Oakley was formed in April 1993 to underwrite professional liability and D&O coverages. The underlying business had been managed by an experienced staff and established systems at VSC. Oakley agreed to hire certain staff from VSC and entered into an arrangement that compensates VSC for its costs with an override related to the renewal of policies and the use of VSC as the issuing carrier until First Re can gain the necessary approvals to insure these coverages. The exclusive portion of the contract with VSC was extended until September 1996. In 1995 84.4% of First Re's premiums earned came from Oakley, up from 66.1% in 1994 and 16.5% in 1993.
The Registrant has replaced its financial institutions' reinsurance business with Oakley's professional liability and D&O policies and other reinsurance writings that may not match the historical experience the Registrant recorded on its financial institutions' business. Oakley is an insurance underwriter who can write a broad range of professional liability and D&O policies produced by the marketing efforts of insurance producers. This underwriting will likely cost less in commission expense but will increase operating costs as the risk analysis is performed by company staff for each submission for an insurance policy. The other assumed reinsurance writings will depend on First Re's ability to participate in the brokered reinsurance market.
The Registrant believes that in the current environment, a conservative underwriting philosophy is warranted. The Registrant, however, will take advantage of opportunities which provide a reasonable return. It seeks to make an underwriting profit on all lines and will withdraw from opportunities that do not provide a reasonable return.
Actual income tax payments made amounted to approximately $2,000,000, $692,000 and $500,000 in 1995, 1994 and 1993, respectively.
John P. Diesel served as President and a member of the Board of Directors of Tenneco, Inc. ("Tenneco") from 1979 until his retirement in 1991. Mr. Diesel joined Tenneco in 1972 as President of Newport News Shipbuilding and became Chairman and Chief Executive Officer of that company in 1973. Prior to joining Tenneco, Mr. Diesel acquired more than 20 years experience in manufacturing, corporate management and consulting through employment with McQuay Norris Mfg., Booz Allen and Hamilton and A.O. Smith Corporation. Mr. Diesel currently serves as a member of the Board of Directors of the Aluminum Corporation of America, Brunswick Corporation and Telepad Corporation.
The Chairman of the Board and the Chairman of the Executive Committee are entitled to an annual cash fee of $10,000. The Chairman of the Board has agreed to forego all compensation. The directors also are reimbursed for their expenses incurred in connection with meetings. No compensation is paid for telephonic meetings.
1. Calculated for each beneficial owner on the basis of shares outstanding at January 31, 1996, plus shares subject to options exercisable by such beneficial owner within 60 days of January 31, 1996.
2. Calculated for each beneficial owner on the basis of shares outstanding at January 31, 1996, plus shares subject to options exercisable by such beneficial owner within 60 days of January 31, 1996.
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K