UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1998
Commission File Number: 1-12369
SYMONS INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1707115
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4720 Kingsway Drive
Indianapolis, Indiana 46205
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (317) 259-6400 (U.S.)
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
As of September 30, 1998, there were 10,382,732 shares of Registrant's common
stock issued and outstanding exclusive of shares held by Registrant.
<PAGE>
Form 10-Q Index
For The Quarter Ended September 30, 1998
Page
Number
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Financial Statements:
Consolidated Balance Sheets at September 30, 1998
(unaudited) and December 31, 1997 . . ............................3
Unaudited Consolidated Statements of Earnings for the
Three and Nine Months Ended September 30, 1998 and 1997 ........4-5
Unaudited Consolidated Statements of Stockholders'
Equity ...........................................................6
Unaudited Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and 1997 ....................7
Condensed Notes to Unaudited Consolidated Financial
Statements .......................................................8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................12
PART 2 OTHER INFORMATION ...............................................22
SIGNATURES ..............................................................23
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
SYMONS INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS (in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(unaudited)
<S> <C> <C>
ASSETS
Investments
Available for sale:
Fixed maturities, at market $181,310 $169,385
Equity securities, at market 37,216 35,542
Short-term investments, at amortized cost which approximates
market 9,860 8,871
Mortgage loans, at cost 2,130 2,220
Other 807 500
------- -------
TOTAL INVESTMENTS 231,323 216,518
Investment in and advances to related parties 4,668 839
Cash and cash equivalents 5,068 11,276
Receivables, net of allowance for doubtful accounts 209,069 91,730
Reinsurance recoverable on paid and unpaid losses, net 235,826 93,832
Prepaid reinsurance premiums 42,693 36,606
Federal income taxes recoverable 7,297 1,505
Deferred policy acquisition costs 14,423 10,740
Deferred income taxes 5,635 4,722
Property and equipment, net of accumulated depreciation 18,230 12,051
Intangible assets 45,596 43,756
Other assets 11,527 6,300
------- -------
TOTAL ASSETS $831,355 $529,875
======= =======
LIABILITIES
Losses and loss adjustment expenses $285,052 $136,772
Unearned premiums 141,161 114,635
Reinsurance payables 163,323 35,692
Notes payable 13,600 4,182
Distributions payable on preferred securities 1,603 4,801
Other 18,630 20,430
------- -------
TOTAL LIABILITIES 623,369 316,512
------- -------
Minority interest:
Preferred securities 135,000 135,000
------- -------
STOCKHOLDERS' EQUITY
Common stock 38,136 39,019
Additional paid-in capital 5,946 5,925
Unrealized gain on investments 474 1,908
Retained earnings 28,430 31,511
------- -------
TOTAL STOCKHOLDERS' EQUITY 72,986 78,363
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $831,355 $529,875
======= =======
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
<S> <C> <C>
Gross premiums written $97,353 $103,919
Less ceded premiums (26,659) (37,554)
------ -------
Net premiums written $70,694 $66,365
====== ======
Net premiums earned $93,912 $72,044
Fee income 3,815 4,199
Net investment income 3,091 2,900
Net realized gain 1,168 3,782
------- ------
Total Revenues 101,986 82,925
------- ------
Loss and loss adjustment expenses 91,901 53,903
Policy acquisition and general and administrative expenses 26,385 15,803
Interest expense 129 540
Amortization of intangibles 698 393
------- ------
Total Expenses 119,113 70,639
------- ------
Earnings (loss) before income taxes and minority interest (17,127) 12,286
Provision for income taxes (5,902) 4,271
------- ------
Net earnings (loss) before minority interest (11,225) 8,015
Minority interest:
Distributions on preferred securities, net of tax 2,101 1,025
Equity in earnings of subsidiary -- 264
------ ------
Net earnings (loss) before extraordinary item (13,326) 6,726
Extraordinary item, net of tax ($0.07 per share) -- 713
------ ------
Net Earnings (Loss) $(13,326) $ 6,013
====== ======
Net earnings (loss) per share - basic $(1.28) $0.56
==== ====
Net earnings (loss) per share - fully diluted $(1.25) $0.55
==== ====
Weighted average shares outstanding:
Basic 10,390 10,773
====== ======
Fully diluted 10,699 10,843
====== ======
</TABLE>
See notes to consolidated financial statements
-4-
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
Gross premiums written $448,843 $382,984
Less ceded premiums (173,874) (166,096)
------- -------
Net premiums written $274,969 $216,888
======= =======
Net premiums earned $261,354 $208,056
Fee income 15,205 14,990
Net investment income 9,355 8,176
Net realized gain 3,979 5,466
------- -------
Total Revenues 289,893 236,688
------- -------
Loss and loss adjustment expenses 217,287 157,196
Policy acquisition and general and administrative expenses 64,397 46,200
Interest expense 361 2,991
Amortization of intangibles 1,719 687
------- -------
Total Expenses 283,764 207,074
------- -------
Earnings before income taxes and minority interest 6,129 29,614
Provision for income taxes 2,536 10,454
------ -------
Net earnings before minority interest 3,593 19,160
Minority interest:
Distributions on preferred securities, net of tax (6,327) 1,025
Equity in earnings of subsidiary -- 1,824
------- -------
Net earnings (loss) before extraordinary item (2,734) 16,311
Extraordinary item ($0.07 per share) -- 713
------- -------
Net Earnings (Loss) $ (2,734) $ 15,598
======= =======
Net earnings (loss) per share - basic $(.26) $1.46
=== ====
Net earnings (loss) per share - fully diluted $(.26) $1.46
=== ====
Weighted average shares outstanding:
Basic 10,409 10,669
====== ======
Fully diluted 10,710 10,705
====== ======
</TABLE>
See notes to consolidated financial statements
-5-
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except number of shares)
<TABLE>
<CAPTION>
Shares Total
Common Stockholders' Retained
Stock Equity Earnings
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 10,450,000 $60,900 $15,206
Comprehensive income:
Net earnings 15,598 15,598
Change in unrealized gains (losses) on securities 5,070 --
------
Comprehensive income 20,668 --
Adjustment of offering costs 50 --
------ -----
BALANCE AT SEPTEMBER 30, 1997 10,450,000 $81,618 $30,804
========== ====== ======
BALANCE AT DECEMBER 31, 1997 10,451,667 $78,363 $31,511
Comprehensive income:
Net earnings (loss) (2,734) (2,734)
Change in unrealized gains (losses) on securities (1,434)
------
Comprehensive income (4,168)
Exercise of stock options 1,665 20
Shares acquired (70,600) (1,229) (347)
---------- ------ ------
BALANCE AT SEPTEMBER 30, 1998 10,382,732 $72,986 $28,430
========== ====== ======
</TABLE>
See notes to consolidated financial statements
-6-
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) for the period $(2,734) $15,598
Adjustments to reconcile net earnings (loss) to net cash provided from
operations:
Equity in earnings of subsidiary -- 1,824
Depreciation and amortization 3,210 1,192
Deferred income tax expense (170) (1,074)
Net realized gain (3,979) (5,466)
Net changes in operating assets and liabilities:
Receivables (117,339) (98,357)
Reinsurance recoverable on paid and unpaid losses, net (141,994) (99,805)
Prepaid reinsurance premiums (6,087) (19,380)
Deferred policy acquisition costs (3,683) 1,031
Losses and loss adjustment expenses 148,280 91,924
Unearned premiums 26,526 28,212
Reinsurance payables 127,631 103,296
Distributions payable on preferred securities (3,198) --
Federal income taxes (5,792) 1,877
Other assets and liabilities (6,960) (262)
------- -------
NET CASH PROVIDED FROM OPERATIONS 13,711 20,610
------- -------
Cash flow used in investing activities:
Cash paid for minority interest -- (61,000)
Net purchases of short-term investments (989) (8,733)
Purchases of fixed maturities (120,913) (198,314)
Proceeds from sales, calls and maturities of fixed maturities 113,110 162,132
Purchase of equity securities (22,427) (26,676)
Proceeds from sales of equity securities 17,555 22,256
Net proceeds from sales and purchases of real estate 267 --
Purchases of property and equipment (7,690) (3,807)
(Purchases) sales of other investments (213) 180
Cash paid for NACU (3,000) --
------ -------
NET CASH USED IN INVESTING ACTIVITIES (24,300) (113,962)
------ -------
Cash flow provided from financing activities:
Cost of shares acquired (1,229) --
Net proceeds on line of credit and notes payable 9,418 41,794
Contribution from minority interest owner -- 2,304
Loans to related parties (3,829) (1,198)
Additional paid-in capital 21 --
Proceeds from preferred securities, net -- 130,100
------- -------
NET CASH PROVIDED FROM FINANCING ACTIVITIES 4,381 89,412
------- -------
Decrease in cash and cash equivalents (6,208) (3,940)
Cash and cash equivalents, beginning of period 11,276 13,095
------- -------
Cash and cash equivalents, end of period $ 5,068 $ 9,155
======= =======
</TABLE>
See notes to consolidated financial statements
-7-
<PAGE>
SYMONS INTERNATIONAL GROUP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
For The Three and Nine Months Ended September 30, 1998
NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentation have
been included. Operating results for the interim periods are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1998. Interim financial statements should be read in
conjunction with the Company's annual audited financial statements.
(2) In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131), which is effective for years beginning
after December 15, 1997. SFAS 131 established standards for the way
that public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports. It also established standards for related
disclosures about products and services, geographic areas, and major
customers. The Company will adopt the new requirements effective
December 31, 1998. Management has not completed its review of SFAS 131,
but does not anticipate that the adoption of this statement will have a
significant effect on the Company's reported segments.
On March 4, 1998, the AICPA Accounting Standards Executive Committee
issued Statement of Position No. 98-1 (SOP 98-1), Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use. SOP
98-1 was issued to address diversity in practice regarding whether and
under what conditions the costs of internal-use software should be
capitalized. SOP 98-1 is effective for financial statements for years
beginning after December 15, 1998. The Company will adopt the new
requirements of the SOP in 1999. Management has not completed its
review of SOP 98-1, but does not anticipate that the adoption of this
SOP will have significant effect on net earnings during 1999.
(3) On March 2, 1998, the Company announced that it had signed an agreement
with CNA to assume its multi-peril and crop hail operations. CNA wrote
approximately $110 million of multi-peril and crop hail insurance
business in 1997. The Company will reinsure 100% of all multi-peril and
crop hail premiums written by CNA during 1998 and cede a small portion
of the Company's total crop book of business (approximately 22% MPCI
and 15% crop hail) back to CNA. Starting in the year 2000, assuming no
event of change in control as defined in the agreement, the Company can
purchase the insurance premiums reinsured to CNA through a call
provision or CNA can require the Company to buy the insurance premiums
reinsured to CNA. Regardless of the method of takeout of CNA, CNA must
not compete in MPCI or crop hail for a period of time. There was no
purchase price. The formula for the buyout in the year 2000 is based on
a multiple of average pre-tax earnings that CNA received from
reinsuring the Company's book of business.
-8-
<PAGE>
(4) On July 8, 1998, the Company acquired North American Crop Underwriters
(NACU) a Henning, Minnesota based managing general agency which focuses
exclusively on crop insurance. The acquisition price was $4 million
with $3 million paid at closing and $1 million due July 1, 2000 without
interest. This acquisition captures 100% of the MPCI underwriting gain
and fees on approximately $27 million of premiums. Prior to this
transaction, NACU received all fees and 50% of the underwriting gain
with the balance going to the Company through the CNA transaction.
(5) Basic and diluted net income per share are computed by dividing net
income as reported by the average number of shares outstanding as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic:
Weighted-average common shares
outstanding 10,390,000 10,773,000 10,409,000 10,669,000
========== ========== ========== ==========
Diluted:
Weighted-average common shares
outstanding 10,390,000 10,773,000 10,409,000 10,669,000
Dilutive effect of stock options 309,000 70,000 301,000 36,000
---------- ---------- ---------- ----------
Average common shares outstanding
assuming dilution 10,699,000 10,843,000 10,710,000 10,705,000
========== ========== ========== ==========
</TABLE>
(6) As part of the agreement by the Company to assume the multi-peril and
crop operations of CNA, the Company agreed to reimburse CNA for certain
direct overhead costs incurred by CNA during the first quarter of 1998
before the Company assumed the book of business. CNA has requested
reimbursement of $2.0 million in expenses which the Company believes
should only be $1.1 million. Negotiations are in process to settle this
reimbursement. The Company fully expects the ultimate settlement will
approximate $1.1 million and has therefore, accrued this amount in its
consolidated financial statements evenly throughout 1998. In the
unforeseen event the ultimate settlement is greater than $1.1 million,
the Company will accrue the full additional amount at that time.
The Company expects to receive a proposed assessment from the
California Department of Insurance (CDOI) which the Company estimates
could approximate $3 million. This expectation is based on ongoing
discussions with the CDOI, although no formal written notification has
been received by the Company. This assessment relates to the charging
of brokers fees to policyholders by independent agents who have placed
business for one of the Company's nonstandard automobile carriers,
Superior Insurance Company. The CDOI has indicated that such broker
fees were improper and has requested reimbursement to the
policyholders by Superior Insurance Company. The Company did not
receive any of these broker fees. As the ultimate outcome of this
potential assessment is not deemed probable the Company has not accrued
any amount in its consolidated financial statements. Although the
assessment has not been formally made by the CDOI at this time, the
Company believes it will prevail and will vigorously defend any
potential assessment.
-9-
<PAGE>
(7) Year 2000 Compliance
General
The Year 2000 Project (Project) is proceeding on schedule. The Project is
addressing the inability of computer software and hardware to distinguish
between the year 1900 and the year 2000. In 1996, the Company began a
company-wide replacement of hardware and software systems to address this and
other issues. This replacement is using systems from Dell, Hewlett Packard, Sun
Systems, Compaq, Oracle and ZIM as well as some software conversions using Java.
The new hardware is in place and operational at all subsidiaries. The software
systems are in place in our nonstandard auto operations and are being
implemented on a state-by-state basis. The Company began implementing the new
nonstandard auto operating system in those states in which the Company writes
annual policies (annual states). 60% of those annual states are currently in
production with the remaining 40% scheduled to be in place by December 31, 1998.
The remaining non-annual states are on schedule to be completed by March 31,
1999. The Company has developed a contingency plan for use in the event that
there is a delay. A decision to adopt the contingency plan, if necessary, will
be made by December 1, 1998. The Y2K issue does not have an effect on the crop
operations until October 1, 1999. The Company is converting non-compliant
systems, through programmatic means, into a Java based Y2K compliant
environment. The crop operations are at 38% of completion for this conversion
and are scheduled to be completed by the end of January 1999. Contingency plans
for crop operations are being considered at this time. A number of the Company's
other IT projects are being delayed or completely eliminated due to the
implementation of the Project. The delay and/or elimination of these projects
has caused or could cause a loss of market share in the nonstandard auto market.
Project
The Company has divided the Project into three sections-Infrastructure,
Applications/Business Systems and Third Party Suppliers. There are common
portions of each of these divisions which are: (1) identifying Y2K items, (2)
assigning a priority for those items identified, (3) repairing or replacing
those items, (4) testing the fixes, and (5) designing a contingency and business
continuation plan for each subsidiary.
In February 1998, all items had been identified and the plans for replacement or
repair were proposed to management. These plans were approved and the process
began.
The infrastructure section of the Project was quickly implemented and tested by
the Company's IT staff and has been completed since May of 1998. All desktop,
mini and midrange systems as well as phone switches, phones and building
security systems have been tested for Y2K compliance. The only outstanding issue
is a security system in one of the Company's buildings, which may need to be
disconnected. This issue is addressed by business continuance. Any new systems
required by the Company are being tested and certified prior to purchase. Two
mainframes being used by the Company are not Y2K certified or compliant. These
machines have been replaced by Sun and HP compliant systems and are being kept
in production until new applications are put in place on the new machines.
-10-
<PAGE>
The applications systems section of the Project includes: (1) the replacement of
nonstandard auto companies Policy Administration and Claims systems, (2) the
conversion of crop operations systems in total, and (3) replacement of non
compliant business systems company-wide (this includes wordprocessors, network
operating systems, spreadsheet programs, presentation systems, etc.)
The Company had already made the decision to transition off all of it's
nonstandard auto legacy systems and this process had been in work since 1996.
These systems are Y2K compliant and are on schedule for completion by the end of
March 31, 1999. The conversion of crop systems began in August 1998 and is
scheduled for completion by the end of January 1999. Business systems are being
replaced as vendors certify their compliance. The Company is at 80% compliance
in this area.
The Company relies on third party vendors for investments, reinsurance treaties
and banking. The Company began inquiring about Y2K compliance with its third
party vendors beginning in July 1998. To date all vendors have replied regarding
their compliance efforts. Those that are not in compliance have until the end of
1Q, 1999 to do so, or they will be replaced.
Costs
The Company considers the cost associated with the Project to be material. The
Company has estimated the total cost to be $5.7 million. The total amount
expended through September 1998 on all infrastructure and software upgrades is
approximately $4.5 million. The Company expects to spend another $1.2 million in
its efforts to complete the Project. This does not include additional annual
maintenance costs that will be incurred as we move forward. Funding for these
costs will continue to be provided by funds from operations. The Company expects
that the new nonstandard auto system will significantly enhance service
capability and reduce future operating costs.
Risks
Failure to correct the Y2K problem could cause a failure or interruption of
normal business operations. These failures could materially affect the Company's
operational results, financial condition and liquidity. Due to the nature of the
Y2K problem, the Company is uncertain whether it will have a material affect.
The Company believes that the possibility of significant business interruptions
should be reduced by implementation of the Project.
-11-
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE COMPANY
The Company underwrites and markets nonstandard private passenger automobile
insurance and crop insurance.
Nonstandard Automobile Insurance Operations
The Company, through its wholly owned subsidiaries, Pafco and Superior, is
engaged in the writing of insurance coverage on automobile physical damage and
liability policies for "nonstandard risks". Nonstandard insureds are those
individuals who are unable to obtain insurance coverage through standard market
carriers due to factors such as poor premium payment history, driving
experience, record of prior accidents or driving violations, particular
occupation or type of vehicle. The Company offers several different policies
which are directed towards different classes of risk within the nonstandard
market. Premium rates for nonstandard risks are higher than for standard risks.
Since it can be viewed as a residual market, the size of the nonstandard private
passenger automobile insurance market changes with the insurance environment and
grows when the standard coverage becomes more restrictive. Nonstandard policies
have relatively short policy periods and low limits of liability. Due to the low
limits of coverage, the period of time that elapses between the occurrence and
settlement of losses under nonstandard policies is shorter than many other types
of insurance. Also, since the nonstandard automobile insurance business
typically experiences lower rates of retention than standard automobile
insurance, the number of new policyholders underwritten by nonstandard
automobile insurance carriers each year is substantially greater than the number
of new policyholders underwritten by standard carriers.
Crop Insurance Operations
The two principal components of the Company's crop insurance business are
Multi-Peril Crop Insurance ("MPCI") and private named peril, primarily crop hail
insurance. Crop insurance is purchased by farmers to reduce the risk of crop
loss from adverse weather and other uncontrollable events. Farms are subject to
drought, floods and other natural disasters that can cause widespread crop
losses and, in severe cases, force farmers out of business. Historically, one
out of every twelve acres planted by farmers has not been harvested because of
adverse weather or other natural disasters. Because many farmers rely on credit
to finance their purchases of such agricultural inputs as seed, fertilizer,
machinery and fuel, the loss of a crop to a natural disaster can reduce their
ability to repay these loans and to find sources of funding for the following
year's operating expenses.
The Company, like other private insurers participating in the MPCI program,
generates revenues from the MPCI program in two ways. First, it markets, issues
and administers policies, for which it receives administrative fees; and second,
it participates in a profit-sharing arrangement in which it receives from the
government a portion of the aggregate profit, or pays a portion of the aggregate
loss, in respect of the business it writes. The Company writes MPCI and crop
hail insurance through approximately 1,118 independent agencies in 42 states.
MPCI is a government-sponsored program with accounting treatment which differs
in certain respects from the more traditional property and casualty insurance
lines. For income statement purposes under generally accepted accounting
principles, gross premiums written consist of the aggregate amount of MPCI
premiums paid by farmers for buy-up coverage (MPCI coverage in excess of CAT
-12-
<PAGE>
Coverage), and any related federal premium subsidies, but do not include MPCI
premium on CAT Coverage (the minimum available level of MPCI Coverage). By
contrast, net premiums written do not include any MPCI premiums or subsidies,
all of which are deemed to be ceded to the FCIC as a reinsurer. The Company's
profit or loss from its MPCI business is determined after the crop season ends
on the basis of a complex profit sharing formula established by law and the
FCIC. For generally accepted accounting principles income statement purposes,
any such profit or loss sharing earned or payable by the Company is treated as
an adjustment to commission expense and is included in policy acquisition and
general and administrative expenses.
The Company also receives from the FCIC (i) an expense reimbursement payment
equal to a percentage of gross premiums written for each Buy-Up Coverage policy
it writes ("Buy-Up Expense Reimbursement Payment") and (ii) an LAE reimbursement
payment equal to 13.0% of MPCI Imputed Premiums for each CAT Coverage policy it
writes (the "CAT LAE Reimbursement Payment"). For 1998 and 1997, the Buy-Up
Expense Reimbursement Payment has been set at 27% and 29%, respectively, of the
MPCI Premium. For generally accepted accounting principles income statement
purposes, the Buy-Up Expense Reimbursement Payment is treated as a contribution
to income and reflected as an offset against policy acquisition and general and
administrative expenses. The CAT LAE Reimbursement Payment and the MPCI Excess
LAE Reimbursement Payment are, for income statement purposes, recorded as an
offset against LAE, up to the actual amount of LAE incurred by the Company in
respect of such policies, and the remainder of the payment, if any, is recorded
as Other Income.
In June 1998, the United States Congress passed legislation which provided
permanent funding for the crop insurance industry. However, beginning with the
1999 crop year, the Buy-Up Expense Reimbursement Payment was reduced to 24.5%,
the CAT LAE Reimbursement Payment was reduced to 11% and the $60 CAT coverage
fee will no longer go to the insurance companies.
The Company expects to more than offset these reductions through growth in fee
income from non-federally subsidized programs such as AgPI(R) and GEO Ag Plus(R)
initiated in 1998. The Company has also been working to reduce its costs. While
the Company fully believes it can more than offset these reductions, there is no
assurance the Company will be successful in its efforts or that further
reductions in federal reimbursements will not continue to occur.
In addition to MPCI, the Company offers stand alone crop hail insurance, which
insures growing crops against damage resulting from hail storms and which
involves no federal participation, as well as its proprietary product which
combines the application and underwriting process for MPCI and hail coverages.
This product tends to produce less volatile loss ratios than the stand alone
product since the combined product generally insures a greater number of acres,
thereby spreading the risk of damage over a larger insured area. Approximately
half of the Company's hail policies are written in combination with MPCI.
Although both crop hail and MPCI provide coverage against hail damage, under
crop hail coverages farmers can receive payments for hail damage which would not
be severe enough to require a payment under an MPCI policy. The Company believes
that offering crop hail insurance enables it to sell more policies than it
otherwise would.
In addition to crop hail insurance, the Company also sells a small volume of
insurance against crop damage from other specific named perils. These products
cover specific crops and are generally written on terms that are specific to the
kind of crop and farming practice involved and the amount of actuarial data
available. The Company plans to seek potential growth opportunities in this
niche market by developing basic policies on a diverse
-13-
<PAGE>
number of named crops grown in a variety of geographic areas and to offer these
policies primarily to large producers through certain select agents.
AgPI(R) protects businesses that depend upon a steady flow of a crop (or crops)
to stay in business. This protection is available to those involved in
agribusiness who are a step beyond the farm gate, such as elevator operators,
custom harvesters, cotton gins and businesses that are dependent upon a single
supplier of products, (i.e., popping corn).
These businesses have been able to buy normal business interruption insurance to
protect against on-site calamities such as a fire, wind storm or tornado. But
until now, they have been totally unprotected by the insurance industry if they
incorporate a production shortfall in their trade area which limited their
ability to bring raw materials to their operation. AgPI(R) allows the
agricultural business to protect against a disruption in the flow of the raw
materials it depends on. AgPI(R) was formally introduced at the beginning of the
1998 crop year.
Geo AgPLUS(TM) provides to the farmer the soil sampling results combined with
fertility maps and the software that is necessary to run their precision farming
program. Grid soil sampling, when combined with precision farming, allows the
farmer to apply just the right amount of fertilization, thus balancing the soil
for a maximum crop yield. Precision farming increases the yield to the farmer,
reduces the cost of unnecessary fertilization and enhances the environment by
reducing overflows of fertilization into the ecosystem. Geo AgPLUS(TM) is an IGF
Insurance Company trademarked precision farming division that is now marketing
its fee based products to the farmer.
In order to reduce the Company's potential loss exposure under the MPCI program,
in addition to reinsurance obtained from the FCIC, the Company purchases
stop-loss reinsurance from other private reinsurers. Such private reinsurance
would not eliminate the Company's potential liability in the event a reinsurer
was unable to pay or losses exceeded the limits of the stop-loss coverage. For
crop hail insurance, the Company has in effect various layers of stop-loss
reinsurance.
Certain other conditions of the Company's crop business may affect comparisons
of the Company's results and operating ratios with those of other insurers,
including: (i) the seasonal nature of the business whereby profits are generally
recognized predominantly in the second half of the year, (ii) the short-term
nature of crop business whereby losses are known within a short time period, and
(iii) the limited amount of investment income associated with crop business. In
addition, cash flows from the crop business differ from cash flows from certain
more traditional lines.
In 1996, the Company instituted a policy of recognizing (i) 35% of its estimated
MPCI gross premiums written for each of the first and second quarters, 20% for
the third quarter and 10% for the fourth quarter, (ii) commission expense at the
applicable rate of MPCI gross premiums written recognized and (iii) Buy-Up
Expense Reimbursement at the applicable rate of MPCI gross premiums written
recognized along with normal operating expenses incurred in connection with
premium writings. In the third quarter, if a sufficient volume of policyholder
acreage reports have been received and processed by the Company, the Company's
policy is to recognize MPCI gross premiums written for the first nine months
based on a re-estimate which takes into account actual gross premiums processed.
If an insufficient volume of policies has been processed, the Company's policy
is to recognize in the third quarter 20% of its full year estimate of MPCI gross
premiums written, unless other circumstances require a different approach. The
remaining amount of
-14-
<PAGE>
gross premiums written is recognized in the fourth quarter, when all amounts are
reconciled. The Company also recognizes the MPCI underwriting gain or loss
during each quarter, reflecting the Company's best estimate of the amount of
such gain or loss to be recognized for the full year, based on, among other
things, historical results, plus a provision for adverse developments. In the
third and fourth quarters, a reconciliation amount is recognized for the
underwriting gain or loss based on final premium and loss information.
Results of Operations
For the three and nine months ended September 30, 1998, the Company recorded net
losses of $(13,326,000) and $(2,734,000) or $(1.28) and $(.26) per share
(basic). This is approximately a decrease of 322% and 118% from 1997 comparable
amounts of $6,013,000 and $15,598,000 or $0.56 and $1.46 per share (basic).
The loss in the third quarter of 1998 was due to losses in both the Company's
crop and nonstandard automobile operations. The Company's loss in its crop
operations was due primarily to crop hail losses from Hurricane Bonnie and other
weather related events and higher than expected commission expenses, primarily
from the integration of the crop business acquired from CNA. As compared to 1997
the Company's crop results were also impacted by a much smaller underwriting
gain on MPCI due primarily to severe drought conditions in certain parts of the
country and overly wet conditions in other parts of the country. However, the
Company accrues a low estimated underwriting gain until results become known in
the third and fourth quarters and the Company did not have to reverse profits
previously booked for MPCI in the third quarter of 1998. The Company's loss in
its nonstandard automobile operations was due primarily to recently noted
reserve development and management taking a more conservative reserve assumption
for its nonstandard operations. Falling nonstandard automobile premium volume
also lead to a higher than normal expense ratio in the quarter.
-15-
<PAGE>
<TABLE>
<CAPTION>
For the three months
ended September 30,
1998 1997
<S> <C> <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:
Gross premiums written $61,536 $77,505
====== ======
Net premiums written $55,381 $61,789
====== ======
Net premiums earned $64,742 $61,059
Fee income 3,827 4,380
Net investment income 2,960 2,702
Net realized gain 1,121 3,837
------ ------
TOTAL REVENUES 72,650 71,978
------ ------
Losses and loss adjustment expenses 57,589 44,873
Policy acquisition and general and administrative expenses 19,563 18,170
------ ------
TOTAL EXPENSES 77,152 63,043
------ ------
Earnings (loss) before income taxes $(4,502) $ 8,935
====== ======
GAAP RATIOS (Nonstandard Automobile Only):
Loss and LAE Ratio 88.95% 73.5%
Expense ratio, net of billing fees 24.31 22.6
------ ----
Combined ratio 113.26% 96.1%
====== ====
CROP INSURANCE OPERATIONS:
Gross premiums written(2) $32,423 $23,997
====== ======
Net premiums written $15,313 $4,576
====== =====
Net premiums earned $29,170 $10,985
Fee income (12) (181)
Net investment income 55 52
Net realized capital gain 47 (55)
------ ------
TOTAL REVENUES 29,260 10,801
------ ------
Losses and loss adjustment expenses 34,312 9,030
Policy acquisition and general and administrative expenses(1) 6,572 (2,609)
Interest expense and amortization of intangibles 287 40
------ ------
TOTAL EXPENSES 41,171 6,461
------ ------
Earnings (loss) before income taxes $(11,911) $ 4,340
====== ======
</TABLE>
(1) Negative crop expenses are caused by inclusion of MPCI expense reimbursement
and underwriting gain. (2) Includes premiums assumed from CNA in accordance with
the Strategic Alliance Agreement.
-16-
<PAGE>
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1998 1997
<S> <C> <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:
Gross premiums written $231,042 $243,052
======= =======
Net premiums written $206,802 $195,632
======= =======
Net premiums earned $203,563 $189,303
Fee income 12,535 11,584
Net investment income 8,894 7,796
Net realized gain 3,762 5,521
------- -------
TOTAL REVENUES 228,754 214,204
------- -------
Losses and loss adjustment expenses 164,237 143,897
Policy acquisition and general and administrative expenses 56,367 53,662
------- -------
TOTAL EXPENSES 220,604 197,559
------- -------
Earnings before income taxes $ 8,150 $ 16,645
======= =======
GAAP RATIOS (Nonstandard Automobile Only):
Loss and LAE Ratio 80.68% 76.0%
Expense ratio, net of billing fees 21.53 22.2
----- ----
Combined ratio 102.21% 98.2%
====== ====
CROP INSURANCE OPERATIONS:
Gross premiums written(2) $210,618 $132,353
======= =======
Net premiums written $68,167 $21,256
====== ======
Net premiums earned $57,791 $18,753
Fee income 2,670 3,406
Net investment income 220 144
Net realized capital gain 217 (55)
------ ------
TOTAL REVENUES 60,898 22,248
------ ------
Losses and loss adjustment expenses 53,050 13,299
Policy acquisition and general and administrative expenses(1) 6,822 (8,635)
Interest expense and amortization of intangibles 520 65
------ ------
TOTAL EXPENSES 60,392 4,729
------ ------
Earnings before income taxes $ 506 $17,519
====== ======
</TABLE>
(1) Negative crop expenses are caused by inclusion of MPCI expense reimbursement
and underwriting gain. (2) Includes premiums assumed from CNA in accordance with
the Strategic Alliance Agreement.
Consolidated gross premiums written decreased 6.3% and increased 17.2% for the
three and nine months ended September 30, 1998 compared to comparable periods in
1997.
-17-
<PAGE>
Gross premiums written for the nonstandard auto segment decreased 20.6% for the
three months ended September 30, 1998 and decreased 4.9% for the nine months
ended September 30, 1998 compared to comparable periods in 1997. The decrease in
nonstandard automobile premiums reflects the effects of competitive pressures,
the results of certain product changes in certain key states and the operational
aspects of implementation of the Company's new operating system. The Company has
addressed the product changes in its key states that contributed to the falling
premium volume and is working to implement appropriate product and rate changes
in its other states. The Company has also recently entered South Florida and the
State of Arizona and has launched its Spanish Language Policy in Florida. The
Company's new operating system is functioning adequately in the States of
Florida, California and Arizona with additional states coming on line in the
near future. The Company expects that the results of these efforts will improve
future premium volume and reduce the costs to do business.
Gross premiums written for the crop segment increased 35.1% and 59.1% for the
three and nine months ended September 30, 1998 compared to comparable periods in
1997. Such increase was due to the transaction with CNA, internal growth and new
products such as AgPI. Premium increases were noted in all lines of crop
insurance. Crop premiums for the three and nine months ended September 30 are as
follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
CAT imputed $1,502 $4,965 $34,140 $31,028
MPCI 18,071 15,195 125,368 94,211
Crop hail and named perils 14,356 8,802 77,721 38,142
AgPI (4) -- 7,529 --
------ ------ ------- ------
33,925 28,962 244,758 163,381
Less: CAT imputed (1,502) (4,965) (34,140) (31,028)
------ ------ ------- -------
$32,423 $23,997 $210,618 $132,353
====== ====== ======= =======
</TABLE>
Remaining gross written premiums represent commercial business which is ceded
100% to an affiliate, Granite Reinsurance Company Ltd.
MPCI premiums are considered to be 100% ceded to the federal government for
accounting purposes. Quota share cession rates for other lines of insurance for
the three and nine months ended September 30 are as follows. The Company
canceled its nonstandard auto quota share treaty with the intention to commute
the agreement effective October 1, 1998.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Nonstandard automobile 10% 20%
Crop hail 25% 40%
Named peril 50% 50%
</TABLE>
Fee income decreased 9.1% for the three months ended September 30, 1998 and
increased 1.4% for the nine months ended September 30, 1998 as compared to the
corresponding periods of the prior year. The decrease in the third quarter of
1998 results from the Company's practice of offsetting CAT fees with crop LAE
costs. Such offset was greater in 1998. Fee income on nonstandard automobile
operations also decreased in the third quarter as a direct result of lower
premium volume in the quarter. The small increase in fee income year to date in
1998 compared to 1997 is primarily the result of higher nonstandard automobile
fees as a percentage of direct premiums written although premium
-18-
<PAGE>
volume decreased in that segment. These fees averaged 5.43% and 4.77% of gross
premiums written in 1998 and 1997, respectively. Crop fees, primarily CAT fees
increased due to growth in premium volume. However, crop fee income appears
lower due to reclass of CAT LAE fees as an offset to loss costs. This was due to
the higher LAE costs in 1998 due to the higher volume of claims.
Net investment income increased 6.6% and 14.4% for the three and nine months
ended September 30, 1998 as compared to the corresponding periods of the prior
year. Such increase was due primarily to greater invested assets offset somewhat
by a declining yield due to market conditions.
The loss ratio for the nonstandard automobile segment for the three and nine
months ended September 30, 1998 was 89.0% and 80.7% as compared to 73.5% and
76.0% in 1997. In the third quarter of 1998, the Company recorded additional
gross loss reserves of approximately $8 million. A mid-year review of reserves
as of June 30, 1998 by the Company's independent actuaries resulted in recorded
loss reserve levels at June 30, 1998 approximating recommended levels.
Development since that date and more conservative assumptions has resulted in
the reserve adjustment.
The crop hail loss ratio for the nine months ended September 30, 1998 was 85.5%
compared to 67.1% in 1997. The loss ratio for 1998 is net of reinsurance
recoveries on its stop loss layer. This loss ratio was dramatically affected by
Hurricane Bonnie in the third quarter. Excluding the effects of Hurricane Bonnie
and related reinsurance recoveries the crop hail loss ratio would have been
75.0%.
Policy acquisition and general and administrative expenses have increased as a
result of the increased volume of business produced by the Company. Policy
acquisition and general and administrative expenses rose to $26,385,000 and
$64,397,000 or 28.1% and 24.6% of net premium earned for the three and nine
months ended September 30, 1998 compared to $15,803,000 and $46,200,000 or 21.9%
and 22.2% of net premium earned in the corresponding periods of 1997. The
increase in the overall expense ratio in the third quarter reflects increases in
both the Company's crop and nonstandard automobile operations. Increases related
to crop operations reflect a much lower MPCI underwriting gain in 1998 as
compared to 1997, as previously discussed, and higher operating and commission
costs due primarily to the integration of the Company's crop acquisitions.
Increases related to nonstandard automobile operations reflect the higher than
normal expense ratio in the third quarter due to the declining premium volume.
Nonstandard automobile and crop operations have integrated acquisitions and are
undergoing a restructuring to reduce operating costs.
Crop segment expenses include agent commissions, stop loss reinsurance costs and
operating expenses which are offset by MPCI Expense Reimbursements and MPCI
Underwriting Gain. The increase in expenses results primarily from a 2% lower
MPCI Expense Reimbursement for 1998 versus 1997, higher commissions due to
competition and integration costs of the CNA transaction and a lower MPCI
underwriting gain as previously discussed. Although the third quarter generally
provides more evidence to support this underwriting gain, it remains an estimate
until all harvest results are known in the fourth quarter. The Company had been
accruing an estimated gain of 10% in the first two quarters of 1998 and adjusted
this estimate in the third quarter to 12%. In 1997 the Company realized a MPCI
underwriting gain in excess of 20% due to the record harvest results and more
consistent weather patterns.
Amortization of intangibles includes goodwill from the acquisition of
-19-
<PAGE>
Superior, additional goodwill from the acquisitions of the minority interest
position in GGSH and NACU, debt or preferred security issuance costs and
organizational costs. The increase in 1998 reflects the effects of the Preferred
Securities Offering in late 1997.
Interest expense primarily represents interest incurred since April 30, 1996 on
the GGS Senior Credit Facility. The GGS Senior Credit Facility was repaid with
the proceeds from the Preferred Securities Offering.
Income tax expense (benefit) was 34.5% and 41.4% of pre-tax income (losses) for
the three and nine months ended September 30, 1998 compared to 34.7% and 35.3%
in 1997. The increased rate is due to higher goodwill amortization.
Distributions on Preferred Securities are calculated at a rate of 9.5% net of
federal income taxes.
Financial Condition
The Company's total assets of $831,355,000 at September 30, 1998 increased by
$301,480,000 from $529,875,000 as of December 31, 1997. Such increase was due to
an increase in cash and invested assets primarily from the Company's nonstandard
automobile operations. With the decrease in nonstandard automobile premium
volume in the third quarter such increase has also slowed. Increases in
receivables and reinsurance assets result primarily from the Company's growth in
its crop operations which carry higher balances during the year until harvest
results are complete and such assets are collected. There is a corresponding
increase in related liabilities. The increase in fixed assets is due to the
purchase of the Company's new crop operation headquarters and substantial
investment in new operating systems to improve efficiencies. Increase in notes
payable primarily reflects short term borrowings from a line of credit at the
Company's crop operations until harvest results are settled and FCIC funds are
received. The decrease in stockholders equity results from the Company's net
loss and unrealized losses on the Company's equity portfolio due to market
conditions. The Company has not substantially changed its investment portfolio.
Net cash from operating activities declined to $13,711,000 in 1998 from
$20,610,000 in 1997 due to the Company's loss from operations. Investing
activities reflect the Company's normal investment activities. Financing
activities include normal activities on the Company's line of credit for crop
operations.
While the Company's crop operations are experiencing some short term cash needs
due to the high volume of crop hail losses, the Company believes it has
sufficient resources to meet its cash flow needs for this operation. In the
event the Company has maximized its borrowing capacity under its line of credit,
the Company can elect to owe the FCIC funds with interest until receipt of its
expense reimbursement and MPCI underwriting gain payments, the latter of which
is made over a three-year period.
The Company's Preferred Security obligations of approximately $13 million per
year is funded from the Company's nonstandard automobile management company and
dividend capacity from the crop operations. The nonstandard auto funds are the
result of management and billing fees in excess of operating costs. For calendar
1997 the coverage ratio of nonstandard automobile cash flows to Preferred
Security costs was 2.2x. The Company estimates this ratio decreased to 1.48x in
the third quarter of 1998 and expects this ratio to increase to 1.8x for all of
1998 with increasing premium volume and stable costs. Coverage
-20-
<PAGE>
from the Company's crop operations entailed a dividend capacity of $13.4 million
in 1998 that will reduce to approximately $4.5 million in 1999 as a result of
the Company's operations and statutory limitations. The Company also has
approximately $10 million in excess funds for debt service. Surplus needs at the
insurance companies will be handled primarily by reinsurance for which the
Company believes it has good relationships and numerous alternatives. It should
be noted that the additional nonstandard automobile reserves did not increase
the accident year loss ratios to levels that would require recovery from
reinsurers. The Company believes it can continue to meet its obligations in 1999
and that coverage will increase through higher nonstandard automobile premium
volumes and more profitable crop operations.
The Trust Indenture for the Preferred Securities contains certain preventative
covenants. These covenants are based upon the Company's Consolidated Coverage
Ratio of earnings before interest, taxes, depreciation and amortization (EBITDA)
whereby if the Company's EBITDA falls below 2.5 times Consolidated Interest
Expense (including Preferred Security distributions) for the most recent four
quarters the following restrictions become effective:
The Company may not incur additional Indebtedness or guarantee
additional Indebtedness.
The Company may not make certain Restricted Payments including loans or
advances to affiliates, stock repurchases and a limitation on the
amount of dividends is inforce.
The Company may not increase its level of Non-Investment Grade
Securities defined as equities, mortgage loans, real estate, real
estate loans and non-investment grade fixed income securities.
These restrictions currently apply, and will continue to apply until the
Company's Consolidated Coverage Ratio is in compliance with the terms of the
Trust Indenture. This does not represent a Default by the Company on the
Preferred Securities. The Company is in compliance with these preventative
covenants as of September 30, 1998.
Forward Looking Statements
All statements, trend analyses, and other information herein contained relative
to markets for the Company's products and/or trends in the Company's operations
or financial results, as well as other statements including words such as
"anticipate," "could," "feel(s)," "believe," "believes," "plan," "estimate,"
"expect," "should," "intend" and other similar expressions, constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to known and unknown risks,
uncertainties and other factors which may cause actual results to be materially
different from those contemplated by the forward-looking statements. Such
factors include, among other things: (i) general economic conditions, including
prevailing interest rate levels and stock market performance; (ii) factors
affecting the Company's crop operations such as weather-related events, final
harvest results, commodity price levels, governmental program changes, new
product acceptance and commission levels paid to agents; and (iii) factors
affecting the Company's nonstandard automobile operations such as premium
volume, levels of operating expenses as compared to premium volume, ultimate
development of loss reserves and implementation of the Company's operating
system.
-21-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's insurance subsidiaries are parties to litigation arising
in the ordinary course of business. The Company believes that the ultimate
resolution of these lawsuits will not have a material adverse effect on its
financial condition or results of operations. The Company, through its claims
reserves, reserves for both the amount of estimated damages attributable to
these lawsuits and the estimated costs of litigation.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: November 12, 1998 By:______________________
Alan G. Symons
Chief Executive Officer
Dated: November 12, 1998 By:______________________
Gary P. Hutchcraft
Vice President, Treasurer and
Chief Financial Officer
Dated: November 12, 1998 By:______________________
James J. Lund
Vice President and
Chief Accounting Officer
-23-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001013698
<NAME> Symons International Group
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 181,310,000
<DEBT-MARKET-VALUE> 181,310,000
<EQUITIES> 37,216,000
<MORTGAGE> 2,130,000
<REAL-ESTATE> 454,000
<TOTAL-INVEST> 231,323,000
<CASH> 5,068,000
<RECOVER-REINSURE> 235,826,000
<DEFERRED-ACQUISITION> 14,423,000
<TOTAL-ASSETS> 831,355,000
<POLICY-LOSSES> 285,052,000
<UNEARNED-PREMIUMS> 141,161,000
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 13,600,000
0
135,000,000
<COMMON> 38,136,000
<OTHER-SE> 34,850,000
<TOTAL-LIABILITY-AND-EQUITY> 831,355,000
261,354,000
<INVESTMENT-INCOME> 9,355,000
<INVESTMENT-GAINS> 3,979,000
<OTHER-INCOME> 15,205,000
<BENEFITS> 217,287,000
<UNDERWRITING-AMORTIZATION> 1,719,000
<UNDERWRITING-OTHER> 64,758,000
<INCOME-PRETAX> 6,129,000
<INCOME-TAX> 2,536,000
<INCOME-CONTINUING> 3,593,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,734,000)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
<RESERVE-OPEN> 136,772,000
<PROVISION-CURRENT> 213,553,000
<PROVISION-PRIOR> 3,734,000
<PAYMENTS-CURRENT> 131,622,000
<PAYMENTS-PRIOR> 49,123,000
<RESERVE-CLOSE> 285,052,000
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
