The principal offices of the Company are leased by the Company in Hamilton, Bermuda. Terra Nova's London executive offices are leased by Terra Nova and its underwriting and claims staff is located in space leased by Terra Nova in the London Underwriting Centre and in the Institute of London Underwriters' building. Octavian leases offices in London, Poole, Leeds and Chelmsford and also leases space in the Lloyd's building. Corifrance leases offices in Paris, France. Additionally, Terra Nova leases offices in Brussels and Toronto. Management believes that its office space is adequate for the Company's current needs.
- -SELECTED FINANCIAL DATA FOR THE FIVE YEARS ENDED DECEMBER 31, 1998
The following discussion addresses the principal factors affecting the earnings and financial condition of the Company. All references to the "Company" are to Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings") and all of its direct and indirect subsidiaries, including Terra Nova Insurance (UK) Holdings plc ("UK Holdings"), Terra Nova Insurance Company Limited ("Terra Nova"), Terra Nova (Bermuda) Insurance Company Ltd. ("Terra Nova (Bermuda)"), Compagnie de Reassurance d'Ile de France ("Corifrance"), Octavian Syndicate Management Limited ("Octavian") and Terra Nova Capital Limited ("Terra Nova Capital").
The Company's mix of business for the years ended December 31, 1998, 1997 and 1996 and the key ratios by major line of business are as set out in the following table:
Gross Written Premiums; Net Written Premiums; Net Earned Premiums. Gross written premiums increased 38.0% to $759.4 million in 1998 from $550.2 million in 1997. The increase in gross written premiums of $209.2 million was primarily due to:
(b) $67.6 million of premiums related to reinsurance to close of orphan Lloyd's syndicates, compared to $39.1 million in 1997. In 1998, this business related to non-marine casualty risks compared to a mixture of non- marine casualty and marine risks in 1997; and
The increases in premium volumes have been partially offset by the effect of a fall in premium rates since 1997 as a result of competition in the markets in which the Company operates, with the exception of motor business which experienced rate increases of approximately 15% in 1998.
Reinsurance ceded increased by 69.7% to $113.2 million in 1998 from $66.7 million in 1997. Reinsurance ceded as a percentage of gross written premiums, increased to 14.9% in 1998 from 12.1% in 1997. The increase is primarily due to:
(a) The Company's bigger participation on the Octavian syndicates in 1998 compared to 1997. The Octavian syndicates, especially the marine and aviation syndicates, buy more reinsurance than Terra Nova and Terra Nova (Bermuda); and
(b) The Company buying more reinsurance, especially at the Octavian syndicates, due to the general perception that reinsurance prices are relatively inexpensive in the very competitive conditions that currently exist in the market place. This applies particularly in the marine and aviation lines of business.
Net Investment Income. Net investment income increased 9.6%, to $93.3 million in 1998 from $85.1 million in 1997. The increase was due to average invested assets being 10.3% higher in 1998 than 1997. The average investment yield before realized gains and losses was 6.1% in 1998 and 6.2% in 1997. The investment yield was similar to 1997, as the Company had a lower proportion of equities in 1998 compared to 1997 and a larger proportion of single A and BBB bonds in 1998 compared to 1997. The effect of these factors was offset by the lower interest rates in 1998 compared to 1997. The average duration of fixed maturity investments at December 31, 1998 and 1997, was 4.8 years and 4.9 years, respectively.
Agency Income. This income consists of fees and profit commissions earned by Octavian for managing certain Lloyd's syndicates.
The decrease in the marine and aviation loss and LAE ratio to 55.8% in 1998 from 64.6% in 1997 was partly a result of Terra Nova (Bermuda) recognizing reserve redundancies on the business written prior to its acquisition by the Company and Terra Nova recognizing reserve redundancies on marine LMX business written prior to 1992. Terra Nova (Bermuda), formerly Underwriters Capital (Merrett) Ltd. ("UCM"), was organized in Bermuda in 1993 to provide reinsurance to certain Lloyd's syndicates. These decreases were partially offset by an increase in losses on the Company's aviation business due to weaker prices and higher losses in 1998 compared to 1997.
Other Operating Expenses. Other operating expenses increased 48.2% to $20.3 million in 1998 from $13.7 million in 1997. As a percentage of net earned premiums, they increased to 3.7% in 1998 from 3.3% in 1997, reflecting the greater proportion of Lloyd's charges.
Net Interest Expense. Net interest expense in 1998 consisted of interest on the $100 million 10.75% Senior Notes issued on June 30, 1995 and redeemed on May 18, 1998, interest on the $75 million 7.2% Senior Notes issued on August 26, 1997, and interest on the $100 million 7.0% Senior Notes issued on May 18, 1998. The net interest expense in 1997 related to interest on the $100 million 10.75% Senior Notes issued on June 30, 1995 and interest on the $75 million 7.2% Senior Notes issued on August 26, 1997.
Agency Expenses. These expenses were incurred by Octavian in managing certain Lloyd's syndicates.
Income Tax Expense. Income tax expense decreased $0.4 million, to $17.2 million in 1998 from $17.6 million in 1997. The lower tax charge reflects a reduction in the average UK tax rate from 31.5% in 1997 to 31% in 1998 and an increase in underwriting profits in Terra Nova (Bermuda). As a consequence of these factors, the income tax expense as a percentage of income before income tax and extraordinary charge fell to 17.0% in 1998 from 19.4% in 1997.
Net Income before Extraordinary Charge. Net income before extraordinary charge increased 14.5% to $84.0 million in 1998 from $73.4 million in 1997, because of the increase in income before income tax and extraordinary charge and the decrease in the income tax expense, referred to above.
Year Ended December 31, 1997 Compared with Year Ended December 31, 1996
Gross Written Premiums; Net Written Premiums; Net Earned Premiums. Gross written premiums increased to $550.2 million in 1997 from $361.0 million in 1996. The increase in gross written premiums arose from:
(b) $39.1 million of premiums related to reinsurance to close of orphan Lloyd's syndicates from the 1993 year of account; and
Reinsurance ceded increased by 33.8% to $66.7 million in 1997 from $49.8 million in 1996. However, reinsurance ceded as a proportion of gross written premiums decreased to 12.1% in 1997 from 13.8% in 1996. The decrease was due to lower reinsurance costs at Terra Nova in 1997 due to structural changes on the non-marine property program and rate reductions obtained on the non-marine property, non-marine casualty and marine programs, partially offset by a higher level of reinsurance purchased by Terra Nova Capital in 1997.
Net written premiums increased by 55.4% to $483.5 million in 1997 from $311.2 million in 1996, as a consequence of the increase in gross written premiums referred to above and lower reinsurance costs. Net earned premiums increased 50.3%, to $419.1 million in 1997 from $278.8 million in 1996.
Realized Net Capital Gains on Sales of Investments. Realized net capital gains on sales of investments increased $3.5 million to $15.3 million in 1997 from $11.8 million in 1996 mainly due to equity securities sold in the year.
Foreign Exchange (Losses) Gains. Foreign exchange losses of $1.3 million in 1997 and gains of $0.4 million in 1996 arose from foreign currency transactions during the year together with the translation of foreign currency assets and liabilities into U.S. dollars, the Company's functional currency. The loss in 1997 was primarily a result of the dollar strengthening against the majority of major currencies in 1997.
Other Operating Expenses. Other operating expenses increased 34.7% to $13.7 million in 1997 from $10.2 million in 1996. Other operating expenses as a percentage of net earned premiums decreased to 3.3% in 1997 from 3.7% in 1996.
Income from Continuing Operations before Income Taxes and Minority Interests. Income from continuing operations before income taxes and minority interests increased 10.1% to $91.0 million in 1997 from $82.7 million in 1996, primarily due to the increase in investment income and realized gains on sales of investments in 1997 compared to 1996.
Combined Ratios. The Company's combined ratios were 98.2% for 1997 and 97.2% for 1996 reflecting the absence of significant large losses and any adverse development of prior year claims in both 1997 and 1996.
For the years ended December 31, 1998 and 1997, the cashflow provided by operating activities of the Company and available for investment was $75.9 million and $81.9 million, respectively. The decrease in cash flows provided by operating activities in 1998 was due to lower cash-flows at Terra Nova caused by a change in business mix, as it wrote a greater proportion of proportional treaty business in 1998, that produced a greater time lag between writing the business and receiving the premiums.
On October 9, 1998, the Company announced that Octavian had established new operating entities in Australia and Hong Kong.
The Company's assets, liabilities, revenues and expenses, except for most corporate overheads which are paid in British pounds, are chiefly in U.S. dollars. Therefore, the Company's principal functional currency is the U.S. dollar. Certain other net translation adjustments are shown as a separate item of shareholders' equity.
On January 1, 1999, the Economic and Monetary Union (EMU) and a new currency, the "euro", were adopted by eleven of the fifteen member states of the European Union (EU). Other member states, including the United Kingdom, currently remain outside the EMU but may join in the future. Today, Corifrance and the Brussels branch of Terra Nova are the Company's only operations in EMU countries.
The Company has divided the Year 2000 Project into three major areas of focus: IT, underwriting and third parties. Each section addresses unique risks, but shares a common approach to the Project, which includes five phases: (1) assessing the nature and scope of the Company's exposure to the Year 2000 issue; (2) identifying the business critical areas of exposure; (3) developing solutions for Year 2000-related problems; (4) testing the solutions; and (5) implementing the solutions. Business critical systems were defined as those that are likely to have a material impact on the financial condition and results of operations of the Company should they malfunction or fail.
The Company initiated the IT section of the Year 2000 Project in March 1997 with the objective of bringing all business critical systems into Year 2000 compliance by September 30, 1998 and all other systems into compliance by December 31, 1998. These key milestones have been met. Market testing with the main processing bureaus, the London Processing Centre, the Lloyd's Policy Signing Office and the Lloyd's Claims Office, has also been completed successfully. Internal certification on compliance has been received from Lloyd's.
The remediation of non-business critical software with embedded chips has been challenging. Work has targeted systems within the Company's control. Developers of old software have been reluctant to reply to questions concerning their Year 2000 compliance status, or are no longer trading. After assessing this area of the Project for criticality, the Project team determined that only a few systems were at risk. Approximately half of those systems have been deemed compliant. Remediation work will continue into the first half of 1999.
As part of the IT section of the Project, a contingency plan is being developed to ensure that fully workable alternatives, covering all aspects of IT, are available in the event of the failures of any business critical systems. Initially, contingency planning had a target completion date of December 31, 1998. This is now being brought into line with Lloyd's timescales for the Octavian syndicates, who plan to complete their work during the third quarter of 1999. An outline plan for the Company will be produced by March 31, 1999.
The Underwriting section of the Project is managed by a committee comprised of senior representatives from the Company's major underwriting units, covering a broad spectrum of business classes. The committee is: (1) co-ordinating and reviewing the evaluation of the Company's current and ongoing underwriting exposure to the Year 2000 and other date-related issues; (2) developing and producing relevant Company underwriting guidelines and monitoring procedures, where practicable; (3) identifying business opportunities; and (4) communicating and raising awareness of date-related underwriting issues within the Company. Among its responsibilities, the committee discusses and disseminates information, research and policy language relating to the Year 2000 issue. A central database for this information has been established and made accessible by all Company employees. When regulators or customers require assessment of the Company's Year 2000 compliance, responses are cleared through the committee.
By December 31, 1998, the Company had substantially completed an initial assessment of risks already written. This initial assessment forms the basis for more detailed ongoing reviews. At Terra Nova, the in-force portfolio of insurance and reinsurance contracts was broken down into those risks that currently provide no cover beyond December 31, 1999, those that might provide cover beyond December 31, 1999 (by virtue of run-off provisions or extended reporting clauses) and those risks that run beyond the millennium. A matrix coding system was developed to numerically quantify the class exposure and effect of the underwriting action taken at the insurance or reinsurance level. The matrix is applied on a risk by risk basis. The matrix multiplies a "class exposure" coding by an "underwriting action" coding to give a geometric weighting. This geometric weighting, combined with the potential in-force analysis, and overlaid by "likelihood of loss factors", enables a calculation to be made of Terra Nova's probable maximum loss ("PML"). To support the matrix, a detailed commentary was prepared by each class underwriter of the potential exposure on a class by class basis, together with the current underwriting approach, based on individual judgment and experience. This work was reviewed by the underwriting committee and the senior underwriter of each underwriting unit for commonality of approach. The described underwriting approach will be monitored and re-evaluated with reference to external factors and market position. Equally, the method of calculating the PML, the weightings applied for the individual factors and likelihood of loss factors will be subject to review and revision, as necessary. Terra Nova (Bermuda) has applied the matrix coding system in the same way as Terra Nova.
The Company provides IT services to third party customers. The related IT systems have been assessed, remedied, tested and re-implemented.
The total cost of the Year 2000 project is not expected to be material to the Company's financial position. The estimated total cost of analyzing and implementing required modifications to bring the Company to Year 2000 compliance is $3.0 million, which is being funded from operating cash flows. The Company primarily used internal human resources for work on the Year 2000 Project. The total amount expended on the Project through December 31, 1998, was $2.5 million of which approximately $2.4 million related to the cost to repair or replace software and resolve related hardware problems and approximately $0.1 million related to the cost of identifying and communicating with third parties. The estimated future cost of completing the Year 2000 Project is $0.5 million.
From an underwriting perspective, management anticipates an increase in the frequency of certain kinds of claims as a result of software malfunction causing or otherwise contributing to losses related to normally insured perils, such as fire and theft. The Company is taking steps to make its own reinsurance and retrocession programs as responsive as possible to such circumstances.
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Terra Nova (Bermuda) Holdings Ltd. and subsidiaries at December 31, 1998 and 1997, and the results of their operations, their comprehensive income and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 14(a) on page 71 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
Terra Nova (Bermuda) Holdings Ltd. ("Bermuda Holdings") is incorporated in Bermuda. All references here to the "Company" are to Bermuda Holdings and all of its direct and indirect subsidiaries. These include Terra Nova Insurance (UK) Holdings plc ("UK Holdings"), Terra Nova Insurance Company Limited ("Terra Nova"), Terra Nova (Bermuda) Insurance Company Ltd. ("Terra Nova (Bermuda)"), Octavian Syndicate Management Limited ("Octavian"), Terra Nova Capital Limited ("Terra Nova Capital") and Compagnie de Reassurance d'Ile de France ("Corifrance").
(a) Investments and related income: Investments in fixed maturities and equity securities are classified as available for sale and held with the intention of selling such investments from time to time, and are carried at fair value. Unrealized gains and losses, net of related deferred income taxes and minority interests, are recorded in shareholders' equity. Realized gains and losses are included in operations and determined by specific identification. Investment income is recorded as earned.
(e) Insurance balances receivable and reinsurance recoverable on paid and unpaid losses: Receivable balances are stated net of allowances for doubtful accounts. Reinsurance recoverable on unpaid losses represents the estimated portion of such liabilities that will be recovered from reinsurers, determined in a manner consistent with the related liabilities.
(f) Income taxes: Deferred income taxes are recorded on temporary differences between financial reporting and tax bases of assets and liabilities in accordance with Statement of Financial Accounting Standard ("SFAS") No. 109.
(i) Prepaid reinsurance premiums: Prepaid reinsurance premiums represent the portion of premiums ceded to reinsurers applicable to the unexpired terms of reinsurance contracts.
Deferred compensation, recorded as a component of shareholders' equity, represents options the Company expects to settle in stock.
(p) Accounting pronouncements: The Company has adopted the provisions of SFAS No.130 "Reporting Comprehensive Income" and SFAS No.131 "Disclosures about Segments of an Enterprise and Related Information". SFAS No.130 establishes standards for reporting and display of comprehensive income and its components within a set of financial statements. SFAS No.131 requires the Company to report financial and descriptive information about its reportable operating segments.
The Company has adopted the provisions of SFAS No.132 "Employers' Disclosures about Pensions and Other Postretirement Benefits". This statement significantly changes current financial statement disclosure requirements from those that were required under SFAS No.87, "Employers' Accounting for Pensions", SFAS No.88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits", and SFAS No.106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". However, SFAS No.132 does not change the existing measurement or recognition provisions of SFAS Nos. 87, 88, or 106.
Cash and securities with a carrying value of $21,100,926 and $19,465,928 at December 31, 1998 and 1997, respectively, were held in trust for the benefit of the Company's U.S. surplus lines policyholders.
Cash and securities with a carrying value of $50,929,708 and $53,350,644 at December 31, 1998 and 1997, respectively, were held in trust for the benefit of the Company's Canadian cedents.
The Company has contingent liabilities regarding undrawn letters of credit supporting certain reinsurance business written by the Company in the U.S. of $106,105,003 and $121,020,906 at December 31, 1998 and
The amortized cost and estimated fair value of the Company's fixed maturities at December 31, 1998, by contractual maturity date, are shown in the following table. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay certain obligations with or without call or prepayment penalties.
(e) At December 31, 1998, the Company's portfolio by rating category, determined by recognized rating agencies, was:
The following reflects the acquisition costs deferred for amortization against future income and the amortization charged to income, excluding certain amounts deferred and amortized in the same period:
Terra Nova provides pension and related benefits for the employees of its branch offices in Belgium and Canada. Benefit plans are in line with local market terms and conditions of employment and are generally costed to be within 10% of basic salaries of the participating employees. Neither of the plans is a defined benefit plan. The Company has adopted, for its Bermuda employees, a similar policy on pension and related benefits and has negotiated for a plan on the same cost basis.
Each "B" ordinary share at the Company is convertible, at the choice of the holder into an "A" ordinary share without payment or adjustment for accrued dividends.
At December 31, 1998, the Company had various stock-based compensation plans which are described below. The Company applies APB Opinion No.25 and related interpretations in accounting for its plans. Compensation expense of $1,348,000 has been charged against income for 1998 (1997: $3,244,000).
The net income and earnings per share would have been reduced to the pro forma amounts indicated below had compensation expense been determined using the fair value methodology of SFAS No.123:
On January 9, 1995, the Company adopted an Executive Share Option Plan (the "Stock Option Plan"). Amendments to the Stock Option Plan were adopted by the Company on May 4, 1998. The Stock Option Plan provides for the grant to eligible employees of options to buy Class A ordinary shares of the Company (the "Option Shares"). The aggregate number of Option Shares issued and Option Shares for which an option may be granted is limited to 15% of the aggregate number of common shares of the Company outstanding. The options are only exercisable on certain specified events occurring and will expire no later than 10 years after the date granted. The Stock Option Plan is administered by the Board of Directors of the Company, which decides which employees are granted options.
A summary of the Company's Stock Option Plan at December 31, 1998, and changes during the year then ended is presented below:
A summary of the Octavian Stock Option Plan at December 31, 1998, and changes during the two years then ended is shown below:
The weighted average fair value per share of options granted in the Company's stock-based compensation plans at December 31, 1998, was $14.25.
In the ordinary course of business, the Company cedes reinsurance to other insurance companies. Ceded reinsurance arrangements provide greater diversification of business and limit the net loss potential arising from large risks. Certain of these arrangements consist of excess of loss contracts which protect against losses over stipulated amounts. Reinsurance is effected under reinsurance treaties and by negotiation on individual risks.
A credit risk exists with reinsurance ceded to the extent that any reinsurer is unable to meet the obligations assumed under the reinsurance arrangements. As is customary in the London Market, collateral is not generally obtained from reinsurers. Reinsurance contracts do not relieve the ceding company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses; so allowances are established for amounts thought uncollectible. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from its exposure to individual reinsurers.
The Company cedes reinsurance to and assumes reinsurance from Lloyd's syndicates. At December 31, 1998, the aggregate exposure in respect of reinsurance ceded to Lloyd's syndicates in respect of continuing operations, including estimated reinsurance recoveries for losses incurred but not reported, was approximately $77,877,000. The majority was ceded into Equitas with effect from September 4, 1996. No specific bad debt provision has been established for amounts due from Lloyd's syndicates.
(/1/) The net reserves from the reinsurance to close of the 1995 year, of $17,910,000, have been included in net incurred losses and loss adjustment expenses for the year ended December 31, 1997. The premiums of $17,910,000 in respect of these losses were included in gross written and net earned premiums in 1997.
Insurance balances receivable and reinsurance recoverable on paid and unpaid losses are stated after deduction of an allowance for doubtful accounts at December 31, 1998 and 1997, of $38,823,000 and $28,904,000, respectively. Doubtful accounts against which provisions of $455,000 had previously been made were written back during 1998. The charge to doubtful accounts was $9,464,000 for the year ended December 31, 1998, and $1,238,000 for the year ended December 31, 1997. A release for doubtful accounts of $1,142,000 was made for the year ended December 31, 1996. The charge in 1998 included $5,558,000 in respect of a provision which had previously been included in unpaid losses and was transferred to the bad debt provision during 1998 due to additional information received by the Company in the year.
(b) Guarantees have been given by Terra Nova in favor of The Prudential Insurance Company Limited and the Royal Bank of Scotland (Industrial Leasing) Limited for leases granted to Market Building Limited in connection with the development of the London Underwriting Centre ("LUC"). The fire that occurred in August 1991, during fitting out of the new LUC resulted in a shortfall of annual rental income and the possibility of further shortfalls in the future. Each year, the Company charges its share of the expense necessary to maintain the LUC as a trading center.
Rental expense on property leases of $4,246,000, $4,102,000 and $3,802,000 was incurred for the periods to December 31, 1998, 1997 and 1996, respectively.
(a) On April 1, 1998, UK Holdings repurchased $4.5 million of the Senior Notes for consideration of $5.2 million, including accrued interest.
On May 18, 1998, UK Holdings completed an issue of $100 million 7.0% Senior Notes due 2008, guaranteed fully and unconditionally by Bermuda Holdings. The net proceeds were used to finance the tender for $95.5 million 10.75% Senior Notes due 2005, as described in Note 15.
The Company's total outstanding consolidated indebtedness at December 31, 1998, was made up of $175 million of the Senior Notes including the $75 million 7.2% Senior Notes due 2007, issued in 1997. The estimated fair value of these Senior Notes at December 31, 1998, was $180.8 million, comprising $102.8 million of 7.0% Senior Notes due 2008 and $78.0 million of 7.2% Senior Notes due 2007.
The 7.2% Senior Notes due 2007 and 7.0% Senior Notes due 2008 may be redeemed at any time at the option of UK Holdings at a redemption price equal to the sum of: (i) the principal amount of the Senior Notes being redeemed plus accrued interest to the redemption date; and (ii) the make-whole amount, if any.
The indenture governing the Senior Notes contains various covenants. Under certain circumstances, these covenants limit among other things, mergers and asset sales, indebtedness, dividends on and redemption of capital stock, the use of proceeds from asset dispositions, liens, sales of capital stock of Bermuda Holdings' principal insurance subsidiaries, encumbrances on the payment of dividends and other payments by subsidiaries, transactions with affiliates, issuance of preferred stock by subsidiaries, issuance of guarantees, investments and certain business activities. The indenture also contains customary events of default, including payment defaults, covenant defaults, defaults in respect of other indebtedness, certain judgments and bankruptcy.
Included within other liabilities in the Company's balance sheet is $23,197,000 (1997:$28,235,000) relating to net liabilities of Aviation business in run-off.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on profit or loss from operations before income taxes and extraordinary items. Inter-segment transactions are eliminated from segmental reporting, such that the segmental accounts are consistent with the Company's consolidated financial statements.
Total revenues, segment profit and segment assets agree with total revenues, income before income taxes and extraordinary items and total assets, respectively, in the consolidated financial statements.
The Company does not rely on any one major customer for ten percent or more of its revenues.
Summarized consolidated balance sheet information as at December 31, 1998, and 1997, and summarized consolidated statements of operations information for the years December 31, 1998, 1997 and 1996, about UK Holdings is set out below.
The Company's net income per share amounts are based on the weighted average number of shares outstanding during the periods (see Note 8). The quarterly 1997 per share data shown above do not agree to those previously reported on Form 10-Q due to adoption of SFAS No.128 "Earnings per Share" in the fourth quarter of 1997.