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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 2003
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: 0-27662
IPC HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
BERMUDA NOT APPLICABLE
- ------------------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
AMERICAN INTERNATIONAL BUILDING, 29 RICHMOND ROAD, PEMBROKE, HM 08, BERMUDA
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(441) 298-5100
--------------
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
The number of outstanding common shares par value U.S. $0.01 per share of IPC
Holdings, Ltd., as of July 29, 2003, was 48,192,955.
EXHIBIT INDEX LOCATED ON PAGE 20
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars, except for per share amounts)
As of As of
June 30, 2003 December 31, 2002
------------- -----------------
(unaudited)
ASSETS:
Fixed maturity investments:
Available for sale, at fair value (amortized cost 2003
$1,184,825; 2002 $1,113,432) $ 1,233,552 $ 1,153,609
Equity investments, available for sale at fair value (cost
2003 $247,154; 2002: $216,815) 273,511 216,897
Cash and cash equivalents 28,322 16,656
Reinsurance premiums receivable 146,114 50,328
Deferred premiums ceded 7,322 819
Loss and loss adjustment expenses recoverable 2,369 405
Accrued investment income 22,120 24,163
Deferred acquisition costs 16,320 6,095
Prepaid expenses and other assets 7,939 5,003
------------ ------------
TOTAL ASSETS $ 1,737,569 $ 1,473,975
============ ============
LIABILITIES:
Reserve for losses and loss adjustment expenses $ 112,149 $ 119,355
Unearned premiums 154,591 51,902
Reinsurance premiums payable 9,400 1,555
Deferred fees and commissions 2,817 127
Investments pending settlement 2,477 0
Accounts payable and accrued liabilities 11,641 9,553
------------ ------------
293,075 182,492
------------ ------------
SHAREHOLDERS' EQUITY:
Share capital (Common shares outstanding, par value U.S. $0.01:
2003 48,192,955; 2002: 48,179,805 shares) 482 482
Additional paid-in capital 848,948 846,397
Deferred stock grant compensation (1,753) 0
Retained earnings 521,733 404,345
Accumulated other comprehensive income 75,084 40,259
------------ ------------
1,444,494 1,291,483
------------ ------------
------------ ------------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES $ 1,737,569 $ 1,473,975
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
2
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of United States dollars, except for per share amounts)
Quarter ended June 30, Six months ended June 30,
---------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
REVENUES:
Gross premiums written $ 64,598 $ 60,110 $ 256,450 $ 207,158
Change in unearned premiums 11,536 (2,110) (102,689) (100,944)
------------ ------------ ------------ ------------
Premiums earned 76,134 58,000 153,761 106,214
------------ ------------ ------------ ------------
Reinsurance premiums ceded (3,702) (2,029) (13,681) (5,069)
Change in deferred premiums ceded (149) 507 6,503 1,744
------------ ------------ ------------ ------------
Premiums ceded (3,851) (1,522) (7,178) (3,325)
------------ ------------ ------------ ------------
Net premiums earned 72,283 56,478 146,583 102,889
Net investment income 11,723 13,075 23,248 24,957
Net realized gains (losses) on investments 2,414 (6,658) 6,140 (7,425)
Other income 878 854 1,544 2,261
------------ ------------ ------------ ------------
87,298 63,749 177,515 122,682
------------ ------------ ------------ ------------
EXPENSES:
Net losses and loss adjustment expenses 11,516 7,765 22,672 15,372
Net acquisition costs 7,096 6,421 14,819 11,465
General and administrative expenses 4,540 3,555 8,905 6,412
Net exchange (gain) loss (1,442) (2,638) (1,997) (2,720)
------------ ------------ ------------ ------------
21,710 15,103 44,399 30,529
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME $ 65,588 $ 48,646 $ 133,116 $ 92,153
============ ============ ============ ============
Basic net income per common share $ 1.36 $ 1.01 $ 2.76 $ 1.91
Diluted net income per common share $ 1.36 $ 1.01 $ 2.76 $ 1.91
Weighted average number of common shares - basic 48,187,912 48,172,776 48,183,858 48,172,776
Weighted average number of common shares - diluted 48,281,119 48,272,420 48,270,385 48,269,061
The accompanying notes are an integral part of these consolidated financial
statements
3
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in thousands of United States dollars)
Quarter ended June 30, Six months ended June 30,
---------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
NET INCOME $ 65,588 $ 48,646 $ 133,116 $ 92,153
------------ ------------ ------------ ------------
OTHER COMPREHENSIVE INCOME (LOSS):
Net holding gains (losses) on investments during
period 39,385 (7,023) 40,965 (21,548)
Reclassification adjustment for (gains) losses
included in net income (2,414) 6,658 (6,140) 7,425
------------ ------------ ------------ ------------
36,971 (365) 34,825 (14,123)
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 102,559 $ 48,281 $ 167,941 $ 78,030
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements
4
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Expressed in thousands of United States dollars)
As of As of
June 30, 2003 December 31, 2002
------------- -----------------
(unaudited)
COMMON SHARES PAR VALUE $0.01:
Balance, beginning of year $ 482 $ 482
Additional shares issued 0 0
------------ ------------
Balance, end of period $ 482 $ 482
============ ============
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year $ 846,397 $ 846,101
Shares issued 686 458
Shares repurchased (309) (162)
Stock options and grants 2,174 0
------------ ------------
Balance, end of period $ 848,948 $ 846,397
============ ============
DEFERRED STOCK GRANT COMPENSATION:
Balance, beginning of year $ 0 $ 0
Stock grants awarded (2,011) 0
Amortization 258 0
------------ ------------
Balance, end of period $ (1,753) $ 0
============ ============
RETAINED EARNINGS:
Balance, beginning of year $ 404,345 $ 246,568
Net income 133,116 157,906
Reduction on share repurchase (310) (129)
Dividends paid (15,418) 0
------------ ------------
Balance, end of period $ 521,733 $ 404,345
============ ============
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Balance, beginning of year $ 40,259 $ 12,643
Other comprehensive income 34,825 27,616
------------ ------------
Balance, end of period $ 75,084 $ 40,259
============ ============
TOTAL SHAREHOLDERS' EQUITY $ 1,444,494 $ 1,291,483
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
5
IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of United States dollars)
Six months ended June 30,
-------------------------
2003 2002
---- ----
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 133,116 $ 92,153
Adjustments to reconcile net income to cash provided
by operating activities:
Amortization of fixed maturity premiums (discount), net 7,213 3,599
Net realized (gains) losses on investments (6,140) 7,425
Stock compensation 420 0
Changes in:
Reinsurance premiums receivable (95,786) (82,754)
Deferred premiums ceded (6,503) (1,744)
Loss and loss adjustment expenses recoverable (1,964) 118
Accrued investment income 2,043 (1,096)
Deferred acquisition costs (10,225) (10,808)
Prepaid expenses and other assets (2,936) (2,960)
Reserve for losses and loss adjustment expenses (7,206) (32,359)
Unearned premiums 102,689 100,944
Reinsurance premiums payable 7,845 1,772
Deferred fees and commissions 2,690 234
Accounts payable and accrued liabilities 2,088 2,959
------------ ------------
Cash provided by operating activities 127,344 77,483
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed maturity investments (478,433) (626,232)
Proceeds from sale of fixed maturity investments 337,449 318,023
Proceeds from maturities of fixed maturity investments 70,996 9,000
Purchases of equity investments (30,339) (64,793)
Proceeds from sale of equity investments 0 518
------------ ------------
Cash used in investing activities (100,327) (363,484)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from share issuance 67 0
Cash dividends paid to shareholders (15,418) 0
------------ ------------
Cash used by financing activities (15,351) 0
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,666 (286,001)
CASH AND CASH EQUIVALENTS, beginning of period 16,656 315,207
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 28,322 $ 29,206
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
6
IPC HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except for per share amounts)
(unaudited)
1. GENERAL:
The consolidated interim financial statements presented herein have been
prepared on the basis of accounting principles generally accepted in the
United States of America ("GAAP") and include the accounts of IPC Holdings,
Ltd. (the "Company"), and its wholly owned subsidiaries, IPCRe Limited
("IPCRe") and IPCRe Underwriting Services Limited ("IPCUSL" and, together
with the Company and IPCRe, "IPC") and IPCRe Europe Limited, which is a
wholly-owned subsidiary of IPCRe. In the opinion of management, these
financial statements reflect all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the results of operations for
the six month periods ended June 30, 2003 and 2002, respectively, the
balance sheet as of June 30, 2003 and the cash flows for the six month
periods ended June 30, 2003 and 2002, respectively. These interim
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31,
2002, incorporated by reference in our report on Form 10-K. The results of
operations for any interim period are not necessarily indicative of results
for the full year.
2. DIVIDENDS:
On March 5, 2003 we paid a dividend of $0.16 per share to shareholders of
record on February 19, 2003.
On June 26, 2003 we paid a dividend of $0.16 per share to shareholders of
record on June 10, 2003
On July 22, 2003 we declared a dividend of $0.20 per share, payable on
September 18, 2003 to shareholders of record on September 2, 2003.
3. ACCOUNTING FOR STOCK-BASED COMPENSATION AND DISCLOSURE:
On December 31, 2002, the Financial Accounting Standards Board ("FASB")
issued Statement No. 148, "Accounting for Stock-Based Compensation and
Disclosure" ("SFAS 148"), which is effective for fiscal years ending after
December 31, 2002. SFAS 148 amends SFAS 123, to provide alternative methods
of transition for a voluntary change to the fair value method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends
disclosure requirements of SFAS 123 to require prominent disclosure about
the method of accounting for stock based employee compensation and the
effect of the method used to report results. SFAS 148 permits two additional
transition methods for entities that adopt the preferable fair value method
of accounting for stock-based employee compensation. In addition, the
original prospective method of transition for changes to the fair value
method under SFAS 123 will no longer be permitted in fiscal periods
beginning after December 15, 2003. Management has adopted the fair value
method of accounting for stock-based employee compensation on a prospective
basis for all awards granted, modified or settled after January 1, 2003. The
amount of the charge recorded in the six months ended June 30, 2003 was
$162.
On June 13, 2003 the shareholders approved a new stock incentive plan
retroactive to January 1, 2003. The plan allows for the issuance of up to
500,000 shares as grants of restricted stock to selected employees to
compensate them for their contributions to the long-term growth and profits
of the company. These grants are accounted for under SFAS 128 and the charge
recorded for the six months ended June 30, 2003 was $258.
7
The following table illustrates the effect on net income and earnings per
share if the fair value based method had been applied to all outstanding and
unvested awards in each period in accordance with SFAS 123.
Quarter ended June 30, Six months ended June 30,
---------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (unaudited)
Net income, as reported $ 65,588 $ 48,646 $ 133,116 $ 92,153
Add: Stock-based employee expense 81 0 162 0
Deduct: Total stock-based employee expense
determined under fair value based method for all
awards (255) (200) (510) (400)
------------ ------------ ------------ ------------
Pro forma net income $ 65,414 $ 48,446 $ 132,768 $ 91,753
------------ ------------ ------------ ------------
Earnings per share:
Basic - as reported 1.36 1.01 2.76 1.91
Basic - pro forma 1.36 1.01 2.76 1.90
Diluted - as reported 1.36 1.01 2.76 1.91
Diluted - pro forma 1.35 1.00 2.75 1.90
4. NEW ACCOUNTING PRONOUNCEMENTS:
In April 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 149 "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" (SFAS 149). The
statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". The statement will be
effective for contracts entered into or modified after June 30, 2003.
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities." FIN 46 requires a variable
interest entity to be consolidated by a company if that company is subject
to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual
returns or both. A variable interest entity is a corporation, partnership,
trust, or any other legal structure used for business purposes that either
(a) does not have equity investors with voting rights or (b) has equity
investors that do not provide sufficient financial resources for the entity
to support its activities. A variable interest entity may be essentially
passive or it may engage in research and development or other activities on
behalf of another company. The consolidation requirements of FIN 46 apply
immediately to variable interest entities created after January 31, 2003.
The consolidation requirements apply to older entities in the first fiscal
year or interim period beginning after June 15, 2003. Certain of the
disclosure requirements apply to all financial statements issued after
January 31, 2003, regardless of when the variable interest entity was
established.
On May 15, 2003, the Financial Accounting Standards Board issued Statement
No. 150, Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity. This Statement requires issuers to classify
as liabilities (or assets in some circumstance) three classes of
freestanding financial instruments that embody obligations for the issuer.
Generally, the Statement is effective for financial instruments entered into
or modified after May 31, 2003 and is otherwise effective at the beginning
of the first interim period beginning after June 15, 2003. The Company
adopted the provisions of the Statement on July 1, 2003.
Management does not believe that the adoption of these new accounting
pronouncements will have any material impact on the Company's financial
position or results of operations.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
The following is a summary of the accounting policies for the three main
components of our balance sheet and statement of income: premiums, losses
(claims) including reserves and investments/investment income.
PREMIUMS
Premiums are recorded as written at the beginning of each policy, based upon
information received from ceding companies and their brokers, and are earned
over the policy period. For excess of loss contracts, the amount of premium
is contractually documented at inception, and no management judgement is
necessary in accounting for this. Premiums are earned on a pro rata basis
over the policy period. For proportional treaties, the amount of premium is
normally estimated at inception by the ceding company. We account for such
premium using the initial estimates, which are reviewed regularly with
respect to the actual premium reported by the ceding company. For the six
months ended June 30, 2003 the net amount of premium written resulting from
estimate accruals was approximately 4% of total premiums written. We also
accrue for reinstatement premiums (premiums paid to reinstate reinsurance
coverage following a claim). Such accruals are based upon actual contractual
terms applied to the amount of loss reserves expected to be paid, and the
only element of management judgement involved is with respect to the amount
of loss reserves, as described below. The amount accrued at June 30, 2003
for reinstatement premiums on Reported But Not Enough losses ("RBNE") and
Incurred But Not Reported ("IBNR") loss reserves was $2.9 million, the
majority of which related to claims from the attack on the World Trade
Center.
LOSS RESERVES
Under accounting principles generally accepted in the United States of
America, we are not permitted to establish loss reserves until the
occurrence of an event which may give rise to a claim. As a result, only
loss reserves applicable to losses incurred up to the reporting date may be
established, with no allowance for the provision of a contingency reserve to
account for expected future losses. Claims arising from future catastrophic
events can be expected to require the establishment of substantial reserves
from time to time.
Estimating appropriate loss reserves for catastrophes is an inherently
uncertain process. Loss reserves represent our estimates, at a given point
in time, of ultimate settlement and administration costs of losses incurred
(including IBNR losses). We regularly review and update these estimates,
using the most current information available to us. Consequently, the
ultimate liability for a catastrophic loss is likely to differ from the
original estimate. Whenever we determine that any existing loss reserves are
inadequate, we are required to increase the loss reserves with a
corresponding reduction, which could be material, in our operating results
in the period in which the deficiency is identified. The establishment of
new reserves, or the adjustment of reserves for reported claims, could
result in significant upward or downward changes to our financial condition
or results of operations in any particular period.
The reserve for losses and loss adjustment expenses is based upon reports
from industry sources, individual case estimates received from ceding
companies, output from commercially available catastrophe loss models and
management's estimates. When a catastrophic event occurs, we first determine
which treaties may be affected using our geographic database of exposures.
We then contact the respective brokers and ceding companies involved with
those treaties, to determine their estimate of involvement and the extent to
which the reinsurance program is affected. We may also use computer modeling
to measure and estimate loss exposure under the actual event scenario, if
available. Since 1993, we have contracted Applied Insurance Research, Inc.
for the use of their proprietary models - currently CATRADER (R) - as part
of our modeling approach. These computer-based loss modeling systems utilize
A.M. Best's data and direct exposure information obtained from our clients.
Once an event occurs, we establish a specific reserve for that event, based
upon estimates of total losses incurred by the ceding insurers as a result
of the event and a specific estimate of the portion of such loss we have
reinsured. Management's estimates are used mostly for IBNR or RBNE loss
amounts. For certain catastrophic events there is considerable uncertainty
underlying the assumptions and associated estimated reserves for losses and
loss adjustment expenses. Reserves are reviewed regularly and, as experience
develops and additional information becomes known, the reserves are adjusted
as necessary. Such adjustments, if necessary, are reflected in results of
operations in the period in which they become known. For excess of loss
business, which is generally over 90% of the premium we write, we are aided
by the fact that each treaty has a defined limit of liability arising from
one event. Once that limit has been reached, we have no further exposure to
additional losses from that treaty for the same event. For proportional
treaties, we generally use an initial estimated loss and loss expense ratio
(the ratio of losses and loss adjustment expenses incurred to net premiums
earned), based upon information provided by the ceding company and our
historical experience of that treaty, if any. The estimate is adjusted as
actual experience becomes known.
At June 30, 2003 management's estimates for IBNR/RBNE represented
approximately 32% of total loss reserves. The majority of the estimate
related to reserves for claims from the attack on the World Trade Center,
hailstorms and
9
tornadoes losses in April/May 2003 in the United States, the floods which
affected central and eastern Europe in August 2002, Tropical Storm Allison
which affected parts of Texas in June 2001 and reserves for proportional
treaties. In accordance with IPCRe's registration under the Bermuda
Insurance Act 1978 and Related Regulations (the "Insurance Act"), the loss
reserves are certified annually by an independent loss reserve specialist.
INVESTMENTS
In accordance with our investment guidelines, our investments consist of
certain marketable equity securities and high-grade marketable fixed income
securities. Investments are carried at fair value as determined by the most
recently traded price of each security at the balance sheet date. In
accordance with SFAS 115, unrealized gains and losses are included within
Accumulated Other Comprehensive Income as a separate component of
Shareholders' Equity. Realized gains and losses on sales of investments are
determined on a first-in, first-out basis. Investment income is recorded
when earned and includes the amortization of premiums and discounts on
investments.
We regularly monitor the difference between the cost and fair value of our
investments, which involves uncertainty as to whether declines in value are
temporary in nature. If we believe a decline in value of a particular
investment is temporary, we record the decline as an unrealized loss as a
separate component of our shareholders' equity. If we believe the decline is
other-than-temporary, we write down the cost basis of the investment to the
market price as of the reporting date and record a realized loss in our
statement of income. The determination that a security has incurred an
other-than-temporary decline in value requires the judgement of IPC's
management, which includes the views of our investment managers and a
regular review of our investments. Our assessment of a decline in value
includes our current judgement as to the financial position and future
prospects of the entity that issued the security. If that judgement changes
in the future we may ultimately record a realized loss, after having
originally concluded that the decline in value was temporary.
Generally, we review all securities that are trading at a significant
discount to par, amortized cost (if lower) or cost for an extended period of
time. We generally focus our attention on all securities whose market value
is less than 75% of their cost. The specific factors we consider in
evaluating potential impairment include the following:
- The extent of decline in value
- The length of time the security is below cost
- The future prospects of the issuer, or in the case of mutual
funds, the future prospects of the fund
- Whether the decline appears to be related to general market or
industry conditions, or is issuer-specific
- Our intent and abilty to hold the security
- Other qualitative and quantitative factors
At June 30, 2003 our equity investments comprised three mutual funds: a U.S.
equity fund, a global equity growth fund and a fund with attributes similar
to those of the S & P 500 Index. None of the funds have a significant
concentration in any business sector; accordingly, the value of our equity
funds is principally influenced by macro economic factors rather than
issuer-specific factors. Our investment in mutual funds is subject to the
same analyses as described above for the determination of
other-than-temporary declines in value. Since there is a portfolio of
securities within a mutual fund, the qualitative issues are usually broader
than those for individual securities and therefore the assessment of
impairment is inherently more difficult and requires more management
judgement.
At June 30, 2003 we determined that there was no other-than-temporary
impairment of securities. At June 30, 2003 we did not hold any securities
that are not investment grade, not rated or not traded on a recognized
exchange.
10
RESULTS OF OPERATIONS, QUARTERS ENDED JUNE 30, 2003 AND 2002
The following is a discussion of the results of operations and financial
position of IPC Holdings, Ltd. References to "we", "our" or "IPC" mean IPC
Holdings together with its wholly-owned subsidiaries, IPCRe and IPCUSL. This
discussion should be read in conjunction with our Consolidated Financial
Statements and related notes for the six months ended June 30, 2003.
Our net income for the quarter ended June 30, 2003 was $65.6 million,
compared to $48.6 million for the quarter ended June 30, 2002, an increase
of 35%. This increase is primarily the result of the increase in
earned premiums, as discussed below.
In the quarters ended June 30, 2003 and 2002, we wrote premiums of $64.6
million and $60.1 million, respectively, an increase of 7%. Written premiums
in the quarter were higher primarily because we wrote additional business
for our existing clients, as well as new business. Premiums were also higher
because of increases in some premium rates, which were generally in the
range of 2% to 7% for loss-free contracts. The additional premium from
existing clients resulting from additional business written, rate increases
and foreign exchange rate differences amounted to approximately $2.1
million. Premiums from new business amounted to $9.8 million. These
increases were offset by business which was not renewed because of
unsatisfactory terms and conditions, which totaled approximately $12.4
million. Adjustment premiums, which are adjustments generally arising from
differences between cedents' actual premium income and the original
estimates thereof, were $3.7 million higher in the second quarter of 2003
compared to the second quarter of 2002. Reinstatement premiums were $1.3
million higher in the quarter ended June 30, 2003 in comparison to the
second quarter in 2002, primarily because of adjustments (as described
above) being applied to reinstatement premiums. We retroceded premiums of
$3.7 million in the second quarter of 2003, compared to $2.0 million ceded
in the second quarter of 2002. The increase reflects increased cessions to
our Property Catastrophe Aggregate Excess of Loss facility, as well as the
increase in retrocedants' participation in our proportional reinsurance
facility, which has increased from 37% in 2002 to 60% in 2003. Net premiums
earned in the three months ended June 30, 2003 were $72.3 million, compared
to $56.5 million in the same period in 2002, an increase of 28%. Earned
premiums were higher due to the increase in written premiums over the past
twelve months, as well as the fact that reinstatement premiums and
adjustment premiums are fully earned when written.
Net investment income was $11.7 million in the quarter ended June 30, 2003,
compared to $13.1 million for the quarter ended June 30, 2002. The overall
yield of the fixed income portfolio was less for the quarter ended June 30,
2003 than for the corresponding quarter in 2002, due to lower interest rates
and their adverse impact on the reinvestment of maturing fixed income
securities. This negative factor was offset in part by the increase in the
average balance of invested assets in the quarter ended June 30, 2003, which
was 18% higher than the second quarter of 2002, because of positive
operating cash flow in the period.
11
There was a net realized gain from investments in the quarter ended June 30,
2003 of $2.4 million, compared to a net realized loss of $(6.7) million in
the second quarter of 2002. Generally, net realized gains and losses
fluctuate from period to period, depending on the individual securities
sold, as recommended by IPCRe's investment advisor. The loss for the second
quarter 2002 included a write-down of $7.1 million in the cost basis of
certain stocks where management had determined there had been a decline in
value which was other than temporary.
In the three months ended June 30, 2003, we incurred losses of $11.5
million, compared to $7.8 million in the second quarter of 2002. Losses in
the quarter ended June 30, 2003 included approximately $8.8 million in
respect of claims from hailstorms and tornadoes which occurred in the United
States in April and May of this year.
Acquisition costs incurred, which consist primarily of commissions and
brokerage fees paid to intermediaries for the production of business, were
$7.1 million for the quarter ended June 30, 2003, compared to $6.4 million
in the corresponding period of 2002, an increase of 11%. Acquisition costs
have increased primarily because of the increase in earned premiums, but not
proportionately, because we have written more business in 2003 where
brokerage is not deducted. General and administrative expenses were $4.5
million in the quarter ended June 30, 2003, compared to the $3.6 million
incurred in the first quarter of 2002. This increase is due primarily to a
$0.4 million increase in administrative fees which are based on earned
premiums, as well as some increases for certain operating expenses,
including salaries and benefits, which include the impact of expensing stock
grants and stock options granted to certain officers, the increased cost of
Directors and Officers liability insurance and fees associated with the
renewal of our revolving credit facility.
RESULTS OF OPERATIONS, SIX MONTHS ENDED JUNE 30, 2003 AND 2002
Our net income for the six months ended June 30, 2003 was $133.1 million,
compared to $92.2 million for the first six months of 2002, an increase of
44%. This increase is primarily the result of the significant increase in
premiums, as discussed below.
In the six months ended June 30, 2003 and 2002, respectively, we wrote
premiums of $256.5 million and $207.2 million, an increase of 24%. Written
premiums in the six months were higher primarily because we wrote additional
business for our existing clients, as well as new business. Premiums were
also higher because of increases in some premium rates,
12
which were generally in the range of 2% to 10% for loss-free contracts. The
additional premium from existing clients resulting from additional business
written, rate increases and foreign exchange rate differences amounted to
approximately $26.7 million. Premiums from new business amounted to $31.0
million. These increases were partly offset by business which was not
renewed because of unsatisfactory terms and conditions, which totaled
approximately $21.0 million. Adjustment premiums were $7.8 million higher in
the first six months of 2003 compared to the first six months of 2002.
Reinstatement premiums were $4.8 million higher in the first six months of
2003 in comparison to the corresponding six months in 2002, primarily
because of adjustments (as described above) being applied to reinstatement
premiums. We retroceded premiums of $13.7 million in the first six months of
2003, compared to $5.1 million ceded in the first six months of 2002. The
increase reflects increased cessions to our Property Catastrophe Aggregate
Excess of Loss facility, as well as the increase in retrocedants'
participation in our proportional reinsurance facility, which has increased
from 37% in 2002 to 60% in 2003. Net premiums earned in the six months ended
June 30, 2003 were $146.6 million, compared to $102.9 million in the same
period in 2002, an increase of 42%. Earned premiums were higher due to the
increase in written premiums over the past twelve months, as well as the
fact that reinstatement premiums and adjustment premiums are fully earned
when written.
Net investment income was $23.2 million in the six months ended June 30,
2003, compared to $25.0 million for the six months ended June 30, 2002. The
overall yield of the fixed income portfolio was less for the six months
ended June 30, 2003 than for the corresponding six months in 2002, due to
lower interest rates and their adverse impact on the reinvestment of
maturing fixed income securities. This negative factor was offset in part by
the increase in the average balance of invested assets in the first six
months of 2003, which was 16% higher than the first six months of 2002,
because of positive operating cash flow in the period.
There was a net realized gain from investments in the six months ended June
30, 2003 of $6.1 million, compared to a net realized loss of $(7.4) million
in the first six months of 2002. Generally, net realized gains and losses
fluctuate from period to period, depending on the individual securities
sold, as recommended by IPCRe's investment advisor. The loss for the first
six months of 2002 included a write-down of $8.4 million in the cost basis
of certain stocks where management had determined there had been a decline
in value which was other than temporary.
In the six months ended June 30, 2003, we incurred losses of $22.7 million,
compared to $15.4 million in the first six months of 2002. Losses in the six
months ended June 30, 2003 included $8.8 million in respect of claims from
hailstorms and tornadoes which occurred in the United States in April and
May of this year and approximately $5.9 million in respect of an increase in
the ultimate expected losses for Tropical Storm Allison which took place in
June, 2001. This was the result of an unfavourable court ruling, regarding
an insurance policy coverage dispute between a cedant and the original
insured under the policy, for which first notice of loss was provided to us
on March 28, 2003. We also established a $3.0 million net reserve ($5.6
million gross) for claims arising from bush-fires which occurred in
Australia in January of this year.
Acquisition costs incurred were $14.8 million for the six months ended June
30, 2003, compared to $11.5 million in the corresponding period of 2002, an
increase of 29%. Acquisition costs have increased primarily because of the
increase in earned premiums, but not proportionately, because we have
written more business in 2003 where there is no brokerage. General and
administrative expenses were $8.9 million in the six months ended June 30,
2003, compared to the $6.4 million incurred in the first six months of 2002.
This increase is due primarily to an increase of $1.1 million in
administrative fees which are based on earned premiums, as well as an
increase of 35% on the aggregate for operating expenses, including salaries
and benefits, which include the impact of expensing stock grants and stock
options granted to certain officers in 2003, the increased cost of Directors
and Officers liability insurance, fees associated with the renewal of our
revolving credit facility and increased fees for auditors and lawyers
because of increased corporate governance requirements under the
Sarbanes-Oxley Act of 2002.
LIQUIDITY AND CAPITAL RESOURCES
IPC Holdings is a holding company that conducts no reinsurance operations of
its own. Its cash flows are limited to distributions from IPCRe and IPCUSL
by way of loans or dividends. The dividends that IPCRe may pay are limited
13
under Bermuda legislation and IPCRe's revolving credit facility. The Bermuda
Insurance Act of 1978, and subsequent amendments thereto, require IPCRe to
maintain a minimum solvency margin and a minimum liquidity ratio. The
maximum dividend payable by IPCRe in accordance with Bermuda regulations as
of June 30, 2003 was approximately $355 million. The maximum amount IPCRe
could have paid in the second quarter under the terms of the credit facility
was $181.5 million.
IPCRe's sources of funds consist of premiums written, investment income,
paid losses recovered from retrocedants and proceeds from sales and
redemptions of investments. Cash is used primarily to pay losses and loss
adjustment expenses, premiums retroceded, brokerage commissions, excise
taxes, general and administrative expenses and dividends. The potential for
a large catastrophe means that unpredictable and substantial payments may
need to be made within relatively short periods of time, and therefore our
cash flows fluctuate significantly from period to period.
Net cash flows from operating activities in the six months ended June 30,
2003 were $127.3 million compared to $77.5 million in the first half of
2002. The increase is primarily the result of the significant increase in
premium volume, combined with a reduction in claims paid during the period,
which were $34.0 million in the six months ended June 30, 2003, compared to
$49.0 million in the first half of 2002. A significant proportion of the
claims paid in 2003 relate to the attack on the World Trade Center. We
expect to continue to pay significant amounts in respect of that event
during the next six to nine months.
Net cash outflows from investing activities in the six months ended June 30,
2003 were $100.3 million. Cash and cash equivalents increased by $11.7
million in the six months ended June 30, 2003, resulting in a balance of
$28.3 million at June 30, 2003. At June 30, 2003, 44% of IPC's fixed
maturity investment portfolio (based on fair value) was held in securities
rated AAA, and 33% was held in securities rated AA. The average modified
duration of IPC's fixed maturity portfolio was 2.6 years. At June 30, 2003
our $150 million revolving credit facility expired and was replaced with a
new, three year facility in the amount of $200 million effective July 1,
2003, with substantially the same terms and conditions, although covenants
with respect to dividends and minimum net worth have been amended. The new
facility is provided by a syndicate of lenders led jointly by Bank One N.A.
and Citibank N.A. We believe that this facility, together with the
relatively short duration and high quality of IPC's investment portfolio,
will provide sufficient liquidity to meet IPC's cash demands.
IPCRe is not a licensed insurer in the United States and therefore, under
the terms of most of its contracts with U.S.-based companies, must provide
security to reinsureds to cover unpaid liabilities in a form acceptable to
state insurance commissioners. Typically, this type of security takes the
form of a letter of credit issued by an acceptable bank, the establishment
of a trust, or a cash advance. Currently IPCRe obtains letters of credit
through one commercial bank pursuant to a $100.0 million facility. In turn,
IPCRe provides the bank security by giving the bank a lien over certain of
IPCRe's investments in an amount not to exceed the aggregate letters of
credit outstanding to a maximum of $118.0 million. At June 30, 2003, there
were outstanding letters of credit of $55.2 million. If we were unable to
obtain the necessary credit, IPCRe could be limited in its ability to write
business for our clients in the United States.
Our investment portfolio does not currently include options, warrants,
swaps, collars or similar derivative instruments. Our investment policy
guidelines provide that financial futures and options and foreign exchange
contracts may not be used in a speculative manner, but may be used, subject
to certain numerical limits, only as part of a defensive strategy to protect
the market value of the portfolio. Also, our portfolio does not contain any
investments in real estate or mortgage loans.
Neither the Company, IPCRe nor IPCUSL have any material commitments for
capital expenditures.
OFF BALANCE SHEET ARRANGEMENTS
Neither the Company nor any of its subsidiaries has any other forms of
off-balance sheet arrangements, other than those disclosed above.
14
TRANSACTIONS WITH NON-INDEPENDENT PARTIES
The following is a summary of amounts in respect of significant
non-independent party transactions during the six month periods ended June
30, 2003 and June 30, 2002, respectively, (expressed in thousands of U.S.
dollars):
June 30, 2003 June 30, 2002
------------- -------------
Administrative services fees (included in General & Admin.
expenses) $ 3,844 $ 2,655
Investment fees netted against investment income: $ 1,526 $ 1,341
Underwriting services fee income (included in Other income) $ 1,544 $ 2,261
Premiums written $ 29,392 $ 30,942
Premiums ceded $ 917 $ 581
Underwriting services fee income is a percentage of the premiums written on
behalf of one client, which is related to shareholders of the Company. Fees
are accrued and taken into income based on the premiums earned each quarter.
In addition, IPCRe assumed premiums through a broker related to a
shareholder of the Company. Generally, such premiums represented less than
5% of total premiums assumed. Brokerage fees incurred on such premiums were
generally 10% of the premium.
For a discussion of certain of our contractual relationships with
non-independent parties, please see "Certain Relationships and Related
Transactions" in our definitive Proxy Statement on Schedule 14A, filed with
the Securities and Exchange Commission on April 28, 2003 and incorporated by
reference into our Form 10-K for the year ended December 31, 2002.
All transactions with related parties are conducted at arm's length, with
normal terms and conditions applicable. Neither the Company nor any of its
subsidiaries have entered into any other significant transactions with
non-independent parties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The investment portfolio of IPCRe is exposed to market risk. Market risk is
the risk of loss of fair value resulting from adverse fluctuations in
interest rates, foreign currency exchange rates and equity prices.
Measuring potential losses in fair values has become the focus of risk
management efforts by many companies. Such measurements are performed
through the application of various statistical techniques. One such
technique is Value at Risk ("VaR"). VaR is a summary statistical measure
that uses historical interest and foreign currency exchange rates and equity
prices and estimates of the volatility and correlation of each of these
rates and prices to calculate the maximum loss that could occur within a
given statistical confidence level and time horizon.
We believe that statistical models alone do not provide a reliable method of
monitoring and controlling market risk. While VaR models are relatively
sophisticated, the quantitative market risk information is limited by the
assumptions and parameters established in creating the related models.
Therefore, such models are tools and do not substitute for the experience or
judgement of senior management.
Our investment managers performed a VaR analysis to estimate the maximum
potential loss of fair value for each segment of market risk for our
investment portfolio, as of June 30, 2003, March 31, 2003 and December 31,
2002. The analysis calculated the VaR with respect to the net fair value of
our financial instrument assets, which includes cash and cash equivalents,
certain equity and high grade fixed maturity securities, as of June 30, 2003
using historical simulation methodology. As of June 30, 2003 the VaR of
IPCRe's investment portfolio was approximately $22.0 million, which
represents a 95th percentile value change over a one-month time horizon.
This result was obtained through historical simulation using approximately
750 days (3 years) of historical interest rate, foreign exchange rate and
equity market data.
15
The following table presents the VaR of each component of market risk of
IPCRe's investment portfolio as of June 30, 2003, March 31, 2003 and
December 31, 2002, respectively, and the average for the six months ended
June 30, 2003 calculated using the beginning, quarterly and ending points
(expressed in thousands of U.S. dollars):
Average for six
June 30, March 31, December 31, months ended
-------- --------- ------------ ------------
MARKET RISK 2003 2003 2002 June 30, 2003
---- ---- ---- -------------
Currency $ 1,268 $ 1,042 $ 1,093 $ 1,134
Interest Rate 6,604 7,193 7,938 7,245
Equity 23,092 18,393 18,397 19,961
- -----------------------------------------------------------------------------------------------------------------
Sum of Risk 30,964 26,628 27,428 28,340
Diversification Benefit (8,937) (9,434) (10,102) (9,491)
- -----------------------------------------------------------------------------------------------------------------
TOTAL NET RISK $ 22,027 $ 17,194 $ 17,326 $ 18,849
- -----------------------------------------------------------------------------------------------------------------
The increase in VaR from equities and the subsequent increase in the overall
VaR is because of an increase in the value of equities. IPCRe's premiums
receivable and liabilities for losses from reinsurance contracts it has
written, are also exposed to the risk of changes in value resulting from
fluctuations in foreign currency exchange rates. To an extent, the impact on
loss reserves of a movement in an exchange rate, will be partly offset by
the impact on assets (receivables and cash/investments) denominated in the
same currency, or vice versa. As of June 30, 2003 an estimated 38% or $56
million (June 30, 2002 - 36% or $45 million) of reinsurance premiums
receivable, and an estimated $32 million (June 30, 2002 - $20 million) of
loss reserves, were denominated in non-U.S. currencies. At June 30, 2003 we
held U.S.$1.5 million in Australian dollar short term deposits. Accordingly,
we do not believe that the impact of exchange rate movements in respect of
receivables or loss reserves on our overall VaR as of June 30, 2003 to be
material.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision and with the participation of the
Company's management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934). As of the end of the
period covered by this report, based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the design and
operation of these disclosure controls and procedures were effective. No
significant changes were made in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of
their evaluation.
NOTE ON FORWARD-LOOKING STATEMENTS
This 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. Forward-looking statements
are statements other than historical information or statements of current
condition, including but not limited to expectations regarding market
cycles, renewals and our ability to increase written premium volume and
improve profit margins, market conditions, the impact of current market
conditions and trends on future periods, the impact of our business strategy
on our results, trends in pricing and claims and the insurance and
reinsurance market response to catastrophic events. Some forward-looking
statements may be identified by our use of terms such as "believes,"
"anticipates," "intends," or "expects" and relate to our plans and
objectives for future operations. In light of the risks and uncertainties
inherent in all forward-looking statements, the inclusion of such statements
in this report should not be considered as a representation by us or any
other person that our objectives or plans will be achieved. We do not
intend, and are under no obligation, to update any forward-looking statement
contained in this report. The largest single factor in our results has been
and will continue to be the severity or frequency of catastrophic events,
which is inherently unpredictable. Numerous factors could cause our actual
results to differ materially from those in the forward-looking statements,
including, but not limited to, the following: (i) the occurrence of natural
or man-made catastrophic events with a frequency or severity exceeding our
estimates; (ii) any lowering or loss of one of the financial ratings of IPC
Holdings' wholly owned subsidiary, IPCRe Limited ("IPCRe" and together with
the Company, IPCRe Europe (as defined herein) and IPCRe Underwriting
Services (as defined herein), "we" or "IPC"); (iii) a decrease in the level
of demand for property catastrophe reinsurance, or increased competition
owing to increased capacity of property catastrophe reinsurers; (iv) the
effect of competition on market trends and pricing; (v) the adequacy of our
loss reserves; (vi) loss of our non-admitted status in United States
jurisdictions or the passage of federal or state legislation subjecting us
to supervision or regulation in the United States; (vii) challenges by
insurance regulators in the United States to our claim of exemption from
insurance regulation under current laws; (viii) a contention by the United
States Internal Revenue Service that we are engaged in the conduct of a
trade or business within the U.S.; (ix) loss of services of any one of our
executive officers; (x) changes in interest rates and/or equity values in
the United States of America and elsewhere; or (xi) changes in exchange
rates and greater than expected currency exposure.
16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 2003 the Annual General Meeting of Shareholders of
the Company was held. At the meeting, shareholders were asked
to vote upon resolutions set forth below. The following
tabulation indicates the number of shares present in person or
by proxy at such meeting and the number of such shares for or
against, or withheld, or abstaining, with respect to each
resolution after giving effect to the voting limitations
contained in the Company's Bye-Laws:
i) amending the Company's Bye-Laws to permit certain passive
investor intermediaries to increase their share ownership
above 10% in specified circumstances -
FOR AGAINST WITHHELD
--- ------- --------
30,598,355 81,751 15,150
ii) amending the Company's Stock Option Plan to increase the
number of Common Shares subject thereto, and extend the
expiration date of the Plan -
FOR AGAINST WITHHELD
--- ------- --------
28,233,518 6,200,500 193,842
iii) approving the Company's Stock Incentive Plan -
FOR AGAINST WITHHELD
--- ------- --------
29,240,174 5,190,569 197,117
iv) electing the following persons as directors of the Company
to serve until the 2004 Annual General Meeting -
FOR AGAINST WITHHELD
--- ------- --------
Joseph C.H. Johnson 33,712,937 - 914,923
Anthony M. Pilling 33,938,253 - 689,607
Dr. the Honourable Clarence James 33,936,963 - 690,897
Frank Mutch 33,957,123 - 670,737
James P. Bryce 31,189,153 - 3,438,707
Jackie Clegg 33,938,043 - 689,817
v) appointing KPMG as auditors of the Company for its fiscal
year ending December 31, 2003 and authorizing the Audit
Committee to set the compensation of the auditors -
FOR AGAINST WITHHELD
--- ------- --------
34,571,410 49,950 6,500
All resolutions were passed by show of hands. No other
business of substance was transacted.
ITEM 5. OTHER INFORMATION
NONE
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Unless otherwise indicated, exhibits are incorporated by
reference to the corresponding numbered exhibits to the
Company's Registration Statement on Form S-1 (Registration No.
333-00088).
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Memorandum of Association of the Company
3.2 + Amended and Restated Bye-laws of the Company
3.3 Form of Memorandum of Increase of Share Capital
10.1 * Credit Agreement between IPCRe Limited, Bank One N.A. and other Lenders named therein
11.1 * Reconciliation of basic and diluted net income per common share ("EPS").
31.1 * Certification by Registrant's Chief Executive Officer, as required by Section 302 of the Sarbanes-
Oxley Act of 2002
31.2 * Certification by Registrant's Chief Financial Officer, as required by Section 302 of the Sarbanes-
Oxley Act of 2002
32.0 Certification, as required by Section 906 of the Sarbanes-Oxley Act of 2002. This is being furnished solely pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections A and B of Section 1350, Chapter 63 of Title 18, United
States Code) and is not being filed as part of this report.
* Filed herewith
+ Incorporated by reference to our filing on Form -8-A/A (No. 000-27662) filed
on July 9, 2003.
(b) Reports on Form 8-K
None
18
IPC HOLDINGS, LTD.
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.
IPC HOLDINGS, LTD.
------------------
(REGISTRANT)
DATE JULY 29TH, 2003 /s/ James P. Bryce
-------------------------------------------------
JAMES P. BRYCE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DATE JULY 29TH , 2003 /s/ John R. Weale
-------------------------------------------------
JOHN R. WEALE
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
19
EXHIBIT INDEX
Unless otherwise indicated, exhibits are incorporated by reference to the
corresponding numbered exhibits to the Company's Registration Statement on
Form S-1 (Registration No. 333-00088).
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Memorandum of Association of the Company
3.2 + Amended and Restated Bye-laws of the Company
3.3 Form of Memorandum of Increase of Share Capital
10.1 * Credit Agreement between IPCRe Limited, Bank One N.A. and other Lenders named therein
11.1 * Reconciliation of basic and diluted net income per common share ("EPS")
31.1 * Certification by Registrant's Chief Executive Officer, as required by Section 302 of the Sarbanes-
Oxley Act of 2002
31.2 * Certification by Registrant's Chief Financial Officer, as required by Section 302 of the Sarbanes-
Oxley Act of 2002
32.0 Certification, as required by Section 906 of the Sarbanes-Oxley Act of 2002. This is being furnished solely
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections A and B of Section 1350, Chapter 63 of Title
18, United States Code) and is not being filed as part of this report.
* Filed herewith
+ Incorporated by reference to our filing on Form 8-A/A (No. 000-27662) filed
on July 9, 2003.
20