SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
August 18, 1998
Date of Report (Date of earliest event reported)
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8993 94-2708455
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) file number) Identification No.)
80 South Main Street, Hanover, New Hampshire 03755
(Address of principal executive offices)
(603) 643-1567
(Registrant's telephone number, including area code)
This Amendment No. 2 amends and supplements the Form 8-K Current Report
originally filed on August 18, 1998, relating to the Company's acquisition of
all the outstanding common stock of Folksamerica Holding Company, Inc.
("Folksamerica") that it did not previously own. Folksamerica is the parent
company of Folksamerica Reinsurance Company.
Item 7. Financial Statements and Exhibits.
Item 7 is hereby amended by adding the following information:
(a) Financial Statements of Businesses Acquired.
Unaudited historical condensed consolidated financial statements of
Folksamerica and its subsidiaries as of December 31, 1997 and June 30, 1998
and for the three and six-month periods ended June 30, 1998 and 1997, filed
as Exhibit 99(a) hereto.*
Audited historical consolidated financial statements of Folksamerica and
its subsidiaries as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, including the report of
PricewaterhouseCoopers LLP, filed as Exhibit 99(b) hereto.*
(b) Pro Forma Financial Information.
Unaudited pro forma condensed combined financial statements of the
Registrant and its subsidiaries consisting of a pro forma balance sheet as
of June 30, 1998, a pro forma income statement for the six months ended
June 30, 1998 and a pro forma income statement for the twelve months ended
December 31, 1997, together with the notes thereto, filed as Exhibit 99(c)
hereto.*
Unaudited pro forma condensed combined financial statements of the
Registrant and its subsidiaries consisting of a pro forma income statement
for the nine months ended September 30, 1998, together with the notes
thereto, filed as Exhibit 99(d) hereto.
(c) Exhibits. The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
10 (a) Stock Purchase Agreement dated as of July 1, 1998, by and among
Fund American Enterprises Holdings, Inc., White Mountains Holdings,
Inc. and the Sellers (as defined therein).*
10 (b) Assignment and Assumption Agreement dated as of August 18, 1998,
by and among Folksam Omsesidig Sakforsakring, Samvirke
Skadeforsikring AS and Fund American Enterprises Holdings, Inc.*
23 (a) Consent of PricewaterhouseCoopers LLP*
99 (a) Unaudited historical condensed consolidated financial statements of
Folksamerica and its subsidiaries as of December 31, 1997 and
June 30, 1998 and for the three and six-month periods ended
June 30, 1998 and 1997.*
99 (b) Audited historical consolidated financial statements of Folksamerica
and its subsidiaries as of December 31, 1997 and 1996 and for each of
the three years in the period ended December 31, 1997, including the
report of PricewaterhouseCoopers LLP.*
99 (c) Unaudited pro forma condensed combined financial statements of the
Registrant and its subsidiaries consisting of a pro forma balance sheet
as of June 30, 1998, a pro forma income statement for the six months
ended June 30, 1998 and a pro forma income statement for the twelve months
ended December 31, 1997, together with the notes thereto.*
99(d) Unaudited pro forma condensed combined financial statements of the Registrant
and its subsidiaries consisting of a pro forma income statement for the nine
months ended September 30, 1998, together with the notes thereto, filed as
Exhibit 99(d) hereto.
* previously filed
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Dated: November 13, 1998 By: /s/
--------------------------------------
Michael S. Paquette
Senior Vice President and
Controller
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10 (a) Stock Purchase Agreement dated as of July 1, 1998, by and
among Fund American Enterprises Holdings, Inc., White
Mountains Holdings, Inc. and the Sellers (as defined therein).*
10 (b) Assignment and Assumption Agreement dated as of August
18, 1998, by and among Folksam Omsesidig Sakforsakring,
Samvirke Skadeforsikring AS and Fund American Enterprises
Holdings, Inc.*
23 (a) Consent of PricewaterhouseCoopers LLP*
99 (a) Unaudited historical condensed consolidated financial
statements of Folksamerica and its subsidiaries as of
December 31, 1997 and June 30, 1998 and for the three and
six-month periods ended June 30, 1998 and 1997.*
99 (b) Audited historical consolidated financial statements of
Folksamerica and its subsidiaries as of December 31, 1997
and 1996 and for each of the three years in the period ended
December 31,1997, including the report of
PricewaterhouseCoopers LLP.*
99 (c) Unaudited pro forma condensed combined financial
statements of the Registrant and its subsidiaries consisting of
a pro forma balance sheet as of June 30, 1998, a pro forma
income statement for the six months ended June 30, 1998 and
a pro forma income statement for the twelve months ended
December 31, 1997, together with the notes thereto.*
99 (d) Unaudited pro forma condensed combined financial
statements of the Registrant and its subsidiaries consisting of
a pro forma income statement for the nine months ended
September 30, 1998, together with the notes thereto.
* previously filed
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of Fund American
Enterprises Holdings, Inc. and its subsidiaries ("Fund American") is being
presented in connection with Fund American's purchase, on August 18, 1998, of
all the outstanding common stock of Folksamerica Holding Company, Inc. and its
subsidiaries ("Folksamerica") that it did not previously own (the
"Transaction").
The accompanying unaudited pro forma condensed combined income statement of Fund
American for the nine month period ended September 30, 1998 (the "pro forma
income statement") present the results for Fund American as if the Transaction
had occurred as of January 1, 1998. The pro forma income statement does not
purport to represent what Fund American's results of operations actually would
have been had the Transaction in fact occurred as of the date indicated, or to
project Fund American's results of operations for any future date or period. The
pro forma adjustments are based on available information and certain assumptions
that Fund American currently believes are reasonable under the circumstances.
The unaudited pro forma financial information should be read in conjunction
with: (i) Fund American's Annual Report on Form 10-K for the year ended December
31, 1997; (ii) Fund American's Quarterly Report on Form 10-Q for the three and
nine month periods ended September 30, 1998; (iii) the separate historical
financial statements of Folksamerica as of June 30, 1998 and for the three and
six month periods ended June 30, 1998 (previously filed); and (iv) the separate
historical financial statements of Folksamerica as of December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997
(previously filed).
The pro forma adjustments and pro forma combined amounts are provided for
informational purposes only. Fund American's financial statements will reflect
the actual effects of the Transaction only from the date the Transaction
occurred. The pro forma adjustments contained herein assume that the tax rate is
35%, the maximum Federal statutory rate for corporations.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
INCOME STATEMENT
(in millions of dollars)
A. Pro forma adjustment to eliminate Folksamerica's results of operations
for the period from August 18, 1998 to September 30, 1998, the period
during which Folksamerica was a consolidated subsidiary of Fund
American.
B. Pro forma adjustment to eliminate Fund American's equity in earnings of
Folksamerica and preferred stock dividends received from January 1,
1998 to September 30, 1998.
C. Pro forma adjustment to reflect a reduction in net investment income
earned on the portion of short-term investment balances deemed to have
partially financed the Transaction ($27.0 million). The consolidated
pro forma income information assumes that the annualized yield on
short-term investments used to partially fund the Transaction was 5.50%
for the period from January 1, 1998 to August 18, 1998.
D. Pro forma adjustment to reflect additional interest expense associated
with the monies borrowed under Fund American's existing debt
arrangements ($50.0 million) to partially fund the Transaction. The
consolidated pro forma income information assumes that the annualized
applicable interest rate on such indebtedness was 6.04% for the period
from January 1, 1998 to August 18, 1998.
E. Pro forma adjustment to reflect the amortization of the net change in
goodwill and the related incremental deferred credit associated with
the Transaction ($7.9 million) for the period from January 1, 1998 to
August 18, 1998. Fund American's amortization period is expected to be
five years.
F. Adjustment to reflect the income tax effects of B, C and D above.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(in millions of dollars)
Pro Forma Adjustments
-----------------------------
Fund for the Pro Forma
REVENUES American Folksamerica Eliminations [A] Transaction Combined
-------- ------------ ---------------- ----------- ---------
Net written premiums .......................... $149.5 $163.6 $(24.7) $288.4
Change in unearned insurance premiums ......... (1.4) 18.1 (4.2) 12.5
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Earned insurance premiums ................... 148.1 181.7 (28.9) -- 300.9
Earnings from unconsolidated ins affiliates ... 20.1 -- (5.6)[B] 14.5
Other ins operations revenues ................. 7.7 -- 7.7
Gross mortgage servicing revenue .............. 59.6 -- 59.6
Amortization and impairment of servicing ...... (52.3) -- (52.3)
Gain on financial instruments ................. 22.3 -- 22.3
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Net mortgage servicing revenue .............. 29.6 -- -- -- 29.6
Net gain on sales of mortgages ................ 63.9 -- 63.9
Gain on sale of mortgage servicing ............ 10.4 -- 10.4
Other mortgage servicing revenues ............. 21.9 -- 21.9
Net investment income ......................... 79.2 38.0 (6.3) (0.9)[C] 110.0
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TOTAL REVENUES ................................... $380.9 $ 219.7 $ (35.2) $ (6.5) $558.9
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EXPENSES
Ins losses and loss adj expenses .............. $102.6 $ 132.4 $ (21.8) $213.2
Compensation and benefits ..................... 89.1 9.1 (1.3) 96.9
Insurance and reinsurance acquisition expenses 27.5 53.8 (8.6) 72.7
Interest expense .............................. 60.7 2.8 (0.5) 1.9 [D] 64.9
General expenses .............................. 52.0 (2.8) 0.4 (1.0)[E] 48.6
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TOTAL EXPENSES .................................... 331.9 195.3 (31.8) 0.9 496.3
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PRETAX OPERATING EARNINGS ......................... 49.0 24.4 (3.4) (7.4) 62.6
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Net realized investment gains ..................... 65.8 8.1 -- -- 73.9
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PRETAX EARNINGS ................................... 114.8 32.5 (3.4) (7.4) 136.5
Income tax provision .............................. 42.3 7.8 (0.5) (2.1)[F] 47.5
------- ------- ------- ------- -------
NET INCOME ........................................ 72.5 24.7 (2.9) (5.3) 89.0
Other comprehensive income, after tax ............. (35.6) 14.0 (3.6) -- (25.2)
------- ------- ------- ------- -------
COMPREHENSIVE NET INCOME .......................... $ 36.9 $ 38.7 $(6.5) $ (5.3) $ 63.8
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Less preferred stock dividends .................... (2.8) (3.5) 3.5 [B] (2.8)
------- ------- ------- ------- -------
Net income applicable to common stock ............. $ 69.7 $ 21.2 $(2.9) $ (1.8) $ 86.2
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Comprehensive net income applicable to common stock $ 34.1 $ 35.2 $(6.5) $ (1.8) $ 61.0
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Basic earnings per common share:
Net income .................................... $ 11.86 $ 14.67
Comprehensive net income ...................... 5.81 10.38
Diluted earnings per common share:
Net income .................................... $ 10.61 $ 13.13
Comprehensive net income ...................... 5.18 9.28
