10-Q 1 form10-q_23995.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ------------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to __________________ Commission file number 0-21988 KAYE GROUP INC. (Exact name of registrant as specified in charter) Delaware 13-3719772 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 122 East 42nd Street, New York, N.Y. 10168 (Address of principal executive office) (Zip code) 212-338-2100 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ---- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of October 6, 2000 - 8,476,003 - Total number of pages filed including cover and under pages 25 - Exhibit index is located on page 19 KAYE GROUP INC. INDEX PAGE NO. PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 3 Consolidated Statements of Income for the Three months and nine months ended September 30, 2000 and 1999 5 Consolidated Statements of Cash Flows for the Nine months ended September 30, 2000 and 1999 7 Consolidated Statements of Comprehensive Income for the Three months and nine months ended September 30, 2000 and 1999 8 Notes to Unaudited Consolidated Financial Statements 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Year 2000 Compliance 17 Safe Harbor Disclosure 18 PART II OTHER INFORMATION 19 2 Item 1. - Financial Statements KAYE GROUP INC. CONSOLIDATED BALANCE SHEETS As of September 30, 2000 and December 31, 1999 (in thousands, except par value per share)

See notes to unaudited consolidated financial statements 3 Item 1. - Financial Statements (continued) KAYE GROUP INC. CONSOLIDATED BALANCE SHEETS As of September 30, 2000 and December 31, 1999 (in thousands, except par value per share)

See notes to unaudited consolidated financial statements 4 Item 1. - Financial Statements (continued) KAYE GROUP INC. CONSOLIDATED STATEMENTS OF INCOME For the three months and nine months ended September 30, 2000 and 1999 (in thousands, except per share amounts) (UNAUDITED)

See notes to unaudited consolidated financial statements 5 Item 1. - Financial Statements (continued) KAYE GROUP INC. CONSOLIDATED STATEMENTS OF INCOME For the three months and nine months ended September 30, 2000 and 1999 (in thousands, except per share amounts) (UNAUDITED)

See notes to unaudited consolidated financial statements 6 ITEM 1. - FINANCIAL STATEMENTS (CONTINUED) KAYE GROUP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (IN THOUSANDS) UNAUDITED

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 KAYE GROUP INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the three months and nine months ended September 30, 2000 and 1999 (in thousands) (UNAUDITED)

See notes to unaudited consolidated financial statements 8 ITEM 1. - Financial Statements (continued) KAYE GROUP INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1) General The consolidated financial statements as of September 30, 2000 and for the three months and nine months ended September 30, 2000 and 1999 are unaudited, have been prepared in accordance with generally accepted accounting principles and, in the opinion of management, reflect all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of the results for such periods. The results of operations for the three months and nine months ended September 30, 2000 are not indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and related notes in the Company's 1999 Form 10-K. The December 31, 1999 Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2) Business Segments Kaye Group Inc. (the "Company"), a Delaware corporation, is a holding company which, through its subsidiaries, is engaged in a broad range of insurance brokerage, underwriting and related activities. The Company operates in two insurance business segments - the Insurance Brokerage Companies Operations comprised of the Retail Brokerage Business and the Program Brokerage Business, and the Property and Casualty Companies Operations ("Property and Casualty Companies" or "Insurance") comprised of the Insurance Companies and Claims Administration Corporation. The Insurance Brokerage Companies derive their revenue principally from commissions associated with the placement of insurance coverage for corporate clients. These commissions are paid by the insurance carriers and are usually a fixed percentage of the total premiums. Certain of these commissions are contingent upon the level of volume and profitability of the related coverage to the insurance companies. There is normally a lag between receipt of funds from the insured and payment to the insurance company. Investment of these funds over this period generates additional revenue in the form of interest income. The Insurance business underwrites property and casualty risks for insureds in the United States and is sold principally through specially designed alternative distribution programs, covering various types of businesses and properties which have similar risk characteristics. The Insurance business generally underwrites the first layer of insurance under the programs and unaffiliated program insurers provide coverage for losses above the first layer of risk. Substantially all of the Insurance business revenues are derived from premiums on this business, plus the investment income generated by the investment portfolio of the Insurance business. Corporate Operations include those activities that benefit the Company and, for the most part, the related expenses are allocated to either the Insurance Brokerage Companies or the Property and Casualty Companies. Certain holding company expenses are not allocated and 9 include debt servicing and public company expenses, including investor relations costs. In addition, Corporate Operations include an investment in Arista Investors Corp. The identifiable segment assets, operating profits and income before income taxes are shown on the accompanying Consolidated Balance Sheets and Statements of Income. The following table is a summary of certain other segment information for the three months and nine months ended September 30, 2000 and 1999:

3) Loan Payable The 7.8% Term Loan due through 2002 is secured by the stock of the Property and Casualty Companies. Certain covenants exist on this loan, the most significant being the requirement to maintain a minimum GAAP net worth, minimum statutory surplus in the insurance companies, a fixed ratio of net premiums to surplus and a minimum debt service coverage. At September 30, 2000, the Company was in compliance with the covenants under the loan agreement. The Company's required principal payments on the Term Loan for the respective years are $320,000 in 2000, $1,343,000 in 2001, and $727,000 in 2002. Interest expense for the loan for the three months and nine months ended September 30, 2000 and 1999 were $56,000 and $185,000 for 2000, and $80,000 and $244,000 for 1999, respectively. In addition, the Company has available a $4,500,000 revolving line of credit through 2001 at a rate of LIBOR plus 175 basis points or the banks' base rate. The line is also secured by the stock of the Property and Casualty Companies. The proceeds are available for general operating needs and acquisitions. At September 30, 2000, no amount was outstanding on the revolving line of credit. A quarterly fee is assessed in the amount of .05% on the unused balance. 10 4) Treasury Stock The Company's repurchases of shares of Common Stock are recorded as treasury stock and result in a reduction of stockholders' equity. When treasury shares are reissued the Company uses a first-in, first-out method and the excess of re-issuance price over repurchase cost is treated as an increase of paid-in capital. Net issuances/(purchases) of treasury stock for the nine months ended September 30, 2000 and 1999 amounted to 17,708 and (15,307) shares, respectively. 5) Lease Commitments and Rentals During the second quarter of 2000, the Company, through one of its insurance brokerage subsidiaries, Kaye Insurance Associates, Inc., entered into a lease for office space in Woodbury, New York for occupancy in the fourth quarter of 2000. In addition, during the third quarter of 2000, the Company, through another of its insurance brokerage subsidiaries, Kaye-Western Insurance & Risk Services, Inc., entered into a lease for office space in Arcadia, California for occupancy in the fourth quarter of 2000. Minimum annual rental commitments as of September 30, 2000 under various non-cancelable operating leases, (including the new leases mentioned above), for office space and equipment are as follows (in thousands): Years Ending December 31, 2000 .............................. $ 694 2001 .............................. 3,108 2002 .............................. 1,199 2003 .............................. 859 Thereafter .......................... 5,932 ------- 11,792 Sub-lease rental income........................ (268) ------- Net rental commitments ........................ $11,524 6) Earnings Per Share Earnings per common share for the three months and nine months ended September 30, 2000 and 1999 have been computed below in accordance with SFAS No. 128, based upon weighted average common and dilutive shares outstanding (in thousands, except per share amounts):

11 7) Dividends On September 20, 2000, the Board of Directors declared a quarterly dividend of $.025 per share, payable October 20, 2000 to stockholders of record on September 30, 2000. 8) Changes in Accounting Policies - Accounting Standards not yet Adopted In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101 which provides guidance for applying generally accepted accounting principles relating to the timing of revenue recognition in financial statements filed with the SEC. Any change required by the SAB must be made in the fourth quarter 2000 with a cumulative effect accounting change. Management believes that this SAB will not have a material impact on the consolidated financial statements. 9) Contingent Liabilities In the ordinary course of business, the Company and its subsidiaries are subject to various claims and lawsuits in connection with the placement of insurance. In the opinion of management, the ultimate resolution of all asserted and potential claims will not have a material adverse effect on the consolidated financial position of the Company. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General Kaye Group Inc. (the "Company"), a Delaware corporation, is a holding company which, through its subsidiaries, is engaged in a broad range of insurance brokerage, underwriting and related activities. The Company operates in two insurance business segments - the Insurance Brokerage Companies Operations comprised of the Retail Brokerage Business and the Program Brokerage Business, and the Property and Casualty Companies Operations ("Property and Casualty Companies" or "Insurance") comprised of the Insurance Companies and Claims Administration Corporation. Overview The Insurance Brokerage Companies derive their revenue principally from commissions associated with the placement of insurance coverage for corporate clients. These commissions are paid by the insurance carriers and are usually a fixed percentage of the total premiums. Certain of these commissions are contingent upon the level of volume and profitability of the related coverage to the insurance companies. There is normally a lag between receipt of funds from the insured and payment to the insurance company. Investment of these funds over this period generates additional revenue in the form of interest income. 12 The Insurance business underwrites property and casualty risks for insureds in the United States and is sold principally through specially designed Programs, covering various types of businesses and properties which have similar risk characteristics. The Insurance business generally underwrites the first layer of insurance under the Programs and unaffiliated Program insurers provide coverage for losses above the first layer of risk. Substantially all of the Insurance business revenues are derived from premiums on this business, plus the investment income generated by the investment portfolio of the Insurance business. Corporate Operations include those activities that benefit the Company in its entirety and cannot be specifically identified to either the Insurance Brokerage Companies or the Property and Casualty Companies. Such activities primarily include debt servicing and public company expenses, including investor relations costs. In addition, Corporate Operations include an investment in Arista Investors Corp. ("Arista"). Results of Operations Three months ended September 30, 2000 compared with three months ended September 30, 1999 Net Income Net Income for the three months ended September 30, 2000 increased by $626,000 to $2,349,000 or basic earnings per share of $0.28 compared to $1,723,000 or $0.20 for the same period last year, as explained below. Insurance Brokerage Companies Income before income taxes increased by $349,000 to $490,000 in 2000 from $141,000 in 1999, primarily due to higher revenues, as discussed below. Total revenues in 2000 were $10,374,000 compared with $9,169,000 in 1999, an increase of $1,205,000 (13%). Gross commissions and fees were higher by $1,934,000 (17%) primarily as a result of new business exceeding lost business, price increases on certain lines of business and commission adjustments on prior period renewals which are recorded when they occur. The commission expense rate (defined as commissions incurred to independent producers as a percentage of gross commissions and fees) to produce new and renewal business increased from 24% to 26% which resulted in a decrease in net commissions and fees of approximately $254,000. Investment income decreased by $119,000 (23%) primarily due to a non-recurring gain on a miscellaneous investment in 1999. Compensation and benefits increased by $467,000 (9%) to $5,959,000 in 2000 compared to $5,492,000 in 1999. The increase was mainly due to increased annual incentive based compensation accruals and increased internal commission expense partially offset by compensation reductions due to lower headcount and an increase in inter-company management fees allocated to the Property and Casualty Companies. 13 Amortization of intangibles decreased $18,000 (6%) to $295,000 in 2000 compared with $313,000 in 1999 due to a reduction in certain intangibles acquired in 1998. Other operating expenses increased by $382,000 (13%) to $3,396,000 in 2000 from $3,014,000 in 1999. The increase was mainly due to higher consulting and advertising costs offset by an increase in inter-company management fees allocated to the Property and Casualty Companies. Interest expense increased by $25,000 (12%) to $234,000 in 2000 from $209,000 in 1999 as a result of higher interest rates. Property and Casualty Companies Income before income taxes increased by $488,000 (20%) to $2,931,000 in 2000 from $2,443,000 in 1999. This increase was due to an increase in net premiums earned together with a decrease in the combined ratio, as discussed below. Net premiums earned for 2000 increased by $991,000 (15%) to $7,795,000 from $6,804,000 in 1999. The increase was due to the growth in the Brokerage segment's managed programs which are insured via direct premiums and facultative reinsurance assumed. Net investment income was $742,000 in 2000 as compared to $734,000 in 1999. The loss ratio (loss incurred expressed as a percentage of premiums earned) decreased to 32% in 2000 from 37% in 1999. The decrease was due to a favorable property loss development on prior-year losses offset by the growth in the reinsurance liability business which generally experiences a higher loss frequency. The acquisition costs and general and administrative expense ratio increased to 40% in 2000 from 37% in 1999. The increase was primarily due to an increase in inter-company management charges and contingent commissions earned by the Brokerage segment. Corporate Net expenses before income taxes decreased in 2000 by $118,000 to $114,000 from $232,000 in 1999 primarily due to lower consulting fees and interest expense for 2000 as well as the 1999 reduction in fair market value of Arista, which was included as a reduction in net investment income in the prior year. Provision for Income Taxes The provision for income taxes for 2000 and 1999 was $958,000 and $629,000, respectively. The 2000 and 1999 provisions reflect an adjustment to match the tax rate on the Company's income tax returns resulting in an effective tax rate of 29% and 27% for 2000 and 1999, respectively. 14 Nine months ended September 30, 2000 compared with nine months ended September 30, 1999 Net Income Net Income for the nine months ended September 30, 2000 increased by $1,683,000 to $6,888,000 or basic earnings per share of $0.81 compared to $5,205,000 or $0.62 for the same period last year, as explained below. Insurance Brokerage Companies Income before income taxes increased by $2,253,000 to $2,334,000 in 2000 from $81,000 in 1999, primarily due to higher revenues, as discussed below. Total revenues in 2000 were $31,258,000 compared with $28,354,000 in 1999, an increase of $2,904,000 (10%). Gross commissions and fees were higher by $4,148,000 (12%) primarily as a result new business exceeding lost business, price increases on certain lines of business and commission adjustments on prior period renewals which are recorded when they occur. The commission expense rate (defined as commissions incurred to independent producers as a percentage of gross commissions and fees) to produce new and renewal business increased from 19% to 21% which resulted in a decrease in net commissions and fees of approximately $693,000. Investment income decreased by $93,000 (8%) primarily due to a non-recurring gain on a miscellaneous investment in 1999. Compensation and benefits increased by $172,000 (1%) to $17,451,000 in 2000 compared to $17,279,000 in 1999. The increase was mainly the result of increased annual incentive based compensation accruals and increased internal commission expense partially offset by compensation reductions due to lower headcount and an increase in inter-company management fees allocated to the Property and Casualty Companies. Amortization of intangibles decreased $79,000 (8%) to $862,000 in 2000 compared with $941,000 in 1999 due to a reduction in certain intangibles acquired in 1998. Other operating expenses increased by $456,000 (5%) to $9,956,000 from $9,500,000. The increase was mainly due to increased consulting expense partially offset by an increase in inter-company management fees allocated to the Property and Casualty Companies. Interest expense increased by $102,000 (18%) to $655,000 in 2000 from $553,000 in 1999 as a result of the 1999 SRW acquisition which includes a related note payable to the Property and Casualty Companies and higher interest rates partially offset by lower balances on other acquisitions. 15 Property and Casualty Companies Income before income taxes increased by $444,000 (6%) to $8,094,000 in 2000 from $7,650,000 in 1999. The increase was due to an increase in net premiums earned, investment income, and service fee income offset by an increase in the combined ratio, as discussed below. Net premiums earned increased by $2,652,000 (13%) to $22,385,000 in 2000 from $19,733,000 in 1999. The increase was due to the growth in the Brokerage segment's managed programs which are insured via direct premiums and facultative reinsurance assumed. Net investment income increased by $135,000 (6%) to $2,303,000 in 2000 from $2,168,000 in 1999. The increase was due to an increase in investments. Net realized gains on investments of $466,000 resulting from the re-balancing of equity investments to include mutual funds and capital gain distributions from certain mutual funds. Other income of $397,000 was non-recurring service fee income. The loss ratio (loss incurred expressed as a percentage of premiums earned) increased to 38% in 2000 from 34% in 1999. The increase was due to the growth in reinsurance liability business which generally experiences a higher loss frequency offset by favorable property loss development on prior-year losses. The acquisition costs and general and administrative expense ratio increased to 40% in 2000 from 38% in 1999. The increase was due to an increase in inter-company management fees and contingent commissions earned by the Brokerage segment. Corporate Net expenses before income taxes increased by $114,000 to $446,000 in 2000 from $332,000 in 1999 due to increased consulting fees. Provision for Income Taxes The provision for income taxes for 2000 and 1999 was $3,094,000 and $2,194,000, respectively. The 2000 and 1999 provisions reflect an adjustment to match the tax rate on the Company's income tax returns resulting in an effective tax rate of 31% and 30% for 2000 and 1999, respectively. 16 Financial Condition and Liquidity Management believes that the Company's operating cash flow, along with its cash equivalents and short term investments will provide sufficient sources of liquidity and capital to meet the Company's anticipated needs during the next twelve months and the foreseeable future. The Company has no capital commitments that are material individually or in the aggregate. Total assets increased by $2,838,000 (2%) to $152,050,000 at September 30, 2000 from $149,212,000 at December 31, 1999. Total liabilities decreased by $3,914,000 (4%) to $98,047,000 at September 30, 2000 from $101,961,000 at December 31, 1999. Stockholders' equity increased by $6,752,000 (14%) to $54,003,000 at September 30, 2000, from $47,251,000 at December 31, 1999. The increase in equity resulted from net income of $6,888,000, an increase in net unrealized appreciation of investments of $334,000, $149,000 for issuances of treasury stock, and $15,000 related to amortization of unearned compensation under the Company's Stock Performance Plan, offset by dividends paid of $634,000. The Company maintains a substantial level of cash and liquid short-term investments which are used to meet anticipated payment obligations, primarily premiums payable to insurance markets. As of September 30, 2000, the Company had cash and short-term investments of $26,233,000. Of the Company's total investments, certain amounts are pledged or deposited into trust funds to collateralize the Company's obligations under reinsurance agreements. As presented in the Consolidated Statements of Cash Flows, the Company's cash and cash equivalents decreased by $11,505,000 for the period ended September 30, 2000. Operating activities provided cash of $679,000. Investing activities used cash of $10,230,000 primarily for the purchase of investments and fixed assets, and acquisition payments. Financing activities used cash of $1,955,000 for payments of dividends and loan repayments. Year 2000 Compliance A comprehensive review was performed by the Company of the insurance policies written by its Insurance Companies and their underwriting guidelines to determine year 2000 exposure. The Insurance Companies primarily issued policies covering all or part of an insured's self-insured retention, with limits generally up to $25,000, that follow the form of the policies for coverage in excess of the Insurance Companies' policies. The Insurance Companies did not issue year 2000 exclusions on these policies. The Insurance Companies also issued a number of policies with greater limits of coverage, and included a year 2000 exclusion on such policies. The Company is aware that year 2000 liabilities may be deemed not to be fortuitous in nature and, therefore, not covered under the policies underwritten by the Insurance Companies. Moreover, based upon the classes of insurance primarily underwritten by the Insurance Companies, the Company believes that its coverage exposure with respect to year 2000 losses will not be material. However, changes in social and legal trends may establish coverage unintended for Year 2000 exposures by re-interpreting insurance contracts and exclusions. 17 Safe Harbor Disclosure The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This Form 10-Q or any other written or oral statements made by or on behalf of the Company may include forward-looking statements which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors (which are described in more detail elsewhere in documents filed by the Company with the SEC) include, but are not limited to, uncertainties relating to government and regulatory policies, volatile and unpredictable developments (including storms and catastrophes), the legal environment, the uncertainties of the reserving process and the competitive environment in which the Company operates. The words "believe", "anticipate", "project", "plan", "expect" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 18 PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is a party to lawsuits arising in the normal course of business. Virtually all pending lawsuits in which the Insurance Companies are a party, involve claims under policies underwritten or reinsured by such Companies. Management believes these lawsuits have been adequately provided for in its established loss and loss expense reserves and that the resolution of these lawsuits will not have a material adverse effect on the Company's financial condition or results of operations. The Insurance Brokerage Companies are subject to various claims and lawsuits from both private and governmental parties, which include claims and lawsuits in the ordinary course of business. The majority of pending lawsuits involve insurance claims, errors and omissions, employment claims, and breaches of contract. The Company believes that the resolution of these lawsuits will not have a material adverse effect on the Company's financial condition or results of operations. Item 2. Changes in Securities - None Item 3. Defaults upon Senior Securities - None Item 4. Submission of Matters to a Vote of Securities Holders Item 5. Exhibits and Reports on Form 8-K a) Exhibits Exhibit Number Description 11 Earnings Per Share Calculation 27 Consolidated Financial Data Schedule b) Reports on Form 8-K There were no reports on Form 8-K for the period July 1, 2000 to September 30, 2000. 19 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. KAYE GROUP INC. ---------------- Registrant November 13, 2000 /s/ Bruce D. Guthart ------------------------------------------------------ Bruce D. Guthart, Chairman, President and Chief Executive Officer November 13, 2000 /s/ Michael P. Sabanos ------------------------------------------------------ Michael P. Sabanos, Executive Vice President and Chief Financial Officer 20 KAYE GROUP INC EXHIBIT 11 Earnings Per Share Calculation Page 1 of 4 For the Three Months Ended September 30, 2000 Shares outstanding at 12/31/99 ............. 8,458,295 (A) Plus: Net Issuance of Treasury Stock ....... 17,708 ------------ Balance @ 9/30/00 .......................... 8,476,003 (B) Balance @ 6/30/00 .......................... 8,469,173 (C) ------------ Weighted average @ 9/30/00 ................. 8,472,588 [(B)+(C)] /2 ------------ Three months ended Sept. 30,2000 --------------------- Net Income ................................ $ 2,349,000 (1) I. Average Shares: ........................... 8,472,588 (2) II. Basic EPS ................................. 0.2772 (1) / (2) ============ III.Diluted EPS Weighted Average Shares ......... 8,472,588 (2) Dilution ........................ 137,634 (3) ------------ 8,610,222 (4) ------------ Diluted EPS ..................... 0.2728 (1) / (4) ============ KAYE GROUP INC EXHIBIT 11 Earnings Per Share Calculation Page 2 of 4 For the Three Months Ended September 30,2000 IV. Outstanding at September 30, 2000

V. Average market value/share

VII. Diluted

KAYE GROUP INC EXHIBIT 11 Earnings Per Share Calculation Page 3 of 4 For the Nine Months Ended September 30, 2000 Shares outstanding at 12/31/99 ........ 8,458,295 (A) Plus: Net Issuance of Treasury Stock .. 17,708 ----------------- Balance @ 9/30/00 ..................... 8,476,003 (B) Balance @ 6/30/00 ..................... 8,469,173 (C) Balance @ 3/31/00 ..................... 8,463,357 (D) ----------------- Weighted average @ 9/30/00 ............ 8,466,707 [(A)+(B)+(C)+(D)]/4 ----------------- Nine months ended Sept. 30,2000 --------------------- Net Income $ 6,888,000 (1) I. Average Shares: 8,466,707 (2) II. Basic EPS 0.8135 (1) / (2) ===================== III. Diluted EPS Weighted Average Shares 8,466,707 (2) Dilution 142,448 (3) --------------------- 8,609,155 (4) ===================== Diluted EPS 0.8001 (1) / (4) ===================== KAYE GROUP INC EXHIBIT 11 Earnings Per Share Calculation Page 4 of 4 For the Nine Months Ended September 30,2000 IV. Outstanding at September 30, 2000

V. Average market value/share

VII. Diluted

KAYE GROUP INC 10-Q