The Company maintains its principal executive offices at 885 Third Avenue, New York, New York 10022. CapMAC also maintains offices in London, England and Paris, France. The headquarters of CapMAC Assurance, S.A. is in Paris. All offices are leased. The Company does not own any real property.
CapMAC Asia has invested its capital in Asia Credit Services (Pte) Ltd ("Asia Services"), which owns all of the stock of Asian Securitization & Infrastructure Assurance (Pte) Ltd ("ASIA Ltd"), a regional financial guarantee company located in Singapore, rated double-A by Duff & Phelps, single-A by S&P and double-A plus by Nippon. At December 31, 1996 and 1995, CapMAC Asia had a $33.4 million and $30.7 million investment in Asia Services, respectively, representing 33.33% of the outstanding shares of Asia Services. ASIA Ltd was formed to provide guarantees of debt securities in the primary and secondary Asian fixed income capital markets and to engage in related business activities in the Asian capital markets and, together with Asia Services, to engage in related business activities in the Asian capital markets and to provide technical advice and assistance in connection with Asian securitization transactions. At December 31, 1996 and 1995, the Company's minority interest in CapMAC Asia amounted to $23.1 million and $19.6 million, respectively.
On July 5, 1996, the Company completed a secondary public offering by some of its stockholders of 3,737,500 shares of common stock at an offering price of $28 per share. The Company did not receive any proceeds from this offering.
Total revenues in 1996 were $84.0 million, an increase of 34% from $62.6 million in 1995. This increase was primarily due to higher advisory fees, premiums earned and investment income offset partially by realized capital losses.
The amount of PFR generated in any given period is based on the weighted average life of the guarantees issued during the period and the net premium and ceding commission expected to be received with respect to such guarantees, whereas gross par written is based on the principal amount of guarantees issued. Accordingly, an increase or decrease in PFR may not correspond with an increase or decrease in gross par written. Business originated or renewed in 1996 was estimated to generate $110.6 million of PFR, an increase of 23% over the same period in 1995 due to higher net premium and ceding commission obtained from certain international transactions and an increase in the weighted average life of the guarantees issued in 1996. However, the principal amount of guarantees issued (gross par written) was $13.1 billion in 1996 compared to $16.9 billion in 1995, a decrease of 23%. The $16.9 billion of gross par written in 1995
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes the most significant estimates relate to deferred acquisition costs, reserve for losses and loss adjustment expenses and disclosures of financial guarantees outstanding. Actual results could differ from those estimates.
The reinsurance of risk does not relieve the ceding insurer of its original liability to its policyholders. A contingent liability exists with respect to the aforementioned reinsurance arrangements, which may become a liability of CapMAC in the event the reinsurers are unable to meet obligations assumed by them under the reinsurance contracts. At December 31, 1996 and 1995, CapMAC had ceded loss reserves of $0 and $69,000, respectively, and had ceded unearned premiums of $18,489,000 and $13,171,000, respectively.
$ in thousands First Second Third Fourth Full Year - ------------------------------------------------------------------------------- Gross premiums written $15,029 18,772 17,214 21,823 72,838 Net premiums written 13,119 13,669 13,085 17,861 57,734 Net premiums earned 8,828 9,988 10,043 11,698 40,557 Advisory and other fees 9,872 5,705 5,750 5,816 27,143 Net investment income 4,111 3,808 4,485 5,502 17,906 Losses and loss adjustment expenses 1,075 1,109 1,248 1,383 4,815 Income before income taxes and minority interest 14,738 11,825 11,683 9,691 47,937 Net income 9,900 8,335 8,239 7,094 33,568 - ------------------------------------------------------------------------------- Gross premiums written $16,992 16,669 12,306 11,509 57,476 Net premiums written 13,899 14,116 6,118 7,351 41,484 Net premiums earned 7,101 7,303 7,311 7,527 29,242 Advisory and other fees 2,286 2,869 7,239 4,574 16,968 Net investment income 2,811 3,088 3,329 3,615 12,843 Losses and loss adjustment expenses 696 762 821 862 3,141 Income before income taxes and minority interest 5,405 6,023 12,186 11,050 34,664 Net income 3,840 4,480 8,033 7,175 23,528 - -------------------------------------------------------------------------------