Net income from 1995 accident and policy year operations was generally lower versus 1994 due to decreased premium production before and after reinsurance, increased commission expense caused by reductions in ceded commissions, increased overhead expenses, and accrued preferred securities accretion.
The operating results of the workers' compensation insurance industry are subject to significant fluctuations from quarter to quarter and from year to year due to the effect of competition on pricing, the frequency and severity of losses incurred in connection with general economic conditions and changes in regulatory environment. Fluctuations in interest rates also have a significant impact on the Company's operating results, as over 50% of the Company's total assets were interest-bearing investments at December 31, 1996.
SNIC is domiciled in the State of California and prepares its statutory financial statements in accordance with accounting practices prescribed or permitted by the DOI. SNIC received written approval from the DOI as to the accounting for certain aspects of its Centre Re aggregate excess of loss contracts and the accounting of the assets of SNIC's subsidiary, WSSC. See Note 10 to the Consolidated Financial Statements.
nature of the area which, in addition to increasing overall claim costs, had a greater prevalence of fraudulent claims than other geographical areas in California. Management does not expect the adverse developments experienced during 1993 and 1992 on prior years' Southern California business to continue in the future. As of December 31, 1996, the discontinued Calabasas Branch continued to "run off" in accordance with management's expectations.
During the first half of 1995, the Company re-entered the Southern California market with a new marketing and underwriting team targeting different producers, insureds and industries. The effect of this operation has not been material, with net premiums written totaling $7.5 million, 8% of the total premium written, for 1996.
CHASE LOAN. In November 1996, the Company entered into a financing transaction involving Centre Re and Chase Manhattan Bank (Chase). Chase extended a $93.1 million term loan (net of transaction costs). The Company used the proceeds from the financing to purchase from SNIC reinsurance receivables due from Centre Re.
PRIM ACQUISITION. The Company has agreed to acquire Pac Rim Holding Corporation for $42 million in cash. (The acquisition is subject to regulatory and shareholder approval.) PRIM, through its wholly-owned subsidiary, the Pacific Rim Assurance Company ("PRAC"), is engaged in the underwriting of workers' compensation insurance principally in California, and also in Arizona, Texas, Georgia and Alabama. The acquisition of PRIM provides the opportunity for the Company to realize immediate strategic and financial benefits. The consolidation of two mid-sized companies whose home offices are located only eight miles apart should provide significant economies of scale that neither company could achieve independently. The combined company will be able to spread fixed costs over a wider premium base. In addition, PRIM's strong presence in Southern California complements the Company's historical focus on Northern and Central California. The foregoing statements contain forward-looking statements regarding efficiencies and economies of scale that management believes may be achieved through the acquisition of PRIM. Realization of management's beliefs and projections will depend on a number of factors, including management's successful execution of its business plan for integrating the operations of the two companies, the insurance market's reception to the combined companies, and other factors beyond the Company's control.
The terms of the transaction with PRIM represent a $12 million purchase price reduction from the $54 million purchase price announced in September 1996. An increase in the loss and loss adjustment expense reserves of PRAC by $12 million as of December 31, 1996 necessitated renegotiation of the terms of the prior agreement. The reserve adjustment resulted in PRAC experiencing an operating loss of $15.9 million in 1996 for the fiscal year ended December 31, 1996. In order to recognize the full benefits of the transaction, the Company intends to strengthen PRAC financially by contributing $10 million to PRAC's capital. Depending on claims experience, additional reserve strengthening for PRAC (to be renamed Superior Pacific Casualty Company) could be required over the next five years for accident years 1996 and prior; however, such reserve adjustments would not be expected to be material to the combined Company's operating results, and the Company expects to realize strategic and financial benefits from the acquisition as outlined in the previous paragraph.
Financing for the acquisition of PRIM and the capital contribution will be obtained by issuing 2,390,438 shares of Common Stock under a Stock Purchase Agreement entered into September 17, 1996, as amended and restated February 17, 1997, by and among the Company, Insurance Partners, L.P., Insurance Partners (Offshore) Bermuda, L.P., TJS Partners, L.P. and members of management of the Company. The shares will be sold at $7.53 per share for a total of $18 million. In addition, the Company will borrow $44 million from a syndicate of banks led by Chase, and use part of the proceeds of such loan to refinance existing long-term debt as well as for
Total assets increased $65.8 million to $306.6 million at year-end December 31, 1996. The increase was primarily the result of the proceeds received from the Chase financing agreement, which were partially offset by a $14.5 million decrease in investments and a $14.3 million decrease in reinsurance recoverable.
Reinsurance recoverable on unpaid losses decreased $13.8 million in 1996 primarily due to the settlement of the 1991 Contract and the return of our funds withheld assets. Premiums receivable decreased due to improved collection efforts by the Company.
GROSS PREMIUMS WRITTEN increased 2.3% to $99.3 million in 1996 from $97.1 million in 1995. The increase in premiums written is attributable to SNIC's strategy to underwrite smaller risks. The Company's strategy is to continue to focus on profitable operating margins first and market share second. The Company continues to make strenuous efforts to increase production, subject to the constraints of sound underwriting, and to develop profitable niches. The result of this strategy was a 24% increase in policy count, which was offset by a 20% decrease in average written premiums per policy. The Company believes the acquisition of PRIM will enhance its ability to pursue this strategy.
POLICYHOLDER DIVIDENDS for 1996 were comparable to 1995, a decrease of $5.9 million in 1996 versus a decrease of $5.7 million in 1995. Prior to open rating, policyholder dividends served both as an economic incentive to employers for safe operations and as a means of price differentiation. As a result of consumers' preference for the
lowest net price at the policy's inception under open rating, dividend paying is no longer a significant factor in the marketing or selling of workers' compensation insurance in California.
UNDERWRITING RATIOS (GAAP BASIS) Claims and claim adjustment expense ratio 60.1% 71.3% Underwriting expense ratio 32.8% 19.7% Policyholder dividends ratio (6.4)% 4.5% --------------- -------------- Combined ratio 86.5% 95.5% --------------- -------------- --------------- --------------
GROSS PREMIUMS WRITTEN decreased $37.7 million or 28% in 1995 from 1994. The significant decrease in premium production was due to the competitive effects of the open rating system in California which replaced California's minimum rate law effective January 1, 1995. In 1995, production measured in policy counts was 8% higher than the 1994 period, but the estimated annual premium associated with those policies was down 26%. The Company's strategy is to continue to focus on profitable operating margins first and market share second. The Company is making strenuous efforts to increase production, subject to the constraints of sound underwriting standards, and to reduce the Company's fixed and semi-fixed expense ratios commensurate with premium levels. Since 1995, the Company has pursued new markets and distribution channels to increase market share in profitable niches, such as Phoenix, Arizona, which commenced operations October 1, 1995.
NET PREMIUMS WRITTEN decreased $16.8 million or 16% in 1995 from 1994. The decrease in net premiums written is reflective of the decrease in gross premiums written as discussed above, but was partially offset by a
decrease in ceded premiums of $20.9 million for the twelve months ended December 31, 1995. The decrease in ceded premiums of $20.9 million was related to a reduction in the ceding rate from 20% in 1994 to 5% in 1995 in the quota-share contract with ZRC and lower direct premium production in 1995 compared to 1994.
CLAIMS AND CLAIM ADJUSTMENT EXPENSE decreased $24.8 million or 31% in 1995 from 1994. The claims and LAE ratio decreased 11.2 percentage points to 60.1% in 1995 from 71.3% in 1994. The 1995 claims and LAE include a $2.2 million decrease in the estimated ultimate claims and LAE on accident years prior to 1995 as a result of continued decreases in the Company's estimates of frequency and severity of claims incurred for those years. The Company's estimates are consistent with those of its outside actuaries. This favorable development provided a 2.5 percentage point improvement in 1995. The remaining decrease of 8.7% in claims and LAE ratio was due to the decline in frequency and severity of the reporting claims to the Company continued through 1995 accident year.
POLICYHOLDER DIVIDENDS decreased $10.7 million in 1995 from 1994. The decrease was primarily due to $5.7 million reduction in the policyholder dividend accrual in 1995 compared to a policyholder dividend accrual of $5.1 million in 1994.
NET INVESTMENT INCOME increased $0.7 million or 8.1% for the period ended December 31, 1995. Of the $0.7 million increase, $0.1 million was attributable to a 10 basis point increase in the investment yield to 5.70% for the twelve months of 1995 from 5.60% for the 1994 period. The increase is generally due to higher investment yields received as a result of general increases in interest rates during the second half of 1994. The remaining $0.6 million increase occurred as a result of a 6.3% increase in average investable assets at December 31, 1995 versus December 31, 1994.
Liquidity is a measure of an entity's ability to secure sufficient cash to fulfill its contractual obligations and operating needs. The Company's cash inflows are generated from cash collected from policies sold and investment income generated from its existing portfolio. The Company's cash outflows are required primarily to pay policyholders' claims, operating expenses, and, historically, dividend obligations. Generally, premium is collected months or years before claims are paid under the policies purchased by the premium. These funds are used first to pay current claims and expenses. The balance is invested in high quality securities to augment the investment income generated by the existing portfolio. Beginning in 1995, there has been a negative impact on cash flows due to several factors, including a decline in premiums as a result of the open rating system adopted in California effective January 1, 1995 and the continued payments of property and casualty claims. While the Company monitors its cash flow carefully, it does not view the trend negatively as it reflects the run-off of claims written on the higher premium volumes that existed prior to January 1, 1995, the start of open rating. Further, the Company's open reserves of P&C claims have declined from $40.5 million in December 1995 to $25.5 million in 1996. In 1996, somewhat off-setting these factors are the recovery of reinsurance receivables under the 1991 Centre Re contract, but such receivables have now been purchased by SNIG and pledged as collateral to Chase . Additionally, as a result of a pay down of its workers' compensation claims and claim adjustment expense, the Company expects the DOI to release approximately $20 million in excess assets currently pledged to secure future workers' compensation claims. Subsequent to the release of the excess assets, additional funds will be available for any working capital needs of the Company. Furthermore, the Chase financing described above has had a positive impact on liquidity and is anticipated to have a positive impact on investment income in future periods, although realization of additional income is not assured.
For its insurance operations, SNIC must have available cash and liquid assets to meet its obligations to policyholders and claimants in accordance with contractual obligations in addition to meeting its ordinary operating costs. It is management's opinion that its present cash resources, with the addition of $44 million in additional bank debt and $18 million in equity anticipated in connection with the PRIM acquisition, are sufficient to meet the needs of the Company, including after the acquisition of PRIM.
to registration with the SEC under the Securities Act. Any offering of rights, if made, would be made only by means of a prospectus.
The effect of inflation on the revenues and net income of SNIG and SNIC during all three periods discussed below was not significant.
Because SNIG depends primarily on dividends from its insurance subsidiary for its net cash flow requirements, absent other sources of cash flow, SNIG cannot pay dividends materially in excess of the amount of dividends that could be paid by SNIC to SNIG. Insurance companies are also subject to restrictions affecting the amount of shareholder dividends and advances that may be paid within any one year without the prior approval of the DOI. The California Insurance Code provides that amounts may be paid as dividends on an annual noncumulative basis (generally based on the greater of (1) net income for the preceding year or (2) 10% of statutory surplus as regards policyholders as of the preceding December 31) without prior notice to, or approval by, the DOI. No cash dividends were paid in 1996 and 1995.
SNIC is a party to various leases principally associated with the Company's home and branch office space. Such leases contain provisions for scheduled lease charges and escalations in base rent over the lease term. The Company's minimum commitment with respect to these leases in 1997 is approximately $1.9 million. These leases expire from 1997 to 2001. See Note 12 to the Consolidated Financial Statements.
The Company (used) generated ($1.2) million and $21.6 million in cash from financing activities in 1995 and 1994, respectively. The use of cash in 1995 was related to the principal paydown of the bank term loan. The cash generated by financing activities in 1994 was funded principally by the sales of preferred securities ($18.0 million) and warrants to affiliates of Centre Re ($2.0 million), and the net proceeds of refinancing the Company's 1992 Notes with bank debt ($2.1 million).
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE - ------------------------- --- ----------------------------- -------- Steven D. Germain (2) 43 Director 1995
- --------------- (1) Member of Audit Committee (2) Member of Compensation Committee (3) Member of Investment Committee
THOMAS J. JAMIESON has been a director of the Company since December 1985. Since 1971, he has served as President of Jaco Oil Company. He is also active as an independent investor. Mr. Jamieson has been a director of Berry Oil Co. since 1993.
GORDON E. NOBLE became a director of the Company in October 1990. Since July 1990, he has been Chairman and Chief Executive Officer of Commodore Insurance Services. From January 1986 to January 1989, Mr. Noble served as Executive Vice President and as a director and member of the Executive Committee of Sedgwick James, an international insurance brokerage and risk management firm.
ROBERT A. SPASS was appointed to the Board of Directors in March 1992. Since 1990, Mr. Spass has served as President and Chief Executive Officer, and a director, of IIA. From 1994 to the present, Mr. Spass has been a Managing Partner of Insurance Partners Advisors, L.P. and a director of Unionamerica Holdings plc, and from 1994 to March 1996 was a director of NACOLAH Holding Corporation. Since January 1996, he has served as a director of Highlands Insurance Group, Inc. From 1984 to 1990, Mr. Spass was associated with Salomon Brothers Inc, where he was an associate from 1984 to 1985, Vice President from 1985 to 1988, and a director from 1988 to 1990. Mr. Spass has served from 1991 to 1995 as a director of Home Holdings, Inc., the parent company to The Home Insurance Company. From 1990 to 1996 he served as a director of National Reinsurance Holdings Corp., the holding company for National Reinsurance Corp. In both these director positions he serves as the designee of III pursuant to separate shareholder agreements.
WILLIAM L. GENTZ has held the position of President and Chief Executive Officer since mid-1994. Mr. Gentz joined the Company after seventeen years at Zenith Insurance Company where he was responsible for marketing, underwriting, loss control, and field operations for Zenith's workers' compensation operations. Mr. Gentz began his insurance career in 1958, and from 1958 to 1968 worked in the marketing and underwriting departments of a variety of insurance companies in the mid-west and California.
JOSEPH P. WOLONSKY has held the position of Senior Vice President and General Counsel from 1989 to December 1995, and was appointed to the position of Chief Claims Officer in December of 1992. Prior to joining the Company, Mr. Wolonsky had 12 years of insurance industry experience as General Counsel to a national credit life and accident and health general agency, and served as General Counsel to the Insurance Division of Borg-Warner Corporation.
THOMAS I. BOGGS, JR. was appointed Senior Vice President of Workers' Compensation Underwriting of SNIC effective March 1995. Previously he was Assistant Vice President of Fremont Compensation Insurance Company, and held various underwriting and marketing positions at Fireman's Fund Insurance Company, Cypress Insurance Company, Industrial Indemnity Insurance Company, and Safeco.
MATTHEW NATALIZIO has held the position of Vice President - Finance and Treasurer since 1994. From 1988 until he joined the Company, Mr. Natalizio was employed by KPMG Peat Marwick LLP.
SUE A. BINDER has held the position of Home Office Claims Manager of SNIC since 1991 and was made a Vice President in 1992. Prior to 1991, Ms. Binder held a variety of claims department staff and management positions at Fremont Indemnity Company where she had been employed since 1977.
HAROLD J. FEDORA, JR. has held the position of Vice President - Claims Services of SNIC since 1993, prior to which he was Calabasas Branch Claims Manager. From 1975 to 1987 Mr. Fedora was employed at several insurance companies in various claims department staff and management positions.
The following table sets forth certain information concerning the compensation for services in all capacities to the Company for the fiscal years ended December 31, 1996, December 31, 1995 and December 31, 1994, of those persons who were, at December 31, 1996, (i) the chief executive officer and (ii) the other four most highly compensated executive officers of the Company.
(7) Represents a grant of 7,438 shares of restricted stock that vests in nine equal annual increments following the date of grant. As of December 31, 1996, Mr. Seaman held an aggregate of 15,163 shares of restricted stock valued at $193,328, based upon the $12.75 per share fair market value of the Common Stock on such date. (8) Represents a grant of 4,375 shares of restricted stock that vests in nine equal annual increments following the date of grant. As of December 31, 1996, Mr. Wolonsky held an aggregate of 9,125 shares of restricted stock valued at $116,344, based upon the $12.75 per share fair market value of the Common Stock on such date. (9) Represents a grant of 4,375 shares of restricted stock that vests in nine equal annual increments following the date of grant. As of December 31, 1996, Mr. Johnson held an aggregate of 7,625 shares of restricted stock valued at $97,219, based upon the $12.75 per share fair market value of the Common Stock on such date. (10) Mr. Boggs began his employment with the Company in March 1995. (11) Represents a grant of 4,375 shares of restricted stock that vests in nine equal annual increments following the date of grant. As of December 31, 1996, Mr. Boggs held an aggregate of 6,875 shares of restricted stock valued at $87,656, based upon the $12.75 per share fair market value of the Common Stock on such date.
The Company has in effect employment agreements with the following officers:
(3) Represents the value of the shares of Common Stock issuable upon the exercise of the option, assuming the stated rates of price appreciation for ten years, compounded annually, with the aggregate exercise price deducted from the final appreciated value. The 5% and 10% rates are established by the SEC as examples only and are not intended to forecast future appreciation in the Company's stock price. (4) Represents a ten-year, incentive stock option grant, vesting at a rate of 20% per year for five years from the date of grant, granted pursuant to the 1995 Plan.
The following table sets forth information concerning the aggregate number of options exercised during fiscal 1996 by each of the executive officers named in the Summary Compensation Table set forth above under "Executive Compensation," and outstanding options held by each such officer as of December 31, 1996.
- --------------- (1) Uses a fair market value at December 31, 1996 of $12.75 per share, with the aggregate exercise price deducted from the total value of the stock underlying the options.
The Compensation Committee during the fiscal year ended December 31, 1996 consisted of Messrs. Noble, Cooper and Germain, each of whom was a non-employee director. Mr. Cooper is an employee and beneficial owner of less than one percent of the equity securities of IIA, which was paid in excess of $60,000 by the Company in fiscal 1996 for investment banking and financial consulting services. Mr. Germain is an officer and a director of Centre Re, which was involved in several transactions with the Company during 1996 involving payments in excess of $60,000. See "Certain Relationships and Related Transactions."
During fiscal 1996, no officers participated in deliberations of the Company's Compensation Committee concerning executive officer compensation, except William Gentz, the Company's Chief Executive Officer.
The Compensation Committee of the Board was comprised of Messrs. Noble, Cooper and Germain during 1996. The Compensation Committee establishes the general compensation policies of the Company, establishes the compensation plans and specific compensation levels for executive officers, and administers the 1986 Plan and the 1995 Plan.
As required by rules designated to enhance the disclosure of the Company's executive compensation policies and practices, the following is the Compensation Committee's report submitted to the Board addressing the compensation of the Company's executive officers for fiscal 1996.
The Compensation Committee of the Board of Directors establishes the general compensation policies of the Company, establishes the compensation plans, establishes the specific compensation of Mr. William Gentz, the Company's Chief Executive Officer, reviews the Chief Executive Officer's recommendations as to the specific compensation levels for the other executive officers, and administers the Company's stock incentive plans.
The Compensation Committee, consistent with its standing policy, has conducted a full review of the Company's executive compensation program and will repeat this review as it deems necessary. Advisors with expertise in executive compensation matters are consulted regularly by the Compensation Committee. It is the Compensation Committee's practice to establish target levels of compensation for senior officers consistent with that of companies comparable in size and complexity to the Company, as well as companies that are direct business competitors of the Company. After considerable review of extensive data relating to aspects of compensation paid by such groups of companies, actual compensation of the Company's executive officers is subject to increase or decrease by the Compensation Committee from targeted levels according to the Company's overall performance and the individual's efforts and contributions. As of 1996, as in previous years, a significant portion of executive compensation is directly related to the Company's financial performance and is therefore at risk. Total compensation for the Company's senior management is composed of base salary, near-term incentive compensation in the form of bonuses, and long-term incentive compensation in the form of stock options and restricted stock grants. The Compensation Committee retains the discretion to adjust the formula for certain items of compensation so long as total compensation reflects overall corporate performance and individual achievement.
BONUSES. The Company's executive officers are eligible for annual bonuses based upon recommendations made by Mr. Gentz (as to the other executive officers) and the Compensation Committee (as to Mr. Gentz) as to individual performance and the Company's achievement of certain operating results.
In determining Mr. Gentz's bonus, the Compensation Committee gives particular consideration to the following factors: (1) the Company's underwriting results; (2) the Company's return on average equity during the fiscal year; (3) the positive earnings growth of the Company during the fiscal year; (4) performance of the Company's stock during the fiscal year; and (5) the efforts and contributions made by Mr. Gentz in discharging his responsibilities as Chief Executive Officer. In 1996, the Compensation Committee placed significant weight on the continued improvement in the Company's underwriting profits and implementation of strategies designed to compete in the open-rating environment.
STOCK INCENTIVES. The Company currently has in place the 1986 Plan and the 1995 Plan. The Company ceased providing options under the 1986 Plan in April 1995. The purpose of the 1995 Plan is to provide incentives and reward the contributions of key employees and officers for the achievement of long-term Company performance, as measured by earnings per share and the market value of the Common Stock. The Compensation Committee set guidelines for the number and terms of stock option or restricted stock awards based on factors similar to those considered with respect to the other components of the Company's compensation program, including comparison with the practices of peer group companies and direct competitors. In the event of unsatisfactory corporate performance, the Compensation Committee may decide not to award stock options or restricted stock in any given fiscal year although exceptions to this policy may be made for individuals who have assumed substantially greater responsibilities and other similar factors. The awards under the 1995 Plan are designed to align the interests of executives with those of the shareholders. Generally, stock options become exercisable in cumulative installments over a period of five years, but the individual forfeits any installment that has not vested during the period of his employment. Restricted stock grants generally vest in equal installments over nine years with unvested shares subject to repurchase by the Company at no gain to the officer upon the termination of his or her employment.
The Compensation Committee has reviewed the Company's executive compensation policies and plans in light of the provisions of the Omnibus Budget Reconciliation Act of 1993 and the rules promulgated under that Act. This legislation amended Section 162 of the Code by limiting to $1 million the deductibility of compensation paid to certain executives. Rulemaking has clarified the impact of the 1993 act on equity incentive plans. It is the current policy of the Compensation Committee to maximize, to the extent reasonably possible, the Company's ability to obtain a corporate tax deduction for compensation paid to executive officers of the Company to the extent consistent with the best interests of the Company and its shareholders.
The graph below compares the cumulative total shareholder return of the Company with the cumulative total return on the Nasdaq Stock Market (U.S. Companies) Index and the Nasdaq Insurance Stocks Index for the period from June 30, 1995 (the date on which the Company's registration statement under Section 12 of the Exchange Act became effective) through December 31, 1996.
Superior National Insurance Group, Inc. Common Stock. . . . . . . $283.33 Nasdaq Insurance Stocks Index . . . . . . . . . . . . . . . . . . $139.12 Nasdaq Stock Market (U.S. Companies) Index. . . . . . . . . . . . $138.97
The Company believes that the Company's total shareholder return improved dramatically during 1996 primarily as a result of the increase in the Company's stock price in the second half of 1996 following the announcement of the PRIM transaction.
Centre Re's relationships with Steven D. Germain and CentreLine. The numbers of shares reported for Centre and III (excluding the Voting Notes) are based on an Amendment No. 1 to Schedule 13G filed with the SEC in February 1997.
Karl O. Johnson . . . . . . . . . . . . . . . 37,282(5) 1.07%
Douglas R. Roche . . . . . . . . . . . . . . 16,354(6) *
Directors and Executive Officers as a Group (22 persons). . . . . . . . . . . . 1,826,782(12) 25.37%
Messrs. Spass, Schwarberg and Cooper, directors of the Company, are employees of IIA and are each the beneficial owner of less than one percent of IIA's equity securities. Mr. Spass is also an officer and director of IIA. IIA was acting as advisor to III and SNIG regarding the purchase by III of $10 million of debt securities, including the Voting Notes, in 1992. IIA was paid $250,000 by the Company during fiscal 1996 for investment banking and financial consulting services. That payment was made pursuant to a consulting agreement entered into in 1992 that continues through 1998.
Mr. Germain, a director of the Company, is an officer and director of Centre Re and of CentreLine. Effective January 1, 1996, the Company cancelled certain reinsurance services provided by Centre Re. The Company accrued a $5.3 million charge related to the cancellation of such reinsurance services.
An affiliate of the Company, Superior National Capital, L.P., a Bermuda limited partnership, issued an additional 83,337 shares of preferred stock in 1995 for preferred securities dividends to an affiliate of Centre Re in connection with the transaction described in Footnote 5 to the Security Ownership of Certain Beneficial Owners table.
Mr. Spass, a director of the Company, and Mr. Steven Gruber, a director nominee, are executive officers of the ultimate general partner of each of IP Delaware and IP Bermuda. If the Stock Purchase Agreement is approved and consummated, IP will acquire 2,124,834 shares of newly issued common stock. In addition, each of Messrs. Spass and Gruber are executive officers of Insurance Partners Advisors, L.P. ("IPA"). If the Stock Purchase Agreement is consummated, IPA will receive a transaction fee from the Company of $625,000 representing a percentage of all of the funds raised to acquire PRIM and to make a capital contribution to the Pacific Rim Assurance Company. Under certain circumstances, alternative fees would be paid.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
Consolidated Balance Sheets as of December 31, 1996 and 1995 Consolidated Statements of Income for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements
10.30 Stock Purchase Agreement dated as of September 17, 1996, as amended and restated effective as of February 17, 1997, among the Company, Insurance Partners, L.P., Insurance Partners Offshore (Bermuda), L.P., TJS Partners, L.P., and certain members of the Company's management***** 10.31 State of California Department of Insurance Amended Certificate of Authority* 11.1 Statement re computation of per share earnings 21.1 Subsidiaries of the Registrant*
** Previously filed as an exhibit to Amendment No. 2 to SNIG's Registration Statement on Form 10/A as filed with the SEC on November 1, 1995 (File No. 0-25984).
*** Previously filed as an exhibit to SNIG's Annual Report on Form 10-K as filed with the SEC on March 29, 1996.
**** Previously filed as an exhibit to SNIG's statement on Schedule 13D filed for Pac Rim Holding Corporation, as filed with the SEC on September 26, 1996.
***** Previously filed as an exhibit to SNIG's statement on Schedule 13D filed for Pac Rim Holding Corporation, as filed with the SEC on February 27, 1997.