Financial information has been included herein related to the consolidated financial statements of Zurich Reinsurance Centre Holdings, Inc. ("ZRCH") and its wholly-owned subsidiaries, Zurich Reinsurance Centre, Inc. ("ZRC") and ZC Insurance Company ("ZCIC", collectively referred to as the "Company"). The Company, through its principal subsidiary, ZRC, operates primarily as a broker reinsurer in the property and casualty reinsurance market. During April 1995, the Company acquired Re Capital Corporation ("Re Capital", subsequently renamed ZC Insurance Company) and accounted for the acquisition using purchase accounting. The operating results of Re Capital are included in the Company's consolidated results of operations from the date of acquisition.
1994, the Northridge earthquake and 1994 East Coast winter storms contributed 5.4 percentage points to ZRC's GAAP loss and commission ratio. The gross and net of reinsurance impact of the 1994 Northridge earthquake was $9.3 million and $8.7 million, respectively. The 1994 East Coast winter storms increased both gross and net reinsurance losses and LAE by $3.5 million.
included in the overall duration. As of December 31, 1996, the cost and market value of the outstanding dollar rolls were $270.1 million and $269.0 million, respectively. There is no leverage related to these transactions since sufficient cash equivalents are retained to cover settlement of the underlying position.
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ZURICH REINSURANCE CENTRE HOLDINGS, INC.
Zurich Reinsurance Centre Holdings, Inc. ("ZRCH") a Delaware corporation, serves as the holding company for Zurich Reinsurance Centre, Inc. ("ZRC"), a Connecticut stock insurance company and ZC Insurance Company ("ZCIC"), a New Jersey stock insurance company. ZRCH, together with ZRC and ZCIC (the "Company"), is a 65.7%-owned indirect subsidiary of the Zurich Insurance Group, a Swiss financial services holding company. The Company, through its principal operating subsidiary, ZRC, operates in the North American market primarily as a reinsurer of property and casualty risks including general liability, automobile liability, workers' compensation and property exposures. The Company provides pro rata and excess of loss reinsurance through reinsurance treaties and facultative arrangements. The Company's treaty business is written through intermediaries while its facultative business is primarily written on a direct basis. ZCIC commenced writing primary casualty business during the fourth quarter of 1996.
Financial information has been included herein related to the consolidated financial statements of ZRCH and its wholly-owned subsidiaries, ZRC and ZCIC. All significant intercompany transactions have been eliminated. The preparation of the financial statements in conformity with generally accepted accounting principles ("GAAP") includes amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates. The following are the Company's significant accounting policies:
During April 1995, ZRCH acquired Re Capital. Through its wholly-owned subsidiary, Re Capital Reinsurance Corporation, Re Capital was principally engaged in underwriting domestic property and casualty reinsurance. As a result of the acquisition: (i) each share of Re Capital's former common stock which was issued and outstanding was converted into the right to receive $18.50 in cash per share; and (ii) ZRCH assumed all obligations under Re Capital's 5 1/2% Convertible Debentures, due August 1, 2000 (the "Convertible Debentures"). Total consideration paid in 1995 by ZRCH in connection with the acquisition was approximately $205.7 million. The acquisition was funded by the sale of $147.6 million of Re Capital's investments, $4.0 million of cash acquired from Re Capital and $54.1 million of the Company's funds. The acquisition of Re Capital has been accounted for as a purchase in accordance with APB No. 16, "Business Combinations." The operating results of Re Capital have been included in the Company's consolidated results of operations from the date of acquisition.
The following tables reconcile amortized cost to the estimated market value of fixed maturity and non-affiliated equity securities: