The Company rents space for its principal executive offices under leases which expire up to June 2009. Total rent expense for the years ended December 31, 1999, 1998 and 1997 was approximately $13 million, $9 million and $7 million, respectively. In 1997, the Company acquired commercial real estate in Bermuda for the purpose of securing long-term office space to meet its anticipated needs. The Company is in the process of developing this property and constructing its worldwide headquarters. The total cost of this development, including the land, is expected to be approximately $110 million, of which $60 million has been spent through December 31, 1999. It is estimated that the development will be completed sometime in 2001. See Note 11 to the Consolidated Financial Statements for discussion of the Company's lease commitments.
1) The loss and loss expense ratio is the calculated by dividing the losses and loss expenses incurred by the net premiums earned. In 1999, the loss and loss expense ratio excludes an increase to reserves of $95 million associated with the merger with NAC.
3) All share and per share information has been retroactively restated to give effect to a one for one stock dividend paid to XL shareholders of record on July 26, 1996. Cash dividends per share have not been adjusted for the pooling effect of NAC.
5) The combined ratio is the sum of the loss and loss expense ratio and the underwriting expense ratio. A combined ratio of under 100% indicates an underwriting profit and over 100% indicates an underwriting loss.
This "Management's Discussion and Analysis of Results of Operations and Financial Condition" contains forward-looking statements which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward looking-statements. These statements are based upon current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements, and therefore you should not place undue reliance on them. See "--Cautionary Note Regarding Forward-Looking Statements" for a list of factors that could cause actual results to differ materially from those contained in any forward-looking statement.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (U.S. dollars in thousands, except share and per share amounts)
XL Capital Ltd (sometimes referred to as the "Company") is a holding company organized under the laws of the Cayman Islands. XL was incorporated on March 16, 1998, as the successor to EXEL Limited, a Cayman Islands corporation organized in 1986, in connection with EXEL's merger with Mid Ocean Limited, a Cayman Islands corporation. The merger was accounted for as a purchase under U.S. generally accepted accounting principles ("GAAP") and as such, results of operations of Mid Ocean are included from August 1, 1998, the effective date of the merger. In the merger, all of the shares of EXEL and Mid Ocean were exchanged for shares in the Company according to two schemes of arrangement under Cayman Islands law. The Company operated under the name "EXEL Limited" from completion of the merger until February 1, 1999 when its current name was approved by the requisite vote of the Company's shareholders. References herein to XL Capital or the Company also shall include EXEL unless the context otherwise requires. Through its subsidiaries, the Company is a leading provider of insurance and reinsurance, including coverages relating to certain financial risks, to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis.
In 1999, XL Capital merged with NAC Re Corp, a Delaware corporation. The merger has been accounted for as a "pooling of interests" under U.S. GAAP. Under pooling of interests accounting, it is assumed that XL Capital and NAC have been merged from the date of incorporation of the Company, and accordingly, all prior period information contained in this document includes the results of NAC. NAC was organized in 1985 and, through its subsidiaries, writes property and casualty insurance and reinsurance in the U.S., Canada and Europe. Subsequent to the merger agreement, XL Capital amended its financial year from November 30 to December 31 as a conforming pooling adjustment and to facilitate year end reporting for its subsidiaries.
XL Insurance, a company organized under the laws of Bermuda, and its subsidiaries are the Company's principal insurance subsidiaries. XL Insurance was formed in 1986 in response to a shortage of high excess liability coverage for Fortune 500 companies in the U.S. In 1990, XL Insurance formed XL Europe, an insurance company organized under the laws of Ireland to serve European clients and, in 1998, formed two companies now known as XL Insurance Company of New York and XL Capital Assurance.
The Company further expanded into the U.S. in 1999 by completing the acquisition of both Intercargo Corporation and ECS, Inc. Intercargo, through its subsidiaries, underwrites specialty insurance products for companies engaged in international trade, including U.S. Customs bonds and marine cargo insurance. ECS is an underwriting manager, which specializes in environmental insurance coverages and risk management services.
Denham Syndicate Management Limited was acquired by NAC during 1998 and it also provides underwriting and similar services to one corporate syndicate, whose capital is partially provided by the Company. This syndicate writes a specialized book of international business, concentrating on long-tail casualty and non-marine physical damage.
The Company participates in several joint ventures of strategic importance. In general, the Company has pursued a strategy of entering into joint ventures with organizations that possess expertise in lines of business that the Company wishes to write. The Company's principal joint ventures are in the areas of financial guaranty insurance, life insurance for high net worth individuals, Latin American reinsurance, political risk insurance and currency and related risk management. In July 1999, the Company entered into a joint venture with Les Mutuelles du Mans Assurances Group to form a new French reinsurance company, Le Mans Re. The Company owns a 49% shareholding in the new company, which underwrites a worldwide portfolio comprising all classes of non-life reinsurance business together with a selective portfolio of life reinsurance business.
In 1998, the Company entered into a joint venture with FSA Holdings Ltd to write financial guaranty insurance and reinsurance. Under the terms of the joint venture, each of the Company and FSA formed a Bermuda insurance company in which it is the majority shareholder and made a minority investment in the company formed by its co-venturer.
These consolidated financial statements include the accounts of the Company and all of its subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). They include the merger with NAC, which occurred in June 1999, and which has been accounted for as a "pooling of interests" under U.S. GAAP. They are also based upon the Company's new fiscal year end of December 31. Results of operations, statements of position and cash flows include NAC as though it had always been a part of the Company. All material intercompany accounts and transactions have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Financial guaranty insurance premiums are earned over the life of the exposure, and certain transactions such as installment premiums are not recognized as premiums written until the premium is received.
Acquisition costs, which vary with and are primarily related to the acquisition of policies, primarily commissions paid to brokers, are deferred and amortized over the period the premiums are earned. Future earned premiums and the anticipated losses, investment income and other costs related to those premiums are also considered in determining the level of acquisition costs to be deferred.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Short-term investments comprise investments with a maturity equal to or greater than 90 days but less than one year. Equity securities include investments in open end mutual funds. All investment transactions are recorded on a trade date basis. Realized gains and losses on sales of investments are determined on the basis of average cost or amortized cost. Investment income is recognized when earned and includes interest and dividend income together with the amortization of premium and discount on fixed maturities and short-term investments.
Unpaid losses and loss expenses includes reserves for unpaid reported losses and loss expenses and for losses incurred but not reported. The reserve for unpaid reported losses and loss expenses has been established by management based on amounts reported from insured or ceding companies and consultation with independent legal counsel, and represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company. Certain workers' compensation case reserves are considered fixed and determinable and are subject to tabular reserving. Such tabular reserves are discounted using an interest rate of 7%.
The Company recognizes as a component of loss reserves, the loss experience accounts of policyholders for policies written on a multi-year basis where experience accounts are a percentage of premiums net of related losses paid. Interest is earned on liable amounts and charged to investment income. In the event the insured cancels the policy, the return of the experience account is treated as a commutation if the Company was previously notified of a loss, or as a return premium if there has been no loss notification.
Policy benefit reserves relate to long duration contracts written by the Company which do not transfer significant mortality or morbidity risks, and are accounted for as deposits, and liabilities for estimated future policy benefits are established at the time such funds are received.
The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) grants and stock appreciation rights is recognized to the extent that the fair value of the stock exceeds the exercise price of the option at the measurement date.
Fair values of certain assets and liabilities are based on published market values, if available, or estimates of fair value of similar issues. Fair values are reported in Notes 4 and 10.
The Company is organized into four underwriting segments - insurance, reinsurance, Lloyd's syndicates and financial services - in addition to a corporate segment that includes the investment operations of the Company. Certain business written by the Company has loss experience characterized as low frequency and high severity. This may result in volatility in both the Company's results and operational cash flows.
The insurance business is written primarily by the following: XL Insurance, XL Europe, XL Insurance Company of New York, Greenwich Insurance, Indian Harbor Insurance, ECS and Intercargo. Business written includes general liability, other liability including directors and officers, professional and employment practices liability, property, program business, marine, aviation, satellite and other product lines including U.S. Customs bonds, surety, political risk and specialty lines.
The Lloyd's operations are comprised of Brockbank and Denham. Corporate syndicates write property, marine and energy, aviation and satellite, motor, professional indemnity, liability coverage and other specialty lines, primarily of insurance but also reinsurance. Effective January 1, 2000, the Company discontinued writing direct motor business.
(3) Operating expenses exclude corporate operating expenses, shown separately, and one time charges of $45.3 million associated with the merger with NAC.
(1) Operating expenses exclude corporate operating expenses, shown separately, and one time charges of $17.5 million associated with the merger with Mid Ocean.
The following table is an analysis of the Company's gross premiums written, net premiums written and net premiums earned by line of business:
During 1999, 1998 and 1997, approximately 21%, 34% and 35% of the Company's consolidated gross written premiums were generated from or placed by Marsh & McLennan Companies. During 1999, 1998 and 1997, approximately 13%, 19% and 18% of the Company's consolidated gross written premiums were generated from or placed by AON Corporation and its subsidiaries. No other broker accounted for more than 10% of gross premiums written in each of the three years ended December 31, 1999.
At December 31, 1999 and 1998, approximately $89.4 million and $92.0 million, respectively, of securities were on deposit with various U.S. state or government insurance departments in order to comply with insurance regulations.
Included in cash and invested assets at December 31, 1999 and 1998 are approximately $16.6 million and $22.4 million, respectively, of assets held in a "holding company" escrow account arising from a tax allocation agreement between certain of the Company's U.S. subsidiaries.
In 1999, the Company signed a joint venture agreement with Les Mutuelles du Mans Assurances Group to form a new French reinsurance company, Le Mans Re. The Company owns a 49% shareholding in the new company, which underwrites a worldwide portfolio comprising all classes of non-life reinsurance business together with a selective portfolio of life reinsurance business.
The Company owned 27.9% of the issued shares of Risk Capital Holdings as at December 31, 1999 and 1998. Risk Capital provides reinsurance and other forms of capital for insurance companies with capital needs that cannot be met by reinsurance alone. Subsequent to year end, this investment was sold. See Note 20 for further discussion.
The Company owns 30% of Pareto Partners, a partnership engaged in the business of providing investment advisory and discretionary management services.
The Intercargo and ECS acquisitions have been accounted for under the purchase method of accounting. The combined purchase price was $222.8 million and the resulting goodwill of $159.6 million is being amortized over 20 years. Cash acquired as a result of the acquisition was $49.6 million.
Losses incurred in 1999 grew significantly over 1998 for a number of reasons. The Company acquired Mid Ocean and Brockbank in August 1998 and consequently, only recognized the effect of their operations for five months in 1998. Incurred losses for these entities were approximately $475 million in 1999 compared to $260 million in 1998. The Company was also affected by a number of catastrophes in 1999 compared to 1998. The fourth
The Company's net incurred losses and loss expenses includes a provision of $10.6 million, $1.2 million and $3.7 million in 1999, 1998 and 1997, respectively, for estimates of actual and potential non-recoveries from reinsurers. Such charges for non-recoveries relate mainly to reinsurance ceded for casualty business written prior to 1986. Included in unpaid losses and loss expenses at December 31, 1999, 1998 and 1997 is a reserve for potential non-recoveries from reinsurers of $25.8 million, $14.5 million and $13.8 million, respectively.
7. LOSSES AND LOSS EXPENSES (CONTINUED) ASBESTOS AND ENVIRONMENTAL RELATED CLAIMS
As of December 31, 1999 and 1998, the Company had approximately 370 and 400 open claim files, respectively, for potential asbestos exposures and 245 and 760 open claim files, respectively, for potential environmental exposures. Approximately 46% and 51% of the open claim files for 1999 and 1998, respectively, are due to precautionary claim notices. Precautionary claim notices are submitted by the ceding companies in order to preserve their right to receive coverage under the reinsurance contract. Such notices do not contain an incurred loss amount to the Company. The Company believes it has made reasonable provision for its asbestos and environmental exposures and is unaware of any specific issues that would materially affect its estimate for losses and loss expenses. The estimation of loss and loss expense liabilities for asbestos and environmental exposures is subject to much greater uncertainty than is normally associated with the establishment of liabilities for certain other exposures due to several factors, including: i) uncertain legal interpretation and application of insurance and reinsurance coverage and liability; ii) the lack of reliability of available historical claims data as an indicator of future claims development; iii) an uncertain political climate which may impact, among other areas, the nature and amount of costs for remediating waste sites; and iv) the potential of insurers and reinsurers to reach agreements in order to avoid further significant legal costs. Due to the potential significance of these uncertainties, the Company believes that no meaningful range of loss and loss expense liabilities beyond recorded reserves can be established. As these uncertainties are resolved, additional reserve provisions, which could be material in amount, may be necessary.
There are a limited amount of retrocession agreements in place for the Company's short tail reinsurance business assumed for common account reinsurance on proportional contracts written and "high level" property catastrophe excess of loss protection. For the long tail casualty reinsurance business written, several reinsurance policies are in place to limit the Company's retention on any one claim and also for multiple claims arising from two or more risks in a single occurrence or event.
The Company's Lloyd's syndicates have traditionally purchased a significant amount of reinsurance to protect against extraordinary loss or loss involving one or more of the lines of business written. Reinsurance is purchased on an excess of loss and quota share basis.
The effect of reinsurance and retrocessional activity on premiums written and earned is shown below:
As at December 31, 1999, the Company had bank and loan facilities available from a variety of sources including commercial banks totaling $2.16 billion (1998: $2.24 billion) of which $410.7 million (1998: $613.9 million) was outstanding. In addition, $891.6 million (1998: $348.9 million) of letters of credit were outstanding, 66% of which were collateralized by the Company's investment portfolio, primarily supporting U.S. non-admitted business, intercompany quota share agreements between affiliates and the Company's Lloyd's capital requirements.
The 364-day facilities are provided by a syndicate of banks where the borrowings are unsecured, and by a U.S. bank where the borrowings are collateralized and guaranteed. There were no borrowings outstanding at December 31, 1999. The weighted average interest rate on the funds borrowed during 1999 was approximately 5.41% and approximately 5.9% during 1998.
Two syndicates of banks provide the two five-year facilities and borrowings are unsecured. The amounts of $299.7 million and $190.0 million outstanding at December 31, 1999 and 1998, respectively, relate primarily to the $300.0 million borrowed to finance the cash option election available to shareholders in connection with the Mid Ocean acquisition in August 1998. The 1999 outstanding amount also relates to the $109.7 million borrowed to finance the acquisition of ECS and Intercargo during 1999. The weighted average interest rate on funds borrowed during 1999 was approximately 5.43% and 5.7% during 1998.
Total pre-tax interest expense on the borrowings described above was $37.4 million, $33.4 million and $29.6 million for the years ended December 31, 1999, 1998 and 1997, respectively. Associated with the Company's bank and loan commitments are various loan covenants with which the Company was in compliance throughout the three year period.
The Company has seven letter of credit facilities available at December 31, 1999, two from two syndicates of banks, three from U.K. banks and two from U.S. banks. Two syndicates of banks and a U.K. bank provided the three letter of credit facilities available at December 31, 1998. These facilities are used to collateralize certain reinsureds' premium and unpaid loss reserves with the Company and for Lloyd's capital requirements of the Company's corporate syndicates. Of the letters of credit outstanding at December 31, 1999, $591.0 million (1998: $348.9 million) were collateralized against the Company's investment portfolio and $300.6 million (1998: Nil) were unsecured.
11. COMMITMENTS AND CONTINGENCIES (CONTINUED) The Company attempts to hedge directly the foreign currency exposure of a portion of its foreign currency fixed maturity investments using forward foreign exchange contracts that generally have maturities of three months or less, and which are rolled over to provide continuing coverage for as long as the investments are held. Where an investment is sold, the related foreign exchange sale contract is closed by entering into an offsetting purchase contract. At December 31, 1999, the Company had, as hedges, foreign exchange contracts for the sale of $94.0 million and the purchase of $7.5 million of foreign currencies at fixed rates, primarily Euros (49% of net contract value), British pounds (18%) and New Zealand dollars (16%). The market value of fixed maturities denominated in foreign currencies that were hedged and held by the Company as at December 31, 1999 was $85.2 million.
In 1997, the Company acquired commercial real estate in Hamilton, Bermuda for the purpose of securing long-term office space to meet its anticipated needs. The Company is in the process of developing this property and constructing its worldwide headquarters. The total cost of the development, including the land, is expected to be approximately $110 million, of which $60 million has been spent to December 31, 1999. It is estimated that the development will be completed sometime in 2001. Upon completion of the development, it is expected that the Company's rental commitments will be reduced.
The Company is a Cayman Islands corporation and, except as described below, neither it nor its non-U.S. subsidiaries have paid United States corporate income taxes (other than withholding taxes on dividend income) on the basis that they are not engaged in a trade or business in the United States; however, because definitive identification of activities which constitute being engaged in trade or business in the United States is not provided by the Internal Revenue Code of 1986, regulations or court decisions, there can be no assurance that the Internal Revenue Service will not contend that the Company or its non-U.S. subsidiaries are engaged in trade or business in the United States. If the Company or its non-U.S. subsidiaries were considered to be engaged in trade or business in the United States (and, if the Company or such subsidiaries were to qualify for the benefits under the income tax treaty between the United States and Bermuda or Ireland, such businesses were attributable to a "permanent establishment" in the United States), the Company or such subsidiaries could be subject to U.S. tax at regular tax rates on its taxable income that is effectively connected with its U.S. trade or business plus an additional 30% "branch profits" tax on such income remaining after the regular tax, in which case there could be a material adverse effect on the Company's shareholders' equity and earnings.
The Company insures and reinsures financial guaranties issued to support public and private borrowing arrangements. Financial guaranties are conditional commitments which guaranty the performance of a customer to a third party. The Company's potential liabilities in the event of nonperformance by the issuer of the insured obligation is represented by its proportionate share of the aggregate outstanding principal and interest payable ("insurance in force") on such insured obligation. At December 31, 1999, the Company's aggregate insurance in force was $5.2 billion. The Company manages its exposure to credit risk through a structured underwriting process which includes detailed credit analysis, review of and adherence to underwriting guidelines, surveillance policies and procedures and the use of reinsurance.
A second stock plan, intended to replace the directors' "Retirement Plan for Non-Employee Directors," provides for the issuance of share units equal to the amount that would have been credited to the Retirement Plan, divided by the market price of the Company's stock on December 1 of each year. These units receive dividends in the form of additional units equal to the cash value divided by the market price on the payment date. Stock units totaling 1,217, 5,531 and 6,716 were provided for in 1999, 1998 and 1997, respectively.
As a result of the merger with Mid Ocean during August 1998, 791,573 Mid Ocean options were converted to options of XL Capital. These are 10 year options that generally vest over 3 years.
In 1999, the Company adopted the 1999 Performance Incentive Plan under which 1,250,000 options were available and issued to employees who were not directors or executive officers of the Company.
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation." Had the Company adopted the accounting provisions of SFAS No. 123, compensation costs would have been determined based on the fair value of the stock option awards
12. SHARE CAPITAL (CONTINUED) The following table summarizes information about the Company's stock options (including stock appreciation rights) for options outstanding as of December 31, 1999:
13. RETIREMENT PLANS (CONTINUED) At NAC, a qualified non-contributory defined benefit pension plan exists to cover substantially all its U.S. employees. Benefits are based on years of service and compensation, as defined in the plan, during the highest consecutive three years of the employee's last ten years of employment.
Under this plan, the Company's policy is to make annual contributions to the plan that are deductible for federal income tax purposes and that meet the minimum funding standards required by law. The contribution level is determined by utilizing the entry age cost method and different actuarial assumptions than those used for pension expense purposes. This plan also includes a non-qualified supplemental defined benefit plan designed to compensate individuals to the extent their benefits under the Company's qualified plan are curtailed due to Internal Revenue Code limitations. The projected benefit obligation, accumulated benefit obligation and fair value of the assets for this plan with accumulated benefit obligations in excess of the plan assets were $4.6 million, $2.5 million and Nil, respectively, as of December 31, 1999 and $5.0 million, $2.5 million and Nil, respectively as of December 31, 1998. The discount rates used in determining the actuarial present value of benefit obligations were 7.7% and 6.5% for 1999 and 1998, respectively. The rate of increase for future compensation levels was 6.5% for 1999 and 5.5% for 1998. The assumed rate of return on plan assets was 9.0% for both 1999 and 1998.
The Company's expenses for its retirement plans is not considered to be significant.
The related tax effects allocated to each component of other comprehensive income were as follows:
The following dividend information relates to the Company without inclusion of the pooling effect with NAC:
In 1999, four regular quarterly dividends were paid at $0.44 per share to shareholders of record at February 5, April 23, July 12 and September 24.
XL Europe has been approved to carry on business in the International Services Centre in Dublin. Under Section 39 of the Finance Act 1990, XL Europe is entitled to benefit from a 10% tax rate on profits (including investment income) until 2005.
17. TAXATION (CONTINUED) The U.S. subsidiaries current U.S. taxable income for the years ended December 31, 1999 and 1997 is based on regular taxable income. The current U.S. tax expense for the year ended December 31, 1998 is based on alternative minimum taxable income.
Shareholders' equity at December 31, 1999 and 1998 reflects tax benefits of $1.5 million and $5.6 million, respectively, related to compensation expense deductions for stock options exercised for one of the Company's U.S. subsidiaries.
The Company's U.S. insurance and reinsurance subsidiaries are subject to regulatory oversight under the insurance statutes and regulations of the jurisdictions in which they conduct business.
The insurance laws of each state of the U.S. and of many foreign countries regulate the sale of insurance within their jurisdiction by alien insurers, such as XL Insurance and XL Mid Ocean Re. The Company believes it is not in violation of the insurance laws of any state in the U.S. or any foreign country. From time to time, various proposals for federal legislation within the United States have been circulated which could require the Company to, amongst other things, register as a surplus lines insurer. The Company believes that generally it could meet and comply with the requirements to be registered as a surplus lines insurer and such compliance would not have a material impact on the ability of the Company to conduct its business. There can be no assurances, however, that the activities of the Company will not be challenged in the future or that the Company will be able to successfully defend against such challenges or that legislation will not be enacted that will affect the Company's ability to conduct its business.
XL Europe's insurance activities are subject to extensive regulation in Ireland, principally under the Irish Acts and Irish Regulations, which impose on insurers headquartered in Ireland minimum solvency and reserve standards and auditing and reporting requirements and grant to the Minister of State for Science, Technology and Commerce (the"Irish Minister") wide powers to supervise, investigate and intervene in the affairs of such insurers. The Irish Minister's powers and functions are exercised through the medium of the Department of Enterprise, Trade and Employment.
The Company, Brockbank and Denham are subject to the regulatory jurisdiction of the Council of Lloyd's (the "Council"). Unlike other financial markets in the U.K., Lloyd's is not subject to direct U.K. government regulation through The Financial Services Act of 1986 but, instead, is self regulating by virtue of the Lloyd's Act of 1982 through the bye-laws, regulations and codes of conduct written by the Council, which governs the market. It is expected that the new Financial Services Authority will take a supervisory regulatory role during 2000. Under the Council, there are two boards, the Market Board and the Regulatory Board. The former is led by a number of the working members of the Council and is responsible for strategy and the provision of services such as premium and claims handling, accounting and policy signing. The Regulatory Board is responsible for the regulation of the market, compliance and the protection of policyholders and capital providers. Under the regulations, the approval of the Council has to be obtained before any person can be a "major shareholder" or "controller" of a corporate Name or managing agency. The Company has been approved as both a "major shareholder" and a "controller" of its corporate Names (the "CCVs") and managing agencies.
The Company is subject to regulation in Australia, Singapore, Madrid, Latin America and Germany as a result of its representative offices and branches in such jurisdictions.
Unaudited condensed pro forma financial information shown below relates to the Company's acquisition of Mid Ocean in August 1998 and is based upon the assumption that Mid Ocean had been a part of the Company's operations since January 1, 1997.