On December 10, 2002, the capital stock of the Oak Entities was contributed by Trenwick to the Company. The Company and the Oak Entities are under the common control of Trenwick, which was effective beginning on September 27, 2000, as a result of the Trenwick/LaSalle business combination, therefore, this transaction was accounted for at historical cost, in a manner similar to a pooling of interests business combination. Accordingly, the selected financial data presented herein for the 2002, 2001 and 2000 years have been restated to reflect the combined operating results, cash flows and financial position of the Company and the Oak Entities. The 1999 and 1998 selected financial data presented herein includes only the results of the Company.
Gross premiums written $ 536,898 $ 522,292 $ 14,606 Change in gross unearned premiums (19,315) (40,289) 20,974 --------- --------- --------- Gross premiums earned 517,583 482,003 35,580 --------- --------- ---------
The improvement in the expense ratio is primarily the result of the commissions earned by LaSalle Re related to the Endurance transaction.
2001 Year 2000 Year Change --------- --------- --------- (in thousands) Gross premiums written $ 522,292 $ 412,242 $ 110,050 Change in gross unearned premiums (40,289) (21,636) (18,653) --------- --------- --------- Gross premiums earned 482,003 390,606 91,397 ========= ========= =========
Operating activities produced a net cash inflow of $76.4 million for the year ended December 31, 2002 compared to $51.5 million for the year ended December 31, 2001. The increase in cash flow from operations was due primarily to an increase in premiums collected and an increase in net investment income received.
The accounting policies described below are those the Company considers critical in preparing its consolidated financial statements. These policies include significant estimates made by management using information available at the time the estimates are made. However, as described below, these estimates could change materially if different information or assumptions were used. The descriptions below are summarized and have been simplified for clarity. A more detailed description of the significant accounting policies used by Trenwick in preparing its financial statements is included in the Notes to the Consolidated Financial Statements and the note references are included below.
Claims and claims expenses are recorded as incurred, at management's best estimate, in order to match claims and claims expense costs with premiums over the contract periods. The amount provided for unpaid claims and claims expenses consists of any unpaid reported claims and claims expenses and estimates for incurred but not reported claims and claims expenses, net of estimated salvage and subrogation. The estimates for claims and claims expenses incurred but not reported were developed based on historical claims and claims expense experience and an actuarial evaluation of expected claims and claims expense experience. Reserves for unpaid claims and claims expenses, by their very nature, do not represent an exact
With respect to the Company's investment portfolio, the risk management strategy is to place its investments with high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one issuer. The Company selects investments with characteristics such as duration, yield, currency and liquidity to reflect the underlying characteristics of related estimated claim liabilities.
minimum listing requirements. Our Series A Preferred Shares were quoted on the Over-The-Counter (OTC) Bulletin Board beginning on Tuesday, March 25, 2003.
As a result of the September 11, 2001 terrorist attacks, LaSalle Re incurred large catastrophe losses that enabled Trenwick to exercise its rights under a catastrophe equity put option with European Reinsurance Company of Zurich, a subsidiary of Swiss Reinsurance Company ("European Re"). In this transaction, Trenwick issued Series B shares to European Re for a purchase price of $40 million. These Series B shares are convertible into Trenwick's common shares upon the occurrence of certain events, including Trenwick's failure to maintain a net worth (as defined) under generally accepted accounting principles of $225 million. Trenwick's net worth is below $225 million, and European Re is able to convert the Series B preferred shares into Trenwick common shares upon not less than 60 trading days' notice to Trenwick. Should European Re convert such Series B Shares, substantial dilution to existing Trenwick common shareholders will occur. In addition, depending on the conversion ratio of preferred shares to common shares, which is based upon the trading price of Trenwick common shares and the book value and number of shares converted, this conversion could result in European Re obtaining control of Trenwick, and therefore the Company, subject to compliance with applicable insurance law and regulation.