<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended DECEMBER 31, 1996
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 1-11733
AMERICAN STATES FINANCIAL CORPORATION
INDIANA NO. 35-1976549
State of Incorporation I.R.S. Employer Identification No.
500 NORTH MERIDIAN STREET
INDIANAPOLIS, INDIANA 46204 - 1275 (317) 262-6262
Address of principal executive offices Telephone Number
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- - -------------------------- -----------------------------
Common Stock, No Par Value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Aggregate market value of Common Stock held by nonaffiliates (computed as of
January 31, 1997): $265,082,333
Shares of Common Stock outstanding as of January 31, 1997: 60,050,515
DOCUMENTS INCORPORATED BY REFERENCE: Certain portions of the Registrant's
Proxy Statement for the Annual Meeting scheduled for May 20, 1997, are
incorporated by reference in Part III of this Form 10-K.
The exhibit index to this report is located on page 70.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION
American States Financial Corporation ("ASFC"), is an Indiana domiciled
holding company incorporated in 1996. Its principal place of business is 500
North Meridian Street, Indianapolis, Indiana 46204. Unless the context
otherwise indicates; (i) the "Company" refers to ASFC and its wholly-owned,
consolidated subsidiaries; (ii) "ASI" refers to American States Insurance
Company, the Company's sole direct wholly-owned subsidiary, and its
consolidated subsidiaries; and (iii) the "Subsidiaries" refer to the direct and
indirect subsidiaries of the Company, which include ASI and its subsidiaries.
On May 16, 1996, Lincoln National Corporation ("LNC") transferred all of the
outstanding shares of ASI to the Company in exchange for 50,000,000 shares of
the Company's Common Stock. Concurrently with the transfer of the ASI stock,
the Company assumed $100 million of LNC debt ("Assumed Debt") and issued a $200
million note to LNC (the "Term Note"). LNC holds approximately 83% of the
outstanding shares of ASFC.
The Company operates in two business segments: (1) property and casualty
insurance; and (2) life insurance. One or more of the Subsidiaries has
underwritten property and casualty insurance since 1929 and life insurance
since 1959. In 1993 the Company withdrew from the property and casualty
reinsurance business, which it had engaged in since 1964. A portion of that
business was sold, and the remainder is in run off. This is the only instance
in which the Company has withdrawn from, or otherwise acquired or disposed of
part of a business segment during the past five years.
The Company's business is not materially affected by any of the following
considerations: the availability of raw materials; the effect of patents,
trademarks, licenses (except those granted by state insurance regulators
authorizing the Company to conduct business within their jurisdictions),
franchises or other concessions held; backlogs; or government contracts which
are or might be subject to termination or re-negotiation of profits. Generally,
the property and casualty industry is not considered seasonal, however, claims
and expenses for property and casualty insurance tend to be higher for periods
of severe or inclement weather. During their last three fiscal years, the
Company has not spent a material amount on research and development activities.
The Company's business is not directly affected in any material way by
compliance with federal, state or local provisions regulating the discharge of
materials into the environment or otherwise relating to protection of the
environment, though such provisions do affect the liability of those insured
under some of its policies, and thus its obligations under those policies (see
Reserves For Losses And Loss Adjustment Expenses). The Company is not dependent
upon any one customer or group of affiliated customers, the loss of any one or
more of which would have a material adverse effect on the Company. Similarly,
not one of the independent insurance agents making up its distribution network
(or any group of affiliated agents) accounts for so much of its business in any
business segment that the termination of the relationship with that agent or
group of agents would have a material adverse effect upon the Company.
The Company's total employment was 3,483 on December 31, 1996. None of
the employees are represented by a labor union or subject to a collective
bargaining agreement.
The following briefly describes the Company's business segments. For
financial information regarding each of the Company's business segments,
including revenues, pre-tax income and identifiable assets, please see the
consolidated financial statements, note 13, on page 55.
2
<PAGE> 3
PROPERTY AND CASUALTY INSURANCE
The Company's property and casualty insurance sales and underwriting
activities are conducted through six subsidiary companies. The Company's
multiple line property and casualty business includes the following types of
personal and commercial lines policies: businessowners ("BOPs"), commercial
multi-peril, commercial automobile, workers' compensation, private passenger
automobile, and homeowners multi-peril. Although other potentially profitable
markets will be considered, the Company's focus is on small to medium-sized
businesses. Substantially all of the Company's policies are written on an
annual basis, except for (i) private passenger automobile, which is typically a
six-month policy and (ii) a small amount of multi-year BOP policies recently
introduced by the Company. The Company is noted as the second largest writer
of property and casualty insurance to businesses with fewer than 50 employees,
with 3.4% of this segment of the U.S. market, based on 1995 estimated premiums.
Although the Company writes business in most of the United States, its primary
geographic focus is on those areas such as the Midwest and the Pacific
Northwest which have relatively modest exposure to catastrophe losses and in
which management believes insurers generally have been permitted to manage risk
selection and pricing without undue regulatory interference. Field operations
are managed through four regional offices, each with broad responsibility for a
particular territory. Distribution is through a network of approximately 4,750
independent agencies.
3,371 employees are involved in this business segment.
LIFE INSURANCE.
The Company conducts its life insurance sales and underwriting operations
through American States Life Insurance Company ("ASL"), an Indiana domiciled
corporation whose principal office is in Indianapolis, Indiana.
Life insurance is treated by the Company as a business segment which
markets an integrated product line through the same independent agency
distribution network as the Company's property and casualty insurance policies.
The Company stresses the sale of universal life and term life policies,
although it also writes whole life, individual annuities and disability income
policies. The Company sells its life products in most of the United States.
112 employees are involved in this business segment.
REINSURANCE
The Company follows the customary industry practice of reinsuring portions
of its risks and paying for that protection based upon premiums received on all
policies subject to such reinsurance. Insurance is ceded principally to reduce
the Company's exposure on large individual risks and to provide protection
against large losses, including catastrophe losses.
In 1996, the Company's property catastrophe reinsurance program, its
"Primary Coverage", provided protection of 93% of $150 million, or
approximately $139.5 million, in excess of a $30 million retention per
occurrence. In 1997, the Primary Coverage will provide protection of 90% of
$150 million, or approximately $135 million, in excess of a $30 million
retention per occurrence. In addition, in 1997 the Company has also purchased
an additional coverage layer of 90% of $100 million, or $90 million, in excess
of its primary coverage. This additional 1997 layer provides protection solely
for non-California earthquake exposure. During the past twenty years, the
Company exceeded its current catastrophe retention only once. The Company also
reinsures a portion of its life business. The maximum net retention on any one
life is currently $250,000.
3
<PAGE> 4
COMPETITION AND REGULATION
The insurance industry is diverse and highly competitive. The Company
competes with other stock insurers, mutual insurance companies and other
underwriting organizations. At the end of 1995, the latest year for which data
is available, there are over 1,100 groups and unaffiliated individual companies
writing property and casualty insurance. The Company ranked 31st in net
written premiums for 1995 (A.M. Best Aggregates and Averages, June 1996) among
all such groups and companies.
The factors influencing purchasing decisions by the Company's customers
include price, breadth of coverage, reputation of the selling agency,
reputation of the insurer, service, financial strength and ratings. The
Company competes against other property and casualty and life insurance
companies, including direct writers (which deal with customers directly or
through exclusive agencies) and other independent agency companies, seeking to
write business in its target markets, including other companies utilizing the
same independent agencies which represent the Company.
Like all insurers similarly situated, the Company, with one or more of
it's subsidiaries licensed in all 50 states and the District of Columbia, is
subject to comprehensive regulation by government agencies in the states in
which it does business. The nature and extent of that regulation varies from
jurisdiction to jurisdiction, but typically involves prior approval of the
acquisition of control of an insurance company or of any company controlling an
insurance company, regulation of certain transactions entered into by an
insurance company with any of its affiliates, limitations on dividends,
approval or filing of premium rates and policy forms for many lines of
insurance, solvency standards, minimum amounts of capital and surplus which
must be maintained, reserve requirements, limitations on types and amounts of
investments, restrictions on the size of risks which may be insured by a single
company, limitation of the right to cancel or non-renew policies in some lines,
regulation of the right to withdraw from markets or agencies, licensing of
insurers and agents, deposits of securities for the benefit of policyholders,
reporting with respect to financial conditions, regulation of market conduct
and other matters. In addition, state insurance department examiners perform
periodic financial and market conduct examination of insurance companies. Such
regulation is generally intended for the protection of policyholders, not
investors.
RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The Company is required by applicable insurance laws and regulations to
maintain reserves for payment of losses and loss adjustment expenses ("LAE")
for claims, both reported and incurred but not reported ("IBNR"), arising from
the policies issued. These laws and regulations require that provision be made
for the ultimate cost of claims without regard to how long it takes to settle
them or the time value of money. The determination of reserves involves
actuarial and statistical projections of what the Company expects to be the
cost of the ultimate settlement and administration of such claims based upon
facts and circumstances then known, estimates of future trends in claims
severity, and other variable factors such as inflation and changing judicial
theories of liability. The estimation of ultimate liability for losses and LAE
is an inherently uncertain process and does not represent an exact calculation
of that liability. The Company's reserving policy recognizes this uncertainty
by maintaining reserves at a level providing for the possibility of adverse
development relative to the estimation process.
When a claim is reported to the Company, its claims personnel establish a
"case reserve" for the estimated amount of the ultimate payment. This estimate
reflects an informed judgment, based upon general insurance reserving practices
and on the experience and knowledge of the estimator regarding the nature and
value of the specific claim, the severity of injury or damage, and the policy
provisions relating to the type of loss. Case reserves are adjusted by the
Company's claims staff as more information becomes available.
4
<PAGE> 5
The Company maintains IBNR reserves, the purpose of which is to provide
for future development on reported claims and IBNR claims. The IBNR reserve is
determined by estimating the Company's ultimate liability for both reported
and IBNR claims and then subtracting the open case reserves and claim payments
made.
Each quarter, the Company's actuaries compute its estimated ultimate
liability using actuarial principles and procedures applicable to the lines of
business written. The primary actuarial projection techniques utilized by the
Company are the "reported loss development method" and the "paid loss
development method." These methods involve projecting reported losses to
ultimate levels based on either historical loss reporting or historical loss
payment patterns. Loss-based methods are considered most appropriate for the
product lines primarily written by the Company. These methods are
supplemented, when appropriate, by (i) premium-based techniques utilizing
estimated loss ratios and earned premiums (ii) utilization of industry loss
exposure estimates coupled with the Company's estimated industry market share,
and (iii) the occasional use of outside consultants to confirm the Company's
estimate for specific loss exposures (see later discussion concerning
construction defect exposure and reinsurance in run-off).
The following table provides a reconciliation of the Company's property
and casualty losses and LAE reserve balances for the years indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance as of January 1, net of related reinsurance recoveries..... $2,294.5 $2,377.2 $2,458.4
Add:
Provision for losses and LAE occurring in the current year,
net of reinsurance......................................... 1,245.6 1,233.6 1,318.2
Increase/(decrease) in estimated losses and LAE occurring
in prior years, net of reinsurance......................... (45.7) (39.9) (92.0)
-------- -------- --------
Incurred losses and LAE during the current year,
net of reinsurance......................................... 1,199.9 1,193.7 1,226.2
Deduct:
Losses and LAE payments for claims, net of reinsurance,
occurring during:
Current year............................................... 654.0 613.5 617.4
Prior years................................................ 578.7 662.9 690.0
-------- -------- --------
Total................................................. 1,232.7 1,276.4 1,307.4
-------- -------- --------
Balance as of December 31, net of related reinsurance recoveries... 2,261.7 2,294.5 2,377.2
Reinsurance recoverables on losses and LAE at end of year.......... 164.4 120.1 119.5
-------- -------- --------
Reserves for losses and LAE, gross of related reinsurance
recoverables, at end of year................................... $2,426.1 $2,414.6 $2,496.7
======== ======== ========
</TABLE>
The liability for property and casualty losses and LAE included in the
preceding table is determined on a basis prescribed by generally accepted
accounting principles ("GAAP"). Such liabilities differ from that reported to
state insurance regulators. A reconciliation of the GAAP liability and the
corresponding liability reported to state insurance regulators is as follows:
5
<PAGE> 6
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------------
1996 1995
----------- -----------
(Dollars in Millions)
<S> <C> <C>
Liability reported to state insurance regulators... $2,298.8 $2,331.6
Increase (decrease) related to:
Estimated salvage and subrogation recoveries... (37.1) (37.1)
Amount recoverable from reinsurers............. 164.4 120.1
----------- -----------
Liability reported on a GAAP basis......... $2,426.1 $2,414.6
=========== ===========
</TABLE>
The following table shows the development of the reserves for unpaid
losses and LAE, net of reinsurance, from 1986 through 1996 for the Company's
property and casualty subsidiaries on a GAAP basis. The top line of the table
shows the liabilities at the balance sheet date for each of the indicated
years. This reflects the estimated amounts of losses and LAE for claims
arising in that year and all prior years that are unpaid at the balance sheet
date, including losses incurred but not yet reported to the Company. The upper
portion of the table shows the cumulative amounts subsequently paid as of
successive years with respect to the liability. The lower portion of the table
shows the re-estimated amount of the previously recorded liability based on
experience as of the end of each succeeding year. The estimates change as more
information becomes known about the frequency and severity of claims for
individual years. The redundancy (deficiency) exists when the re-estimated
liability at each December 31 is less (greater) than the prior liability
estimate. The "cumulative total redundancy (deficiency)" depicted in the
table, for any particular calendar year, represents the aggregate change in the
initial estimates over all subsequent calendar years. Company management
believes that overall loss and LAE reserves as of December 31, 1996 make an
adequate and reasonable provision for loss and LAE expense, with these reserves
having been determined based upon conservative actuarial techniques
consistently applied. The Company has historically attempted to maintain a
slight redundancy in its overall reserves in order to provide for potential
adverse events. Nonetheless, the conditions and trends which have affected the
development of these liabilities in the past may not necessarily recur in the
future and it would not, therefore, be appropriate to use this cumulative
history to project future performance:
6
<PAGE> 7
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------- ------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Dollars in Millions)
Liability for unpaid losses and LAE, net of reinsurance recoverable:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,257.6 $1,395.8 $1,643.9 $1,890.7 $2,148.6 $2,370.3 $2,538.5 $2,458.4 $2,377.2 $2,294.5 $2,261.7
<CAPTION>
Cumulative amount of liability paid through: (First column represents number of years later)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 477.0 509.5 606.0 710.3 777.7 779.7 800.6 690.0 662.9 578.7
2 727.1 785.2 937.0 1,096.2 1,183.1 1,230.8 1,225.1 1,094.3 996.8
3 887.6 931.0 1,152.6 1,321.7 1,453.7 1,495.6 1,501.6 1,322.7
4 971.6 1,052.4 1,272.2 1,479.7 1,617.9 1,685.4 1,663.6
5 1,046.3 1,124.7 1,361.9 1,580.1 1,740.6 1,807.5
6 1,095.7 1,180.3 1,422.1 1,659.9 1,828.1
7 1,134.3 1,219.8 1,471.4 1,716.6
8 1,164.1 1,253.5 1,509.8
9 1,190.4 1,282.9
10 1,214.1
<CAPTION>
Liability re-estimated as of: (First column represents number of years later)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,189.2 1,335.6 1,608.7 1,900.9 2,153.4 2,397.9 2,490.4 2,366.4 2,337.3 2,248.8
2 1,205.9 1,328.7 1,635.5 1,924.6 2,195.5 2,407.0 2,458.0 2,399.5 2,342.7
3 1,227.9 1,354.6 1,651.4 1,969.1 2,247.7 2,402.5 2,534.3 2,454.6
4 1,259.6 1,375.3 1,685.6 2,028.9 2,265.3 2,505.3 2,618.1
5 1,285.2 1,420.9 1,764.7 2,052.7 2,373.5 2,603.1
6 1,326.6 1,507.0 1,779.4 2,159.3 2,472.5
7 1,410.9 1,515.1 1,871.8 2,237.8
8 1,417.4 1,604.7 1,935.6
9 1,507.1 1,655.0
10 1,543.0
<CAPTION>
Cumulative total redundancy (deficiency) (1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ (285.4) $ (259.2) $ (291.7) $ (347.1) $ (323.9) $ (232.8) $ (79.6) $ 3.8 $ 34.5 $ 45.7
========= ========= ========= ========= ========= ========= ======== ======== ======== ========
<CAPTION>
Change in cumulative total redundancy (deficiency)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 26.2 $ (32.5) $ (55.4) $ 23.2 $ 91.1 $ 153.2 $ 83.4 $ 30.7 $ 11.2 $ (45.7)
<S> <C> <C> <C>
Net reserve - December 31 $2,377.2 $2,294.5 $2,261.7
Reinsurance recoverables 119.5 120.1 164.4
-------- -------- --------
Gross reserve, December 31 $2,496.7 $2,414.6 $2,426.1
======== ======== ========
<CAPTION>
Cumulative redundancy (deficiency):
Personal and Commercial lines
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ (48.5) $ (36.2) $ (75.8) $ (99.6) $ (87.1) $ (12.1) $ 78.5 $ 126.5 $ 129.5 $ 71.9
<CAPTION>
Reinsurance business in run-off
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(236.9) (223.0) (215.9) (247.5) (236.8) (220.7) (158.1) (122.7) (95.0) (26.2)
--------- --------- --------- --------- --------- --------- -------- -------- --------- --------
Total $ (285.4) $(259.2) $ (291.7) $ (347.1) $ (323.9) $ (232.8) $ (79.6) $ 3.8 $ 34.5 $ 45.7
========= ========= ========= ========= ========= ========= ======== ======== ======== ========
<CAPTION>
Change in cumulative redundancy (deficiency):
Personal and Commercial lines
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 12.3 $ (39.6) $ (23.8) $ 12.5 $ 75.0 $ 90.6 $ 48.0 $ 3.0 $ (57.6) $ (71.9)
<CAPTION>
Reinsurance business in run-off
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
13.9 7.1 (31.6) 10.7 16.1 62.6 35.4 27.7 68.8 26.2
Total ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$ 26.2 $ (32.5) $ (55.4) $ 23.2 $ 91.1 $ 153.2 $ 83.4 $ 30.7 $ 11.2 $ (45.7)
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
______________________________
(1) The cumulative deficiency in reserves for the years 1986-1992 is
primarily attributable to environmental and asbestos claims incurred under
assumed reinsurance.
7
<PAGE> 8
The following table is derived from the preceding table and summarizes the
effect of reserve re-estimates, net of reinsurance, on calendar year operations
for the same ten-year period ended December 31, 1996. The total of each column
details the amount of reserve re-estimates made in the indicated calendar year
and shows the accident years to which the re-estimates are applicable. The
amounts in the total accident year column on the far right represent the
cumulative reserve re-estimates for the indicated accident year(s).
<TABLE>
<CAPTION>
Cumulative
Deficiency
(Redundancy)
Effect of Reserve Re-estimates on Calendar Year Operations from
--------------------------------------------------------------------------------Re-estimates
Increase (Decrease) in Reserves for Calendar Year for each
-------------------------------------------------------------------------------- Accident
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Year
------- ------ ------ ------ ------ ------ ------ ----- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Accident Years
1986 and prior $(68.4) $16.7 $22.0 $31.6 $25.6 $41.4 $84.3 $6.5 $89.7 $36.0 $ 285.4
1987 (76.9) (29.0) (5.7) (4.9) 4.2 1.8 1.6 (.1) 14.4 (94.6)
1988 (28.2) .9 (4.9) (11.4) (7.0) 6.6 2.8 13.5 (27.7)
1989 (16.6) 7.9 10.3 (19.3) 9.1 14.2 14.6 20.2
1990 (18.9) (2.5) (7.5) (6.2) 1.7 20.5 (12.9)
1991 (14.4) (43.2) (22.1) (5.5) (1.2) (86.3)
1992 (57.2) (27.9) (26.5) (14.0) (125.6)
1993 (59.6) (43.2) (28.7) (131.6)
1994 (73.0) (49.7) (122.7)
1995 (51.1) (51.1)
Total calendar year effect:
------- ------- ------- ----- ------- ------- ------- ------- ------- ------- --------
$(68.4) $(60.2) $(35.2) $10.2 $ 4.8 $ 27.6 $(48.1) $(92.0) $(39.9) $(45.7) $(346.9)
======= ======= ======= ===== ======= ======= ======= ======= ======= ======= ========
</TABLE>
In personal and commercial lines excluding reinsurance in run-off, the
Company benefited from positive prior year loss reserve development during both
1996 and 1995 on the Company's core book of on-going business, which includes
businessowners, commercial multi-peril, commercial automobile, workers'
compensation, homeowners and personal automobile. This positive development
was consistent with industry trends, but was also due in part to the continuing
effects of the Company's "New Directions" initiative. Under New Directions,
which was implemented in 1991, the Company elected to reduce market share in
lines of business and geographic areas which were producing less than
acceptable loss ratios computed in accordance with statutory accounting
principles ("SAP"). The New Directions program has been primarily responsible
for the 10.6 percentage point improvement in the Company's loss ratio from
71.6% for 1991 to 61.0% for 1996. Other factors contributing to favorable loss
reserve development were on-going improvements in the claim evaluation and
management process and consistent application of the Company's reserving
philosophy, which seeks to maintain a slight redundancy in loss reserves.
Additionally, workers' compensation reform and tort reform have created some
improvement in loss cost trends for both the Company and the industry.
Notwithstanding the above, favorable loss reserve development on prior accident
years may not necessarily occur in the future, and there can be no assurance
that earnings will continue to benefit from positive reserve developments.
The Company continued to experience adverse loss development on
construction defect claims which is netted within the aggregate 1996 favorable
development on prior year loss and LAE reserves in personal and commercial
lines excluding reinsurance in run-off. Construction defect claims are a subset
of claims that arise from coverage provided by general property damage
liability insurance. The Company defines construction defect claims as those
involving allegations of defective work which result in claims for damages
related to the diminution in value of large construction projects, such as
condominiums, office buildings, shopping centers and housing developments.
Prior to 1993, the number of construction defect claims reported to the Company
were insignificant relative to the total number of general property damage
liability claims; therefore, these claims were not separated for the purpose of
reserve analysis. The reporting pattern and incurred losses and LAE for
construction defect claims are as follows:
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<PAGE> 9
<TABLE>
<CAPTION>
Number of
Calendar Reported Incurred
Year Claims Losses and LAE (1)
---- -------- ---------------------
(Dollars in Millions)
<S> <C> <C>
1991 & prior................................. 442 $12.0
1992......................................... 804 25.0
1993......................................... 1,257 46.1
1994......................................... 1,274 88.8
1995......................................... 1,227 110.8
1996......................................... 1,709 134.3
</TABLE>
___________________
(1) Incurred losses and LAE include reported claims and IBNR claims, net of
reinsurance.
Approximately 90% of the reported claims involve construction activity in
California, with the majority of reported claims through 1996 being incurred in
accident years prior to 1994. Management believes that the increase in 1996
reportings is attributable, in large part, to the California Supreme Court's
landmark decision in Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal. 4th
654 (1995), which was handed down in July 1995. In Montrose, the court held
that in progressive damage cases, such as environmental and construction defect
cases (where damage begins in one policy period and advances in subsequent
policy periods), any policy in effect while the damage progressed is triggered
and is potentially exposed to the loss. The adoption of this "continuous"
trigger theory in the interpretation of liability insurance policies marked a
significant departure from the "manifestation" trigger the court had adopted in
the interpretation of first-party property insurance policies, which many
intermediate California courts had applied prior to Montrose. The adoption of
the continuous trigger in conjunction with the ten year statute of limitations
for construction defect claims greatly expanded the number of primary carriers
which would potentially have exposure for losses arising from any one project.
Those factors combined with an aggressive plaintiffs bar and a receptive
California judiciary to produce the experienced growth in reportings.
From an operational perspective, in late 1992, the Company established a
dedicated claim unit specifically for the management of construction defect
claims. Also, beginning in 1993, the Company intentionally began reducing the
volume of new contractor business written in California, and currently is not
writing any new California contractor business. The Company has significantly
reduced its in-force book of contractor business in California. Further, as
the number of construction defect claims increased during 1993 and 1994, the
Company decided, at the end of 1994, to segregate construction defect claims
from all other general property damage liability claims for reserve analysis.
As a result of a separate analysis of the construction defect losses, the
reserves were increased. This analysis was repeated at the end of 1995 and
1996 as part of the Company's analysis of its total reserves for general
property damage liability.
In addition, in 1996, the Company engaged an outside consulting firm to
perform a construction defect reserve analysis and claims management study. The
Company adopted the firm's recommendations resulting from the study and
recorded the proposed addition to construction defect loss and LAE reserves as
of December 31, 1996. The Company believes that based on its own analysis and
that of the consultant, its total provision for construction defect exposures
is adequate at December 31, 1996.
The Company's reinsurance in run-off business incurred adverse prior year
loss reserve development of $26.2 million in 1996 versus $69.3 million in
1995. The adverse development in 1996 was attributable to asbestosis and
environmental ("A&E") loss exposures related to accident years prior to 1988.
The Company engaged an independent actuarial firm in 1996 to review the
sufficiency of total reinsurance in run-off reserves, with a particular
emphasis on A&E reserves. The Company also obtained previously unavailable
information from a large property and casualty pool from which the Company
9
<PAGE> 10
assumes an approximate 2% pro-rata share. The pool indicated that it was
experiencing adverse development related to its A&E exposure. Additionally, new
actuarial techniques and methodologies were applied to pre-existing data. The
cumulative effect of these initiatives has been to help identify the various
components of the adverse development. They appear to be approximately $13.0
million related to the pool with the remaining $13.2 million of adverse
development related primarily to various casualty excess-of-loss exposures.
As a result of the above, the Company increased its A&E reinsurance in
run-off reserves, net of reinsurance recoverables, to $143.9 million at year
end, up from $127.1 million at year end 1995. In addition, in January of 1996
the Company agreed to assume $61.4 million of reserves, from an affiliate of
LNC, on a closed block of specialty lines business. This run-off business
covers primarily property, casualty, accident and health exposures on sports,
leisure and entertainment venues. Reserves as of December 31, 1996 totaled
$41.3 million. Due to the increase in A&E reserves and the assumption of the
closed block of specialty business, total reinsurance in run-off reserves, net
of reinsurance recoverables, increased to $262.4 million at year end 1996, up
from $210.3 million at year end 1995. The Company believes its total
reinsurance in run-off loss reserves are appropriate as of December 31, 1996.
Establishing reserves for A&E claims is subject to uncertainties that are
greater than those presented by other types of claims. The Company continually
monitors and evaluates A&E claims and re-estimates its reserves accordingly.
In addition to the periodic utilization of outside experts, another method used
by the Company to evaluate its reserves for A&E claims is to compute the number
of years of claim payments which are being carried in reserve (the survival
ratio). Based on losses and LAE payments made during the preceding twelve
months, the Company's survival ratio for total A&E reserves increased to 18.5
years at December 31, 1996 versus 17.4 years at December 31, 1995. With a
survival ratio of 18.5 compared to an industry average of 9.1, the Company
believes that total Company A&E loss exposures are adequately reserved. The
loss and LAE reserves for reported and unreported A&E liabilities, net of
reinsurance recoverables, are as follows:
<TABLE>
<CAPTION>
Calendar Asbestos Environmental
Year Reserves Reserves
---- -------- -------------
(Dollars in Millions)
<S> <C> <C>
1994............................................... $69.6 $128.6
1995............................................... 77.8 163.4
1996............................................... 112.3 138.2
</TABLE>
10
<PAGE> 11
The following table summarizes the Company's property and casualty reserves,
net of reinsurance recoverables, by type of claim as of the dates indicated:
<TABLE>
<CAPTION>
At December 31,
----------------------------
1996 1995 1994
-------- -------- --------
(Dollars in Millions)
<S> <C> <C> <C>
Commercial and personal:
Core commercial and personal ................. $1,562.7 $1,724.6 $1,941.7
Construction defect .......................... 330.0 245.5 173.9
A&E........................................... 106.6 114.1 101.3
-------- -------- --------
Total commercial and personal .......... $1,999.3 $2,084.2 $2,216.9
-------- -------- --------
Reinsurance in run-off:
A&E........................................... 143.9 127.1 96.9
All other reinsurance in run-off ............. 118.5 83.2 63.4
-------- -------- --------
Total reinsurance in run-off ........... 262.4 210.3 160.3
--------
Total reserves, net of reinsurance recoverables... $2,261.7 $2,294.5 $2,377.2
======== ======== ========
</TABLE>
11
<PAGE> 12
The following table provides a detailed reconciliation of the Company's
property and casualty losses and LAE reserve balances for the years indicated:
<TABLE>
<CAPTION>
Consolidated Less Construction
Defects and A&E Construction Defects
---------------------------------- ----------------------------
Year Ended December 31, Year Ended December 31,
---------------------------------- ----------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, net of related
reinsurance recoveries........................ $1,807.8 $2,005.1 $2,142.8 $245.5 $173.9 $114.9
Add:
Provision for losses and LAE occurring
in the current year, net of reinsurance 1,235.0 1,221.8 1,303.9 8.4 8.9 8.4
Increase/(decrease) in estimated losses
and LAE occurring in prior years, net
of reinsurance............................ (192.3) (195.8) (178.0) 125.9 101.9 80.4
---------- ---------- ---------- -------- -------- --------
Incurred losses and LAE during the
current year, net of reinsurance.......... 1,042.7 1,026.0 1,125.9 134.3 110.8 88.8
Deduct:
Losses and LAE payments for claims,
net of reinsurance, occurring during:
Current year.............................. 652.4 613.2 617.1 1.5 .2 .1
Prior years............................... 516.9 610.1 646.5 48.3 39.0 29.7
---------- ---------- ---------- -------- -------- --------
Total.................................. 1,169.3 1,223.3 1,263.6 49.8 39.2 29.8
---------- ---------- ---------- -------- -------- --------
Balance as of December 31, net of related
reinsurance recoveries........................ 1,681.2 1,807.8 2,005.1 330.0 245.5 173.9
Reinsurance recoverables on losses and
LAE at end of year............................ 132.7 97.4 99.6 1.2 2.4 1.6
---------- ---------- ---------- -------- -------- --------
Reserves for losses and LAE, gross of
related reinsurance recoverables, at end
of year....................................... $1,813.9 $1,905.2 $2,104.7 $331.2 $247.9 $175.5
========== ========== ========== ======== ======== ========
<CAPTION>
A&E Total
Year Ended December 31, Year Ended December 31,
---------------------------------- ----------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 1, net of related
reinsurance recoveries........................ $241.2 $198.2 $200.7 $2,294.5 $2,377.2 $2,458.4
Add:
Provision for losses and LAE occurring
in the current year, net of reinsurance 2.2 2.9 5.9 1,245.6 1,233.6 1,318.2
Increase/(decrease) in estimated losses
and LAE occurring in prior years, net
of reinsurance............................ 20.7 54.0 5.6 (45.7) (39.9) (92.0)
---------- ---------- ---------- -------- -------- --------
Incurred losses and LAE during the
current year, net of reinsurance.......... 22.9 56.9 11.5 1,199.9 1,193.7 1,226.2
Deduct:
Losses and LAE payments for claims,
net of reinsurance, occurring during:
Current year.............................. .1 .1 .2 654.0 613.5 617.4
Prior years............................... 13.5 13.8 13.8 578.7 662.9 $690.0
---------- ---------- ---------- -------- -------- --------
Total.................................. 13.6 13.9 14.0 1,232.7 1,276.4 1,307.4
---------- ---------- ---------- -------- -------- --------
Balance as of December 31, net of related
reinsurance recoveries........................ 250.5 241.2 198.2 2,261.7 2,294.5 2,377.2
Reinsurance recoverables on losses and
LAE at end of year............................ 30.5 20.3 18.3 164.4 120.1 119.5
---------- ---------- ---------- -------- -------- --------
Reserves for losses and LAE, gross of
related reinsurance recoverables, at end
of year....................................... $281.0 $261.5 $216.5 $2,426.1 $2,414.6 $2,496.7
========== ========== ========== ======== ======== ========
</TABLE>
12
<PAGE> 13
ITEM 2. PROPERTIES
The Company's home office complex consists of a leased office building of
approximately 407,800 square feet in downtown Indianapolis, Indiana, a nearby
leased parking garage and a printing and supply building of approximately
52,400 square feet, which is owned by the Company. The lease covering the
office building and parking garage (the "Lease") will expire on August 31,
2009. Semi-annual lease payments under the Lease total approximately $3.2
million ($6.4 million per year) until August, 1999. From September, 1999,
until August, 2004, the semi-annual lease payments will total approximately
$4.9 million ($9.8 million per year), and from September, 2004, until August,
2009, the semi-annual lease payments will approximate $5.2 million ($10.4
million per year).
At December 31, 1995, the Company owned 16 of the buildings in which the
Company's principal field offices were located. As part of a planned
realignment of its field structure designed to reduce expenses, contribute to
improvement of the combined ratio, and enhance growth (the "Realignment"), the
Company announced it would dispose of 14 of the principal field offices and
consolidate the functions of those offices into four regional offices. A $28.4
million pre-tax charge for loss on operating properties was charged to income
in the fourth quarter of 1995. As of December 31, 1996, four of the offices
had been sold. The location and approximate size of each of those offices are
as follows:
<TABLE>
<CAPTION>
Approximate Size
----------------
(In square feet)
<S> <C>
Offices to be Maintained
------------------------
Fort Scott, KS 82,000
Mountlake Terrace, WA 52,500
Offices to be Sold
------------------------
Carol Stream, IL 39,500
Costa Mesa, CA 53,000
Englewood, CO 44,400
Grand Rapids, MI 44,500
Lexington, KY 43,500
Maitland, FL 58,200
New Britain, CT 59,600
Pittsburgh, PA 48,300
Pleasant Hill, CA 61,500
San Antonio, TX 43,700
Offices Sold During 1996
------------------------
Lake Oswego, OR 58,100
Montgomery, AL 30,500
Richardson, TX 59,300
Springfield, OH 26,300
</TABLE>
In addition to the locations listed above, company field operations are
conducted from approximately 100 leased offices aggregating approximately
350,000 square feet. These leases generally have terms of five years or less.
Management considers the planned owned and leased office facilities adequate
for the current and anticipated future level of operations.
13
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
The Company is routinely involved in pending or threatened legal
proceedings. Those proceedings sometimes involve alleged breaches of contract,
torts (including bad faith and fraud claims) and miscellaneous other causes of
action. Some of the pending litigation includes claims for punitive damages in
addition to compensatory damages and other relief. While the aggregate dollar
amounts involved in these legal proceedings cannot be determined with
certainty, the amounts at issue could have a significant effect on the
Company's results of operations. However, based upon information presently
available, and in light of legal and other defenses available to the Company,
management does not believe that any of these routine proceedings will have a
material adverse effect on the financial results or operations of the Company.
On February 14, 1996, three of the Company's property and casualty
insurance subsidiaries were among 23 underwriters of real property insurance
named defendants in a case brought in the United States District Court for the
Western District of Missouri alleging that their underwriting, sales and
marketing practices violated a number of civil rights laws (including, without
limitation, the Fair Housing Act). The plaintiffs seek to represent themselves
and a putative class of similarly situated persons in the State of Missouri.
This action seeks injunction relief, unspecified compensatory damages, punitive
damages and attorneys' fees. In response to motions filed by the defendants,
the court dismissed the conspiracy count by Order dated October 2, 1996 but has
required that the defendants answer the remaining counts and discovery has now
begun. Management believes, based upon current information, that the Company's
underwriting, sales and marketing practices have complied in all material
respects with the applicable requirements of both state and federal law. The
Company intends to vigorously defend this action.
On August 29, 1996, the first of two actions were brought in Missouri
state courts alleging that underinsured motorist insurance coverage sold in
that state by three of the Company's property and casualty insurance
subsidiaries constitutes "phantom coverage" when sold at limits equal to the
State's financial responsibility requirements. In both actions, the plaintiffs
seek to represent themselves and a putative class of similarly situated persons
in the State of Missouri. The actions seek both compensatory and punitive
damages based upon a number of legal theories, including, without limitation,
breach of fiduciary duty, negligence, breach of contract, unjust enrichment and
misrepresentation. While it is too early to fully evaluate the plaintiffs'
allegations, the potential defenses available or the size of the putative class
of plaintiffs, management does not believe, based upon current information,
that the allegations have merit and it therefore intends to defend these
actions vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no matters were submitted to security
holders for a vote.
14
<PAGE> 15
EXECUTIVE OFFICERS OF THE REGISTRANT
The following chart sets forth the names and ages of all executive officers of
the Company and indicates all positions and officers with the Company and its
principal subsidiaries held by each such person:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert A. Anker 55 Director, Chairman and Chief Executive Officer of the Company and ASI
- - ----------------------------------------------------------------------------------------------------
William J. Lawson 57 Director, President and Chief Operating Officer of the Company and ASI
- - ----------------------------------------------------------------------------------------------------
Jerome T. Gallogly 60 Executive Vice President of the Company and ASI and Director of ASI
- - ----------------------------------------------------------------------------------------------------
J. Robert Coffin 60 Senior Vice President , Technology Administration of ASI and
Director of ASI
- - ----------------------------------------------------------------------------------------------------
David N. Hafling 49 Senior Vice President and Actuary of ASI and Director of ASI
- - ----------------------------------------------------------------------------------------------------
Harry R. Simpson 56 Senior Vice President of ASL and Director of ASI
- - ----------------------------------------------------------------------------------------------------
Todd R. Stephenson 42 Senior Vice President, Treasurer and Chief Financial Officer of the
Company and ASI and Director of ASI
- - ----------------------------------------------------------------------------------------------------
Janis E. Stoddard-Smith 49 Senior Vice President, Claims of ASI and Director of ASI
- - ----------------------------------------------------------------------------------------------------
Ronald K. Young 47 Senior Vice President, Product Management of ASI and Director of ASI
- - ----------------------------------------------------------------------------------------------------
Thomas R. Kaehr 38 Vice President and Controller (Chief Accounting Officer) of the
Company and ASI
- - ----------------------------------------------------------------------------------------------------
Thomas M. Ober 52 Vice President, Secretary and General Counsel of the Company and ASI
and Director of ASI
- - ----------------------------------------------------------------------------------------------------
</TABLE>
Biographical information for each of the individuals listed in the above
table is set forth below, including the identity of any other publicly traded
company of which such person is a director. All executive officers of the
Company except Mr. Anker and Mr. Kaehr have held their positions with the
Company since its incorporation on February 5, 1996. Mr. Anker has been a
director of the Company since incorporation and has been its Chairman and
Chief Executive Officer since December 31, 1996. Mr. Kaehr was elected to his
current office with the Company on August 20, 1996. Officers of the Company
are elected annually and serve until resignation, removal or termination of
employment.
15
<PAGE> 16
Mr. Anker is Chairman and Chief Executive Officer of the Company and ASI.
He served as a director of ASI from 1984 to April, 1996; President and Chief
Operating Officer of LNC from 1992 until December, 1996; Chairman and Chief
Executive Officer of Lincoln National Life Insurance Company ("Lincoln Life"),
a LNC affiliate, from 1994 to December, 1996; President and Chief Operating
Officer of Lincoln Life from 1992 to 1994; President of ASI from 1985 until
1991; Chief Executive Officer of ASI from 1990 to 1992; and as Chairman of ASI
from 1991 until 1992. Mr. Anker is also currently a director of Fort Wayne
National Corporation, the holding company for Fort Wayne National Bank.
Mr. Lawson is President, Chief Operating Officer and a director of the
Company and ASI, having joined ASI in October, 1995. Prior to joining ASI, Mr.
Lawson served as Chairman and Chief Executive Officer of EMPHESYS Financial
Group, Inc. ("EMPHESYS"), an LNC affiliate, the parent company of Employers
Health Insurance Company, from 1994, until he joined ASI; and he served as
President and Chief Executive Officer of EMPHESYS from 1993 to 1994. Mr.
Lawson served as President, Chief Executive Officer and a director of Employers
Health Insurance Company, from 1988 to 1993.
Mr. Gallogly has been Executive Vice President and a director of ASI since
1992. He joined ASI in 1975 and has held various positions with ASI including
Senior Vice President, Product Management from 1986 to 1992.
Mr. Coffin has been Senior Vice President, Technology Administration of
ASI since May, 1995 and a director of ASI since April, 1996. He has served ASI
in several areas of management including Vice President, Personnel from 1990
until May, 1995.
Mr. Hafling has been Senior Vice President and Actuary of ASI since 1993
and a director of ASI since April, 1996. He joined ASI in 1972 and has held
various positions with ASI including Vice President and Actuary from 1986 to
1993.
Mr. Simpson has been Senior Vice President of ASL since May, 1995 and a
director of ASI since April, 1996. In this position, he acts as the general
manager of ASL. Mr. Simpson joined ASI in 1977 and has held various positions
with ASI including Vice President, Field Operations from 1990 until May, 1995.
Mr. Stephenson is Senior Vice President, Treasurer and Chief Financial
Officer of the Company and ASI. He is also a director of ASI and has been
since February, 1995. He joined ASI in 1977 and served in a number of
financial positions with ASI, including Vice President, Corporate Accounting
from 1992 to May, 1995; Second Vice President, Planning and Administration from
1991 to 1992; and Assistant Treasurer and Manager of Budget and Financial
Planning from 1984 to 1991.
Ms. Stoddard-Smith has been Senior Vice President, Claims of ASI since
May, 1995 and a director of ASI since April, 1996. She has held several claims
management positions with ASI, including Vice President of Claims for the
Eastern Region from 1991 to May, 1995 and Indiana Division Claim Manager from
1989 to 1991.
Mr. Young has been Senior Vice President, Product Management of ASI since
May, 1995 and a director of ASI since April, 1996. He has held several
management positions with ASI, including Vice President, Field Operations, from
1992 to May, 1995 and Division Vice President from 1988 to 1992.
Mr. Kaehr has been Vice President and Controller (Chief Accounting
Officer) of the Company since August 20, 1996. He has been Vice President and
Controller (Chief Accounting Officer) of ASI since August 19, 1996 and a Vice
President of ASI since February, 1995. Mr. Kaehr joined ASI in June, 1994 and
was elected a Second Vice President of ASI in August of that year. Prior to
becoming employed by ASI, Mr. Kaehr was employed in various capacities with LNC
from November, 1985 through May, 1994.
Mr. Ober joined ASI in 1973. He is Vice President, Secretary and General
Counsel of the Company and, since 1984, of ASI. Since 1996, he has been a
director of ASI.
16
<PAGE> 17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SECURITIES AND RELATED STOCKHOLDER
MATTERS.
MARKET INFORMATION
The Common Stock of the Company (trading symbol "ASX") was listed for
trading on the New York Stock Exchange for the first time on May 23, 1996. The
initial public offering price was $23 per share. The following table sets
forth the quarterly ranges of high and low sales prices per share as reported
by the NYSE and dividends declared per share:
<TABLE>
<CAPTION>
Period Market price Dividends
------ ------------------
High Low declared
------- --------- ---------
<S> <C> <C>
1996:
Third Quarter............................................ 23 3/8 19 3/8 .21
Fourth Quarter........................................... 27 3/8 22 1/4 .21
</TABLE>
As of January 31, 1997, there were approximately 250 holders of the
outstanding shares of the Company's Common Stock, excluding participants in
securities position listings.
DIVIDENDS
The Board of Directors of the Company has adopted a policy of declaring
regular cash dividends on the Company's Common Stock, commencing in the third
quarter of 1996. The declaration and payment of dividends is at the discretion
of the Board of Directors. Factors taken into account on the timing and amount
of dividends will depend upon, among other things, the result of the Company's
operations, its statutory surplus, its financial condition, cash requirements,
future prospects, regulatory restrictions on the payment of dividends by its
subsidiaries, financial covenants in loan agreements and other factors deemed
relevant by its Board of Directors.
The Company is an insurance holding company whose principal asset is the
common stock of ASI, and its cash flow consists of dividends received from ASI.
The payment of any cash dividends to holders of the Company's Common Stock
depends upon the receipt of dividend payments by the Company from ASI. The
payment of dividends by ASI will depend on the amount of its statutory surplus,
earnings and regulatory restrictions. The insurance holding company laws of
Indiana regulate the distribution of dividends and other payments to the
Company by its principal Indiana domiciled Subsidiaries. Under the applicable
Indiana statutes, an insurer may not pay dividends in any twelve month period
in an amount exceeding the greater of (i) 10% of statutory surplus as of the
end of the preceding year or (ii) the prior year's net income if the insurer is
a property and casualty insurer, or the prior year's net gain from operations
if the insurer is a life insurer, without notifying the Indiana Commissioner of
Insurance and giving the Commissioner 30 days within which to object. Based on
these statutes, ASI will not be able to pay any dividends to the Company until
May 15, 1997 without notifying the Indiana Commissioner of Insurance and giving
the Commissioner 30 days within to object. Similar statutory restrictions
apply to those subsidiaries domiciled in Texas and Illinois, the domicile of
other subsidiaries of immaterial size. The factors noted above will have no
effect on the ability of the Company to pay regular dividends in the first two
quarters of 1997.
17
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
As of and for the Year Ended December 31
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(Dollars in Millions, Except Per Share Data)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Premiums.................................... $1,674.1 $1,746.4 $1,746.0 $1,855.1 $2,064.7
Net investment income....................... 274.3 266.6 260.5 266.8 266.2
Realized gain on investments................ 35.6 41.0 19.9 149.9 65.4
Loss on operating properties (1)............ - (28.4) - - -
--------- --------- --------- --------- ---------
Total revenues........................ 1,984.0 2,025.6 2,026.4 2,271.8 2,396.3
Benefits and expenses:
Benefits and settlement expenses............ 1,248.9 1,242.3 1,272.0 1,386.3 1,683.4
Commissions................................. 283.0 291.5 296.9 323.0 359.3
Operating and administrative expenses....... 206.7 236.8 208.1 217.2 219.1
Taxes, licenses and fees.................... 37.3 45.9 49.0 52.1 62.4
Interest on debt (2)........................ 12.4 - .1 .4 .3
--------- --------- --------- --------- ---------
Total benefits and expenses........... 1,788.3 1,816.5 1,826.1 1,979.0 2,324.5
--------- --------- --------- --------- ---------
Income before federal income taxes and
cumulative effect of accounting change.. 195.7 209.1 200.3 292.8 71.8
Federal income taxes (credit) .............. 26.0 30.8 15.7 46.1 (34.0)
Cumulative effect of change in accounting
for postretirement benefits other than
pensions, net of taxes................... - - - (40.5) -
--------- --------- --------- --------- ---------
Net income............................ $ 169.7 $ 178.3 $ 184.6 $ 206.2 $ 105.8
========= ========= ========= ========= =========
Net income per share $ 3.03 $ 3.57 $ 3.69 $ 4.12 $ 2.12
Weighted average shares outstanding 56.0 50.0 50.0 50.0 50.0
Pro forma net income (3) $ 162.4 $ 160.7
Pro forma net income per share (4) $ 2.71 $ 2.68
CONSOLIDATED BALANCE SHEET
DATA:
Total investments and cash.................. $4,356.2 $4,442.9 $4,152.3 $4,641.0 $4,288.1
Total assets................................ 5,541.1 5,539.2 5,419.3 5,777.8 5,569.8
Policy liabilities and accruals............. 3,580.3 3,546.8 3,603.7 3,677.6 3,801.7
Debt........................................ 299.5 - - 5.0 5.0
Total liabilities........................... 4,205.1 3,870.5 3,950.7 4,065.6 4,082.8
Shareholders' equity........................ 1,336.0 1,668.7 1,468.6 1,712.2 1,487.0
STATUTORY CAPITAL AND SURPLUS:
Property and casualty companies $ 966.0 $1,011.0 $ 980.7 $1,068.4 $1,038.2
Life company 57.4 51.7 61.2 60.9 57.9
PROPERTY AND CASUALTY
STATUTORY RATIOS AND DATA (5):
Loss ratio.................................. 61.0% 59.3% 61.1% 63.8% 70.9%
Loss adjustment expense ratio............... 13.6 11.8 11.8 11.4 10.6
Underwriting expense ratio.................. 31.2 32.3 31.6 31.7 30.6
Policyholder dividend ratio................. 0.1 0.2 0.1 0.2 0.4
Company combined ratio................... 105.8% 103.6% 104.6% 107.1% 112.5%
Industry combined ratio (6)................. 107.0% 106.5% 108.5% 106.9% 115.8%
Net premiums written to surplus............. 1.7x 1.7x 1.7x 1.6x 1.9x
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
As of and for the Year Ended December 31
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(Dollars in Millions)
OTHER CONSOLIDATED DATA:
Natural peril losses (pre-tax) (7)........... $165.7 $122.1 $140.5 $122.7 $151.6
Operating income (8) 146.4 188.8 171.6 150.3 62.6
Common stock dividends declared (9).......... 371.2 199.0 180.0 140.0 48.0
Total employees.............................. 3,483 3,750 3,903 4,231 4,242
Total agencies............................... 4,755 4,882 5,050 5,203 5,490
</TABLE>
________________
(1) Represents an allowance for losses on the contemplated sale of operating
properties used for division offices, resulting from the Realignment. See
Note 14 to the Consolidated Financial Statements on page 56.
(2) Interest expense incurred in 1996 is a direct result of, in May 1996, the
Company assuming $100 million of LNC debt and issuing a $200 million note
to LNC. See Note 5 to the Consolidated Financial Statements on page 48.
(3) Pro forma net income for the years ended December 31, 1996 and 1995 are
presented to reflect the impact of the May 1996 initial public offering of
the Company's Common Stock and related transactions as if they had
occurred January 1, 1995. Pro forma net income for the years ended
December 31, 1996 and 1995 includes the impact of (i) net investment
income decreasing by $6.0 million and $14.4 million, respectively,
representing the interest yield on $300 million of tax-exempt municipal
securities, (ii) net investment income increasing by $6.0 million and
$14.4 million, respectively, representing the interest yield on $215.2
million net proceeds from the initial public offering invested in risk
free investments, (iii) interest expense increasing by $8.5 million and
$20.4 million, respectively, representing the interest on the debt assumed
and issued and (iv) the tax effect on the foregoing of $1.2 million and
$2.9 million, respectively.
(4) Based on 60,000,000 shares outstanding.
(5) Company statutory data have been derived from the financial statements of
the Company's insurance subsidiaries prepared in accordance with SAP and
filed with insurance regulatory authorities. The loss, loss adjustment
expense, underwriting expense, policyholder dividend and Company combined
ratios are not materially different than such ratios computed pursuant to
GAAP.
(6) The ratios presented are after policyholder dividends. Industry averages
for 1992 through 1995 are from A.M. Best Company, Inc. ("A.M. Best")
Aggregates & Averages Property-Casualty (1996 edition). The industry
combined ratio for 1996 is a published estimate from A.M. Best.
(7) "Natural peril losses", which include catastrophe losses, is a
Company-defined term for losses caused by wind, hail, water (including
freezing water) and earthquake, regardless of the size of any individual
event. The Company feels that this measure is a more meaningful
management tool as compared to catastrophe losses. The majority of the
Company's loss exposure base resides inland (away from coastal exposures)
where frequency, rather than severity, of loss events has historically
been a more significant factor to the Company.
(8) Represents net income before (i) realized gain on investments (net of
federal income taxes) of $23.3, $21.5, $13.0, $96.4, and $43.2 million in
1996, 1995, 1994, 1993 and 1992 respectively, (ii) the $28.4 million loss
on operating properties in 1995, net of federal income taxes of $9.9
million, (iii) the estimated Realignment implementation costs accrued in
1995 of $21.0 million, net of federal income taxes of $7.3 million, and
(iv) the cumulative effect of a change in accounting in 1993. The net
effect of these amounts are included to assist the reader in analyzing the
Company's results of operations by
19
<PAGE> 20
showing the effect of the listed items. The resulting amounts are not
intended to represent net income prepared in accordance with GAAP.
(9) Amounts shown in 1992 through 1995 represent dividends declared on ASI
stock, which were paid to LNC. ASI also declared $.1 million in dividends
on publicly held preferred stock in 1992. This stock was called and
retired in 1992. In 1996, ASI declared and distributed a $300 million
dividend consisting primarily of tax-exempt securities ("Dividended
Assets") to LNC. ASFC declared a $.21 per share dividend on its
outstanding Common Stock in the third and fourth quarter of 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information contained herein, the discussion in this
Annual Report on Form 10-K includes certain forward-looking statements based
upon management expectations. Factors which could cause future results to
differ from these expectations include the following: financial markets (e.g.
interest rates and securities markets), state and federal legislative and
regulatory initiatives, acts of God (e.g. hurricanes, earthquakes and storms),
other insurance risks and competition.
The Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the accompanying
audited consolidated financial statements, including the notes.
RESULTS OF OPERATIONS
The Company's revenues from operations are derived primarily from net
premiums earned on policies written by the Company, investment income and
realized gain on investments. Expenses consist primarily of payments for
claims incurred, claims adjustment expenses and underwriting expenses,
including agents' commissions and other operating expenses.
Significant factors influencing results of operations include the supply
and demand for property and casualty insurance and life insurance, as well as
the number and magnitude of catastrophe or natural peril losses, such as losses
caused by wind, hail, water (including freezing water) and earthquakes.
Although the property and casualty insurance industry has historically been
highly cyclical, management of the Company believes that variability within
each product line has become more pronounced than industry-wide cyclicality.
Premium rate levels are related to the availability of insurance coverage,
which varies according to, among other things, the level of surplus in the
industry. The level of surplus in the industry varies with returns on invested
capital and regulatory barriers to withdrawal of surplus. Surplus levels have
been relatively high in recent years due in part to the gains in the investment
portfolios of many insurers. Increases in surplus have generally been
accompanied by increased price competition among property and casualty
insurers. The industry's profitability can also be affected significantly by
fluctuations in interest rates and other changes in the investment environment
which affect market prices of insurance companies' investments and the income
from those investments, inflationary pressures that affect the size of losses
and judicial decisions affecting insurers' liabilities. The demand for
property and casualty insurance can also vary, generally rising as the overall
level of economic activity increases and falling as such activity decreases.
The Company seeks to manage its risk exposure by adjusting the mix and
volume of business written in response to changes in price and by balancing the
geographic distribution of its risks. Management believes that this strategy
accounts, in part, for loss ratios that are lower than the property and
casualty industry average.
20
<PAGE> 21
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
CONSOLIDATED
The Company's revenues decreased 2.1% or $41.6 million to $1,984.0 in 1996
from $2,025.6 million in 1995. Net premiums earned and other revenue decreased
4.1% or $72.3 million to $1,674.1 million in 1996 from $1,746.4 million in
1995. Net investment income increased by $7.7 million, or 2.9%, while realized
gain on investments decreased by $5.5 million.
The Company's net income of $169.7 million for 1996 was down 4.8% from
$178.3 million for 1995. The provision for consolidated income taxes was $26.0
million in 1996 compared to $30.8 million in 1995.
PROPERTY AND CASUALTY
The following table sets forth certain summarized financial data and key
operating ratios for the Company's property and casualty operations for 1996
and 1995. All ratios are computed using data reported in accordance with SAP.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
(Dollars in Millions)
Net premiums written................................................ $1,600.9 $1,671.6
Net premiums earned and other revenue............................... $1,617.2 $1,689.6
Losses and loss adjustment expense.................................. 1,199.9 1,193.7
Other costs and expenses............................................ 505.4 552.8
------------ ------------
Underwriting loss.......................................... (88.1) (56.9)
Net investment income............................................... 238.2 233.8
Realized gain on investments........................................ 34.2 38.8
Loss on operating properties........................................ - 28.4
Income tax expense.................................................. 22.1 23.5
------------ ------------
Net income................................................. $ 162.2 $ 163.8
============ ============
Loss ratio.......................................................... 61.0% 59.3%
Loss adjustment expense ratio....................................... 13.6 11.8
Underwriting expense ratio.......................................... 31.2 32.3
Policyholder dividend ratio......................................... .1 .2
Combined ratio............................................. 105.8% 103.6%
Percentage point effect of natural peril losses on loss ratio (1)... 10.3 7.3
Percentage point effect of Realignment costs on combined ratio...... - 1.2
Underwriting results by source:
Net premiums written:
Commercial...................................................... $ 915.5 $ 991.6
Personal........................................................ 684.5 681.1
Reinsurance in run-off.......................................... .9 (1.1)
------------ ------------
Total...................................................... $ 1,600.9 $ 1,671.6
Underwriting gain (loss) (1):
Commercial...................................................... $ (1.5) $ 45.8
Personal........................................................ (60.0) (32.8)
Reinsurance in run-off.......................................... (26.6) (69.9)
------------ ------------
Total...................................................... $ (88.1) $ (56.9)
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Combined ratios (1):
Commercial........................................................... 100.4% 95.8%
Personal............................................................. 109.3 104.8
Reinsurance in run-off............................................... N/A N/A
Total........................................................... 105.8 103.6
Percentage point effect of reinsurance in run-off on combined ratio...... 1.6 4.2
</TABLE>
____________________
(1) Most expenses specifically relate to, and are identified to, lines of
business. Fixed expenses, including salaries and other operating
expenses, are allocated to lines of business based on cost and time
studies.
Net Premiums Written
Total reported net premiums written decreased by $70.7 million, or 4.2%,
to $1,600.9 million for 1996, from $1,671.6 million for 1995. This premium
decline was attributable to (i) lower volume from involuntary workers'
compensation (ii) the Company's planned reduction of exposure in California
and Florida and (iii) a decrease in premium related to a retrospectively rated
errors and omissions ("E&O") policy written on LNC.
Involuntary workers' compensation net premiums written, primarily from
state mandated pools and associations, decreased $40.1 million, to $3.5
million, in 1996. This decrease was due in large part to the continuing impact
of aggressive pricing and de-population programs implemented by most large
state workers' compensation pools over the last few years. Another
contributing factor was the decrease in the Company's share of the voluntary
workers' compensation market in several states in 1995. Voluntary market share
is a major component in the calculation of the volume of involuntary business
assumed in each state. A decrease in voluntary market share tends to decrease
the volume of involuntary business assumed. 1995 voluntary market share was
used in determination of 1996 involuntary assumed percentages. Finally,
reported premiums were negatively impacted by the re-estimation of premiums
receivable. Reporting from the National Council of Compensation Insurers
("NCCI"), which constitutes nearly 90% of total assumed involuntary workers'
compensation business, is two quarters in arrears, requiring the Company to
estimate premium for the most recent two quarters. Reported premiums from NCCI
declined dramatically in 1996, requiring a decrease in premiums receivable of
approximately $12.9 million.
The Company's continued planned reduction of exposure in California and
Florida, excluding all involuntary markets premium , decreased premiums $25.9
million, to $150.3 million, in 1996. While the Company plans continued risk
exposure reduction in these two states in 1997, the rate of premium reduction
should moderate from 1996 levels. This forward looking statement is based on
(i) the gradual and continuous net decrease of agencies under contract in these
markets in 1996 (ii) management's intention of achieving a continuing, yet much
smaller net reduction of agency appointments in these markets in 1997 (iii) a
continued de-emphasis of the sale of certain classes and lines of business in
these markets, and (iv) no current plans by management to introduce new
products or growth initiatives in these markets in 1997.
Finally, premiums on the retrospectively rated LNC E&O policy decreased
$15.1 million in 1996. Prior year premiums were unusually high due to the
settlement of a large casualty claim in 1995. The Company expects to record
approximately $1.5 to $2.0 million in net written premium on this policy in
1997. This forward looking statement assumes that the frequency and severity
of claim activity presented against this policy in 1997 will be consistent with
historic levels, adjusted for unusual and isolated claims.
Net premiums written for commercial lines products decreased by $76.1
million, or 7.7%, to $915.5 million for 1996, compared to $991.6 million for
1995. Net premiums written for personal lines products increased by $3.4
million, or .5%, to $684.5 million for 1996, compared to $681.1 million for
1995.
22
<PAGE> 23
Excluding the impacts of premium decreases caused by involuntary workers'
compensation, the Company's planned reduction of exposure in California and
Florida and the impacts of the E&O policy, net premiums written increased .3%
in 1996 to $1,440.2 million, from $1,435.3 million in 1995. Net premiums
written for commercial lines products decreased by $3.4 million, or .4%, to
$831.1 million for 1996, compared to $834.5 million for 1995. Net premiums
written for personal lines products increased by $8.4 million, or 1.4%, to
$609.1 million for 1996, compared to $600.7 million for 1995.
Net Premiums Earned and Other Revenue
Consistent with the decrease in net premiums written, net premiums earned
and other revenue (primarily finance and service fees) decreased by $72.4
million to $1,617.2 million for 1996, from $1,689.6 million for 1995.
Losses and Loss Adjustment Expense ("LAE")
Losses and LAE increased by $6.2 million to $1,199.9 million for 1996,
from $1,193.7 million for 1995. The SAP loss ratio for 1996 was 61.0% as
compared to 59.3% for 1995. The 1.7 percentage point increase in the loss
ratio in 1996 was the net result of several factors.
The SAP loss ratio was adversely affected by an increase of $43.5 million
in natural peril losses resulting from widespread severe winter storm activity
and frequent wind and hail storms across the Midwest, as well as a severe
Pacific Northwest winter storm in late December. Natural peril losses were
$165.6 million and $122.1 million for 1996 and 1995, respectively.
In addition, as discussed in the Business section under "Reserves for
Losses and Loss Adjustment Expenses", the Company experienced $45.7 million in
favorable prior year loss reserve development in 1996, an increase of $5.8
million when compared to favorable loss reserve development of $39.9 million in
1995. Of the total $45.7 favorable loss development in 1996, $71.9 million
was attributable to personal and commercial lines excluding reinsurance in
run-off, and ($26.2) million was attributable to the reinsurance operations.
Of the total $39.9 million favorable loss development in 1995, $109.2 was
attributable to personal and commercial lines excluding reinsurance in run-off,
and ($69.3) was attributable to the reinsurance operations.
Finally, as a result of continued price competition in the industry, the
SAP loss ratio for 1996 was adversely impacted by a slight deterioration in the
1996 accident year underlying loss ratio on most commercial and personal lines
of business. The underlying loss ratio is the total loss ratio less the impact
of (i) natural peril losses and (ii) development on prior accident year loss
reserves. The Company expects a continued slight deterioration in the 1997
accident year underlying loss ratio. This forward looking statement assumes
(i) a continuation of significant price competition in most lines of business
and (ii) no significant deviation from current underlying claim frequency or
severity trends in the 1997 accident year.
The SAP LAE ratio was 13.6% for 1996 compared to 11.8% for 1995. The
increase was primarily attributable to an increase in LAE reserves of
approximately $18.7 million compared to a $6.0 million decrease in 1995. This
LAE reserve increase was primarily driven by an increase in legal expense
reserves related to construction defect claims. As noted in the "Other Costs
and Expenses" section below, the SAP LAE ratio also benefited to a slight
degree from Realignment savings. Finally, earned premium decreased $68.6
million in 1996, creating upward pressure on the LAE ratio.
23
<PAGE> 24
Other Costs and Expenses
Other costs and expenses decreased by $47.4 million, or 8.6%, to $505.4
million for 1996, from $552.8 million for 1995. This was the result of several
factors. The Company experienced a $16.7 million decrease, or 5.1%, in
variable expenses, primarily commission expense and premium taxes, due to a
4.2% decline in net written premium in 1996. Realignment related fixed expense
savings totaled approximately $13.4 million in 1996; approximately 77% of these
savings, or $10.3 million, are attributable to Other Costs and Expenses, with
the remaining 23%, or $3.1 million, reducing LAE expense. In addition, the
Realignment, office closings prior to the Realignment and an early retirement
program added $21.9 million to expenses in 1995.
The SAP underwriting expense ratio for 1996 was 31.2%, as compared to
32.3% for 1995. Realignment expense savings accounted for a reduction of
approximately .7% in the underwriting expense ratio in 1996. In 1995, the
Realignment, office closings prior to Realignment and early retirement
accounted for 1.3% of the underwriting expense ratio. Including the continuing
impact of Realignment related expense reduction measures undertaken in 1996,
coupled with planned 1997 expense reduction activities, the Company expects to
realize approximately $30 million in Realignment related expense savings in
1997, approximately 80% of which, or $24 million, will benefit the SAP
underwriting ratio. This forward looking statement assumes successful
completion of the Company's Realignment operational plan, including the closing
and consolidation of various division, service center and other offices around
the country into the Company's regional structure. The operational
implementation of this plan was nearly 75% complete as of year end 1996.
Combined Ratio
The SAP combined ratio, after policyholder dividends, was 105.8% in 1996,
versus 103.6% in 1995. After peaking at 112.5% in 1992, the Company's combined
ratio had decreased in 1993 through 1995, with an increase in 1996, due
primarily to natural peril losses. The reinsurance in run-off has a negative
impact of 1.6 percentage points on the Company's combined ratio in 1996, versus
4.2 percentage points in 1995.
Commercial Lines
Commercial lines results weakened in 1996, with the SAP combined ratio
increasing to 100.4% from 95.8% in 1995. The majority of this increase was due
to an increase in the LAE ratio, driven primarily by the aforementioned
increase in legal expense reserves related to construction defect claims.
Increased natural peril losses accounted for the remainder of deterioration in
the combined ratio.
Personal Lines
In 1996 the personal lines SAP combined ratio also increased to 109.3%,
from 104.8% in 1995, with all of the increase being attributable to the loss
ratio component. Natural peril losses accounted for approximately half of this
deterioration, with the most significant impact in the homeowners line of
business. Private passenger results also deteriorated due to price competition
and increased loss costs, primarily physical damage coverages.
Net Investment Income
Net investment income increased $4.4 million, or 1.9%, to $238.2 million
for 1996, from $233.8 million in 1995. This increase was due primarily to an
increased investment in taxable securities. The pre-tax yield on invested
assets (excluding realized and unrealized gains) was 6.6% for 1996, compared
with 6.3% in 1995. The increase in net investment income occurred despite a
decrease in average invested assets.
Realized Gain On Investments
Realized gain on investments was $34.2 million for 1996, compared to $38.8
million in 1995. This decrease was due primarily to the reduction in the
Company's investment in unaffiliated common stocks during 1995, many of which
were sold at a gain.
24
<PAGE> 25
Loss On Operating Properties
In 1995, a $28.4 million provision was made to recognize the expected loss
on operating properties which the Company occupied and plans to dispose of in
connection with the Realignment.
Income Tax Expense
Federal income taxes decreased by $1.4 million to $22.1 million for 1996
from $23.5 million for 1995. The decrease in expense is due primarily to a
decline in underwriting results.
LIFE.
The following table sets forth certain summarized financial and key
operating data for the Company's life insurance operations for 1996 and 1995.
<TABLE>
<CAPTION>
As of and for the Year
Ended December 31,
-------------------------
1996 1995
--------- --------
(Dollars in Millions)
<S> <C> <C>
Account values - Universal life and Annuities..... $ 341.5 $ 315.5
Life insurance in-force........................... 15,366.9 15,405.8
Invested assets (at amortized cost)............... 466.1 432.3
Policy income..................................... $ 56.9 $ 56.8
Benefits and expenses............................. 70.1 70.1
Net investment income............................. 34.0 32.8
Realized gain on investments...................... 1.2 2.3
Income tax expense................................ 7.6 7.3
----- -----------
Net income.................................. $ 14.4 $ 14.5
===== ===========
</TABLE>
Life insurance policy income was flat in 1996 compared to 1995. Account
values at December 31, 1996, increased by 8.2% from December 31, 1995 levels.
Net investment income increased by 3.7% during 1996, reflecting the growth in
account values as well as the general growth of invested assets. Net
investment income increased despite a decrease in the average pre-tax yield
from 7.7% in 1995 to 7.5% in 1996. Realized gain on investments decreased $1.1
million to $1.2 million primarily as a result of 1995 sales of securities to
take advantage of market opportunities. Net income declined slightly to $14.4
million compared to $14.5 million in 1995.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
CONSOLIDATED.
The Company's revenues for 1995 aggregated $2,025.6 million, virtually
unchanged from its 1994 revenues which totaled $2,026.4 million. Net premiums
earned and other revenue of $1,746.4 million for 1995 slightly exceeded the
$1,746.0 million recorded in 1994. Net investment income increased by $6.1
million, or 2.3%, while realized gain on investments increased by $21.1
million.
The Company's net income of $178.3 million for 1995 was down 3.4% from
$184.6 million for 1994. The cost relating to Realignment, which aggregated
$49.5 million, resulted in the decrease in net income despite significant
improved underwriting results. Realized gain on investments increased $21.1
million to $41.0 million in 1995 compared to $19.9 million in 1994. The
provision for consolidated income taxes was $30.8 million in 1995 compared to
$15.7 million in 1994. This increase was due to improved underwriting results
and a greater proportion of taxable investment income.
25
<PAGE> 26
PROPERTY AND CASUALTY.
The following table sets forth certain summarized financial data and key
operating ratios for the Company's property and casualty operations for 1995
and 1994. All ratios are computed using data reported in accordance with SAP.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
(Dollars in Millions)
Net premiums written................................................. $1,671.6 $1,655.5
Net premiums earned and other revenue................................ $1,689.6 $1,693.5
Losses and loss adjustment expense................................... 1,193.7 1,226.2
Other costs and expenses............................................. 552.8 536.3
------------ ------------
Underwriting loss........................................... (56.9) (69.0)
Net investment income................................................ 233.8 230.9
Realized gain on investments......................................... 38.8 19.2
Loss on operating properties......................................... 28.4 -
Income tax expense................................................... 23.5 9.4
------------ ------------
Net income.................................................. $ 163.8 $ 171.7
============ ============
Loss ratio........................................................... 59.3% 61.1%
Loss adjustment expense ratio........................................ 11.8 11.8
Underwriting expense ratio........................................... 32.3 31.6
Policyholder dividend ratio.......................................... .2 .1
Combined ratio.............................................. 103.6% 104.6%
Percentage point effect of natural peril losses on loss ratio ....... 7.3 8.4
Percentage point effect of Realignment costs on combined ratio....... 1.2 -
Underwriting results by source:
Net premiums written:
Commercial....................................................... $ 991.6 $ 985.1
Personal......................................................... 681.1 668.3
Reinsurance in run-off........................................... (1.1) 2.1
------------ ------------
Total....................................................... $1,671.6 $1,655.5
Underwriting gain (loss) (1):
Commercial....................................................... $ 45.8 $ 4.5
Personal......................................................... (32.8) (49.7)
Reinsurance in run-off........................................... (69.9) (23.8)
------------ ------------
Total....................................................... $ (56.9) $ (69.0)
Combined ratios (1):
Commercial....................................................... 95.8% 100.1%
Personal......................................................... 104.8 107.8
Reinsurance in run-off........................................... N/A N/A
Total....................................................... 103.6 104.6
Percentage point effect of reinsurance in run-off on combined ratio.. 4.2 1.4
</TABLE>
____________________
(1) Most expenses specifically relate to, and are identified to, lines of
business. Fixed expenses, including salaries and other operating
expenses, are allocated to lines of business based on cost and time
studies.
26
<PAGE> 27
Net Premiums Written
Net premiums written increased by $16.1 million, or 1.0%, to $1,671.6
million for 1995, from $1,655.5 million for 1994. This growth was largely
attributable to an increase in premiums written on private passenger automobile
and businessowners policies designed specifically for owners of small business.
Net premiums written for commercial lines products increased by $6.5 million,
or .7%, to $991.6 million for 1995, compared to $985.1 million for 1994. Net
premiums written for personal lines products increased by $12.8 million, or
1.9%, to $681.1 for 1995, compared to $668.3 million for 1994. For the states
of Illinois, Indiana, Kansas, Michigan, Missouri, Ohio, Oregon and Washington,
which comprise the most significant part of the Company's target market, direct
premiums written increased by 3.6% in 1995, while for the states of California
and Florida, where the Company has been reducing its exposure due to
unfavorable results, direct premiums written decreased by 6.5%. For all other
states, 1995 direct premiums written were virtually unchanged from 1994.
Net Premiums Earned and Other Revenue
Net premiums earned and other revenue (primarily finance and service fees)
decreased by $3.9 million to $1,689.6 million for 1995, from $1,693.5 million
for 1994.
Losses and Loss Adjustment Expense
Losses and LAE decreased by $32.5 million to $1,193.7 million for 1995,
from $1,226.2 million for 1994. The SAP loss ratio for 1995 was 59.3% as
compared to 61.1% for 1994. The 1.8 percentage point decline in the loss ratio
in 1995 was due primarily to the continuing benefit from the New Directions
strategy implemented in late 1991. The Company's results of operations
benefited materially in 1995 and 1994, as a result of reductions in the
estimated amounts needed to settle prior years' claims, with such benefit being
most significant in 1994. The overall favorable reserve development in both
1995 and 1994 was the result of improving trends, both industry-wide and
related to the Company's New Directions initiatives, as well as enhancements
made in the claim evaluation process.
For 1995, natural peril losses were $122.1 million versus $140.5 million
for 1994. During the spring months of 1995, the Company experienced a
relatively high frequency of wind and hail losses. Hurricane Opal, which
struck the Florida panhandle in October, 1995, resulted in approximately $15.0
million of losses to the Company in Florida and other southeastern states.
Natural peril losses in 1994 were largely due to a severe winter freeze and the
Northridge, California earthquake. Gross losses from Northridge were $32.4
million; $31.1 million net of reinsurance recoveries. Additional incurred
losses from the earthquake of $2.6 million were recorded in 1995.
The SAP LAE ratio was 11.8% for 1995, the same as in 1994. While the
Company's SAP loss ratio decreased due to New Directions and other initiatives,
the impact on the Company's LAE ratio has been less evident, due partially to
increases in legal expense reserves relating to environmental claims. In 1995,
the LAE ratio was favorably impacted by approximately $10.7 million of LAE
reserve release due to positive development of prior accident years.
Offsetting this, some unusual items increased expense in 1995. In the first
quarter of 1995, the Company announced an early retirement plan for certain
levels of management and the closing of two division offices and a service
office; the second quarter of 1995 included the costs of settling a lawsuit and
the fourth quarter included the costs of Realignment. These unusual items
added $9.5 million of LAE-related expense during 1995.
Other Costs and Expenses
Other costs and expenses increased by $16.5 million, or 3.1%, to $552.8
million for 1995, from $536.3 million for 1994. The SAP underwriting expense
ratio for 1995 was 32.3%, as compared to 31.6% for 1994. The Realignment,
office closings prior to the Realignment and early retirement added $21.9
million to expenses and accounted for 1.3% of the underwriting expense ratio
for 1995.
27
<PAGE> 28
Combined Ratio
The SAP combined ratio, after policyholder dividends, was 103.6% in 1995,
versus 104.6% in 1994. After peaking at 112.5% in 1992, the Company's combined
ratio has decreased each of the last three years. Both commercial and personal
lines reflected improvement due to lower natural peril losses, the continued
favorable impact of New Directions and the release of losses and LAE reserves
related to prior accident years. The reinsurance in run-off has a negative
impact of 4.2 percentage points on the Company's combined ratio in 1995, versus
1.4 percentage points in 1994.
Commercial Lines
Commercial lines results were substantially improved in 1995, with the SAP
combined ratio decreasing to 95.8% from 100.1% in 1994. Improved results, as
reflected by the loss ratio, were broad based across most commercial lines.
The key lines of BOPs, commercial multi-peril, commercial auto and workers'
compensation all improved.
Personal Lines
The personal lines SAP combined ratio also improved in 1995, decreasing to
104.8% from 107.8% in 1994. Improvement, as reflected by the loss ratio, was
evident in both personal automobile and homeowners.
Net Investment Income
Net investment income increased $2.9 million, or 1.2%, to $233.8 million
for 1995, from $230.9 million in 1994. This increase was due primarily to an
increase in higher yielding securities, a reduction in unaffiliated common
stock holdings and subsequent reinvestment of proceeds in an unconsolidated
subsidiary, EMPHESYS Financial Group, Inc. The pre-tax yield on invested
assets (excluding realized and unrealized gains) was 6.3% for 1995, compared
with 6.2% in 1994.
Realized Gain On Investments
Realized gain on investments was $38.8 million for 1995, compared to $19.2
million in 1994. This increase was due to the reduction in the Company's
investment in unaffiliated common stocks, many of which were sold at a gain.
Loss On Operating Properties
In 1995, a $28.4 million provision was made to recognize the expected loss
on operating properties which the Company now occupies and plans to dispose of
in connection with the Realignment.
Income Tax Expense
Federal income taxes increased by $14.1 million to $23.5 million for 1995
from $9.4 million for 1994. The increase was due primarily to improved
underwriting results and net investment income which reflected an investment
portfolio containing a higher proportion of taxable securities.
28
<PAGE> 29
LIFE.
The following table sets forth certain summarized financial and key
operating data for the Company's life insurance operations for 1995 and 1994.
<TABLE>
<CAPTION>
As of and for the Year
Ended December 31,
----------------------
1995 1994
--------- ----------
(Dollars in Millions)
<S> <C> <C>
Account values - Universal life and Annuities........................ $ 315.5 $ 285.7
Life insurance in-force.............................................. 15,405.8 14,743.0
Invested assets (at amortized cost).................................. 432.3 412.3
Policy income........................................................ $ 56.8 $ 52.5
Benefits and expenses................................................ 70.1 63.6
Net investment income................................................ 32.8 29.6
Realized gain on investments......................................... 2.3 .7
Income tax expense................................................... 7.3 6.3
-------- ---------
Net income..................................................... $ 14.5 $ 12.9
======== =========
</TABLE>
Life insurance reflects steady growth in policy income, which increased by
8.2% for 1995, compared to 1994. Sales of life insurance, primarily universal
life products, were strong. Account values at December 31, 1995, increased by
10.4% from December 31, 1994 levels. Net investment income increased by 10.8%
during 1995, reflecting the growth in account values as well as the general
growth of invested assets. Realized gain on investments increased $1.6 million
to $2.3 million primarily as a result of sales of securities to take advantage
of market opportunities. Net income increased by 12.4 % to $14.5 million in
1995, compared to 1994.
FINANCIAL CONDITION AND LIQUIDITY
The primary sources of funds available to the Company are premiums,
investment income and proceeds from the sale or maturity of invested assets.
Such funds are used principally for the payment of claims, operating expenses,
commissions, dividends, debt service and the purchase of investments. Cash
outflows can be variable because of uncertainties regarding settlement dates
for liabilities for unpaid losses and because of the potential for large losses
either individually or in the aggregate. Accordingly, the Company maintains
investment programs generally intended to provide adequate funds to pay claims
without the forced sale of investments. Finally, as noted below, the Company
has a $200 million revolving credit agreement, and intends to establish a
medium-term note program, to augment its available liquidity. Based upon a
quarterly dividend of $.21 per share and the terms of the Assumed Debt, Term
Note and Line of Credit, Company management believes the Company has adequate
liquidity and resources to meet its obligations.
CASH PROVIDED BY OPERATIONS
Net cash provided by operating activities of the Company was $45.4
million, $107.9 million and $73.8 million for 1996, 1995 and 1994,
respectively. The decrease in cash provided by operating activities for 1996
compared to 1995 is primarily due to a decrease in premiums collected. The
decrease in collected premiums was driven by (i) a $70.7 million decrease in
net premiums written and (ii) a $35.6 million increase in premium receivable,
which was largely the result of the Company allowing more of its customer base
to pay its premium on a monthly basis in 1996. The decrease in premiums
collected was offset in part by a decrease in claims and operating expenses
paid. The increase for 1995 compared to 1994 was primarily due to a decrease
in the level of paid losses and LAE relative to the amount of
29
<PAGE> 30
premiums collected for the period. Operating cash flows in each of the last
three years have been more than adequate to meet the liquidity requirements of
the Company.
INVESTED ASSETS
Since a substantial portion of the Company's revenues are generated from
its invested assets, the performance, quality and liquidity of its investment
portfolio materially effects the Company's financial condition and results of
operations. The Company pursues a total return investment strategy which seeks
an attractive level of current income combined with long-term capital
appreciation. The following table details, at carrying value, the distribution
of the Company's investment portfolio at December 31, 1996 (dollars in
millions):
<TABLE>
<S> <C> <C>
Fixed maturity securities:
Tax-exempt municipal $2,096.1 48.3%
US government 195.8 4.5
Mortgage-backed and asset-backed 300.8 6.9
Corporate and other 1,093.9 25.2
Redeemable preferred stock 77.3 1.8
Equities:
Perpetual preferred stock 192.0 4.4
Common stock 243.1 5.6
Mortgage loans 32.3 .7
Short-term investments 73.3 1.7
Other 38.0 .9
-------- ------
Total $4,342.6 100.0%
======== ======
</TABLE>
The total investment portfolio decreased $87.7 million in 1996. This
decrease is the net result of (i) the distribution of the Dividended Assets to
LNC, (ii) a decrease in unrealized gains on securities available-for-sale and
(iii) offset by an increase in invested assets from the proceeds of the
issuance of Common Stock to the public.
The Company attempts to minimize the risk of loss due to default by the
borrower by maintaining a quality investment portfolio. As of December 31,
1996, approximately 89% of the Company's bond portfolio was rated "A" or
higher, or was a U.S. government obligation, and only $24.4 million, or .7% of
the carrying value of the bond portfolio, was rated below investment grade (Ba
and below). Ratings are based on the ratings, if any, assigned by Moody's
and/or Standard & Poors. If ratings were split, the rating used is generally
the higher of the two. Approximately $241.5 million of securities are private
placements for which ratings have been assigned by the Company based generally
on equivalent ratings supplied by the National Association of Insurance
Commissioners.
As of December 31, 1996, 48.3% of the Company's investment portfolio
consisted of tax-exempt municipal securities as compared to 53.6% as of
December 31, 1995. The Company has reduced its position in tax-exempt
municipal securities in order to provide for greater diversification of the
portfolio and to give the Company greater margin relative to the possibility of
being in a federal alternative minimum tax position.
The Company's fixed maturity securities are classified as
available-for-sale and accordingly, are carried at fair value. The difference
between amortized cost and fair value, less deferred income taxes, is reflected
as a component of shareholders' equity.
30
<PAGE> 31
CAPITALIZATION
The following table summarizes the Company's capitalization at the end of
the last three years:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Debt............................................................. $ 299.5 $ - $ -
Shareholders' equity:
Common stock and retained earnings............................ $1,172.4 $1,456.9 $1,477.7
Net unrealized gain (loss) on securities available-for-sale... 163.6 211.8 (9.1)
-------- -------- --------
Total shareholders' equity............................... 1,336.0 1,668.7 1,468.6
-------- -------- --------
Total capitalization.................................. $1,635.5 $1,668.7 $1,468.6
======== ======== ========
Ratio of debt to total capitalization ........................... 18% n/a n/a
</TABLE>
On February 5, 1996, the Company was incorporated in the State of Indiana
to serve as the holding company for ASI. The formation of the Company was done
in contemplation of an initial public offering. On April 22, 1996, ASI
declared, and on May 15, 1996, it distributed to its parent, LNC, the $300
million Dividended Assets. On May 16, 1996, LNC transferred all of the
outstanding shares of ASI to the Company in exchange for 50,000,000 shares of
the Company's Common Stock. Concurrently with the transfer of the ASI stock,
the Company assumed $100 million of LNC debt ("Assumed Debt") and issued a $200
million note to LNC (the "Term Note"). On May 29, 1996, the Company issued
10,000,000 shares of Common Stock at $23 per share to the public (the
"Offering").
The net proceeds from the Offering (after deduction of underwriting
discounts and offering expenses) were $215.2 million. The Company contributed
$140.5 million of such net proceeds to ASI to enable it to invest in taxable
securities for its investment portfolio to partially replace the Dividended
Assets. The remainder of the net proceeds were retained by the Company for
general corporate purposes. As a result of the Offering, LNC's ownership was
reduced to approximately 83%. The Company retained $74.7 million of the net
proceeds from the Offering for general corporate purposes, including the
funding of its regular cash dividends, debt service obligations and other
general corporate obligations. Until utilized for such purposes, the net
proceeds from the Offering not contributed to ASI is invested and will continue
to be invested in short-term, interest bearing, investment-grade securities.
SUBSIDIARY DIVIDEND RESTRICTIONS
Historically, ASI has paid dividends to LNC, as its parent, based upon its
annual operating results and statutory surplus requirements. ASI paid cash
dividends to LNC of $46.1 million, $244.0 million and $215.0 million in 1996,
1995 and 1994 respectively. After taking into account the one-time
distribution of the Dividended Assets paid by ASI to LNC, ASI will not be able
to pay any additional dividends to the Company until May 15, 1997 without
notifying the Indiana Commissioner of Insurance and giving the Commissioner 30
days to object. Regulatory restrictions on the ability of ASI to pay dividends
or make other payments to the Company could affect the Company's ability to pay
dividends and service its debt.
NOTES PAYABLE AND DEBT WITH LNC
The Assumed Debt is governed by an agreement between the Company and LNC
(the "Assumption Agreement") which provides for the payment by the Company of
the currently outstanding 7 1/8% notes due July 15, 1999, originally issued to
the public by LNC on July 15, 1992. The Assumption Agreement also provides that
interest at 7 1/8% is payable semi-annually by the Company.
31
<PAGE> 32
The Term Note pays interest quarterly at a rate of 50 basis points over
the rate on three year Treasury Notes from the effective date through and
including November 14, 1997, 50 basis points over the rate on two year Treasury
Notes from November 15, 1997 through and including November 14, 1998 and 50
basis points over the rate on one-year Treasury Bills from November 15, 1998
through the maturity date. The current rate on the Term Note is approximately
6.7%. The Term Note will be payable in three equal principal payments of $66.7
million due on August 15, 1997, 1998 and 1999. Pursuant to the provisions on
the Term Note, the Company has the right to prepay the Term Note at any time.
The Term Note also contains covenants that, among other things, (i) requires
the Company to maintain certain levels of adjusted consolidated net worth (as
defined in the Term Note), and (ii) restricts the ability of the Company to
incur indebtedness in excess of 50% of its adjusted consolidated net worth and
to enter into a major corporate transaction unless the Company is the survivor
and would not be in default.
The Company incurred $12.4 million in interest expense on the foregoing
debt in 1996.
LINE OF CREDIT
On May 29, 1996, the Company entered into a revolving credit agreement
with third party financial institutions in which the Company may borrow and
repay amounts up to a maximum of $200 million (the "Line of Credit").
Borrowings using the Line of Credit will bear interest generally at variable
rates tied to LIBOR, an adjusted certificate of deposit rate or other
short-term indices. No debt was outstanding using the Line of Credit at
December 31, 1996.
MEDIUM TERM NOTE PROGRAM
For additional liquidity, the Company intends to establish a medium-term
note program (the "MTN Program") within the next year. The MTN Program, if
established, would enable the Company to issue debt from time to time for
general corporate purposes.
INFLATION
The effects of inflation on the Company are implicitly considered in
estimating reserves for unpaid losses and LAE, and in the premium rate-making
process. The actual effects of inflation on the Company's results of
operations cannot be accurately known until the ultimate settlement of claims.
However, based upon the actual results reported to date, it is management's
opinion that the Company's loss reserves, including reserves for losses that
have been incurred but not yet reported, make adequate provision for the
effects of inflation.
32
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
--------- --------- --------- ---------
(Dollars in Thousands, Except Per Share Data)
1996 Data
<S> <C> <C> <C> <C>
Premiums and other revenue............................... $423,994 $424,483 $407,067 $418,578
Net investment income.................................... 68,333 66,156 67,031 72,794
Realized gain on investments............................. 21,096 7,374 2,531 4,537
Net income............................................... 46,913 29,759 40,429 52,605
Net income per share..................................... $.94 $.55 $.67 $.88
Operating income (1)..................................... $33,263 $26,518 $38,407 $48,175
Operating income per share (1)........................... $.67 $.49 $.64 $.80
1995 Data
Premiums and other revenue............................... $438,722 $431,525 $446,324 $429,815
Net investment income.................................... 66,461 67,191 66,460 66,457
Realized gain (loss) on investments...................... 27,215 6,256 7,742 (169)
Loss on operating properties (2)......................... - - - (28,350)
Net income............................................... 65,487 16,775 58,871 37,131
Net income per share..................................... $1.31 $.34 $1.18 $.74
Operating income (1)..................................... $48,343 $13,074 $53,473 $73,909
Operating income per share (1)........................... $.97 $.26 $1.07 $1.48
</TABLE>
_____________________
(1) Represents net income or net income per share before realized gain on
investments, net of federal income taxes. In addition, the fourth quarter of
1995 excludes the loss on operating properties and the Realignment
implementation costs, net of federal income taxes.
(2) In the fourth quarter of 1995, the Company announced a realignment plan
which included the consolidation of 20 divisional offices into four regional
offices. As part of the this plan, the Company recorded a $28.4 million
valuation allowance on the sale of operating properties.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company follow on pages 34 through
57.
33
<PAGE> 34
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American States Financial Corporation
We have audited the accompanying consolidated balance sheets of American States
Financial Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. Our
audits also include the financial statement schedules listed in the index at
item 14(a)(2). These financial statements and schedules are the responsibility
of the Company'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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American States Financial Corporation and subsidiaries at December 31, 1996 and
1995, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statements and schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Indianapolis, Indiana
January 28, 1997
34
<PAGE> 35
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
(Dollars in Thousands)
ASSETS
Investments:
Securities available-for-sale at fair value:
Fixed maturity (amortized cost: 1996 - $3,579,807; 1995 - $3,590,601) $3,763,880 $3,860,883
Equity (cost: 1996 - $362,720; $1995 - $374,232) 435,137 437,685
Mortgage loans 32,293 33,319
Short-term investments 73,276 63,170
Other invested assets 37,986 35,178
----------- -----------
Total investments 4,342,572 4,430,235
Cash 13,610 12,708
Premium receivable, less allowance for doubtful accounts (1996 - $3,045;
1995 - $2,860) 413,444 377,802
Deferred policy acquisition costs 202,233 199,192
Properties to be sold, less valuation allowances (1996 - $26,916;
1995 - $28,350) 30,633 41,403
Property and equipment-at cost, less allowances for depreciation (1996 -
$73,789; 1995 - $79,011) 31,143 29,823
Accrued investment income 64,602 66,173
Deferred federal income taxes recoverable 128,742 100,647
Cost in excess of net assets of acquired subsidiaries, less amortization
(1996 - $46,036; 1995 - $42,618) 97,772 101,190
Ceded reinsurance on claims and claims expense reserves 179,445 136,939
Miscellaneous 36,887 43,073
----------- -----------
Total Assets $5,541,083 $5,539,185
=========== ===========
</TABLE>
(continued on next page)
See accompanying notes to consolidated financial statements.
35
<PAGE> 36
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Losses, loss adjustment expense and future policy benefits $2,868,348 $2,828,337
Unearned premiums 711,955 718,478
----------- -----------
Total policy liabilities and accruals 3,580,303 3,546,815
Commissions and other expenses 120,872 134,031
Current federal income taxes payable 5,303 7,095
Outstanding checks 69,901 67,308
Short-term debt due LNC 66,667 -
Notes payable 99,511 -
Debt due LNC 133,333 -
Other liabilities 129,154 115,229
----------- -----------
Total liabilities 4,205,044 3,870,478
Shareholders' equity:
Common stock, no par value: 195,000,000 shares authorized,
shares issued and outstanding: 1996 - 60,050,515; 1995 - 50,000,000 304,493 387,547
Net unrealized gain on securities available-for-sale 163,647 211,767
Retained earnings 867,899 1,069,393
----------- -----------
Total shareholders' equity 1,336,039 1,668,707
----------- -----------
Total liabilities and shareholders' equity $5,541,083 $5,539,185
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 37
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C> <C>
Revenue:
Premiums and other revenue $1,674,122 $1,746,386 $1,745,971
Net investment income 274,314 266,569 260,454
Realized gain on investments 35,538 41,044 19,936
Loss on operating properties - (28,350) -
---------- ---------- ----------
Total revenue 1,983,974 2,025,649 2,026,361
Benefits and expenses:
Benefits and settlement expenses 1,248,879 1,242,270 1,271,957
Commissions 282,991 291,551 296,886
Operating and administrative expenses 206,755 236,825 208,123
Taxes, licenses and fees 37,295 45,891 49,003
Interest on debt 12,372 - 125
---------- ---------- ----------
Total benefits and expenses 1,788,292 1,816,537 1,826,094
Income before federal income taxes 195,682 209,112 200,267
Federal income taxes (credit):
Current 28,160 35,298 26,124
Deferred (2,184) (4,450) (10,415)
---------- ---------- ----------
Total federal income taxes 25,976 30,848 15,709
---------- ---------- ----------
Net income $ 169,706 $ 178,264 $ 184,558
========== ========== ==========
Net income per share $ 3.03 $ 3.57 $ 3.69
========== ========== ==========
Weighted average shares outstanding 55,975,238 50,000,000 50,000,000
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE> 38
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Net Unrealized
Common Stock Gain (Loss) on
--------------------- Securities
Number Available- Retained
of Shares Amount for-Sale Earnings Total
---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994................... 50,000,000 $387,547 $239,080 $1,085,571 $1,712,198
Change in unrealized gain (loss) on
securities available-for-sale............. - - (248,190) - (248,190)
Cash dividends paid to LNC................... - - - (180,000) (180,000)
Net income................................... - - - 184,558 184,558
---------- --------- --------- ---------- ----------
Balance at December 31, 1994................. 50,000,000 387,547 (9,110) 1,090,129 1,468,566
Change in unrealized gain (loss) on
securities available-for-sale............. - - 220,877 - 220,877
Cash dividends paid to LNC................... - - - (199,000) (199,000)
Net income................................... - - - 178,264 178,264
---------- --------- --------- ---------- ----------
Balance at December 31, 1995................. 50,000,000 387,547 211,767 1,069,393 1,668,707
Public offering of common stock.............. 10,000,000 215,182 - - 215,182
Common stock issued for employee benefit
plans..................................... 50,515 1,162 - - 1,162
Assumption and issuance of debt in
exchange with LNC......................... - (299,398) - - (299,398)
Change in unrealized gain (loss)
on securities available-for-sale.......... - - (48,120) - (48,120)
Dividends to LNC prior to public offering:
Assets dividended......................... - - - (299,866) (299,866)
Cash dividend............................. - - - (46,134) (46,134)
Cash dividends declared and paid after
public offering ($.42 per share).......... - - - (25,200) (25,200)
Net income................................... - - - 169,706 169,706
---------- --------- --------- ---------- ----------
Balance at December 31, 1996................. 60,050,515 $304,493 $163,647 $867,899 $1,336,039
========== ========= ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE> 39
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 169,706 $ 178,264 $ 184,558
Adjustments to reconcile net income to cash provided by
operating activities:
Deferred policy acquisition costs 172 (280) 1,743
Premiums and fees in course of collection (35,642) 6,220 4,558
Accrual of discount on investments (18,656) (17,166) (13,113)
Amortization of premium on investments 4,973 6,782 12,571
Accrued investment income (2,859) 6,253 (622)
Policy liabilities and accruals (290) (95,605) (111,825)
Federal income taxes (3,976) 803 (12,485)
Provision for depreciation 7,549 10,535 10,453
Gain on sale of investments (35,538) (41,044) (19,936)
Loss on operating properties - 28,350 -
Ceded reinsurance on claims and claims expense reserves (42,506) 1,224 12,589
Other 2,419 23,554 5,302
----------- ----------- -----------
Net adjustments (124,354) (70,374) (110,765)
----------- ----------- -----------
Net cash provided by operating activities 45,352 107,890 73,793
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available-for-sale:
Purchase of investments (1,173,931) (1,002,548) (1,009,660)
Sales of investments 892,669 990,781 983,684
Maturities and redemptions 58,042 68,846 110,236
Purchase of mortgage loans and other investments (10,973) (11,441) (13,441)
Sale or maturity of mortgage loans and other investments 8,515 28,039 11,747
Net (increase) decrease in short-term investments (10,106) 42,275 34,653
Purchase of property and equipment, net 1,900 (4,815) (9,871)
Other 11,807 (12,191) 1,989
----------- ----------- -----------
Net cash provided by (used in) investing activities (222,077) 98,946 109,337
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 215,182 - -
Principal payments on notes payable - - (5,000)
Universal life investment contract deposits 47,240 47,805 47,285
Universal life investment contract withdrawals (13,461) (9,067) (9,330)
Dividends paid (71,334) (244,000) (215,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities 177,627 (205,262) (182,045)
----------- ----------- -----------
Net increase in cash 902 1,574 1,085
Cash at beginning of period 12,708 11,134 10,049
----------- ----------- -----------
Cash at end of period $ 13,610 $ 12,708 $ 11,134
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE> 40
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
PRINCIPLES OF CONSOLIDATION
On February 5, 1996, American States Financial Corporation (the "Company")
was incorporated in the State of Indiana to serve as a holding company. The
consolidated financial statements include the accounts of American States
Insurance Company ("ASI") and its wholly-owned insurance subsidiaries and have
been presented as if the holding company formation occurred at the earliest
date presented herein. The Company was a wholly owned subsidiary of Lincoln
National Corporation ("LNC") until May 22, 1996, when LNC's ownership was
reduced to 83% as a result of an initial public offering by the Company. ASI
has licenses to write business in all 50 states and the District of Columbia.
ASI and its subsidiaries write standard commercial and personal lines, and life
insurance business throughout the United States with the greatest volume in the
Midwest and Pacific Northwest. All significant intercompany accounts and
transactions are eliminated in consolidation.
During 1994, American Union Reinsurance Company and Amstats Insurance
Company were sold. These transactions had no significant effect on the results
of operation for that year.
HOLDING COMPANY FORMATION AND INITIAL PUBLIC OFFERING
As noted above, the financial statements have been presented as if the
Company had been organized at the earliest date presented herein. The
formation of the Company was done in contemplation of an initial public
offering. On April 22, 1996, ASI declared, and on May 15, 1996, it paid to
LNC, a dividend of $300,000 consisting primarily of tax-exempt municipal
securities ("Dividended Assets"). On May 16, 1996, LNC transferred all of the
outstanding shares of ASI to the Company in exchange for 50,000,000 shares of
Common Stock and $300,000 debt of the Company. The transfer of ASI stock to the
Company by LNC in exchange for Company Common Stock and debt have been
accounted for similar to a pooling of interests, thus the assets, liabilities,
shareholders' equity and the results of operation of the Company and its
subsidiaries have been combined at historical carrying values.
On May 29, 1996, the closing date of the initial public offering, the
Company issued 10,000,000 shares of Common Stock at $23 per share to the
public. The net proceeds, after deduction of underwriting discounts and
offering expenses were $215,182. The Company contributed $140,500 of such net
proceeds to ASI to enable it to invest in taxable securities for its investment
portfolio and the remainder was retained by the Company for general corporate
purposes.
The 50,000,000 shares held by LNC are "restricted shares" as defined by
Rule 144 of the Securities Act of 1993, as amended (the "Securities Act").
Such shares may not be resold in the absence of registration under the
Securities Act or exemptions from such registration including, among others,
the exemption provided by Rule 144 of the Securities Act. As an affiliate of
the Company, LNC is subject to certain volume restrictions on the sale of
shares of the Company's Common Stock.
The Company's Common Stock is publicly traded on the New York Stock
Exchange under the symbol "ASX".
40
<PAGE> 41
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed maturity and equity securities (common and perpetual preferred
stocks) are classified as available-for-sale and accordingly, are carried at
fair value.
For the mortgage-backed bond portion of the fixed maturity securities
portfolio, the Company recognizes income using a constant effective yield based
on anticipated prepayments and the estimated economic life of the securities.
When actual prepayments differ significantly from anticipated prepayments, the
effective yield is recalculated to reflect actual payments to date and
anticipated future payments. The net investment in the securities is adjusted
to the amount that would have existed had the new effective yield been applied
since the acquisition of the securities. This adjustment is reflected in net
investment income.
Mortgage loans on real estate are carried at the outstanding principal
balances less unaccrued discounts and allowances for losses. Short-term
investments which are carried at cost, include all highly liquid debt
instruments purchased with a maturity of one year or less, and the carrying
value approximates fair value.
Realized gains and losses on investments are recognized in net income
using the specific identification method. Changes in the fair values of
securities carried at fair value are reflected directly in shareholders' equity
after deductions for related adjustments for deferred policy acquisition costs
and deferred taxes.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less allowances for
depreciation. Depreciation is computed generally by the straight-line method
at rates calculated to amortize costs over the estimated useful lives of the
assets. Properties to be sold are carried at the lower of amortized cost or
estimated fair value, less selling costs. The difference between book value
and fair value is recognized by maintaining a valuation allowance.
COST IN EXCESS OF NET ASSETS OF ACQUIRED SUBSIDIARIES
Cost in excess of net assets from the purchase of subsidiaries is being
amortized using the straight-line method up to 40 years. The carrying value of
these assets will be reviewed if the facts and circumstances suggest that it
may be impaired. If the undiscounted cash flows estimated to be generated by
these assets are less than the carrying amounts, an impairment loss would be
recognized.
USE OF ESTIMATES
The nature of the insurance business requires management to make estimates
and assumptions that affect the amounts reported in the financial statements.
Actual results reported in future financial statements could differ from these
estimates. The effects of changes in estimates are included in the operating
results for the period in which such changes occur.
41
<PAGE> 42
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOSSES, LOSS ADJUSTMENT EXPENSE AND FUTURE POLICY BENEFITS
The liability for losses and loss adjustment expense is determined using
case basis evaluation and statistical analysis and represents estimates of the
ultimate net cost of all reported and unreported losses which are unpaid at
year end. This liability includes estimates of future trends in claim severity
and frequency and other factors which could vary as the losses are ultimately
settled. Although it is not possible to measure the degree of variability
inherent in such estimates, management believes that the liability for losses
and loss adjustment expense is adequate. The estimates are continually
reviewed and as adjustments become necessary to this liability, they are made
and reflected in current operations. The reserve for losses and loss
adjustment expense is stated at an amount after deduction of salvage and
subrogation recoverable. At December 31, 1996, the Company has guaranteed and
is contingently liable in the amount of $43,855 with respect to annuities
purchased to fund structured settlements. In the normal course of settling
losses, the Company has been named in various lawsuits. The ultimate
settlement of these lawsuits is not expected to be material to the Company's
operations.
Future policy benefits on traditional life insurance have been computed
using principally a net-level premium method and assumptions for investment
yields, withdrawals and mortality based principally on Company experience
projected at the time of policy issue, with provision for possible adverse
deviations. Interest assumptions for direct individual life reserves range
from approximately 4.5% for 1958 issues to 6.75% for 1996 issues. With respect
to universal life and annuity products, the retrospective deposit accounting
method is used. Policy reserves represent the premiums received plus
accumulated interest, less mortality and administrative charges.
RECOGNITION OF INCOME AND EXPENSES
Premiums include property and casualty insurance premiums and life
insurance premiums and contract charges earned. Direct property and casualty
insurance premiums are earned ratably over the terms of the policies. Assumed
reinsurance premiums are earned ratably over the terms of the original policies
issued and terms of the reinsurance contracts. The reserve for unearned
premiums is computed by the semi-monthly pro rata method. Life insurance
premiums on traditional life business are generally earned when due. Revenues
for universal life and investment products consist of policy charges for the
cost of insurance, policy administration charges, amortization of policy
initiation fees, and surrender charges assessed against policyholder account
balances during the period. Expenses related to these products include
interest credited to policyholder account balances and death benefits incurred
in excess of policyholder account balances. Commissions, premium taxes, and
certain other expenses incurred in the acquisition of business are deferred and
amortized as the related premiums are earned. Acquisition costs that are not
recoverable from future premiums and related investment income are expensed.
The amounts of acquisition costs amortized were $338,012, $359,840 and $359,747
in 1996, 1995 and 1994, respectively.
FEDERAL INCOME TAXES
A consolidated federal income tax return is filed by LNC and includes the
Company. Pursuant to an agreement with LNC, the Company provides for income
taxes on the basis of a separate return calculation. The taxes computed are
remitted to or collected from LNC.
42
<PAGE> 43
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
PENSION PLAN AND OTHER RETIREMENT BENEFITS
A qualified non-contributory defined benefit retirement plan covers
substantially all employees. Benefits are based on total years of service and
the highest 60 months of compensation during the last 10 years of employment.
The plan is funded by contributions to tax-exempt trusts consistent with
requirements of federal law and regulations. Contributions are intended to
provide not only the benefits attributed to service to date, but also those
expected to be earned in the future. Plan assets consist principally of listed
equity securities, corporate obligations, and United States government bonds.
The Company also sponsors an unfunded, nonqualified, supplemental defined
benefit pension plan for certain employees.
Further, the Company sponsors an unfunded defined benefit plan that
provides postretirement medical and life insurance benefits to full-time
employees who have worked 10 years and attained age 55 while in service with
the Company. The plan is contributory, with retiree contributions adjusted
annually, and contains other cost-sharing features such as deductibles and
coinsurance.
Eligible employees also participate in a defined contribution plan. The
Company's contribution to the plan is equal to a participant's pre-tax
contribution, not to exceed 6% of base pay, multiplied by a percentage, ranging
from 25% to 150%, which varies according to certain incentive criteria as
determined by the Board of Directors. Expense for this plan amounted to
$5,297, $6,644 and $11,419 in 1996, 1995 and 1994, respectively.
STOCK OPTIONS
The Company utilizes the intrinsic value method of accounting to determine
whether compensation expense should be recognized in conjunction with its stock
option incentive plan. Using the intrinsic value method, compensation cost is
the excess, if any, of the quoted market price of the stock at the grant date,
or other measurement date, over the amount an employee must pay to acquire the
stock. Since all options are granted at market price, the Company has not
recognized compensation expense relating to the stock option incentive plan.
RECLASSIFICATIONS
Amounts from prior periods have been reclassified to conform to the 1996
presentation. Net income and shareholders' equity have not been affected by
these reclassifications.
43
<PAGE> 44
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS
The cost, unrealized gains and losses and fair value of securities
available-for-sale are as follows:
<TABLE>
<CAPTION>
Securities Available-for-Sale
-----------------------------------------
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
United States treasury securities and other United States
government agencies......................................... $ 188,574 $ 7,583 $ 320 $ 195,837
Obligations of states and political subdivisions.............. 1,965,798 131,626 1,323 2,096,101
Corporate securities.......................................... 1,052,694 49,929 8,721 1,093,902
Mortgage-backed securities.................................... 298,733 4,365 2,282 300,816
Redeemable preferred stocks................................... 74,008 3,590 374 77,224
---------- -------- ------- ----------
Total fixed maturity securities............................... 3,579,807 197,093 13,020 3,763,880
Common and perpetual preferred stocks......................... 362,720 76,475 4,058 435,137
---------- -------- ------- ----------
$3,942,527 $273,568 $17,078 $4,199,017
========== ======== ======= ==========
DECEMBER 31, 1995
United States treasury securities and other United States
government agencies......................................... $301,547 $ 27,097 $86 $ 328,558
Obligations of states and political subdivisions.............. 2,222,697 153,728 2,211 2,374,214
Corporate securities.......................................... 679,983 77,831 692 757,122
Mortgage-backed securities.................................... 312,705 11,326 320 323,711
Redeemable preferred stocks................................... 73,669 3,985 376 77,278
---------- -------- ------- ----------
Total fixed maturity securities............................... 3,590,601 273,967 3,685 3,860,883
Common and perpetual preferred stocks......................... 374,232 71,306 7,853 437,685
---------- -------- ------- ----------
$3,964,833 $345,273 $11,538 $4,298,568
========== ======== ======= ==========
</TABLE>
Fair values for fixed maturity securities are based on quoted market
prices, where available. For fixed maturity securities not actively traded,
fair values are estimated using values obtained from independent pricing
services or, in the case of private placements, are estimated by discounting
expected future cash flows using a current market rate applicable to the yield,
credit quality, and maturity of the investments. The fair values for equity
securities are based on quoted market prices.
The amortized cost and estimated fair value of fixed maturity securities
at December 31, 1996, by contractual maturity, is shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---------- ----------
<S> <C> <C>
Available-for-sale:
Due in one year or less............................. $120,401 $121,124
Due after one year through five years............... 728,552 776,878
Due after five years through ten years.............. 1,214,593 1,277,075
Due after ten years................................. 1,217,528 1,287,987
---------- ----------
3,281,074 3,463,064
Mortgage-backed securities.............................. 298,733 300,816
---------- ----------
$3,579,807 $3,763,880
========== ==========
</TABLE>
44
<PAGE> 45
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Fixed maturity:
Tax exempt......................................... $123,608 $134,506 $ 145,940
Taxable............................................ 120,571 100,611 81,000
-------- --------- ---------
244,179 235,117 226,940
Equity................................................. 21,048 23,328 26,759
Other.................................................. 11,348 11,938 11,754
-------- --------- ---------
276,575 270,383 265,453
Less investment expense................................ 2,261 3,814 4,999
-------- --------- ---------
Net investment income.................................. $274,314 $266,569 $ 260,454
======== ========= =========
<CAPTION>
The change in unrealized gain (loss) on securities available-for-sale is as follows:
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Fixed maturity securities available-for-sale........... $(86,209) $308,589 $(346,946)
Equity securities available-for-sale................... 8,964 44,921 (46,001)
-------- --------- ---------
Net change in unrealized gain (loss) on securities
available-for-sale................................. (77,245) 353,510 (392,947)
Adjustment for effect on other balance sheet
accounts........................................... 3,214 (11,877) 11,116
Less deferred income taxes............................. 25,911 (120,756) 133,641
-------- --------- ---------
Change in unrealized gain (loss) included in
shareholders' equity............................... $(48,120) $220,877 $(248,190)
======== ========= =========
<CAPTION>
The realized gain (loss) on investments is summarized as follows:
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
Available-for-sale:
Fixed maturity
Gross gain.................................... $ 9,975 $ 5,816 $ 18,977
Gross loss.................................... (11,505) (5,063) (11,300)
Equity securities
Gross gain.................................... $ 54,169 $ 63,123 $36,663
Gross loss.................................... (16,413) (24,264) (29,942)
Other, net of expenses............................. (688) 1,432 5,538
-------- --------- ---------
Total......................................... $ 35,538 $ 41,044 $ 19,936
======== ========= =========
</TABLE>
The Company has estimated the fair value of its investment in mortgage
loans on real estate to be $33,943 and $35,591 at December 31, 1996 and 1995,
respectively. This estimate was established using a discounted cash flow
method based on rating, maturity and future income when compared to the
expected yield for mortgages having similar characteristics.
45
<PAGE> 46
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENTS (Continued)
The Company had no impaired loans at the end of December 31, 1996 or 1995.
A reconciliation of the mortgage loan allowance for losses is as follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Balance at beginning of year..................... $4,435 $ 5,968
Provisions for losses............................ 155 76
Releases due to recoveries....................... - (1,222)
Releases due to sales............................ (4,330) (387)
Transfers to other invested assets............... (260) -
------- -------
Balance at end of year........................... $ - $ 4,435
======= =======
</TABLE>
The carrying value of short-term investments and other invested assets
approximate fair value.
4. LIABILITY FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
Activity in the liability for losses and loss adjustment expense for
property and casualty operations is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance as of January 1, net of related reinsurance recoverables....... $2,294,458 $2,377,245 $2,458,465
Add:
Provision for losses and loss adjustment expense occurring in the
current year, net of reinsurance.............................. 1,245,580 1,233,627 1,318,224
Decrease in estimated losses and loss adjustment expense
occurring in prior years, net of reinsurance.................. (45,705) (39,917) (91,984)
---------- ---------- ----------
Incurred losses and loss adjustment expense during the current
year, net of reinsurance...................................... 1,199,875 1,193,710 1,226,240
Deduct:
Losses and loss adjustment expense payments for losses, net of
reinsurance, occurring during:
Current year.................................................. 653,977 613,580 617,425
Prior years.................................................... 578,664 662,917 690,035
---------- ---------- ----------
1,232,641 1,276,497 1,307,460
---------- ---------- ----------
Balance as of December 31, net of related reinsurance recoverables..... 2,261,692 2,294,458 2,377,245
Reinsurance recoverables on losses and loss adjustment expenses
at end of year..................................................... 164,413 120,117 119,458
---------- ---------- ----------
Liability for losses and loss adjustment expense, gross of related
reinsurance recoverables, at end of year........................... $2,426,105 $2,414,575 $2,496,703
========== ========== ==========
</TABLE>
The reconciliation shows a decrease to the liability for estimated losses
and loss adjustment expense arising in prior years. Such reserve adjustments,
which affected current operations during each of the years, resulted from
developed losses from prior years being different than were anticipated when
the liability for losses and loss expense were originally estimated. Favorable
development trends are partially a result of the change the Company has
initiated in its underwriting and claims adjudication practices. These
development trends have been considered in establishing the current year
liabilities.
46
<PAGE> 47
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. LIABILITY FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (Continued)
Included in the liability for losses and loss adjustment expense, net of
related reinsurance recoverables, is the liability for environmental and
asbestos losses of $250,521 and $241,216 as of December 31, 1996 and 1995,
respectively. In establishing liabilities for losses and loss adjustment
expense related to environmental and asbestos matters, management considers
facts currently known and the current state of the law and coverage litigation.
Liabilities are recognized for known losses, including the cost of related
litigation, when sufficient information has been developed to indicate the
involvement of a specific insurance policy and management can reasonably
estimate its liability. In addition, liabilities have been established to
cover additional exposures on both known and unasserted losses. Estimates of
the liabilities are reviewed and updated continually. Developed case law and
adequate claim history do not exist for a portion of the Company's
environmental and asbestos exposure, especially because significant uncertainty
exists about the outcome of coverage litigation and whether past loss
experience will be representative of future loss experience. Management
believes the estimated liabilities provided for environmental and asbestos
losses at December 31, 1996, are adequate; however, it is reasonably possible
that a change in estimate of the required liability could occur in the future.
It is not possible to provide a meaningful estimate of a range of possible
outcomes at this time.
The Company writes personal and commercial lines of property and casualty
insurance throughout the United States. As a result, the Company is always at
risk that there could be significant losses arising in certain geographic areas
from catastrophes, such as earthquakes and hurricanes. In 1996 the Company's
property catastrophe reinsurance program, its "primary coverage", provided
protection of 93% of $150,000, or approximately $139,500, in excess of a
$30,000 retention per occurrence. In 1997, the Company's primary coverage will
provide protection of 90% of $150,000, or approximately $135,000, in excess of
a $30,000 retention per occurrence. In addition, in 1997 the Company has also
purchased an additional coverage layer of 90% of $100,000, or $90,000, in
excess of its primary coverage. This additional 1997 layer provides protection
solely for non-California earthquake exposure.
The Company's policies providing earthquake, hurricane and related
coverage in the midwest, western and southeastern coastal areas of the United
States could expose the Company to losses exceeding its reinsurance limits.
Although the exposure exists, the Company has not encountered losses in excess
of its reinsurance limits during the past twenty years. It is also possible
that catastrophes could have an adverse effect on the Company's reinsurers. As
the Company is not relieved of its primary obligation to the policyholder in a
reinsurance transaction, an event or series of events which render
uncollectible any amounts due from its reinsurers could have a material adverse
effect on the Company.
The following is a reconciliation of the activity in the liability for
losses and loss adjustment expense for property and casualty operations to the
consolidated balance sheets and statements of income:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Property and casualty incurred losses and loss adjustment expense
during the current year, net of reinsurance......................... $1,199,875 $1,193,710 $1,226,240
Life insurance benefits and settlement expenses,
net of reinsurance.................................................. 49,004 48,560 45,717
---------- ---------- ----------
Benefits and settlement expenses, net of reinsurance.................... $1,248,879 $1,242,270 $1,271,957
========== ========== ==========
Liability for property and casualty losses and loss adjustment
expense, at end of year............................................. $2,426,105 $2,414,575 $2,496,703
Liability for life future policy benefits, at end of year............... 442,243 413,762 381,532
---------- ---------- ----------
Liability for losses, loss adjustment expense and future policy
benefits............................................................ $2,868,348 $2,828,337 $2,878,235
========== ========== ==========
</TABLE>
47
<PAGE> 48
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. LIABILITY FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (Continued)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Reinsurance recoverables on property and casualty losses and loss
adjustment expenses, at end of year.................................. $164,413 $120,117 $119,458
Reinsurance recoverables on life future policy benefits,
at end of year....................................................... 15,032 16,822 18,705
-------- -------- --------
Ceded reinsurance on claims and claims expense reserves,
at end of year....................................................... $179,445 $136,939 $138,163
======== ======== ========
</TABLE>
5. NOTES PAYABLE AND DEBT DUE LNC
In conjunction with the formation of the Company, $100,000 of debt was
assumed from LNC ("Assumed Debt"). The Assumed Debt is governed by an
agreement between the Company and LNC (the "Assumption Agreement") which
provides for the payment by the Company of the currently outstanding 7 1/8%
notes due July 15, 1999, originally issued to the public by LNC on July 15,
1992. LNC continues to be the primary obligor of this public debt; however,
pursuant to the Assumption Agreement, the Company will make a $100 million
principal payment on July 15, 1999 to repay the holders of the public debt.
The Assumption Agreement also provides that interest at 7 1/8% is payable
semi-annually by the Company.
Also in conjunction with the formation of the Company, a $200,000 term
note was issued to LNC ("Term Note"). The Term Note will pay interest
quarterly at a rate of 50 basis points over the rate on three year Treasury
Notes through November 14, 1997, 50 basis points over the rate on two year
Treasury Notes from November 15, 1997 through November 14, 1998 and 50 basis
points over the rate on one-year Treasury Bills from November 15, 1998 through
the maturity date. The current rate of interest on the Term Note is 6.7%. The
Term Note will be payable in three equal principal payments due on August 15,
1997, 1998 and 1999. Pursuant to the provisions on the Term Note, the Company
will have the right to prepay the Term Note at any time. The Term Note also
contains covenants that will, among other things, (i) require the Company to
maintain certain levels of adjusted consolidated net worth (as defined in the
Term Note), and (ii) restrict the ability of the Company to incur indebtedness
in excess of 50% of its adjusted consolidated net worth and to enter into a
major corporate transaction unless the Company is the survivor and would not be
in default.
In 1996, the Company incurred and paid interest cost of $12,372 and
$7,218, respectively.
Minimum repayments on the outstanding Assumed Debt and Term Note at
December 31, 1996 are scheduled as follows:
<TABLE>
<S> <C>
1997 (included in short-term debt due LNC).... $ 66,667
1998.......................................... 66,667
1999.......................................... 166,667
</TABLE>
On May 29, 1996, the Company entered into a revolving credit agreement
with third party financial institutions in which the Company may borrow and
repay amounts up to a maximum of $200,000 (the "Line of Credit"). Borrowings
using the Line of Credit will bear interest generally at variable rates tied to
LIBOR, an adjusted certificate of deposit rate or other short-term indices. No
debt was outstanding using the Line of Credit at December 31, 1996.
48
<PAGE> 49
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FEDERAL INCOME TAXES
Federal income taxes paid in 1996, 1995 and 1994 were $29,952, $30,045,
and $28,556, respectively.
The effective tax rate on pre-tax income is lower than the prevailing
corporate federal income tax rate. A reconciliation of this difference is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Tax on pre-tax income at 35%......................................... $ 68,489 $ 73,189 $ 70,093
Add (deduct) tax effect of:
Tax exempt bond interest.......................................... (42,286) (47,174) (51,333)
Dividends earned.................................................. (5,482) (5,513) (6,028)
15% of tax exempt interest and dividends received deduction....... 6,660 7,311 7,828
Goodwill.......................................................... 1,196 1,196 1,219
Other............................................................. (2,601) 1,839 (6,070)
-------- -------- --------
Federal income taxes............................................... $ 25,976 $ 30,848 $ 15,709
======== ======== ========
<CAPTION>
Significant components of net deferred tax assets and liabilities are as follows:
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Change in unearned premium reserve............................... $ 48,286 $ 48,916
Discounting of losses and loss adjustment expense reserve........ 162,094 165,991
Other postretirement benefits.................................... 25,596 24,926
Sale/leaseback of building....................................... 7,758 8,000
Nondeductible accruals........................................... 21,432 22,879
Other............................................................ 24,591 29,607
-------- --------
Total deferred tax assets............................................ 289,757 300,319
Deferred tax liabilities:
Deferred acquisition costs....................................... (64,411) (72,496)
Net unrealized gains on securities............................... (88,117) (114,028)
Other............................................................ (8,487) (13,148)
-------- --------
Total deferred tax liabilities....................................... (161,015) (199,672)
-------- --------
Net deferred tax asset............................................... $128,742 $100,647
======== ========
</TABLE>
As defined by previous life insurance company tax law, certain amounts
were accumulated tax free in a special memorandum account designated as
"Policyholders' Surplus Account" and generally are not subject to federal
income taxes until distributed to stockholders. The aggregate accumulation in
this account is $17,623 at December 31, 1996. No provision has been made for
federal income taxes on this account since distributions are not presently
contemplated.
7. RESTRICTIONS ON SHAREHOLDERS' EQUITY
Generally, the net assets of the Company's insurance subsidiaries
available for transfer to ASFC are limited to the amounts that the insurance
subsidiaries' net assets, as determined in accordance with statutory accounting
practices, exceed minimum statutory capital requirements; however, payments of
such amounts as dividends may be subject to approval by regulatory authorities.
At December 31, 1996, $7,200 of consolidated shareholders' equity represents
net assets of the Company's insurance subsidiaries that cannot be transferred
in the form of dividends, loans or advances to ASFC.
49
<PAGE> 50
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. RECONCILIATION WITH STATUTORY ACCOUNTING POLICIES
Net income of ASI and subsidiaries, as determined in accordance with
statutory accounting practices, was $171,822, $197,058 and $177,654, for 1996,
1995 and 1994, respectively. Consolidated statutory shareholder's equity for
ASI was $965,987 and $1,010,992 at December 31, 1996 and 1995, respectively.
9. EMPLOYEE BENEFIT PLANS
PENSION PLAN. The funded status of the defined benefit pension plan and
the amount recognized in the balance sheet are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested........................................................ $(146,298) $(134,836)
Non vested.................................................... (5,751) (7,909)
--------- ---------
Accumulated benefit obligation.................................... (152,049) (142,745)
Effect of future compensation increases........................... (44,999) (48,595)
--------- ---------
Projected benefit obligation...................................... (197,048) (191,340)
Plan assets available for benefits................................ 187,445 172,913
--------- ---------
Projected benefit obligation in excess of plan assets............. (9,603) (18,427)
Unrecognized prior service cost................................... 2,209 2,561
Unrecognized net loss............................................. 7,342 19,355
--------- ---------
Prepaid (accrued) pension cost included in the balance sheet...... $ (52) $ 3,489
========= =========
Assumptions used in the foregoing calculations are as follows:
1996 1995 1994
------- --------- ---------
Assumed rate on plan assets....................................... 9.0% 9.0% 9.0%
Weighted average discount rate.................................... 7.0 7.0 8.0
Future compensation trends........................................ 4.5 5.0 5.0
</TABLE>
The change in discount rate increased the accumulated benefit obligation
by $17,800 as of December 31, 1995.
Net pension cost for the defined benefit pension plans includes the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Service cost benefits earned................................ $9,418 $8,091 $8,982
Interest cost on projected benefit obligation............... 12,482 11,322 10,189
Actual return on assets..................................... (17,547) (31,425) 3,338
Net amortization and deferral............................... 2,850 20,708 (13,779)
Impact of realignment of field operations (see Note 14)..... - 3,029 -
-------- -------- --------
Net periodic pension cost................................... $7,203 $11,725 $8,730
======== ======== ========
</TABLE>
POSTRETIREMENT BENEFIT PLAN. The postretirement defined benefit plan is
unfunded; however, the details of the amount included in other liabilities are
as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................... $28,538 $34,715
Fully eligible active plan participants..... 11,774 12,746
Other active plan participants.............. 16,146 16,384
------- -------
56,458 63,845
Unrecognized net gain........................... 16,648 7,378
------- -------
Accrued postretirement benefit cost............. $73,106 $71,223
======= =======
</TABLE>
50
<PAGE> 51
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. EMPLOYEE BENEFIT PLANS (Continued)
Assumptions used in the foregoing calculation at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
Discount rate..................... 7.0% 7.0% 8.0%
Rate of compensation increases.... 4.5 5.0 5.0
<CAPTION>
Net periodic postretirement benefit cost includes the following components:
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
Service cost...................... $1,685 $1,395 $2,033
Interest cost..................... 3,700 4,057 4,373
Net amortization and deferral..... (1,104) (1,120) (115)
------ ------- ------
Net periodic benefit cost......... $4,281 $4,332 $6,291
====== ======= ======
</TABLE>
The calculation of the accumulated postretirement benefit obligation
assumes a weighted-average annual assumed rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) of 8.5% for 1997
gradually decreasing to 5.0% by 2005. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation at
December 31, 1996 by $3,952, and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1996 by $431.
INCENTIVE PLANS. Prior to the initial public offering, certain employees
of the Company participated in various incentive plans maintained by LNC. In
conjunction with the initial public offering, the Company established various
incentive plans for eligible employees that provide for the issuance of stock
options, restricted stock, stock appreciation rights, phantom stock or cash.
These plans are comprised primarily of stock option incentive plans. Stock
options are granted at the market price on the date of grant and, subject to
termination of employment, expire 10 years from the date of grant. The options
are exercisable in 25% increments on the option issuance anniversary in the
four years following issuance. The maximum number of shares which can be
granted from the stock option incentive plan is 1,000,000 from the inception of
the plan to the plan expiration date on July 1, 2000. During 1996, options for
199,400 shares were granted with an exercise price of $23 per share. None of
these options were exercisable nor were any forfeited during the year.
In addition, 50,515 restricted shares of the Company's Common Stock were
issued to key personnel. The shares are restricted from sale or trade for
three years after grant except in a situation relating to death or disability.
In addition, at the time restrictions lapse, compensation equal to the amount
of dividends that would have been paid during the period the shares were
restricted is paid to the personnel.
The Company utilizes the intrinsic value method of accounting to determine
whether compensation expense should be recognized in conjunction with its stock
option incentive plan. As the amount the employee must pay to acquire the
stock is equal to the quoted market price of the stock at the grant date, no
compensation expense has been recognized for stock option incentive plans. Had
compensation expense for the Company's stock option incentive plans for options
been determined based on the estimated fair value at the grant date for awards
under those plans, the Company's pro forma net income and earnings per share
for 1996 would have been $168,266 or $3.01 per share, a decrease of $1,440 or
$.02 per share. The effects on 1996 pro forma net income and earnings per
share of expensing the estimated fair value of stock options are not
necessarily representative of the effects on reported net income for future
years due to factors such as the vesting period of the stock options and the
potential for issuance of additional stock options in future years.
51
<PAGE> 52
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. EMPLOYEE BENEFIT PLANS (Continued)
The fair value of options granted during 1996 were estimated as of the
date of grant using a Black-Scholes option pricing model. The option pricing
assumptions include a dividend yield of 3.7%; an expected volatility of 30%; a
risk-free interest rate of 6.8%; and an expected life of 9 years. The average
fair value per option granted during 1996 was $11.12 based on these
assumptions.
10. RENT EXPENSE
The principal leased property is the home office which is leased through a
sale-leaseback agreement. The agreement, which was entered into in 1984,
provides for a 25 year lease period with options to renew for six additional
terms of five years each. The agreement also provides the Company with the
right of first refusal to purchase the property during the term of the lease,
including renewal periods, at a price as defined in the agreements. In
addition, the Company has the option to purchase the leased property at fair
market value as defined in the agreements on the last day of the initial 25
year lease period ending in 2009 or the last day of any of the renewal periods.
Rent expense included in benefits and expenses amounted to approximately
$16,980, $16,123 and $16,898 in 1996, 1995 and 1994, respectively. At December
31, 1996, future minimum payments, by year and in the aggregate, for
noncancelable operating leases with initial or remaining terms of one year or
more consisted of the following:
<TABLE>
<S> <C>
1997.......................................... $10,052
1998.......................................... 8,808
1999.......................................... 8,969
2000.......................................... 10,279
2001.......................................... 9,938
2002 and thereafter........................... 77,750
</TABLE>
52
<PAGE> 53
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. REINSURANCE ACTIVITIES
The principal sources of reinsurance assumed are national and state
associations. Reinsurance is ceded to other companies for risks which exceed
retention limits and to provide for catastrophic claims.
The effect of reinsurance on premiums written and earned is as follows:
<TABLE>
<CAPTION>
Written Earned
-------------------------------
Property- Property-
Casualty Casualty Life Total
---------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1996
Direct................................. $1,642,016 $1,650,216 $58,975 $1,709,191
Assumed................................ 8,905 15,622 2,596 18,218
Ceded.................................. (50,034) (48,603) (4,684) (53,287)
---------- ---------- ------- ----------
Net............................... $1,600,887 $1,617,235 $56,887 $1,674,122
========== ========== ======= ==========
1995
Direct................................. $1,674,470 $1,689,668 $57,872 $1,747,540
Assumed................................ 43,481 46,562 2,870 49,432
Ceded.................................. (46,391) (46,635) (3,951) (50,586)
---------- ---------- ------- ----------
Net............................... $1,671,560 $1,689,595 $56,791 $1,746,386
========== ========== ======= ==========
1994
Direct................................. $1,657,930 $1,686,388 $54,469 $1,740,857
Assumed................................ 55,557 61,031 2,060 63,091
Ceded.................................. (58,028) (53,977) (4,000) (57,977)
---------- ---------- ------- ----------
Net............................... $1,655,459 $1,693,442 $52,529 $1,745,971
========== ========== ======= ==========
</TABLE>
Benefits and settlement expenses were reduced by $33,821, $22,904 and
$24,399 in 1996, 1995 and 1994, respectively, as a result of ceded reinsurance
arrangements. The Company remains contingently liable with respect to losses
reinsured in the event any reinsurer is unable to meet obligations assumed.
12. OTHER TRANSACTIONS WITH AFFILIATES
On March 29, 1995, the Company purchased 4,986,507 shares, or 29.22% of
EMPHESYS Financial Group, Inc. from LNC for $193,227. This investment was
accounted for using the equity method and resulted in earnings of $6,449 being
included in net investment income through September 30, 1995. On August 22,
1995, a tender offer was extended by Humana, Inc. and on October 7, 1995, the
Company tendered its investment in EMPHESYS stock resulting in an after-tax
loss of $9,004.
In January of 1996, the Company agreed to assume $63.7 million of
liabilities, primarily loss and loss adjustment expense reserves, from an
affiliate of LNC, on a closed block of specialty lines business. The Company
received $63.7 million in assets, primarily cash, as part of the transaction.
This run-off business covers primarily property, casualty, accident and health
exposures on sports, leisure and entertainment venues.
53
<PAGE> 54
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. OTHER TRANSACTIONS WITH AFFILIATES (Continued)
In addition to the above, the Company has various other transactions with
LNC and its affiliates in the normal course of operations. These transactions
include systems, strategic planning and management advice, financial services,
investment services, legal services, accounting services, and assistance with
employee benefits, information services, data processing, actuarial, marketing
and human resources. In addition, the Company pays to LNC affiliates
investment advisory fees. In 1996, 1995 and 1994, the Company paid LNC and its
affiliates fees totaling $10,145, $10,454, and $7,614.
At December 31, 1995, the Company had $37,910 invested in LNC's short-term
investment pool. During 1996, the Company established its own short-term
investment pool. In addition, the Company had $31,037 and $40,072, at cost,
invested in mutual funds administered by a subsidiary of LNC with a fair value
of $40,088 and $41,198 at December 31, 1996 and 1995, respectively.
The Company provides supervision and administrative services to
wholly-owned property and casualty insurance subsidiaries of LNC. In 1996,
1995 and 1994, LNC paid the Company fees totaling $432, $924, and $625,
respectively.
LNC paid the Company $7,425, $6,277 and $5,298 during 1996, 1995 and 1994
for administrative services and insurance coverages provided by the Company to
LNC. The Company paid LNC $2,757, $6,935 and $2,601 during 1996, 1995 and 1994
for services rendered by LNC to purchase corporate insurance coverages. The
Company's life insurance subsidiary paid LNC $4,267, $3,042 and $3,528 during
1996, 1995 and 1994 for reinsurance coverages.
54
<PAGE> 55
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SEGMENT INFORMATION
The Company, operates within the property/casualty and the life insurance
industry through a network of independent agents. The property/casualty
insurance industry is further broken down into commercial, personal and
reinsurance business in runoff. Revenues, pre-tax operation income and
identifiable assets for the property/casualty, life and holding company
segments are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenue
Property/casualty operations
Net premiums earned and other revenue:
Personal $ 690,799 $ 684,091 $ 684,903
Commercial 925,680 1,005,364 1,003,209
Reinsurance business in runoff 755 140 5,330
Net investment income 238,227 233,759 230,945
Net realized gain on investments 34,370 38,778 19,228
Loss on operating properties - (28,350) -
---------- ---------- ----------
Total property/casualty operations 1,889,831 1,933,782 1,943,615
---------- ---------- ----------
Life operations
Net premiums earned and other revenue $ 56,888 $ 56,791 $ 52,529
Net investment income 33,975 32,810 29,509
Net realized gain on investments 1,161 2,266 708
---------- ---------- ----------
Total life operations 92,024 91,867 82,746
Holding company
Net investment income $ 2,112 $ - $ -
Net realized gain on investments 7 - -
---------- ---------- ----------
Total holding company 2,119 - -
---------- ---------- ----------
Net revenues $1,983,974 $2,025,649 $2,026,361
========== ========== ==========
Pre-tax income
Property/casualty operations
Underwriting gain (loss):
Personal $ (59,955) $ (32,789) $ (49,800)
Commercial (1,537) 45,762 4,533
Reinsurance business in runoff (26,639) (69,826) (23,777)
Net investment income 238,227 233,759 230,945
Net realized gain on investments 34,211 38,778 19,228
Loss on operating properties - (28,350) -
---------- ---------- ----------
Total property/casualty operations 184,307 187,334 181,129
Total life operations 21,993 21,778 19,138
Holding company (10,618) - -
---------- ---------- ----------
Total pre-tax income $ 195,682 $ 209,112 $ 200,267
========== ========== ==========
</TABLE>
55
<PAGE> 56
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Identifiable assets
Property/casualty operations....................... $4,907,722 $4,981,343
Life operations.................................... 585,726 560,325
Holding company.................................... 1,663,690 1,668,707
Eliminations....................................... (1,616,055) (1,671,190)
---------- ----------
Total identifiable assets $5,541,083 $5,539,185
========== ==========
</TABLE>
The operating expenses of the Company have all been considered to be
allocable to the segments since the Company's activities were all directly
related to those segments through December 31, 1996. Capital expenditures and
depreciation expense are not material.
14. REALIGNMENT OF FIELD OPERATIONS
In November 1995, the Company approved a realignment plan which included
the consolidation of the field operations from 20 divisional offices into four
regional offices. Certain of the locations will be converted to service
offices. Those operating properties owned by the Company that will not be used
as a regional office will be sold. For each location to be downsized, job
classifications, positions to be eliminated and individuals impacted were
identified and severance benefits were communicated. This process was started
in 1995 with the majority of the Realignment occurring in 1996 and the balance
to be completed in 1997. Management estimated that the costs of realignment
and valuation allowance for the sale of the operating properties based on
independent appraisals with net carrying value representing the lower of cost
or market, net of taxes, approximated $13,700 and $18,500, respectively, and
was charged to income in 1995; accordingly, net income decreased $32,200.
During 1996, the Company sold 4 of the divisional offices. At December
31, 1995, the Company had estimated that it would incur approximately $21,000
related to the various costs associated with the realignment plan and had
accrued such costs. Through December 31, 1996, approximately $14,000 of the
accrued costs have been paid. Management believes the balance of $7,000 is
adequate to cover future expected payments.
15. CONTINGENCIES
The Company is routinely involved in pending or threatened legal
proceedings. Those proceedings sometimes involve alleged breaches of contract,
torts (including bad faith and fraud claims) and miscellaneous other causes of
action. Some of the pending litigation includes claims for punitive damages in
addition to compensatory damages and other relief. While the aggregate dollar
amounts involved in these legal proceedings cannot be determined with
certainty, the amounts at issue could have a significant effect on the
Company's results of operations. However, based upon information presently
available, and in light of legal and other defenses available to the Company,
management does not believe that any of these routine proceedings will have a
material adverse effect on the financial results or operations of the Company.
56
<PAGE> 57
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. CONTINGENCIES (Continued)
On February 14, 1996, three of the Company's property and casualty
insurance subsidiaries were among 23 underwriters of real property insurance
named defendants in a case brought in the United States District Court for the
Western District of Missouri alleging that their underwriting, sales and
marketing practices violated a number of civil rights laws (including, without
limitation, the Fair Housing Act). The plaintiffs seek to represent themselves
and a putative class of similarly situated persons in the State of Missouri.
This action seeks injunction relief, unspecified compensatory damages, punitive
damages and attorneys' fees. In response to motions filed by the defendants,
the court dismissed the conspiracy court by Order dated October 2, 1996 but has
required that the defendants answer the remaining counts and discovery has now
begun. Management believes, based upon current information, that the Company's
underwriting, sales and marketing practices have complied in all material
respects with the applicable requirements of both state and federal law. The
Company intends to vigorously defend this action.
On August 29, 1996, the first of two actions were brought in Missouri
state courts alleging that underinsured motorist insurance coverage sold in
that state by three of the Company's property and casualty insurance
subsidiaries constitutes "phantom coverage" when sold at limits equal to the
State's financial responsibility requirements. In both actions, the plaintiffs
seek to represent themselves and a putative class of similarly situated persons
in the State of Missouri. The actions seek both compensatory and punitive
damages based upon a number of legal theories, including, without limitation,
breach of fiduciary duty, negligence, breach of contract, unjust enrichment and
misrepresentation. While it is too early to fully evaluate the plaintiffs'
allegations, the potential defenses available or the size of the putative class
of plaintiffs, management does not believe, based upon current information,
that the allegations have merit and it therefore intends to defend these
actions vigorously.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no disagreements with the Company's independent auditors
which are reportable pursuant to Item 304 of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers of the Registrant may be
found in Part I of this report under the heading "EXECUTIVE OFFICERS OF THE
REGISTRANT" as permitted by General Instruction G to Form 10-K. Information
regarding directors of the Registrant may be found in the Registrant's Proxy
Statement for the Annual Meeting scheduled for May 20, 1997 under the heading
"NOMINEES FOR DIRECTOR", "DIRECTORS CONTINUING IN OFFICE", and "COMPLIANCE WITH
SECTION 16(a) OF THE SECURITIES AND EXCHANGE ACT OF 1934", all of which is
incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation may be found in the
Registrant's Proxy Statement for the Annual Meeting scheduled for May 20, 1997
under the heading "EXECUTIVE COMPENSATION" which is incorporated by reference.
57
<PAGE> 58
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management may be found in the Registrant's Proxy Statement for the Annual
Meeting scheduled for May 20, 1997 under the heading "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS" and "SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND
EXECUTIVE OFFICERS" which is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions may
be found in the Registrant's Proxy Statement for the Annual Meeting scheduled
for May 20, 1997 under the heading "EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT ARRANGEMENTS" which is incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ITEM 14A (1) FINANCIAL STATEMENTS
The following consolidated financial statements of American States
Financial Corporation and Subsidiaries are included in Item 8:
<TABLE>
<CAPTION>
Page Numbers
------------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors 34
Consolidated Balance Sheets - December 31, 1996 and 1995 35 - 36
Consolidated Statements of Income - Years ended
December 31, 1996, 1995 and 1994 37
Consolidated Statements of Shareholders' Equity - Years ended December 31, 1996, 1995 and 1994 38
Consolidated Statements of Cash Flows - Years ended December 31, 1996, 1995 and 1994 39
Notes to Consolidated Financial Statements 40 - 57
</TABLE>
58
<PAGE> 59
ITEM 14 (A) (2) FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of American
States Financial Corporations and subsidiaries are included in Item 14 (d):
<TABLE>
<S> <C> <C>
Page Number
I - Summary of Investments - Other than Investments in Related Parties 63
II - Condensed Financial Information of Registrant 64 - 67
III - Supplementary Insurance Information 67
IV - Reinsurance 68
V - Valuation and Qualifying Accounts 69
</TABLE>
All other schedules are omitted, either because they are not applicable,
not required, or because the information they contain is included elsewhere in
the consolidated financial statements or notes.
ITEM 14 (A) (3) LISTING OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- - --------- -------------------------------------------------------------------------------
<S> <C>
3.1 Registrant's Restated Articles of Incorporation
3.2 Registrant's Restated Code of Bylaws
4.1 Article V - "Number, Terms and Voting Rights of Shares" and
Article XI - "Provisions for Certain Business Combinations" of
the Registrant's Article of Incorporation, incorporated by
reference to the Registrant's Article of Incorporation filed
hereunder as Exhibit 3.1
4.2 Article I - "Shareholders" and Article VI - "Stock Certificates,
Transfer of Shares, Stock Records" of the Registrant's Code of
Bylaws, incorporated by reference to the Registrant's Code of
Bylaws filed hereunder as Exhibit 3.2
10.0 (1) Investment Management Agreement, dated July 1, 1996, between
Lincoln Investment Management, Inc. and American States Lloyds
Insurance Company
10.0 (2) Investment Management Agreement, dated May 26, 1996, between
Lincoln Investment Management, Inc. and the Registrant
10.0 (3) Investment Management Agreement, dated June 1, 1996, between
Lincoln Investment Management, Inc. and American States Life
Insurance Company
10.0 (4) Investment Management Agreement, dated July 1, 1996, between
Lincoln Investment Management, Inc. and American States
Insurance Company of Texas
10.0 (5) Investment Management Agreement, dated June 1, 1996, between
Lincoln Investment Management, Inc. and American States
Insurance Company, American Economy Insurance Company and
American States Preferred Insurance Company
10.0 (6) Investment Management Agreement, dated October 21, 1996, between
Lincoln Investment Management, Inc. and Insurance Company of
Illinois
10.1 Assumption Agreement, dated May 16, 1996, by and between the
Registrant and Lincoln National Corporation
10.2 Promissory Note, dated May 16, 1996, by and between the
Registrant and Lincoln National Corporation
10.3 American States Financial Corporation Stock Option Incentive Plan
10.4 American States Financial Corporation Executive Performance
Incentive Compensation Plan
10.5 American States Executive Salary Continuation Plan
10.6 (1) American States Insurance Companies Sustained Performance
Incentive Plan for Senior Management
</TABLE>
59
<PAGE> 60
<TABLE>
<CAPTION>
Exhibit
Number Description
- - --------- -------------------------------------------------------------------------------
<S> <C>
10.6 (2) American States Insurance Companies Sustained Performance Incentive Plan for
Second Vice Presidents
10.6 (3) American States Insurance Companies Sustained Performance Incentive Plan for
Assistant Vice Presidents, Assistant Treasurers, Actuaries and Other Key
Positions
10.6 (4) American States Insurance Companies Sustained Performance Incentive Plan for
Division Managers
10.6 (5) American States Insurance Companies Sustained Performance Incentive Plan for
Division Senior Department Managers
10.7 Lincoln National Corporation Executive Deferred Compensation Plan for Employees
10.8 Form of American States Financial Corporation Split-Dollar Life Insurance
Arrangements
10.9 American States Insurance Company Savings and Profit Sharing Plan
10.10 Employment Agreement, dated March 18, 1996, between Registrant and F. Cedric
McCurley
10.11 Employment Agreement, dated March 18, 1996, between Registrant and William J.
Lawson
10.12 Employment Agreement, dated March 18, 1996, between Registrant and Jerome T.
Gallogly
10.13 Employment Agreement, dated March 18, 1996, between Registrant and Todd R.
Stephenson
10.14 Registration Rights Agreement, dated May 29, 1996, between the Registrant and
Lincoln National Corporation
10.15 (1) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American States Insurance Company
10.15 (2) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American Economy Insurance Company
10.15 (3) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American States Preferred Insurance Company
10.15 (4) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American States Life Insurance Company
10.15 (5) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American States Insurance Company of Texas
10.15 (6) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and Insurance Company of Illinois
10.16 (1) Tax Sharing Agreement, dated August 22, 1996, between the Registrant and
Lincoln National Corporation
10.16 (2) Tax Sharing Agreement, dated August 22, 1996, between the Registrant, American
States Insurance Company and Lincoln National Corporation
10.16 (3) Tax Sharing Agreement, dated August 22, 1996, between American States
Insurance Company, American Economy Insurance Company and Lincoln National
Corporation
10.16 (4) Tax Sharing Agreement, dated August 22, 1996, between American States
Insurance Company, American States Preferred Insurance Company and Lincoln
National Corporation
10.16 (5) Tax Sharing Agreement, dated August 22, 1996, between American States
Insurance Company, American States Life Insurance Company and Lincoln National
Corporation
10.16 (6) Tax Sharing Agreement, dated October 9, 1996, between American States
Insurance Company, Insurance Company of Illinois and Lincoln National
Corporation
10.16 (7) Tax Sharing Agreement, dated September 23, 1996, between Lincoln National
Corporation and Linsco Reinsurance Company
</TABLE>
60
<PAGE> 61
<TABLE>
<CAPTION>
Exhibit
Number Description
- - --------- -------------------------------------------------------------------------------
<S> <C>
10.16 (8) Tax Sharing Agreement, dated August 22, 1996, between American States
Insurance Company, City Insurance Agency, Inc. and Lincoln National Corporation
10.16 (9) Tax Sharing Agreement, dated November 22, 1996, between American States
Insurance Company, American States Lloyds Insurance Company and Lincoln
National Corporation
10.16 (10) Tax Sharing Agreement, dated November 22, 1996, between American Economy
Insurance Company, American States Insurance Company of Texas and Lincoln
National Corporation
10.17 (1) Reinsurance Agreement, dated January 1, 1984, between American States
Life Insurance Company and The Lincoln National Life Insurance Company, as
amended on January 14, 1985; April 23, 1985; January 31, 1986; March 17, 1986;
July 16, 1986; July 19, 1990; August 13, 1990; January 15, 1992; April 19,
1993; June 30, 1993; November 3, 1994; November 5, 1994; December 11, 1995 and
April 19, 1996
10.17 (2) Reinsurance Agreement, dated March 1, 1983, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on November 30, 1984; April 23, 1985; January 31, 1986; March 17, 1986;
December 17, 1986; January 15, 1992; November 3, 1994; and April 19, 1996
10.17 (3) Accident and Sickness Reinsurance Agreement, dated June 15, 1964, between
American States Life Insurance Company and The Lincoln National Life Insurance
Company, as amended on October 3, 1986
10.17 (4) Coinsurance Agreement, dated October 31, 1985, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on December 17, 1986; January 15, 1992; February 18, 1992; November 3, 1994;
March 14, 1996 and April 19, 1996
10.17 (5) Coinsurance Agreement, dated January 1, 1981, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on November 13, 1981; December 2, 1981; December 16, 1983; November 7, 1984;
March 17, 1986; January 15, 1992; November 3, 1994; and April 19, 1996
10.17 (6) Coinsurance Agreement, dated January 1, 1983, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on October 17, 1985
10.17 (7) Disability Income Extended-Wait Reinsurance Agreement, dated January 1,
1995, between American States Life Insurance Company and The Lincoln National
Life Insurance Company, as amended on September 1, 1995
10.17 (8) Reinsurance Agreement, dated January 1, 1963, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on June 11, 1969; June 26, 1972; January 3, 1975; May 16, 1977; March 28, 1979;
May 25, 1979; September 2, 1980; November 13, 1981; December 2, 1981; December
16, 1983; January 3, 1985; April 23, 1985; January 31, 1986; March 17,
1986; January 15, 1992; November 3, 1994; and April 19, 1996
10.18 (1) Services Agreement, dated October 10, 1996 between the Registrant and
its subsidiaries and affiliates and Lincoln National Corporation and its
subsidiaries and affiliates
10.18 (2) Services Agreement, dated September 26, 1996, between Insurance Company of
Illinois and Lincoln National Corporation and its subsidiaries and affiliates
10.19 Management Agreement, dated October 1, 1989, by and between American States
Insurance Company and Linsco Reinsurance Company, as amended on August 28,
1990
10.20 (1) Lease and Agreement, dated as of August 1, 1984, between Clinton Street
Limited Partnership and American States Insurance Company
10.20 (2) Assignment of Lease and Guaranty, dated as of August 1, 1984, from Clinton
Street Limited Partnership to Clinton Holding Corporation
</TABLE>
61
<PAGE> 62
<TABLE>
<CAPTION>
Exhibit
Number Description
- - --------- -------------------------------------------------------------------------------
<S> <C>
10.20 (3) Second Assignment of Lease and Guaranty, dated as of August 1,
1984, from Clinton Street Limited Partnership to Clinton Holding
Corporation
10.20 (4) Reassignment of Lease and Guaranty, dated as of August 1, 1984,
from Clinton Holding Corporation to the Connecticut Bank and
Trust Company, National Association and F.W. Kawam, as Trustees
10.21 Software License Agreement, dated April 1, 1989, by and between
American States Life Insurance Company and Lincoln National Risk
Management, Inc., as amended May 5, 1994
10.22 Indemnification Agreement, dated May 29, 1996, between the
Registrant, American States Insurance Company and Lincoln
National Corporation
10.23 (1) Surety Bond, effective November 3, 1993, between American States
Insurance Company, the Industrial Development Authority of the
City of Clayton, Missouri and Mercantile Bank of St. Louis, N.A
10.24 Commitment Letter, dated April 23, 1994, by and between
Registrant, J.P. Morgan Securities Inc. and Morgan Guaranty Trust
Company of New York
10.25 Agreement, dated January 1, 1997, between Registrant and Robert
A. Anker (regarding employment)
11 Computation of Earnings Per Share
21 Subsidiaries of the registrant
23 Consent of Independent Auditors
24 Power of attorney
27 Financial Data Schedule
28 Information from reports furnished to state regulatory authorities
</TABLE>
ITEM 14 (B)
During the fourth quarter of the year ended December 31, 1996, no reports on
Form 8-K were filed with the Commission.
ITEM 14 (C)
The exhibits of American States Financial Corporation and subsidiaries are
listed in Item 14 (a) (3) above.
ITEM 14 (D)
The financial statement schedules for American States Financial Corporations
are listed in Item 14 (a) (2) above.
62
<PAGE> 63
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D
-------- -------- -------- --------
Amount at
Which Shown
in the
Type of Investment Cost Value Balance Sheet
<S> <C> <C> <C>
Fixed maturity securities, available-for-sale:
Bonds:
United States Government and government
agencies and authorities.......................... $188,573 $195,837 $195,837
States, municipalities and political subdivisions.... 1,965,798 2,096,101 2,096,101
Mortgage-backed securities........................... 298,733 300,816 300,816
Foreign governments.................................. 6,193 7,217 7,217
Public utilities..................................... 181,810 185,912 185,912
All other corporate bonds............................ 864,692 900,773 900,773
Redeemable preferred stock............................... 74,008 77,224 77,224
---------- ---------- ----------
Total....................................... 3,579,807 $3,763,880 3,763,880
==========
Equity securities, available-for-sale:
Common stocks:
Public utilities..................................... 9,588 10,938 10,938
Banks, trust and insurance companies................. 18,535 26,164 26,164
Industrial, miscellaneous and all other.............. 159,677 206,024 206,024
Perpetual preferred stocks............................... 174,920 192,011 192,011
---------- ---------- ----------
Total....................................... 362,720 $435,137 435,137
==========
Mortgage loans on real estate................................ 32,293 32,293
Short-term investments....................................... 73,276 73,276
Other invested assets........................................ 37,986 37,986
---------- ----------
Total investments................................. $4,086,082 $4,342,572
========== ==========
</TABLE>
63
<PAGE> 64
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
American States Financial Corporation (Parent Company Only)
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Assets:
Investments in subsidiaries*.......................... $1,591,695 $1,668,707
Short-term investments................................ 70,511 -
Cash.................................................. 5 -
Other assets.......................................... 1,479 -
---------- ----------
Total assets.................................. $1,663,690 $1,668,707
========== ==========
Liabilities:
Amounts payable to subsidiaries*...................... $ 23,048 $ -
Short-term debt due LNC............................... 66,667 -
Notes payable......................................... 99,511 -
Debt due LNC.......................................... 133,333 -
Other liabilities..................................... 5,092 -
---------- ----------
Total liabilities............................. 327,651 -
Shareholders' equity:
Common stock.......................................... 304,493 387,547
Net unrealized gain on securities available-for-sale
from subsidiaries.................................. 163,647 211,767
Retained earnings..................................... 867,899 1,069,393
---------- ----------
Total shareholders' equity.................... 1,336,039 1,668,707
---------- ----------
Total liabilities and shareholders' equity.... $1,663,690 $1,668,707
========== ==========
</TABLE>
* Eliminated in consolidation.
These condensed financial statements should be read in conjunction with the
consolidated financial statements and accompanying footnotes of American States
Financial Corporation and subsidiaries.
64
<PAGE> 65
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
STATEMENT OF INCOME
American States Financial Corporation (Parent Company Only)
(Dollars in Thousands)
<TABLE>
Year Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenue..................................................... $ 2,119 $ - $ -
Expenses:
Operating and administrative........................... 366 - -
Interest on debt....................................... 12,372 - -
-------- -------- --------
Total expenses................................. 12,738 - -
-------- -------- --------
Loss before federal income tax benefit and equity
in undistributed earnings of subsidiaries........... (10,619) - -
Federal income tax benefit................................. (3,716) - -
-------- -------- --------
Loss before undistributed earnings of subsidiaries..... (6,903) - -
Equity in undistributed earnings of subsidiaries*.......... 176,609 178,264 184,558
-------- -------- --------
Net income..................................... $169,706 $178,264 $184,558
======== ======== ========
</TABLE>
* Eliminated in consolidation.
These condensed financial statements should be read in conjunction with the
consolidated financial statements and accompanying footnotes of American States
Financial Corporation and subsidiaries.
65
<PAGE> 66
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
STATEMENT OF CASH FLOWS
American States Financial Corporation (Parent Company Only)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.................................................. $169,706 $178,264 $184,558
Adjustments to reconcile net income to net cash used
by operating activities:
Equity in undistributed earnings of subsidiaries*....... (176,609) (178,264) (184,558)
Other................................................... 4,889 - -
--------- --------- ---------
Net adjustments................................. (171,720) (178,264) (184,558)
--------- --------- ---------
Net cash used in operating activities........... (2,014) - -
Cash Flows from Investing Activities:
Investments in consolidated subsidiaries*............... (140,500) - -
Net increase in short-term investments.................. (70,511)
Other investment activity with subsidiaries*............ 23,048 - -
--------- --------- ---------
Net cash used in investing activities........... (187,963) - -
Cash Flows from Financing Activities:
Proceeds from issuance of common stock.................. 215,182 - -
Dividends paid to shareholders.......................... (25,200) - -
--------- --------- ---------
Net cash provided by financing activities....... 189,982 - -
--------- --------- ---------
Net increase in cash and short-term investments. 5 - -
Cash at beginning of period................................. - - -
--------- --------- ---------
Cash at end of period........................... $ 5 $ - $ -
========= ========= =========
</TABLE>
* Eliminated in consolidation.
These condensed financial statements should be read in conjunction with the
consolidated financial statements and accompanying footnotes of American States
Financial Corporation and subsidiaries.
66
<PAGE> 67
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in Thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
------------- ------------- ------------- ------------- ---------------- ----------
Deferred Future Policy
Policy Benefits, Losses Other Policy Premium
Acquisition Claims, and Unearned Claims and and Other
Segment Costs Loss Expenses Premiums Benefits Payable Revenue
------------- ------------- ------------- ------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Property/casualty insurance............ $136,893 $2,426,105 $711,955 $- $1,617,234
Life operations........................ 65,340 442,243 - - 56,888
Holding company........................ - - - - -
________ _________ ________ ___ _________
Total....................... $202,233 $2,868,348 $711,955 $- $1,674,122
=========== ================ ============== ================ ===========
Year Ended December 31, 1995
Property/casualty insurance............ $138,272 $2,414,575 $718,478 $- $1,689,595
Life operations........................ 60,920 413,762 - - 56,791
________ _________ ________ ___ _________
Total....................... $199,192 $2,828,337 $718,478 $- $1,746,386
=========== ================ ============== ================ ===========
Year Ended December 31, 1994
Property/casualty insurance............ $140,122 $2,496,703 $725,448 $- $1,693,442
Life operations........................ 70,667 381,532 - - 52,529
________ _________ ________ ___ _________
Total....................... $210,789 $2,878,235 $725,448 $- $1,745,971
=========== ================ ============== ================ ===========
Col. G Col. H Col. I Col. J Col. K
----------- ---------------- -------------- ---------------- -----------
Benefit, Claims Amortization
Net Losses, and of Deferred Other
Investment Settlement Policy Ac- operating Premiums
Income (A) Expenses (C) quisition Cost expenses (A)(C) Written (B)
----------- ---------------- -------------- ---------------- -----------
Year Ended December 31, 1996
Property/casualty insurance............ $238,227 $1,199,875 $329,721 $175,928 $1,600,887
Life operations........................ 33,975 49,004 8,291 12,735
Holding company........................ 2,112 - - 12,738
________ _________ ________ ________
Total....................... $274,314 $1,248,879 $338,012 $201,401
=========== ================ ============== ================
Year Ended December 31, 1995
Property/casualty insurance............ $233,759 $1,193,710 $352,503 $200,236 $1,671,560
Life operations........................ 32,810 48,560 7,337 14,191
________ _________ ________ ________
Total....................... $266,569 $1,242,270 $359,840 $214,427
=========== ================ ============== ================
Year Ended December 31, 1994
Property/casualty insurance............ $230,945 $1,226,240 $355,528 $180,717 $1,655,459
Life operations........................ 29,509 45,717 4,219 13,673
________ ________ ________ ________
Total....................... $260,454 $1,271,957 $359,747 $194,390
=========== ================ ============== ================
</TABLE>
=========================
(A) Allocations of Net Investment Income and Other Operating Expenses are
based on a number of assumptions and estimates, and the results would
change if different methods were applied.
(B) Does not apply to life insurance. This amount includes premiums from
reinsurance assumed and is net of premiums on reinsurance ceded.
(C) In 1996, interest expense is included in Other Operating Expenses. In
1995, the cost related to implementing the realignment plan to consolidate
field operations from twenty divisional offices into four regional offices was
allocated to loss adjustment expenses and other operating expenses in the
amounts of $3,581 and $17,410, respectively.
67
<PAGE> 68
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
(Dollars in Thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
----------- ----------- ---------- ---------- ----------- -------
% of
Ceded to Assumed Amount
Gross Other from Other Net Assumed
Segment Amount Companies Companies Amount to Net
----------- ----------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
- - ---------------------------------------------------
Life insurance in force (A)...................... $15,366,897 $1,815,434 $ - $13,551,463 0.0%
=========== ========== ========== ===========
Insurance premiums and other
considerations:
Property/casualty insurance.................... $1,650,216 $48,603 $15,622 $1,617,234 1.0%
Life insurance and annuities................... 58,975 4,684 2,596 56,888 4.6
__________ _________ _______ __________
Total..................................... $1,709,191 $53,287 $18,218 $1,674,122 1.1
=========== ========== ========== ===========
Year Ended December 31, 1995
- - ---------------------------------------------------
Life insurance in force (A)...................... $15,405,804 $1,820,391 $ - $13,585,413 0.0%
=========== ========== ========== ===========
Insurance premiums and other
considerations:
Property/casualty insurance.................... $1,689,668 $46,635 $46,562 $1,689,595 2.8%
Life insurance and annuities................... 57,872 3,951 2,870 56,791 5.1
__________ _________ _______ __________
Total..................................... $1,747,540 $50,586 $49,432 $1,746,386 2.8
=========== ========== ========== ===========
Year Ended December 31, 1994
- - ---------------------------------------------------
Life insurance in force (A)...................... $14,742,987 $1,289,364 $ - $13,453,623 0.0%
=========== ========== ========== ===========
Insurance premiums and other
considerations:
Property/casualty insurance.................... $1,686,388 $53,977 $61,031 $1,693,442 3.6%
Life insurance and annuities................... 54,469 4,000 2,060 52,529 3.9
__________ _________ _______ __________
Total..................................... $1,740,857 $57,977 $63,091 $1,745,971 3.6
=========== ========== ========== ===========
</TABLE>
__________________
(A) At end of year.
68
<PAGE> 69
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D. Col. E
------ ------ --------- ------- ------
Additions
---------
(1) (2)
Balance at Charged to Balance at
Beginning Charged to Other Accounts- Deductions- End of
Description of Period Costs & Expenses Describe (A) Describe Period
----------- ---------- ---------------- ---------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
- - ----------------------------
Deducted from asset accounts:
Allowance for doubtful
accounts.............................. 2,860 306 - 121 (B) 3,045
Allowance for losses on
operating properties.................. 28,350 - - 1,434 (D) 26,916
Year Ended December 31, 1995
- - ----------------------------
Deducted from asset accounts:
Allowance for losses on
mortgage loans........................ $4,435 $ 155 $(260) $4,330 (C) $-
Allowance for doubtful
accounts.............................. 2,610 533 - 283 (B) 2,860
Allowance for losses on
operating properties.................. - 28,350 - - 28,350
Year Ended December 31, 1994
- - ----------------------------
Deducted from asset accounts:
Allowance for losses on
mortgage loans......................... $5,968 $ 76 $ - $1,609 (C) $4,435
Allowance for doubtful
accounts............................... 2,904 1,817 - 2,111 (B) 2,610
</TABLE>
________________
(A) Transfer between investment classifications.
(B) Uncollectible accounts written off.
(C) All revenue for losses on mortgage loans deductions reflect sales or
foreclosures of the underlying holdings.
(D) Allowance for losses on operating properties deductions reflect the sale
of the underlying properties.
69
<PAGE> 70
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX FOR THE ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- --------------------------------------------------------------------------------- ----
<S> <C> <C>
3.1 Registrant's Restated Articles of Incorporation *
3.2 Registrant's Restated Code of Bylaws *
4.1 Article V - "Number, Terms and Voting Rights of Shares" and Article XI -
"Provisions for Certain Business Combinations" of the Registrant's Article of
Incorporation, incorporated by reference to the Registrant's Article of
Incorporation filed hereunder as Exhibit 3.1 *
4.2 Article I - "Shareholders" and Article VI - "Stock Certificates, Transfer of
Shares, Stock Records" of the Registrant's Code of Bylaws, incorporated by
reference to the Registrant's Code of Bylaws filed hereunder as Exhibit 3.2 *
10.0 (1) Investment Management Agreement, dated July 1, 1996, between Lincoln Investment
Management, Inc. and American States Llyods Insurance Company *
10.0 (2) Investment Management Agreement, dated May 26, 1996, between Lincoln Investment
Management, Inc. and the Registrant *
10.0 (3) Investment Management Agreement, dated June 1, 1996, between Lincoln Investment
Management, Inc. and American States Life Insurance Company *
10.0 (4) Investment Management Agreement, dated July 1, 1996, between Lincoln Investment
Management, Inc. and American States Insurance Company of Texas *
10.0 (5) Investment Management Agreement, dated June 1, 1996, between Lincoln Investment
Management, Inc. and American States Insurance Company, American Economy
Insurance Company and American States Preferred Insurance Company *
10.0 (6) Investment Management Agreement, dated October 21, 1996, between Lincoln
Investment Management, Inc. and Insurance Company of Illinois *
10.1 Assumption Agreement, dated May 16, 1996, by and between the Registrant and
Lincoln National Corporation *
10.2 Promissory Note, dated May 16, 1996, by and between the Registrant and Lincoln
National Corporation *
10.3 American States Financial Corporation Stock Option Incentive Plan *
10.4 American States Financial Corporation Executive Performance Incentive
Compensation Plan *
10.5 American States Executive Salary Continuation Plan *
10.6 (1) American States Insurance Companies Sustained Performance Incentive Plan for
Senior Management *
10.6 (2) American States Insurance Companies Sustained Performance Incentive Plan for
Second Vice Presidents *
10.6 (3) American States Insurance Companies Sustained Performance Incentive Plan for
Assistant Vice Presidents, Assistant Treasurers, Actuaries and Other Key
Positions *
10.6 (4) American States Insurance Companies Sustained Performance Incentive Plan for
Division Managers *
10.6 (5) American States Insurance Companies Sustained Performance Incentive Plan for
Division Senior Department Managers *
10.7 Lincoln National Corporation Executive Deferred Compensation Plan for Employees*
10.8 Form of American States Financial Corporation Split-Dollar Life Insurance
Arrangements *
10.9 American States Insurance Company Savings and Profit Sharing Plan *
* Incorporated by Reference
</TABLE>
70
<PAGE> 71
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- --------------------------------------------------------------------------------- ----
<S> <C> <C>
10.10 Employment Agreement, dated March 18, 1996, between Registrant and F.
Cedric McCurley *
10.11 Employment Agreement, dated March 18, 1996, between Registrant and William J.
Lawson *
10.12 Employment Agreement, dated March 18, 1996, between Registrant and Jerome T.
Gallogly *
10.13 Employment Agreement, dated March 18, 1996, between Registrant and Todd
R. Stephenson *
10.14 Registration Rights Agreement, dated May 29, 1996, between the
Registrant and Lincoln National Corporation 75
10.15 (1) ASFC Short-Term Investment Pool Participation Agreement, dated September
16, 1996, between the Registrant and American States Insurance Company *
10.15 (2) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American Economy Insurance Company *
10.15 (3) ASFC Short-Term Investment Pool Participation Agreement, dated September
16, 1996, between the Registrant and American States Preferred Insurance
Company *
10.15 (4) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American States Life Insurance Company *
10.15 (5) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and American States Insurance Company of Texas *
10.15 (6) ASFC Short-Term Investment Pool Participation Agreement, dated September 16,
1996, between the Registrant and Insurance Company of Illinois *
10.16 (1) Tax Sharing Agreement, dated August 22, 1996, between the Registrant and
Lincoln National Corporation *
10.16 (2) Tax Sharing Agreement, dated August 22, 1996, between the Registrant, American
States Insurance Company and Lincoln National Corporation *
10.16 (3) Tax Sharing Agreement, dated August 22, 1996, between American States Insurance
Company, American Economy Insurance Company and Lincoln National Corporation *
10.16 (4) Tax Sharing Agreement, dated August 22, 1996, between American States Insurance
Company, American States Preferred Insurance Company and Lincoln National
Corporation *
10.16 (5) Tax Sharing Agreement, dated August 22, 1996, between American States Insurance
Company, American States Life Insurance Company and Lincoln National
Corporation *
10.16 (6) Tax Sharing Agreement, dated October 9, 1996, between American States Insurance
Company, Insurance Company of Illinois and Lincoln National Corporation *
10.16 (7) Tax Sharing Agreement, dated September 23, 1996, between Lincoln National
Corporation and Linsco Reinsurance Company *
10.16 (8) Tax Sharing Agreement, dated August 22, 1996, between American States Insurance
Company, City Insurance Agency, Inc. and Lincoln National Corporation *
10.16 (9) Tax Sharing Agreement, dated November 22, 1996, between American States
Insurance Company, American States Lloyds Insurance Company and Lincoln
National Corporation 91
10.16 (10) Tax Sharing Agreement, dated November 22, 1996, between American Economy
Insurance Company, American States Insurance Company of Texas and Lincoln
National Corporation 100
* Incorporated by Reference
</TABLE>
71
<PAGE> 72
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- --------------------------------------------------------------------------------- ----
<S> <C> <C>
10.17 (1) Reinsurance Agreement, dated January 1, 1984, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on January 14, 1985; April 23, 1985; January 31, 1986; March 17, 1986; July 16,
1986; July 19, 1990; August 13, 1990; January 15, 1992; April 19, 1993; June
30, 1993; November 3, 1994; November 5, 1994; December 11, 1995 and April 19,
1996 *
10.17 (2) Reinsurance Agreement, dated March 1, 1983, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on November 30, 1984; April 23, 1985; January 31, 1986; March 17, 1986;
December 17, 1986; January 15, 1992; November 3, 1994; and April 19, 1996 *
10.17 (3) Accident and Sickness Reinsurance Agreement, dated June 15, 1964, between
American States Life Insurance Company and The Lincoln National Life
Insurance Company, as amended on October 3, 1986 *
10.17 (4) Coinsurance Agreement, dated October 31, 1985, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on December 17, 1986; January 15, 1992; February 18, 1992; November 3,
1994; March 14, 1996 and April 19, 1996 *
10.17 (5) Coinsurance Agreement, dated January 1, 1981, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on November 13, 1981; December 2, 1981; December 16, 1983; November 7, 1984;
March 17, 1986; January 15, 1992; November 3, 1994; and April 19, 1996 *
10.17 (6) Coinsurance Agreement, dated January 1, 1983, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on October 17, 1985 *
10.17 (7) Disability Income Extended-Wait Reinsurance Agreement, dated January 1, 1995,
between American States Life Insurance Company and The Lincoln National
Life Insurance Company, as amended on September 1, 1995 *
10.17 (8) Reinsurance Agreement, dated January 1, 1963, between American States Life
Insurance Company and The Lincoln National Life Insurance Company, as amended
on June 11, 1969; June 26, 1972; January 3, 1975; May 16, 1977; March 28, 1979;
May 25, 1979; September 2, 1980; November 13, 1981; December 2, 1981; December
16, 1983; January 3, 1985; April 23, 1985; January 31, 1986; March 17,
1986; January 15, 1992; November 3, 1994; and April 19, 1996 *
10.18 (1) Services Agreement, dated October 10, 1996 between the Registrant and its
subsidiaries and affiliates and Lincoln National Corporation and its
subsidiaries and affiliates *
10.18 (2) Services Agreement, dated September 26, 1996, between Insurance Company of
Illinois and Lincoln National Corporation and its subsidiaries and affiliates *
10.19 Management Agreement, dated October 1, 1989, by and between American States
Insurance Company and Linsco Reinsurance Company, as amended on August 28, 1990 *
10.20 (1) Lease and Agreement, dated as of August 1, 1984, between Clinton Street
Limited Partnership and American States Insurance Company *
10.20 (2) Assignment of Lease and Guaranty, dated as of August 1, 1984, from Clinton
Street Limited Partnership to Clinton Holding Corporation *
10.20 (3) Second Assignment of Lease and Guaranty, dated as of August 1, 1984, from
Clinton Street Limited Partnership to Clinton Holding Corporation *
* Incorporated by Reference
</TABLE>
72
<PAGE> 73
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- --------------------------------------------------------------------------------- ----
<S> <C> <C>
10.20 (4) Reassignment of Lease and Guaranty, dated as of August 1, 1984, from Clinton
Holding Corporation to the Connecticut Bank and Trust Company, National
Association and F.W. Kawam, as Trustees *
10.21 Software License Agreement, dated April 1, 1989, by and between American States
Life Insurance Company and Lincoln National Risk Management, Inc., as amended May
5, 1994 *
10.22 Indemnification Agreement, dated May 29, 1996, between the Registrant, American
States Insurance Company and Lincoln National Corporation 109
10.23 (1) Surety Bond, effective November 3, 1993, between American States Insurance
Company, the Industrial Development Authority of the City of Clayton, Missouri and
Mercantile Bank of St. Louis, N.A *
10.24 Commitment Letter, dated April 23, 1994, by and between Registrant, J.P. Morgan
Securities Inc. and Morgan Guaranty Trust Company of New York *
10.25 Employment Agreement, dated January 1, 1997, between Registrant and Robert A. Anker 115
11 Computation of Earnings Per Share 124
21 Subsidiaries of the registrant *
23 Consent of Independent Auditors 125
24 Power of attorney *
27 Financial Data Schedule 126
28 Information from reports furnished to state regulatory authorities 127
* Incorporate by Reference
</TABLE>
73
<PAGE> 74
SIGNATURES
Pursuant to the requirements of Section 13 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:
AMERICAN STATES FINANCIAL CORPORATION
By /s/ Robert A. Anker
-----------------------------------
Robert A. Anker
Director, Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
By /s/ Robert A. Anker Director, Chairman and February 19, 1997
--------------------------- Chief Executive Officer
Robert A. Anker
By /s/ William J. Lawson Director, President and February 19, 1997
--------------------------- Chief Operating Officer
William J. Lawson
By /s/ Todd R. Stephenson Senior Vice President, Treasurer February 19, 1997
--------------------------- and Chief Financial Officer
Todd R. Stephenson
By /s/ Thomas R. Kaehr Vice President and February 19, 1997
--------------------------- Chief Accounting Officer
Thomas R. Kaehr
By /s/ Edwin J. Goss Director February 19, 1997
---------------------------
Edwin J. Goss
By /s/ Stephen J. Paris Director February 19, 1997
---------------------------
Stephen J. Paris
By /s/ Paula M. Parker-Sawyers Director February 19, 1997
---------------------------
Paula M. Parker-Sawyers
By /s/ William E. Pike Director February 19, 1997
---------------------------
William E. Pike
By /s/ Milton O. Thompson Director February 19, 1997
---------------------------
Milton O. Thompson
By /s/ Richard C. Vaughan Director February 19, 1997
---------------------------
Richard C. Vaughan
</TABLE>
74
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT Exhibit 10.14
This REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of May 29,
1996, is between LINCOLN NATIONAL CORPORATION, an Indiana corporation ("LNC")
and AMERICAN STATES FINANCIAL CORPORATION, an Indiana corporation (the
"Company").
WHEREAS, LNC is the owner of all of the Company's issued and outstanding
shares of common stock, no par value "Common Stock") at the date hereof, and
LNC and the Company have determined to cause the Company to offer to the public
(the "Public Offering") up to an aggregate of 11,500,000 outstanding and new
shares of the Common Stock, in a primary offering.
WHEREAS, following completion of the Public Offering, LNC will continue to
own approximately 83% of the outstanding shares of Common Stock (approximately
81% if the over allotment option granted to the underwriters of the Public
Offering is exercised in full).
WHEREAS, the parties hereto desire to enter into this Agreement which sets
forth the terms of certain registration rights applicable to the Registrable
Securities (as defined below) subsequent to the Public Offering.
NOW, THEREFORE, upon the terms and conditions, and the mutual promises
herein contained, and for good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
initially capitalized terms shall have the following meanings:
(a) "Affiliate" means, with respect to any person, any other person who,
directly or indirectly, is in control of, is controlled by or is under common
control with the former person.
(b) "Holder" means LNC and any "transferee" (as such term is defined in
Section 11 hereof) which is the record holder of Registrable Securities.
(c) "Registrable Securities" means the Common Stock (as presently
constituted), any stock or other securities into which or for which such Common
Stock may hereafter be changed, converted or exchanged, and any other
securities issued to holders of such Common Stock (or such shares into which or
for which such shares are so changed, converted or exchanged) upon any
reclassification, share combination, share subdivision, share dividend, merger,
consolidation or similar transactions or events, provided that any such
securities shall cease to be Registrable Securities (i) if a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with the plan of distribution set forth in such registration
statement, (ii) if such securities shall have been distributed pursuant to Rule
144 or Rule 144A, or (iii) if such securities are held by a Holder other than
LNC, unless such Holder shall furnish the Company an opinion of counsel, which
opinion shall be reasonably satisfactory to the Company, to the effect that all
of such securities are
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not permitted to be distributed by such Holder in one transaction
pursuant to Rule 144 or Rule 144A.
(d) "Registration Expenses" means all reasonable expenses in connection
with any registration of securities pursuant to this Agreement including,
without limitation, the following: (i) SEC filing fees; (ii) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Registrable Securities to be disposed
of under the Securities Act; (iii) all expenses in connection with the
preparation, printing and filing of the registration statement, any preliminary
prospectus or final prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to any Holders, underwriters and
dealers and all expenses incidental to delivery of the Registrable Securities;
(iv) the cost of producing blue sky or legal investment memoranda; (v) all
expenses in connection with the qualification of the Registrable Securities to
be disposed of for offering and sale under state securities laws, including the
fees and disbursements of counsel for the underwriters or Holders in connection
with such qualification and in connection with any blue sky and legal
investments surveys; (vi) the filing fees incident to securing any required
review by the National Association of Securities Dealers, inc. of the terms of
the sale of the Registrable Securities to be disposed of, (vii) transfer
agents', depositories' and registrars' fees and the fees of any other agent
appointed in connection with such offering; (viii) all security engraving and
security printing expenses, (ix) all fees and expenses payable in connection
with the listing of the Registrable Securities on each securities exchange or
inter-dealer quotation system on which a class of common equity securities of
the Company is then listed, (x) courier, overnight, delivery, word processing
and duplication expenses and (xi) any one-time payment for directors and
officers insurance directly related to such offering, provided the insurer
provides a separate statement for such payment.
(e) "Rule 144" means Rule 144 promulgated under the Securities Act, or any
successor rule to similar effect.
(f) "Rule 144A" means Rule 144A promulgated under the Securities Act, or
any successor rule to similar effect.
(f) "SEC" means the United States Securities and Exchange Commission.
(g) "Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
2. Demand Registration.
(a) At any time after the closing date of the Public Offering, upon
written notice from a Holder in the manner set forth in Section 12(h) hereof
requesting that the Company effect the registration under the Securities Act of
any or all of the Registrable Securities held by such Holder, which notice
shall specify the intended method or methods of disposition of such Registrable
Securities, the Company shall use its best efforts to effect, in the manner set
forth in Section 5, the registration under the Securities Act of such
Registrable
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Securities for disposition in accordance with the intended method
or methods of disposition stated in such request, provided that:
(i) if, within 5 business days of receipt of a registration request
pursuant to this Section 2(a), the Company is advised in writing (with a
copy to the Holder requesting registration) by the managing underwriter
of the proposed offering described below that, in such firm's good faith
opinion, a registration at the time and on the terms requested would
materially and adversely affect any immediately planned offering of
securities by the Company that had been contemplated by the Company prior
to receipt of notice requesting registration pursuant to this Section
2(a) (a "Transaction Blackout"), the Company shall not be required to
effect a registration pursuant to this Section 2(a) until the earliest of
(A) the abandonment of such offering, (C) the termination of any "hold
back" period obtained by the underwriter(s) of such offering from any
person in connection therewith or (D) 180 days after receipt by the
Holder requesting registration of the managing underwriter's written
opinion referred to above in this subsection (i));
(ii) if, while a registration request is pending pursuant to this
Section 2(a), the Company has determined in good faith that (A) the
filing of a registration statement would require the disclosure of
material information that the Company has a bona fide business purpose
for preserving as confidential or (B) the Company then is unable to
comply with SEC requirements applicable to the requested registration,
the Company shall not be required to effect a registration pursuant to
this Section 2(a) until the earlier of (1) the date upon which such
material information is otherwise disclosed to the public or ceases to be
material or the Company is able to so comply with applicable SEC
requirements, as the case may be, and (2) 45 days after the Company makes
such good-faith determination, provided that the Company shall not be
permitted to delay a requested registration in reliance on this clause
(ii) more than once in any 24-month period; and
(iii) the Company shall not be obligated to file a registration
statement relating to a registration request pursuant to this Section 2:
(A) within a period of 12 months after the effective date of any other
registration statement of the Company demanded pursuant to this
Section 2(a); (B) if such registration request is for a number of
Registrable Securities less than 10% of the common equity of the Company
then owned in the aggregated by the Holders; or (C) if Holders in the
aggregate own less than 10% of the common equity of the Company.
(b) Notwithstanding any other provision of this Agreement to the
contrary:
(i) a registration requested by a Holder pursuant to this Section 2,
shall not be deemed to have been effected (and, therefore, not requested
for purposes of subsection 2(a), (A) unless the registration statement
filed in connection therewith has become effective, (B)
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if after it has become effective such registration is interfered with
by any stop order, injunction or other order or requirement of the SEC or
other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof,
not less than 90% of the Registrable Securities requested to be
registered cannot be completely distributed in accordance with the plan
of distribution set forth in the related registration statement or (C) if
the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration
are not satisfied (other than by reason of some act or omission by such
Holder) or waived by the underwriters;
(ii) a registration requested by a Holder pursuant to this Section 2
and later withdrawn at the request of such Holder shall be deemed to have
been effected (and, therefore, requested for purposes of Section 2(a)),
whether withdrawn by the Holder prior to or after the effectiveness of
such requested registration, except that if such request is withdrawn by
a Holder prior to the filing of a registration statement with the SEC,
such Holder can require the Company to disregard for purposes of Section
2(a)(iii) one such requested registration in any twelve month period; and
(iii) nothing herein shall modify Holder's obligation to pay the
Registration Expenses incurred in connection with any withdrawn
registration.
(c) In the event that any registration pursuant to this Section 2 shall
involve, in whole or in part, an underwritten offering, a Holder shall have the
right to designate an underwriter reasonably satisfactory to the Company as the
lead managing underwriter of such underwritten offering and the Company shall
have the right to designate one underwriter reasonably satisfactory to the
Holder as a co-manager of such underwritten offering.
(d) The Company shall have the right to cause the registration of
additional securities for sale for the account of any person (including the
Company) in any registration of Registrable Securities requested by a Holder
pursuant to Section 2(a); provided that the Company shall not have the right to
cause the registration of such additional securities if such Holder is advised
in writing (with a copy to the Company) by the managing underwriter that, in
such firm's good faith opinion, registration of such additional securities
would materially and adversely affect the offering and sale of the Registrable
Securities then contemplated by such Holder.
3. Piggyback Registration. If the Company at any time proposes to
register any of its Common Stock or any other of its common equity securities
(collectively, "Other Securities") under the Securities Act (other than a
registration on Form S-4 or S-8 or any successor form thereto), whether or not
for sale for its own account, in a manner which would permit registration of
Registrable Securities for sale for cash to the public under the Securities
act, it will each such time give prompt written notice to each Holder of its
intention to do so at least 10 business days prior to the anticipated filing
date of the registration statement relating to such registration. Such notice
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shall offer each such Holder the opportunity to include in such registration
statement such number of Registrable Securities as each such Holder may
request. Upon the receipt of the Company's notice (which request shall specify
the number of Registrable Securities intended to be disposed of and the
intended method of disposition thereof), the Company shall effect, in the
manner set forth in Section 5, in connection with the registration of the Other
Securities, the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register, to the extent
required to permit the disposition (in accordance with such intended methods
thereof) of the Registrable Securities so requested to be registered, provided
that:
(a) If at any time after giving written notice of its intention to
register any securities and prior to the effective date of such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to the Holder and, thereupon, (A) in the case of a
determination not to register, the Company shall be relieved of its obligation
to register any Registrable Securities in connection with such registration and
(B) in the case of a determination to delay such registration, the Company
shall be permitted to delay registration of any Registrable Securities
requested to be included in such registration for the same period as the delay
in registering such other securities.
(b) (i) if the registration referred to in the first sentence of this
Section 3 is to be an underwritten primary registration on behalf of the
Company, and the managing underwriter advises the Company in writing that, in
such firm's opinion, such offering would be materially and adversely affected
by the inclusion therein of the Registrable Securities requested to be included
therein, the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account ("Company
Securities"), (2) second, up to the full number of Registrable Securities held
by LNC and requested to be included in such registration by LNC ("LNC
Securities") in excess of the number or dollar amount of securities the Company
proposes to sell which, in the good-faith opinion of such managing underwriter,
can be so sold without so materially and adversely affecting such offering, (3)
third, up to the full number of Registrable Securities (other than LNC
Securities) in excess of the number or dollar amount of Company Securities and
LNC Securities, which, in the good faith opinion of such managing underwriter,
can be sold without materially and adversely affecting such offering (and, if
less than the full number of such Registrable Securities, allocated pro rata
among the Holders of such Registrable Securities (other than LNC Securities) on
the basis of the number of securities requested to be included therein by each
such Holder, and (4) fourth, an amount of other securities, if any, requested
to be included therein in excess of the number or dollar amount of Company
Securities, LNC Securities and other Registrable Securities which, in the
opinion of such underwriter(s), can be sold without materially and adversely
affecting such offering (allocated among the holders of such other securities
in such proportions as such holders and the Company may agree); and (ii) if the
registration referred to in the first sentence of this Section 3 is to be an
underwritten secondary registration on behalf of holders of securities (other
than Registrable Securities) of the Company (the "Other Holder"), and the
managing underwriter advises the Company in writing that in its good-faith
opinion such offering would be materially and adversely affected by the
inclusion
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therein of the Registrable Securities requested to be included therein,
the Company shall include in such registration the amount of securities
(including Registrable Securities) that such managing underwriter advises
allocated pro rata among the Other Holders and the Holders on the basis of the
number of securities (including Registrable Securities) requested to be
included therein by each Other Holder and each Holder;
(c) the Company shall not be required to effect any registration of
Registrable Securities under this Section 3 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock option or
other executive or employee benefit or compensation plans; and
(d) no registration of Registrable Securities effected under this Section
3 shall relieve the Company of its obligation to effect a registration of
Registrable Securities pursuant to Section 2 hereof.
4. Expenses. Each Holder, by accepting Registrable Securities, agrees to
pay all Registration Expenses with respect to an offering pursuant to Section 2
hereof, pro rata based on each Holder's number of Registrable Securities
included in such offering, except to the extent the Company causes shares to be
registered for itself or another party pursuant to Section 2(d), in which event
the Company or such other party shall pay the incremental expenses of including
such shares in the offering. The Company agrees to pay all Registration
Expenses with respect to an offering pursuant to Section 3 hereof, except for
the incremental expenses of including a Holder's Registrable Securities in such
offering, which incremental expenses shall be paid by such Holder. All
Registration Expenses to be paid by the Holder shall be paid within 30 days of
the delivery of a statement, such statements to be delivered not more
frequently than once every 30 days.
5. Registration and Qualifications. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2 or 3 hereof, the
Company, subject to Section 4 hereof, shall:
(a) prepare and file a registration statement under the Securities Act
relating to the Registrable Securities to be offered as soon as practicable,
but in no event later than 45 days (60 days if the applicable registration form
is other than Form S-3) after the date notice is given, and use its best
efforts to cause the same to become effective within 90 days after the date
notice is given (120 days if the applicable registration form is other than
Form S-3);
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective for 60 days (or, in
the case of an underwritten offering, such shorter time period as the
underwriters may require);
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(c) furnish to the Holders and to any underwriter of such Registrable
Securities such number of conformed copies of such registration statement and
of each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act, and
such other documents, as the Holders or such underwriter may reasonably request
in order to facilitate the public sale of the Registrable Securities, and a
copy of any and all transmittal letters or other correspondence to, or received
from the SEC or any other governmental agency or self-regulatory body or other
body having jurisdiction (including any domestic or foreign securities
exchange) relating to such offering;
(d) use its best efforts to register or qualify all Registrable Securities
covered by such registration statement under the securities or blue sky laws of
such jurisdictions as the Holders or any underwriter of such Registrable
Securities shall request, and use its best efforts to obtain all appropriate
registration, permits and consents required in connection therewith, and do any
and all other acts and things which may be necessary or advisable to enable the
Holders or any such underwriter to consummate the disposition in such
jurisdictions of its Registrable Securities covered by such registration
statement; provided that the Company shall not for any such purpose be required
to register or qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, or to subject itself to taxation
in any such jurisdiction, or to consent to general service of process in any
such jurisdiction;
(e) (i) use its best efforts to furnish an opinion of counsel for the
Company addressed to the underwriters and each Holder of Registrable Securities
included in such registration (each a "Selling Holder") and dated the date of
the closing under the underwriting agreement (if any) (or if such offering is
not underwritten, dated the effective date of the registration statement), and
(ii) use its best efforts to furnish a "cold comfort" letter addressed to each
Selling Holder, if permissible under applicable accounting practices, and
signed by the independent public accountants who have audited the Company's
financial statements included in such registration statement, in each such case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Selling Holders may reasonably request and, in the case of such
accountants' letter, with respect t to events subsequent to the date of such
financial statements;
(f) immediately notify the Selling Holders in writing (i) at any time when
a prospectus relating to a registration pursuant to Section 2 or 3 hereof is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of any material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) of any request by the SEC or any other regulatory body
or other body having jurisdiction for any amendment of or
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supplement to any registration statement or other document relating to
such offering, and in either such case (i) or (ii) at the request of the
Selling Holders, subject to Section 4 hereof, prepare and furnish to the
Selling Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated there in or necessary to make the
statements therein, in light of the circumstances under which they are made,
not misleading;
(g) use its best efforts to list all such Registrable Securities covered
by such registration on each securities exchange and inter-dealer quotation
system on which a class of common equity securities of the Company is then
listed, with expenses in connection therewith (not including any future
periodic assessments or fees for such additional listing) to be paid in
accordance with Section 4 hereof; and
(h) furnish unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested
by the Selling Holders or the underwriters with expenses therewith to be paid
in accordance with Section 4 hereof.
6. Conversion of Other Securities, etc, If LNC offers any options, rights,
warrants or other securities issued by it or any other person that are offered
with, convertible into or exercisable or exchangeable for any Registrable
Securities, the Registrable Securities underlying such option, rights, warrants
or other securities shall be eligible for registration pursuant to Section 2
and Section 3 of this Agreement.
7. Underwriting: Due Diligence.
(a) If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a registration requested under this
Agreement, the Company shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distribution, including, without limitation, indemnities and contribution
substantially to the effect and to the extent provided in Section 8 hereof and
the provision of opinions of counsel and accountants' letters to the effect and
to the extent provided in Section 5(e) hereof The Selling Holders on whose
behalf the Registrable Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters, shall also be made to and for the benefit of
such Selling Holders. Such underwriting agreement shall also contain such
representations and warranties by the Selling Holders on whose behalf the
Registrable Securities are to be distributed as are customarily contained in
underwriting agreements with respect to secondary distributions. Selling
Holders may require that any additional securities included in an
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offering proposed by a Holder be included on the same terms and
conditions as the Registrable Securities that are included therein.
(b) In the event that any registration pursuant to Section 3 shall
involve, in whole or in part, an underwritten offering, the Company may require
the Registrable Securities requested to be registered pursuant to Section 3 to
be included in such underwriting on the same terms and conditions as shall be
applicable to the other securities being sold through underwriters under such
registration. If requested by the underwriters for such underwritten offering,
the Selling Holders on whose behalf the Registrable Securities are to be
distributed shall enter into an underwriting agreement with such underwriters,
such agreement to contain such representations and warranties by the Selling
Holders and such other terms and provisions as are customarily contained in
underwriting agreement with respect to secondary distributions, including
without limitation, indemnities and contribution substantially to the effect
and to the extent provided in Section 8 hereof Such underwriting agreement
shall also contain such representations and warranties by the Company and such
other person or entity for whose account securities are being sold in such
offering as are customarily contained in underwriting agreements with respect
to secondary distributions.
(c) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the Securities Act, the
Company shall give the Holders of such Registrable Securities and the
underwriters, if any, and their respective counsel and accountants, such
reasonable and customary access to its books and records and such opportunities
to discuss the business of the Company with its officers and the independent
public accountants who have certified the Company's financial statements as
shall be necessary, in the opinion of such Holder and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
8. Indemnification and Contribution.
(a) In the case of each offering of Registrable Securities made pursuant
to this Agreement, the Company agrees to indemnify and hold harmless each
Holder, its officers and directors, each underwriter of Registrable Securities
so offered and each person, if any, who controls any of the foregoing persons
within the meaning of the Securities Act, from and against any and all claims,
liabilities, losses, damages, expenses and judgments, joint or several, to
which they or any of them may become subject, under the Securities Act or
otherwise, including any amount paid in settlement of any litigation commenced
or threatened, and shall promptly reimburse them, as and when incurred, for any
reasonable legal or other expenses incurred by them in connection with
investigating any claims and defending any actions, insofar as such losses,
claims, damages, liabilities or actions shall arise out of, or shall be based
upon, any untrue statement or alleged untrue statement of a material fact
contained in the registration statement (or in any preliminary or final
prospectus included therein, or any amendment thereto or supplement thereto, or
in any document incorporated by reference therein, or any omission or alleged
omission to state
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therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
shall not be liable to a particular Holder in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, any untrue statement or alleged untrue statement, or any omission, if
such statement or omission shall have been made in reliance upon and in
conformity with information relating to such Holder furnished to the Company in
writing by or on behalf of such Holder specifically for use in the preparation
of the registration statement (or in any preliminary or final prospectus
included therein) or any amendment thereof or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of a Holder and shall survive the transfer of such
securities. The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to each Holder, its officers and
directors, underwriters of the Registrable Securities or any controlling person
of the foregoing; provided, further, that, as to any underwriter or any person
controlling any underwriter, this indemnity does not apply to any loss,
liability, claim, damage or expense arising out of or base upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of a prospectus was not sent or given by or on
behalf of an underwriter to such person asserting such loss, claim, damage,
liability or action at or prior to the written confirmation of the sale of the
Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such prospectus.
(b) In the case of each offering made pursuant to this Agreement, each
Holder of Registrable Securities, included in such offering, by exercising its
registration rights hereunder, agrees to indemnify and hold harmless the
Company, its officers and directors and each person, if any, who controls any
of the foregoing within the meaning of the Securities Act), from and against
any and all claims, liability, losses, damages, expenses and judgments, joint
or several, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount pale in settlement of any
litigation commenced, or threatened, and shall promptly reimburse them, as and
when incurred, for any legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any such
losses, claims, damages, liabilities or actions shall arise out of, or shall be
based upon, any untrue statement or alleged untrue statement of a material fact
contained in the registration statement (or in any preliminary or final
prospectus included therein) or any amendment thereof or supplement thereto, or
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that such untrue statement of a material
fact is contained in, or such material fact is omitted from, information
relating to such Holder furnished in writing to the Company by or on behalf of
such Holder specifically for use in the preparation of such registration
statement (or in any preliminary or final prospectus included therein). The
foregoing indemnity is in addition to any liability which such Holder may
otherwise have to the Company, or any of its directors, officers or controlling
persons; provided, however, that, as to any underwriter or any person
controlling any underwriter, this indemnity does not apply to any loss,
liability, claim, damage or expense arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of
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a prospectus was not sent or given by or on behalf of an underwriter to
such person asserting such loss, claim, damage, liability or action at or prior
to the written confirmation of the sale of the Registrable Securities as
required by the Securities Act and such untrue statement or omission had been
corrected in such prospectus.
(c) Procedure for Indemnification. Each party indemnified under paragraph
(a) or (b) of this Section 8 shall, promptly after receipt of notice of any
claim or the commencement of any action against such indemnified party in
respect of which indemnity may be sought, notify the indemnifying party in
writing of the claim or the commencement thereof; provided that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party on account of the indemnity agreement
contained in paragraph (a) or (b) of this Section 8, except to the extent the
indemnifying party was prejudiced by such failure, and in no event shall
relieve the indemnifying party from any other liability which it may have to
such indemnified party. If any such claim or action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice form the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided that each indemnified party, its officers and
directors, if any, and each person, if any, who controls such indemnified led
party within the meaning of the Securities act, shall have the right to employ
separate counsel reasonably approved by the indemnifying party to represent
them if the named parties to any action (including any impleaded parties)
include both such indemnified party and an indemnifying party or an affiliate
of an indemnifying part, and such indemnified party shall have been advised by
counsel either (i) that there may be one or more legal defenses available to
such indemnified party that are different from or additional to those available
to such indemnifying party or such affiliate or (ii) a conflict may exist
between such indemnified party and such indemnifying party or such affiliate,
and in that event the fees and expenses of one such separate counsel for all
such indemnified parties shall be paid by the indemnifying party. As
indemnified party will not enter into any settlement agreement which is not
approved by the indemnifying party, such approval not to be unreasonably
withheld. The indemnifying party may not agree to any settlement of any such
claim or action which provides for any remedy or relief other than monetary
damages for which the indemnifying party shall be responsible hereunder,
without the prior written consent of the indemnified party, which shall not be
unreasonably withheld. In any action hereunder as to which the indemnifying
party has assumed the defense thereof with counsel reasonably satisfactory to
the indemnified party, the indemnified party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the indemnifying party shall not be obligated hereunder to
reimburse the indemnified part; for the costs thereof. In all instances, the
indemnified party shall cooperate fully with the indemnifying party or its
counsel in the defense of each claim or action.
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<PAGE> 12
If the indemnification provided for in this Section 8 shall for any reason
be unavailable to an indemnified party in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to herein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party on the one hand or the indemnified party on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission,
but not by reference to any indemnified party's stock ownership in the Company.
In no event, however, shall a Holder be required to contribute in excess of
the amount of the net proceeds received by such Holder in connection with the
sale of Registrable Securities in the offering which is the subject of such
loss, claim, damage or liability. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph shall be deemed to include, for
purposes of this paragraph, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
9. Rule 144. The Company shall take such measures and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144 (or any successor provision).
10. Holdback.
(a) Each Holder agrees by acquisition of Registrable Securities, if so
required by the managing underwriter, not to sell, make any short sale of,
loan, grant any option for the purchase of, effect any public sale or
distribution of or otherwise dispose of any securities of the Company, during
the 30 days prior to and the 90 days after any underwritten registration
pursuant to Section 2 or 3 hereof has become effective (or such shorter period
as may be required by the underwriter), except as part of such underwritten
registration. Notwithstanding the foregoing sentence, each Holder subject to
the foregoing sentence shall be entitled to sell during the foregoing period
securities in a private sale. The Company may legend and may impose stop
transfer instructions on any certificate evidencing Registrable Securities
relating to the restrictions provided for in this Section 10.
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<PAGE> 13
(b) The Company agrees, if so required by the managing underwriter, not to
sell, make any short sale of, loan, grant any option for the purchase of (other
than pursuant to employee benefit plans) effect any public sale or distribution
of or otherwise dispose of its equity securities or securities convertible into
or exchangeable or exercisable for any such securities during the 30 days prior
to and the 90 days after any underwritten registration pursuant to Section 2 or
3 hereof has become effective, except as part of such underwritten registration
and except pursuant to registrations on Form S-4, S-8 or any successor or
similar forms thereto.
11. Transfer of registration Rights.
(a) LNC may transfer all or any portion of its rights under this Agreement
to any transferee of the lesser of (i) at least 20% of LNC's initial holdings
of Registrable Securities and (ii) all of LNC's remaining Registrable
Securities (each, a "transferee"). No transfer of registration rights pursuant
to this Section shall be effective unless the Company has received written
notice from LNC of an intention to transfer of at least 30 days prior to LNC
entering into a binding agreement to transfer Registrable Securities (10
business days in the event of an unsolicited offer. Such notice need not
contain proposed terms or name a proposed transferee. On or before the time of
the transfer, the Company shall receive a written notice stating the name and
address of any transferee and identifying the amount of Registrable Securities
with respect to which the rights under this Agreement are being transferred and
the nature of the rights to transferred. In connection, with any such
transfer, the term "LNC" as used in this Agreement (other than in this Section
11, Section 3(a)(1)(2) and Section (1)(c)(iii) hereof shall, where appropriate
to assign the rights and obligations of LNC hereunder to such direct
transferee, be deemed to refer to the transferee holder of such Registrable
Securities. LNC and such transferees may exercise the registration rights
hereunder in such proportion and upon the demand of such Holder as they shall
agree among themselves, that in no event shall the Company be required to
effect more than one registration pursuant to Section 2 of this Agreement in
any 12 month period and that each such registration shall be at the request of
not more than one Holder.
(b) After any such transfer, LNC shall retain its rights under this
Agreement with respect to all other Registrable Securities owned by LNC.
(c) Upon the request of LNC, the Company shall execute a Registration
Rights Agreement with such transferee or a proposed transferee substantially
similar to this Agreement, and any demand registrations granted to such
transferee shall limit the demand registrations to which LNC is entitled under
Section 2(a) hereof.
12. Miscellaneous.
(a) Injunctions. Each party acknowledges and agrees that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. Therefore, each party shall be entitled to an
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<PAGE> 14
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court having jurisdiction, such remedy being in addition to any other remedy to
which such party may be entitled at law or in equity.
(b) Severability. If any term or provision of this Agreement held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
(c) Further Assurances. Subject to the specific terms of this Agreement,
each of the parties hereto shall make, execute, acknowledge and deliver such
other instruments and documents, and take all such other actions, as may be
reasonably required in order to effectuate the purposes of this Agreement and
to consummate the transactions contemplated hereby.
(d) Waivers, etc. No failure or delay on the part of either party (or the
intended third party beneficiaries referred to herein) in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No
modification or waiver of any provision of this Agreement nor consent to any
departure therefrom shall in any event be effective unless the same shall be in
writing and signed by an authorized officer of each of the parties, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
(e) Entire Agreement. This Agreement contains the final and complete
understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the
parties, whether written or oral, with respect to the subject matter hereof.
The paragraph headings contained in this Agreement are for reference purposes
only, and shall not affect in any manner the meaning or interpretation of this
Agreement.
(f) Counterparts. For the convenience of the parties, this Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original but all of which together shall be one and the same instrument.
(g) Amendment. This Agreement may be amended only by a written instrument
duly executed by an authorized officer of each of the parties.
(h) Notices. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed registered or certified mail, postage prepaid,
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<PAGE> 15
return receipt requested, on the date the return receipt is executed or
the letter refused by the addressee or its agent or (iii) if sent by overnight
courier which delivers only upon the signed receipt of the addressee, on the
date the receipt acknowledgment is executed or refused by the addressee or its
agent:
(i) if to LNC, to:
Lincoln National Corporation
200 East Berry Street
Fort Wayne, Indiana 46802
Attention: Jack D. Hunter,
Executive Vice President and General Counsel
(ii) if to the Company, to:
American States Financial Corporation
500 North Meridian
Indianapolis, Indiana 46204
Attention: President
and
(iii) if to a Holder of Registrable Securities, to the name and
address as the same appear in the security transfer books of the
Company;
or to such other address as the party (or Holder of Registrable Securities) to
whom notice is to be given may have previously furnished to the other party
(or, in the case of a Holder of Registrable Securities, to the Company) in
writing in the manner set forth above.
(i) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF INDIANA.
(j) Assignment. Except as provided herein, the parties may not assign
their rights under this Agreement. The Company may not delegate its
obligations under this Agreement.
[next page is signature page]
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<PAGE> 16
IN WITNESS WHEREOF, LNC and the Company have caused this Agreement to be
duly executed by their authorized representative as of the date first above
written.
LINCOLN NATIONAL CORPORATION
By:/s/ Barbara S. Kowalczyk
------------------------------
Name: Barbara S. Kowalczyk
Title: Senior Vice President
AMERICAN STATES FINANCIAL
CORPORATION
By:/s/ Thomas M. Ober
------------------------------
Name: Thomas M. Ober
Title: Secretary
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<PAGE> 1
TAX SHARING AGREEMENT Exhibit 10.16 (9)
This tax sharing agreement (the "Agreement") is entered into by American States
Insurance Company ("ASIC"), a corporation organized under the laws of the State
of Indiana, and American States Lloyds Insurance Company ("ASLI"), a
corporation organized under the laws of the State of Texas, and is effective as
of January 1, 1996. Lincoln National Corporation ("LNC"), as the ultimate
parent of a group of affiliated corporations filing a consolidated return (the
"LNC Consolidated Group"), is also a party to this Agreement. This Agreement
applies to federal, state, local, and foreign income taxes, including any
interest and penalties assessed for any such taxes, arising for any taxable
year ("Tax Year") during which ASIC owns any ASLI stock. This Agreement
supersedes all prior tax sharing agreements between ASIC and ASLI or any
subsidiaries of ASIC and ASLI, except to the extent otherwise noted. As
described more fully below, the rights and obligations of ASIC and ASLI depend
upon the amount of ASLI stock owned by ASIC, and on whether ASIC and ASLI are
members of an affiliated group that files a consolidated federal income tax
return.
SECTION I. ASLI IN CONSOLIDATED GROUP
A. Management of Tax Disputes and Tax Computations. For any Tax Year or
portion of a Tax Year in which ASLI is a member of the LNC Consolidated Group,
LNC shall be responsible for managing the filing of tax returns and for
determining the appropriate strategy for handling audits and disputes with
taxing authorities. Additionally, LNC shall be responsible for the final
determination of all computations required under this Agreement.
B. Calculation of ASLI's Tax Liability. For any Tax Year in which ASLI
is a member of the LNC Consolidated Group, the LNC Consolidated Group's federal
income tax liability shall be allocated between ASLI and the remainder of the
LNC Consolidated Group as follows:
1. Separate Tax Liability. Periodic computations shall be made
of the federal income tax liability of ASLI, on a hypothetical separate return
basis ("Separate Tax Liability"), for each Tax Year, or for any part of a Tax
Year during which ASLI is included in the LNC Consolidated Group. Computations
shall be made at least once per quarter to support the required payments of
quarterly estimated taxes and shall also be made at the time of the original
and extended due dates for the filing of the federal income tax return for each
Tax Year. Such Separate Tax Liability shall be calculated as follows:
a. ASLI shall be treated as a corporation which files a
federal income tax return separate from the LNC Consolidated Group, except as
otherwise provided in this Agreement.
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<PAGE> 2
b. For purposes of this calculation, ASLI shall be
treated as if it had never been included in the LNC Consolidated Group.
c. Gains and losses on intercompany transactions shall
be disregarded until such time as they are recognized in the consolidated
federal income tax return of the LNC Consolidated Group.
d. Income, gain, deductions, credits, and similar items
of ASLI described in Treasury Regulation section 1.1552-1(a)(2)(ii) shall
generally be taken into account in the manner specified in that subdivision.
e. To the extent that ASLI is unable to avail itself of
special rules applicable only to small corporations, lower tax rates
applicable to part or all of the income of a single corporation, the
exemption provided in Internal Revenue Code section 59A (applicable to the
environmental tax) or any other similar item because it participates in the
filing of the federal income tax return of the LNC Consolidated Group, ASLI
shall not use such benefit in calculating its Separate Tax Liability.
f. Income, gain, deductions, credits, and similar items
of ASLI shall not be included to the extent attributable to a period
commencing on or after the date that ASLI ceases to be includible in the LNC
Consolidated Group.
g. For each quarter of a Tax Year that ASLI has net
operating losses, net capital losses, tax credits or any other tax benefits
that have not been used to decrease ASLI's Separate Tax Liability in the
current Tax Year ("Excess Tax Items") that can be used as hypothetical carry
back items against prior hypothetical ASLI separate return Tax Years ("Carry
Back Items"), ASIC shall reimburse ASLI for the use of such Carry Back Items at
the rate ASLI would have been entitled to receive had such Carry Back Items
actually been used in a ASLI claim for refund.
h. To the extent that Excess Tax Items can ultimately be
used as hypothetical carry forward items against future hypothetical ASLI Tax
Years ("Carry Forward Items"), ASLI shall be entitled to use such Excess Tax
Items to offset future years' income but will be required to reimburse ASIC to
the extent that paragraph 2.c., below, applies.
2. Excess Tax Items, Generally.
a. To the extent that the LNC Consolidated Group can use
an Excess Tax Item, which has not otherwise been used as a Carry Back Item, to
decrease its federal income tax liability for that quarter after taking into
account all similar items from the other affiliated corporations in the LNC
Consolidated Group,
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<PAGE> 3
ASIC shall reimburse ASLI at an amount equal to the actual decrease in the tax
liability of the LNC Consolidated Group for any Excess Tax Items used,
notwithstanding the fact that ASLI could not use these Excess Tax Items in
calculating its Separate Tax Liability.
b. To the extent that the Excess Tax Items are not used
under paragraphs a. or 1.g. above, ASLI shall be entitled to a reimbursement
from ASIC if and when such Excess Tax Items actually reduce the LNC
Consolidated Group's federal income tax payments, or when the LNC Consolidated
Group actually receives a refund of previously paid taxes, to the extent that
such refund payment is directly attributable to such Excess Tax Items.
c. To the extent that ASLI receives a payment from ASIC
for the actual use of Excess Tax Items pursuant to paragraphs a. or b., above,
ASIC shall be entitled to reimbursement from ASLI for the full amount of such
payments to the extent that ASLI may use such Excess Tax Items as Carry Forward
Items. To the extent that ASLI has been compensated by ASIC under a prior tax
sharing agreement for an amount which would qualify as an Excess Tax Item under
this Agreement, ASIC shall also be entitled to reimbursement from ASLI for the
full amount of such prior payments to the extent that ASLI may use such Excess
Tax Items as Carry Forward Items.
d. Nothing in this entire Section I. shall be interpreted
to entitle ASLI to more than a single use of any Excess Tax Items, Carry Back
Items, Carry Forward Items, or any other items which reduce the tax liability
of ASLI.
3. Alternative Minimum Tax Periods.
a. If the LNC Consolidated Group is required to pay
Alternative Minimum Tax ("AMT") for any taxable quarter, then the AMT
amount shall be divided among all of the corporations in the LNC Consolidated
Group which would have had to pay AMT if their tax liability had been
calculated on a separate return basis. The allocation of AMT shall be in
proportion to the amount of AMT each corporation would have had to pay on a
hypothetical separate return basis. Any amount of AMT so apportioned to ASLI
shall be available for use as an AMT credit in calculating ASLI's Separate Tax
Liability for future taxable periods in which the AMT credit may actually be
used by the LNC Consolidated Group. This provision also shall apply to the
extent that the LNC Consolidated Group becomes subject to AMT for prior Tax
Years as a result of an IRS audit or other adjustment to the tax liability
payable.
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<PAGE> 4
b. If ASLI would be required to pay AMT based upon the
calculation of its Separate Tax Liability, but the LNC Consolidated Group is
not required to pay AMT for that taxable quarter, then ASLI shall not be
required to pay the AMT amount to ASIC. Instead, ASLI shall pay to ASIC an
amount equal to its Separate Tax Liability calculated without regard to the AMT
provisions.
4. Interest and Penalties.
a. If, after netting interest payable by the LNC
Consolidated Group against interest payable by the IRS for a given Tax
Year, the LNC Consolidated Group is required to pay interest to the IRS as a
result of any increase in tax liability for a given Tax Year, such interest
shall be divided among all of the corporations in the LNC Consolidated Group
whose tax liability increased from the initial calculation at the time of the
filing of the LNC consolidated tax return for that Tax Year. This allocation
shall be made in proportion to the increase in tax liability of ASLI as
compared to the increase in tax liability of all members of the LNC
Consolidated Group.
b. If, after netting interest payable by the LNC
Consolidated Group against interest payable by the IRS for a given Tax
Year, the LNC Consolidated Group is entitled to receive interest from the IRS
as a result of any decrease in tax liability for a given Tax Year, such
interest shall also be divided among all of the corporations in the LNC
Consolidated Group whose tax liability decreased from the initial calculation
at the time of the filing of the LNC consolidated tax return for that Tax Year.
This allocation shall be made in proportion to the decrease in tax liability of
ASLI as compared to the decrease in tax liability of all members of the LNC
Consolidated Group.
c. Any tax penalties imposed by a taxing authority shall
be the responsibility of the corporation whose tax position or tax item caused
the imposition of such penalties.
5. Payments. Payments between ASIC and ASLI shall be made as
follows:
a. Within five days following the due date of the
quarterly estimated federal income tax payment for the LNC Consolidated Group,
ASLI shall pay to ASIC the full amount (if any) of its Separate Tax
Liability for that taxable quarter. Also, to the extent that an Excess Tax
Item can be used to reduce the amount of the estimated federal income tax
payment for the LNC Consolidated Group in a given tax quarter, ASIC shall
reimburse ASLI for the use of that item within five days following the
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<PAGE> 5
due date of such quarterly payment. Likewise, to the extent that ASLI can use
an Excess Tax Item for which it has received payment from ASIC pursuant to
Section I.B.2., above, as a Carry Forward Item, ASLI shall reimburse ASIC for
such amounts as described in Section I.B.2.c., above, within five days of the
quarter in which it may use the Carry Forward Item.
b. Within five days following the last date for filing a
request for an extension to file the annual federal income tax return, an
adjusting payment shall be made between ASIC and ASLI which is equal to
the difference between the quarterly payments made pursuant to paragraph a.
above, and the estimated annual Separate Tax Liability of ASLI.
c. Within 45 days after the filing of the annual federal
income tax return of the LNC Consolidated Group, adjusting payments shall
be made between ASIC and ASLI to the extent of any difference between the
payments made pursuant to paragraph a. or b. above, and the annual Separate Tax
Liability of ASLI. In the event that an Excess Tax Item cannot be used to
offset the federal income tax liability of the LNC Consolidated Group for the
current Tax Year, but ASLI can use such an item as a Carry Back Item, then the
reimbursement by ASIC to ASLI contemplated in Section I.B.1.g., above, shall
also be made within 45 days after the filing of the annual federal income tax
return of the LNC Consolidated Group.
d. Within 45 days of a settlement of any IRS audit
dispute, adjusting payments shall be made between ASIC and ASLI as necessary
as a result of such settlement. ASLI will be adequately indemnified and held
harmless in the event the IRS levies upon ASLI's assets for penalty,
interest, or unpaid taxes in excess of the amount paid in accordance with this
Agreement.
e. LNC shall be responsible for making all required
federal income tax payments for the LNC Consolidated Group.
6. Information. If any information relevant to making any
calculation covered by this Agreement is particularly within the knowledge or
possession of ASLI or any subsidiary of ASLI, ASLI shall promptly provide such
information to LNC and shall also provide any supporting schedules, data or
details which LNC may reasonably request.
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<PAGE> 6
7. State Taxes. To the extent that any state tax system permits or
requires that the tax liability of affiliated corporations be computed on a
consolidated, affiliated, unitary or combined basis ("Combined Return Basis")
and ASLI files on a Combined Return Basis with one or more other corporations
in the LNC Consolidated Group, ASLI's state tax liability shall be calculated
and allocated in a manner comparable to that provided in Section I of this
Agreement.
SECTION II. ASLI NOT CONSOLIDATED
A. Responsibility for Tax Returns and Tax Payments. For any period in
which ASIC owns any stock of ASLI, but ASLI is not included in the LNC
Consolidated Group, ASLI shall be responsible for filing all federal, state,
local, and foreign tax returns relevant to it and shall also be responsible for
paying any such taxes payable by it. Furthermore, any federal, state, local,
or foreign tax liabilities which are not calculated on a consolidated basis
with part or all of the LNC Consolidated Group shall be the responsibility of
the entity incurring such liability even if ASLI is filing as part of the LNC
Consolidated Group for federal income tax purposes.
B. Management of Tax Disputes and Tax Computations. For any Tax Year or
portion of a Tax Year in which ASIC owns sufficient ASLI stock to result in
ASIC and ASLI being treated as a consolidated group for financial statement
reporting purposes, ASIC shall be consulted prior to determining the strategy
for handling audits and disputes with taxing authorities, including, but not
limited to, whether or not to appeal or litigate one or more issues and any
proposed settlements of issues.
C. Carry Over Attributes from Consolidated Periods.
1. General Carry Over Provisions. To the extent that ASLI carries
forward tax attributes for which it has already received compensation from ASIC
pursuant to the terms of Section I. above, ASLI shall reimburse ASIC for the
previous payment by ASIC to ASLI, at the time of the deconsolidation of ASIC
and ASLI. To the extent that ASLI has paid ASIC for a Separate Tax Liability
for which it remains liable after leaving the LNC Consolidated Group, ASIC
shall reimburse ASLI for the previous payment by ASLI to ASIC at the time of
the deconsolidation of ASIC and ASLI. Similarly, to the extent that the
ultimate amount of tax paid differs from the amount of
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<PAGE> 7
tax liability initially calculated for any given Tax Year in which ASLI was
included in the LNC Consolidated Group, ASIC or ASLI, as the case may be, shall
be required to pay and entitled to receive amounts sufficient to compensate for
this difference.
2. AMT Credits. In the event that ASLI leaves the LNC Consolidated
Group, the amount of AMT credit which it shall be allowed to carry over without
any obligation to reimburse ASIC shall not exceed the amount allocated pursuant
to Section I.B.3, above. ASIC shall be reimbursed by ASLI to the extent that
any AMT credit actually carried over exceeds the amounts calculated in Section
I.B.3., at the time of the deconsolidation. Also, ASLI shall be reimbursed by
ASIC to the extent that it is permitted to carry over less than the amount
calculated in Section I.B.3.
3. Prior Consolidation Impacts. Neither LNC nor any member of
the LNC Consolidated Group shall be liable for any payment to ASLI should the
amount of tax that ASLI pays in any such later year on a separate return basis
or as a member of another consolidated group be increased as a result of ASLI
having been a member of the LNC Consolidated Group.
4. Elections Impacting Prior Consolidated Periods. In the event
that ASLI wishes to make an election for tax purposes which may adversely
affect tax positions taken by the LNC Consolidated Group during Tax Years when
it was a member of the LNC Consolidated Group, ASLI shall submit to LNC a
written request for permission to make such an election. LNC shall not
unreasonably withhold such written permission to make a tax election which may
be beneficial to ASLI after it leaves the LNC Consolidated Group. ASLI shall,
as a condition of receiving written permission to make the tax election,
reimburse LNC for any and all additional tax costs incurred by the LNC
Consolidated Group in connection with permitting such an election to be made.
SECTION III. GENERAL ITEMS
A. Interaction with Prior Tax Periods.
1. Tax Payments for Prior Periods. To the extent that the tax
liability initially allocated to ASLI for a prior tax period is subsequently
redetermined, as a result of filing an amended return, the outcome of an IRS
examination, the retroactive
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<PAGE> 8
application of a new tax law or tax regulation, or other similar modifying
action or item, ASLI shall pay ASIC for any such increases to ASLI's tax
liability and is also entitled to receive a payment from ASIC for any decreases
in tax liability attributable to ASLI.
2. Prior Tax Payments. To the extent that ASLI paid to ASIC an
amount for its share of the LNC Consolidated Group's federal income tax
liability or to the extent that it pays an amount pursuant to paragraph 1.
above, ASLI shall be entitled to consider the amount of such prior payments when
determining whether or not Carry Back Items may be used to offset tax payments
for prior years.
3. Interest and Penalties for Prior Periods. Any interest and
penalties payable by any member of the LNC Consolidated Group relating to
Tax Years prior to this Agreement shall be subject to the terms of Section I.B.4
to the extent that they become payable after the effective date of this
Agreement.
B. Filing Relevant Items. ASLI agrees to file any elections, consents,
and other documents and take any other actions which may be necessary or
appropriate to carry out the purposes of this Agreement.
C. Inclusion of ASLI Subsidiaries. If ASLI owns, acquires or creates any
subsidiary corporation which is an includible corporation as that term is
defined in IRC section 1504, such subsidiary corporation shall be subject to
this Agreement. ASLI shall treat each such subsidiary corporation as if ASLI
has an identical tax sharing Agreement to this Agreement between itself and the
subsidiary corporation, unless ASLI and such subsidiary have entered into a
separate tax sharing Agreement which has been approved in writing by LNC.
D. Applicability to Succeeding Entities. This Agreement shall be binding
on any successor of the parties to this Agreement, including but not limited to
any successor of LNC, ASIC or ASLI, to the same extent as if the successor had
been an original party to this Agreement.
E. Provision of Items to Defend Tax Positions. Both ASIC and ASLI agree
to cooperate in supplying information reasonably requested by the other party
in order to make any computations required under this Agreement and for the
purpose of defending tax examinations, including appeals and litigation.
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<PAGE> 9
F. Maintenance of Books and Records. ASIC and ASLI agree to maintain
internal accounting books and records for themselves and each of their
subsidiaries in a manner consistent with U.S. generally accepted accounting
principles and relevant statutory accounting principles. Furthermore, ASIC and
ASLI agree to account for any intercompany transactions entered into by them or
any of their subsidiaries and to make such information available to the other
party for tax purposes both when such transactions are entered into and when
such intercompany transactions become currently taxable.
G. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Indiana and no state court other than
the courts of the State of Indiana shall have jurisdiction over disputes
between the parties concerning the validity, performance, interpretation or
construction of this Agreement.
LINCOLN NATIONAL CORPORATION
Date: 11-19-96 By /s/ Richard C. Vaughan
----------------------------------------------------
Richard C. Vaughan
Executive Vice President and Chief Financial Officer
AMERICAN STATES INSURANCE COMPANY
Date:11-22-96 By /s/ Todd R. Stephenson
----------------------------------------------------
Todd R. Stephenson
Senior Vice President and Treasurer
AMERICAN STATES LLOYDS INSURANCE COMPANY
Date: 10/15/96 By /s/ James A. Moore
----------------------------------------------------
James A. Moore
Deputy Attorney-In-Fact
9
<PAGE> 1
TAX SHARING AGREEMENT Exhibit 10.16 (10)
This tax sharing agreement (the "Agreement") is entered into by American
Economy Insurance Company ("AEIC"), a corporation organized under the laws of
the State of Indiana, and American States Insurance Company of Texas ("AST"), a
corporation organized under the laws of the State of Texas, and is effective as
of January 1, 1996. Lincoln National Corporation ("LNC"), as the ultimate
parent of a group of affiliated corporations filing a consolidated return (the
"LNC Consolidated Group"), is also a party to this Agreement. This Agreement
applies to federal, state, local, and foreign income taxes, including any
interest and penalties assessed for any such taxes, arising for any taxable
year ("Tax Year") during which AEIC owns any AST stock. This Agreement
supersedes all prior tax sharing agreements between AEIC and AST or any
subsidiaries of AEIC and AST, except to the extent otherwise noted. As
described more fully below, the rights and obligations of AEIC and AST depend
upon the amount of AST stock owned by AEIC, and on whether AEIC and AST are
members of an affiliated group that files a consolidated federal income tax
return.
SECTION I. AST IN CONSOLIDATED GROUP
A. Management of Tax Disputes and Tax Computations. For any Tax Year or
portion of a Tax Year in which AST is a member of the LNC Consolidated Group,
LNC shall be responsible for managing the filing of tax returns and for
determining the appropriate strategy for handling audits and disputes with
taxing authorities. Additionally, LNC shall be responsible for the final
determination of all computations required under this Agreement.
B. Calculation of AST's Tax Liability. For any Tax Year in which AST is
a member of the LNC Consolidated Group, the LNC Consolidated Group's federal
income tax liability shall be allocated between AST and the remainder of the
LNC Consolidated Group as follows:
1. Separate Tax Liability. Periodic computations shall be made
of the federal income tax liability of AST, on a hypothetical separate return
basis ("Separate Tax Liability"), for each Tax Year, or for any part of a Tax
Year during which AST is included in the LNC Consolidated Group. Computations
shall be made at least once per quarter to support the required payments of
quarterly estimated taxes and shall also be made at the time of the
original and extended due dates for the filing of the federal income tax return
for each Tax Year. Such Separate Tax Liability shall be calculated as follows:
a. AST shall be treated as a corporation which files a
federal income tax return separate from the LNC Consolidated Group, except as
otherwise provided in this Agreement.
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b. For purposes of this calculation, AST shall be treated
as if it had never been included in the LNC Consolidated Group.
c. Gains and losses on intercompany transactions shall be
disregarded until such time as they are recognized in the consolidated federal
income tax return of the LNC Consolidated Group.
d. Income, gain, deductions, credits, and similar items of
AST described in Treasury Regulation section 1.1552-1(a)(2)(ii) shall generally
be taken into account in the manner specified in that subdivision.
e. To the extent that AST is unable to avail itself of
special rules applicable only to small corporations, lower tax rates
applicable to part or all of the income of a single corporation, the exemption
provided in Internal Revenue Code section 59A (applicable to the environmental
tax) or any other similar item because it participates in the filing of the
federal income tax return of the LNC Consolidated Group, AST shall not use
such benefit in calculating its Separate Tax Liability.
f. Income, gain, deductions, credits, and similar items of
AST shall not be included to the extent attributable to a period commencing
on or after the date that AST ceases to be includible in the LNC Consolidated
Group.
g. For each quarter of a Tax Year that AST has net
operating losses, net capital losses, tax credits or any other tax benefits
that have not been used to decrease AST's Separate Tax Liability in the current
Tax Year ("Excess Tax Items") that can be used as hypothetical carry back items
against prior hypothetical AST separate return Tax Years ("Carry Back Items"),
AEIC shall reimburse AST for the use of such Carry Back Items at the rate AST
would have been entitled to receive had such Carry Back Items actually been
used in an AST claim for refund.
h. To the extent that Excess Tax Items can ultimately be
used as hypothetical carry forward items against future hypothetical AST Tax
Years ("Carry Forward Items"), AST shall be entitled to use such Excess Tax
Items to offset future years' income but will be required to reimburse AEIC to
the extent that paragraph 2.c., below, applies.
2. Excess Tax Items, Generally.
a. To the extent that the LNC Consolidated Group can use
an Excess Tax Item, which has not otherwise been used as a Carry Back Item, to
decrease its federal income tax liability for that quarter after taking into
account all similar items from the other affiliated corporations in the LNC
Consolidated Group,
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<PAGE> 3
AEIC shall reimburse AST at an amount equal to the actual decrease in the tax
liability of the LNC Consolidated Group for any Excess Tax Items used,
notwithstanding the fact that AST could not use these Excess Tax Items in
calculating its Separate Tax Liability.
b. To the extent that the Excess Tax Items are not used
under paragraphs a. or 1.g. above, AST shall be entitled to a reimbursement
from AEIC if and when such Excess Tax Items actually reduce the LNC
Consolidated Group's federal income tax payments, or when the LNC Consolidated
Group actually receives a refund of previously paid taxes, to the extent that
such refund payment is directly attributable to such Excess Tax Items.
c. To the extent that AST receives a payment from AEIC for
the actual use of Excess Tax Items pursuant to paragraphs a. or b., above,
AEIC shall be entitled to reimbursement from AST for the full amount of such
payments to the extent that AST may use such Excess Tax Items as Carry Forward
Items. To the extent that AST has been compensated by AEIC under a prior tax
sharing agreement for an amount which would qualify as an Excess Tax Item under
this Agreement, AEIC shall also be entitled to reimbursement from AST for the
full amount of such prior payments to the extent that AST may use such Excess
Tax Items as Carry Forward Items.
d. Nothing in this entire Section I. shall be interpreted
to entitle AST to more than a single use of any Excess Tax Items, Carry Back
Items, Carry Forward Items, or any other items which reduce the tax liability
of AST.
3. Alternative Minimum Tax Periods.
a. If the LNC Consolidated Group is required to pay
Alternative Minimum Tax ("AMT") for any taxable quarter, then the AMT
amount shall be divided among all of the corporations in the LNC Consolidated
Group which would have had to pay AMT if their tax liability had been
calculated on a separate return basis. The allocation of AMT shall be in
proportion to the amount of AMT each corporation would have had to pay on a
hypothetical separate return basis. Any amount of AMT so apportioned to AST
shall be available for use as an AMT credit in calculating AST's Separate Tax
Liability for future taxable periods in which the AMT credit may actually be
used by the LNC Consolidated Group. This provision also shall apply to the
extent that the LNC Consolidated Group becomes subject to AMT for prior Tax
Years as a result of an IRS audit or other adjustment to the tax liability
payable.
b. If AST would be required to pay AMT based upon the
calculation of its Separate Tax Liability, but the LNC Consolidated Group is
not required to pay AMT for that taxable quarter, then AST shall not be
required to pay the AMT
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<PAGE> 4
amount to AEIC. Instead, AST shall pay to AEIC an amount equal to its Separate
Tax Liability calculated without regard to the AMT provisions.
4. Interest and Penalties.
a. If, after netting interest payable by the LNC
Consolidated Group against interest payable by the IRS for a given Tax Year,
the LNC Consolidated Group is required to pay interest to the IRS as a
result of any increase in tax liability for a given Tax Year, such interest
shall be divided among all of the corporations in the LNC Consolidated Group
whose tax liability increased from the initial calculation at the time of the
filing of the LNC consolidated tax return for that Tax Year. This allocation
shall be made in proportion to the increase in tax liability of AST as compared
to the increase in tax liability of all members of the LNC Consolidated Group.
b. If, after netting interest payable by the LNC
Consolidated Group against interest payable by the IRS for a given Tax Year,
the LNC Consolidated Group is entitled to receive interest from the IRS as a
result of any decrease in tax liability for a given Tax Year, such interest
shall also be divided among all of the corporations in the LNC Consolidated
Group whose tax liability decreased from the initial calculation at the time
of the filing of the LNC consolidated tax return for that Tax Year. This
allocation shall be made in proportion to the decrease in tax liability of
AST as compared to the decrease in tax liability of all members of the LNC
Consolidated Group.
c. Any tax penalties imposed by a taxing authority shall
be the responsibility of the corporation whose tax position or tax item caused
the imposition of such penalties.
5. Payments. Payments between AEIC and AST shall be made as
follows:
a. Within five days following the due date of the
quarterly estimated federal income tax payment for the LNC Consolidated
Group, AST shall pay to AEIC the full amount (if any) of its Separate Tax
Liability for that taxable quarter. Also, to the extent that an Excess Tax
Item can be used to reduce the amount of the estimated federal income tax
payment for the LNC Consolidated Group in a given tax quarter, AEIC shall
reimburse AST for the use of that item within five days following the due date
of such quarterly payment. Likewise, to the extent that AST can use an
4
<PAGE> 5
Excess Tax Item for which it has received payment from AEIC pursuant to Section
I.B.2., above, as a Carry Forward Item, AST shall reimburse AEIC for such
amounts as described in Section I.B.2.c., above, within five days of the
quarter in which it may use the Carry Forward Item.
b. Within five days following the last date for filing a
request for an extension to file the annual federal income tax return, an
adjusting payment shall be made between AEIC and AST which is equal to the
difference between the quarterly payments made pursuant to paragraph a. above,
and the estimated annual Separate Tax Liability of AST.
c. Within 45 days after the filing of the annual federal
income tax return of the LNC Consolidated Group, adjusting payments shall
be made between AEIC and AST to the extent of any difference between the
payments made pursuant to paragraph a. or b. above, and the annual Separate Tax
Liability of AST. In the event that an Excess Tax Item cannot be used to
offset the federal income tax liability of the LNC Consolidated Group for the
current Tax Year, but AST can use such an item as a Carry Back Item, then the
reimbursement by AEIC to AST contemplated in Section I.B.1.g., above, shall
also be made within 45 days after the filing of the annual federal income tax
return of the LNC Consolidated Group.
d. Within 45 days of a settlement of any IRS audit dispute,
adjusting payments shall be made between AEIC and AST as necessary as a
result of such settlement. AST will be adequately indemnified and held
harmless in the event the IRS levies upon AST's assets for penalty, interest,
or unpaid taxes in excess of the amount paid in accordance with this Agreement.
e. LNC shall be responsible for making all required federal
income tax payments for the LNC Consolidated Group.
6. Information. If any information relevant to making any
calculation covered by this Agreement is particularly within the knowledge or
possession of AST or any subsidiary of AST, AST shall promptly provide such
information to LNC and shall also provide any supporting schedules, data or
details which LNC may reasonably request.
7. State Taxes. To the extent that any state tax system permits or
requires that the tax liability of affiliated corporations be computed on a
consolidated, affiliated, unitary or combined basis ("Combined Return Basis")
and AST files on a
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<PAGE> 6
Combined Return Basis with one or more other corporations in the LNC
Consolidated Group, AST's state tax liability shall be calculated and allocated
in a manner comparable to that provided in Section I of this Agreement.
SECTION II. AST NOT CONSOLIDATED
A. Responsibility for Tax Returns and Tax Payments. For any period in
which AEIC owns any stock of AST, but AST is not included in the LNC
Consolidated Group, AST shall be responsible for filing all federal, state,
local, and foreign tax returns relevant to it and shall also be responsible for
paying any such taxes payable by it. Furthermore, any federal, state, local,
or foreign tax liabilities which are not calculated on a consolidated basis
with part or all of the LNC Consolidated Group shall be the responsibility of
the entity incurring such liability even if AST is filing as part of the LNC
Consolidated Group for federal income tax purposes.
B. Management of Tax Disputes and Tax Computations. For any Tax Year or
portion of a Tax Year in which AEIC owns sufficient AST stock to result in AEIC
and AST being treated as a consolidated group for financial statement reporting
purposes, AEIC shall be consulted prior to determining the strategy for
handling audits and disputes with taxing authorities, including, but not
limited to, whether or not to appeal or litigate one or more issues and any
proposed settlements of issues.
C. Carry Over Attributes from Consolidated Periods.
1. General Carry Over Provisions. To the extent that AST carries
forward tax attributes for which it has already received compensation from AEIC
pursuant to the terms of Section I. above, AST shall reimburse AEIC for the
previous payment by AEIC to AST, at the time of the deconsolidation of AEIC and
AST. To the extent that AST has paid AEIC for a Separate Tax Liability for
which it remains liable after leaving the LNC Consolidated Group, AEIC shall
reimburse AST for the previous payment by AST to AEIC at the time of the
deconsolidation of AEIC and AST. Similarly, to the extent that the ultimate
amount of tax paid differs from the amount of tax liability initially
calculated for any given Tax Year in which AST was included in the LNC
Consolidated Group, AEIC or AST, as the case may be, shall be required to pay
and entitled to receive amounts sufficient to compensate for this difference.
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<PAGE> 7
2. AMT Credits. In the event that AST leaves the LNC
Consolidated Group, the amount of AMT credit which it shall be allowed to
carry over without any obligation to reimburse AEIC shall not exceed the
amount allocated pursuant to Section I.B.3, above. AEIC shall be reimbursed by
AST to the extent that any AMT credit actually carried over exceeds the amounts
calculated in Section I.B.3., at the time of the deconsolidation. Also, AST
shall be reimbursed by AEIC to the extent that it is permitted to carry over
less than the amount calculated in Section I.B.3.
3. Prior Consolidation Impacts. Neither LNC nor any member of
the LNC Consolidated Group shall be liable for any payment to AST should the
amount of tax that AST pays in any such later year on a separate return basis
or as a member of another consolidated group be increased as a result of AST
having been a member of the LNC Consolidated Group.
4. Elections Impacting Prior Consolidated Periods. In the event
that AST wishes to make an election for tax purposes which may adversely
affect tax positions taken by the LNC Consolidated Group during Tax Years
when it was a member of the LNC Consolidated Group, AST shall submit to LNC a
written request for permission to make such an election. LNC shall not
unreasonably withhold such written permission to make a tax election which may
be beneficial to AST after it leaves the LNC Consolidated Group. AST shall, as
a condition of receiving written permission to make the tax election, reimburse
LNC for any and all additional tax costs incurred by the LNC Consolidated Group
in connection with permitting such an election to be made.
SECTION III. GENERAL ITEMS
A. Interaction with Prior Tax Periods.
1. Tax Payments for Prior Periods. To the extent that the tax
liability initially allocated to AST for a prior tax period is subsequently
redetermined, as a result of filing an amended return, the outcome of an IRS
examination, the retroactive application of a new tax law or tax regulation, or
other similar modifying action or item, AST shall pay AEIC for any such
increases to AST's tax liability and is also entitled to receive a payment from
AEIC for any decreases in tax liability attributable to AST.
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<PAGE> 8
2. Prior Tax Payments. To the extent that AST paid to AEIC an
amount for its share of the LNC Consolidated Group's federal income tax
liability or to the extent that it pays an amount pursuant to paragraph 1.
above, AST shall be entitled to consider the amount of such prior payments
when determining whether or not Carry Back Items may be used to offset tax
payments for prior years.
3. Interest and Penalties for Prior Periods. Any interest and
penalties payable by any member of the LNC Consolidated Group relating to Tax
Years prior to this Agreement shall be subject to the terms of Section I.B.4
to the extent that they become payable after the effective date of this
Agreement.
B. Filing Relevant Items. AST agrees to file any elections, consents,
and other documents and take any other actions which may be necessary or
appropriate to carry out the purposes of this Agreement.
C. Inclusion of AST Subsidiaries. If AST owns, acquires or creates any
subsidiary corporation which is an includible corporation as that term is
defined in IRC section 1504, such subsidiary corporation shall be subject to
this Agreement. AST shall treat each such subsidiary corporation as if AST has
an identical tax sharing Agreement to this Agreement between itself and the
subsidiary corporation, unless AST and such subsidiary have entered into a
separate tax sharing Agreement which has been approved in writing by LNC.
D. Applicability to Succeeding Entities. This Agreement shall be binding
on any successor of the parties to this Agreement, including but not limited to
any successor of LNC, AEIC or AST, to the same extent as if the successor had
been an original party to this Agreement.
E. Provision of Items to Defend Tax Positions. Both AEIC and AST agree
to cooperate in supplying information reasonably requested by the other party
in order to make any computations required under this Agreement and for the
purpose of defending tax examinations, including appeals and litigation.
F. Maintenance of Books and Records. AEIC and AST agree to maintain
internal accounting books and records for themselves and each of their
subsidiaries in a manner consistent with U.S. generally accepted accounting
principles and relevant statutory accounting principles. Furthermore, AEIC and
AST agree to account for any
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<PAGE> 9
intercompany transactions entered into by them or any of their subsidiaries and
to make such information available to the other party for tax purposes both
when such transactions are entered into and when such intercompany transactions
become currently taxable.
G. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Indiana and no state court other than
the courts of the State of Indiana shall have jurisdiction over disputes
between the parties concerning the validity, performance, interpretation or
construction of this Agreement.
LINCOLN NATIONAL CORPORATION
Date: 11-19-96 By /s/ Richard C. Vaughan
----------------------------------------------------
Richard C. Vaughan
Executive Vice President and Chief Financial Officer
AMERICAN ECONOMY INSURANCE COMPANY
Date:11-22-96 By /s/ Todd R. Stephenson
----------------------------------------------------
Todd R. Stephenson
Senior Vice President and Treasurer
AMERICAN STATES INSURANCE COMPANY OF TEXAS
Date: 10/15/96 By /s/ Thomas R. Kaehr
----------------------------------------------------
Thomas R. Kaehr
Vice President
9
<PAGE> 1
INDEMNIFICATION AGREEMENT Exhibit 10.22
This INDEMNIFICATION AGREEMENT ("Agreement"), dated as of May 29, 1996, is
among LINCOLN NATIONAL CORPORATION, an Indiana corporation ("LNC") and AMERICAN
STATES FINANCIAL CORPORATION, an Indiana corporation (the "Company") and
AMERICAN STATES INSURANCE COMPANY, an Indiana insurance company ("ASIC").
WHEREAS, LNC is the owner of all of the Company's issued and outstanding
shares of common stock, no par value ("Common Stock") at the date hereof, and
LNC and the Company have determined to cause the Company to offer to the public
(the "Public Offering") up to an aggregate of 11,500,000 outstanding and new
shares of the Common Stock, in a primary offering.
WHEREAS, the Company is the owner of all of ASIC's issued and outstanding
shares of common stock at the date hereof.
WHEREAS, the parties hereto desire to enter into this Agreement which sets
forth the terms of certain indemnification rights applicable to the Public
Offering.
NOW, THEREFORE, upon the terms and conditions, and the mutual promises
herein contained, and for good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
initially capitalized terms shall have the following meanings:
(a) "Affiliate" means, with respect to any person, any other person who,
directly or indirectly, is in control of, is controlled by or is under common
control with the former person.
(b) "SEC" means the United States Securities and Exchange Commission.
(c) "Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
2. Indemnification and Contribution.
(a) In connection with the Public Offering, the Company and ASIC agree to
indemnify and hold harmless LNC, its officers and directors, and each person,
if any, who controls any of the foregoing persons within the meaning of the
Securities Act, from and against any and all claims, liabilities, losses,
damages, expenses and judgments, joint or several, to which they or any of them
may become subject, under the Securities Act or otherwise, including any amount
paid in settlement of any litigation commenced or threatened, and shall
promptly reimburse them, as and when incurred, for any reasonable legal or
other expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as such losses, claims, damages, liabilities or
actions shall arise out of, or shall be based upon, any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement (or in any preliminary or final prospectus included therein), or any
amendment thereto or supplement thereto, or in any document
<PAGE> 2
incorporated by reference therein, or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
and ASIC shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement, or any omission, if such statement or
omission shall have been made in reliance upon and in conformity with
information relating to LNC furnished to the Company and ASIC in writing by or
on behalf of LNC specifically for use in the preparation of the registration
statement (or in any preliminary or final prospectus included therein) or any
amendment thereof or supplement thereto. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of LNC
and shall survive the transfer of such securities. The foregoing indemnity
agreement is in addition to any liability which the Company and ASIC may
otherwise have to LNC, its officers and directors, or any controlling person of
the foregoing.
(b) In the case of the Public Offering, LNC agrees to indemnify and hold
harmless each of the Company and ASIC, its officers and directors and each
person, if any, who controls any of the foregoing (within the meaning of the
Securities Act), from and against any and all claims, liability, losses,
damages, expenses and judgments, joint or several, to which they or any of them
may become subject, under the Securities Act or otherwise, including any amount
paid in settlement of any litigation commenced, or threatened, and shall
promptly reimburse them, as and when incurred, for any legal or other expenses
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, liabilities or actions
shall arise out of, or shall be based upon, any untrue statement or alleged
untrue statement of a material fact contained in the registration statement (or
in any preliminary or final prospectus included therein) or any amendment
thereof or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that
such untrue statement of a material fact is contained in, or such material fact
is omitted from, information relating to LNC furnished in writing to the
Company or ASIC by or on behalf of LNC specifically for use in the preparation
of such registration statement (or in any preliminary or final prospectus
included therein). The foregoing indemnity is in addition to any liability
which LNC may otherwise have to each of the Company and ASIC, or any of its
directors, officers or controlling persons.
(c) Procedure for Indemnification. Each party indemnified under paragraph
(a) or (b) of this Section 2 shall, promptly after receipt of notice of any
claim or the commencement of any action against such indemnified party in
respect of which indemnity may be sought, notify the indemnifying party in
writing of the claim or the commencement thereof, provided that the failure to
notify the indemnifying party shall not relieve it from an liability which it
may have to an indemnified party on account of the indemnity agreement
contained in paragraph (a) or (b) of this Section 2, except to the extent the
indemnifying party was prejudiced by such failure, and in no event shall
relieve the indemnifying party from any other liability which it may have to
such indemnified party. If any such claim or action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate
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<PAGE> 3
therein, and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 2 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided that each
indemnified party, its officers and directors, if any, and each person, if any,
who controls such indemnified led party within the meaning of the Securities
act, shall have the right to employ separate counsel reasonably approved by the
indemnifying party to represent them if the named parties to any action
(including any impleaded parties) include both such indemnified party and an
indemnifying party or an affiliate of an indemnifying party, and such
indemnified party shall have been advised by counsel either (i) that there may
be one or more legal defenses available to such indemnified party that are
different from or additional to those available to such indemnifying party or
such affiliate or (ii) a conflict may exist between such indemnified party and
such indemnifying party or such affiliate, and in that event the fees and
expenses of one such separate counsel for all such indemnified parties shall be
paid by the indemnifying party. An indemnified party shall not enter into any
settlement agreement which is not approved by the indemnifying party, such
approval not to be unreasonably withheld. The indemnifying party may not agree
to any settlement of any such claim or action which provides for any remedy or
relief other than monetary damages for which the indemnifying party shall be
responsible hereunder, without the prior written consent of the indemnified
party, which shall not be unreasonably withheld. In any action hereunder as to
which the indemnifying party has assumed the defense thereof with counsel
reasonably satisfactory to the indemnified party, the indemnified party shall
continue to be entitled to participate in the defense thereof, with counsel of
its own choice, but, except as set forth above, the indemnifying party shall
not be obligated hereunder to reimburse the indemnified party; for the costs
thereof. In all instances, the indemnified party shall cooperate fully with
the indemnifying party or its counsel in the defense of each claim or action.
If the indemnification provided for in this Section 2 shall for any reason
be unavailable to an indemnified party in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to herein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the
indemnifying party on the one hand and the indemnified party on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party on the one hand or the indemnified party on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission,
but not by reference to any indemnified party's stock ownership in the Company
or proceeds from the offering. The amount paid or payable by an indemnified
party as a
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<PAGE> 4
result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph shall be deemed to include, for
purposes of this paragraph, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
3. Miscellaneous.
(a) Injunctions. Each party acknowledges and agrees that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. Therefore, each party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court having
jurisdiction, such remedy being in addition to any other remedy to which such
party may be entitled at law or in equity.
(b) Severability. If any term or provision of this Agreement held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
each of the parties shall use its best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
(c) Further Assurances. Subject to the specific terms of this Agreement,
each of the parties hereto shall make, execute, acknowledge and deliver such
other instruments and documents, and take all such other actions, as may be
reasonably required to effectuate the purposes of this Agreement and to
consummate the transactions contemplated hereby.
(d) Waivers, etc. No failure or delay on the part of either party (or the
intended third party beneficiaries referred to herein) in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No
modification or waiver of any provision of this Agreement nor consent to any
departure therefrom shall in any event be effective unless the same shall be in
writing and signed by an authorized officer of each of the parties, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
(e) Entire Agreement. This Agreement contains the final and complete
understanding of the parties' with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the
parties, whether written or oral, with respect to the subject matter
-4-
<PAGE> 5
hereof. The paragraph headings contained in this Agreement are for
reference purposes only, and shall not affect in any manner the meaning or
interpretation of this Agreement.
(f) Counterparts. For the convenience of the parties, this Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original but all of which together shall be one and the same instrument.
(g) Amendment. This Agreement may be amended only by a written instrument
duly executed by an authorized officer of each of the parties.
(h) Notices. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent:
(i) if to LNC, to:
Lincoln National Corporation
200 East Berry Street
Fort Wayne, Indiana 46802
Attention: Jack D. Hunter, Executive
Vice President and General Counsel
and
(ii) if to the Company or ASIC, to:
American States Financial Corporation
500 North Meridian
Indianapolis, Indiana 46204
Attention: President,
or to such other address as the party to whom notice is to be given may have
previously furnished to the other party in writing in the manner set forth
above.
(i) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF INDIANA.
-5-
<PAGE> 6
(j) Assignment. Except as provided herein, the parties may not assign
their rights under this Agreement. None of the Company, ASIC or LNC may
delegate its obligations under this Agreement.
IN WITNESS WHEREOF, LNC, the Company and ASIC have caused this Agreement
to be duly executed by their authorized representative as of the date first
above written.
LINCOLN NATIONAL CORPORATION
By:/s/ Barbara S. Kowalczyk
---------------------------
Name: Barbara S. Kowalczyk
Title: Senior Vice President
AMERICAN STATES FINANCIAL CORPORATION
By:/s/ Thomas M. Ober
---------------------------
Name: Thomas M. Ober
Title: Secretary
AMERICAN STATES INSURANCE COMPANY
By:/s/ Thomas M. Ober
---------------------------
Name: Thomas M. Ober
Title: Secretary
-6-
<PAGE> 1
AGREEMENT Exhibit 10.25
AGREEMENT made as of January 1, 1997, by and between American States
Financial Corporation (hereinafter called "Company"), an Indiana corporation
having its principal place of business in Indianapolis, Indiana, and Robert A.
Anker (hereinafter called "Employee"):
WITNESSETH:
WHEREAS, Employee desires to render faithful and efficient service to
Company; and
WHEREAS, Company desires to receive the benefit of Employee's service; and
WHEREAS, Employee is willing to be employed by Company; and
WHEREAS, Company deems it essential to formalize the conditions of
Employee's employment by written agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties agree as follows:
1. Office. Company hereby employs Employee as its Chief Executive
Officer, and Employee hereby agrees to serve Company in such capacity or in
such other capacity as the Board of Directors of Company may from time to time
designate.
2. Term of Employment. Employee's employment shall be for the "Employment
Period," with the term commencing on January 1, 1997 and ending on December 31,
1997. During the Employment Period, Employee's employment may be terminated
for Cause as defined in Section 5. Employee's employment may continue by
mutual agreement at the will of Company after the expiration of the Employment
Period or Employee and Employer may extend this contract by mutual written
agreement. During any such period of at will employment, the provisions of
Sections 12, 15, 16 and 17 of this Agreement shall continue to apply as if the
Employment Period under this Agreement had not ended.
3. Incapacity. If during the Employment Period, Employee should be
prevented from performing Employee's duties or fulfilling Employee's
responsibilities by reason of any incapacity or disability that is reasonably
expected to continue for a period of six (6) months or until death, then
Company, in its sole and absolute discretion, may, based on the opinion of a
qualified physician, consider such incapacity or disability to be total and may
on ninety (90) days written notice to Employee terminate the Employment Period.
-1-
<PAGE> 2
4. Death. The Employment Period shall automatically terminate upon the
death of Employee.
5. For Cause. For purposes of this Agreement, Cause means a determination
by the Board of Directors of Company or the Chief Executive Officer of Lincoln
National Corporation ("Lincoln"), made in good faith, without being bound by
Company's progressive discipline policy for employees:
a. that Employee has engaged in acts or omissions against Company, its
parent company, or any of its subsidiaries constituting dishonesty, intentional
breach of fiduciary obligation or intentional wrongdoing or misfeasance;
b. that Employee has been arrested or indicted in a possible criminal
violation involving fraud or dishonesty;
c. after due consideration and with prior written notice to the
Employee, that Employee has performed poorly;
d. that Employee has failed or refused to perform Employee's duties set
forth in paragraph 6 hereof, or willfully failed to execute any reasonable
instruction relating to Employee's duties with Company given him by the Board
of Directors of Company, or the Chief Executive Officer of Lincoln, if either
such failure or refusal is not corrected within ten (10) business days after
Employee's receipt of written notification of such failure or refusal; or
e. that Employee has intentionally and in bad faith acted in a manner
which results in a material detriment to the assets, business or prospects of
Lincoln, Company or the subsidiaries or affiliates of either of them.
6. Responsibilities. During the period of Employee's employment, Employee
shall devote Employee's entire business time and attention, except during
reasonable vacation periods, to, and exert Employee's best efforts to promote,
the affairs of Company, and shall render such services to Company as may be
required by the Board of Directors of Company consistent with services required
by virtue of the office set forth in paragraph 1 hereof and shall perform such
other services as may now or hereafter be specified or enumerated in the
By-Laws of Company consistent with such office. While employed by Company,
Employee shall not, directly or indirectly, alone or as a member of a
partnership or association, or as an officer, director, advisor, consultant,
agent or employee of any other company, be engaged in or concerned with any
other duties or pursuits requiring Employee's personal services except with the
prior written consent of the Board of Directors of Company. Nothing herein
contained shall preclude the ownership by Employee of stocks or other
investment securities. Nothing herein contained shall preclude service by
Employee on boards of directors or
-2-
<PAGE> 3
trustees of charitable or other not-for-profit entities not engaged in any
business competitive with the business of Company so long as such service does
not materially interfere with Employee's responsibilities to Company.
7. Compensation. During the Employment Period, Employee shall receive a
base salary that shall be at an annual rate of not less than $565,000 payable
in accordance with the payroll practices of Company as from time to time in
effect with regard to executive personnel.
8. Benefit Plans and Programs. During the Employment Period, Employee
shall be eligible for participation in all benefit plans and programs made
available by Company to its employees generally (other than Company's
generally available severance program) and in those benefit plans and programs
applicable to executives of the Employee's level to the extent Employee is not
eligible for comparable benefits from Lincoln.
The bonus payable by Company for periods which include the Employment Period
will be payable under the terms of Company's Executive Performance Incentive
Compensation Plan ("EPIC"). Employee's performance goals and target and
maximum awards are set out in Exhibit A. To the extent an EPIC bonus is
payable in the form of stock, phantom stock, or stock units, it shall be
awarded and payable in the form of (or, in the case of phantom stock or stock
units, measured by reference to) Common Stock of Company.
Employee shall be entitled through March 31, 1998 to the benefit of Company's
standard relocation package for executives at Employee's level.
9. Stock Options and Restricted Stock Awards. Among the benefit plans and
programs to be made available by Company to certain of its employees is
Company's Stock Option Plan. Any options granted to Employee shall be options
for Company Common Stock at the appropriate level for his position.
10. Payments after Termination. If Employee's employment with Company
terminates at the end of the Employment Period referred to in Section 2 hereof
for reasons other than incapacity or death or Cause, Employee shall be
entitled to all the following upon execution of a release satisfactory to
Company and Lincoln ("Release"):
a. Company shall pay to the Employee $600,000 in 26 equal biweekly
installments;
b. Employee shall become entitled to EPIC bonus payments as set out
on Exhibit A;
-3-
<PAGE> 4
c. Employee shall be entitled to receive an early retirement benefit
without adjustment for Employee's age;
d. Employee shall be entitled to outplacement benefits through Right &
Associates' standard program for executives or a similar firm approved by
Company; and
e. Employee shall be entitled to executive financial planning
benefits for calendar year 1998.
In the event that Employee's employment terminates prior to the end of the
Employment Period due to death or disability, the amounts specified in
subsections a, b and c above shall still be payable. If Employee's employment
terminates during the Employment Period for the reasons specified in Section
5c, upon execution of a Release, Employee shall be entitled to receive $285,000
in 26 equal biweekly installments and the benefit specified in subsection c
above shall also be payable. If Employee's employment terminates during the
Employment Period for the reasons specified in Section 5b, upon execution of a
Release, the Employee shall be entitled to receive $285,000 in 26 equal
biweekly installments. The amounts provided under subsections b and c above
shall be payable only if the indictment or charges are dismissed or Employee is
acquitted as a result of a trial.
11. Expenses. During the Employment Period, Company shall allow Employee
reasonable expense of travel and business entertainment incurred in the
performance of Employee's duties hereunder, subject to the rules and
regulations adopted by Company for the handling of such business expenses.
12. Other Obligations of Employee. All payments to the Employee provided
for under Section 10 of this Agreement or under the Executive Salary
Continuation Plan of Company, the exercise of any options for stock of Company
and the vesting or payment of any restricted stock (or restricted phantom stock
or restricted stock units) of Company or Lincoln shall be subject, to the
extent permitted by law, to Employee's compliance with the following
provisions. (For purposes of this Section, Company and Lincoln shall be deemed
to include their affiliates and subsidiaries.)
a. Assistance in Litigation. At all times during and after the term of
this Agreement, Employee shall, upon reasonable notice, furnish such
information and proper assistance to Company or Lincoln as may reasonably be
required by Company or Lincoln in connection with any litigation in which it
is, or may become, a party.
b. Confidential Information. At all times during and after the term
of this Agreement, Employee shall not knowingly disclose or reveal to any
unauthorized person any trade secret or other confidential information relating
to Company or Lincoln or to any of the businesses operated by them. Employee
acknowledges, understands and agrees that any amounts payable under this
Agreement that have not been paid
-4-
<PAGE> 5
shall be immediately forfeited in the event Employee divulges or appropriates
to Employee's own use or the use of any other person or organization, except as
otherwise ordered by a court of competent jurisdiction, any secret or
confidential information or knowledge pertaining to the businesses of Company
or Lincoln obtained during Employee's employment with Company or Lincoln.
Employee recognizes and acknowledges that (1) all plans, systems, methods,
designs, programs, procedures, books and records relating to the operations,
practices and personnel of Company or Lincoln (whether instituted or commenced
prior or subsequent to the date Employee was first employed by Company or
Lincoln and whether or not devised, created or initially instituted by Company
or Lincoln) and (2) all other records, documents and information concerning the
business activities, practices and procedures, as they may exist from time to
time, constitute and will constitute secret or confidential information or
knowledge pertaining to the businesses of Company or Lincoln. The information
and material described in this paragraph shall constitute secret or
confidential information or knowledge only to the extent such information and
material has remained confidential (except for unauthorized disclosures) and
except as otherwise ordered by a court of competent jurisdiction. The
provisions of this Section 12b shall not be construed as prohibiting or
limiting Company or Lincoln from pursuing any other remedies for the divulgence
or appropriation or threatened divulgence or appropriation of secret or
confidential information or knowledge relating to Company or Lincoln.
c. Non-competition. During the term of Employee's employment and for a
period of three (3) years following the termination of Employee's employment,
Employee will not act as a director, officer, employee, consultant or advisor
to, nor directly or indirectly become associated with any person, firm, company
or corporation where his activities relate to any business competitive with
Company or Lincoln; provided, however, that this prohibition shall not extend
to the Property Casualty Reinsurance business. Employee specifically
acknowledges that the geographic region to which this restriction applies is
the same geographic region in which Employee personally was present and
performed services for Lincoln during the past two (2) years. This restriction
does not prohibit Employee from buying, selling, or otherwise trading in the
securities of any corporation which is listed on any recognized securities
exchange, and he may engage in any other business activities not competitive
with Company or Lincoln. Neither Company nor Lincoln will object to Employee's
service on the boards of other companies as a Director so long as there is no
conflict with the terms of this subsection or subsection b above or e below.
Employee may request an interpretation by the Chief Executive Officer of
Lincoln of the applicability of this provision to specific activities in which
Employee contemplates engaging.
d. Non-solicitation. During the term of Employee's employment and for
a period of three (3) years following the termination of the Employee's
employment, Employee shall not directly or indirectly solicit or endeavor to
entice away from Company or Lincoln any person who is employed with Company or
Lincoln.
-5-
<PAGE> 6
e. Change in Control. During the term of Employee's employment and
for a period of three (3) years following the termination of Employee's
employment, Employee agrees that neither he nor any entity directly or
indirectly controlled by him will directly or indirectly participate in a
proscribed activity. A "proscribed activity" shall mean either (1) soliciting
others to invest in the Common Stock of Lincoln for the purpose of effecting an
acquisition of control of Lincoln or Employee's directly investing in more than
1% of the Common Stock of Lincoln or (2) using confidential information (as
described in subparagraph b above) to assist any person, entity or group of
persons which intends to or does attempt to effect an acquisition of control of
Lincoln. The term "Control" shall be defined for purposes of this subparagraph
to have the meaning of control contained in Ind. Code Ann. Sec. 27-1-23-1(e)
(West, 1996).
f. Consideration and Legal Action. As consideration for the receipt
of the amounts payable under this Agreement, Employee acknowledges, understands
and agrees that any such amounts that have not been paid will be immediately
forfeited if Employee breaches any provision of this Section 12 during the term
of Employee's employment and for a period of three (3) years following the
termination of Employee's employment. Employee acknowledges that the
restrictions contained in this Section 12 b, c, d and e are reasonable and
necessary to protect the legitimate interests of Company and Lincoln; and that,
therefore, Company or Lincoln shall be entitled to seek preliminary and
permanent injunctive and other equitable relief (including, without limitation,
and equitable accounting of all earnings, profits and other benefits arising
from such violation) in any court of competent jurisdiction, which rights shall
be cumulative and in addition to any other rights or remedies to which Company
or Lincoln may be entitled. Employee hereby irrevocably consents to the
personal jurisdiction over him of the courts of the State of Indiana and of any
Federal court located in such state in connection with any action or proceeding
arising out of or relating to this Section 12 or any related breach of this
Agreement involved in such action or proceeding and further agrees, and shall
not contest, that the proper venue for filing and maintaining any such action
or proceeding shall be in the State of Indiana.
13. Effect of Termination of the Employment Period. Except as
specifically provided in Sections 2, 10 and 12, this Agreement shall terminate
upon the termination of the Employment Period. The obligations of the Employee
under Section 12 and the rights and remedies available to Company under that
Section for any breach of such obligations, however, shall in all events
survive.
14. Notice. Any notice required to be given by Company hereunder to
Employee shall be in proper form and signed by an Officer or Director of
Company. Until one party shall advise the other in writing to the contrary,
notices shall be deemed delivered:
a. to Company if delivered to Lynda Van Kirk, Vice President, with a
copy to Tom Ober, General Counsel, or, if mailed, certified or registered mail,
postage prepaid, to the above-named individuals at American States Insurance
Company, 500
-6-
<PAGE> 7
North Meridian Street, Indianapolis, IN 46204; and a copy to George Davis,
Senior Vice President, Lincoln National Corporation, 200 East Berry Street,
Fort Wayne, IN 46802.
b. to Employee if delivered to Employee, or if mailed to him,
certified or registered mail, postage prepaid, at 3603 West Hamilton Road,
Fort Wayne, IN 46804.
15. Alternative Dispute Resolution. With the exception of actions under
Sections 12b, c, d and e of this Agreement, any controversy, dispute or
questions arising out of, in connection with or in relation to this Agreement
or its interpretation, performance or nonperformance or any breach thereof
shall be resolved through mediation. In the event mediation fails to resolve
the dispute within sixty (60) days after a mediator has been agreed upon or
such other longer period as may be agreed to by the parties, such controversy,
dispute or question shall be settled by arbitration in accordance with the
Center for Public Resources Rules for Non-Administered Arbitration of Business
Disputes, by a sole arbitrator. The arbitrator shall be governed by the United
States Arbitration Act, 9 U.S.C. Sec. 1-16, and judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof. The place of the arbitration shall be Indianapolis, Indiana. In any
such controversy or dispute, regardless of the party by whom such controversy
or dispute is initiated, Company shall, if written notice is given and upon
presentation of appropriate vouchers, pay all legal expenses, including
reasonable attorneys' fees, court costs and ordinary and necessary
out-of-pocket costs of attorneys, billed to and payable by the Employee in
connection with the bringing, prosecuting, defending, litigating, negotiating,
or settling such controversy or dispute; provided, however, that such expenses,
fees and costs shall not be paid by Company unless and until the Employee is
successful on the merits; further provided, however, that in the event such
controversy or dispute is settled, the settlement agreement shall provide for
the allocation of such expenses, fees and costs between the parties.
16. Benefit. This Agreement shall bind and inure to the benefit of
Company and the Employee, their respective heirs, successors and assigns.
17. Conditions. This Agreement is effective upon the approval of the
Agreement by the non-interested members of the Board of Directors of Company or
its designated compensation committee. Should the aforementioned conditions
not be satisfied, this Agreement shall become null and void and shall have no
effect whatsoever on any previous agreement, expressed or implied, between
Employee and Company.
18. Effect on Previous Agreements. Should this Agreement become
effective, it will supersede all employment related agreements between Employee
and Company or Lincoln or their affiliates or subsidiaries.
-7-
<PAGE> 8
19. Amendments. This Agreement may only be amended by the written
agreement of Employee and Company with the written approval of Lincoln.
20. Severability. In case any part of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby. In lieu of any such illegal, invalid or unenforceable provision,
there automatically will be added as part of this Agreement a legal, valid and
enforceable provision as similar in terms and intent to such illegal, invalid
or unenforceable provision as possible.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
American States Financial Corporation
By: /s/ William J. Lawson
-----------------------------
Name: William J. Lawson
----------------------------
Title: President & COO
--------------------------
Employee
By: /s/ Robert A. Anker
-----------------------------
Name: Robert A. Anker
----------------------------
Title: Chairman & CEO
--------------------------
-8-
<PAGE> 9
EXHIBIT A
Executive Performance Incentive Compensation Plan
Performance Threshold Target Maximum
Cycle
----------- --------- ------ -------
1996-1997 $174,825 $436,230 $765,900
These numbers were established taking into account Employee's actual Employment
Period with Company during the Performance Cycle.
If employment terminates as set out in Section 10, Employee shall be entitled
to receive a pro rata award for the 1997-1999 EPIC cycle.
-9-
<PAGE> 1
Exhibit 11
AMERICAN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
<S> <C>
Year Ended December 31,
------------------------------------
1996 1995 1994
------------ ---------- ---------
(Dollars in Thousands
Except Per Share Data)
<S> <C> <C> <C>
Primary
- - -------
Shares outstanding, beginning of period 50,000,000 50,000,000 50,000,000
Weighted average shares issued during period:
Stock offering 5,945,206 - -
Employee benefit plans 30,032 - -
---------- ---------- ----------
Weighted average primary shares outstanding 55,975,238 50,000,000 50,000,000
========== ========== ==========
Net income $ 169,706 $ 178,264 $ 184,558
========== ========== ==========
Net income per primary common share $ 3.03 $ 3.57 $ 3.69
========== ========== ==========
Fully Diluted
- - -------------
Shares outstanding, beginning of period 50,000,000 50,000,000 50,000,000
Weighted average shares issued during period:
Stock offering 5,945,206 - -
Employee benefit plans 30,032 - -
---------- ---------- ----------
Weighted average fully diluted shares outstanding 55,975,238 50,000,000 50,000,000
========== ========== ==========
Net income $ 169,706 $ 178,264 $ 184,558
========== ========== ==========
Net income per fully diluted common share $ 3.03 $ 3.57 $ 3.69
========== ========== ==========
</TABLE>
Note: The fully diluted calculation is submitted in accordance with Regulation
S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
124
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-04887) pertaining to the American States Financial
Corporation Employees' Savings and Profit-Sharing Plan, the Registration
Statement (Form S-8 No. 333-04689) pertaining to the American States Financial
Corporation Stock Option Incentive Plan and in the related prospectuses of our
report dated January 28, 1997, with respect to the consolidated financial
statements and schedules of American States Financial Corporation and
subsidiaries included in the Annual Report (Form 10K) for the year ended
December 31, 1996.
ERNST & YOUNG
February 24, 1997
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN STATES FINANCIAL CORPORATION AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 3,763,880
<DEBT-MARKET-VALUE> 3,763,880
<EQUITIES> 435,137
<MORTGAGE> 32,293
<REAL-ESTATE> 0
<TOTAL-INVEST> 4,342,572
<CASH> 13,610
<RECOVER-REINSURE> 179,445
<DEFERRED-ACQUISITION> 202,233
<TOTAL-ASSETS> 5,541,083
<POLICY-LOSSES> 2,868,348
<UNEARNED-PREMIUMS> 711,955
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 299,511
0
0
<COMMON> 304,493
<OTHER-SE> 1,031,546
<TOTAL-LIABILITY-AND-EQUITY> 5,541,083
1,674,122
<INVESTMENT-INCOME> 274,314
<INVESTMENT-GAINS> 35,538
<OTHER-INCOME> 0
<BENEFITS> 1,248,879
<UNDERWRITING-AMORTIZATION> 338,012
<UNDERWRITING-OTHER> 201,401
<INCOME-PRETAX> 195,682
<INCOME-TAX> 25,976
<INCOME-CONTINUING> 169,706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,706
<EPS-PRIMARY> 3.03
<EPS-DILUTED> 3.03
<RESERVE-OPEN> 2,294,458
<PROVISION-CURRENT> 1,245,580
<PROVISION-PRIOR> (45,705)
<PAYMENTS-CURRENT> 653,977
<PAYMENTS-PRIOR> 578,664
<RESERVE-CLOSE> 2,261,692
<CUMULATIVE-DEFICIENCY> 45,705
</TABLE>
<PAGE> 1
EXHIBIT 28
<TABLE>
<CAPTION>
SCHEDULE P - PART 1 SUMMARY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 23657 5715 5558 270 534 511 23741 0
1987 1792282 89713 1702569 972440 36302 68439 1622 30024 65742 1068697 0
1988 1940195 55193 1885002 1163495 34150 83388 4669 37311 78647 1286711 0
1989 2080973 53126 2027847 1369802 30153 96600 1633 36930 87897 1522513 0
1990 2192757 50224 2142533 1399884 22472 93700 1610 37086 92521 1562023 0
1991 2219646 55077 2164569 1346115 16415 88422 613 34320 96996 1514505 0
1992 2083034 59914 2023120 1221611 51623 71059 895 31202 94688 1334840 0
1993 1843756 48889 1794867 949756 4074 49423 77 26106 91486 1086514 0
1994 1734108 53977 1680131 854464 1922 34552 97 26903 94579 981576 0
1995 1724868 46635 1678233 744764 -1132 17990 80 23094 94542 858348 0
1996 1658228 48603 1609625 571498 2002 6931 4 11748 77554 653977 0
TOTAL 0 0 0 10617486 203696 616062 11570 295258 875163 11893445 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 205935 57388 158912 18346 29839 3900 7502 0 0 6367 328921 0
1987 18965 1809 12967 140 8470 106 2599 0 0 2217 43163 0
1988 27755 8126 15670 167 12683 381 3309 0 0 2951 53694 0
1989 39077 5467 30370 860 20084 261 7025 0 0 5397 95365 0
1990 55230 9799 41041 4053 26055 723 8623 0 0 7059 123433 0
1991 70282 5775 43980 2808 29551 217 8713 0 0 8139 151865 0
1992 80351 3113 45245 3431 26883 149 6006 0 0 8280 160072 0
1993 107458 2072 38219 518 23333 304 4644 0 0 9074 179834 0
1994 149494 10557 43546 16 20587 463 4612 0 0 11496 218699 0
1995 205279 7778 83440 1656 24674 652 10940 0 0 18344 332591 0
1996 345978 8585 185154 3202 34940 1591 26041 0 0 32421 611156 0
TOTAL 1305804 120469 698544 35197 257099 8747 90014 0 0 111745 2298793 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 289113 39808
1987 1151838 39979 1111859 64.3 44.6 65.3 0 0 0.0 29983 13180
1988 1387898 47493 1340405 71.5 86.0 71.1 0 0 0.0 35132 18562
1989 1656252 38374 1617878 79.6 72.2 79.8 0 0 0.0 63120 32245
1990 1724112 38658 1685454 78.6 77.0 78.7 0 0 0.0 82419 41014
1991 1692198 25828 1666370 76.2 46.9 77.0 0 0 0.0 105679 46186
1992 1554122 59211 1494911 74.6 98.8 73.9 0 0 0.0 119052 41020
1993 1273392 7046 1266346 69.1 14.4 70.6 0 0 0.0 143087 36747
1994 1213330 13055 1200275 70.0 24.2 71.4 0 0 0.0 182467 36232
1995 1199973 9033 1190940 69.6 19.4 71.0 0 0 0.0 279285 53306
1996 1280519 15384 1265135 77.2 31.7 78.6 0 0 0.0 519345 91811
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 1848682 450111
</TABLE>
<PAGE> 2
SCHEDULE P - PART 2 SUMMARY
<TABLE>
<CAPTION>
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 670994 707023 728615 773617 787187 830165 913708 919217 1006896 1042151 35255 122934
1987 1143814 1058480 1031510 1042752 1023609 1027504 1029172 1030680 1030531 1043901 13370 13221
1988 0 1288764 1250311 1225090 1256405 1245178 1237637 1244168 1246528 1258807 12279 14639
1989 0 0 1518200 1494017 1501496 1511110 1490150 1498818 1512205 1524583 12378 25765
1990 0 0 0 1618356 1588290 1585364 1575014 1567543 1568657 1585874 17217 18331
1991 0 0 0 0 1664389 1642426 1595822 1572102 1565135 1561235 -3900 -10867
1992 0 0 0 0 0 1537659 1468599 1436335 1407944 1391943 -16001 -44392
1993 0 0 0 0 0 0 1314308 1241365 1194978 1165785 -29193 -75580
1994 0 0 0 0 0 0 0 1229798 1144506 1094200 -50306 -135598
1995 0 0 0 0 0 0 0 0 1140054 1078054 -62000 0
1996 0 0 0 0 0 0 0 0 0 1155160 0 0
TOTAL -70901 -71547
</TABLE>
SCHEDULE P - PART 3 SUMMARY
<TABLE>
<CAPTION>
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 244470 399704 501324 556151 604114 642748 671259 696367 719597 0 0
1987 474906 724062 836057 911338 941956 964164 980953 990293 997376 1002955 0 0
1988 0 496239 813996 961907 1084962 1130897 1164498 1184493 1199529 1208064 0 0
1989 0 0 649005 1012781 1178756 1281510 1348774 1387569 1416909 1434616 0 0
1990 0 0 0 675884 1051502 1226288 1337074 1398471 1439778 1469501 0 0
1991 0 0 0 0 687687 1045702 1222617 1319379 1384331 1417509 0 0
1992 0 0 0 0 0 629274 965184 1118510 1201819 1240151 0 0
1993 0 0 0 0 0 0 559558 808666 930995 995027 0 0
1994 0 0 0 0 0 0 0 544894 786122 886997 0 0
1995 0 0 0 0 0 0 0 0 535452 763806 0 0
1996 0 0 0 0 0 0 0 0 0 576423 0 0
TOTAL
</TABLE>
SCHEDULE P - PART 4 SUMMARY
<TABLE>
<CAPTION>
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 89825 37387 24362 28793 27089 45521 85637 72222 129542 148068
1987 375562 105912 44959 31325 18549 15928 10992 11639 11276 15426
1988 0 400340 126895 65854 40036 27695 20021 16942 15888 18812
1989 0 0 433521 164395 92460 70275 37821 31809 38163 36534
1990 0 0 0 473825 196243 106045 73757 53856 49332 45610
1991 0 0 0 0 503435 217869 114318 80404 64307 49885
1992 0 0 0 0 0 479547 162614 107402 72330 47819
1993 0 0 0 0 0 0 368491 153960 72371 42344
1994 0 0 0 0 0 0 0 311184 118512 48142
1995 0 0 0 0 0 0 0 0 245382 92724
1996 0 0 0 0 0 0 0 0 0 207994
TOTAL
</TABLE>
<PAGE> 3
SCHEDULE P - PART 1R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
<TABLE>
<CAPTION>
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1987 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1988 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1989 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1990 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1991 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1992 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1993 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1994 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
</TABLE>
<PAGE> 4
SCHEDULE P - PART 1S FINANCIAL GUARANTY / MORTGAGE GUARANTY
<TABLE>
<CAPTION>
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
</TABLE>
<PAGE> 5
SCHEDULE P - PART 2A HOMEOWNERS/FARMOWNERS
<TABLE>
<CAPTION>
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 22849 21118 20976 21790 21217 21278 24205 22507 22489 22351 -138 -156
1987 128345 116529 114619 114664 113204 112916 113218 113228 113184 113265 81 37
1988 0 148258 137074 134810 138271 137109 137219 137520 137962 137568 -394 48
1989 0 0 186580 172322 169946 168606 168351 167886 167746 167790 44 -96
1990 0 0 0 197791 181599 178137 178199 177565 177238 177132 -106 -433
1991 0 0 0 0 201527 191654 188990 188579 188521 188375 -146 -204
1992 0 0 0 0 0 184444 179144 178683 177814 177911 97 -772
1993 0 0 0 0 0 0 168926 169154 168473 168125 -348 -1029
1994 0 0 0 0 0 0 0 174703 171504 168172 -3332 -6531
1995 0 0 0 0 0 0 0 0 150666 148778 -1888 0
1996 0 0 0 0 0 0 0 0 0 180265 0 0
TOTAL -6130 -9136
<CAPTION>
SCHEDULE P - PART 2B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 97582 96148 96780 101358 97272 97163 99771 108863 108684 108939 255 76
1987 225754 201686 201046 204990 202025 201604 201899 201240 201205 201373 168 133
1988 0 248631 239866 236000 238935 238764 238138 238851 238979 238645 -334 -206
1989 0 0 256305 257862 256253 253410 252495 253690 253285 252795 -490 -895
1990 0 0 0 286396 288464 281454 278895 277133 275540 275290 -250 -1843
1991 0 0 0 0 283175 275714 265422 261607 261229 259931 -1298 -1676
1992 0 0 0 0 0 253784 246020 238903 234556 236211 1655 -2692
1993 0 0 0 0 0 0 233748 221430 219779 220376 597 -1054
1994 0 0 0 0 0 0 0 220298 211785 209967 -1818 -10331
1995 0 0 0 0 0 0 0 0 212640 209391 -3249 0
1996 0 0 0 0 0 0 0 0 0 216196 0 0
TOTAL -4764 -18488
<CAPTION>
SCHEDULE P - PART 2C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 90905 95362 96397 95727 93357 93598 96639 95088 95068 95115 47 27
1987 127608 130438 129288 132680 129742 128410 128047 127024 126883 126889 6 -135
1988 0 153077 156221 155494 159021 156246 154895 154162 153513 153497 -16 -665
1989 0 0 188541 192642 194121 193766 189686 192794 191762 190384 -1378 -2410
1990 0 0 0 199170 196002 196739 195418 191629 189727 188227 -1500 -3402
1991 0 0 0 0 204575 206008 197364 186983 184568 181518 -3050 -5465
1992 0 0 0 0 0 190308 174394 161690 157569 150213 -7356 -11477
1993 0 0 0 0 0 0 168205 160851 148502 137548 -10954 -23303
1994 0 0 0 0 0 0 0 150257 135387 130793 -4594 -19464
1995 0 0 0 0 0 0 0 0 137450 123794 -13656 0
1996 0 0 0 0 0 0 0 0 0 127168 0 0
TOTAL -42451 -66294
<CAPTION>
SCHEDULE P - PART 2D WORKERS' COMPENSATION
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 121736 133497 138444 148066 149046 151551 154745 152667 153595 155192 1597 2525
1987 133334 128549 126102 135166 133332 137027 138445 138478 137331 138076 745 -402
1988 0 164184 180972 172614 189450 189952 190852 191905 190948 190713 -235 -1192
1989 0 0 194267 205638 211910 215518 213707 216288 215212 215462 250 -826
1990 0 0 0 222059 234202 237294 238259 239126 237392 236677 -715 -2449
1991 0 0 0 0 225535 233341 231360 226632 222169 221050 -1119 -5582
1992 0 0 0 0 0 188249 177877 169156 159675 157956 -1719 -11200
1993 0 0 0 0 0 0 161936 146338 137683 132991 -4692 -13347
1994 0 0 0 0 0 0 0 131446 120392 110602 -9790 -20844
1995 0 0 0 0 0 0 0 0 119523 103218 -16305 0
1996 0 0 0 0 0 0 0 0 0 92586 0 0
TOTAL -31983 -53317
<CAPTION>
SCHEDULE P - PART 2E COMMERCIAL MULTIPLE PERIL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 111553 117300 124058 130230 127802 140632 146540 139824 147339 151860 4521 12036
1987 197074 167470 158607 159749 153583 158831 159911 162919 162833 169575 6742 6656
1988 0 226951 204294 197507 201308 199953 201019 203937 206409 216521 10112 12584
1989 0 0 298617 290875 287645 300068 292360 297914 313324 320462 7138 22548
1990 0 0 0 322379 314793 316715 311516 309159 322558 331067 8509 21908
1991 0 0 0 0 363899 359550 347647 340403 332180 329112 -3068 -11291
1992 0 0 0 0 0 355619 342059 339851 329398 317905 -11493 -21946
1993 0 0 0 0 0 0 292374 268570 249380 238254 -11126 -30316
1994 0 0 0 0 0 0 0 270918 245366 230664 -14702 -40254
1995 0 0 0 0 0 0 0 0 237911 234082 -3829 0
1996 0 0 0 0 0 0 0 0 0 250350 0 0
TOTAL -7196 -28075
</TABLE>
<PAGE> 6
SCHEDULE P - PART 1A HOMEOWNERS/FARMOWNERS
<TABLE>
<CAPTION>
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 353 170 31 0 5 9 223 0
1987 190700 5824 184876 111145 1657 3664 -27 1070 7427 120606 69700
1988 203551 6045 197506 133486 1224 5233 150 1614 9246 146591 67904
1989 212941 3308 209633 164437 1898 5071 43 1524 10628 178195 72527
1990 225497 4598 220899 174811 4443 5897 28 1464 11886 188123 86089
1991 231712 6421 225291 182511 2291 6374 46 1224 13496 200044 88234
1992 223532 3351 220181 169738 942 4914 15 929 14083 187778 69544
1993 209900 6878 203022 160257 26 4092 1 1069 14881 179203 67336
1994 206788 8474 198314 161764 0 2961 0 1248 15683 180408 60333
1995 206451 8541 197910 136326 0 1741 0 578 15179 153246 66711
1996 204942 7445 197497 129751 0 1397 0 306 14122 145270 74071
TOTAL 0 0 0 1524579 12651 41375 256 11031 126640 1679687 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 132 0 19 0 9 0 1 0 0 13 174 6
1987 75 0 5 0 5 0 0 0 0 7 92 4
1988 213 8 4 0 15 1 0 0 0 18 241 7
1989 403 200 6 0 27 13 0 0 0 23 246 7
1990 828 0 11 0 56 0 1 0 0 78 974 10
1991 1684 0 27 0 113 0 2 0 0 158 1984 33
1992 2984 13 63 0 1163 7 27 0 0 273 4490 59
1993 3293 0 81 0 419 0 10 0 0 294 4097 91
1994 5481 2688 209 0 422 0 23 0 0 582 4029 168
1995 6705 0 2738 0 930 0 339 0 0 871 11583 457
1996 31660 5 15008 0 2132 0 323 0 0 3333 52451 5867
TOTAL 53458 2914 18171 0 5291 21 726 0 0 5650 80361 6709
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 151 23
1987 122329 1630 120699 64.1 28.0 65.3 0 0 0.0 80 12
1988 148215 1383 146832 72.8 22.9 74.3 0 0 0.0 209 32
1989 180595 2155 178440 84.8 65.1 85.1 0 0 0.0 209 37
1990 193568 4471 189097 85.8 97.2 85.6 0 0 0.0 839 135
1991 204366 2336 202030 88.2 36.4 89.7 0 0 0.0 1711 273
1992 193244 977 192267 86.5 29.2 87.3 0 0 0.0 3034 1456
1993 183327 28 183299 87.3 0.4 90.3 0 0 0.0 3374 723
1994 187126 2688 184438 90.5 31.7 93.0 0 0 0.0 3002 1027
1995 164828 0 164828 79.8 0.0 83.3 0 0 0.0 9443 2140
1996 197726 5 197721 96.5 0.1 100.1 0 0 0.0 46663 5788
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 68715 11646
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
SCHEDULE P - PART 1B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 1005 648 25 5 18 22 399 0
1987 230527 3451 227076 194228 1399 8534 99 4201 12047 213311 88780
1988 256141 5442 250699 234724 5806 9266 113 5203 16240 254311 83732
1989 265205 3442 261763 244402 2424 9864 36 5190 16994 268800 80355
1990 289464 4797 284667 267354 3762 10481 136 5670 17075 291012 79517
1991 311232 7944 303288 249092 2742 10124 74 5310 16288 272688 71560
1992 308750 8140 300610 217952 1083 9332 0 4802 16502 242703 63845
1993 295028 6302 288726 193313 713 8133 0 4325 18856 219589 59587
1994 284933 6008 278925 172081 1441 6217 0 3758 20472 197329 57528
1995 285987 4257 281730 135970 620 3141 0 2697 19346 157837 59691
1996 295386 4068 291318 76639 110 975 0 1126 14034 91538 55456
TOTAL 0 0 0 1986760 20748 76092 463 42300 167876 2209517 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 20018 7610 41 0 530 351 2 0 0 236 12866 35
1987 267 172 8 0 16 11 1 0 0 8 117 4
1988 724 205 22 0 44 13 1 0 0 31 604 12
1989 903 0 29 0 55 0 2 0 0 48 1037 13
1990 1933 753 96 0 118 46 6 0 0 77 1431 23
1991 3708 471 91 0 226 29 6 0 0 179 3710 66
1992 7249 74 498 0 2208 23 151 0 0 396 10405 181
1993 16316 76 1157 0 2148 52 150 0 0 934 20577 413
1994 27563 812 4248 0 1880 58 289 0 0 1648 34758 1030
1995 54859 348 11863 0 3789 76 814 0 0 3601 74502 2936
1996 95589 367 35496 0 5831 22 2165 0 0 7123 145815 12809
TOTAL 229129 10888 53549 0 16845 681 3587 0 0 14281 305822 17522
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 12449 417
1987 215108 1680 213428 93.3 48.7 94.0 0 0 0.0 103 14
1988 261053 6136 254917 101.9 112.8 101.7 0 0 0.0 541 63
1989 272296 2460 269836 102.7 71.5 103.1 0 0 0.0 932 105
1990 297139 4698 292441 102.7 97.9 102.7 0 0 0.0 1276 155
1991 279714 3316 276398 89.9 41.7 91.1 0 0 0.0 3328 382
1992 254289 1179 253110 82.4 14.5 84.2 0 0 0.0 7673 2732
1993 241008 841 240167 81.7 13.3 83.2 0 0 0.0 17397 3180
1994 234398 2310 232088 82.3 38.4 83.2 0 0 0.0 30999 3759
1995 233383 1044 232339 81.6 24.5 82.5 0 0 0.0 66374 8128
1996 237854 500 237354 80.5 12.3 81.5 0 0 0.0 130718 15097
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 271790 34032
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
SCHEDULE P - PART 1C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 298 148 104 36 1 8 226 0
1987 194342 3691 190651 120632 2741 8679 73 1204 6974 133471 34035
1988 220498 3066 217432 143149 427 10132 72 1149 6784 159566 39080
1989 246841 2487 244354 177185 1466 12151 18 1313 8567 196419 39229
1990 260779 3308 257471 174790 299 10829 206 1285 8745 193859 36449
1991 270332 3581 266751 166429 1729 9771 156 1274 8886 183201 33870
1992 248314 4688 243626 131643 1994 7185 286 1249 8178 144726 29011
1993 216718 3313 213405 111848 455 6952 19 987 8384 126710 26172
1994 195172 3399 191773 85687 -828 4754 -10 963 9832 101111 25389
1995 185579 3266 182313 60454 -956 2422 -4 726 8778 72614 25483
1996 181853 2934 178919 32679 199 626 0 487 6374 39480 23669
TOTAL 0 0 0 1204794 7674 73605 852 10638 81510 1351383 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 1357 -3 28 0 83 0 2 0 0 74 1547 64
1987 325 0 45 0 20 0 3 0 0 19 412 8
1988 1032 467 108 0 70 35 7 0 0 47 762 17
1989 2955 771 202 0 185 52 12 0 0 132 2663 18
1990 2589 24 1954 1596 177 8 22 0 0 155 3269 21
1991 5853 448 1719 264 326 7 26 0 0 286 7491 44
1992 9331 194 3076 1484 2551 48 433 0 0 560 14225 101
1993 15195 79 2428 244 1948 80 54 0 0 891 20113 207
1994 31677 2058 7612 0 2308 194 170 0 0 1793 41308 537
1995 41783 477 16057 948 2666 44 922 0 0 3171 63130 1261
1996 70008 789 19968 572 4332 59 1175 0 0 4813 98876 4671
TOTAL 182105 5304 53197 5108 14666 527 2826 0 0 11941 253796 6949
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 1388 159
1987 136696 2815 133881 70.3 76.3 70.2 0 0 0.0 370 42
1988 161328 1001 160327 73.2 32.6 73.7 0 0 0.0 673 89
1989 201390 2307 199083 81.6 92.8 81.5 0 0 0.0 2386 277
1990 199260 2133 197127 76.4 64.5 76.6 0 0 0.0 2923 346
1991 193295 2604 190691 71.5 72.7 71.5 0 0 0.0 6860 631
1992 162958 4006 158952 65.6 85.5 65.2 0 0 0.0 10729 3496
1993 147699 877 146822 68.2 26.5 68.8 0 0 0.0 17300 2813
1994 143832 1413 142419 73.7 41.6 74.3 0 0 0.0 37231 4077
1995 136252 509 135743 73.4 15.6 74.5 0 0 0.0 56415 6715
1996 139974 1620 138354 77.0 55.2 77.3 0 0 0.0 88615 10261
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 224890 28906
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
SCHEDULE P - PART 1D WORKERS' COMPENSATION
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 6395 2426 239 72 120 129 4265 0
1987 168137 4444 163693 124866 4716 5331 84 2033 8017 133414 53195
1988 219027 2281 216746 169022 -152 7127 255 2506 9888 185934 64459
1989 262982 1470 261512 186644 0 7798 0 2366 10291 204733 63149
1990 286367 1986 284381 202711 287 8180 10 2818 10823 221417 57268
1991 291653 2477 289176 185551 634 7524 9 2119 10808 203240 52213
1992 253795 2565 251230 128052 320 5161 8 1072 8908 141793 37829
1993 225021 1855 223166 101859 324 3507 10 917 7496 112528 27658
1994 205194 1320 203874 75628 68 2628 4 1611 7818 86002 25225
1995 204085 -3267 207352 53820 0 1481 0 182 6211 61512 24987
1996 156632 1139 155493 22790 0 402 0 32 3753 26945 20813
TOTAL 0 0 0 1257338 8623 49378 452 15776 84142 1381783 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 56846 31012 9141 0 2885 1706 166 0 0 1403 37723 439
1987 9796 1018 3496 0 449 67 23 0 0 329 13008 64
1988 9669 260 4854 0 388 18 35 0 0 322 14990 97
1989 15570 1768 6600 0 692 120 46 0 0 509 21529 131
1990 21411 3781 7563 0 1085 257 63 0 0 747 26831 203
1991 21077 1088 7572 0 1034 74 99 0 0 852 29472 276
1992 16143 30 7662 0 1105 4 194 0 0 679 25749 316
1993 20407 480 7024 0 967 39 80 0 0 804 28763 422
1994 23557 970 8571 0 1119 79 220 0 0 997 33415 664
1995 40113 4540 10170 0 2273 368 268 0 0 1727 49643 1431
1996 44069 927 22576 0 2836 63 903 0 0 2786 72180 5719
TOTAL 278658 45874 95229 0 14833 2795 2097 0 0 11155 353303 9762
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 34975 2748
1987 152307 5884 146423 90.6 132.4 89.4 0 0 0.0 12274 734
1988 201304 382 200922 91.9 16.7 92.7 0 0 0.0 14263 727
1989 228150 1889 226261 86.8 128.5 86.5 0 0 0.0 20402 1127
1990 252582 4335 248247 88.2 218.3 87.3 0 0 0.0 25193 1638
1991 234516 1806 232710 80.4 72.9 80.5 0 0 0.0 27561 1911
1992 167904 361 167543 66.2 14.1 66.7 0 0 0.0 23775 1974
1993 142143 852 141291 63.2 45.9 63.3 0 0 0.0 26951 1812
1994 120539 1121 119418 58.7 84.9 58.6 0 0 0.0 31158 2257
1995 116064 4908 111156 56.9 -150.2 53.6 0 0 0.0 45743 3900
1996 100115 990 99125 63.9 86.9 63.7 0 0 0.0 65718 6462
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 328013 25290
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
SCHEDULE P - PART 1E COMMERCIAL MULTIPLE PERIL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 1658 -11 2114 -4 81 81 3868 0
1987 342352 6355 335997 130565 1378 23406 146 3418 8952 161399 43465
1988 384926 8208 376718 170482 7123 31278 2249 4732 11804 204192 50665
1989 420123 5617 414506 239467 4526 40607 744 4199 15663 290467 58750
1990 461676 5788 455888 236076 528 39346 52 4210 17093 291935 61219
1991 465500 5307 460193 233728 3791 35943 94 3693 17511 283297 62957
1992 439028 5884 433144 249906 13614 29999 153 4025 18696 284834 52879
1993 387671 10441 377230 166904 -56 17642 1 2746 15417 200018 47313
1994 368231 12332 355899 161728 1675 11675 45 2644 18867 190550 45839
1995 370696 12343 358353 148369 270 5861 34 2198 18738 172664 52125
1996 367639 10384 357255 105230 0 1953 0 752 15414 122597 49257
TOTAL 0 0 0 1844113 32838 239824 3514 32698 158236 2205821 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 7839 650 10002 0 7584 195 3476 0 0 1879 29935 269
1987 4893 285 5293 0 5416 29 1839 0 0 1176 18303 141
1988 8275 2847 7441 0 8969 290 2586 0 0 1808 25942 210
1989 9900 0 15947 0 14270 0 5542 0 0 3377 49036 322
1990 14315 0 18265 0 17299 0 6347 0 0 4049 60275 345
1991 21030 250 17440 0 19121 74 6060 0 0 4446 67773 417
1992 20271 0 15363 0 12671 0 3462 0 0 3936 55703 417
1993 30537 0 8989 0 11776 0 2351 0 0 3733 57386 659
1994 37982 0 8487 0 10444 0 2067 0 0 4209 63189 1071
1995 43257 480 21048 0 11271 40 5100 0 0 5558 85714 1929
1996 55984 30 58488 0 13931 2 14796 0 0 8892 152059 8262
TOTAL 254283 4542 186763 0 132752 630 53626 0 0 43063 665315 14042
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 17191 12744
1987 181540 1838 179702 53.0 28.9 53.5 0 0 0.0 9901 8402
1988 242643 12510 230133 63.0 152.4 61.1 0 0 0.0 12869 13073
1989 344772 5270 339502 82.1 93.8 81.9 0 0 0.0 25847 23189
1990 352789 581 352208 76.4 10.0 77.3 0 0 0.0 32580 27695
1991 355278 4210 351068 76.3 79.3 76.3 0 0 0.0 38220 29553
1992 354304 13767 340537 80.7 234.0 78.6 0 0 0.0 35634 20069
1993 257349 -55 257404 66.4 -0.5 68.2 0 0 0.0 39526 17860
1994 255460 1720 253740 69.4 13.9 71.3 0 0 0.0 46469 16720
1995 259203 824 258379 69.9 6.7 72.1 0 0 0.0 63825 21889
1996 274688 32 274656 74.7 0.3 76.9 0 0 0.0 114442 37617
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 436504 228811
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
SCHEDULE P - PART 1F SECTION 1 MEDICAL MALPRACTICE - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 118 1 117 0 0 -1 0 0 8 7 1
1988 65 0 65 5 0 10 0 0 16 31 1
1989 69 0 69 168 0 87 0 0 -2 253 4
1990 75 0 75 0 0 0 0 0 1 1 2
1991 90 0 90 0 0 0 0 0 5 5 1
1992 84 0 84 112 0 38 0 0 7 157 8
1993 79 0 79 10 0 126 0 0 10 146 3
1994 74 0 74 0 0 0 0 0 8 8 1
1995 58 0 58 0 0 0 0 0 6 6 2
1996 42 0 42 0 0 0 0 0 4 4 0
TOTAL 0 0 0 295 0 260 0 0 63 618 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 63 0 0 0 20 0 0 0 0 3 86 1
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 285 0 0 0 91 0 0 0 0 15 391 1
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 1 0 51 0 0 0 16 0 0 3 71 1
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 349 0 51 0 111 0 16 0 0 21 548 3
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 63 23
1987 8 0 8 6.8 0.0 6.8 0 0 0.0 0 0
1988 31 0 31 47.7 0.0 47.7 0 0 0.0 0 0
1989 254 0 254 368.1 0.0 368.1 0 0 0.0 0 0
1990 1 0 1 1.3 0.0 1.3 0 0 0.0 0 0
1991 5 0 5 5.6 0.0 5.6 0 0 0.0 0 0
1992 157 0 157 186.9 0.0 186.9 0 0 0.0 0 0
1993 538 0 538 681.0 0.0 681.0 0 0 0.0 285 106
1994 8 0 8 10.8 0.0 10.8 0 0 0.0 0 0
1995 77 0 77 132.8 0.0 132.8 0 0 0.0 52 19
1996 4 0 4 9.5 0.0 9.5 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 400 148
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
SCHEDULE P - PART 1F SECTION 2 MEDICAL MALPRACTICE - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1987 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1988 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1989 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1990 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1991 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1992 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1993 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1994 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
SCHEDULE P - PART 1G SPECIAL LIABILITY (OCEAN, MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 5354 1123 4231 815 114 77 73 7 122 827 0
1988 4438 180 4258 972 148 98 96 3 178 1004 0
1989 4567 26 4541 1097 285 71 54 0 189 1018 0
1990 4896 44 4852 749 47 50 48 0 210 914 0
1991 4910 47 4863 983 250 25 21 0 213 950 0
1992 4826 43 4783 703 0 8 0 0 220 931 0
1993 5157 80 5077 809 0 0 0 0 245 1054 0
1994 5510 91 5419 1471 0 20 0 18 417 1908 0
1995 6063 112 5951 674 0 0 0 0 292 966 0
1996 6387 114 6273 981 0 2 0 0 306 1289 0
TOTAL 0 0 0 9254 844 351 292 28 2392 10861 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 9 0 0 0 3 0 0 0 0 0 12 3
1995 11 0 0 0 4 0 0 0 0 1 16 2
1996 99 0 148 0 32 0 48 0 0 13 340 27
TOTAL 119 0 148 0 39 0 48 0 0 14 368 32
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1987 1014 187 827 18.9 16.7 19.5 0 0 0.0 0 0
1988 1248 245 1003 28.1 136.1 23.6 0 0 0.0 0 0
1989 1357 339 1018 29.7 1303.8 22.4 0 0 0.0 0 0
1990 1009 95 914 20.6 215.9 18.8 0 0 0.0 0 0
1991 1220 271 949 24.8 576.6 19.5 0 0 0.0 0 0
1992 931 0 931 19.3 0.0 19.5 0 0 0.0 0 0
1993 1054 0 1054 20.4 0.0 20.8 0 0 0.0 0 0
1994 1921 0 1921 34.9 0.0 35.4 0 0 0.0 9 3
1995 982 0 982 16.2 0.0 16.5 0 0 0.0 11 5
1996 1630 0 1630 25.5 0.0 26.0 0 0 0.0 247 93
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 267 101
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
SCHEDULE P - PART 1H SECTION 1 OTHER LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 3797 868 2660 124 4 260 5725 0
1987 153625 15849 137776 51101 7516 12612 82 300 3635 59750 13918
1988 156704 9734 146970 60330 11433 14095 1549 245 4009 65452 14209
1989 146739 6613 140126 59631 7669 14175 662 135 3389 68864 12362
1990 136499 7784 128715 54236 6305 12584 1093 307 2798 62220 9958
1991 129220 8100 121120 47432 3520 12862 162 155 2951 59563 8657
1992 120681 12078 108603 40260 10141 9510 391 54 2822 42060 8074
1993 112438 11820 100618 22446 2933 5843 26 92 2530 27860 7642
1994 109553 11890 97663 18442 495 3871 56 61 3985 25747 6978
1995 105078 11786 93292 10071 -180 1208 0 19 3821 15280 6589
1996 99149 12130 87019 5841 0 206 0 40 2828 8875 5282
TOTAL 0 0 0 373587 50700 89626 4145 1412 33028 441396 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 16401 2956 15049 0 11814 1310 3779 0 0 2642 45419 674
1987 2707 88 2047 0 1793 0 514 0 0 545 7518 101
1988 3327 416 2586 0 2645 1 649 0 0 685 9475 117
1989 5624 288 5324 658 3745 75 1171 0 0 1143 15986 126
1990 8138 1917 8620 727 5898 404 1982 0 0 1748 23338 126
1991 9056 192 11514 205 6652 21 2438 0 0 2090 31332 183
1992 16509 908 9977 36 5508 49 1657 0 0 2277 34935 225
1993 15348 78 12802 0 4637 67 1879 0 0 2154 36675 260
1994 15706 500 10432 0 3721 133 1755 0 0 2011 32992 350
1995 12448 1533 19473 45 3073 123 3302 0 0 2987 39582 518
1996 19246 5660 24484 0 5304 1437 6148 0 0 3512 51597 1134
TOTAL 124510 14536 122308 1671 54790 3620 25274 0 0 21794 328849 3814
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 28494 16925
1987 74954 7686 67268 48.8 48.5 48.8 0 0 0.0 4666 2852
1988 88328 13399 74929 56.4 137.7 51.0 0 0 0.0 5497 3978
1989 94202 9352 84850 64.2 141.4 60.6 0 0 0.0 10002 5984
1990 96004 10445 85559 70.3 134.2 66.5 0 0 0.0 14114 9224
1991 94995 4100 90895 73.5 50.6 75.0 0 0 0.0 20173 11159
1992 88521 11524 76997 73.4 95.4 70.9 0 0 0.0 25542 9393
1993 67639 3104 64535 60.2 26.3 64.1 0 0 0.0 28072 8603
1994 59922 1183 58739 54.7 9.9 60.1 0 0 0.0 25638 7354
1995 56384 1522 54862 53.7 12.9 58.8 0 0 0.0 30343 9239
1996 67571 7097 60474 68.2 58.5 69.5 0 0 0.0 38070 13527
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 230611 98238
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
SCHEDULE P - PART 1H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 2 0 10 0 0 0 12 0
1987 2018 1965 53 3254 3254 5 5 0 0 0 177
1988 3328 3274 54 3758 3563 -2 15 0 18 196 175
1989 4956 4890 66 3377 3387 -9 0 0 1 -18 166
1990 4943 4849 94 7510 7478 0 0 0 2 34 197
1991 8412 8405 7 12756 582 0 0 0 300 12474 178
1992 18017 6807 11210 5574 0 0 0 0 57 5631 196
1993 6124 -976 7100 2896 0 0 0 0 41 2937 171
1994 2781 -748 3529 2010 0 5 0 0 94 2109 153
1995 12969 -546 13515 401 0 20 0 0 5 426 151
1996 -1384 -513 -871 983 0 0 0 0 9 992 141
TOTAL 0 0 0 42521 18264 29 20 0 527 24793 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 634 579 107 0 149 122 27 0 0 27 243 3
1987 80 73 7 0 5 0 2 0 0 1 22 3
1988 6 0 7 0 5 0 2 0 0 1 21 1
1989 41 35 7 0 5 0 2 0 0 1 21 2
1990 94 94 0 0 0 0 0 0 0 0 0 1
1991 1954 0 0 0 0 0 0 0 0 0 1954 3
1992 611 0 0 0 0 0 0 0 0 0 611 4
1993 1289 0 0 0 0 0 0 0 0 0 1289 13
1994 1240 0 0 0 0 0 0 0 0 0 1240 16
1995 1920 0 0 0 46 0 0 0 0 22 1988 45
1996 3507 0 50 0 1 0 13 0 0 4 3575 98
TOTAL 11376 781 178 0 211 122 46 0 0 56 10964 189
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 162 81
1987 3353 3332 21 166.2 169.6 39.6 0 0 0.0 14 8
1988 3796 3577 219 114.1 109.3 405.6 0 0 0.0 13 8
1989 3425 3422 3 69.1 70.0 4.5 0 0 0.0 13 8
1990 7606 7573 33 153.9 156.2 35.1 0 0 0.0 0 0
1991 15010 582 14428 178.4 6.9 206114.3 0 0 0.0 1954 0
1992 6241 0 6241 34.6 0.0 55.7 0 0 0.0 611 0
1993 4227 0 4227 69.0 0.0 59.5 0 0 0.0 1289 0
1994 3349 0 3349 120.4 0.0 94.9 0 0 0.0 1240 0
1995 2414 0 2414 18.6 0.0 17.9 0 0 0.0 1920 68
1996 4567 0 4567 -330.0 0.0 -524.3 0 0 0.0 3557 18
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 10773 191
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
SCHEDULE P - PART 1I SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY & THEFT)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 848 4 368 1 358 52 1263 0
1995 82527 5481 77046 43996 1295 762 47 490 4419 47835 0
1996 82330 5267 77063 34751 636 409 0 178 3838 38362 0
TOTAL 0 0 0 79595 1935 1539 48 1026 8309 87460 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 2453 0 2 0 217 0 0 0 0 156 2828 31
1995 2084 0 7 0 54 0 0 0 0 159 2304 34
1996 7582 229 2689 0 190 6 22 0 0 486 10734 1313
TOTAL 12119 229 2698 0 461 6 22 0 0 801 15866 1378
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 2455 373
1995 51480 1342 50138 62.4 24.5 65.1 0 0 0.0 2091 213
1996 49967 871 49096 60.7 16.5 63.7 0 0 0.0 10042 692
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 14588 1278
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
SCHEDULE P - PART 1J AUTO PHYSICAL DAMAGE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 -3158 -245 60 -1 1700 -155 -3007 0
1995 242797 767 242030 153011 387 1122 0 16097 16635 170381 154029
1996 242555 581 241974 158787 354 913 0 8828 16115 175461 153219
TOTAL 0 0 0 308640 496 2095 -1 26625 32595 342835 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 272 9 937 100 53 0 0 0 0 27 1180 23
1995 280 0 -9 0 6 0 0 0 0 19 296 85
1996 17027 45 1385 0 150 0 12 0 0 1284 19813 7214
TOTAL 17579 54 2313 100 209 0 12 0 0 1330 21289 7322
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 1100 80
1995 171064 387 170677 70.5 50.5 70.5 0 0 0.0 271 25
1996 195672 400 195272 80.7 68.8 80.7 0 0 0.0 18367 1446
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 19738 1551
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
SCHEDULE P - PART 1K FIDELITY / SURETY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 -65 -228 111 6 475 13 281 0
1995 10953 869 10084 805 0 153 0 107 158 1116 0
1996 10917 798 10119 199 0 10 0 0 114 323 0
TOTAL 0 0 0 939 -228 274 6 582 285 1720 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 1261 156 0 0 405 50 0 0 0 61 1521 63
1995 932 0 0 0 299 0 0 0 0 49 1280 51
1996 463 0 796 0 149 0 255 0 0 55 1718 88
TOTAL 2656 156 796 0 853 50 255 0 0 165 4519 202
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 1105 416
1995 2397 0 2397 21.9 0.0 23.8 0 0 0.0 932 348
1996 2040 0 2040 18.7 0.0 20.2 0 0 0.0 1259 459
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 3296 1223
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
SCHEDULE P - PART 1L OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 -34153 -22897 -104 -18 0 56 -11286 0
1995 6791 2986 3805 602 -2569 13 2 0 683 3865 0
1996 7251 4235 3016 2793 703 24 4 0 392 2502 0
TOTAL 0 0 0 -30758 -24763 -67 -12 0 1131 -4919 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 21731 20689 16649 5639 373 98 0 0 0 85 12412 129
1995 417 401 1028 662 0 0 1 0 0 46 429 420
1996 558 533 3367 2629 1 0 7 0 0 38 809 454
TOTAL 22706 21623 21044 8930 374 98 8 0 0 169 13650 1003
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 12052 360
1995 2789 -1503 4292 41.1 -50.3 112.8 0 0 0.0 382 47
1996 7179 3870 3309 99.0 91.4 109.7 0 0 0.0 763 46
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 13197 453
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
SCHEDULE P - PART 1M INTERNATIONAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 154 0 154 0 0 0 0 0 0 0 0
1993 113 0 113 0 0 0 0 0 -2 -2 0
1994 2 0 2 0 0 0 0 0 -2 -2 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 -4 -4 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1987 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1988 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1989 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1990 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1991 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1992 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1993 -2 0 -2 -1.8 0.0 -1.8 0 0 0.0 0 0
1994 -2 0 -2 -100.0 0.0 -100.0 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
SCHEDULE P - PART 1N REINSURANCE A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 12967 6865 6102 4485 314 60 1 0 28 4258 0
1989 13849 5993 7856 19423 8228 69 -1 0 21 11286 0
1990 15882 5344 10538 8356 1181 55 3 0 50 7277 0
1991 18559 5852 12707 11381 2788 303 43 0 272 9125 0
1992 25876 10151 15725 45271 22903 116 8 0 233 22709 0
1993 6172 2109 4063 3866 475 31 2 0 87 3507 0
1994 -353 426 -779 -167 0 0 0 0 0 -167 0
1995 -546 10 -556 0 0 0 0 0 0 0 0
1996 21 1 20 0 0 0 0 0 2 2 0
TOTAL 0 0 0 92615 35889 634 56 0 693 57997 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 11 1 0 0 10 0 0 0 0 0 20 0
1989 200 104 0 0 33 0 0 0 0 0 129 0
1990 78 4 0 0 13 0 0 0 0 0 87 0
1991 363 111 90 0 94 6 0 0 0 0 430 0
1992 866 186 116 56 135 0 0 0 0 0 875 0
1993 188 23 50 2 30 0 0 0 0 0 243 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 1706 429 256 58 315 6 0 0 0 0 1784 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 4594 316 4278 35.4 4.6 70.1 0 0 0.0 10 10
1989 19746 8331 11415 142.6 139.0 145.3 0 0 0.0 96 33
1990 8553 1188 7365 53.9 22.2 69.9 0 0 0.0 74 13
1991 12504 2947 9557 67.4 50.4 75.2 0 0 0.0 342 88
1992 46736 23152 23584 180.6 228.1 150.0 0 0 0.0 740 135
1993 4251 502 3749 68.9 23.8 92.3 0 0 0.0 213 30
1994 -167 0 -167 47.3 0.0 21.4 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 2 0 2 9.5 0.0 10.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 1475 309
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
SCHEDULE P - PART 1O REINSURANCE B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 4652 196 4456 2411 0 70 0 0 208 2689 0
1989 5611 218 5393 3481 0 127 2 0 304 3910 0
1990 4564 148 4416 3442 4 162 0 0 231 3831 0
1991 6880 176 6704 3318 -1 140 -1 0 55 3515 0
1992 4211 46 4165 763 -18 428 3 0 22 1228 0
1993 5913 -27 5940 589 60 145 13 0 3 664 0
1994 1109 46 1063 -390 0 2 0 0 -21 -409 0
1995 562 6 556 0 0 0 0 0 0 0 0
1996 582 -1 583 0 0 0 0 0 0 0 0
TOTAL 0 0 0 13614 45 1074 17 0 802 15428 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 296 0 429 65 86 0 0 0 0 0 746 0
1989 688 12 1163 103 202 0 0 0 0 0 1938 0
1990 1454 0 2225 228 240 0 0 0 0 0 3691 0
1991 1227 2 2020 92 240 0 0 0 0 0 3393 0
1992 3210 18 2832 296 343 0 0 0 0 0 6071 0
1993 1398 8 778 55 113 0 0 0 0 0 2226 0
1994 96 0 188 16 77 0 0 0 0 0 345 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 8369 40 9635 855 1301 0 0 0 0 0 18410 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 3501 66 3435 75.3 33.7 77.1 0 0 0.0 660 86
1989 5965 117 5848 106.3 53.7 108.4 0 0 0.0 1736 202
1990 7753 232 7521 169.9 156.8 170.3 0 0 0.0 3451 240
1991 7000 92 6908 101.7 52.3 103.0 0 0 0.0 3153 240
1992 7598 299 7299 180.4 650.0 175.2 0 0 0.0 5728 343
1993 3025 137 2888 51.2 -507.4 48.6 0 0 0.0 2113 113
1994 -49 16 -65 -4.4 34.8 -6.1 0 0 0.0 268 77
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 17109 1301
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
SCHEDULE P - PART 1P REINSURANCE C
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1989 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1990 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1991 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1992 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1993 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1994 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
SCHEDULE P - PART 1Q REINSURANCE D
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 10160 1459 386 28 0 0 9059 0
1987 19831 8232 11599 5512 276 55 0 0 122 5413 0
TOTAL 0 0 0 15672 1735 441 28 0 122 14472 0
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 100437 13026 124330 18346 6022 157 0 0 0 0 199260 0
1987 470 2 1188 128 50 0 0 0 0 0 1578 0
TOTAL 100907 13028 125518 18474 6072 157 0 0 0 0 200838 0
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 193395 5865
1987 7398 406 6992 37.3 4.9 60.3 0 0 0.0 1528 50
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 194923 5915
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
SCHEDULE P - PART 1R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 -5 0 -22 0 0 -1 -28 0
1987 11517 3003 8514 2366 28 711 7 15 1253 4295 143
1988 12640 2538 10102 4448 47 1493 9 18 1847 7732 342
1989 20052 7590 12462 2538 0 1491 0 3 1275 5304 871
1990 17113 5647 11466 1971 0 937 0 13 1227 4135 596
1991 10092 63 10029 2293 0 1474 0 13 1515 5282 465
1992 5231 22 5209 1493 0 766 0 -1 873 3132 212
1993 4587 19 4568 718 0 364 0 4 588 1670 214
1994 4660 24 4636 270 0 198 0 0 171 639 183
1995 4819 26 4793 265 0 65 0 0 270 600 213
1996 3927 21 3906 74 0 13 0 0 248 335 108
TOTAL 0 0 0 16431 75 7490 16 65 9266 33096 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 682 70 196 0 709 33 49 0 0 87 1620 7
1987 94 0 865 0 712 0 217 0 0 127 2015 9
1988 247 0 117 0 418 0 29 0 0 37 848 3
1989 288 0 992 0 831 0 249 0 0 153 2513 9
1990 623 0 806 0 1098 0 202 0 0 172 2901 10
1991 829 0 331 0 1691 0 83 0 0 120 3054 20
1992 869 0 467 0 1088 0 80 0 0 130 2634 24
1993 644 0 701 0 848 0 120 0 0 149 2462 24
1994 845 0 503 0 264 0 88 0 0 121 1821 18
1995 469 0 1015 0 263 0 178 0 0 132 2057 25
1996 185 0 699 0 53 0 176 0 0 83 1196 24
TOTAL 5775 70 6692 0 7975 33 1471 0 0 1311 23121 173
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 808 812
1987 6345 35 6310 55.1 1.2 74.1 0 0 0.0 959 1056
1988 8635 56 8579 68.3 2.2 84.9 0 0 0.0 364 484
1989 7816 0 7816 39.0 0.0 62.7 0 0 0.0 1280 1233
1990 7035 0 7035 41.1 0.0 61.4 0 0 0.0 1429 1472
1991 8337 0 8337 82.6 0.0 83.1 0 0 0.0 1160 1894
1992 5766 0 5766 110.2 0.0 110.7 0 0 0.0 1336 1298
1993 4133 0 4133 90.1 0.0 90.5 0 0 0.0 1345 1117
1994 2460 0 2460 52.8 0.0 53.1 0 0 0.0 1348 473
1995 2657 0 2657 55.1 0.0 55.4 0 0 0.0 1484 573
1996 1532 0 1532 39.0 0.0 39.2 0 0 0.0 884 312
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 12397 10724
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
SCHEDULE P - PART 1R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1987 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1988 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1989 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1990 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1991 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1992 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1993 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1994 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
SCHEDULE P - PART 1S FINANCIAL GUARANTY / MORTGAGE GUARANTY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 13 COL 14 COL 15 COL 16 COL 17 COL 18 COL 19 COL 20 COL 21 COL 22 COL 23 COL 24
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
COL 25 COL 26 COL 27 COL 28 COL 29 COL 30 COL 31 COL 32 COL 33 COL 34 COL 35
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1995 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
1996 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
TOTAL 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
SCHEDULE P - PART 2A HOMEOWNERS/FARMOWNERS
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 22849 21118 20976 21790 21217 21278 24205 22507 22489 22351 -138 -156
1987 128345 116529 114619 114664 113204 112916 113218 113228 113184 113265 81 37
1988 0 148258 137074 134810 138271 137109 137219 137520 137962 137568 -394 48
1989 0 0 186580 172322 169946 168606 168351 167886 167746 167790 44 -96
1990 0 0 0 197791 181599 178137 178199 177565 177238 177132 -106 -433
1991 0 0 0 0 201527 191654 188990 188579 188521 188375 -146 -204
1992 0 0 0 0 0 184444 179144 178683 177814 177911 97 -772
1993 0 0 0 0 0 0 168926 169154 168473 168125 -348 -1029
1994 0 0 0 0 0 0 0 174703 171504 168172 -3332 -6531
1995 0 0 0 0 0 0 0 0 150666 148778 -1888 0
1996 0 0 0 0 0 0 0 0 0 180265 0 0
TOTAL -6130 -9136
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 97582 96148 96780 101358 97272 97163 99771 108863 108684 108939 255 76
1987 225754 201686 201046 204990 202025 201604 201899 201240 201205 201373 168 133
1988 0 248631 239866 236000 238935 238764 238138 238851 238979 238645 -334 -206
1989 0 0 256305 257862 256253 253410 252495 253690 253285 252795 -490 -895
1990 0 0 0 286396 288464 281454 278895 277133 275540 275290 -250 -1843
1991 0 0 0 0 283175 275714 265422 261607 261229 259931 -1298 -1676
1992 0 0 0 0 0 253784 246020 238903 234556 236211 1655 -2692
1993 0 0 0 0 0 0 233748 221430 219779 220376 597 -1054
1994 0 0 0 0 0 0 0 220298 211785 209967 -1818 -10331
1995 0 0 0 0 0 0 0 0 212640 209391 -3249 0
1996 0 0 0 0 0 0 0 0 0 216196 0 0
TOTAL -4764 -18488
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 90905 95362 96397 95727 93357 93598 96639 95088 95068 95115 47 27
1987 127608 130438 129288 132680 129742 128410 128047 127024 126883 126889 6 -135
1988 0 153077 156221 155494 159021 156246 154895 154162 153513 153497 -16 -665
1989 0 0 188541 192642 194121 193766 189686 192794 191762 190384 -1378 -2410
1990 0 0 0 199170 196002 196739 195418 191629 189727 188227 -1500 -3402
1991 0 0 0 0 204575 206008 197364 186983 184568 181518 -3050 -5465
1992 0 0 0 0 0 190308 174394 161690 157569 150213 -7356 -11477
1993 0 0 0 0 0 0 168205 160851 148502 137548 -10954 -23303
1994 0 0 0 0 0 0 0 150257 135387 130793 -4594 -19464
1995 0 0 0 0 0 0 0 0 137450 123794 -13656 0
1996 0 0 0 0 0 0 0 0 0 127168 0 0
TOTAL -42451 -66294
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2D WORKERS' COMPENSATION
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 121736 133497 138444 148066 149046 151551 154745 152667 153595 155192 1597 2525
1987 133334 128549 126102 135166 133332 137027 138445 138478 137331 138076 745 -402
1988 0 164184 180972 172614 189450 189952 190852 191905 190948 190713 -235 -1192
1989 0 0 194267 205638 211910 215518 213707 216288 215212 215462 250 -826
1990 0 0 0 222059 234202 237294 238259 239126 237392 236677 -715 -2449
1991 0 0 0 0 225535 233341 231360 226632 222169 221050 -1119 -5582
1992 0 0 0 0 0 188249 177877 169156 159675 157956 -1719 -11200
1993 0 0 0 0 0 0 161936 146338 137683 132991 -4692 -13347
1994 0 0 0 0 0 0 0 131446 120392 110602 -9790 -20844
1995 0 0 0 0 0 0 0 0 119523 103218 -16305 0
1996 0 0 0 0 0 0 0 0 0 92586 0 0
TOTAL -31983 -53317
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2E COMMERCIAL MULTIPLE PERIL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 111553 117300 124058 130230 127802 140632 146540 139824 147339 151860 4521 12036
1987 197074 167470 158607 159749 153583 158831 159911 162919 162833 169575 6742 6656
1988 0 226951 204294 197507 201308 199953 201019 203937 206409 216521 10112 12584
1989 0 0 298617 290875 287645 300068 292360 297914 313324 320462 7138 22548
1990 0 0 0 322379 314793 316715 311516 309159 322558 331067 8509 21908
1991 0 0 0 0 363899 359550 347647 340403 332180 329112 -3068 -11291
1992 0 0 0 0 0 355619 342059 339851 329398 317905 -11493 -21946
1993 0 0 0 0 0 0 292374 268570 249380 238254 -11126 -30316
1994 0 0 0 0 0 0 0 270918 245366 230664 -14702 -40254
1995 0 0 0 0 0 0 0 0 237911 234082 -3829 0
1996 0 0 0 0 0 0 0 0 0 250350 0 0
TOTAL -7196 -28075
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
SCHEDULE P - PART 2F SECTION 1 MEDICAL MALPRACTICE - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 1421 1179 928 787 1022 895 892 792 792 875 83 83
1987 1 1 1 1 6 9 -1 -1 -1 -1 0 0
1988 0 0 0 67 68 69 72 75 76 15 -61 -60
1989 0 0 71 258 526 276 255 255 255 255 0 0
1990 0 0 0 0 67 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 201 3 383 150 150 0 -233
1993 0 0 0 0 0 0 0 20 22 513 491 493
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 68 68 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 581 283
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2F SECTION 2 MEDICAL MALPRACTICE - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2G SPECIAL LIABILITY (OCEAN, MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 403 356 253 229 206 255 273 220 220 220 0 0
1987 867 779 763 733 710 705 706 706 706 706 0 0
1988 0 948 978 975 941 849 812 826 826 826 0 0
1989 0 0 852 823 829 840 843 829 829 829 0 0
1990 0 0 0 993 737 711 705 703 703 703 0 0
1991 0 0 0 0 896 735 740 736 736 736 0 0
1992 0 0 0 0 0 991 749 727 728 711 -17 -16
1993 0 0 0 0 0 0 870 826 809 809 0 -17
1994 0 0 0 0 0 0 0 1346 1501 1504 3 158
1995 0 0 0 0 0 0 0 0 778 689 -89 0
1996 0 0 0 0 0 0 0 0 0 1310 0 0
TOTAL -103 125
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2H SECTION 1 OTHER LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 146368 160573 154491 153373 162909 177120 177654 190045 204727 209570 4843 19525
1987 74052 78536 66354 60457 61507 59588 58798 58977 59827 63088 3261 4111
1988 0 78509 77652 69547 74578 72057 64990 66149 67535 70235 2700 4086
1989 0 0 83369 72319 82846 83295 79451 74991 74277 80318 6041 5327
1990 0 0 0 77985 75489 79493 80890 78968 70636 81012 10376 2044
1991 0 0 0 0 83684 79920 80331 80727 81916 85854 3938 5127
1992 0 0 0 0 0 59197 74213 70326 69169 71898 2729 1572
1993 0 0 0 0 0 0 74240 69463 65114 59851 -5263 -9612
1994 0 0 0 0 0 0 0 76221 62521 52744 -9777 -23477
1995 0 0 0 0 0 0 0 0 60781 48053 -12728 0
1996 0 0 0 0 0 0 0 0 0 54134 0 0
TOTAL 6120 8703
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 491 -4 -3 109 -3 1599 1821 1463 987 727 -260 -736
1987 1785 12 12 12 12 0 0 0 0 20 20 20
1988 0 0 12 39 -1 180 180 180 178 200 22 20
1989 0 0 0 16 0 155 -19 -19 -19 2 21 21
1990 0 0 0 145 10 362 206 181 31 31 0 -150
1991 0 0 0 0 0 13562 8005 8370 14284 14128 -156 5758
1992 0 0 0 0 0 11329 7064 6267 7356 6185 -1171 -82
1993 0 0 0 0 0 0 5377 4077 4493 4185 -308 108
1994 0 0 0 0 0 0 0 4099 3659 3255 -404 -844
1995 0 0 0 0 0 0 0 0 5693 2387 -3306 0
1996 0 0 0 0 0 0 0 0 0 4553 0 0
TOTAL -5542 4115
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
SCHEDULE P - PART 2I SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY & THEFT)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 14571 15411 15743 332 1172
1995 0 0 0 0 0 0 0 0 44708 45561 853 0
1996 0 0 0 0 0 0 0 0 0 44771 0 0
TOTAL 1185 1172
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2J AUTO PHYSICAL DAMAGE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 17825 7653 5295 -2358 -12530
1995 0 0 0 0 0 0 0 0 161063 154023 -7040 0
1996 0 0 0 0 0 0 0 0 0 177874 0 0
TOTAL -9398 -12530
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2K FIDELITY / SURETY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 4790 2915 2517 -398 -2273
1995 0 0 0 0 0 0 0 0 2588 2189 -399 0
1996 0 0 0 0 0 0 0 0 0 1872 0 0
TOTAL -797 -2273
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2L OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 3224 2027 2164 137 -1060
1995 0 0 0 0 0 0 0 0 4136 3564 -572 0
1996 0 0 0 0 0 0 0 0 0 2879 0 0
TOTAL -435 -1060
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2M INTERNATIONAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 122 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
SCHEDULE P - PART 2N REINSURANCE A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 3168 4250 4248 4319 4285 4294 4354 4301 4250 -51 -104
1989 0 0 8288 11798 11255 11365 11377 11608 11581 11394 -187 -214
1990 0 0 0 6075 7782 7642 7287 7468 7512 7314 -198 -154
1991 0 0 0 0 9775 9141 8669 8955 9265 9285 20 330
1992 0 0 0 0 0 29054 21958 24272 23891 23351 -540 -921
1993 0 0 0 0 0 0 2749 4051 3776 3662 -114 -389
1994 0 0 0 0 0 0 0 0 -137 -167 -30 -167
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL -1100 -1619
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2O REINSURANCE B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 4982 4544 4773 4105 3218 2799 4210 3126 3227 101 -983
1989 0 0 5506 5474 5081 5999 3649 5351 5764 5544 -220 193
1990 0 0 0 7025 4912 6390 2800 5926 6854 7290 436 1364
1991 0 0 0 0 7175 6610 2617 5274 5879 6854 975 1580
1992 0 0 0 0 0 10387 2104 4932 6749 7278 529 2346
1993 0 0 0 0 0 0 262 1551 2667 2886 219 1335
1994 0 0 0 0 0 0 0 0 1173 -44 -1217 -44
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 823 5791
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2P REINSURANCE C
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2Q REINSURANCE D
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 59188 64626 75559 94575 112092 124898 185066 186633 251138 275598 24460 88965
1987 11499 11508 11222 7744 5832 5636 5500 5801 6097 6869 772 1068
TOTAL 25232 90033
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
SCHEDULE P - PART 2R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 3335 5732 10691 16982 10519 8780 9322 9397 10314 10300 -14 903
1987 2230 2408 4127 7182 4201 3125 3026 3237 3328 4931 1603 1694
1988 0 2582 5178 11231 7450 5255 5402 5529 6216 6696 480 1167
1989 0 0 4140 8218 6164 3984 4387 4061 5011 6388 1377 2327
1990 0 0 0 4156 4733 4053 4801 3759 4857 5636 779 1877
1991 0 0 0 0 4744 3514 5284 5438 6493 6702 209 1264
1992 0 0 0 0 0 2030 3272 3860 4296 4763 467 903
1993 0 0 0 0 0 0 2778 2841 3064 3396 332 555
1994 0 0 0 0 0 0 0 1840 2488 2168 -320 328
1995 0 0 0 0 0 0 0 0 2116 2256 140 0
1996 0 0 0 0 0 0 0 0 0 1200 0 0
TOTAL 5053 11018
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 2S FINANCIAL GUARANTY / MORTGAGE GUARANTY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
TOTAL 0 0
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
SCHEDULE P - PART 3A HOMEOWNERS/FARMOWNERS
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 9579 14640 17312 18392 19491 20592 21090 21975 22190 8 6
1987 82380 106251 109429 111695 111613 112110 112594 112917 113077 113180 66682 3341
1988 0 93363 123214 127414 132167 133964 135884 136542 136980 137344 64167 3822
1989 0 0 118606 157262 162670 164838 165903 166635 167102 167567 69105 5014
1990 0 0 0 125322 163862 169743 172731 174258 175732 176237 78677 7492
1991 0 0 0 0 133538 172073 180450 183604 185450 186549 80882 7297
1992 0 0 0 0 0 124332 160317 168953 172473 173695 63582 5903
1993 0 0 0 0 0 0 124304 154977 160310 164322 62402 4843
1994 0 0 0 0 0 0 0 125964 158573 164725 53981 6184
1995 0 0 0 0 0 0 0 0 108469 138067 49547 16707
1996 0 0 0 0 0 0 0 0 0 131148 50047 18157
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 3B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 51459 76454 87384 90442 93488 98171 95876 95931 96308 7 5
1987 76628 140462 172669 190268 195255 198131 200184 200701 200860 201264 75770 13879
1988 0 75627 158461 200130 224537 231212 234791 236053 237277 238072 68489 15222
1989 0 0 93023 178124 216579 233707 242452 247016 249848 251806 66137 14219
1990 0 0 0 101454 194658 237927 259835 268275 271659 273936 65243 14424
1991 0 0 0 0 94781 181078 225019 244197 252549 256400 58167 13537
1992 0 0 0 0 0 87061 169724 204010 219677 226201 51433 12231
1993 0 0 0 0 0 0 81601 149324 185060 200733 47425 11749
1994 0 0 0 0 0 0 0 77915 142625 176857 44701 11797
1995 0 0 0 0 0 0 0 0 75454 138490 41295 15460
1996 0 0 0 0 0 0 0 0 0 77505 31576 11071
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 3C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 41059 64001 77873 83613 87665 89785 91444 93425 93644 41 25
1987 31047 68808 96331 114186 120819 123787 125180 126042 126351 126496 28979 5318
1988 0 30108 74467 110488 134250 144556 149829 152244 152734 152783 32748 6315
1989 0 0 45671 99552 137048 163178 176937 183864 187428 187851 32809 6402
1990 0 0 0 46837 104800 141213 164979 176998 183145 185114 30178 6250
1991 0 0 0 0 44662 100479 140897 161455 169740 174315 28047 5779
1992 0 0 0 0 0 38771 84790 117289 132188 136549 23670 5240
1993 0 0 0 0 0 0 35148 72894 101931 118325 21431 4534
1994 0 0 0 0 0 0 0 35705 71079 91279 20059 4793
1995 0 0 0 0 0 0 0 0 32693 63836 17787 6435
1996 0 0 0 0 0 0 0 0 0 33106 14197 4801
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 3D WORKERS' COMPENSATION
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 39986 64303 81349 89307 97614 104425 110501 114738 118874 97 31
1987 29165 74380 96129 109139 113129 118632 121445 123465 124503 125397 49016 4926
1988 0 23076 91997 123199 151496 161829 168069 172053 174387 176045 57701 6659
1989 0 0 45751 110323 148664 170095 181666 188084 191390 194442 56971 6045
1990 0 0 0 54529 125209 165135 186085 197977 205613 210594 51805 5260
1991 0 0 0 0 53134 121322 156614 175271 185851 192432 46800 5137
1992 0 0 0 0 0 42146 89647 113665 125735 132885 33914 3599
1993 0 0 0 0 0 0 33988 76013 95307 105032 24787 2449
1994 0 0 0 0 0 0 0 26401 62018 78184 21958 2603
1995 0 0 0 0 0 0 0 0 25361 55302 18945 4611
1996 0 0 0 0 0 0 0 0 0 23192 12028 3066
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 3E COMMERCIAL MULTIPLE PERIL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 37469 68079 85663 93970 104596 111964 116150 120018 123805 62 85
1987 62141 95231 108923 123668 131050 137720 143045 146935 149626 152447 36393 7337
1988 0 65288 108761 129505 156720 164452 174183 181218 189101 192388 40922 9575
1989 0 0 104105 166812 194361 217356 239956 252256 266287 274804 46498 11931
1990 0 0 0 104714 164993 196728 226153 245516 260488 274841 47887 12990
1991 0 0 0 0 125496 183250 214940 236678 254199 265785 48764 13776
1992 0 0 0 0 0 123585 190706 225807 250668 266138 40798 11664
1993 0 0 0 0 0 0 103226 144736 168340 184600 36555 10099
1994 0 0 0 0 0 0 0 103239 149242 171684 33333 11435
1995 0 0 0 0 0 0 0 0 104735 153926 32009 18187
1996 0 0 0 0 0 0 0 0 0 107183 26619 14376
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
SCHEDULE P - PART 3F SECTION 1 MEDICAL MALPRACTICE - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 278 457 557 779 782 790 792 792 792 0 0
1987 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 1 0
1988 0 0 0 1 1 2 4 7 8 15 1 0
1989 0 0 0 2 44 253 255 255 255 255 4 0
1990 0 0 0 0 0 0 0 0 0 0 0 2
1991 0 0 0 0 0 0 0 0 0 0 0 1
1992 0 0 0 0 0 0 3 17 150 150 5 3
1993 0 0 0 0 0 0 0 20 22 136 1 1
1994 0 0 0 0 0 0 0 0 0 0 0 1
1995 0 0 0 0 0 0 0 0 0 0 0 1
1996 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 3F SECTION 2 MEDICAL MALPRACTICE - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 3G SPECIAL LIABILITY (OCEAN, MARINE, AIRCRAFT (ALL PERILS), BOILER AND MACHINERY)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 98 35 77 97 121 123 125 220 220 0 0
1987 470 620 658 689 697 699 702 703 706 706 0 0
1988 0 524 653 774 786 795 801 801 826 826 0 0
1989 0 0 468 702 749 786 807 809 829 829 0 0
1990 0 0 0 469 698 701 702 703 703 703 0 0
1991 0 0 0 0 502 689 734 736 736 736 0 0
1992 0 0 0 0 0 424 679 688 689 711 0 0
1993 0 0 0 0 0 0 670 800 809 809 0 0
1994 0 0 0 0 0 0 0 866 1481 1491 0 0
1995 0 0 0 0 0 0 0 0 479 675 0 0
1996 0 0 0 0 0 0 0 0 0 984 0 0
<CAPTION>
SCHEDULE P - PART 3H SECTION 1 OTHER LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 46807 79791 101462 117548 127317 134977 143902 161328 166793 105 298
1987 7842 18546 29169 37107 43047 46349 50778 52164 54990 56116 10795 2969
1988 0 6156 16629 27068 38542 46643 52851 57236 59852 61443 11064 3180
1989 0 0 9984 18661 31942 43009 51338 58247 62682 65475 9509 3092
1990 0 0 0 7160 18536 31791 41562 47832 54633 59422 6361 2285
1991 0 0 0 0 7711 20814 31497 42284 51769 56613 4790 2177
1992 0 0 0 0 0 5999 14664 26042 34583 39239 5595 2232
1993 0 0 0 0 0 0 6981 15915 23755 25330 5304 2056
1994 0 0 0 0 0 0 0 6776 14946 21763 4614 2014
1995 0 0 0 0 0 0 0 0 5359 11458 3789 2282
1996 0 0 0 0 0 0 0 0 0 6048 2705 1443
<CAPTION>
SCHEDULE P - PART 3H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 -3 -3 -3 -3 33 479 492 499 511 0 7
1987 1 12 12 12 12 0 0 0 0 0 86 98
1988 0 0 0 -1 -1 180 180 180 178 180 58 60
1989 0 0 0 0 0 -18 -19 -19 -19 -19 56 65
1990 0 0 0 10 10 36 31 31 31 31 80 115
1991 0 0 0 0 0 2661 3550 3942 12050 12174 57 114
1992 0 0 0 0 0 25 1422 2171 5567 5574 46 146
1993 0 0 0 0 0 0 1564 1720 2139 2896 30 130
1994 0 0 0 0 0 0 0 173 1438 2015 23 113
1995 0 0 0 0 0 0 0 0 92 421 13 93
1996 0 0 0 0 0 0 0 0 0 983 3 40
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
SCHEDULE P - PART 3I SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLARY & THEFT)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 11858 13070 0 0
1995 0 0 0 0 0 0 0 0 35559 43416 0 0
1996 0 0 0 0 0 0 0 0 0 34523 0 0
<CAPTION>
SCHEDULE P - PART 3J AUTO PHYSICAL DAMAGE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 6995 4143 0 0
1995 0 0 0 0 0 0 0 0 143765 153746 129230 24714
1996 0 0 0 0 0 0 0 0 0 159346 123957 22048
<CAPTION>
SCHEDULE P - PART 3K FIDELITY / SURETY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 789 1057 0 0
1995 0 0 0 0 0 0 0 0 305 958 0 0
1996 0 0 0 0 0 0 0 0 0 208 0 0
<CAPTION>
SCHEDULE P - PART 3L OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 1179 -10164 0 0
1995 0 0 0 0 0 0 0 0 3076 3181 0 0
1996 0 0 0 0 0 0 0 0 0 2110 0 0
<CAPTION>
SCHEDULE P - PART 3M INTERNATIONAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
SCHEDULE P - PART 3N REINSURANCE A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 1635 3725 3993 4173 4186 4269 4313 4204 4230 0 0
1989 0 0 4606 9941 10617 10958 11175 11385 11286 11264 0 0
1990 0 0 0 3373 6733 7152 7137 7287 7242 7228 0 0
1991 0 0 0 0 3238 7599 8354 8400 8583 8854 0 0
1992 0 0 0 0 0 11075 20214 21942 22204 22476 0 0
1993 0 0 0 0 0 0 2320 2977 3240 3419 0 0
1994 0 0 0 0 0 0 0 0 -167 -167 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 3O REINSURANCE B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 43 1508 1877 2107 2403 2648 2812 2349 2481 0 0
1989 0 0 76 1233 2223 2577 3096 3242 3300 3606 0 0
1990 0 0 0 53 636 1567 2304 2849 2853 3600 0 0
1991 0 0 0 0 413 2000 2202 2868 2790 3460 0 0
1992 0 0 0 0 0 631 1637 2289 -201 1206 0 0
1993 0 0 0 0 0 0 143 340 8 660 0 0
1994 0 0 0 0 0 0 0 0 -741 -389 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 3P REINSURANCE C
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 3Q REINSURANCE D
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 12881 22592 37191 47008 56089 63684 71682 67279 76338 0 0
1987 1111 3909 4276 4696 4934 5140 5262 5353 5138 5291 0 0
</TABLE>
<PAGE> 37
<TABLE>
<CAPTION>
SCHEDULE P - PART 3R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 979 3860 5300 6568 7488 7929 8374 8793 8766 0 3
1987 227 -56 694 1488 2716 2768 2843 2964 3068 3042 65 62
1988 0 302 1023 2213 4163 4560 4680 4775 5224 5885 79 83
1989 0 0 450 1199 1859 2226 2526 2931 3673 4029 215 141
1990 0 0 0 511 1190 1449 1704 2073 2800 2908 740 264
1991 0 0 0 0 582 828 1576 2362 2875 3768 931 229
1992 0 0 0 0 0 106 272 882 2053 2259 109 79
1993 0 0 0 0 0 0 68 231 481 1083 120 70
1994 0 0 0 0 0 0 0 90 236 468 96 69
1995 0 0 0 0 0 0 0 0 106 330 83 105
1996 0 0 0 0 0 0 0 0 0 87 47 37
<CAPTION>
SCHEDULE P - PART 3R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 3S FINANCIAL GUARANTY / MORTGAGE GUARANTY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12 COL 13
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
SCHEDULE P - PART 4A HOMEOWNERS/FARMOWNERS
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 2453 706 340 240 252 85 1871 80 34 20
1987 23849 3189 421 239 212 48 17 9 5 5
1988 0 24480 2832 682 819 235 60 18 13 5
1989 0 0 37298 3941 1160 188 77 48 19 7
1990 0 0 0 37947 5404 834 391 115 64 11
1991 0 0 0 0 33243 4948 732 307 194 29
1992 0 0 0 0 0 28032 2439 718 358 90
1993 0 0 0 0 0 0 16846 3987 677 91
1994 0 0 0 0 0 0 0 22196 4196 233
1995 0 0 0 0 0 0 0 0 11488 3077
1996 0 0 0 0 0 0 0 0 0 15332
<CAPTION>
SCHEDULE P - PART 4B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 5481 548 55 58 48 9 34 37 20 43
1987 58929 7553 1644 1107 105 22 13 28 15 9
1988 0 60487 12012 3787 799 62 33 49 31 23
1989 0 0 49739 16695 5260 1396 80 36 24 31
1990 0 0 0 56051 20628 3462 739 145 38 101
1991 0 0 0 0 59361 12877 1467 699 104 96
1992 0 0 0 0 0 51135 6490 5012 466 650
1993 0 0 0 0 0 0 40230 9101 2134 1307
1994 0 0 0 0 0 0 0 32944 10786 4537
1995 0 0 0 0 0 0 0 0 32549 12677
1996 0 0 0 0 0 0 0 0 0 37662
<CAPTION>
SCHEDULE P - PART 4C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 8984 3047 907 430 123 39 2603 788 193 29
1987 41377 10499 4816 2605 409 172 72 88 106 48
1988 0 44923 14746 7350 2013 382 197 104 214 114
1989 0 0 52356 23678 8202 1162 385 236 740 214
1990 0 0 0 63431 24078 8924 1204 498 920 380
1991 0 0 0 0 68173 25237 7543 2594 2483 1480
1992 0 0 0 0 0 70929 16944 10057 9572 2025
1993 0 0 0 0 0 0 47730 20710 8149 2238
1994 0 0 0 0 0 0 0 37938 16340 7781
1995 0 0 0 0 0 0 0 0 40451 16030
1996 0 0 0 0 0 0 0 0 0 20570
<CAPTION>
SCHEDULE P - PART 4D WORKERS' COMPENSATION
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 9940 6215 3895 4175 7000 9229 9509 7493 7810 9306
1987 65408 14042 3850 4159 3843 4684 3705 3485 3104 3519
1988 0 77800 24288 11951 9316 6444 5045 4873 4293 4889
1989 0 0 79475 30643 20468 15568 7225 6334 6437 6647
1990 0 0 0 90596 40438 24685 18239 8159 7822 7626
1991 0 0 0 0 97639 45190 28747 13554 8263 7671
1992 0 0 0 0 0 90855 39160 21066 8810 7856
1993 0 0 0 0 0 0 80968 25054 10871 7104
1994 0 0 0 0 0 0 0 57211 18643 8792
1995 0 0 0 0 0 0 0 0 42150 10439
1996 0 0 0 0 0 0 0 0 0 23479
<CAPTION>
SCHEDULE P - PART 4E COMMERCIAL MULTIPLE PERIL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 29245 12781 9816 9443 4620 10951 11453 10532 13435 13477
1987 95486 34854 13993 11053 6411 6388 5073 6302 5771 7133
1988 0 101017 41407 25596 14160 11330 11066 8971 8376 10027
1989 0 0 118177 59395 35166 32400 18145 18916 24841 21488
1990 0 0 0 138831 76787 47761 33478 27712 31858 24612
1991 0 0 0 0 157184 92123 54858 42987 37923 23500
1992 0 0 0 0 0 148729 68894 47574 35139 18826
1993 0 0 0 0 0 0 117900 61280 28691 11341
1994 0 0 0 0 0 0 0 96564 38223 10554
1995 0 0 0 0 0 0 0 0 69106 26148
1996 0 0 0 0 0 0 0 0 0 73284
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
SCHEDULE P - PART 4F SECTION 1 MEDICAL MALPRACTICE - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 518 358 63 63 108 39 47 0 0 0
1987 2 2 2 2 7 10 0 0 0 0
1988 0 0 0 36 44 44 45 44 35 0
1989 0 0 70 13 34 22 0 0 0 0
1990 0 0 0 0 49 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 199 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 67
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 4F SECTION 2 MEDICAL MALPRACTICE - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 4G SPECIAL LIABILITY (OCEAN, MARINE, AIRCRAFT (ALL PERILS),
BOILER AND MACHINERY)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 28 1 1 0 0 0 38 0 0 0
1987 253 71 43 12 0 0 0 0 0 0
1988 0 222 31 19 7 0 0 0 0 0
1989 0 0 220 16 7 0 0 0 0 0
1990 0 0 0 362 10 9 0 0 0 0
1991 0 0 0 0 229 14 0 0 0 0
1992 0 0 0 0 0 367 0 0 0 0
1993 0 0 0 0 0 0 105 0 0 0
1994 0 0 0 0 0 0 0 65 0 0
1995 0 0 0 0 0 0 0 0 177 0
1996 0 0 0 0 0 0 0 0 0 196
<CAPTION>
SCHEDULE P - PART 4H SECTION 1 OTHER LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 19744 11658 7414 8352 5230 16248 11637 18745 18905 18828
1987 38367 26682 13280 7837 6815 4438 2051 1643 1837 2561
1988 0 47360 27321 11750 10003 8830 3352 1894 2561 3236
1989 0 0 52608 22070 18315 16713 11134 4934 4158 5837
1990 0 0 0 41335 21737 16663 18194 15384 6004 9875
1991 0 0 0 0 44351 29670 19282 17456 13233 13746
1992 0 0 0 0 0 38810 27301 19982 14496 11599
1993 0 0 0 0 0 0 47884 31536 20240 14680
1994 0 0 0 0 0 0 0 48760 27506 12186
1995 0 0 0 0 0 0 0 0 41699 22730
1996 0 0 0 0 0 0 0 0 0 30632
<CAPTION>
SCHEDULE P - PART 4H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 460 0 0 64 0 397 983 700 348 134
1987 1716 0 0 0 0 0 0 0 0 9
1988 0 0 0 0 0 0 0 0 0 9
1989 0 0 0 0 0 92 0 0 0 9
1990 0 0 0 87 0 14 0 0 0 0
1991 0 0 0 0 0 32 0 0 0 0
1992 0 0 0 0 0 0 32 25 21 0
1993 0 0 0 0 0 0 55 62 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 21 0
1996 0 0 0 0 0 0 0 0 0 63
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
SCHEDULE P - PART 4I SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE, EARTHQUAKE, GLASS, BURGLA
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 3910 12 3
1995 0 0 0 0 0 0 0 0 1342 7
1996 0 0 0 0 0 0 0 0 0 2711
<CAPTION>
SCHEDULE P - PART 4J AUTO PHYSICAL DAMAGE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 7292 2 837
1995 0 0 0 0 0 0 0 0 2784 -9
1996 0 0 0 0 0 0 0 0 0 1397
<CAPTION>
SCHEDULE P - PART 4K FIDELITY / SURETY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 1074 0 0
1995 0 0 0 0 0 0 0 0 1052 0
1996 0 0 0 0 0 0 0 0 0 1051
<CAPTION>
SCHEDULE P - PART 4L OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 2182 92 11010
1995 0 0 0 0 0 0 0 0 1041 366
1996 0 0 0 0 0 0 0 0 0 744
<CAPTION>
SCHEDULE P - PART 4M INTERNATIONAL
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 122 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
SCHEDULE P - PART 4N REINSURANCE A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 8 6 0 0 0 30 0
1989 0 0 26 7 21 0 0 0 35 0
1990 0 0 0 19 40 0 0 0 55 0
1991 0 0 0 0 3113 0 0 0 85 90
1992 0 0 0 0 0 8973 0 500 64 60
1993 0 0 0 0 0 0 0 500 0 48
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 4O REINSURANCE B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 4263 1877 1914 1180 6 0 900 295 364
1989 0 0 3717 2135 1415 1688 0 900 1350 1060
1990 0 0 0 5068 1912 2546 0 1400 1803 1997
1991 0 0 0 0 5462 3247 0 1400 1307 1928
1992 0 0 0 0 0 8969 0 1400 2570 2536
1993 0 0 0 0 0 0 0 500 805 723
1994 0 0 0 0 0 0 0 0 1576 172
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 4P REINSURANCE C
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 4Q REINSURANCE D
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 11756 1576 1383 4690 9046 8364 42731 33613 88700 105985
1987 8630 6644 5656 2414 293 0 0 0 302 1060
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
SCHEDULE P - PART 4R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 385 192 391 903 145 76 249 189 97 246
1987 1419 1522 1036 1699 287 143 56 82 136 1083
1988 0 1454 1613 2603 1481 319 219 89 39 146
1989 0 0 2533 4066 2011 1005 763 404 558 1241
1990 0 0 0 2528 1927 1075 1496 442 766 1008
1991 0 0 0 0 2374 985 1679 1406 714 414
1992 0 0 0 0 0 1013 1161 1060 830 547
1993 0 0 0 0 0 0 1239 1109 799 821
1994 0 0 0 0 0 0 0 1225 1150 591
1995 0 0 0 0 0 0 0 0 1523 1193
1996 0 0 0 0 0 0 0 0 0 875
<CAPTION>
SCHEDULE P - PART 4R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 4S FINANCIAL GUARANTY / MORTGAGE GUARANTY
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 43
<TABLE>
<CAPTION>
SCHEDULE P - PART 5A HOMEOWNERS/FARMOWNERS
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 9106 717 225 127 66 25 20 15 6 8
1987 54694 66068 66435 66583 66639 66660 66669 66675 66680 66682
1988 0 55209 63480 63919 64043 64103 64138 64157 64162 64167
1989 0 0 57048 68477 68892 69001 69066 69086 69099 69105
1990 0 0 0 66414 77969 78446 78576 78631 78667 78677
1991 0 0 0 0 71144 80184 80663 80789 80846 80882
1992 0 0 0 0 0 55305 63082 63430 63530 63582
1993 0 0 0 0 0 0 55678 61977 62288 62402
1994 0 0 0 0 0 0 0 47714 53695 53981
1995 0 0 0 0 0 0 0 0 43120 49547
1996 0 0 0 0 0 0 0 0 0 50047
<CAPTION>
SCHEDULE P - PART 5A HOMEOWNERS/FARMOWNERS
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 819 366 244 116 52 60 49 17 14 6
1987 2918 467 212 88 35 21 15 7 5 4
1988 0 3015 479 219 135 73 36 15 12 7
1989 0 0 4351 505 160 110 63 28 12 7
1990 0 0 0 4550 462 241 120 54 21 10
1991 0 0 0 0 3907 608 234 119 67 33
1992 0 0 0 0 0 3547 507 225 121 59
1993 0 0 0 0 0 0 2427 467 199 91
1994 0 0 0 0 0 0 0 2322 413 168
1995 0 0 0 0 0 0 0 0 5747 457
1996 0 0 0 0 0 0 0 0 0 5867
<CAPTION>
SCHEDULE P - PART 5A HOMEOWNERS/FARMOWNERS
SECTION 3
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 7764 499 152 78 47 45 36 18 11 6
1987 59609 69281 69526 69621 69656 69669 69685 69691 69698 69700
1988 0 60728 67373 67711 67815 67851 67880 67891 67898 67904
1989 0 0 62865 72065 72341 72431 72497 72511 72522 72527
1990 0 0 0 76209 85527 85886 86016 86056 86082 86089
1991 0 0 0 0 80494 87678 88082 88174 88212 88234
1992 0 0 0 0 0 62946 69155 69433 69514 69544
1993 0 0 0 0 0 0 61538 67009 67261 67336
1994 0 0 0 0 0 0 0 53641 60124 60333
1995 0 0 0 0 0 0 0 0 62905 66711
1996 0 0 0 0 0 0 0 0 0 74071
</TABLE>
<PAGE> 44
<TABLE>
<CAPTION>
SCHEDULE P - PART 5B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 21228 3609 1148 412 152 78 27 27 13 7
1987 57346 72567 74701 75376 75615 75704 75749 75764 75767 75770
1988 0 50745 65224 67477 68146 68344 68438 68468 68478 68489
1989 0 0 47916 62938 65089 65745 65967 66070 66118 66137
1990 0 0 0 47366 61995 64189 64862 65106 65202 65243
1991 0 0 0 0 43308 55304 57271 57863 58081 58167
1992 0 0 0 0 0 37982 49014 50703 51256 51433
1993 0 0 0 0 0 0 35429 45327 46899 47425
1994 0 0 0 0 0 0 0 33692 43016 44701
1995 0 0 0 0 0 0 0 0 31638 41295
1996 0 0 0 0 0 0 0 0 0 31576
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 5B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 5791 2147 850 360 179 105 80 49 41 35
1987 17402 3534 1203 456 189 86 35 17 10 4
1988 0 15367 3546 1156 401 202 93 40 26 12
1989 0 0 14221 3441 1146 459 207 91 38 13
1990 0 0 0 14183 3359 1239 465 181 70 23
1991 0 0 0 0 12288 3213 1099 418 158 66
1992 0 0 0 0 0 11626 2811 1008 385 181
1993 0 0 0 0 0 0 10766 2714 1015 413
1994 0 0 0 0 0 0 0 10536 2827 1030
1995 0 0 0 0 0 0 0 0 12668 2936
1996 0 0 0 0 0 0 0 0 0 12809
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE P - PART 5B PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
SECTION 3
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 10340 926 239 115 51 32 20 11 13 6
1987 83098 88059 88513 88672 88729 88751 88772 88776 88779 88780
1988 0 75743 82864 83465 83636 83689 83719 83727 83730 83732
1989 0 0 71208 79569 80093 80257 80320 80347 80353 80355
1990 0 0 0 70790 78677 79254 79446 79493 79511 79517
1991 0 0 0 0 64850 70811 71389 71514 71544 71560
1992 0 0 0 0 0 57896 63298 63718 63817 63845
1993 0 0 0 0 0 0 54358 59160 59498 59587
1994 0 0 0 0 0 0 0 52171 57177 57528
1995 0 0 0 0 0 0 0 0 56190 59691
1996 0 0 0 0 0 0 0 0 0 55456
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
SCHEDULE P - PART 5C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 7687 1415 522 208 94 37 17 5 9 41
1987 21597 27600 28462 28767 28892 28939 28961 28968 28974 28979
1988 0 25002 31393 32259 32553 32666 32718 32740 32745 32748
1989 0 0 24716 31321 32246 32591 32732 32775 32799 32809
1990 0 0 0 22919 28868 29732 30003 30116 30162 30178
1991 0 0 0 0 21575 26769 27578 27875 27999 28047
1992 0 0 0 0 0 18404 22673 23319 23557 23670
1993 0 0 0 0 0 0 16723 20455 21151 21431
1994 0 0 0 0 0 0 0 15728 19374 20059
1995 0 0 0 0 0 0 0 0 14282 17787
1996 0 0 0 0 0 0 0 0 0 14197
<CAPTION>
SCHEDULE P - PART 5C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 2549 1138 489 232 113 87 57 44 95 64
1987 5220 1603 576 245 103 51 31 21 19 8
1988 0 5593 1489 603 276 115 63 34 25 17
1989 0 0 5644 1594 659 273 118 67 33 18
1990 0 0 0 5122 1424 552 250 121 46 21
1991 0 0 0 0 4791 1407 588 254 105 44
1992 0 0 0 0 0 4176 1250 538 248 101
1993 0 0 0 0 0 0 3795 1297 528 207
1994 0 0 0 0 0 0 0 3851 1299 537
1995 0 0 0 0 0 0 0 0 4560 1261
1996 0 0 0 0 0 0 0 0 0 4671
<CAPTION>
SCHEDULE P - PART 5C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
SECTION 3
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 5222 513 132 67 29 36 19 21 82 35
1987 29597 33601 33819 33930 33973 33986 33999 34007 34027 34035
1988 0 34424 38520 38875 38969 39001 39029 39048 39068 39080
1989 0 0 34093 38594 39008 39121 39167 39199 39215 39229
1990 0 0 0 31886 35937 36274 36383 36422 36434 36449
1991 0 0 0 0 30119 33425 33728 33825 33854 33870
1992 0 0 0 0 0 25937 28680 28920 28992 29011
1993 0 0 0 0 0 0 23498 25914 26120 26172
1994 0 0 0 0 0 0 0 22532 25212 25389
1995 0 0 0 0 0 0 0 0 23697 25483
1996 0 0 0 0 0 0 0 0 0 23669
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
SCHEDULE P - PART 5D WORKERS' COMPENSATION
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 14304 3807 1423 798 377 268 146 127 87 97
1987 32629 45888 47728 48392 48671 48836 48911 48962 48994 49016
1988 0 41557 54389 56244 57010 57357 57511 57596 57660 57701
1989 0 0 40738 53447 55501 56330 56664 56835 56921 56971
1990 0 0 0 36323 48505 50448 51176 51510 51693 51805
1991 0 0 0 0 33343 43782 45620 46268 46608 46800
1992 0 0 0 0 0 24586 31979 33233 33672 33914
1993 0 0 0 0 0 0 17824 23574 24444 24787
1994 0 0 0 0 0 0 0 16020 21068 21958
1995 0 0 0 0 0 0 0 0 13735 18945
1996 0 0 0 0 0 0 0 0 0 12028
<CAPTION>
SCHEDULE P - PART 5D WORKERS' COMPENSATION
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 6549 3679 2196 1432 1064 802 667 577 507 439
1987 9761 3373 1350 701 420 253 178 130 89 64
1988 0 10645 3250 1512 798 429 278 202 138 97
1989 0 0 10125 3395 1587 782 424 257 182 131
1990 0 0 0 10083 3511 1606 858 482 316 203
1991 0 0 0 0 9295 3347 1514 844 482 276
1992 0 0 0 0 0 6652 2207 1008 556 316
1993 0 0 0 0 0 0 4871 1583 763 422
1994 0 0 0 0 0 0 0 4236 1552 664
1995 0 0 0 0 0 0 0 0 5380 1431
1996 0 0 0 0 0 0 0 0 0 5719
<CAPTION>
SCHEDULE P - PART 5D WORKERS' COMPENSATION
SECTION 3
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 7866 1193 391 277 146 113 70 91 57 60
1987 44595 52645 52893 53079 53136 53163 53180 53189 53191 53195
1988 0 56196 63718 64198 64358 64401 64427 64449 64456 64459
1989 0 0 54362 62305 62855 63033 63073 63112 63139 63149
1990 0 0 0 49483 56753 57103 57197 57227 57255 57268
1991 0 0 0 0 45672 51759 52063 52165 52194 52213
1992 0 0 0 0 0 33494 37488 37734 37790 37829
1993 0 0 0 0 0 0 24213 27423 27601 27658
1994 0 0 0 0 0 0 0 21673 25082 25225
1995 0 0 0 0 0 0 0 0 22719 24987
1996 0 0 0 0 0 0 0 0 0 20813
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
SCHEDULE P - PART 5E COMMERCIAL MULTIPLE PERIL
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 8116 1574 736 420 212 123 94 65 64 62
1987 25991 34573 35466 35834 36031 36172 36243 36292 36337 36393
1988 0 30015 38888 39921 40308 40510 40655 40749 40842 40922
1989 0 0 33422 44031 45199 45676 45982 46175 46335 46498
1990 0 0 0 34808 45416 46637 47199 47495 47710 47887
1991 0 0 0 0 37029 46534 47725 48273 48567 48764
1992 0 0 0 0 0 31368 39069 40055 40507 40798
1993 0 0 0 0 0 0 28830 35354 36138 36555
1994 0 0 0 0 0 0 0 26071 32464 33333
1995 0 0 0 0 0 0 0 0 25435 32009
1996 0 0 0 0 0 0 0 0 0 26619
<CAPTION>
SCHEDULE P - PART 5E COMMERCIAL MULTIPLE PERIL
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 3497 1896 1149 661 493 564 339 330 283 269
1987 5154 1802 892 509 327 219 181 173 123 141
1988 0 6247 1912 973 574 396 303 258 194 210
1989 0 0 7018 2196 1197 801 516 424 329 322
1990 0 0 0 7142 2401 1362 829 554 399 345
1991 0 0 0 0 7155 2657 1436 830 491 417
1992 0 0 0 0 0 6024 2253 1178 669 417
1993 0 0 0 0 0 0 5374 1981 1144 659
1994 0 0 0 0 0 0 0 5468 2010 1071
1995 0 0 0 0 0 0 0 0 7925 1929
1996 0 0 0 0 0 0 0 0 0 8262
<CAPTION>
SCHEDULE P - PART 5E COMMERCIAL MULTIPLE PERIL
SECTION 3
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 7393 1379 550 331 297 391 96 221 151 133
1987 34535 41713 42369 42689 42868 43002 43131 43265 43343 43465
1988 0 41126 48561 49437 49790 50000 50196 50376 50491 50665
1989 0 0 46764 56062 57113 57641 57969 58280 58489 58750
1990 0 0 0 48828 58662 59837 60354 60701 60940 61219
1991 0 0 0 0 52189 60820 61892 62405 62634 62957
1992 0 0 0 0 0 44214 51320 52181 52595 52879
1993 0 0 0 0 0 0 40100 46145 46942 47313
1994 0 0 0 0 0 0 0 37660 45008 45839
1995 0 0 0 0 0 0 0 0 46978 52125
1996 0 0 0 0 0 0 0 0 0 49257
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
SCHEDULE P - PART 5F SECTION 1 MEDICAL MALPRACTICE - OCCURRENCE
SECTION 1A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 18 8 2 2 1 0 0 0 0 0
1987 1 1 1 1 1 1 1 1 1 1
1988 0 0 0 0 0 0 0 0 0 1
1989 0 0 0 1 1 4 4 4 4 4
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 1 2 3 5 5
1993 0 0 0 0 0 0 0 1 1 1
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 5F SECTION 1 MEDICAL MALPRACTICE - OCCURRENCE
SECTION 2A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 20 9 5 2 2 0 0 0 0 1
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 1 1 1 1 1 1 0
1989 0 0 1 2 3 0 0 0 0 0
1990 0 0 0 0 1 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 3 0 2 0 0
1993 0 0 0 0 0 0 0 0 0 1
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 1
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 5F SECTION 1 MEDICAL MALPRACTICE - OCCURRENCE
SECTION 3A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 6 5 2 0 2 0 0 0 0 1
1987 1 1 1 1 1 1 1 1 1 1
1988 0 0 0 1 1 1 1 1 1 1
1989 0 0 1 3 4 4 4 4 4 4
1990 0 0 0 0 1 2 2 2 2 2
1991 0 0 0 0 1 1 1 1 1 1
1992 0 0 0 0 0 5 5 8 8 8
1993 0 0 0 0 0 0 1 2 2 3
1994 0 0 0 0 0 0 0 0 0 1
1995 0 0 0 0 0 0 0 0 0 2
1996 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
SCHEDULE P - PART 5F SECTION 2 MEDICAL MALPRACTICE - CLAIMS-MADE
SECTION 1B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 5F SECTION 2 MEDICAL MALPRACTICE - CLAIMS-MADE
SECTION 2B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 5F SECTION 2 MEDICAL MALPRACTICE - CLAIMS-MADE
SECTION 3B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
SCHEDULE P - PART 5H SECTION 1 OTHER LIABILITY - OCCURRENCE
SECTION 1A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 4136 1218 745 432 29 116 270 247 65 105
1987 7243 9808 10341 10551 10568 10646 10696 10729 10768 10795
1988 0 7541 10149 10596 10700 10831 10926 10985 11030 11064
1989 0 0 6865 8927 8949 9167 9298 9386 9455 9509
1990 0 0 0 5189 5519 5898 6090 6204 6287 6361
1991 0 0 0 0 2583 4029 4367 4592 4710 4790
1992 0 0 0 0 0 3746 5037 5322 5490 5595
1993 0 0 0 0 0 0 3576 4881 5158 5304
1994 0 0 0 0 0 0 0 3261 4359 4614
1995 0 0 0 0 0 0 0 0 2855 3789
1996 0 0 0 0 0 0 0 0 0 2705
<CAPTION>
SCHEDULE P - PART 5H SECTION 1 OTHER LIABILITY - OCCURRENCE
SECTION 2A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 3328 2249 1437 951 707 1058 1147 1291 773 674
1987 1716 1002 573 354 213 173 147 140 90 101
1988 0 1812 877 615 350 249 181 144 124 117
1989 0 0 1492 796 513 375 266 206 152 126
1990 0 0 0 1212 641 473 336 239 161 126
1991 0 0 0 0 1066 693 502 363 244 183
1992 0 0 0 0 0 989 630 494 338 225
1993 0 0 0 0 0 0 1077 583 431 260
1994 0 0 0 0 0 0 0 982 569 350
1995 0 0 0 0 0 0 0 0 1150 518
1996 0 0 0 0 0 0 0 0 0 1134
<CAPTION>
SCHEDULE P - PART 5H SECTION 1 OTHER LIABILITY - OCCURRENCE
SECTION 3A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 4157 1346 701 471 160 665 849 1007 405 304
1987 9957 12736 13258 13474 13494 13572 13673 13778 13840 13918
1988 0 10541 13153 13699 13644 13758 13900 14017 14125 14209
1989 0 0 9639 11915 11615 11811 12015 12172 12284 12362
1990 0 0 0 7359 8840 9203 9490 9684 9819 9958
1991 0 0 0 0 5992 7502 8010 8350 8539 8657
1992 0 0 0 0 0 5585 7196 7685 7938 8074
1993 0 0 0 0 0 0 5440 6967 7443 7642
1994 0 0 0 0 0 0 0 5051 6631 6978
1995 0 0 0 0 0 0 0 0 5476 6589
1996 0 0 0 0 0 0 0 0 0 5282
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
SCHEDULE P - PART 5H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
SECTION 1B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 47 10 9 2 0 0 0 1 0 0
1987 30 65 75 80 83 84 85 86 86 86
1988 0 20 47 52 55 56 56 58 58 58
1989 0 0 13 43 50 52 53 55 56 56
1990 0 0 0 22 60 67 70 74 79 80
1991 0 0 0 0 15 42 51 54 56 57
1992 0 0 0 0 0 11 20 35 41 46
1993 0 0 0 0 0 0 7 19 25 30
1994 0 0 0 0 0 0 0 9 19 23
1995 0 0 0 0 0 0 0 0 4 13
1996 0 0 0 0 0 0 0 0 0 3
<CAPTION>
SCHEDULE P - PART 5H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
SECTION 2B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 31 12 1 0 0 0 0 34 9 3
1987 107 47 25 10 6 4 3 2 2 3
1988 0 84 21 10 7 5 5 1 0 1
1989 0 0 94 25 13 10 8 3 3 2
1990 0 0 0 102 31 20 17 10 2 1
1991 0 0 0 0 105 40 28 13 6 3
1992 0 0 0 0 0 112 62 28 13 4
1993 0 0 0 0 0 0 111 60 28 13
1994 0 0 0 0 0 0 0 104 42 16
1995 0 0 0 0 0 0 0 0 113 45
1996 0 0 0 0 0 0 0 0 0 98
<CAPTION>
SCHEDULE P - PART 5H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
SECTION 3B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 14 1 7 0 0 0 0 0 9 1
1987 162 172 175 175 176 176 176 176 176 177
1988 0 149 168 170 172 172 173 173 174 175
1989 0 0 149 160 163 163 163 163 165 166
1990 0 0 0 182 192 192 193 196 196 197
1991 0 0 0 0 175 177 177 178 178 178
1992 0 0 0 0 0 184 188 192 195 196
1993 0 0 0 0 0 0 147 169 171 171
1994 0 0 0 0 0 0 0 143 153 153
1995 0 0 0 0 0 0 0 0 148 151
1996 0 0 0 0 0 0 0 0 0 141
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
SCHEDULE P - PART 5R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
SECTION 1A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 106 0 4 3 5 0
1987 0 0 0 0 56 56 57 61 64 65
1988 0 0 0 0 66 66 70 75 78 79
1989 0 0 0 0 181 181 188 196 208 215
1990 0 0 0 0 705 706 720 729 737 740
1991 0 0 0 0 879 883 899 911 919 931
1992 0 0 0 0 0 41 69 85 100 109
1993 0 0 0 0 0 0 70 99 108 120
1994 0 0 0 0 0 0 0 59 85 96
1995 0 0 0 0 0 0 0 0 52 83
1996 0 0 0 0 0 0 0 0 0 47
<CAPTION>
SCHEDULE P - PART 5R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
SECTION 2A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 68 24 25 18 10 7
1987 0 0 0 0 17 7 6 8 5 9
1988 0 0 0 0 38 10 11 8 3 3
1989 0 0 0 0 57 24 23 20 19 9
1990 0 0 0 0 55 24 27 14 12 10
1991 0 0 0 0 68 32 44 36 27 20
1992 0 0 0 0 0 26 34 32 21 24
1993 0 0 0 0 0 0 29 24 24 24
1994 0 0 0 0 0 0 0 26 29 18
1995 0 0 0 0 0 0 0 0 42 25
1996 0 0 0 0 0 0 0 0 0 24
<CAPTION>
SCHEDULE P - PART 5R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
SECTION 3A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 258 -13 16 10 6 0
1987 0 0 0 0 117 117 122 133 137 143
1988 0 0 0 0 322 319 327 336 340 342
1989 0 0 0 0 823 819 833 846 864 871
1990 0 0 0 0 528 536 568 578 588 596
1991 0 0 0 0 370 374 420 441 453 465
1992 0 0 0 0 0 71 125 166 195 212
1993 0 0 0 0 0 0 121 166 193 214
1994 0 0 0 0 0 0 0 111 169 183
1995 0 0 0 0 0 0 0 0 163 213
1996 0 0 0 0 0 0 0 0 0 108
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
SCHEDULE P - PART 5R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
SECTION 1B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 5R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
SECTION 2B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 5R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
SECTION 3B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
SCHEDULE P - PART 6C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 2
1988 0 0 0 0 0 0 0 0 0 0 3
1989 0 0 0 0 0 0 0 0 0 0 4
1990 0 0 0 0 0 0 0 0 0 0 2
1991 0 0 0 0 0 0 0 0 0 0 4
1992 0 0 0 0 0 0 0 0 0 0 5
1993 0 0 0 0 0 0 218124 216560 216396 216352 -45
1994 0 0 0 0 0 0 0 196640 192218 192161 -57
1995 0 0 0 0 0 0 0 0 190154 189996 -158
1996 0 0 0 0 0 0 0 0 0 182092 182092
Total 0 0 0 0 0 0 0 0 0 0 181853
Earned Premiums
(Sch P-Pt 1) 194342 220498 246841 260779 270332 248314 216718 195172 185579 181853 0
<CAPTION>
SCHEDULE P - PART 6C COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 3236 3227 3234 3233 0
1994 0 0 0 0 0 0 0 3401 3394 3394 0
1995 0 0 0 0 0 0 0 0 3263 3350 87
1996 0 0 0 0 0 0 0 0 0 2848 2848
Total 0 0 0 0 0 0 0 0 0 0 2934
Earned Premiums
(Sch P-Pt 1) 3691 3066 2487 3308 3581 4688 3313 3399 3266 2934 0
<CAPTION>
SCHEDULE P - PART 6D WORKERS' COMPENSATION
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 -69
1989 0 0 0 0 0 0 0 0 0 0 -6
1990 0 0 0 0 0 0 0 0 0 0 -4
1991 0 0 0 0 0 0 0 0 0 0 158
1992 0 0 0 0 0 0 0 0 0 0 -76
1993 0 0 0 0 0 0 238981 225369 224972 224952 -20
1994 0 0 0 0 0 0 0 219279 202989 201918 -1071
1995 0 0 0 0 0 0 0 0 220289 225538 5249
1996 0 0 0 0 0 0 0 0 0 152472 152472
Total 0 0 0 0 0 0 0 0 0 0 156632
Earned Premiums
(Sch P-Pt 1) 168137 219027 262982 286367 291653 253795 225021 205194 204085 156632 0
<CAPTION>
SCHEDULE P - PART 6D WORKERS' COMPENSATION
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 -1
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 1
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 1721 1768 1757 1758 0
1994 0 0 0 0 0 0 0 1274 1556 1549 -7
1995 0 0 0 0 0 0 0 0 1093 1073 -20
1996 0 0 0 0 0 0 0 0 0 1165 1165
Total 0 0 0 0 0 0 0 0 0 0 1139
Earned Premiums
(Sch P-Pt 1) 4444 2281 1470 1986 2477 2565 1855 1320 -3267 1139 0
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
SCHEDULE P - PART 6E COMMERCIAL MULTIPLE PERIL
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 -1
1993 0 0 0 0 0 0 379887 387545 387450 387450 0
1994 0 0 0 0 0 0 0 360290 367515 367447 -68
1995 0 0 0 0 0 0 0 0 363568 368613 5045
1996 0 0 0 0 0 0 0 0 0 362662 362662
Total 0 0 0 0 0 0 0 0 0 0 367639
Earned Premiums
(Sch P-Pt 1) 342352 384926 420123 461676 465500 439028 387671 368231 370696 367639 0
<CAPTION>
SCHEDULE P - PART 6E COMMERCIAL MULTIPLE PERIL
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 10196 10201 10200 10200 0
1994 0 0 0 0 0 0 0 12311 12378 12377 -1
1995 0 0 0 0 0 0 0 0 12277 12307 31
1996 0 0 0 0 0 0 0 0 0 10354 10354
Total 0 0 0 0 0 0 0 0 0 0 10384
Earned Premiums
(Sch P-Pt 1) 6355 8208 5617 5788 5307 5884 10441 12332 12343 10384 0
<CAPTION>
SCHEDULE P - PART 6H SECTION 1 OTHER LIABILITY - OCCURRENCE
SECTION 1A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 5
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 1
1990 0 0 0 0 0 0 0 0 0 0 1
1991 0 0 0 0 0 0 0 0 0 0 14
1992 0 0 0 0 0 0 0 0 0 0 -134
1993 0 0 0 0 0 0 111037 112395 112253 112254 1
1994 0 0 0 0 0 0 0 108100 109709 109464 -245
1995 0 0 0 0 0 0 0 0 103820 104740 921
1996 0 0 0 0 0 0 0 0 0 98586 98586
Total 0 0 0 0 0 0 0 0 0 0 99149
Earned Premiums
(Sch P-Pt 1) 153625 156704 146739 136499 129220 120681 112438 109553 105078 99149 0
<CAPTION>
SCHEDULE P - PART 6H SECTION 1 OTHER LIABILITY - OCCURRENCE
SECTION 2A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 -1
1993 0 0 0 0 0 0 11779 11774 11763 11763 0
1994 0 0 0 0 0 0 0 11810 11956 11955 -1
1995 0 0 0 0 0 0 0 0 11669 11670 1
1996 0 0 0 0 0 0 0 0 0 12131 12131
Total 0 0 0 0 0 0 0 0 0 0 12130
Earned Premiums
(Sch P-Pt 1) 15849 9734 6613 7784 8100 12078 11820 11890 11786 12130 0
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
SCHEDULE P - PART 6H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
SECTION 1B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 -6
1989 0 0 0 0 0 0 0 0 0 0 -190
1990 0 0 0 0 0 0 0 0 0 0 -318
1991 0 0 0 0 0 0 0 0 0 0 -227
1992 0 0 0 0 0 0 0 0 0 0 -769
1993 0 0 0 0 0 0 10525 9712 10713 9103 -1610
1994 0 0 0 0 0 0 0 4789 4747 4434 -314
1995 0 0 0 0 0 0 0 0 5462 2867 -2595
1996 0 0 0 0 0 0 0 0 0 4645 4645
Total 0 0 0 0 0 0 0 0 0 0 -1384
Earned Premiums
(Sch P-Pt 1) 2018 3328 4956 4943 8412 18017 6124 2781 12969 -1384 0
<CAPTION>
SCHEDULE P - PART 6H SECTION 2 OTHER LIABILITY - CLAIMS-MADE
SECTION 2B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 -515
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 75 75 75 75 0
1994 0 0 0 0 0 0 0 73 73 73 0
1995 0 0 0 0 0 0 0 0 2 2 0
1996 0 0 0 0 0 0 0 0 0 1 1
Total 0 0 0 0 0 0 0 0 0 0 -513
Earned Premiums
(Sch P-Pt 1) 1965 3274 4890 4849 8405 6807 -976 -748 -546 -513 0
<CAPTION>
SCHEDULE P - PART 6M INTERNATIONAL
ERR
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 113 115 115 115 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0 0 0 0
Earned Premiums
(Sch P-Pt 1) 0 0 0 0 0 154 113 2 0 0 0
<CAPTION>
SCHEDULE P - PART 6M INTERNATIONAL
ERR
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0 0 0 0
Earned Premiums
(Sch P-Pt 1) 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
SCHEDULE P - PART 6N REINSURANCE A
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 21
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 4260 3791 2953 2953 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0 0 0 21
Earned Premiums
(Sch P-Pt 1) 0 12967 13849 15882 18559 25876 6172 -353 -546 21 0
<CAPTION>
SCHEDULE P - PART 6N REINSURANCE A
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 1
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 306 439 434 434 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0 0 0 1
Earned Premiums
(Sch P-Pt 1) 0 6865 5993 5344 5852 10151 2109 426 10 1 0
<CAPTION>
SCHEDULE P - PART 6O REINSURANCE B
SECTION 1
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 131
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 4270 3800 3487 3487 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 451 451
Total 0 0 0 0 0 0 0 0 0 0 582
Earned Premiums
(Sch P-Pt 1) 0 4652 5611 4564 6880 4211 5913 1109 562 582 0
<CAPTION>
SCHEDULE P - PART 6O REINSURANCE B
SECTION 2
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 17 32 32 32 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0 0 0 -1
Earned Premiums
(Sch P-Pt 1) 0 196 218 148 176 46 -27 46 6 -1 0
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
SCHEDULE P - PART 6R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
SECTION 1A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 4551 4705 4701 4701 0
1994 0 0 0 0 0 0 0 4506 4723 4712 -11
1995 0 0 0 0 0 0 0 0 4607 4614 7
1996 0 0 0 0 0 0 0 0 0 3931 3931
Total 0 0 0 0 0 0 0 0 0 0 3927
Earned Premiums
(Sch P-Pt 1) 11517 12640 20052 17113 10092 5231 4587 4660 4819 3927 0
<CAPTION>
SCHEDULE P - PART 6R SECTION 1 PRODUCTS LIABILITY - OCCURRENCE
SECTION 2A
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 19 19 19 19 0
1994 0 0 0 0 0 0 0 24 26 26 0
1995 0 0 0 0 0 0 0 0 25 25 0
1996 0 0 0 0 0 0 0 0 0 21 21
Total 0 0 0 0 0 0 0 0 0 0 21
Earned Premiums
(Sch P-Pt 1) 3003 2538 7590 5647 63 22 19 24 26 21 0
<CAPTION>
SCHEDULE P - PART 6R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
SECTION 1B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0 0 0 0
Earned Premiums
(Sch P-Pt 1) 0 0 0 0 0 0 0 0 0 0 0
<CAPTION>
SCHEDULE P - PART 6R SECTION 2 PRODUCTS LIABILITY - CLAIMS-MADE
SECTION 2B
COL 1 COL 2 COL 3 COL 4 COL 5 COL 6 COL 7 COL 8 COL 9 COL 10 COL 11 COL 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRIOR 0 0 0 0 0 0 0 0 0 0 0
1987 0 0 0 0 0 0 0 0 0 0 0
1988 0 0 0 0 0 0 0 0 0 0 0
1989 0 0 0 0 0 0 0 0 0 0 0
1990 0 0 0 0 0 0 0 0 0 0 0
1991 0 0 0 0 0 0 0 0 0 0 0
1992 0 0 0 0 0 0 0 0 0 0 0
1993 0 0 0 0 0 0 0 0 0 0 0
1994 0 0 0 0 0 0 0 0 0 0 0
1995 0 0 0 0 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0 0 0 0
Earned Premiums
(Sch P-Pt 1) 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
