--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXHIBIT 99.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 11-K
------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ...................... TO .....................
COMMISSION FILE NUMBER ........................................................
RELIANCE SAVINGS INCENTIVE XXXX
XXXXX XXXXXXX
XXXXXXXXXXXX, XXXXXXXXXXXX 00000
(FULL TITLE AND ADDRESS OF THE PLAN)
RELIANCE GROUP HOLDINGS, INC.
PARK AVENUE PLAZA
00 XXXX 00XX XXXXXX
XXX XXXX, XXX XXXX 00000
(NAME AND ADDRESS OF ISSUER OF SECURITIES HELD PURSUANT TO THE PLAN)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
Benefit Plans Committee and Participants of
Reliance Savings Incentive Plan
Philadelphia, Pennsylvania
We have audited the accompanying statements of net assets available for plan
benefits of the Reliance Savings Incentive Plan as of December 31, 1999 and
1998, and the related statements of changes in net assets available for plan
benefits for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for plan benefits as of December 31, 1999 and
1998, and the changes in net assets available for plan benefits for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of: (1) assets
held for investment purposes as of December 31, 1999, and (2) reportable
transactions for the year then ended, are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedules are the
responsibility of the Plan's management. Such supplemental schedules have been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, are fairly stated in all material
aspects when considered in relation to the basic financial statements taken as a
whole.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
June 16, 2000
RELIANCE SAVINGS INCENTIVE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
Assets:
Investments (See Note G)..................................... $228,976,976 $233,811,930
Receivables:
Employer contributions..................................... 5,316,563 2,750,772
Dividends and interest..................................... 496,933 411,951
------------ ------------
Total receivables....................................... 5,813,496 3,162,723
------------ ------------
Total assets............................................ 234,790,472 236,974,653
------------ ------------
Net assets available for plan benefits....................... $234,790,472 $236,974,653
============ ============
See notes to financial statements.
2
RELIANCE SAVINGS INCENTIVE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
1999 1998 1997
------------ ------------ ------------
Additions:
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in fair value
of investments (see Notes K and L).................... $(22,293,536) $ 26,223,271 $ 53,868,150
Interest and dividends................................... 13,692,765 10,065,608 10,672,156
------------ ------------ ------------
(8,600,771) 36,288,879 64,540,306
------------ ------------ ------------
Contributions:
Employee................................................. 18,566,685 17,271,754 21,114,406
Employer (net of forfeitures applied).................... 5,171,957 5,042,522 7,777,977
------------ ------------ ------------
23,738,642 22,314,276 28,892,383
------------ ------------ ------------
Participant loan repayment--interest....................... 400,140 427,316 489,704
------------ ------------ ------------
Total additions.......................................... 15,538,011 59,030,471 93,922,393
------------ ------------ ------------
Deductions:
Deductions from net assets attributed to:
Withdrawals and terminations............................... 17,722,192 19,309,570 16,298,399
Distribution to LandAmerica Financial Group, Inc. profit
sharing plan............................................. -- 80,920,307 --
------------ ------------ ------------
Total deductions......................................... 17,722,192 100,229,877 16,298,399
------------ ------------ ------------
Net increase (decrease).................................. (2,184,181) (41,199,406) 77,623,994
------------ ------------ ------------
Net assets available for benefits:
Beginning of year............................................. 236,974,653 278,174,059 200,550,065
------------ ------------ ------------
End of year................................................... $234,790,472 $236,974,653 $278,174,059
============ ============ ============
See notes to financial statements.
3
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS
A. ACCOUNTING PRINCIPLES
The financial statements of the Reliance Savings Incentive Plan (the
"Plan") are presented on the accrual basis of accounting. Such statements
include informed estimates and judgements of management for those transactions
that are not yet complete or for when the ultimate effects cannot be precisely
anticipated. Actual results may differ from these estimates. Investments are
carried at fair value as determined by the applicable trustee. Dividends and
interest are recorded when earned. Employee and employer contributions are
recorded in the period to which they are applicable. Brokerage commissions, and
other expenses incurred in connection with the purchase or sale of securities,
are charged directly to the Plan. All other costs and expenses of the Plan are
paid by Reliance Insurance Company and participating affiliates.
In 1999, the Plan adopted the American Institute of Certified Public
Accountants' Statement of Position 99-3, "Accounting for and Reporting of
Certain Employee Benefit Plan Investments and Other Disclosure Matters" ("SOP").
The SOP changes certain disclosure requirements including the elimination of
by-fund disclosures. Prior year financial statements have been reclassified to
conform to the SOP.
B. PLAN DESCRIPTION
The following is not intended to be a complete description of the Plan.
Participants should refer to the Plan documents for a complete description of
the Plan. The original effective date of the Plan was July 1, 1967 and the Plan
was last amended effective June 1, 2000. The Plan is a defined contribution plan
designed to allow eligible employees of Reliance Group Holdings, Inc. and
participating affiliates (each an "Employer") to save for their retirement.
Employees, upon completion of twelve months employment during which they have
worked a minimum of 1,000 hours, are eligible to join the Plan.
During the first quarter 1998, Reliance Insurance Company sold Commonwealth
Land Title Insurance Company, CRS Financial Services, Inc. and Commonwealth
Relocation Services, Inc., ("Title Companies") to LandAmerica Financial Group,
Inc. (formerly Lawyers Title Corporation). At the completion of this
transaction, the Title Companies ceased to be participating affiliates under the
Plan. Employees of the Title Companies who were employed on the date of closing
(February 27, 1998) became fully vested in their company contribution accounts.
In addition, in connection with the sale, the accounts of such employees were
transferred to a profit sharing plan maintained by LandAmerica Financial Group,
Inc. The amounts transferred were $46,551,571 in cash and 1,845,470 shares of
Reliance Group Holdings, Inc. Common Stock.
An eligible employee who participates in the Plan (a "member" or
"participant") may elect to have their salary reduced each pay period in an
amount from 1% to 15% of their base salary, and their Employer will make a
salary reduction contribution to the Plan on their behalf in the amount by which
their base salary was reduced. Additional limitations may be imposed under the
Plan on the amount of salary reduction contributions and after-tax savings
contributions that may be elected by highly compensated members, in order to
comply with certain non-discrimination requirements of the Internal Revenue Code
("IRC"). The annual limit on salary reduction contributions by a member is
determined from time to time by the Benefit Plans Committee (not to exceed the
indexed limitations contained in the Internal Revenue Code of 1986). The 1999
and 1998 plan year limit was $10,000. The 1997 plan year limit was $9,500. The
2000 plan year limit is $10,500.
Any member may elect to make after-tax savings contributions to the Plan by
authorizing payroll deductions of 1% to 15% of their base salary for each
payroll period. However, the amount a member may elect to contribute for a pay
period as savings contributions may not exceed 20% of their base salary less the
amount being contributed by them as salary reduction contributions. Members are
not required to make salary reduction contributions before they can make savings
contributions.
Under the loan feature of the Plan, eligible participants may generally
borrow up to a maximum of 50% of their vested account balance (less any
outstanding loan balance), or $50,000, whichever is less. Loans cannot be made
against the Employer and Employee Common Stock Funds, but these funds can be
considered for the purpose of determining the maximum loan amount. The term of
the loan cannot be more than five years.
4
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
B. PLAN DESCRIPTION--(CONTINUED)
However, a loan to be used for the purchase of a principal residence may have a
term up to 10 years. Loans will be repaid to the participant's account through
payroll deductions together with interest fixed at the time of the loan at the
prime rate plus one percentage point.
The number of employees that were active participants of the Plan as of
December 31, 1999 and 1998 was 3,809 and 3,650, respectively.
During 1999, the Plan was amended to reflect the following changes:
Contribution Percentage Changes:
The maximum contribution limit for salary reduction contributions
for non-highly compensated employees was increased from 10% to 15%
of base salary. The maximum limit for after-tax contributions
remains 15%. However, the maximum contribution limit for non-highly
compensated employees for after-tax contributions when added to a
participant's salary reduction contributions was increased from 15%
to 20%.
Quarterly Transfers to the Common Stock Fund:
Participants are now permitted to transfer all or part of the
company matching contribution balance in the Managed Income Fund to
the Common Stock Fund during four quarterly window periods.
Automatic Transfer to After-Tax Contributions:
Contributions exceeding the IRS limit for pre-tax contributions will
automatically be treated as after-tax matched contributions unless
the participant notifies the Plan within 30 days of reaching the IRS
limit.
Annuity Payment Option Eliminated:
Participants joining the Plan on or after January 1, 1999 will no
longer be able to elect an annuity distribution upon retirement or
termination. The participant will instead receive their balance in a
lump-sum payment.
Effective May 1, 1997, the Plan was amended to reflect the following
changes:
Payroll Contribution Percentage Changes:
Participants will no longer be restricted to one change in their
contribution percentage per quarter. Participants will be allowed to
make one change per payroll period. Such changes will be effective
as of the earliest practicable subsequent payroll period.
Voluntary Suspensions:
There is no longer a six-month minimum suspension period if a
participant voluntarily suspends or withdraws after-tax
contributions. A participant may voluntarily suspend after-tax
contributions for less than six months, if desired.
Distributions:
A participant receiving a lump sum distribution of a vested account
balance due to termination of employment is now permitted to request
an in-kind transfer, in a direct rollover, of his account balance
that is invested in mutual funds managed by Fidelity Management and
Research Company to an individual account with Fidelity Retail
Investor Services or Fidelity Brokerage Services Inc.
Investment Options:
Participants will have the choice of additional investment options
(see Note F for a description of options available).
5
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
C. ADMINISTRATION OF THE PLAN
The Plan is administered by the Benefit Plans Committee (the "Committee")
which has fiduciary responsibility for general operation of the Plan and has the
power to interpret provisions of the Plan. Members of the Committee are
appointed by the Board of Directors of Reliance Insurance Company for indefinite
terms and may resign or be removed at any time. Members of the Committee serve
without compensation for their service as such, and Reliance Insurance Company
indemnifies such members to the extent determined by its Board of Directors.
Fidelity Management and Trust Company ("Fidelity") is trustee of all funds
of the Plan, except for the Common Stock Fund, whose trustee is CTC Illinois
Trust Company. Fidelity also acts as investment manager with respect to the
assets of the Managed Income Fund.
Although Reliance Insurance Company expects to continue the Plan, the right
to amend or terminate the Plan is reserved. In the event of Plan termination,
all benefits become fully vested and nonforfeitable and the net assets of the
Plan would be allocated as required by the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
D. EMPLOYER MATCHING CONTRIBUTIONS
Each Employer will make an annual matching contribution to a separate
"Incentive Account" with respect to the salary reduction and/or savings
contributions of each member employed by it, subject to a limit of 5% of the
member's base salary in any pay period. For every dollar a member contributes to
the Plan (not exceeding a total of 5% of base salary in any pay period) and does
not withdraw before the close of the Plan year, the Employer will make a
contribution of $.60.
Matching contributions for any Plan year generally must be made no later
than March 5 of the next following Plan year. In order to be entitled to the
Employer matching contribution for a Plan Year, a member must be (i) employed by
the Employer on the last day of the Plan Year, (ii) on an authorized leave of
absence, or (iii) entitled to receive a distribution of his account on account
of his retirement, death or disability (provided that, with respect to periods
before November 1, 1998, he has not elected to receive an early distribution of
his accounts).
Employer matching contributions, which may be made with Reliance Group
Holdings, Inc. ("RGH") Common Stock, will be invested in the Common Stock Fund
or the Managed Income Fund or a combination thereof as determined by the Board
of Directors of Reliance Insurance Company or a committee thereof. Prior to the
making of Employer matching contributions for each such Plan year, the Board of
Directors or committee thereof will make a one-time determination regarding the
investment of the Employer matching contributions for such Plan year. The
Employer matching contributions for each of the Plan years 1997 through 1999
were invested in the Common Stock Fund with the exception of the 1997 match
related to the title companies which was invested in the Retirement Government
Money Market Fund.
After the close of any Plan year, an Employer may, in its sole discretion,
make a supplemental matching contribution. For every dollar its employees
contributed to the Plan during the Plan year (not exceeding 5% of base salary in
any pay period), the Employers made supplemental matching contributions in cash
or RGH Common Stock. For the year ended December 31, 1997, Commonwealth Land
Title Insurance Company, CRS Financial Services, Inc., and Commonwealth
Relocation Services, Inc. each made a supplemental contribution of $.75. No
supplemental contributions were made during 1998 or 1999.
E. VESTING
The rights of a member to savings contributions made by him and salary
reduction contributions made by his Employer on his behalf, and any earnings
thereon, are at all times fully vested and nonforfeitable. Matching
contributions, and any earnings thereon, become vested based on such member's
years of vesting service. A member earns one year of vesting service for each
Plan year in which such member completes at least 1,000 hours of service.
6
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
E. VESTING--(CONTINUED)
Participating employees become vested under the following schedule:
VESTED
PERCENTAGE OF
THE MEMBER'S
YEARS OF VESTING SERVICE INCENTIVE ACCOUNT
------------------------------------------------------------ -----------------
less than 2................................................. 0%
2 but less than 3........................................... 20%
3 but less than 4........................................... 40%
4 but less than 5........................................... 60%
5 but less than 6........................................... 80%
6 or more................................................... 100%
F. INVESTMENT OPTIONS
Salary reduction, savings and rollover contributions were invested in
accordance with the direction of the members in one or more of the following
funds:
(a) Growth and Income Fund. The assets of the Growth and Income Fund,
including earnings thereon, are invested through shares of the Fidelity
Growth and Income Portfolio primarily in domestic and foreign common stocks
as well as preferred stocks, warrants, convertible securities and bonds.
The Growth and Income Fund's objective is to provide high total returns
through a combination of current income and capital appreciation. The value
of this fund will fluctuate with market conditions.
(b) Intermediate Bond Fund. The assets of the Intermediate Bond Fund,
including earnings thereon, are invested through shares of the Fidelity
Intermediate Bond Fund in U.S. and foreign investment-grade debt
securities, including corporate or U.S. government issues. The average
portfolio maturity range is from three to ten years. The Intermediate Bond
Fund's primary objective is a high level of current income. The value of
this fund will fluctuate with changes in interest rates and other market
conditions.
(c) Magellan Fund. The assets of the Magellan Fund, including
earnings thereon, are invested through shares of the Fidelity Magellan Fund
in domestic and foreign common stocks and other securities which are
convertible into common stock and in put and call options and futures
contracts with respect to the foregoing securities. The Magellan Fund's
primary objective is to provide long-term capital appreciation with current
income being incidental. The value of this fund will fluctuate with market
conditions.
(d) Managed Income Fund. The assets of the Managed Income Fund,
including earnings thereon, are invested through units of the Fidelity
Managed Income Portfolio primarily in a portfolio of short-term and
long-term conventional and synthetic investment contracts, which contracts
have maturities at the time of issuance of between one to seven years.
Generally, investment contracts are with insurance companies, banks and
other financial institutions and contain provisions for repayment of
principal plus interest at a specified annual rate for a specified period.
Synthetic investment contracts simulate the terms of conventional
investment contracts and generally consist of debt obligations, such as
mortgage-backed and asset-backed securities, in conjunction with a book
value, benefit-responsive contract arrangement with a third party, usually
an insurance company, bank or brokerage firm. The Managed Income Fund is a
commingled pool managed by the Fidelity Trustee. The Managed Income Fund's
objectives are to seek preservation of capital and a competitive level of
income over time. The Managed Income Fund will seek to maintain a stable
net asset value of $1.00 per unit but there is no guarantee that the unit
value will not change.
(e) Retirement Government Money Market Fund. The assets of the
Retirement Government Money Market Fund, including earnings thereon, are
invested through shares of the Fidelity Retirement Government Money Market
Portfolio only in U.S. government securities and repurchase agreements for
these securities. The fund may enter into reverse repurchase agreements.
The Retirement Government
7
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
F. INVESTMENT OPTIONS--(CONTINUED)
Money Market Fund's primary objective is to obtain as high a level of
current income as is consistent with the preservation of principal and
liquidity. The value of this fund will fluctuate with changes in interest
rates and other market conditions.
(f) Spartan U.S. Equity Index Fund. The assets of the Spartan U.S.
Equity Index Fund, including earnings thereon, are invested through shares
of the Fidelity Spartan U.S. Equity Index Fund, primarily in equity
securities of the companies that make up the Standard & Poor's Index of 500
Stocks. The Spartan U.S. Equity Index Fund's primary objective is to
provide a total return which corresponds to the total return of such index.
The value of this fund will fluctuate with market conditions.
(g) Emerging Growth Fund. The assets of the Emerging Growth Fund,
including earnings thereon, are invested through shares of the PBHG
Emerging Growth Fund in the common stocks of micro and small-sized U.S.
growth companies. Such companies generally have market capitalization or
annual revenues of up to $500 million. The Emerging Growth Fund's primary
objective is to provide long-term capital appreciation. The value of this
fund will fluctuate with market conditions.
(h) Growth Fund. The assets of the Growth Fund, including earnings
thereon, are invested through shares of the PBHG Growth Fund, primarily in
common stock, and convertible securities of small and medium-sized U.S.
companies. Such companies generally have market capitalization or annual
revenues of up to $2 billion. The Growth Fund's primary objective is to
provide capital appreciation. The value of this fund will fluctuate with
market conditions.
(i) Capital and Income Fund. The assets of the Capital and Income
Fund, including earnings thereon, are invested through shares of the
Fidelity Capital and Income Fund, in a combination of stocks and bonds with
an emphasis on lower quality debt securities. The fund may be subject to
more abrupt price changes because it invests in these lower quality, less
well-known securities. Sales of shares within one year of purchase are
subject to a 1.5% redemption fee. The Capital and Income Fund's primary
objective is a high level of current income and capital growth. The value
of this fund will fluctuate with changes in interest rates and other market
conditions.
(j) Diversified International Fund. The assets of the Diversified
International Fund, including earnings thereon, are invested through shares
of the Fidelity Diversified International Fund in stocks of companies
located outside the U.S. which are undervalued compared to industry norms
within their countries. The Diversified International Fund's primary
objective is to provide long-term capital growth. The value of this fund
will fluctuate with market conditions.
(k) Freedom Income Fund. The assets of the Freedom Income Fund,
including earnings thereon, are invested through shares of the Fidelity
Freedom Income Fund, which is invested approximately 20% in Fidelity stock
mutual funds, approximately 40% in Fidelity bond mutual funds and
approximately 40% in Fidelity money market mutual funds. The Freedom Income
Fund's primary objective is to provide high current income. A secondary
objective is to provide capital appreciation for those individuals already
in retirement. The value of this fund will fluctuate with changes in
interest rates and other market conditions.
(l) Freedom 2000 Fund. The assets of the Freedom 2000 Fund, including
earnings thereon, are invested through shares of the Fidelity Freedom 2000
Fund. The Freedom 2000 Fund's primary objective is to provide high total
returns for individuals planning to retire in or around the year 2000. The
fund is currently invested approximately 41% in Fidelity stock mutual
funds, approximately 44% in Fidelity bond mutual funds and approximately
15% in Fidelity money market mutual funds. The fund will seek to gradually
become more conservative over time. The value of this fund will fluctuate
with changes in interest rates and other market conditions.
(m) Freedom 2010 Fund. The assets of the Freedom 2010 Fund, including
earnings thereon, are invested through shares of the Fidelity Freedom 2010
Fund. The Freedom 2010 Fund's primary objective is to provide high total
returns for individuals planning to retire in or around the year 2010. The
fund is
8
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
F. INVESTMENT OPTIONS--(CONTINUED)
currently invested approximately 65% in Fidelity stock mutual funds,
approximately 33% in Fidelity bond mutual funds, and approximately 2% in
Fidelity money market mutual funds. The fund will seek to gradually become
more conservative over time. The value of this fund will fluctuate with
market conditions.
(n) Freedom 2020 Fund. The assets of the Freedom 2020 Fund, including
earnings thereon, are invested through shares of the Fidelity Freedom 2020
Fund. The Freedom 2020 Fund's primary objective is to provide high total
returns for individuals planning to retire in or around the year 2020. The
fund is currently invested approximately 80% in Fidelity stock mutual funds
and approximately 20% in Fidelity bond mutual funds. The fund will seek to
gradually become more conservative over time. The value of this fund will
fluctuate with market conditions.
(o) Freedom 2030 Fund. The assets of the Freedom 2030 Fund, including
earnings thereon, are invested through shares of the Fidelity Freedom 2030
Fund. The Freedom 2030 Fund's primary objective is to provide high total
returns for individuals planning to retire in or around the year 2030. The
fund is currently invested approximately 84% in Fidelity stock mutual funds
and approximately 16% in Fidelity bond mutual funds. The fund will seek to
gradually become more conservative over time. The value of this fund will
fluctuate with market conditions.
(p) Common Stock Fund. The assets of the Common Stock Fund, including
earnings thereon, are invested in RGH Common Stock purchased by the
applicable Trustee or contributed by the Employers, with the portion of the
fund not invested in Common Stock invested primarily in cash and short term
investments. The applicable Trustee purchases RGH Common Stock at
prevailing market prices in the open market, in privately negotiated
transactions or directly from RGH. The applicable Trustee retains the RGH
Common Stock in this fund regardless of market fluctuations, and, in the
normal course of business, the applicable Trustee sells such stock only to
meet administrative and distribution requirements of the Plan. The value of
this fund will fluctuate based on the market price of RGH Common Stock.
During the 1997 plan year, the Common Stock Fund was converted from "share"
accounting to "unit" accounting. As a unitized stock fund, the Common Stock Fund
holds shares of RGH Common Stock and a small percentage of cash and short-term
instruments, while members hold units of the Common Stock Fund. At December 31,
1999 and 1998, the Common Stock Fund had 7,260,739 and 5,827,134 units,
respectively, valued at $6.56 and $11.89 per unit, respectively.
The selection of investment options, which may be done in increments of 10%
in any one of the above mentioned funds, pursuant to the Plan, with the
exception of Employer matching contributions, is the sole responsibility of each
member. Neither the Trustees nor the Employer shall have any responsibility to
select investment options or to advise members in selecting their investment
options. Subject to applicable provisions of law, each member assumes all risks
connected with any decrease in the market value of any securities in the funds,
and such funds shall be the sole source of payments to be made under the Plan.
G. INVESTMENTS
Investments that represent more than 5% of the net assets available for
plan benefits as of December 31, 1999 and 1998 were as follows:
1999 1998
----------- -----------
Employee Growth and Income Fund.......................................... $78,268,753 $77,716,709
Employee Magellan Fund................................................... 45,388,881 31,939,876
Employee Managed Income Fund............................................. 18,505,740 19,217,301
Employer Common Stock Fund*.............................................. 31,092,363 56,742,948
------------------
* nonparticipant-directed investment
9
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
H. NONPARTICIPANT-DIRECTED INVESTMENTS
The Employer Common Stock Fund is a nonparticipant-directed investment. The
net assets and significant components of the changes in net assets relating to
the Employer Common Stock Fund is as follows:
1999 1998
----------- -----------
Net Assets:
Reliance Group Holdings, Inc. Common Stock................... $31,092,363 $56,742,948
Other investments............................................ -- 40,601
Contributions receivable--employer........................... 5,316,563 2,750,772
Dividends and interest receivable............................ 383,863 339,642
----------- -----------
$36,792,789 $59,873,963
=========== ===========
1999 1998 1997
------------ ------------ ------------
Changes in Net Assets:
Contributions (net of forfeitures applied).. $ 5,188,131 $ 5,042,522 $ 4,501,555
Interest and dividends...................... 1,434,544 1,491,297 1,818,966
Net appreciation (depreciation)............. (27,703,648) 1,066,929 29,181,074
Participant loan repayment.................. 11,396 14,201 10,687
Withdrawals and terminations.................. (2,011,597) (4,847,614) (4,437,280)
Distribution to LandAmerica Financial Group,
Inc. profit sharing plan.................... -- (29,927,566) --
------------ ------------ ------------
$(23,081,174) $(27,160,231) $ 31,075,002
============ ============ ============
I. WITHDRAWALS
The number of withdrawals is not limited with respect to amounts
attributable to the plan member's savings contributions; however, the minimum
withdrawal permitted is $500 (or the full value of the member's applicable
account, if less).
All amounts attributable to savings contributions must be withdrawn prior
to any hardship withdrawal of amounts attributable to Employer matching
contributions or salary reduction contributions.
The Plan's hardship withdrawal rules comply with the Internal Revenue Code
of 1986. In order to make a hardship withdrawal, a Plan member must exhaust the
possibility of all other withdrawals (other than hardship withdrawals) under the
Plan and all such withdrawals and nontaxable loans available under all
retirement plans maintained by the Employer. Earnings credited after 1988 on
salary reduction contributions are not available for hardship withdrawals, even
if the contributions were made before 1989. Upon receiving a hardship
distribution, a member is generally suspended from making salary reduction
contributions and savings contributions to the Plan (and all other deferred
compensation plans maintained by the Employer) for one year and an additional
limitation is imposed on the amount of salary reduction contributions that can
be made by the member for the calendar year following the year of the hardship
withdrawal.
J. FEDERAL TAX CONSIDERATIONS
a. Status of Plan
The Internal Revenue Service has issued a determination letter dated August
28, 1996, ruling that the Plan and related trust are designed in accordance with
applicable sections of the IRC. According to the Plan administrator, the Plan is
currently being operated in compliance with the applicable requirements of the
IRC. Therefore, no provision for income taxes has been included in the Plan's
financial statements.
10
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
b. Impact on Plan Participants
Matching contributions and salary reduction contributions, as well as
earnings on all Plan assets, are generally not subject to federal income tax
until distributed because the Plan is tax-qualified.
Savings contributions are treated as having been received by the member as
part of current compensation, and such amounts are taxable as ordinary income
prior to payment into the Plan. Because a member's savings contributions are
made from income which is taxed to such member when earned, an amount equal to
such contributions is not taxable when distributed to him. The excess of a
member's account values over his savings contributions is generally taxable
income to such member only when distributed.
K. UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENTS
Investments are carried at fair value as determined by the Trustee. The net
unrealized appreciation (depreciation) of investments included in Net Assets
Available For Plan Benefits is as follows:
COMMON ALL OTHER COMBINED
STOCK FUNDS FUNDS FUNDS
----------- ----------- -----------
Balance at January 1, 1999................................ $30,133,195 $39,938,305 $70,071,500
Change for the Year..................................... (32,525,346) 3,390,149 (29,135,197)
----------- ----------- -----------
Balance at December 31, 1999.............................. $(2,392,151) $43,328,454 $40,936,303
=========== =========== ===========
Balance at January 1, 1998................................ $53,184,182 $30,368,097 $83,552,279
Change for the Year..................................... (23,050,987) 9,570,208 (13,480,779)
----------- ----------- -----------
Balance at December 31, 1998.............................. $30,133,195 $39,938,305 $70,071,500
=========== =========== ===========
Balance at January 1, 1997................................ $20,903,448 $14,155,358 $35,058,806
Change for the Year..................................... 32,280,734 16,212,739 48,493,473
----------- ----------- -----------
Balance at December 31, 1997.............................. $53,184,182 $30,368,097 $83,552,279
=========== =========== ===========
L. REALIZED GAINS
Net realized gains on the disposition of investments were computed as
follows:
COMMON ALL OTHER COMBINED
STOCK FUNDS FUNDS FUNDS
----------- ----------- ------------
Year Ended December 31, 1999
Amount Realized........................................ $ 2,170,058 $47,907,184 $ 50,077,242
Cost................................................... 2,214,642 41,020,939 43,235,581
----------- ----------- ------------
Net Realized Gain...................................... $ (44,584) $ 6,886,245 $ 6,841,661
=========== =========== ============
Year Ended December 31, 1998
Amount Realized........................................ $39,762,241 $98,548,743 $138,310,984
Cost................................................... 14,912,581 83,694,353 98,606,934
----------- ----------- ------------
Net Realized Gain...................................... $24,849,660 $14,854,390 $ 39,704,050
=========== =========== ============
Year Ended December 31, 1997
Amount Realized........................................ $ 5,237,829 $35,940,212 $ 41,178,041
Cost................................................... 2,839,409 32,963,955 35,803,364
----------- ----------- ------------
Net Realized Gain...................................... $ 2,398,420 $ 2,976,257 $ 5,374,677
=========== =========== ============
11
RELIANCE SAVINGS INCENTIVE PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
M. EMPLOYER AND EMPLOYEE CONTRIBUTIONS
Amounts contributed, net of forfeitures, to the Plan by participating
employers and employees for Plan years 1997 through 1999 were as follows:
1999 1998 1997
----------- ----------- -----------
Employer Contributions:
Reliance Insurance Company.............................. $ 4,925,842 $ 4,803,793 $ 4,277,148
Reliance Group Holdings, Inc............................ 246,115 238,729 227,435
Commonwealth Land Title Insurance Company............... -- -- 3,273,394
----------- ----------- -----------
Total................................................ $ 5,171,957 $ 5,042,522 $ 7,777,977
=========== =========== ===========
1999 1998 1997
----------- ----------- -----------
Employee Contributions:
Reliance Insurance Company.............................. $17,891,268 $15,708,125 $14,602,745
Reliance Group Holdings, Inc............................ 675,417 595,333 576,348
Commonwealth Land Title Insurance Company............... -- 968,296 5,935,313
----------- ----------- -----------
Total................................................ $18,566,685 $17,271,754 $21,114,406
=========== =========== ===========
N. SUBSEQUENT EVENTS
On May 26, 2000, Reliance Group Holdings, Inc. (the "Company") and Leucadia
National Corporation ("Leucadia") announced that they have entered into a
definitive agreement for the acquisition of the Company by Leucadia. Under the
terms of the proposed transaction, the Company's shareholders will receive
common stock of Leucadia in exchange for the Company's common stock. The
transaction is expected to be tax-free to the Company's shareholders. The boards
of directors of both the Company and Leucadia have approved the transaction.
Consummation is subject to a number of terms and conditions, including various
required regulatory approvals, the approval of the Company's shareholders and
satisfactory completion of Leucadia's due diligence review of the Company's
business and operations.
On May 31, 2000, the Company completed the sale of its surety and fidelity
operation ("Surety") to Travelers Casualty and Surety Company ("Travelers").
Employees of Surety who were denoted as transferred employees (as defined) on
the date of closing will become fully vested in their company contribution
accounts. Special provisions will apply to any outstanding loans of such
transferred employees under the Plan. In addition, matching contributions will
be made for such employees with respect to the period from January 1, 2000
through May 31, 2000.
12
RELIANCE SAVINGS INCENTIVE PLAN
SCHEDULE H, ITEM 4I--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1999
NUMBER OF
SHARES COST FAIR VALUE
---------- ------------ ------------
Employee Growth and Income Fund
Fidelity Growth and Income Portfolio............................. 1,659,643 $ 52,014,638 $ 78,268,753
Employee Intermediate Bond Fund
Fidelity Intermediate Bond Fund.................................. 939,098 9,619,288 9,165,599
Employee Magellan Fund
Fidelity Magellan Fund........................................... 332,203 32,432,367 45,388,881
Employee Managed Income Fund
Fidelity Managed Income Portfolio................................ 18,505,740 18,505,740 18,505,740
Employee Retirement Government Money Market Fund
Fidelity Retirement Government Money Market Portfolio............ 3,511,130 3,511,130 3,511,130
Employee Spartan U.S. Equity Index Fund
Fidelity Spartan U.S. Equity Index Portfolio..................... 160,691 6,548,314 8,370,384
Employee Emerging Growth Fund
PBHG Emerging Growth Fund........................................ 37,190 897,776 1,273,742
Employee Growth Fund
PBHG Growth Fund................................................. 55,558 1,689,388 2,632,338
Employee Capital & Income Fund
Fidelity Capital & Income Fund................................... 121,567 1,193,996 1,129,354
Employee Diversified International Fund
Fidelity Diversified International Fund.......................... 113,478 2,173,407 2,907,298
Employee Freedom Income Fund
Fidelity Freedom Income Fund..................................... 57,051 621,016 646,393
Employee Freedom 2000 Fund
Fidelity Freedom 2000 Fund....................................... 118,074 1,410,016 1,533,783
Employee Freedom 2010 Fund
Fidelity Freedom 2010 Fund....................................... 99,359 1,260,046 1,477,467
Employee Freedom 2020 Fund
Fidelity Freedom 2020 Fund....................................... 96,402 1,319,154 1,579,058
Employee Freedom 2030 Fund
Fidelity Freedom 2030 Fund....................................... 47,349 664,448 799,258
Employee Common Stock Fund
Fidelity Cash and Other Assets................................... 468,007 468,007 468,007
Reliance Group Holdings, Inc.* Common Stock...................... 1,533,694 10,842,031 10,256,581
------------ ------------
Total Employee Common Stock Fund.............................. 11,310,038 10,724,588
Employer Common Stock Fund
Reliance Group Holdings, Inc.* Common Stock...................... 4,732,953 32,899,064 31,092,363
------------ ------------
Total Employer Common Stock Fund.............................. 32,899,064 31,092,363
Employer Managed Income Fund
Fidelity Managed Income Portfolio................................ 5,661,773 5,661,773 5,661,773
Loan Fund
Participant Loan Fund (Rates of interest charged range from
9% to 10%)..................................................... 4,309,074 4,309,074
------------ ------------
Total Investments............................................. $188,040,673 $228,976,976
============ ============
------------------------
* Indicates party-in-interest to the Plan
13
RELIANCE SAVINGS INCENTIVE PLAN
SCHEDULE H, ITEM 4J--SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENTS PURCHASED INVESTMENTS MATURED/SOLD
------------------------------------ ---------------------------------------------------------------
NUMBER OF TRANSACTION NUMBER OF TRANSACTION
SHARES DATE COST SHARES DATE PROCEEDS COST GAIN
--------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
Common Stock
Fund-Units........ 1,930,563 Various 12,215,450 303,782 Various 2,170,058 2,214,642 (44,584)
Fidelity Magellan
Fund.............. 115,277 Various 14,686,597 47,433 Various 7,231,203 6,004,975 1,226,228
Fidelity Growth and
Income Fund....... 306,497 Various 14,103,241 342,245 Various 21,220,022 15,860,771 5,359,251
Fidelity Managed
Income Fund....... 7,283,977 Various 7,283,977 8,674,154 Various 8,674,154 8,674,154 --
Under the provisions of ERISA, transactions or the aggregate of
transactions involving the same security which exceed five percent of the
current value of net assets at the beginning of the Plan year are included in
this Schedule of Reportable Transactions.
14
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
BENEFIT PLANS COMMITTEE HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
RELIANCE SAVINGS INCENTIVE PLAN
BY: /S/ XXXXX X. XXXXXXXX
------------------------------------
XXXXX X. XXXXXXXX
CHAIRMAN, BENEFIT PLANS COMMITTEE
Date: June 23, 2000
15
