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þ
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For
the quarterly period ended June 30, 2007
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||
OR
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||
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For
the transition period from ________________to
_______________________
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Bermuda
|
|
98-0481623
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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|
(I.R.S.
Employer
Identification
No.)
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Page
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1
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1
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2
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3
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4
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5
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14
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26
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29
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30
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30
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30
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Item 3. | Defaults Upon Senior Securities | 30 | |
Item 4. | Submission of Matters to a Vote of Security Holders | 30 | |
Item 5. | Other Information | 31 | |
|
31
|
As
at
|
As
at
|
|||||||
June
30, 2007
|
December
31, 2006
|
|||||||
ASSETS
|
||||||||
Investments:
|
||||||||
Fixed
maturities, at fair value (Amortized cost: 2007 - $992,567; 2006
-
$686,288)
|
$ |
978,660
|
$ |
682,278
|
||||
Short
term investments, at fair value (Cost: 2007 - $25,683; 2006 -
$nil)
|
25,583
|
–
|
||||||
Equity
investments, at fair value (Cost: 2007 - $25,171; 2006 -
$nil)
|
28,766
|
–
|
||||||
Other
investments
|
157,438
|
74,496
|
||||||
Total
Investments
|
1,190,447
|
756,774
|
||||||
Cash
and cash equivalents
|
422,045
|
261,352
|
||||||
Reinsurance
premium balances receivable
|
220,229
|
68,940
|
||||||
Unearned
premiums ceded
|
4,211
|
8,224
|
||||||
Accrued
interest receivable
|
7,719
|
6,331
|
||||||
Receivable
for investments sold
|
–
|
3,599
|
||||||
Deferred
acquisition costs
|
34,186
|
11,909
|
||||||
Funds
withheld
|
5,138
|
–
|
||||||
Goodwill
|
6,602
|
5,624
|
||||||
Other
assets
|
17,580
|
18,659
|
||||||
Due
from related parties
|
2,291
|
3,090
|
||||||
Total
Assets
|
$ |
1,910,448
|
$ |
1,144,502
|
||||
LIABILITIES
|
||||||||
Loss
and loss adjustment expense reserves
|
$ |
135,143
|
$ |
22,516
|
||||
Unearned
premiums
|
269,020
|
98,659
|
||||||
Insurance
and reinsurance balances payable
|
883
|
–
|
||||||
Payable
for investments purchased
|
1,201
|
9,531
|
||||||
Long
term debt
|
238,290
|
137,159
|
||||||
Other
liabilities
|
17,164
|
11,866
|
||||||
Due
to related parties
|
1,283
|
252
|
||||||
Total
Liabilities
|
662,984
|
279,983
|
||||||
Minority
Interest
|
161,619
|
–
|
||||||
SHAREHOLDERS’
EQUITY
|
||||||||
Common
voting shares, 150,000,000 authorized, $0.01 par value, issued
and
outstanding (2007 - 85,297,891; 2006 - 71,547,891)
|
853
|
715
|
||||||
Additional
paid-in capital
|
901,279
|
728,378
|
||||||
Accumulated
other comprehensive loss
|
(2,536 | ) | (4,528 | ) | ||||
Retained
earnings
|
186,249
|
139,954
|
||||||
Total
Shareholders’ Equity
|
1,085,845
|
864,519
|
||||||
Total
Liabilities, Minority Interest and Shareholders’
Equity
|
$ |
1,910,448
|
$ |
1,144,502
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Gross
premiums written
|
$ |
181,345
|
$ |
125,453
|
$ |
388,358
|
$ |
214,067
|
||||||||
Reinsurance
premiums ceded
|
–
|
(6,714 | ) | (8,245 | ) | (8,602 | ) | |||||||||
Net
premiums written
|
181,345
|
118,739
|
380,113
|
205,465
|
||||||||||||
Change
in net unearned premiums
|
(69,503 | ) | (81,464 | ) | (167,045 | ) | (149,218 | ) | ||||||||
Net
premiums earned
|
111,842
|
37,275
|
213,068
|
56,247
|
||||||||||||
Net
investment income
|
20,531
|
8,173
|
34,162
|
14,801
|
||||||||||||
Net
realized and unrealized gains (losses)
|
(1,901 | ) | (5,526 | ) |
2,613
|
(8,621 | ) | |||||||||
Other
income
|
251
|
2,009
|
924
|
2,009
|
||||||||||||
Total
revenues
|
130,723
|
41,931
|
250,767
|
64,436
|
||||||||||||
EXPENSES
|
||||||||||||||||
Loss
and loss adjustment expenses
|
77,257
|
3,609
|
125,005
|
9,827
|
||||||||||||
Acquisition
costs
|
14,725
|
5,253
|
27,443
|
8,098
|
||||||||||||
General
and administrative expenses
|
13,800
|
8,399
|
28,469
|
16,249
|
||||||||||||
Interest
expense
|
3,520
|
–
|
6,784
|
–
|
||||||||||||
Net
foreign exchange gains
|
(56 | ) | (1,166 | ) | (1,338 | ) | (1,325 | ) | ||||||||
Total
expenses
|
109,246
|
16,095
|
186,363
|
32,849
|
||||||||||||
Income
before income taxes, minority interest and interest in earnings
of equity
investments
|
21,477
|
25,836
|
64,404
|
31,587
|
||||||||||||
Provision
for income tax
|
(77 | ) |
–
|
(122 | ) |
–
|
||||||||||
Minority
interest
|
(7,892 | ) |
–
|
(15,625 | ) |
–
|
||||||||||
Interest
in earnings of equity investments
|
1,186
|
259
|
1,647
|
259
|
||||||||||||
NET
INCOME
|
$ |
14,694
|
$ |
26,095
|
$ |
50,304
|
$ |
31,846
|
||||||||
Change
in net unrealized losses
|
–
|
(2,603 | ) |
–
|
(3,584 | ) | ||||||||||
Change
in currency translation adjustment
|
(1,741 | ) |
52
|
(2,017 | ) |
52
|
||||||||||
COMPREHENSIVE
INCOME
|
$ |
12,953
|
$ |
23,544
|
$ |
48,287
|
$ |
28,314
|
||||||||
Weighted
average common shares outstanding—Basic
|
85,139,757
|
71,547,891
|
78,479,958
|
68,481,102
|
||||||||||||
Weighted
average common shares outstanding—Diluted
|
85,198,147
|
71,547,891
|
78,529,631
|
68,481,102
|
||||||||||||
Net
income per common share outstanding—Basic
|
$ |
0.17
|
$ |
0.36
|
$ |
0.64
|
$ |
0.47
|
||||||||
Net
income per common share outstanding—Diluted
|
$ |
0.17
|
$ |
0.36
|
$ |
0.64
|
$ |
0.47
|
For
the Six Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
Common
voting shares:
|
||||||||
Balance
at beginning of period
|
71,547,891
|
55,239,491
|
||||||
Issued
during the period
|
13,750,000
|
16,308,400
|
||||||
Balance
at end of period
|
85,297,891
|
71,547,891
|
||||||
Share
capital:
|
||||||||
Common
voting shares
|
||||||||
Balance
at beginning of period
|
$ |
715
|
$ |
552
|
||||
Issued
during period
|
138
|
163
|
||||||
Balance
at end of period
|
853
|
715
|
||||||
Additional
paid-in capital
|
||||||||
Balance
at beginning of period
|
728,378
|
559,466
|
||||||
Issue
of shares
|
185,488
|
162,921
|
||||||
Issuance
costs (related party: 2007, $3,430; 2006, $nil)
|
(16,839 | ) | (251 | ) | ||||
Fair
value of issued warrant
|
–
|
3,372
|
||||||
Share
based compensation expense
|
4,252
|
–
|
||||||
Balance
at end of period
|
901,279
|
725,508
|
||||||
Accumulated
other comprehensive loss
|
||||||||
Balance
at beginning of period
|
(4,528 | ) |
–
|
|||||
Change
in net unrealized losses
|
–
|
(3,584 | ) | |||||
Change
in currency translation adjustment
|
(2,017 | ) |
52
|
|||||
Cumulative
effect adjustment from adoption of new accounting
principle
|
4,009
|
–
|
||||||
Balance
at end of period
|
(2,536 | ) | (3,532 | ) | ||||
Retained
earnings (accumulated deficit)
|
||||||||
Balance
at beginning of period
|
139,954
|
(12,384 | ) | |||||
Cumulative
effect adjustment from adoption of new accounting
principle
|
(4,009 | ) |
–
|
|||||
Net
income for period
|
50,304
|
31,846
|
||||||
Balance
at end of period
|
186,249
|
19,462
|
||||||
Total
Shareholders’ Equity
|
$ |
1,085,845
|
$ |
742,153
|
For
the Six Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
Cash
flows provided by (used in) operating activities:
|
||||||||
Net
income
|
$ |
50,304
|
$ |
31,846
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Net
realized and unrealized (gains) losses
|
(2,613 | ) |
8,621
|
|||||
Minority
interest
|
15,625
|
–
|
||||||
Depreciation
expense
|
820
|
310
|
||||||
Share
based compensation expense
|
4,252
|
4,257
|
||||||
Amortization
of debt offering expenses
|
388
|
–
|
||||||
Interest
in earnings of equity investments
|
(1,647 | ) | (259 | ) | ||||
Amortization/accretion
on fixed maturities
|
(5,975 | ) | (708 | ) | ||||
Changes
in assets and liabilities, excluding net assets acquired:
|
||||||||
Reinsurance
premium receivable
|
(151,289 | ) | (129,105 | ) | ||||
Unearned
premiums ceded
|
(3,323 | ) | (6,762 | ) | ||||
Deferred
acquisition costs
|
(21,977 | ) | (17,537 | ) | ||||
Funds
withheld
|
(5,138 | ) |
–
|
|||||
Loss
and loss adjustment expense reserves
|
112,627
|
7,494
|
||||||
Unearned
premiums
|
170,361
|
155,980
|
||||||
Insurance
and reinsurance balances payable
|
883
|
–
|
||||||
Other
changes in assets and liabilities, net
|
3,984
|
3,984
|
||||||
Net
cash provided by operating activities
|
167,282
|
58,121
|
||||||
Cash
flows provided by (used in) investing activities:
|
||||||||
Net
cash received (paid) in acquisitions of subsidiaries
|
4,581
|
(11,992 | ) | |||||
Purchases
of fixed income securities
|
(838,231 | ) | (389,194 | ) | ||||
Sales
and maturities of fixed income securities
|
574,260
|
114,131
|
||||||
Purchases
of equity securities
|
(25,171 | ) | (69,693 | ) | ||||
Other
investments, net
|
(69,405 | ) | (19,573 | ) | ||||
Purchases
of fixed assets
|
(3,666 | ) | (1,462 | ) | ||||
Net
cash used in investing activities
|
(357,632 | ) | (377,783 | ) | ||||
Cash
flows provided by (used in) financing activities:
|
||||||||
Issue
of common shares, net of issuance costs paid
|
171,644
|
162,833
|
||||||
Issue
of debentures, net of issuance costs paid
|
98,940
|
–
|
||||||
Contribution
of minority interest
|
83,100
|
–
|
||||||
Other
|
(1,151)
|
(2 | ) | |||||
Net
cash provided by financing activities
|
352,533
|
162,831
|
||||||
Effect
of foreign exchange rate on cash and cash equivalents
|
(1,490 | ) |
–
|
|||||
Increase
(decrease) in cash and cash equivalents
|
160,693
|
(156,831 | ) | |||||
Cash
and cash equivalents—beginning of period
|
261,352
|
548,255
|
||||||
Cash
and cash equivalents—end of period
|
$ |
422,045
|
$ |
391,424
|
||||
Supplemental
cash flow information:
|
||||||||
Payable
for investments purchased
|
$ |
1,201
|
$ |
2,472
|
||||
Interest
paid
|
$ |
6,416
|
$ |
–
|
Fair
Value Measurement at June 30, 2007, using:
|
||||||||||
Fair
Value
Measurements
|
Quoted
Prices in
Active
Markets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
||||||||
|
|
|
||||||||
Description
|
||||||||||
Fixed
maturity investments
|
$ |
978,660
|
$ |
978,660
|
$ |
–
|
||||
Short
term investments
|
25,583
|
25,583
|
–
|
|||||||
Equity
investments
|
28,766
|
28,766
|
–
|
|||||||
1,033,009
|
1,033,009
|
–
|
||||||||
Other
Investments:
|
||||||||||
Real
Estate Investment Trusts
|
12,724
|
–
|
12,724
|
|||||||
Investment
funds
|
30,195
|
21,561
|
8,634
|
|||||||
Catastrophe
bonds
|
36,541
|
–
|
36,541
|
|||||||
Fixed
income fund
|
66,001
|
66,001
|
–
|
|||||||
Island
Heritage *
|
–
|
–
|
–
|
|||||||
145,461
|
87,562
|
57,899
|
||||||||
Totals
|
$ |
1,178,470
|
$ |
1,120,571
|
$ |
57,899
|
||||
For
the Three Months Ended June 30, 2007
|
For
the Six Months Ended June 30, 2007
|
||||||||||||||||||||||
Number
|
Weighted
average
grant
date
fair value
|
Weighted
average remaining contractual
term
|
Number
|
Weighted
average
grant
date
fair value
|
Weighted
average remaining contractual term
|
||||||||||||||||||
Outstanding
at beginning of period
|
1,381,000
|
$ |
11.72
|
2.2
|
713,000
|
$ |
10.03
|
2.0
|
|||||||||||||||
Forfeited
|
–
|
–
|
(4,000 | ) |
10.07
|
||||||||||||||||||
Granted
|
157,000
|
13.29
|
829,000
|
13.46
|
|||||||||||||||||||
Outstanding
at end of period
|
1,538,000
|
$ |
11.88
|
2.0
|
1,538,000
|
$ |
11.88
|
2.0
|
For
the Three Months Ended June 30, 2007
|
For
the Six Months Ended June 30, 2007
|
||||||||||||||||||||||
Number
|
Weighted
average
grant
date
fair value
|
Weighted
average remaining contractual
term
|
Number
|
Weighted
average
grant
date
fair value
|
Weighted
average remaining contractual term
|
||||||||||||||||||
Outstanding
at beginning of period
|
254,477
|
$ |
12.14
|
1.3
|
117,727
|
$ |
10.49
|
0.8
|
|||||||||||||||
Forfeited
|
(16,300
|
) |
12.39
|
(19,100 | ) |
12.09
|
|||||||||||||||||
Granted
|
88,361
|
13.31
|
227,911
|
13.43
|
|||||||||||||||||||
Outstanding
at end of period
|
326,538
|
$ |
12.45
|
1.1
|
326,538
|
$ |
12.45
|
1.1
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
||||||||||||
Basic
earnings per common share
|
|||||||||||||||
Net
income
|
$ |
14,694
|
$ |
26,095
|
$ |
50,304
|
$ |
31,846
|
|||||||
Weighted
average common shares outstanding
|
85,050,638
|
71,547,891
|
78,408,388
|
68,481,102
|
|||||||||||
Weighted
average vested restricted share units
|
89,119
|
–
|
71,570
|
–
|
|||||||||||
Weighted
average common shares outstanding—Basic
|
85,139,757
|
71,547,891
|
78,479,958
|
68,481,102
|
|||||||||||
Basic
earnings per common share
|
$ |
0.17
|
$ |
0.36
|
$ |
0.64
|
$ |
0.47
|
|||||||
Diluted
earnings per common share
|
|||||||||||||||
Net
income
|
$ |
14,694
|
$ |
26,095
|
$ |
50,304
|
$ |
31,846
|
|||||||
Weighted
average common shares outstanding
|
85,050,638
|
71,547,891
|
78,408,388
|
68,481,102
|
|||||||||||
Weighted
average vested restricted share units outstanding
|
89,119
|
–
|
71,570
|
–
|
|||||||||||
85,139,757
|
71,547,891
|
78,479,958
|
68,481,102
|
||||||||||||
Share
equivalents:
|
|||||||||||||||
Unvested
restricted share units
|
58,390
|
–
|
49,673
|
–
|
|||||||||||
Weighted
average common shares outstanding—Diluted
|
85,198,147
|
71,547,891
|
78,529,631
|
68,481,102
|
|||||||||||
Diluted
earnings per common share
|
$ |
0.17
|
$ |
0.36
|
$ |
0.64
|
$ |
0.47
|
Three
Months Ended June 30, 2007
|
Three
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Line
of business
|
|||||||||||||||||
Property
catastrophe
|
$ |
144,389
|
79.6 | % | $ |
99,831
|
79.6 | % | |||||||||
Property
|
26,344
|
14.5 | % |
21,577
|
17.2 | % | |||||||||||
Short-tail
specialty and casualty
|
10,612
|
5.9 | % |
4,045
|
3.2 | % | |||||||||||
Total
|
$ |
181,345
|
100.0 | % | $ |
125,453
|
100.0 | % |
Six
Months Ended June 30, 2007
|
Six
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Line
of business
|
|||||||||||||||||
Property
catastrophe
|
$ |
302,757
|
78.0 | % | $ |
160,262
|
74.9 | % | |||||||||
Property
|
50,900
|
13.1 | % |
41,751
|
19.5 | % | |||||||||||
Short-tail
specialty and casualty
|
34,701
|
8.9 | % |
12,054
|
5.6 | % | |||||||||||
Total
|
$ |
388,358
|
100.0 | % | $ |
214,067
|
100.0 | % |
Three
Months Ended June 30, 2007
|
Three
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Geographic
area of risk insured(1)
|
|||||||||||||||||
North
America
|
$ |
123,682
|
68.2 | % | $ |
81,501
|
65.0 | % | |||||||||
Europe
|
17,053
|
9.4 | % |
6,911
|
5.5 | % | |||||||||||
Worldwide
risks(2)
|
14,058
|
7.8 | % |
14,345
|
11.4 | % | |||||||||||
Japan
and Australasia
|
17,874
|
9.9 | % |
15,849
|
12.6 | % | |||||||||||
Caribbean
|
7,692
|
4.2 | % |
6,550
|
5.2 | % | |||||||||||
Other
|
986
|
0.5 | % |
297
|
0.3 | % | |||||||||||
Total
|
$ |
181,345
|
100.0 | % | $ |
125,453
|
100.0 | % |
Six
Months Ended June 30, 2007
|
Six
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Geographic
area of risk insured(1)
|
|||||||||||||||||
North
America
|
$ |
214,433
|
55.2 | % | $ |
119,901
|
56.0 | % | |||||||||
Europe
|
84,021
|
21.6 | % |
28,877
|
13.5 | % | |||||||||||
Worldwide
risks(2)
|
39,664
|
10.2 | % |
31,684
|
14.8 | % | |||||||||||
Japan
and Australasia
|
29,513
|
7.6 | % |
18,780
|
8.8 | % | |||||||||||
Caribbean
|
15,055
|
3.9 | % |
12,366
|
5.8 | % | |||||||||||
Other
|
5,672
|
1.5 | % |
2,459
|
1.1 | % | |||||||||||
Total
|
$ |
388,358
|
100.0 | % | $ |
214,067
|
100.0 | % |
(1)
|
Except
as otherwise noted, each of these categories includes
contracts that cover
risks located primarily in the designated geographic
area.
|
|
|
|
|
(2)
|
This
geographic area includes contract that cover risks
primarily in two or
more geographic zones.
|
Three
Months Ended June 30, 2007
|
Three
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Name
of broker
|
|||||||||||||||||
Benfield
|
$ |
51,266
|
28.3 | % | $ |
39,486
|
31.5 | % | |||||||||
Guy
Carpenter
|
47,486
|
26.2 | % |
14,955
|
11.9 | % | |||||||||||
Willis
Group
|
30,188
|
16.6 | % |
26,698
|
21.3 | % | |||||||||||
Aon
Re Worldwide
|
29,593
|
16.3 | % |
24,404
|
19.4 | % | |||||||||||
Other
brokers
|
22,812
|
12.6 | % |
19,910
|
15.9 | % | |||||||||||
Total
|
$ |
181,345
|
100.0 | % | $ |
125,453
|
100.0 | % |
Six
Months Ended June 30, 2007
|
Six
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Name
of broker
|
|||||||||||||||||
Benfield
|
$ |
119,899
|
30.9 | % | $ |
61,502
|
28.7 | % | |||||||||
Guy
Carpenter
|
98,045
|
25.2 | % |
31,419
|
14.7 | % | |||||||||||
Willis
Group
|
61,734
|
15.9 | % |
48,711
|
22.7 | % | |||||||||||
Aon
Re Worldwide
|
58,872
|
15.2 | % |
45,098
|
21.1 | % | |||||||||||
Other
brokers
|
49,808
|
12.8 | % |
27,337
|
12.8 | % | |||||||||||
Total
|
$ |
388,358
|
100.0 | % | $ |
214,067
|
100.0 | % | |||||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30, 2007
|
June
30, 2006
|
June
30, 2007
|
June
30, 2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Gross
premiums written
|
$ |
181,345
|
$ |
125,453
|
$ |
388,358
|
$ |
214,067
|
||||||||
Reinsurance
premiums ceded
|
–
|
(6,714 | ) | (8,245 | ) | (8,602 | ) | |||||||||
Net
premiums written
|
181,345
|
118,739
|
380,113
|
205,465
|
||||||||||||
Change
in net unearned premiums
|
(69,503 | ) | (81,464 | ) | (167,045 | ) | (149,218 | ) | ||||||||
Net
premiums earned
|
111,842
|
37,275
|
213,068
|
56,247
|
||||||||||||
Net
investment income
|
20,531
|
8,173
|
34,162
|
14,801
|
||||||||||||
Net
realized and unrealized gains (losses)
|
(1,901 | ) | (5,526 | ) |
2,613
|
(8,621 | ) | |||||||||
Other
income
|
251
|
2,009
|
924
|
2,009
|
||||||||||||
Total
revenues
|
130,723
|
41,931
|
250,767
|
64,436
|
||||||||||||
EXPENSES
|
||||||||||||||||
Loss
and loss adjustment expenses
|
77,257
|
3,609
|
125,005
|
9,827
|
||||||||||||
Acquisition
costs
|
14,725
|
5,253
|
27,443
|
8,098
|
||||||||||||
General
and administrative expenses
|
13,800
|
8,399
|
28,469
|
16,249
|
||||||||||||
Interest
expense
|
3,520
|
–
|
6,784
|
–
|
||||||||||||
Net
foreign exchange gains
|
(56 | ) | (1,166 | ) | (1,338 | ) | (1,325 | ) | ||||||||
Total
expenses
|
109,246
|
16,095
|
186,363
|
32,849
|
||||||||||||
Income
before income taxes, minority interest and interest
in earnings of equity
investments
|
21,477
|
25,836
|
64,404
|
31,587
|
||||||||||||
Provision
for income tax
|
(77 | ) |
–
|
(122 | ) |
–
|
||||||||||
Minority
interest
|
(7,892 | ) |
–
|
(15,625 | ) |
–
|
||||||||||
Interest
in earnings of equity investments
|
1,186
|
259
|
1,647
|
259
|
||||||||||||
NET
INCOME
|
$ |
14,694
|
$ |
26,095
|
$ |
50,304
|
$ |
31,846
|
||||||||
Change
in net unrealized losses
|
–
|
(2,603 | ) |
–
|
(3,584 | ) | ||||||||||
Change
in currency translation adjustment
|
(1,741 | ) |
52
|
(2,017 | ) |
52
|
||||||||||
COMPREHENSIVE
INCOME
|
$ |
12,953
|
$ |
23,544
|
$ |
48,287
|
$ |
28,314
|
||||||||
Weighted
average common shares outstanding—Basic
|
85,139,757
|
71,547,891
|
78,479,958
|
68,481,102
|
||||||||||||
Weighted
average common shares outstanding—Diluted
|
85,198,147
|
71,547,891
|
78,529,631
|
68,481,102
|
||||||||||||
Net
income per common share outstanding—Basic
|
$ |
0.17
|
$ |
0.36
|
$ |
0.64
|
$ |
0.47
|
||||||||
Net
income per common share outstanding—Diluted
|
$ |
0.17
|
$ |
0.36
|
$ |
0.64
|
$ |
0.47
|
Three
Months Ended June 30, 2007
|
Three
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Line
of business
|
|||||||||||||||||
Property
catastrophe
|
$ |
144,389
|
79.6 | % | $ |
99,831
|
79.6 | % | |||||||||
Property
|
26,344
|
14.5 | % |
21,577
|
17.2 | % | |||||||||||
Short-tail
specialty and casualty
|
10,612
|
5.9 | % |
4,045
|
3.2 | % | |||||||||||
Total
|
$ |
181,345
|
100.0 | % | $ |
125,453
|
100.0 | % |
Three
Months Ended June 30, 2007
|
Three
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Geographic
area of risk insured(1)
|
|||||||||||||||||
North
America
|
$ |
123,682
|
68.2 | % | $ |
81,501
|
65.0 | % | |||||||||
Europe
|
17,053
|
9.4 | % |
6,911
|
5.5 | % | |||||||||||
Worldwide
risks(2)
|
14,058
|
7.8 | % |
14,345
|
11.4 | % | |||||||||||
Japan
and Australasia
|
17,874
|
9.9 | % |
15,849
|
12.6 | % | |||||||||||
Caribbean
|
7,692
|
4.2 | % |
6,550
|
5.2 | % | |||||||||||
Other
|
986
|
0.5 | % |
297
|
0.3 | % | |||||||||||
Total
|
$ |
181,345
|
100.0 | % | $ |
125,453
|
100.0 | % |
(1)
|
Except
as otherwise noted, each of these categories includes
contracts that cover
risks located primarily in the designated geographic
area.
|
|
(2)
|
This
geographic area includes contracts that cover risks
primarily in two or
more geographic zones.
|
Three
Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
($
in thousands)
|
||||||||
Interest
and dividend income
|
||||||||
Cash
and cash equivalents
|
$ |
3,247
|
$ |
4,911
|
||||
Fixed
maturities
|
11,647
|
2,537
|
||||||
Short
term
|
–
|
384
|
||||||
Equity
investments
|
225
|
(48 | ) | |||||
Other
investments
|
25
|
–
|
||||||
Amortization
income
|
||||||||
Cash
and cash equivalents
|
–
|
(2 | ) | |||||
Fixed
maturities
|
5,534
|
655
|
||||||
Investment
expenses
|
(147 | ) | (264 | ) | ||||
Net
investment income
|
$ |
20,531
|
$ |
8,173
|
Three
Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
($
in thousands)
|
||||||||
Fixed
maturities
|
||||||||
Gross
realized gains
|
$ |
215
|
$ |
19
|
||||
Gross
realized losses
|
(2,834 | ) | (717 | ) | ||||
Net
realized losses
|
$ | (2,619 | ) | $ | (698 | ) |
Three
Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
($
in thousands)
|
||||||||
Net
realized losses on fixed maturities
|
$ | (2,619 | ) | $ | (698 | ) | ||
Net
unrealized losses on fixed maturities & equities
|
(8,638 | ) |
–
|
|||||
Net
realized and unrealized gains (losses) on derivative
instruments
|
8,834
|
(4,828 | ) | |||||
Net
realized and unrealized gains on other investments
|
522
|
–
|
||||||
Total
net realized and unrealized losses
|
$ | (1,901 | ) | $ | (5,526 | ) |
Six
Months Ended June 30, 2007
|
Six
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Line
of business
|
|||||||||||||||||
Property
catastrophe
|
$ |
302,757
|
78.0 | % | $ |
160,262
|
74.9 | % | |||||||||
Property
|
50,900
|
13.1 | % |
41,751
|
19.5 | % | |||||||||||
Short-tail
specialty and casualty
|
34,701
|
8.9 | % |
12,054
|
5.6 | % | |||||||||||
Total
|
$ |
388,358
|
100.0 | % | $ |
214,067
|
100.0 | % |
Six
Months Ended June 30, 2007
|
Six
Months Ended June 30, 2006
|
||||||||||||||||
Gross
premiums
written
|
Percentage
of total
|
Gross
premiums
written
|
Percentage
of total
|
||||||||||||||
Geographic
area of risk insured(1)
|
|||||||||||||||||
North
America
|
$ |
214,433
|
55.2 | % | $ |
119,901
|
56.0 | % | |||||||||
Europe
|
84,021
|
21.6 | % |
28,877
|
13.5 | % | |||||||||||
Worldwide
risks(2)
|
39,664
|
10.2 | % |
31,684
|
14.8 | % | |||||||||||
Japan
and Australasia
|
29,513
|
7.6 | % |
18,780
|
8.8 | % | |||||||||||
Caribbean
|
15,055
|
3.9 | % |
12,366
|
5.8 | % | |||||||||||
Other
|
5,672
|
1.5 | % |
2,459
|
1.1 | % | |||||||||||
Total
|
$ |
388,358
|
100.0 | % | $ |
214,067
|
100.0 | % |
(1)
|
Except
as otherwise noted, each of these categories includes
contracts that cover
risks located primarily in the designated geographic
area.
|
|
(2)
|
This
geographic area includes contracts that cover risks
primarily in two or
more geographic
zones.
|
Six
Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
($
in thousands)
|
||||||||
Interest
and dividend income
|
||||||||
Cash
and cash equivalents
|
$ |
6,659
|
$ |
10,176
|
||||
Fixed
maturities
|
21,522
|
3,854
|
||||||
Short
term
|
35
|
384
|
||||||
Equity
investments
|
225
|
184
|
||||||
Other
investments
|
(67 | ) |
–
|
|||||
Amortization
income
|
||||||||
Cash
and cash equivalents
|
–
|
11
|
||||||
Fixed
maturities
|
5,975
|
697
|
||||||
Investment
expenses
|
(187 | ) | (505 | ) | ||||
Net
investment income
|
$ |
34,162
|
$ |
14,801
|
Six
Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
($
in thousands)
|
||||||||
Fixed
maturities
|
||||||||
Gross
realized gains
|
$ |
739
|
$ |
123
|
||||
Gross
realized losses
|
(3,419 | ) | (1,538 | ) | ||||
Net
realized losses
|
$ | (2,680 | ) | $ | (1,415 | ) |
Six
Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
($
in thousands)
|
||||||||
Net
realized losses on fixed maturities
|
$ | (2,680 | ) | $ | (1,415 | ) | ||
Net
unrealized losses on fixed maturities & equities
|
(5,315 | ) |
-
|
|||||
Net
realized and unrealized gains (losses) on derivative
instruments
|
7,974
|
(7,206 | ) | |||||
Net
realized and unrealized gains on other investments
|
2,634
|
-
|
||||||
Total
net realized and unrealized gains (losses)
|
$ |
2,613
|
$ | (8,621 | ) |
As
at
|
As
at
|
|||||||
June
30, 2007
|
December
31, 2006
|
|||||||
($
in thousands)
|
||||||||
Long
term debt
|
$ |
238,290
|
$ |
137,159
|
||||
Common
shares
|
853
|
715
|
||||||
Additional
paid-in capital
|
901,279
|
728,378
|
||||||
Accumulated
other comprehensive loss
|
(2,536 | ) | (4,528 | ) | ||||
Retained
earnings
|
186,249
|
139,954
|
||||||
Total
Capitalization
|
$ |
1,324,135
|
$ |
1,001,678
|
·
|
|
the
risks discussed on our Form S-1 filed with the SEC on March
30, 2007
beginning on page 12
|
·
|
|
cyclicality
of demand and pricing in the reinsurance market
|
·
|
|
unpredictability
and severity of catastrophic events
|
·
|
|
adequacy
of our risk management and loss limitation methods
|
·
|
|
adequacy
of our loss reserves
|
·
|
|
our
limited operating history
|
·
|
|
dependence
on key personnel
|
·
|
|
dependence
on the policies, procedures and expertise of ceding
companies
|
·
|
|
potential
loss of business from one or more major reinsurance
brokers
|
·
|
|
potential
for financial strength rating downgrade
|
·
|
|
risks
inherent to our acquisition strategy
|
·
|
|
highly
competitive business environment and
|
·
|
|
other
factors, most of which are beyond our
control.
|
NONE
|
|||||||
There
have been no material changes to the risk factors previously
described in
Part I, Item 1A of our annual report on Form S-1 for the year
ended
December 31, 2006.
|
|||||||
NONE
|
|||||||
NONE
|
|||||||
On
20th
July
the Company held its Annual General Meeting of shareholders.
Shareholders
were asked to vote upon the resolutions set out below. The
following
tabulation indicates the number of shares for or against, or
withheld, or
abstaining with respect to each resolution after giving effect
to the
voting limitations contained in the Company’s Bye-laws:
|
|||||||
Election
of Directors
|
1)
|
electing
the following persons as directors to hold office until the
Company’s next
Annual General Meeting or until their successors are elected
or appointed
or their offices are otherwise vacated:
|
||||||
FOR
|
WITHHELD
|
||||||
DAVID A. BROWN |
68,992,161
|
10,780
|
|||||
STEPHEN COLEY |
62,022,598
|
2,980,343
|
|||||
DR. ANTHONY KNAP |
62,022,598
|
2,980,343
|
In
accordance with the Company’s Bye-Laws the Class A Directors, Mark J.
Byrne, Stewart Gross, E. Daniel James and Marc Roston have
terms which
expire at the 2009 Annual General Meeting. The Class B Directors,
Gary
Black, Thomas Dickson, Jan Spiering and Wray Thorn have terms
which expire
at the 2008 Annual General Meeting.
|
2)
|
to
appoint Deloitte & Touche, independent auditors, to serve as our
independent auditors for the 2007 Fiscal year until our 2008
Annual
General Meeting, and to refer the determination of the auditors’
remuneration to the Board of
Directors:
|
FOR
|
AGAINST
|
|
ABSTAIN
|
|||||
64,888,995
|
4,112,047
|
1,899
|
3)
|
to
approve an amendment to the Company’s
Bye-laws.
|
FOR
|
AGAINST
|
|
ABSTAIN
|
|||||
68,984,172
|
9,049
|
9,719
|
4)
|
to
consider and take action with respect to such matters as may
properly come
before the Annual General Meeting or any adjournment
thereof:
|
FOR
|
AGAINST
|
|
ABSTAIN
|
|||||
60,726,657
|
8,269,022 |
7,261
|
5)
|
authorizing
the Board of Directors to fill vacancies in their number not
filled at a
general meeting:
|
FOR
|
AGAINST
|
|
ABSTAIN
|
|||||
53,038,137
|
0
|
0
|
NONE
|
||||||||
The exhibits listed on the accompanying Exhibit Index, and such Exhibit Index, are filed or incorporated by reference as a part of this report. |
FLAGSTONE REINSURANCE | |||
|
By:
|
/s/ David Brown | |
David Brown | |||
Chief Executive Officer | |||
(Authorized Officer) |
|
By:
|
/s/ James O’Shaughnessy | |
James O’Shaughnessy | |||
Chief Financial Officer | |||
(Principal Financial Officer) |
Exhibit
No.
|
Description
of Exhibit
|
|
3.1
|
Bye-laws
of the Company, as amended 20th July 2007.
|
|
4.1
|
Indenture,
dated as of June 8, 2007, between Flagstone Finance S.A., as Issuer,
Flagstone Reinsurance Holdings Limited, as Guarantor, and Wilmington
Trust
Company, as Trustee (incorporated herein by reference to Exhibit
4.1 to
the Company’s Current Report on Form 8-K dated June 14,
2007).
|
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, with respect to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2007.
|
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, with respect to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2007.
|
|
32.1
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, with respect to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2007
|
|
32.2
|
Certification
of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, with respect to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2007
|