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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended September 30, 1996.
COMMISSION FILE NUMBER 0-27216
LASALLE RE HOLDINGS LIMITED
(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.)
CONTINENTAL BUILDING, 25 CHURCH STREET, HAMILTON HM 12, BERMUDA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER: 441-292-3339
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON SHARES, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS)
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. [X] Yes [_] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S) 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X] (Amended by Exch
Act Rel No. 28869, eff. 5/1/91.)
The aggregate market value of the shares of all classes of voting stock of
the registrant held by non-affiliates of the registrant on December 12, 1996
was approximately $441,832,719, computed upon the basis of the closing sales
price of the Common Shares on that date. For the purposes of this computation,
shares held by directors (and shares held by any entities in which they serve
as officers) and officers of the registrant have been excluded. Such exclusion
is not intended, nor shall it be deemed to be an admission that such persons
are affiliates of the registrant.
As of December 12, 1996, there were outstanding 16,517,111 Common Shares of
$1.00 par value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
1. Excerpts from the Registrant's annual report to shareholders for the fiscal
year ended September 30, 1996 (the "1996 Annual Report").
2. The Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission not later than 120 days after the end of the
Registrant's fiscal year pursuant to Regulation 14A relating to the Annual
General Meeting of Shareholders scheduled to be held on February 28, 1997.
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LASALLE RE HOLDINGS LIMITED
TABLE OF CONTENTS
PAGE
ITEM NUMBER
- ---- ------
PART I
1.Business................................................................. 2
2.Properties............................................................... 15
3.Legal Proceedings........................................................ 15
4.Submission of Matters to a Vote of Security Holders...................... 15
Executive Officers of the Registrant..................................... 15
PART II
5.Market for the Registrant's Common Stock and Related Stockholder
Matters................................................................... 16
6.Selected Financial Data................................................. 17
7.Managements' Discussion and Analysis of Financial Condition and Results
of Operations............................................................. 18
8.Financial Statements and Supplementary Data............................. 18
9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...................................................... 18
PART III
10.Directors and Executive Officers........................................ 18
11.Executive Compensation.................................................. 18
12.Security Ownership of Certain Beneficial Owners and Management.......... 18
13.Certain Relationships and Related Transactions.......................... 19
PART IV
14.Exhibits, Financial Statement Schedules, and Reports on Form 8-K........ 19
1
PART 1
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. Some forward-looking statements may be identified by use of terms
such as "believes", "anticipates", "intends", or "expects". These forward-
looking statements relate to the plans and objectives of LaSalle Re Holdings
Limited ("the Company") for future operations, including the Company's
objective to seek annualized returns on shareholders' equity of 20%-25% and
the Company's policy to distribute as dividends 50%-60% of the Company's net
income from the prior fiscal year. In light of the risks and uncertainties
inherent in all future projections, the inclusion of forward-looking
statements in this report should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will
be achieved. Numerous factors could cause the Company's actual results to
differ materially from those in the forward-looking statements, including the
following: (i) the occurrence of catastrophic events with a frequency or
severity exceeding the Company's estimates; (ii) a decrease in the level of
demand for property catastrophe reinsurance; (iii) any lowering or loss of one
of the financial ratings of the Company's subsidiary, LaSalle Re Limited
("LaSalle Re"), or the Company's non-admitted status in the United States
jurisdictions; (iv) a decrease in the cession of business from CNA Financial
Corporation (together with its affiliates, "CNA") to the Company; (v) loss of
the services of any of the Company's executive officers; (vi) the termination
of any of the Company's service agreements; (vii) the passage of federal or
state legislation subjecting the Company to supervision or regulation in the
United States; (viii) challenges by insurance regulators in the United States
or the United Kingdom to the Company's claim of exemption from insurance
regulation under current laws; or (ix) a contention by the United States
Internal Revenue Service that the Company or LaSalle Re is engaged in the
conduct of a trade or business within the U.S. The foregoing review of
important factors should not be construed as exhaustive; the Company
undertakes no obligation to release publicly the results of any future
revisions it may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF THE BUSINESS
The Company writes high severity, low frequency reinsurance on a worldwide
basis through its subsidiary, LaSalle Re. The Company primarily underwrites
property catastrophe reinsurance and also seeks to take advantage of pricing
opportunities that may occur in other lines of reinsurance. These lines
currently include property risk excess, property pro rata treaty, casualty
clash, marine, crop hail, aviation and satellite.
The Company was incorporated on September 20, 1995 under the laws of Bermuda
to act as an investment holding company. LaSalle Re was incorporated on
October 26, 1993 under the laws of Bermuda to capitalize on the opportunity
created by an imbalance between the supply of and demand for property
catastrophe reinsurance, which resulted in an increase in premiums from pre-
1993 levels. The Company believes that the decrease in supply of property
catastrophe capacity was attributable to the withdrawal, in whole or in part,
of certain reinsurers, including syndicates at Lloyd's of London ("Lloyd's"),
from the property catastrophe market. Such withdrawals followed a succession
of property catastrophe losses by those reinsurers that began in 1987 and
culminated with hurricane Andrew.
LaSalle Re has two wholly owned subsidiaries, LaSalle Re (Services) Limited
("LaSalle Re Services"), which acts as a representative office for the Company
in the UK, and LaSalle Re Corporate Capital Ltd. ("LaSalle Re Capital"), which
was formed to provide capital support to selected Lloyd's syndicates
commencing in January 1997.
In November 1995, the Company and LaSalle Re consummated an offer (the
"Exchange Offer") pursuant to which, among other things, the founding
shareholders of LaSalle Re (the "Founding Shareholders") exchanged their
capital stock of LaSalle Re for common shares of the Company (the "Common
Shares") and,
2
in certain circumstances, exchangeable non-voting shares of LaSalle Re (the
"Exchangeable Non-Voting Shares"). The Exchangeable Non-Voting Shares are held
by certain Founding Shareholders who would otherwise hold, or cause another
shareholder to hold, directly, indirectly or constructively, in excess of 9.9%
of the voting power of the Company or LaSalle Re. The Exchangeable Non-Voting
Shares are exchangeable, at the option of the holder, for Common Shares on a
one-for-one basis, unless the board of directors of the Company (the "Board")
determines that such exchange may cause actual or potential adverse tax
consequences to the Company or any shareholder. The Exchangeable Non-Voting
Shares will at all times rank as to assets, dividends and in all other
respects on a parity with the common shares of LaSalle Re, except that they do
not have the right to vote on any matters except as required by Bermuda law
and in connection with certain actions by the Company.
On November 27, 1995, the Company and certain Founding Shareholders also
consummated an initial public offering of 4,312,500 Common Shares (the
"Offerings"). Of these shares, 2,920,500 were sold by Founding Shareholders
and 1,392,000 by the Company. The proceeds from the sale of 1,392,000 shares
sold by the Company were used to enable LaSalle Re to redeem shares of its
capital stock (the "Redemption").
Since the consummation of the Exchange Offer, the Offerings and the
Redemption, the Company owned 100% of the outstanding voting stock which
constituted approximately 63% of the outstanding capital stock of LaSalle Re.
The Exchange Offer was accounted for as if it were a pooling of interests of
combining enterprises under common control.
In December 1996, certain selling shareholders of the Company consummated a
secondary public offering of 3,910,000 Common Shares. The Company did not
receive any of the proceeds from the sale of the Common Shares. Upon
completion of the secondary offering, the Company owned approximately 73% of
the outstanding capital stock of LaSalle Re, or 100% of the outstanding voting
stock of LaSalle Re.
BUSINESS SEGMENTS
The Company writes high severity, low frequency reinsurance on a worldwide
basis through its subsidiary, LaSalle Re. The Company primarily writes
property catastrophe reinsurance and also writes selected other lines of
reinsurance when it believes that market conditions are favorable. These lines
currently include property risk excess, property pro rata treaty, casualty
clash, marine, crop hail, aviation and satellite.
The following table sets forth the Company's net premiums written and number
of contracts written by type of reinsurance for the periods indicated (dollars
in millions):
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
---------------------- ----------------------
NET PREMIUMS NUMBER OF NET PREMIUMS NUMBER OF
TYPE OF REINSURANCE WRITTEN CONTRACTS WRITTEN CONTRACTS
- ------------------- ------------ --------- ------------ ---------
Property catastrophe reinsurance:
Excess of loss................. $122.4 832 $135.7 773
Pro rata....................... 42.2 10 42.8 10
Other lines of business:
Property--risk excess and pro
rata.......................... 9.7 70 5.3 59
Casualty clash................. 3.0 30 2.6 27
Marine......................... 4.6 17 3.1 4
Miscellaneous.................. 4.8 36 6.4 20
Adjustments and reinstatement
premiums...................... 3.5 -- 6.0 --
------ --- ------ ---
Total........................ $190.2 995 $201.9 893
====== === ====== ===
Property Catastrophe
The largest portion of the Company's business consists of property
catastrophe excess of loss contracts. Property catastrophe excess of loss
reinsurance provides coverage when total losses and loss expenses from a
3
single occurrence of a covered peril under a portfolio of primary reinsurance
contracts exceed the attachment point specified in the reinsurance contract
with the primary insurer. Some of the Company's property catastrophe excess of
loss policies limit coverage to one occurrence in a policy year, but most
policies provide for coverage of a second occurrence after the payment of a
reinstatement premium. The Company also writes a minimal amount of aggregate
property catastrophe excess of loss contracts, which cover more than one
catastrophe with one attachment point.
The Company writes pro rata of property catastrophe reinsurance treaties when
it believes that rates and volume are attractive. In such programs, the Company
assumes a specified proportion of the exposure under a portfolio of excess of
loss property catastrophe reinsurance contracts written by the ceding reinsurer
and receives an equal proportion of the premium received by the cedent. The
cedent generally receives a ceding commission, based upon the premiums ceded to
the reinsurer, and may also be entitled to receive a profit commission based on
the ratio of losses, loss expenses and the reinsurer's expenses to premiums
ceded. The Company generally requires that its pro rata of property catastrophe
contracts have aggregate exposure limits per occurrence on a zonal basis. The
Company generally obtains detailed information concerning each underlying
contract and the exposures underlying the risks it assumes and audits the
premiums associated with the cessions. However, the Company is dependent upon
the cedent's underwriting, pricing and claims administration to yield an
underwriting profit.
Other Lines of Business
The Company's property risk excess of loss contracts cover a cedent's loss on
a single "risk" in excess of the cedent's attachment point, rather than
covering multiple risks as does property catastrophe reinsurance. A "risk" in
this context might mean the insurance coverage on one building or a group of
buildings or the insurance coverage under a single policy, which the reinsured
treats as a single risk. In property pro rata reinsurance treaties, the Company
assumes a proportional part of the original premiums and losses of the
reinsured on non-catastrophe reinsurance contracts. In property pro rata
reinsurance, the reinsurer generally pays the ceding company a ceding
commission. The ceding commission generally is based on the ceding company's
cost of acquiring the business being reinsured (including commissions, premium
taxes, assessments and miscellaneous administrative expense) and also may
include a profit factor.
In addition to property risk excess of loss and pro rata, the Company also
writes other lines of reinsurance, which currently include casualty clash,
marine, crop hail, aviation and satellite. Casualty clash reinsurance protects
cedents against an aggregation of casualty losses incurred by multiple insureds
from a single event. In addition to aggregation of losses, casualty clash
coverage protects a reinsured against a single extraordinary loss caused by a
judgment in excess of the original policy limit issued (including punitive
damages) or an action by an original insured against the insurer for "bad
faith" handling of a claim (extra-contractual obligations). Marine and aviation
risks involve property damage, although they may also involve casualty
coverages arising from the same event causing the property claims. Crop hail
reinsurance provides property coverage for hail damage to crops. Satellite
reinsurance protects the reinsured primarily from losses relating to launches,
improper orbits and other losses in the early stages of the satellite's life.
The Company has formed LaSalle Re Capital to provide capital support to
selected Lloyd's syndicates commencing in January 1997. The Company expects
that such support will be provided through letters of credit or a deposit of
funds at Lloyd's. The Company is currently negotiating with three syndicates.
One of such syndicates writes direct and facultative property insurance; one
writes marine insurance and reinsurance; and one writes professional indemnity,
directors and officers' insurance and bankers blanket bond business. There can
be no assurance that any such negotiations will result in a definitive
agreement. LaSalle Re Capital's provision of capital support to Lloyd's
syndicates is subject to approval by the appropriate regulatory authorities.
Geographic Diversification
The Company seeks to diversify its property catastrophe exposures across
geographic zones in order to optimize its spread of risk. For the year ended
September 30, 1996, 41.7% of the Company's net premiums
4
written represented U.S.-based risks. Within the United States, the Company's
largest exposure on a zonal basis is the West Coast, including Hawaii and
Alaska. The remaining 58.3% of net premiums written was spread in other
territories around the world. This distribution of risk is subject to change
and is dependent upon rates available in various zones. The Company intends to
continue its expansion in international writings to further diversify its
exposures. As a result of long-term relationships between the Company's
management and certain clients and brokers, the Company has developed a strong
base of regional business in the U.S. This business assists the Company in
diversifying its U.S.-based risks and makes more efficient use of its capital
by limiting multi-zone exposures. In the year ended September 30, 1996, this
regional business represented a significant component of the Company's U.S.-
based net premiums written.
The following table sets forth the percentage of the Company's net premiums
written allocated to the zone of exposure at the dates indicated (dollars in
millions):
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
---------------------- ----------------------
NET PERCENTAGE OF NET PERCENTAGE OF
PREMIUMS NET PREMIUMS PREMIUMS NET PREMIUMS
GEOGRAPHIC AREA WRITTEN WRITTEN WRITTEN WRITTEN
- --------------- -------- ------------- -------- -------------
United States.................... $ 79.4 41.7% $ 91.6 45.4%
Europe (excluding the U.K.)...... 22.0 11.6 21.0 10.4
United Kingdom................... 16.3 8.6 14.1 7.0
Japan............................ 8.0 4.2 7.6 3.8
Australasia...................... 11.0 5.8 9.8 4.8
Worldwide........................ 22.0 11.6 26.9 13.3
Worldwide (excluding the
U.S.)(1)........................ 11.5 6.0 8.8 4.4
Other(2)......................... 16.5 8.6 16.1 8.0
Adjustments and reinstatements... 3.5 1.9 6.0 2.9
------ ----- ------ -----
Total........................ $190.2 100.0% $201.9 100.0%
====== ===== ====== =====
- --------
(1) The category "Worldwide (excluding the U.S.)" consists of contracts that
cover more than one zone (none of which is in the U.S.). The exposure in
this category for business written to date is predominantly from Europe and
Japan.
(2) Other relates to other lines of reinsurance, including casualty clash,
marine, crop hail, aviation and satellite.
Program Limits
The following table sets forth the number of the Company's property
catastrophe excess of loss programs written in the year ended September 30,
1996 by aggregate excess of loss program limits:
NUMBER OF
PROGRAMS
---------
Greater than $15 million but less than $20 million.............. 2
$10-15 million.................................................. 15
$7.5-10 million................................................. 18
$5-7.5 million.................................................. 36
$2.5-5 million.................................................. 70
Less than $2.5 million.......................................... 209
---
Total....................................................... 350
===
UNDERWRITING
The Company's principal underwriting strategy is to underwrite property
catastrophe exposures within clearly defined parameters that permit thorough
analysis and appropriate pricing of each of the Company's
5
reinsurance contracts. Underwriting decisions are made following analysis of
each reinsurance contract based on the expected incremental return on equity
in relation to the Company's overall portfolio of reinsurance contracts.
The Underwriting/Actuarial Committee of the Company's Board has set limits
on the Company's aggregate exposure. The Company uses various methods to
evaluate and monitor its exposure to loss. The Company diversifies its
property catastrophe exposures worldwide and within each geographic zone and
also maintains exposure limits within each geographic zone. Aggregate
exposures also are controlled and monitored on a real-time basis using
computer-based rating and control systems. The Company imposes attachment
points in its contracts at a level that is expected to exceed frequency of
loss and limits aggregate risk exposure. In addition, the Company regularly
reevaluates its pricing to ensure that general market conditions remain
attractive.
The Company obtains information from brokers, potential cedents and other
sources, as appropriate, in order to make informed underwriting decisions. A
potential cedent generally is not accepted without a thorough examination of
its historical record, management, business strategy, underwriting policies
and risk management systems. The Company also seeks to select clients with
disciplined catastrophe management programs. The Company seeks to build long-
term relationships with its clients because the Company believes that it can
underwrite renewal business with greater precision.
The Company uses computer-based modeling systems to estimate exposure to
loss and evaluate pricing adequacy of its reinsurance programs. These models
are also used in the analysis of projected return on equity and the monitoring
of aggregate exposures within geographic zones.
For U.S.-based risks, the Company has developed a proprietary model called
L-CAM(TM) (LaSalle Catastrophe Analysis Model). L-CAM(TM) incorporates
commercially available catastrophe simulation models and the Company's
internally-generated models. The commercially available models include (i)
CATMAP(TM), which uses market share data derived from zip code and/or country
aggregate data to develop individual contract and portfolio loss statistics
and (ii) IRAS(TM), which derives loss statistics based on hypothetical risk
location determined from the most detailed information provided by the primary
insurer. Models developed by the Company and used in L-CAM(TM) include (i) the
Modified Historical Event Model, which fits a Pareto loss distribution to over
45 years of catastrophe loss data, adjusted for inflation and demographic
shifts, (ii) the Market Loss Pricing Model, which uses underwriting-zone
market share information to develop attachment and exhaustion probabilities
from which pricing input is determined and (iii) the Industry Peer Model,
which is a portfolio management tool selecting treaties in force with similar
characteristics for pricing considerations.
For non-U.S. based property catastrophe risks, the Company uses modeling
techniques which incorporate Pareto loss distributions with exposure rating
based on aggregate liabilities per geographic zone. The Company also examines
experience ratings of adjusted historical loss events and, for some non-U.S.
territories, uses a commercially available software program produced by EQECAT
International, which utilizes probabilistic and deterministic loss
calculations.
For the other lines of reinsurance, the Company uses internal rating
techniques that incorporate, among other things, exposure and experience
ratings and thorough analysis of loss ratios and underwriting expenses
associated with the business to be reinsured. The Company carefully structures
the terms and conditions of its contracts to restrict coverage to the specific
perils intended.
The results of these analyses are measured against the Company's current
portfolio and other known treaties in the market and combined with
management's knowledge of the client and the current reinsurance market
environment. Pricing and participation decisions are then made based on the
estimated exposure of losses and the potential impact of each contract on
incremental return on equity.
Underwriting services are provided to the Company by CNA (Bermuda) Services
Ltd. ("CNA Bermuda") pursuant to an underwriting services agreement. A staff
of five professionals with extensive experience in the
6
reinsurance industry currently serve as the Company's underwriting team in
Bermuda. The Company also has access to the reinsurance expertise of CNA in
terms of underwriting databases and technology, a staff of specialized
professionals and a worldwide network of contacts in the reinsurance market.
In addition, the underwriting of all new exposures is reviewed by the Chief
Executive Officer or Chief Underwriting Officer of the Company.
MARKETING
The Company markets its reinsurance products worldwide primarily through
reinsurance brokers. By marketing its products primarily through the broker
network, the Company avoids the expense of establishing and maintaining
worldwide offices and marketing operations. The Company believes that its
broker relationships permit it to obtain business and monitor developments in
various lines of reinsurance in order to increase its writings when market
conditions in those lines are favorable.
The Company maintains an office in London, England through LaSalle Re
Services. LaSalle Re Services introduces prospective customers to the Company
and provides an important liaison with brokers in the London Market, assisting
in the distribution of marketing literature and collecting information for
LaSalle Re on demand and developments in the London reinsurance market
generally. In addition, LaSalle Re Services plays a key role in the Company's
marketing efforts in Europe.
The Company strives to develop strong relationships with its brokers and
clients. Retention of clients permits the Company to use experience regarding
a client's underwriting practices and risk management systems to underwrite
its own business with greater precision. The Company also targets brokers and
clients that it believes will enhance the risk/return composition of its
portfolio, are capable of supplying detailed and accurate underwriting data
and can potentially add diversification to the Company's book of business.
Additionally, the Company believes that its level of capital and surplus
offers financial security and demonstrates to brokers and clients a high level
of commitment to property catastrophe reinsurance.
The Company focuses on providing high quality service by promptly responding
to underwriting submissions, designing customized programs and offering lead
terms when circumstances warrant and paying valid claims within an average of
five days. The Company believes that it has established a reputation with its
brokers and clients for high quality service.
The Company received approximately 3,423 contract submissions in the year
ended September 30, 1996 as compared to 3,667 in the year ended September 30,
1995. The Company is highly selective in accepting risks, extending coverage
on only 995 contracts, or 29.1% of the program submissions received, in the
year ended September 30, 1996. Subsidiaries and affiliates of Aon Corporation
(together with its affiliates, "Aon") were brokers for approximately 12.4%,
10.6% and 11.9% of the Company's net written premiums in the years ended
September 30, 1996, 1995 and the period ended September 30,1994 respectively.
Guy Carpenter & Company, Inc., together with its affiliates, generated 16.6%,
21.1% and 20.3% of the Company's net premiums written for the years ended
September 30, 1996, 1995 and the period ended September 30, 1994. No other
broker accounted for more than 10% of the Company's net premiums written for
the years ended September 30, 1996, 1995 or the period ended September 30,
1994.
Consistent with its emphasis on disciplined underwriting practices, the
Company is not obligated to accept any business from any intermediary,
including Aon, CNA or LaSalle Re Services. No intermediary has the authority
to bind the Company on any business.
RESERVES
The Company establishes loss reserves for the ultimate settlement costs of
all losses and loss expenses incurred with respect to business written by it.
Generally accepted accounting principles ("GAAP") does not
7
permit the Company to establish reserves with respect to its property
catastrophe reinsurance until an event occurs that may give rise to a claim.
As a result, only loss reserves applicable to losses incurred up to the
reporting date may be set aside, with no allowance for the provision of a
contingency reserve to account for expected future losses.
The derivation of loss reserves involves the actuarial and statistical
projection at any given time of the Company's expectations of the ultimate
settlement of loss and loss expenses. These loss projections become necessary,
in large part, as a result of time lags associated with reinsurance loss
reporting. These lags are principally attributable both to claimant delays in
reporting to the primary carrier as well as primary and reinsurance company
delays in gathering statistics and subsequently reporting cession details to
the Company. As a result, in addition to the loss estimates reported by
primary insurers on known claims, actuarially projected estimates of reserves
applicable to both the development (growth) of known claims as well as the
emergence of new claims reports related to losses events which have been
incurred but not reported ("IBNR losses") prior to the evaluation date must be
developed. In addition to the impact of reporting lags upon the accuracy of
estimated loss liabilities, other factors have tremendous impact upon the
ultimate settlement of insured losses, including loss cost inflation, trends
in the amount of insurance purchased to the full value of insured properties
and trends in the size and demographics of insured populations. The loss
reserve estimates are not precise in that they necessarily involve an attempt
to predict the ultimate outcome of future loss reporting and settlement
activities.
To establish appropriate loss reserves, the Company uses a combination of
data sources and commercially available catastrophe models. These models are
employed upon the occurrence of an event to arrive at estimates of losses to
the Company. In addition, grouped and individual contract data illustrating
the loss development history for prior similar events, as well as actual loss
emergence experience of the underlying insurers, are analyzed to assist in the
determination of suitable loss reserves. The data derived from the industry
sources, and supplemented with the client specific information, are then used
to arrive at estimates of loss emergence patterns and initial estimates of
ultimate loss rates. These parameters are then applied, on a contract by
contract basis, to arrive at estimates of ultimate losses. These loss
estimates are then supplemented with the results derived from the catastrophe
models, and final loss estimates are selected and reduced for losses reported
to the Company to arrive at IBNR losses as of the date of evaluation.
The reserves are reviewed regularly by the Company's actuaries and executive
officers and the Board of Directors of LaSalle Re, and to the extent they
develop upward or downward, the results are reflected in the net income in the
period in which the reserve deficiency or redundancy is evaluated. There can
be no assurance that the final loss settlements will not exceed the Company's
loss reserve and have a material adverse effect upon the Company's financial
condition and results of operations in a particular period.
The Company determines its reserves with the assistance of actuarial staff
provided by Aon Risk Consultants (Bermuda) Ltd. ("Aon Bermuda") pursuant to an
administrative services agreement (the "Administrative Services Agreement").
INVESTMENTS
Composition of Portfolio
The Board has implemented a set of investment guidelines designed to meet
the Company's liquidity requirements and return objectives. The guidelines are
intended to be conservative, stressing preservation of principal, yield
enhancement through the identification of value and market inefficiencies,
market liquidity and risk reduction. The primary objective of the investment
portfolio, as set forth in the guidelines, is to maximize investment returns
consistent with these policies. The Company's investment guidelines are
reviewed periodically and are subject to change at the discretion of the
Board.
8
The following table summarizes the composition of the Company's investment
portfolio as of September 30, 1996, 1995 and 1994 (dollars in millions):
SEPTEMBER 30
---------------------------
1996 1995
------------- ------------
FAIR % OF FAIR % OF
TYPE OF INVESTMENT VALUE TOTAL VALUE TOTAL
------------------ ------- ----- ------ -----
Fixed maturities:
Non-U.S. government bonds and agencies..... $ 75.3 14.0% $ 63.3 12.1%
U.S. government bonds and agencies......... 90.1 16.8 4.9 0.9
Corporate bonds............................ 325.1 60.5 371.8 71.2
Short-term investments..................... 0.0 0.0 0.0 0.0
------- ----- ------ -----
Subtotal................................. 490.5 91.3 440.0 84.2
Cash and cash equivalents.................. 47.0 8.7 82.4 15.8
------- ----- ------ -----
Total investments........................ $ 537.5 100.0% $522.4 100.0%
======= ===== ====== =====
Quality of Portfolio
The Company has investment guidelines which restrict investments in
securities below an "AA" grade rating to 15% of the total portfolio, and only
10% of the total portfolio can be invested in "BBB" grade rating. In addition,
the guidelines restrict investments in a single issuer to no greater than 5%
of the market value of the portfolio (except for U.S. and U.K. Government
issues) and, with respect to country of issue, to no greater than 25% of the
market value of the portfolio, except for U.S. and supernational borrowers.
The following table summarizes the composition of the Company's fixed
maturity portfolio by rating as assigned by S&P or Moody's as of September 30,
1996 and 1995 (dollars in millions):
SEPTEMBER 30,
----------------------------
1996 1995
------------- -------------
FAIR % OF FAIR % OF
RATING VALUE TOTAL VALUE TOTAL
------ ------ ------ ------ ------
AAA......................................... $310.5 63.3% $305.4 69.4%
AA.......................................... 126.1 25.7 134.6 30.6
A........................................... 53.9 11.0 -- --
------ ------ ------ ------
$490.5 100.0% $440.0 100.0%
====== ====== ====== ======
Maturity and Duration of Portfolio
The Company's investment guidelines specify a one to four year duration for
the Company's investment portfolio, reflecting the need to maintain a liquid,
short duration portfolio to assure the Company's ability to pay claims on a
timely basis. The Company currently has a target duration for the portfolio of
three years and at September 30, 1996, the modified average duration of the
portfolio was 2.57 years. The Company expects to periodically reevaluate the
target duration in light of market conditions, including the level of interest
rates, and estimates of the duration of its liabilities.
The following table summarizes the contractual maturities of the Company's
fixed maturity portfolio as of September 30, 1996 and 1995 (dollars in
millions):
SEPTEMBER 30,
--------------------------
1996 1995
------------ ------------
Due in less than one year..................... $ 99.8 20.4% $ 45.1 10.3%
Due in one to five years...................... 331.8 67.6 353.3 80.3
Due in five to ten years...................... 58.9 12.0 41.6 9.4
Greater than 10 years......................... -- -- -- --
------ ----- ------ -----
$490.5 100.0% $440.0 100.0%
====== ===== ====== =====
9
Equity Securities/Real Estate
Pursuant to the Company's investment guidelines, the Company's investment
portfolio may not contain any direct investments in real estate, mortgage loans
or equity securities.
Foreign Currency Exposures
At present, the Company's fixed maturity portfolio is composed only of
securities denominated in U.S. dollars. In the future, the Company's investment
managers may be instructed to invest some of the fixed maturity portfolio in
securities denominated in currencies other than U.S. dollars based upon the
business the Company anticipates writing, the exposures and claims reserves on
the Company's books and the local currency outlook compared to that of the U.S.
dollar. The primary risk exposures and premiums receivable are denominated in
U.S. dollars, European currencies, Japanese yen and Australian dollars.
In an effort to manage its exposure to foreign currency exchange rate
fluctuations, the Company from time to time enters into foreign exchange
contracts. These contracts generally involve the exchange of one currency for
U.S. dollars at some future date. At September 30, 1996, the Company has a
notional principal amount outstanding of approximately $25.2 million in foreign
exchange contracts as compared to $6.1 million at September 30, 1995. The
carrying value of these contracts at September 30, 1996 approximated their fair
value. Realized and unrealized gains or losses on these contracts are recorded
as an income item in the Company's consolidated statement of operations.
Foreign exchange contracts at September 30, 1996 generally had maturities of
six months or less and related to major Western currencies.
Diversification and Liquidity
Pursuant to the investment guidelines of the Company, no more than 25% of the
fair market value of the Company's investment portfolio may be invested in the
securities of any sovereign government or agency issuing in its own currency
(except for the U.S. and supernational entities). Additionally, no more than 5%
of the fair market value of the investment portfolio may be invested in
securities issued by any single issuer.
Investment Manager
LaSalle Re has entered into an investment management agreement (the
"Investment Management Agreement") with Aon Advisors (UK) Limited ("Aon
Advisors"). Pursuant to the terms of the Investment Management Agreement, the
Company pays Aon Advisors a fee equal to 0.35% per annum of the first $100
million of assets under management, 0.25% per annum of the next $100 million of
assets under management in excess of $100 million and 0.15% per annum of any
additional assets under management in excess of $200 million. The terms of the
Investment Management Agreement were determined in arm's length commercial
negotiations. The performance of, and the fees paid to, Aon Advisors under the
Investment Management Agreement are reviewed periodically by the Board.
COMPETITION
The property catastrophe reinsurance industry is highly competitive. The
Company competes, and will continue to compete, with major U.S. and non-U.S.
insurers and property catastrophe reinsurers, including other Bermuda based
property catastrophe reinsurers and CNA, some of which have greater financial
and organizational resources than the Company. There may be established
companies or new companies of which the Company is not aware which may be
planning to enter the property catastrophe reinsurance market or existing
reinsurers which may be planning to raise additional capital. In addition,
Lloyd's began to allow capital from corporate investors in 1994. Competition in
the types of reinsurance business that the Company underwrites is based on many
factors, including rates and other terms and conditions offered, services
provided, ratings assigned by independent rating agencies, speed of claims
payment and reputation, the perceived financial strength and experience of the
reinsurer in the line of reinsurance to be written.
10
In April 1996, LaSalle Re received an initial rating from A.M. Best Company,
Inc. ("A.M. Best") of "A-" (Excellent). Prior to that time, LaSalle Re was not
rated by any rating agency. The rating received by LaSalle Re represents the
fourth highest in the rating scale used by A.M. Best. In October 1996, LaSalle
Re received an initial rating of its claims paying ability from Standard &
Poor's Corporation ("S&P") of "A" (Good). The rating received by LaSalle Re
represents the sixth highest in the rating scale used by S&P. Such ratings are
based on factors of concern to cedents and brokers and are not directed toward
the protection of investors. Such ratings are neither a rating of securities
nor a recommendation to buy, hold or sell such securities. While the Company
believes that its new ratings will not be a major competitive advantage or
disadvantage, some of the Company's principal competitors have higher ratings
than the Company. Insurance ratings are one factor used by brokers and cedents
as a means of assessing the financial strength and quality of reinsurers. In
addition, a cedent's own rating may be adversely affected by the lack of a
rating of its reinsurer. Therefore, a cedent may elect to reinsure with a
competitor of the Company that has a higher insurance rating. Similarly, the
lowering or loss of a rating in the future could adversely affect the
Company's ability to compete.
The Company is not licensed or admitted as an insurer in any jurisdiction
other than Bermuda and has no plans to become so licensed or admitted;
however, LaSalle Re Capital may become a corporate member of a Lloyd's
syndicate. Because jurisdictions in the United States do not permit insurance
companies to take credit for reinsurance obtained from unlicensed or non-
admitted insurers on their statutory financial statements unless security is
posted, the Company's reinsurance contracts generally require it to post a
letter of credit or provide other security for outstanding claims and/or
unearned premiums. In order to post these letters of credit, the Company
generally is required to provide the issuing banks with collateral equal to
such amounts. As a result of the size of the Company's capitalization, the
Company does not believe that its non-admitted status in any jurisdiction has,
or should have, a material adverse effect on its ability to compete or obtain
business in the property catastrophe reinsurance market in which it operates,
principally because many of the Company's competitors are not admitted or
licensed in United States jurisdictions. However, there can be no assurance
that increased competitive pressure from current reinsurers and future market
entrants or the Company's non-admitted status will not adversely affect the
Company.
EMPLOYEES
The Company has three employees, which are Mr. Blake, Chairman, Chief
Executive Officer and President of the Company, Mr. Cook, Chief Financial
Officer and Treasurer of the Company and the Company's Investor Relations
Manager. In addition to their activities, the Company's day-to-day operations
are performed by affiliates of Aon and CNA pursuant to certain service
agreements. Under these agreements, 31 employees of Aon and CNA are currently
dedicated to the Company. The Company believes that its employee relations are
satisfactory. None of the Company's employees are subject to collective
bargaining agreements, and the Company knows of no current efforts to
implement such agreements at the Company.
REGULATION
Bermuda
The Insurance Act 1978, as amended, and Related Regulations (the "Insurance
Act"). As a holding company, the Company is not subject to Bermuda insurance
regulations. However, the Insurance Act, which regulates the insurance
business of LaSalle Re, provides that no person shall carry on an insurance
business in or from within Bermuda unless registered as an insurer under the
Insurance Act by the Minister of Finance (the "Minister"). The Minister, in
deciding whether to grant registration, has broad discretion to act as he
thinks fit in the public interest. The Minister is required by the Insurance
Act to determine whether the applicant is a fit and proper body to be engaged
in the insurance business and, in particular, whether it has, or has available
to it, adequate knowledge and expertise. The registration of an applicant as
an insurer is subject to its complying with the terms of its registration and
such other conditions as the Minister may impose at any time.
11
An Insurance Advisory Committee appointed by the Minister advises him on
matters connected with the discharge of his functions, and sub-committees
thereof supervise and review the law and practice of insurance in Bermuda,
including reviews of accounting and administrative procedures.
The Insurance Act imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
Minister powers to supervise, investigate and intervene in the affairs of
insurance companies. Other significant aspects of the Bermuda insurance
regulatory framework are set forth below.
Cancellation of Insurer's Registration. An insurer's registration may be
canceled by the Minister on certain grounds specified in the Insurance Act,
including failure of the insurer to comply with its obligations under the
Insurance Act or, if in the opinion of the Minister after consultation with the
Insurance Advisory Committee, the insurer has not been carrying on business in
accordance with sound insurance principles.
Independent Approved Auditor. Every registered insurer must appoint an
independent auditor who will annually audit and report on the Statutory
Financial Statements and the Statutory Financial Return of the insurer, both of
which, in the case of LaSalle Re, are required to be filed annually with the
Registrar of Companies (the "Registrar"), who is the chief administrative
officer under the Insurance Act. The independent auditor of the insurer must be
approved by the Minister and may be the same person or firm which audits the
insurer's financial statements and reports for presentation to its
shareholders.
Loss Reserve Specialist. LaSalle Re is registered as a Class 4 insurer. Every
Class 4 insurer is required to submit an annual loss reserve opinion when
filing the Annual Statutory Financial Return. This opinion must be issued by a
Loss Reserve Specialist. The Loss Reserve Specialist, who will normally be a
qualified casualty actuary, must be approved by the Minister.
Statutory Financial Statements. An insurer must prepare Annual Statutory
Financial Statements. The Insurance Act prescribes rules for the preparation
and substance of such Statutory Financial Statements (which include, in
statutory form, a balance sheet, income statement, statement of capital and
surplus and detailed notes thereto). The insurer is required to give detailed
information and analyses regarding premiums, claims, reinsurance and
investments. The Statutory Financial Statements are not prepared in accordance
with GAAP and are distinct from the financial statements prepared for
presentation to the insurer's shareholders under the Companies Act 1981 of
Bermuda, which financial statements may be prepared in accordance with GAAP.
LaSalle Re is required to submit the Annual Statutory Financial Statements as
part of the Annual Statutory Financial Return.
Minimum Solvency Margin. The Insurance Act provides that the statutory assets
of an insurer must exceed its statutory liabilities by an amount greater than
the prescribed minimum solvency margin which varies with the type of business
and class of registration of the insurer and the insurer's net premiums written
and loss reserve level. As a registered Class 4 insurer, LaSalle Re is required
to maintain a minimum solvency margin equal to the greatest of $100 million,
50% of its net premiums written and 15% of its loss and other certain insurance
reserves. At September 30, 1996, LaSalle Re's actual statutory capital and
surplus was $475.6 million, compared to its minimum solvency margin requirement
of $100 million.
Minimum Liquidity Ratio. The Insurance Act provides a minimum liquidity ratio
for general business. An insurer engaged in general business is required to
maintain the value of its relevant assets at not less than 75% of the amount of
its relevant liabilities. Relevant assets include cash and time deposits,
quoted investments, unquoted bonds and debentures, first liens on real estate,
investment income due and accrued, accounts and premiums receivable and
reinsurance balances receivable. There are certain categories of assets which,
unless specifically permitted by the Minister, do not automatically qualify as
relevant assets, such as unquoted equity securities, investments in and
advances to affiliates, real estate and collateral loans. The relevant
liabilities are total general business insurance reserves and total other
liabilities less deferred income tax and sundry liabilities (by interpretation,
those not specifically defined).
12
Annual Statutory Financial Return. LaSalle Re is required to file with the
Registrar an Annual Statutory Financial Return no later than four months after
its financial year end (unless specifically extended). The Annual Statutory
Financial Return includes, among other matters, a report of the approved
independent auditor on the Annual Statutory Financial Statements of the
insurer; a declaration of the statutory ratios; a solvency certificate; the
Annual Statutory Financial Statements themselves; the opinion of the approved
Loss Reserve Specialist and certain details concerning ceded reinsurance. The
solvency certificate and the declaration of the statutory ratios must be
signed by the principal representative and at least two directors of the
insurer who are required to state (among other matters) whether the Minimum
Solvency Margin and, in the case of the solvency certificate, the Minimum
Liquidity Ratio have been met, and the independent approved auditor is
required to state whether in its opinion it was reasonable for them to so
state and whether the declaration of the statutory ratios complies with the
requirements of the Insurance Act. The Statutory Financial Return must include
the opinion of the Loss Reserve Specialist in respect of the loss and loss
expense provisions of LaSalle Re. Where an insurer's accounts have been
audited for any purpose other than compliance with the Insurance Act, a
statement to that effect must be filed with the Statutory Financial Return.
Supervision, Investigation and Intervention. The Minister may appoint an
inspector with extensive powers to investigate the affairs of an insurer if
the Minister believes that an investigation is required in the interest of the
insurer's policyholders or persons who may become policyholders. In order to
verify or supplement information otherwise provided to him, the Minister may
direct an insurer to produce documents or information relating to matters
connected with the insurer's business.
If it appears to the Minister that there is a risk of the insurer becoming
insolvent or that it is in breach of the Insurance Act or any conditions
imposed upon its registration, the Minister may (among other matters) direct
the insurer not to take on any new insurance business; not to vary any
insurance contract if the effect would be to increase the insurer's
liabilities; not to make certain investments; to realize certain investments;
to maintain in Bermuda, or transfer to the custody of a specified bank,
certain assets; not to declare or pay any dividends or other distributions or
to restrict the making of such payments; and/or to limit its premium income.
Principal Representative. An insurer is required to maintain a principal
office in Bermuda and to appoint and maintain a principal representative in
Bermuda. For the purpose of the Insurance Act, the principal office of LaSalle
Re is at the Company's offices at 25 Church Street, Hamilton HM FX Bermuda,
and Andrew Cook is the principal representative of LaSalle Re. Without a
reason acceptable to the Minister, an insurer may not terminate the
appointment of its principal representative, and the principal representative
may not cease to act as such, unless 30 days' notice in writing to the
Minister is given of the intention to do so. It is the duty of the principal
representative, within 30 days of his reaching the view that there is a
likelihood of the insurer for which he acts becoming insolvent or its coming
to his knowledge, or his having reason to believe, that an "event" has
occurred, to make a report in writing to the Minister setting out all the
particulars of the case that are available to him. Examples of such an "event"
include failure by the reinsurer to comply substantially with a condition
imposed upon the reinsurer by the Minister relating to a solvency margin or a
liquidity or other ratio.
Class 4 Insurer. LaSalle Re is registered as a Class 4 insurer and, as such:
(i) is required to maintain a minimum statutory capital and surplus equal to
the greatest of $100 million, 50% of its net premiums written and 15% of its
loss and other insurance reserves; (ii) is required to file annually within
four months following the end of the relevant financial year with the
Registrar a Statutory Financial Return together with a copy of its Annual
Statutory Financial Statements and an opinion of a Loss Reserve Specialist in
respect of its loss and loss expense provisions; (iii) is prohibited from
declaring or paying any dividends during any financial year if it is in breach
of its minimum solvency margin or minimum liquidity ratio or if the
declaration or payment of such dividends would cause it to fail to meet such
margin or ratio (if it has failed to meet its minimum solvency margin or
minimum liquidity ratio on the last day of any financial year, LaSalle Re will
be prohibited, without the approval of the Minister, from declaring or paying
any dividends during the next financial year); (iv) is prohibited from
declaring or paying in any financial year dividends of more than 25% of its
total statutory capital and surplus (as shown on its previous financial year's
statutory balance sheet) unless it files with the Registrar an affidavit
stating that it will continue to meet the required margins; (v) is prohibited,
without the approval of
13
the Minister, from reducing by 15% or more its total statutory capital, as set
out in its previous year's financial statements; and (vi) is required, at any
time it fails to meet its solvency margin, within 30 days (45 days where total
statutory capital and surplus falls to $75 million or less) after becoming
aware of that failure or having reason to believe that such failure has
occurred to file with the Minister a written report containing certain
information.
Certain Other Considerations. As "exempted" companies, the Company and
LaSalle Re may not, without the express authorization of the Bermuda
legislature or a license granted by a Minister, participate in certain business
transactions, including: (i) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy
agreement for a term not exceeding 21 years); (ii) the taking of mortgages on
land in Bermuda in excess of $50,000; or (iii) the carrying on of business of
any kind in Bermuda, except in furtherance of the business of the Company
carried on outside Bermuda.
The Bermuda government actively encourages foreign investment in "exempted"
entities like the Company that are based in Bermuda but do not operate in
competition with local businesses. As well as having no restrictions on the
degree of foreign ownership, the Company and LaSalle Re are not currently
subject to taxes on their incomeor dividends or to any foreign exchange
controls in Bermuda. In addition, there currently is no capital gains tax in
Bermuda, and profits can be accumulated by the Company and LaSalle Re, as
required, without limitation.
United States, United Kingdom and Other
LaSalle Re is registered as an insurer and is subject to regulation and
supervision in Bermuda. LaSalle Re is not admitted or authorized to do business
in any jurisdiction except Bermuda. The insurance laws of each state of the
United States do not directly regulate the sale of reinsurance within their
jurisdictions by alien insurers, such as LaSalle Re. Nevertheless, the sale of
reinsurance by alien reinsurers, such as LaSalle Re, to insurance companies
domiciled or licensed in United States jurisdictions is indirectly regulated by
state "credit for reinsurance" laws that operate to deny financial statement
credit to ceding insurers unless the non-admitted alien reinsurer posts
acceptable security for ceded liabilities and agrees to certain contract
provisions (e.g., insolvency and intermediary clauses). Although the insurance
laws of United States jurisdictions generally exempt the business of
reinsurance from "doing business" laws, the Company conducts its business at
its principal offices in Bermuda and does not maintain an office in the United
States, and its personnel do not solicit, advertise, settle claims or conduct
other insurance activities in the United States. All policies are issued and
delivered and premiums are received outside the United States. The Company does
not believe that it is subject to the insurance laws of any state in the United
States.
From time to time, there have been congressional and other initiatives in the
United States regarding the supervision and regulation of the insurance
industry, including proposals to supervise and regulate alien reinsurers. While
none of these proposals has been adopted to date on either the federal or state
level, there can be no assurance that federal or state legislation will not be
enacted subjecting the Company to supervision and regulation in the United
States, which could have a material adverse effect on the Company. In addition,
no assurance can be given that if the Company were to become subject to any
laws of the United States or any state thereof or of any other country at any
time in the future, it would be in compliance with such laws.
LaSalle Re does not intend to maintain an office or to solicit, advertise,
settle claims or conduct other insurance activities in any jurisdiction other
than Bermuda where the conduct of such activities would require that LaSalle Re
be so admitted. Consistent with this policy, LaSalle Re established LaSalle Re
Services as a subsidiary in the United Kingdom to operate a London "contact
office" at the London Underwriting Center. LaSalle Re Services is not
registered as an insurer in England or in any other jurisdiction. The Company
believes that LaSalle Re Services is not required to be registered as an
insurance company in the United Kingdom, and that the activities of LaSalle Re
Services do not cause the Company to be subject to regulation as an insurance
company in the United Kingdom.
The Company has formed LaSalle Re Capital to provide capital support to
selected Lloyd's syndicates commencing in January 1997. LaSalle Re Capital may
become a corporate member of Lloyd's in the course of
14
December 1996 and underwrite as a member of Lloyd's syndicates as from January
1 1997, at which point it will become subject to various Lloyd's regulations.
ITEM 2. PROPERTIES
The Company is provided office space in Bermuda and London by Aon Bermuda
pursuant to the Administrative Services Agreement.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders of the Company during the
fourth fiscal quarter of the fiscal year ended September 30, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages, positions and certain other information
concerning the current executive officers of the Company.
NAME AGE POSITION
---- --- --------
Victor H. Blake 61 Chief Executive Officer and President
Guy D. Hengesbaugh 37 Executive Vice President and
Chief Underwriting Officer
Andrew Cook 34 Chief Financial Officer and Treasurer
Terry J. Alfuth 51 Senior Vice President
Victor H. Blake has been Chairman, Chief Executive Officer and President of
the Company since its organization in September 1995 and Chairman and Chief
Executive Officer of LaSalle Re, since May 1994. Mr. Blake has 37 years
experience in the insurance industry, concentrating primarily in reinsurance.
Mr. Blake served as Chairman and Chief Executive Officer of CNA International
Reinsurance Company Ltd. ("CNA Re"), a leading property and casualty insurer
operating in the London market, from its formation in 1976 until October 1995.
In addition, he acted as the chairman and chief executive officer of CNA
Reinsurance Group, from its formation in April 1994 until October 1995. CNA
Reinsurance Group includes CNA Re and the United States reinsurance operations
of CNA. Mr. Blake is the non-executive chairman of CNA Reinsurance Group. Mr.
Blake is also founder Chairman of the LUC Holdings Ltd, the shareholders of the
London Underwriting Centre, a marketplace housing many of the London market
insurers and reinsurers. He also served as a member of the Council of the
London Insurance and Reinsurance Market Association and its predecessor bodies
from 1977 to 1996.
Guy D. Hengesbaugh has been Executive Vice President and Chief Underwriting
Officer of the Company since its organization in September 1995 and Executive
Vice President and Chief Underwriting Officer of LaSalle Re since its
organization in October 1993. Mr. Hengesbaugh has ten years experience in
underwriting management with CNA in Chicago and London. Mr. Hengesbaugh is a
Vice President of Continental Casualty Company and an employee of CNA Bermuda
and his services are made available to the Company pursuant to an underwriting
services agreement.
Andrew Cook, a chartered accountant, has been Chief Financial Officer and
Treasurer of the Company since its organization in September 1995 and Chief
Financial Officer and Treasurer of LaSalle Re since its organization in October
1993. Mr. Cook was an employee of Aon from 1993 until October 1995. Mr. Cook
was employed by Becher and Carlson Risk Management Limited, a subsidiary of
American Re-Insurance Company, from
15
November 1990 to October 1993, where he was a Vice President responsible for a
portfolio of captive insurance companies. From December 1987 to October 1990,
Mr. Cook was an audit manager with Ernst & Young in Bermuda specializing in the
audit of insurance and reinsurance companies.
Terry J. Alfuth has been Senior Vice President, responsible for actuarial,
claims, human resources, and information services, of the Company and LaSalle
Re since September 1996. He joined LaSalle in September 1996 after eight years
with one of the Winterthur US Regional companies as Vice President/Risk
Management during which time he was instrumental in establishing a commercial
lines division. Mr. Alfuth has 29 years of experience in the property and
casualty insurance industry. He is a Fellow of the Casualty Actuarial Society,
a member of the American Academy of Actuaries and a graduate of the PMD program
at Harvard Graduate School of Business
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Common Shares were initially offered to the public on November 20, 1995
at a price of $19.25 per share. The Common Shares are quoted on the NASDAQ
National Market under the symbol "LSREF."
The following table sets forth, for the periods indicated, the high and low
sale prices for the Common Shares as reported by the NASDAQ National Market.
Such prices reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and do not necessarily represent actual transactions.
HIGH LOW
------- -------
Quarter ended December 31, 1995 (from November 20, 1995). $23.250 $19.500
Quarter ended March 31, 1996............................. 23.625 21.000
Quarter ended June 30, 1996.............................. 22.750 19.750
Quarter ended September 30, 1995......................... 25.500 21.000
Quarter ended December 31, 1996 (through December 12,
1996)................................................... 29.500 22.375
As of December 12, 1996, there were 58 holders of record of the Common Shares.
In April, July and October 1996, the Company paid dividends of $0.25, $0.25
and $0.25 per share to holders of its Common Shares. In October 1996, the
Company adopted a dividend policy pursuant to which it intends to distribute in
each fiscal year 50% to 60% of the Company's net income from the prior fiscal
year, if any, on a quarterly basis. The actual amount and timing of any future
dividends is at the discretion of the Board and is dependent upon the profits
and financial requirements of the Company as well as loss experience, business
opportunities and any other factors that the Board deems relevant. In addition,
if the Company has funds available for distribution, it may nevertheless
determine that such funds should be retained for the purposes of replenishing
capital, expanding premium writings or other purposes. In order for the Company
to pay dividends in excess of 50% of net income, the Company will have to
renegotiate certain terms of its credit facility. The Company is a holding
company whose principal source of income is cash dividends and other permitted
payments from LaSalle Re. The payment of dividends by LaSalle Re to the Company
is restricted under Bermuda law and regulation, including Bermuda insurance
law. Under the Insurance Act, LaSalle Re is prohibited from paying dividends of
more than 25% of its opening statutory capital and surplus unless it files an
affidavit stating that it will continue to meet the required solvency margin
and minimum liquidity ratio requirements and from declaring or paying any
dividends without the approval of the Minister of Finance if it failed to meet
its required margins in the previous fiscal year. The Insurance Act also
requires LaSalle Re to maintain a minimum solvency margin and minimum liquidity
ratio and prohibits dividends which would result in a breach of these
requirements. In addition, LaSalle Re is prohibited under the Insurance Act
from reducing its opening total statutory capital by more than 15% without the
approval of the Minister of Finance. As a result of these factors, there can be
no assurance that the Company's dividend policy will not change or that the
Company will declare or pay any dividends.
16
ITEM 6. SELECTED FINANCIAL DATA
The historical consolidated financial data presented below as of and for each
of the periods ended September 30, 1996, 1995 and 1994 were derived from the
Company's consolidated financial statements incorporated from the Company's
1996 Annual Report. The selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and related
notes thereto and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" also contained in the 1996 Annual Report.
PERIOD
OCTOBER 26,
YEAR ENDED YEAR ENDED 1993 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995(1) 1994(1)
------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
STATEMENT OF INCOME DATA
Net premiums written............... $ 190,151 $ 201,916 $ 133,327
Net premiums earned................ 195,141 170,370 76,989
Net investment income (net of
realized losses).................. 26,428 25,066 15,739
Loss and loss expenses incurred.... 51,477 60,397 49,801
Underwriting expenses.............. 27,268 22,988 8,686
Operating expenses (2)............. 13,373 7,603 4,342
Income before minority interest.... 129,451 104,448 29,899
Minority interest (3).............. 47,966 38,774 10,958
Net income......................... 81,485 65,674 18,941
Net income per share (4)........... $ 5.40 $ 4.51 $ 1.31
Weighted average shares outstanding
(5)............................... 23,967,870 23,170,680 22,852,910
Dividend per Common Share (6)...... $ 1.85 $ 4.62 --
OTHER DATA
Loss and loss expense ratio (7).... 26.4% 35.5% 64.7%
Expense ratio (7).................. 19.6% 17.1% 16.6%
Combined ratio (7)................. 46.0% 52.6% 81.3%
Return on average Combined Equity
(8)............................... 29.2% 26.6% 9.3%
Total statutory capital and surplus
(9)............................... $ 475,580 $ 390,683 $ 376,414
BALANCE SHEET DATA (AT END OF PERIOD)
Total investments and cash......... $ 537,504 $ 522,425 $ 409,738
Reinsurance balances receivable.... 70,625 86,146 50,307
Total assets....................... 634,374 636,547 481,424
Reserve for losses and loss
expenses.......................... 49,875 66,654 37,789
Reserve for unearned premiums...... 82,894 87,885 56,338
Minority interest (3).............. 179,470 147,389 140,838
Total shareholders' equity......... 307,448 253,422 243,446
Book value per share (10).......... $ 21.42 $ 17.64 $ 16.91
- --------
(1) In October 1995, LaSalle Re changed its fiscal year end from December 31,
to September 30, effective September 30, 1995. All prior periods have been
adjusted to reflect a fiscal year end of September 30.
(2) Includes operating expenses, corporate expenses, interest payable and
foreign exchange gains and losses. For a discussion of foreign exchange
gains and losses, see "Management's Discussion of Financial Condition and
Results of Operations".
(3) Minority interest represents those shares in LaSalle Re that are held as
Exchangeable Non-Voting Shares and constitute approximately 37% of the
capital stock of LaSalle Re. The Exchangeable Non-Voting Shares are held by
certain Founding Shareholders and are exchangeable, at the option of the
holder, for Common Shares on a one-for-one basis, unless the Board
determines that such exchange may cause actual or potential adverse tax
consequences to the Company or any shareholder.
(4) Net income per share equals income before minority interest divided by
weighted average shares outstanding.
17
(5) Weighted average shares outstanding include Common Shares and the
Exchangeable Non-Voting Shares as common stock equivalents and the dilutive
effect of stock options and stock appreciation rights using the treasury
stock method.
(6) Dividend per Common Share is based on the outstanding Common Shares as of
September 30, 1996 of 14,397,720 (1995: 14,397,720; 1994: 14,395,710).
(7) The loss and loss expense ratio is calculated by dividing the losses and
loss expenses incurred by net premiums earned. The expense ratio is
calculated by dividing underwriting expenses and certain operational
expenses by net premiums earned. The combined ratio is the sum of the loss
and loss expense ratio and the expense ratio.
(8) Return on average Combined Equity is calculated by dividing net income
before minority interest by the average of the opening and closing sum of
shareholders' equity and minority interest. The adjustment in respect of
minority interest reflects the exchangeable nature of the Exchangeable Non-
Voting Shares. Closing shareholders' equity and minority interest reflects
any dividends declared or paid during such periods, with the average not
adjusted to reflect the timing of dividends declared or paid.
(9) Total statutory capital and surplus is calculated in accordance with the
provisions of the Insurance Act. See "Business--Regulation."
(10) Book value per share is based on Combined Equity divided by Common Shares
and Exchangeable Non-Voting Shares of 22,727,010 (as of September 30,
1996) (1995: 22,727,010; 1994: 22,725,000).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required for this item is incorporated by reference to the
narrative contained under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's 1996 Annual
Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required for this item is incorporated by reference to the
consolidated financial statements of the Company contained in the Company's
1996 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information concerning directors required for this item is incorporated
by reference to the information contained under the captions "Election of
Directors", "Nominees", "Meetings and Committees of the Board of Directors" and
"Section 16 Reporting" in the Company's Proxy Statement for the Annual Meeting
of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required for this item is incorporated by reference to the
information contained under the caption "Management" in the Company's Proxy
Statement for the Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required for this item is incorporated by reference to the
information contained under the caption "Beneficial Ownership of Common
Shares--Directors, Officers and Other Beneficial Owners" in the Company's Proxy
Statement for the Annual Meeting of Stockholders.
18
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required for this item is incorporated by reference to the
information contained under the caption "Certain Transactions" in the
Company's Proxy Statement for the Annual Meeting of Stockholders.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of LaSalle Re Holdings
Limited and the Report of Independent Auditors are incorporated by
reference to the Company's 1996 Annual Report:
Consolidated balance sheets as at September 30, 1996 and 1995
Consolidated statements of operations for the years ended September 30,
1996, 1995 and the period from October 26, 1993 to September 30, 1994
Consolidated statements of changes in shareholders' equity for the
years ended September 30, 1996, 1995 and the period from October 26,
1993 to September 30, 1994
Consolidated statements of cash flows for the years ended September 30,
1996, 1995 and the period from October 26, 1993 to September 30, 1994
Notes to the Consolidated Financial Statements
(a) 2. Financial Statement Schedules
Schedule III Supplementary Insurance Information
(a) 3. Exhibits
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
3.1 Memorandum of Association Incorporated by reference to Exhibit
3.1 to Registration Statement on Form
S-1 (No. 33-97304)
3.2 Bye-Laws Incorporated by reference to Exhibit
3.1 to Form 10-Q for the quarterly
period ended December 31, 1995 (File
No. 0-27216)
10.1 Excess Ownership Agreement Incorporated by reference to Exhibit
dated November 27, 1995 among 10.3 to Form 10-Q for the quarterly
the Company, LaSalle Re and period ended December 31, 1995 (File
the Founding Shareholders No. 0-27216)
10.2 Amended and Restated Incorporated by reference to Exhibit
Shareholders Agreement dated 10.1 to Form 10-Q for the quarterly
November 27, 1995 among the period ended December 31, 1995 (File
Company, LaSalle Re and the No. 0-27216).
Founding Shareholders
10.3 Amended and Restated Option Incorporated by reference to Exhibit
Agreement dated November 27, 10.2 to Form 10-Q for the quarterly
1995 among the Company, period ended December 31, 1995 (File
LaSalle Re and certain of the No. 0-27216).
Founding Shareholders
10.4 Conversion Agreement dated Incorporated by reference to Exhibit
November 27, 1995 among the 10.4 to Form 10-Q for the quarterly
Company, LaSalle Re and period ended December 31, 1995 (File
holders of Exchangeable Non- No. 0-27216).
Voting Shares
10.5 Amended and Restated Incorporated by reference to Exhibit
Employment Agreement dated 10.5 to Form 10-Q for the quarterly
October 1, 1995 between Victor period ended December 31, 1995 (File
H. Blake and LaSalle Re* No. 0-27216).
19
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
10.6 Amended and Restated Incorporated by reference to Exhibit
Underwriting Services Agreement 10.6 to Form 10-Q for the quarterly
dated September 21, 1995 among period ended December 31, 1995 (File
the Company, LaSalle Re and CNA No. 0-27216).
Bermuda**
10.7 Amended and Restated Incorporated by reference to Exhibit
Administrative Services 10.7 to Form 10-Q for the quarterly
Agreement dated September 21, period ended December 31, 1995 (File
1995 among the Company, LaSalle No. 0-27216).
Re and Aon Bermuda
10.8 Amended and Restated Investment Incorporated by reference to
Management Agreement dated Registration Statement on Form S-1
September 21, 1995 among the (No. 333-14861)
Company, LaSalle Re and Aon
Advisors.
10.9 Claims Agreement dated December Incorporated by reference to
16, 1993 between LaSalle Re and Registration Statement on Form S-1
IRISC (No. 333-14861)
10.10 Employment Agreement dated Incorporated by reference to Exhibit
October 1, 1995 between Andrew 10.10 to Form 10-Q for the quarterly
Cook and LaSalle* period ended December 31, 1995 (File
No. 0-27216).
10.11 Credit Agreement dated as of Incorporated by reference to Exhibit
December 1, 1995 among the 10.9 to Form 10-Q for the quarterly
Company, several banks and period ended December 31, 1995 (File
Chemical Bank, as No. 0-27216).
administrative agent
10.12 First Amendment, dated Incorporated by reference to
September 25, 1996, among the Registration Statement on Form S-1
Company, several banks and (No. 333-14861)
Chase Manhattan Bank as
administrative agent, to Credit
Agreement dated as of December
1, 1995 among Holdings, several
banks and Chemical Bank, as
administrative agent
10.13 Long-Term Incentive Plan.* Incorporated by reference to
Registration Statement on Form S-1
(No. 333-14861)
10.14 Employee Stock Purchase Plan.* Incorporated by reference to
Registration Statement on Form S-1
(No. 333-14861)
10.15 First Amendment dated July 1, Incorporated by reference to
1996 to Amended and Restated Registration Statement on Form S-1
Underwriting Services Agreement (No. 333-14861)
dated as of September 21, 1995
between CNA (Bermuda) Services
Limited and LaSalle Re
10.16 First Amendment dated July 1, Incorporated by reference to
1996 to Amended and Restated Registration Statement on Form S-1
Administrative Services (No. 333-14861)
Agreement dated as of September
21, 1995 between Aon Risk
Consultants (Bermuda) Limited
and LaSalle Re
10.17 Quota Share Treaty between CNA Incorporated by reference to
International Reinsurance Registration Statement on Form S-1
Company Limited and LaSalle Re (No. 333-14861)
in respect of 1994 underwriting
year of account (London office).
10.18 Quota Share Treaty between CNA Incorporated by reference to
International Reinsurance Registration Statement on Form S-1
Company Limited and LaSalle Re (No. 333-14861)
in respect of 1995 underwriting
year of account (London office).
20
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
10.19 Quota Share Treaty between CNA Incorporated by reference to
International Reinsurance Registration Statement on Form S-1
Company Limited and LaSalle Re (No. 333-14861)
in respect of 1996 underwriting
year of account (London office).
10.20 Quota Share Treaty between CNA Incorporated by reference to
International Reinsurance Registration Statement on Form S-1
Company Limited and LaSalle Re (No. 333-14861)
in respect of 1994 underwriting
year of account (Amsterdam
office).
10.21 Quota Share Treaty between CNA Incorporated by reference to
International Reinsurance Registration Statement on Form S-1
Company Limited and LaSalle Re (No. 333-14861)
in respect of 1995 underwriting
year of account (Amsterdam
office).
10.22 Quota Share Treaty between CNA Incorporated by reference to
International Reinsurance Registration Statement on Form S-1
Company Limited and LaSalle Re (No. 333-14861)
in respect of 1996 underwriting
year of account (Amsterdam
office).
10.23 LMX Quota Share Retrocessional Incorporated by reference to
Agreement between Continental Registration Statement on Form S-1
Casualty Company and LaSalle Re (No. 333-14861)
for the 1995 underwriting year
of account.
10.24 LMX Quota Share Retrocessional Incorporated by reference to
Agreement between Continental Registration Statement on Form S-1
Casualty Company and LaSalle Re (No. 333-14861)
for the 1996 underwriting year
of account.
10.25 Amendment of Amended and Incorporated by reference to
Restated Employment Agreement Registration Statement on Form S-1
dated as of October 1, 1996 (No. 333-14861)
between Victor H. Blake and the
Company*
10.26 Amendment of Amended and Incorporated by reference to
Restated Employment Agreement Registration Statement on Form S-1
dated as of October 1, 1996 (No. 333-14861)
between Andrew Cook and the
Company*
11.1 Statement re computation of per Incorporated by reference to
share earnings Registration Statement on Form S-1
(No. 333-14861)
13.1 Annual Report to shareholders Filed with this document
for the fiscal year ended
September 30, 1996
21.1 Subsidiaries of the Registrant Incorporated by reference to
Registration Statement on Form S-1
(No. 333-14861)
27.1 Financial Data Schedule Incorporated by reference to
Registration Statement on Form S-1
(No. 333-14861)
- --------
*Management contract or compensatory plan.
**Pursuant to this services agreement, the services of Mr. Hengesbaugh are
provided to the Company.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth fiscal quarter of
Fiscal 1996.
21
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REPORT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
BERMUDA, ON THE 20TH DAY OF DECEMBER, 1996.
LaSalle Re Holdings Limited
/s/ Andrew Cook
By: _________________________________
Andrew Cook
Chief Financial Officer and
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED AND ON THE 20TH DAY OF DECEMBER,
1996.
SIGNATURE TITLE
--------- -----
/s/ Victor H. Blake Chairman, President and Chief Executive
___________________________________________ Officer (Principal Executive Officer)
Victor H. Blake
/s/ Andrew Cook Chief Financial Officer and Treasurer
___________________________________________ (Principal Financial Officer)
Andrew Cook
/s/ Steven Given Controller (Principal Accounting Officer)
___________________________________________
Steven Given
/s/ William J. Adamson, Jr. Director
___________________________________________
William J. Adamson, Jr.
/s/ Andrew Africk Director
___________________________________________
Andrew Africk
/s/ Ivan P. Berk Director
___________________________________________
Ivan P. Berk
/s/ Joseph Haviv Director
___________________________________________
Joseph Haviv
/s/ Jonathan H. Kagan Director
___________________________________________
Jonathan H. Kagan
/s/ Donald P. Koziol, Jr. Director
___________________________________________
Donald P. Koziol, Jr.
/s/ Lester Pollack Director
___________________________________________
Lester Pollack
/s/ Peter J. Rackley Director
___________________________________________
Peter J. Rackley
/s/ Scott A. Schoen Director
___________________________________________
Scott A. Schoen
/s/ Harvey G. Simons Director
___________________________________________
Harvey G. Simons
/s/ David A. Stockman Director
___________________________________________
David A. Stockman
/s/ Paul J. Zepf Director
___________________________________________
Paul J. Zepf
22
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
LaSalle Re Holdings Limited
Under date of October 19, 1996 we reported on the consolidated balance
sheets of LaSalle Re Holdings Limited and subsidiaries as of September 30,
1996 and 1995 and the related consolidated statements of operations, changes
in shareholders' equity and cash flows for the years ended September 30, 1996
and 1995 and the period from October 26, 1993 (date of incorporation) to
September 30, 1994, as contained in the 1996 annual report to the
shareholders. These consolidated financial statements and our report thereon
are incorporated by reference in this annual report on Form 10-K for the year
1996. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedules as listed in Item 14 (a) 2 of this Form 10-K. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick
Hamilton, Bermuda
October 19, 1996
Chartered Accountants
23
SCHEDULE III
LASALLE RE HOLDINGS LIMITED
SUPPLEMENTARY INSURANCE INFORMATION
(EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
FUTURE POLICY
BENEFITS,
DEFERRED LOSSES, OTHER POLICY
ACQUISITION CLAIMS AND LOSS UNEARNED CLAIMS AND PREMIUM
SEGMENT COST EXPENSES PREMIUMS BENEFITS PAYABLE REVENUE
- ------- ----------- --------------- --------------- ---------------- --------
1996: Property &
Similar................ 10,464 49,875 82,894 NIL 195,141
1995: Property &
Similar................ 10,708 66,654 87,885 NIL 170,370
1994: Property &
Similar................ 6,809 37,789 56,338 NIL 76,989
BENEFITS,
CLAIMS AMORTIZATION OF
NET LOSSES AND DEFERRED
INVESTMENT SETTLEMENT ACQUISITION OTHER OPERATING PREMIUMS
SEGMENT INCOME EXPENSES COSTS EXPENSES WRITTEN
- ------- ----------- --------------- --------------- ---------------- --------
1996: Property &
Similar................ 26,846 51,477 27,268 13,373 190,151
1995: Property &
Similar................ 25,091 60,397 22,988 7,603 201,916
1994: Property &
Similar................ 15,758 49,801 8,686 4,342 133,327
24
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
3.1 Memorandum of Association Incorporated by reference to Exhibit
3.1 to Registration Statement on Form
S-1
(No. 33-97304)
3.2 Bye-Laws Incorporated by reference to Exhibit
3.1 to Form 10-Q for the quarterly pe-
riod ended December 31, 1995 (File No.
0-27216)
10.1 Excess Ownership Agreement Incorporated by reference to Exhibit
dated November 27, 1995 10.3 to Form 10-Q for the quarterly
among the Company, LaSalle period ended December 31, 1995 (File
Re and the Founding Share- No. 0-27216)
holders
10.2 Amended and Restated Share- Incorporated by reference to Exhibit
holders Agreement dated No- 10.1 to Form 10-Q for the quarterly
vember 27, 1995 among the period ended December 31, 1995 (File
Company, LaSalle Re and the No. 0-27216).
Founding Shareholders
10.3 Amended and Restated Option Incorporated by reference to Exhibit
Agreement dated November 10.2 to Form 10-Q for the quarterly
27, 1995 among the Company, period ended December 31, 1995 (File
LaSalle Re and certain of No. 0-27216).
the Founding Shareholders
10.4 Conversion Agreement dated Incorporated by reference to Exhibit
November 27, 1995 among the 10.4 to Form 10-Q for the quarterly
Company, LaSalle Re and period ended December 31, 1995 (File
holders of Exchangeable No. 0-27216).
Non-Voting Shares
10.5 Amended and Restated Em- Incorporated by reference to Exhibit
ployment Agreement dated 10.5 to Form 10-Q for the quarterly
October 1, 1995 between period ended December 31, 1995 (File
Victor H. Blake and LaSalle No. 0-27216).
Re*
10.6 Amended and Restated Under- Incorporated by reference to Exhibit
writing Services Agreement 10.6 to Form 10-Q for the quarterly
dated September 21, 1995 period ended December 31, 1995 (File
among the Company, LaSalle No. 0-27216).
Re and CNA Bermuda**
10.7 Amended and Restated Admin- Incorporated by reference to Exhibit
istrative Services Agree- 10.7 to Form 10-Q for the quarterly
ment dated September 21, period ended December 31, 1995 (File
1995 among the Company, No. 0-27216).
LaSalle Re and Aon Bermuda
10.8 Amended and Restated In- Incorporated by reference to Registra-
vestment Management Agree- tion Statement on Form S-1 (No. 333-
ment dated September 21, 14861)
1995 among the Company,
LaSalle Re and Aon Advi-
sors.
10.9 Claims Agreement dated De- Incorporated by reference to Registra-
cember 16, 1993 between tion Statement on Form S-1 (No. 333-
LaSalle Re and IRISC 14861)
10.10 Employment Agreement dated Incorporated by reference to Exhibit
October 1, 1995 between An- 10.10 to Form 10-Q for the quarterly
drew Cook and LaSalle* period ended December 31, 1995 (File
No. 0-27216).
10.11 Credit Agreement dated as Incorporated by reference to Exhibit
of December 1, 1995 among 10.9 to Form 10-Q for the quarterly
the Company, several banks period ended December 31, 1995 (File
and Chemical Bank, as ad- No. 0-27216).
ministrative agent
10.12 First Amendment, dated Sep- Incorporated by reference to Registra-
tember 25, 1996, among the tion Statement on Form S-1 (No. 333-
Company, several banks and 14861)
Chase Manhattan Bank as ad-
ministrative agent, to
Credit Agreement dated as
of December 1, 1995 among
Holdings, several banks and
Chemical Bank, as adminis-
trative agent
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
10.13 Long-Term Incentive Plan* Incorporated by reference to Registra-
tion Statement on Form S-1 (No. 333-
14861)
10.14 Employee Stock Purchase Incorporated by reference to Registra-
Plan* tion Statement on Form S-1 (No. 333-
14861)
10.15 First Amendment dated July Incorporated by reference to Registra-
1, 1996 to Amended and Re- tion Statement on Form S-1 (No. 333-
stated Underwriting Serv- 14861)
ices Agreement dated as of
September 21, 1995 between
CNA (Bermuda) Services Lim-
ited and LaSalle Re
10.16 First Amendment dated July Incorporated by reference to Registra-
1, 1996 to Amended and Re- tion Statement on Form S-1 (No. 333-
stated Administrative Serv- 14861)
ices Agreement dated as of
September 21, 1995 between
Aon Risk Consultants (Ber-
muda) Limited and LaSalle
Re
10.17 Quota Share Treaty between Incorporated by reference to Registra-
CNA International Reinsur- tion Statement on Form S-1 (No. 333-
ance Company Limited and 14861)
LaSalle Re in respect of
1994 underwriting year of
account (London office)
10.18 Quota Share Treaty between Incorporated by reference to Registra-
CNA International Reinsur- tion Statement on Form S-1 (No. 333-
ance Company Limited and 14861)
LaSalle Re in respect of
1995 underwriting year of
account (London office)
10.19 Quota Share Treaty between Incorporated by reference to Registra-
CNA International Reinsur- tion Statement on Form S-1 (No. 333-
ance Company Limited and 14861)
LaSalle Re in respect of
1996 underwriting year of
account (London office)
10.20 Quota Share Treaty between Incorporated by reference to Registra-
CNA International Reinsur- tion Statement on Form S-1 (No. 333-
ance Company Limited and 14861)
LaSalle Re in respect of
1994 underwriting year of
account (Amsterdam office)
10.21 Quota Share Treaty between Incorporated by reference to Registra-
CNA International Reinsur- tion Statement on Form S-1 (No. 333-
ance Company Limited and 14861)
LaSalle Re in respect of
1995 underwriting year of
account (Amsterdam office)
10.22 Quota Share Treaty between Incorporated by reference to Registra-
CNA International Reinsur- tion Statement on Form S-1 (No. 333-
ance Company Limited and 14861)
LaSalle Re in respect of
1996 underwriting year of
account (Amsterdam office)
10.23 LMX Quota Share Incorporated by reference to Registra-
Retrocessional Agreement tion Statement on Form S-1 (No. 333-
between Continental Casu- 14861)
alty Company and LaSalle Re
for the 1995 underwriting
year of account
10.24 LMX Quota Share Incorporated by reference to Registra-
Retrocessional Agreement tion Statement on Form S-1 (No. 333-
between Continental Casu- 14861)
alty Company and LaSalle Re
for the 1996 underwriting
year of account
10.25 Amendment of Amended and Incorporated by reference to Registra-
Restated Employment Agree- tion Statement on Form S-1 (No. 333-
ment dated as of October 1, 14861)
1996 between Victor H.
Blake and the Company*
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
10.26 Amendment of Amended and Incorporated by reference to Registra-
Restated Employment Agree- tion Statement on Form S-1 (No. 333-
ment dated as of October 1, 14861)
1996 between Andrew Cook
and the Company*
11.1 Statement re computation of Incorporated by reference to Registra-
per share earnings tion Statement on Form S-1 (No. 333-
14861)
13.1 Annual Report to sharehold- Filed with this document
ers for the fiscal year
ended September 30, 1996
21.1 Subsidiaries of the Regis- Incorporated by reference to Registra-
trant tion Statement on Form S-1 (No. 333-
14861)
27.1 Financial Data Schedule Incorporated by reference to Registra-
tion Statement on Form S-1 (No. 333-
14861)
- --------
*Management contract or compensatory plan.
**Pursuant to this services agreement, the services of Mr. Hengesbaugh are
provided to the Company.