUDA) HOLDINGS LTD. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) BERMUDA N/A ------------------------------- ------------------ (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANISATION) IDENTIFICATION NO) RICHMOND HOUSE 12 PAR LA VILLE STREET HAMILTON HM08 BERMUDA ---------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) TELEPHONE: (441) 292 7731 ---------------------------------------- (REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE) N/A (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT) 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 --- --- The number of registrant's ordinary shares ($5.80 par value) outstanding as of November 14, 1997 was 25,881,802 (includes 469,250 ordinary shares owned by trusts on behalf of the Company). TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES INDEX TO FORM 10-Q PART I - FINANCIAL INFORMATION - ------------------------------ Page No. -------- Item 1. Financial Statements: Consolidated Balance Sheets September 30, 1997 (Unaudited) and December 31, 1996 1 Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, 1997 and 1996 Nine Months Ended September 30, 1997 and 1996 2 Consolidated Statements of Shareholders' Equity (Unaudited) Nine Months Ended September 30, 1997 and 1996 3 Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 1997 and 1996 4 Notes to the Interim Consolidated Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 Exhibit Index 18 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
AT SEPTEMBER 30, AT DECEMBER 31, 1997 1996 ----------------- ---------------- (Unaudited) ASSETS Investments available for sale and cash, at fair value: Fixed maturities: Bonds (amortized cost $1,149,875 and $1,095,126, respectively) $1,181,058 $1,119,531 Common stocks (cost $110,701 and $92,877, respectively) 153,010 120,411 Cash and cash equivalents 90,237 50,544 ----------------- ---------------- Total investments and cash 1,424,305 1,290,486 Accrued investment income 28,630 24,351 Insurance balances receivable 55,382 31,943 Reinsurance recoverable on paid losses 38,238 43,745 Reinsurance recoverable on unpaid losses 222,230 254,129 Accrued premium income 214,666 121,900 Prepaid reinsurance premiums 33,820 8,261 Deferred acquisition costs 85,676 45,279 Other assets 65,089 47,253 ----------------- ---------------- Total assets $2,168,036 $1,867,347 ================= ================ LIABILITIES Unpaid losses and loss adjustment expenses $1,080,084 $1,078,108 Unearned premiums 316,964 173,120 Insurance balances payable 8,182 18,340 Income taxes payable 32,666 21,311 Deferred income taxes 10,725 8,720 Long-term debt 175,000 100,000 Net liabilities of Aviation business in run-off 43,501 43,286 Other liabilities 41,382 25,703 ----------------- ---------------- Total liabilities $1,708,504 $1,468,588 ----------------- ---------------- SHAREHOLDERS' EQUITY Common shares 150,114 149,933 Stock held in Trust (9,500) -- Deferred equity compensation 2,464 -- Additional capital 111,568 111,544 Unrealized appreciation of investments, net of income tax 53,426 36,271 Cumulative translation adjustments 58 190 Retained earnings 151,402 100,821 ----------------- ---------------- Total shareholders' equity 459,532 398,759 ================= ================ Total liabilities and shareholders' equity $2,168,036 $1,867,347 ================= ================
See accompanying notes to the interim consolidated financial statements. 1 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES CONSOLIDATED STAtEMENTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ----------------------- 1997 1996 1997 1996 --------- --------- ----------- ----------- REVENUES Net premiums written $90,458 $50,653 $368,778 $275,837 Decrease (increase) in unearned premiums 11,399 17,220 (92,537) (65,711) ------- ------- -------- -------- Net premiums earned 101,857 67,873 276,241 210,126 Net investment income 21,461 19,839 62,524 58,665 Realized net capital gains (losses) on sales of investments 4,221 (1,122) 11,733 11,060 Foreign exchange gains (losses) (585) 35 210 (600) Agency income 3,455 2,251 10,019 6,486 ------- ------- ------- ------- Total revenues 130,409 88,876 360,727 285,737 ------- ------- ------- ------- EXPENSES Losses and loss adjustment expenses, net 61,875 42,230 178,147 137,031 Acquisition costs 34,104 20,621 83,868 61,604 Other operating expenses 3,500 2,094 10,714 6,042 Interest expense 3,297 2,688 8,672 8,063 Agency expense 2,805 2,050 8,044 5,886 Other expenses 1,441 1,682 4,195 4,344 ------- ------- ------- ------- Total expenses 107,022 71,365 293,640 222,970 ------- ------- ------- ------- Income from operations before income taxes and minority interests 23,387 17,511 67,087 62,767 Income tax expense (4,378) (3,062) (13,430) (13,204) Minority interests in income of consolidated subsidiaries -- -- -- (985) ------- ------- ------- ------- Net income $19,009 $14,449 $53,657 $48,578 ======= ======= ======= ======= Earnings per common share and common share equivalent $0.74 $0.55 $ 2.06 $ 2.13 Earnings per common share and common share equivalent -- assuming full dilution $0.74 $0.55 $2.06 $2.11 Weighted average number of common shares and common share equivalents outstanding (in thousands) 25,799 26,207 26,071 22,714 Weighted average number of common shares and common share equivalents outstanding (in thousands) 25,826 26,222 26,104 23,204 -- assuming full dilution
See accompanying notes to the interim consolidated financial statements. 2 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 1997 1996 -------- -------- Common shares: Balance, beginning of period $149,933 $ 89,282 Shares issued in initial public offering -- 42,195 Shares issued in exchange for minority interests in subsidiaries -- 11,826 Shares issued for conversion of convertible redeemable preferred shares -- 5,740 Other shares issued during the period 181 732 -------- -------- Balance, end of period $150,114 $149,775 ======== ======== Stock held in Trust: Balance, beginning of period $ -- $ -- Purchased during the period (10,020) -- Options exercised during the period 520 -- -------- -------- Balance, end of period $ (9,500) $ -- ======== ======== Deferred equity compensation: Balance, beginning of period $ -- $ -- Stock option compensation expense 2,833 -- Options exercised during the period (369) -- -------- -------- Balance, end of period $ 2,464 $ -- ======== ======== Additional capital: Balance, beginning of period $111,544 $ 18,203 Options exercised during the period 24 -- Surplus arising from initial public offering -- 71,758 Surplus arising from shares issued in exchange for minority interests in subsidiaries -- 8,655 Surplus arising from conversion of convertible redeemable preferred shares -- 12,108 Other capital contributed during the period -- 820 -------- -------- Balance, end of period $111,568 $111,544 ======== ======== Unrealized appreciation of investments: Balance, beginning of period $ 36,271 $ 49,972 Changes during the period 21,553 (32,451) Deferred income tax benefit (charge) (4,398) 7,388 -------- -------- Balance, end of period $ 53,426 $ 24,909 ======== ======== Cumulative translation adjustments: Balance, beginning of period $ 190 $ -- Changes during the period (132) -- -------- -------- Balance, end of period $ 58 $ -- ======== ======== Retaining earnings: Balance, beginning of period $100,821 $ 39,551 Net income 53,657 48,578 Dividends payable on ordinary shares (3,076) (1,030) Dividends payable on convertible redeemable preferred shares -- (1,088) -------- -------- Balance, end of period $151,402 $ 86,011 ======== ======== -------- -------- Total shareholders' equity $459,532 $372,239 ======== ========
See accompanying notes to the interim consolidated financial statements. 3 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED) (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 53,657 $ 49,563 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Amortization of goodwill 854 828 Stock option compensation expense 2,403 -- Realized capital gains (11,733) (11,060) Change in unpaid losses and loss adjustment expenses (33,809) (92,130) Change in unearned premiums and prepaid reinsurance 95,769 65,644 Change in insurance balances payable (20,686) (13,233) Change in insurance balances receivable, accrued premium income and reinsurance recoverable on paid and unpaid losses (41,495) 22,689 Change in deferred acquisition costs (35,771) (19,251) Change in accrued investment income (2,064) (628) Change in current and deferred income taxes 9,747 22,078 Change in other assets and liabilities, net 8,631 (7,058) Change in net liabilities of Aviation business in run-off 215 881 -------- -------- Total adjustments (27,939) (31,240) ======== ======== Net cash provided by operating activities 25,718 18,323 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds of fixed maturities matured 50,582 38,283 Proceeds of fixed maturities sold 311,423 254,891 Proceeds of equity securities sold 132,966 138,828 Purchase of fixed maturities (361,341) (409,517) Purchase of equity securities (138,159) (144,048) Payment consideration for Corifrance (42,225) -- Payment consideration for Octavian -- (9,393) Acquisition expenses (203) (644) ======== ======== Net cash used in investing activities (46,957) (131,600) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from public debt offering 74,866 -- Payment of fees for financing public debt offering (538) -- Net proceeds from initial public offering -- 113,953 Redemption of preferred shares -- (16,035) Preference dividends paid to stockholders -- (499) Ordinary dividends paid to stockholders (3,076) (1,030) Repurchase of common shares (10,020) -- Stock options exercised 356 -- -------- -------- Net cash provided by financing activities 61,588 96,389 -------- -------- Change in cash and cash equivalents 40,349 (16,888) Exchange on foreign currency cash balances (656) 299 Cash and cash equivalents at beginning of period 50,544 88,725 ======== ======== Cash and cash equivalents at end of period $ 90,237 $ 72,136 ======== ======== Supplemental disclosure of cash flow information Income taxes paid (refunded) $ 324 $(10,610) ======== ======== Interest paid $ 10,750 $ 10,750 ======== ======== See accompanying notes to the interim consolidated financial statements.
4 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying interim consolidated financial statements present information in relation to Terra Nova (Bermuda) Holdings Ltd. ("The Company") and have been prepared on the basis of accounting principles generally accepted in the United States of America. All material intercompany accounts and transactions among the companies included in the interim consolidated financial statements have been eliminated. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position, results of operations and cash flows of the company. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Certain prior year amounts have been reclassified to conform with the current year presentation. These financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 1996 and for each of the three years for the period ended December 31, 1996, and related notes thereto included in the Company's annual report as filed with the Securities and Exchange Commission. 2. CONTINGENCIES The Company is regularly involved, directly or indirectly, in litigation in the ordinary course of conducting its insurance and reinsurance business. In a number of cases, plaintiffs seek to establish coverage for liability under environmental protection laws. While the nature and extent of insurance and reinsurance coverage for environmental liability has widened since 1980, in the judgement of management, none of these cases, individually or collectively, is likely to result in judgements for amounts which, net of losses and loss adjustment expense liabilities previously established and reinsurance recoverables which management believes are probable of realization, would have a material effect on the financial position of the Company, although there is no assurance that such losses will not materially affect the Company's results of operations for any period. 3. RECENTLY ISSUED ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share ("EPS") ("FAS 128"). FAS 128 specifies the computation presentation and disclosure requirements for EPS and is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Earlier application is not permitted. FAS 128 is designed to improve the EPS information provided in financial statements by simplifying the existing computational guidelines, revising the disclosure requirements, and increasing the comparability of EPS data on an international basis. Some of the changes made to simplify the EPS computations include: (a) eliminating the presentation of primary EPS and replacing it with basic EPS, with the principal difference being that common stock equivalents (CSES) are not considered in computing basic EPS, (b) eliminating the modified treasury stock method and the three percent materiality provision, and (c) revising the contingent share provisions and the supplemental EPS data requirements. FAS 128 requires dual presentation of basic and diluted EPS on the face of the income statements for all entities with complex capital structures regardless of whether basic and diluted EPS are the same; it also requires a reconciliation of the numerator and denominator used in computing basic and diluted EPS. The impact of FAS 128 has not yet been determined. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 129, Disclosure of Information about Capital Structure ("FAS 129"). FAS 129 is effective for financial statements for periods ending after December 15, 1997. 5 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FAS 129 requires disclosure about an entity's capital structure including a brief discussion of rights and privileges for securities outstanding, dividend and liquidation preferences, participation rights, exercise prices or rates and pertinent dates, significant terms of contracts to issue additional shares and other similar items. The impact of FAS 129 has not yet been determined. 4. REINSURANCE CEDED In the ordinary course of business, Terra Nova Insurance Company Limited ("Terra Nova"), Terra Nova (Bermuda) Insurance Company Ltd. ("Terra Nova (Bermuda)") and Terra Nova Capital Limited ("Terra Nova Capital") cede reinsurance to other insurance companies. Ceded reinsurance arrangements provide greater diversification of business and limit the net loss potential arising from large risks. Reinsurance is effected under reinsurance treaties and by negotiation on individual risks. Terra Nova, Terra Nova (Bermuda) and Terra Nova Capital cede reinsurance to and assume reinsurance from Lloyd's of London ("Lloyd's") syndicates. As of September 30, 1997 the aggregate exposure in respect of reinsurance ceded to Lloyd's syndicates in respect of continuing operations, including estimated reinsurance recoveries in respect of losses incurred but not reported, was approximately $91 million, the majority of which was ceded into Equitas with effect from September 4, 1996.
(A) NET PREMIUMS WRITTEN ARE COMPRISED OF THE FOLLOWING: NINE MONTHS ENDED SEPTEMBER 30, --------------------------- 1997 1996 ----------- ----------- (DOLLARS IN THOUSANDS) Direct business $209,573 $95,540 Reinsurance assumed 222,552 228,137 Reinsurance ceded (63,347) (47,840) -------- -------- Net premiums written $368,778 $275,837 ======== ======== (B) NET PREMIUMS EARNED ARE COMPRISED OF THE FOLLOWING: NINE MONTHS ENDED SEPTEMBER 30, ------------------------- 1997 1996 --------- --------- (DOLLARS IN THOUSANDS) Direct business $123,218 $69,630 Reinsurance assumed 192,637 177,686 Reinsurance ceded (39,614) (37,190) -------- ------- Net premiums earned $276,241 $210,126 ======== ======== (C) LOSSES AND LOSS ADJUSTMENT EXPENSES, NET, ARE COMPRISED OF THE FOLLOWING: NINE MONTHS ENDED SEPTEMBER 30, ----------------------- 1997 1996 ----------- -------- (DOLLARS IN THOUSANDS) Losses and loss adjustment expenses $200,817 $150,249 Reinsurance ceded (22,670) (13,218) -------- -------- Losses and loss adjustment expenses, net $178,147 $137,031 ======== ========
6 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5. EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT Primary earnings per share are computed using the weighted average number of common shares and common share equivalents outstanding during the period. Common share equivalents consist of shares issuable upon exercise of share options. In accordance with the SEC Staff Accounting Bulletin Topic 4-D, for purposes of the earnings per share calculations reflected in these interim consolidated financial statements, all shares of common stock issued and stock options granted prior to the date of the Registration Statement filed with the SEC on March 19, 1996 have been deemed to be outstanding since January 1, 1995. 6. LONG TERM DEBT On August 26, 1997, UK Holdings completed an issue of $75 million 7.2% Senior Notes due 2007, fully and unconditionally guaranteed by Bermuda Holdings. The net proceeds were used to finance the acquisition of Corifrance on September 8, 1997 and to support the Company's operations in the UK. 7. CORIFRANCE ACQUISITION On September 8 1997, the Company purchased all of the issued and outstanding shares of Corifrance, a French reinsurance company. The acquisition was made by a French subsidiary of Terra Nova, the Group's UK operating insurance company. Corifrance transacts business internationally, although mainly outside of the United States. The goodwill in the Company's balance sheet includes the goodwill arising on the acquisition of Corifrance, which has been calculated using the purchase method of accounting and is being amortized on a straight line basis over a twenty five year period. 8. SUMMARIZED FINANCIAL INFORMATION FOR TERRA NOVA INSURANCE (UK) HOLDINGS PLC ("UK HOLDINGS") Summarized consolidated balance sheet information as at September 30, 1997 and December 31, 1996 and summarized consolidated statement of operations information for the nine months ended September 30, 1997 and 1996 relating to UK Holdings is set out below. Separate financial statements of UK Holdings are not presented because they would not be material to holders of UK Holdings 10.75% Senior Notes due 2005 or to holders of UK Holdings 7.2% Senior Notes due 2007.
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------------ ----------------- (DOLLARS IN THOUSANDS) Investments and cash $933,513 $872,171 Reinsurance recoverable on unpaid losses 384,804 387,733 Accrued premium income 200,486 108,012 Other assets 288,027 193,212 ---------- ---------- Total assets $1,806,830 $1,561,128 ========== ========== Unpaid losses and loss adjustment expenses $1,012,304 $1,011,015 Uncarried premiums 296,320 157,515 Net liabilities of Aviation business in run-off 37,455 36,913 Long-term debt 175,000 100,000 Other liabilities 106,442 83,440 ---------- ---------- Total liabilities 1,627,521 1,388,883 ---------- ---------- Total shareholders' equity 179,309 172,245 ---------- ---------- Total liabilities and shareholders' equity $1,806,830 $1,561,128 ========== ==========
7 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------- 1997 1996 ---------- ---------- (DOLLARS IN THOUSANDS) Net premiums earned $239,724 $184,860 Net investment income 41,214 39,697 Realized investment gains 11,350 10,759 Foreign exchange gains (losses) 300 (680) Agency income 10,019 6,486 ---------- ---------- Total revenues 302,607 241,122 ---------- ---------- Underwriting costs and expenses 243,848 186,391 Interest expense 8,672 8,063 Agency expenses 8,044 5,886 ---------- ---------- Income from operations before income taxes and minority interests 42,043 40,782 ---------- ---------- Net income $28,612 $27,071 ========== ==========
9. DIVIDENDS DECLARED On February 10, 1997 the Company declared a dividend of $0.02 per share payable on March 27, 1997, to shareholders of record as of March 6, 1997. On May 5, 1997 the Company declared a dividend of $0.05 per share payable on June 27, 1997, to shareholders of record as of June 6, 1997. On August 4, 1997 the Company declared a dividend of $0.05 per share payable on September 26, 1997, to shareholders of record as of September 5, 1997. On November 4, 1997 the Company declared a dividend of $0.05 per share payable on December 29, 1997, to shareholders of record as of December 5, 1997. 10. STOCK REPURCHASE On May 5, 1997 the Company's Board of Directors authorised the repurchase of up to $20 million of the Company's Common Stock. As at November 14, 1997 the Company had repurchased 500,000 shares at a total cost of $10,020,000. The stock is to be held in trust for the satisfaction of employees' and directors' long-term compensation plans or for any other corporate purposes. 8 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) THE COMPANY The following discussion addresses the principal factors affecting the earnings and financial condition of the Company. All references herein to the "Company" are to Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings") and all of its direct and indirect subsidiaries, including Terra Nova Insurance (UK) Holdings plc ("UK Holdings"), Terra Nova Insurance Company Limited ("Terra Nova"), Terra Nova (Bermuda) Insurance Company Ltd. ("Terra Nova (Bermuda)"), Octavian Syndicate Management Limited ("Octavian"), Terra Nova Capital Limited ("Terra Nova Capital") and Corifrance. This discussion should be read in conjunction with the audited consolidated financial statements of Bermuda Holdings as of December 31, 1996 and for each of the three years during the period ended December 31, 1996 and related notes thereto included in the Company's Annual Report as filed with the Securities and Exchange Commission. MIX OF BUSINESS The Company's mix of business and combined ratios for the three and nine months ended september 30, 1997 and 1996 are set forth in the following table:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------- ------------------------------------- 1997 1996 1997 1996 AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- ------ ------- (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) Gross Premiums Written Non-marine property $ 44,846 44.7% $ 31,832 52.0% $198,996 46.0% $176,472 54.5% Non-marine casualty $ 22,148 22.1 $ 11,432 18.7% 97,028 22.5 51,201 15.8 Marine & Aviation 33,372 33.2 17,993 29.4 136,101 31.5 94,776 29.3 Life (1) -- -- (73) (0.1) -- -- 1,228 0.4 -------- ------- -------- ----- -------- ----- -------- ----- Total $100,366 100.0% $ 61,184 100.0% $432,125 100.0% $323,677 100.0% ======== ======= ======== ===== ======== ===== ======== ===== Net Premiums Written Non-marine property $ 38,214 42.2% $ 24,313 47.9% $174,702 47.4% $147,978 53.6% Non-marine casualty 20,542 22.8 11,578 22.9 88,120 23.9 46,204 16.8 Marine & Aviation 31,702 35.0 14,775 29.2 105,956 28.7 80,427 29.2 Life (1) -- -- (13) -- -- -- 1,228 0.4 -------- ------- -------- ----- -------- ----- -------- ----- Total $ 90,458 100.0% $ 50,653 100.0% $368,778 100.0% $275,837 100.0% ======== ======= ======== ===== ======== ===== ======== ===== Net Premiums Earned Non-marine property $ 47,737 46.9% $ 32,477 47.9% $130,690 47.3% $ 94,720 45.1% Non-marine casualty 24,308 23.8 14,408 21.2 65,805 23.8 40,032 19.0 Marine & Aviation 29,812 29.3 21,001 30.9 79,746 28.9 74,146 35.3 Life (1) -- (13) -- -- -- 1,228 0.6 -------- ------- -------- ----- -------- ----- -------- ----- Total $101,857 100.0% $ 67,873 100.0% $276,241 100.0% $210,126 100.0% ======== ======= ======== ===== ======== ===== ======== ===== Losses and Loss Adjustment Expense Ratios Non-marine property 61.3% 57.4% 63.3% 60.1% Non-marine casualty 63.6 78.1 75.3 81.7 Marine & Aviation 57.5 58.6 57.5 62.6 Life (1) NA NM NA 76.6 ------- ----- ----- ----- Total 60.7% 62.2% 64.5% 65.2% ======= ===== ===== ===== Underwriting Expense Ratios Non-marine property 35.3% 31.0% 33.4% 31.9% Non-marine casualty 38.6 34.4 29.6 29.0 Marine & Aviation 38.2 37.1 39.5 34.6 Life (1) NA NM NA 20.2 ------- ----- ----- ----- Total 36.9% 33.5% 34.2% 32.2% ======= ===== ===== ===== Combined Ratios Non-marine property 96.6% 88.4% 96.7% 92.0% Non-marine casualty 102.2 112.5 104.9 110.7 Marine & Aviation 95.7 95.7 97.0 97.2 Life (1) NA NM NA 96.8 ------- ----- ----- ----- Total 97.6% 95.7% 98.7% 97.4% ======= ===== ===== =====
(1) The Company ceased writing new life insurance business on March 1, 1996. 9 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1996 Gross Premiums Written; Net Premiums Written; Net Premiums Earned. Gross premiums written increased by 64.0%, to $100.4 million in 1997 from $61.2 million in 1996. The overall increase in gross premiums written of $39.2 million was mainly a consequence of Terra Nova Capital writing gross premiums of $39.4 million in 1997 compared to $5.3 million in 1996, due to increasing its participation on syndicates managed by Octavian from 11.1% in 1996 to 39.5% in 1997 (excluding the dedicated corporate syndicate 1227). The majority of the business written by Terra Nova Capital is UK motor, UK casualty, marine and aviation business. Reinsurance ceded decreased by 5.9% to $9.9 million in 1997 from $10.5 million in 1996 owing to timing differences in the purchase of reinsurance in 1997 compared to 1996. As a result of the higher gross premiums written and a decrease in reinsurance ceded, net premiums written increased by 78.6% to $90.5 million in 1997 from $50.7 million in 1996. Net premiums earned increased by 50.1% to $101.9 million in 1997 from $67.9 million in 1996. The increase was attributable to the Company's share of the Octavian syndicates' earned premiums and a large increase in business written. Net Investment Income. Net investment income increased by 8.2%, to $21.5 million in 1997 from $19.8 million in 1996 resulting from an increase of 8.3% in average invested assets, attributable to the IPO in April 1996, the debt issue in August 1997 and relatively stable portfolio yields. The average investment yield before realized gains and losses was 6.3% in both 1997 and 1996. Realized Net Capital Gains on Sales of Investments. Realized net capital gains on sales of investments increased by $5.3 million to $4.2 million in 1997 from a loss of $1.1 million in 1996. the majority of gains in 1997 and 1996 arose from equity securities sold during the period. Foreign Exchange Losses. Foreign exchange losses of $0.6 million in 1997 arose from foreign currency exchange during the quarter together with the translation of foreign currency assets and liabilities into U.S. dollars, the Company's functional currency. Agency Income. This income consists of fees and profit commissions earned by Octavian in respect of the managing of certain Lloyd's syndicates. Losses and Loss Adjustment Expenses. Losses and LAE increased by 46.5% to $61.9 million in 1997 from $42.2 million in 1996. As a percentage of net premiums earned, losses and LAE decreased 1.5 percentage points, to 60.7% in 1997 from 62.2% in 1996. The decrease is due to favourable loss development on both current and prior years more than offsetting weakening premium rates. Acquisition Costs. Acquisition costs, comprising commissions and other underwriting expenses, increased by 65.4% to $34.1 million in 1997 from $20.6 million in 1996. Acquisition costs as a percentage of net premiums earned increased by 3.1 percentage points, to 33.5% in 1997 from 30.4% in 1996, reflecting the higher proportion of insurance business written in 1997 and the establishment of three new syndicates at Octavian in 1997. Other Operating Expenses. Other operating expenses increased by 67.1% to $3.5 million in 1997 from $2.1 million in 1996. Other operating expenses as a percentage of net premiums earned increased to 3.4% in 1997 from 3.1% in 1996, primarily due to the greater proportion of Terra Nova Capital business earned in 1997 which has a higher other operating expense ratio. 10 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net Interest Expense. Net interest expense increased to $3.3 million in 1997 from $2.7 million in 1996 owing to interest arising on the $75 million 7.2% Senior Notes issued on August 26, 1997, in addition to interest on the $100 million 10.75% Senior Notes issued on June 30, 1995. Agency Expenses. These expenses consist of costs incurred by octavian in managing certain Lloyd's syndicates. Other Expenses. Other expenses decreased by 14.3% to $1.4 million in 1997 from $1.7 million in 1996. Income from Operations before Income Taxes and Minority Interests. Income from operations before income taxes and minority interests increased by 33.6% to $23.4 million in 1997 from $17.5 million in 1996. This increase was mainly due to higher realized gains in 1997 compared to 1996. Income Tax Expense. Income tax expense increased by 43.0% to $4.4 million in 1997 from $3.1 million in 1996, due to an increase in realized gains arising in the United Kingdom subsidiaries more than offsetting a reduction in the rate of United Kingdom corporate tax from 33% to 31%. Net Income. Net income increased by $4.6 million to $19.0 million in 1997 from $14.4 million in 1996 as a result of the factors described above. Combined Ratios. The Company's combined ratios were 97.6% for 1997 and 95.7% for 1996. The increase was primarily due to the rise in the Company's expense ratio, for the reasons described above. 11 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1996 Gross Premiums Written; Net Premiums Written; Net Premiums Earned. Gross premiums written increased by 33.5% to $432.1 million in 1997 from $323.7 million in 1996. The increase in gross written premiums arises from: (a) Terra Nova Capital writing gross premiums of $122.0 million (excluding "orphaned" syndicate business) in 1997 compared to $25.7 million in 1996. Terra Nova Capital was established by the Company to participate in business written by the Octavian Syndicates for the 1996 and future years of account. The majority of the business written by the Octavian Syndicates is UK motor, UK casualty, marine and aviation business; (b) $12.1 million of non-recurring premiums relating to reinsurance to close of "orphaned" syndicates from the 1993 underwriting year. Reinsurance ceded increased by 32.4% to $63.3 million from $47.8 million. The increase was primarily attributable to Terra Nova Capital ceding $30.5 million of reinsurance premiums in 1997 compared to $6.6 million ceded in 1996, due to its increased participation in syndicates managed by Octavian. As a percentage of gross premiums written, reinsurance ceded was 14.7% in 1997, in line with the 14.8% in 1996. As a consequence of the higher gross premiums written and stable proportion of reinsurance ceded, net premiums written increased by 33.7% to $368.8 million in 1997 from $275.8 million in 1996. Net premiums earned increased by 31.5% to $276.2 million in 1997 from $210.1 million in 1996. The increase in net premiums earned was attributable to the comparable increase in net premiums written, as described above. Net Investment income. Net investment income increased by 6.6% to $62.5 million in 1997 from $58.7 million in 1996, resulting from an increase of 11.4% in average invested assets attributable to the IPO in April 1996 and the $75 million Senior Notes issue in August 1997, partially offset by lower portfolio yields. The average investment yield in 1997 was 6.2% compared to 6.4% for the same period in 1996. Realized Gains on Sale of Investments. Realized gains on sale of investments increased by 6.1% to a gain of $11.7 million in 1997 from a gain of $11.1 million in 1996. The majority of gains in 1997 and 1996 arose from equity securities sold during the period. Foreign Exchange Gains (Losses). Foreign exchange gains of $0.2 million in 1997 and losses of $0.6 million in 1996 arose from foreign currency exchange transactions during the nine months together with the translation of foreign currency assets and liabilities into US dollars, the Company's functional currency. Agency Income. This income consists of fees received and profit commissions earned by Octavian in respect of the managing of certain Lloyd's syndicates. Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses increased by 30.0% to $178.1 million in 1997 from $137.0 million in 1996. As a percentage of net premiums earned, losses and LAE decreased 0.7 percentage points to 64.5% in 1997 from 65.2% in 1996. The relative stability is due to an absence of large losses, favourable overall loss experience and stable results for prior years in 1997 and 1996. Acquisition Costs. Acquisition costs, comprising commissions and other underwriting expenses, increased by 36.1% to $83.9 million in 1997 from $61.6 million in 1996. Acquisition costs as a percentage of net premiums earned increased by 1.1 percentage points to 30.4% in 1997 from 29.3% in 1996, reflecting the higher proportion of insurance business written in 1997. 12 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Other Operating Expenses. Other operating expenses increased by 77.3% to $10.7 million in 1997 from $6.0 million in 1996. Other operating expenses as a percentage of net premiums earned increased from 2.9% in 1996 to 3.9% in 1997, primarily due to the greater proportion of Terra Nova Capital business earned in 1997 which has a higher other operating expense ratio. Net Interest Expense. Net interest expense increased to $8.7 million in 1997 from $8.1 million in 1996 owing to interest arising on the $75 million 7.2% Senior Notes issued on August 26, 1997, in addition to interest on the $100 million 10.75% Senior Notes issued on June 30, 1995. Other Expenses. Other expenses decreased marginally to $4.2 million in 1997 from $4.3 million in 1996. Income from Operations before Income Taxes and Minority Interests. Income from operations before income taxes and minority interests increased by 6.9% to $67.1 million in 1997 from $62.8 million in 1996. The increase was primarily due higher investment income and higher realized investment gains partially offset by lower underwriting profits in 1997 compared to 1996. Income Tax Expense. Income tax expense increased by 1.7% to $13.4 million in 1997 from $13.2 million in 1996, as a consequence of the increase in operating income of the United Kingdom subsidiaries being offset by a reduction in the United Kingdom corporate tax rate. Net Income. Net income increased by 8.3% to $53.7 million in 1997 from $48.6 million in 1996 as a result of the factors described above. Combined Ratios. The Company's combined ratio was 98.7% for 1997 and 97.4% for 1996. the increase was primarily due to the rise in the Company's expense ratio, for the reasons described above. LIQUIDITY AND CAPITAL RESOURCES The Company's assets consist primarily of the capital stock of UK Holdings and Terra Nova (Bermuda), and UK Holdings' assets consist primarily of the capital stock of Terra Nova, Terra Nova Capital, Octavian and Corifrance. The ability of the Company to pay dividends on its capital stock and to pay its obligations depends primarily on dividends or other payments from Terra Nova, Terra Nova (Bermuda), Terra Nova Capital, Octavian and Corifrance. The payment of dividends and other payments by Terra Nova, Terra Nova Capital and Octavian are subject to restrictions under UK law and Terra Nova (Bermuda), Bermuda law and Corifrance, French law. The sources of funds for the Company's subsidiaries consist primarily of net premiums, investment income and proceeds from sales and redemptions of investments. The funds are used primarily to pay claims and operating expenses and for the purchase of investments, largely fixed income securities. The shareholders' equity of Terra Nova at September 30, 1997 was $272.5 million. The increase of $19.4 million in the nine months to September 30, 1997 was due to the issue of $15.0 million of share capital to UK Holdings in September, unrealized gains on investments (net of tax) of $11.0 million and net income of $31.1 million, partially offset by $37.7 million of dividends paid to UK Holdings. The shareholders' equity of Terra Nova (Bermuda) at September 30, 1997 was $256.3 million. The increase of $32.9 million during 1997 was due to $25.7 million of net income and unrealized gains on investments of $7.2 million. 13 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the nine months ended September 30, 1997 the cash flow provided by operating activities of the Company was $25.7 million compared to $18.3 million in 1996. The increase in the 1997 operating cashflow is primarily a consequence of: (a) Terra Nova experiencing lower cash outflows on its discounted LMX business in 1997 compared to 1996 and improved operating cash flows at Terra Nova Capital due to it increasing its participation on syndicates managed by Octavian in 1997, partially offset by higher expense payments at Lloyd's partially offset by (b) a tax repayment of $11.5 million plus interest on the overdue amount of $5.3 million from the UK Inland Revenue in March 1996. Total investments and cash were $1,424.3 million at September 30, 1997. At September 30, 1997, 82.9%, 10.8% and 6.3% of total investments and cash were held in fixed maturities, common stocks and cash and cash equivalents, respectively. At September 30, 1997, approximately 92% of the Company's fixed income investments were rated "AA" or better by S&P. The Company's investment portfolio earned interest and dividend income, net of investment management fees, of 6.2% and 6.4% in the nine months ended September 30, 1997 and 1996, respectively. The Company had realized investment gains of $11.7 million and $11.1 million in the nine months ended September 30, 1997 and 1996, respectively. On August 28, 1997 the Company filed a Form 8-K in respect of the issue of $75 million 7.2% Senior Notes due 2007, fully and unconditionally guaranteed by Bermuda Holdings. On September 8, 1997 the Company announced that it had purchased all of the issued and outstanding shares of Compagnie de Reassurance d'Ile de France, Corifrance. Corifrance is a French reinsurance company which transacts business internationally. Certain information contained herein is based on management's estimates, assumptions and projections. Important factors that could cause actual results to differ materially from those estimated by management include, among other things, an unexpected increase in competition, unfavorable government regulation, the pricing environment and other industry developments. FOREIGN CURRENCY The Company's assets, liabilities, revenues and expenses, except for the majority of corporate overheads which are paid in British pounds, are predominantly in U.S. dollars. Accordingly, the Company's functional currency is the U.S. dollar. Certain other net translation adjustments are shown as a separate component of shareholders' equity. 14 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DIVIDEND POLICY On February 10, 1997 the Company declared a dividend of $0.02 per share payable on March 27, 1997 to shareholders of record as of March 6, 1997. On May 5, 1997 the Company declared a dividend of $0.05 per share payable on June 27, 1997, to shareholders of record as of June 6, 1997. On August 4, 1997 the Company declared a dividend of $0.05 per share payable on September 26, 1997 to shareholders of record as of September 5, 1997. On November 4, 1997 the Company declared a dividend of $0.05 per share payable on December 29, 1997 to shareholders of record as of December 5, 1997. The declaration and payment of dividends is at the discretion of the Board of Directors of the Company and will depend upon the Company's results of operations, the financial position and capital requirements of the Company's operating subsidiaries, general business conditions, legal, tax and regulatory restrictions on the payment of dividends and other factors the Board of Directors of the Company deems relevant. While the Company is not itself subject to any contractual restrictions or significant legal prohibitions on dividend payments the Company's subsidiaries are subject to regulatory and legal constraints on their respective abilities to pay dividends. Accordingly, there is no assurance that dividends will be declared or paid in the future. 15 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES PART II - OTHER INFORMATION - --------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) EXHIBIT 11.1 Statement regarding Computation of Primary and Fully Diluted Earnings Per Common Share and Common Share Equivalents. EXHIBIT 27.1 Financial Data Schedule b) FORM 8-K DATE OF REPORT AUGUST 28, 1997 NEWS RELEASE 16 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES 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 thereto duly authorized. Date: November 14, 1997 By: /s/ WILLIAM O. BAILEY ----------------- --------------------- William O. Bailey Chairman, President and Chief Executive Officer Date: November 14, 1997 By: /s/ WILLIAM J. WEDLAKE ----------------- ---------------------- William J. Wedlake Chief Financial Officer, Senior Vice President and Principal Accounting Officer 17 TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES EXHIBIT INDEX -------------
SEQUENTIAL EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - --------- ----------- __________ 11.1 Statement regarding Computation of Primary and Fully Diluted Earnings 19-22 Per Common Share and Common Share Equivalents 27.1 Financial Data Schedule Form 8K
18 EX-11.1 2 COMPUTATION OF PRIMARY EARNINGS EXHIBIT 11.1 ------------ TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
NINE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 ------------------- ------------------- Earnings per common share and common share equivalents - -- Primary Weighted average common shares outstanding 25,874,208 22,342,562 Weighted average common shares outstanding (under as if converted method) -- -- Average stock options and warrants outstanding (net of repurchased shares under the treasury stock method) 196,747 371,062 Other dilutive securities assumed to be outstanding under regulatory rules (net of repurchased shares under the treasury stock method) -- -- ------------ ----------- Weighted average common shares and common share equivalents outstanding 26,070,955 22,713,624 =========== =========== Net income $53,656,854 $48,475,445 =========== =========== Primary earnings per common share and common share equivalent $2.06 $2.13 =========== ===========
19 EXHIBIT 11.1 ------------ TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
THREE MONTHS THREE MONTHS ENDED SEPTEMBER 30 ENDED SEPTEMBER 30, 1997 1996 Earnings per common share and common share equivalents - -- Primary Weighted average common shares outstanding 25,901,389 25,823,308 Weighted average common shares outstanding (under as if converted method) -- -- Average stock options and warrants outstanding (net of repurchased shares under the treasury stock method) (102,458) 383,782 Other dilutive securities assumed to be outstanding under regulatory rules (net of repurchased shares under the treasury stock method) -- -- ----------- ----------- Weighted average common shares and common share equivalents outstanding 25,798,931 26,207,090 ----------- ----------- Net income $19,009,853 $14,449,621 =========== =========== Primary earnings per common share and common share equivalent $0.74 $0.55 =========== ===========
20 EXHIBIT 11.1 ------------ TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
NINE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 Earnings per common share and common share equivalents - -- Fully Diluted Weighted average common shares outstanding 25,874,208 21,663,276 Weighted average common shares outstanding (under as if converted method) -- 1,148,916 Average stock options and warrants outstanding (net of repurchased shares under the treasury stock method) 229,641 391,994 Other dilutive securities assumed to be outstanding under regulatory rules (net of repurchased shares under the treasury stock method) -- -- ----------- ----------- Weighted average common shares and common share equivalents outstanding 26,103,849 23,204,186 =========== =========== Net income $53,656,854 $49,064,445 =========== =========== Fully diluted earnings per common share and common share equivalent $2.06 $2.11 =========== ===========
21 EXHIBIT 11.1 ------------ TERRA NOVA (BERMUDA) HOLDINGS LTD. AND SUBSIDIARIES COMPUTATION OF FULLY DILUTED EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
THREE MONTHS THREE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 ------------------- ------------------- Earnings per common share and common share equivalents - --Fully Diluted Weighted average common shares outstanding 25,898,286 25,823,308 Weighted average common shares outstanding (under as if converted method) -- -- Average stock options and warrants outstanding (net of repurchased shares under the treasury stock method) (72,362) 398,779 Other dilutive securities assumed to be outstanding under regulatory rules (net of repurchased shares under the treasury stock method) -- -- ---------- ----------- Weighted average common shares and common share equivalents outstanding 25,825,924 26,222,087 =========== =========== Net income $19,009,853 $14,449,621 =========== =========== Fully diluted earnings per common share and common share equivalent $0.74 $0.55 =========== ===========
22 EX-27.1 3 FINANCIAL DATA SCHEDULE
7 1,000 3-MOS 9-MOS DEC-31-1997 DEC-31-1997 JUL-01-1997 JAN-01-1997 SEP-30-1997 SEP-30-1997 1,181,058 1,181,058 0 0 0 0 153,010 153,010 0 0 0 0 1,334,068 1,334,068 90,237 90,237 38,238 38,238 85,676 85,676 2,168,036 2,168,036 1,080,084 1,080,084 316,964 316,964 0 0 0 0 175,000 175,000 0 0 0 0 150,114 150,114 309,418 309,418 2,168,036 2,168,036 101,857 276,241 21,461 62,524 4,221 11,733 2,870 10,229 61,875 178,147 34,104 83,868 3,500 10,714 23,387 67,087 4,378 13,430 19,009 53,657 0 0 0 0 0 0 19,009 53,657 0.74 2.06 0.74 2.06 823,979 823,979 93,380 209,652 0 0 6,575 8,000 54,316 167,777 857,854 857,854 0 0 FOREIGN EXCHANGE MOVEMENT DURING THE YEAR HAS BEEN ALLOCATED TO PRIOR YEAR PAID CLAIMS.
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