SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended March 31, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from ______________ to ____________.
0-16533
(Commission File Number)
Old Guard Group, Inc.
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-2852984
(State of Incorporation) (IRS Employer ID Number)
2929 Lititz Pike, Lancaster, PA 17604
(Address of Principal Executive Offices) (Zip Code)
717-569-5361
(Registrant's Telephone Number)
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 [ ]
Number of Shares Outstanding as of April 30, 1998: 4,235,605
Common Stock (No Par Value)
(Title of Class)
<PAGE>
OLD GUARD GROUP, INC
Form 10-Q
For the Quarter Ended March 31, 1998
Contents
Part I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31,
1998 and December 31, 1997 3
Consolidated Statements of Income for the
Three Months Ended March 31, 1998 and 1997 5
Consolidated Statement of Shareholders' Equity
for the Three Months Ended March 31, 1998 6
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 7
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Change in Securities 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security
Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE>
OLD GUARD GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(UNAUDITED)
<TABLE>
<CAPTION>
As of As of
March 31, 1998 December 31, 1997
<S> <C> <C>
ASSETS
Investments:
Fixed income securities
Held to maturity, at amortized cost $37,490,309 $38,382,722
Available for sale, at fair value 56,174,676 57,237,836
Preferred stocks, available for sale,
at fair value 5,612,795 4,626,565
Common stocks, available for sale,
at fair value 13,573,514 12,208,318
Other invested assets 5,766,152 5,668,025
Total investments 118,617,446 118,123,466
Cash and cash equivalents 7,791,144 10,214,908
Receivables:
Premiums 8,137,580 7,945,218
Reinsurance 11,136,689 10,767,770
Investment income 1,275,785 1,236,186
Affiliates 3,549,668 1,093,062
Prepaid reinsurance premiums 4,752,393 6,285,844
Deferred policy acquisition costs 8,245,993 7,318,767
Deferred income taxes - 262,750
Property and equipment 12,205,345 10,112,212
Goodwill 758,237 772,023
Other assets 2,825,867 1,266,509
Total assets $179,296,147 $175,398,715
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Losses and loss adjustment expenses 47,586,178 48,718,666
Unearned premiums 38,546,440 36,535,108
Accrued expenses 1,824,762 2,541,896
Capital lease obligations 598,572 796,558
Deferred income taxes 511,632 -
ESOP liability 3,771,624 3,840,566
Other liabilities 3,969,810 3,662,423
Total liabilities 96,809,018 96,095,217
Minority Interest 682,212 649,125
Shareholders' Equity:
Preferred stock (5,000,000 shares authorized;
0 issued and outstanding) - -
Common Stock (15,000,000 shares authorized;
4,232,605 and 4,204,910 shares issued;
4,106,265 and 4,084,370 shares outstanding;
no par) 38,594,858 38,317,908
Additional paid-in capital 4,844,702 4,787,703
Deferred compensation (6,046,384) (6,277,553)
Retained earnings 41,627,414 40,259,736
Net unrealized investment gains, net of
deferred income taxes 5,228,360 3,856,612
Treasury stock, at cost (126,340 and
120,540 shares) (2,444,033) (2,290,033)
Total shareholders' equity 81,804,917 78,654,373
Total liabilities and shareholders'
equity $179,296,147 $175,398,715
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
OLD GUARD GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
<S> <C> <C>
Revenue:
Net premiums written $21,274,210 $16,752,561
Change in unearned premiums (3,544,783) (2,045,615)
Net premiums earned 17,729,427 14,706,946
Investment income, net of expenses 1,503,754 1,373,236
Net realized investment gains 807,381 467,258
Other revenue 598,651 88,890
Total revenue 20,639,213 16,636,330
Expenses:
Losses and loss adjustment expenses incurred 9,540,015 8,885,227
Operating expenses 8,501,608 5,856,756
Interest expense 111,709 136,529
Total expenses 18,153,332 14,878,512
Income before income tax and minority
interest 2,485,881 1,757,818
Income tax expense 874,870 618,890
Income before minority interest 1,611,011 1,138,928
Minority interest in earnings of consolidated
subsidiary 33,087 10,274
Net income 1,577,924 1,128,654
Other comprehensive income, before tax:
Unrealized holding gains (losses) 2,893,813 (1,032,459)
Less: Reclassification adjustment for gains
included in net income 807,381 467,258
Other comprehensive income (loss),
before tax 2,086,432 (1,499,717)
Income tax expense (benefit) related to
items of other comprehensive income 714,684 (562,034)
Other comprehensive income (loss), net of tax 1,371,748 (937,683)
Comprehensive income $ 2,949,672 $ 190,971
Earnings per share
Basic 0.43 0.30
Diluted 0.41 0.30
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE>
OLD GUARD GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Three Months Ended March 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Net
Unrealized
Investment
Additional Gains, Net of
Common Stock Paid-In Deferred Retained Deferred Treasury
Shares Amount Capital Compensation Earnings Income Taxes Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 4,084,370 $38,317,908 $4,787,703 ($6,277,553) $40,259,736 $3,856,612 ($2,290,033) $78,654,373
Comprehensive income:
Net income 1,577,924 1,577,924
Unrealized gains on
securities, net of
reclassification
adjustment 1,371,748 1,371,748
Comprehensive income 2,949,672
Dividends ($.05 per share) (210,246) (210,246)
Exercise of common
stock options 27,695 276,950 276,950
Purchase of treasury stock (8,000) (154,000) (154,000)
MRP stock-based compensation 2,200 162,226 162,226
ESOP compensation earned 56,999 68,943 125,942
Balance, March 31, 1998 4,106,265 $38,594,858 $4,844,702 ($6,046,384) $41,627,414 $5,228,360 ($2,444,033) $81,804,917
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE>
OLD GUARD GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $1,577,924 $ 1,128,654
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 346,326 359,384
Net realized investment gains (807,381) (467,258)
Deferred income tax provision 59,698 257,556
Non-cash compensation expense 288,167 28,968
Other 33,087 10,274
(Increase) decrease in assets:
Receivables (3,057,486) 2,807,840
Prepaid reinsurance premiums 1,533,451 2,039,148
Deferred policy acquisition costs (927,226) (503,143)
Other assets (1,559,358) 403,186
Increase (decrease) in liabilities:
Losses and loss adjustment expenses (1,132,488) (6,361,832)
Unearned premiums 2,011,332 (807,208)
Accrued expenses (717,134) (896,020)
Other liabilities 1,626,732 912,935
Net cash used by operating activities (724,356) (1,087,516)
Cash flows from investing activities:
Cost of purchases of fixed income securities
Held to maturity (1,973,291) -
Available for sale (2,718,721) (20,872,384)
Proceeds from sales of fixed income securities
Available for sale 3,877,689 2,361,290
Proceeds from maturities of fixed income securities
Held to maturity 2,829,399 -
Available for sale 1,076,753 1,503,316
Cost of equity securities acquired (1,966,514) (3,917,605)
Proceeds from sales of equity securities 1,318,861 2,447,578
Cost of purchases of other invested assets (60,000) (140,000)
Proceeds from sales of other invested assets - 624,442
FDIC acquisition, net of cash acquired - (626,175)
Cost of purchases of property and equipment (2,410,016) (2,050,159)
Net cash used by investing activities (25,840) (20,669,697)
Cash flows from financing activities:
Proceeds from sale of stock 276,950 37,836,339
Purchase of treasury stock (1,473,345) -
Payment of dividends (210,246) -
Proceeds from bank loan - 1,100,000
Payments on principal of capital lease or bank loan (266,927) (1,742,731)
Net cash used by financing activities (1,673,568) 37,193,608
Net increase (decrease) in cash and cash equivalents (2,423,764) 15,436,395
Cash and cash equivalents at beginning of period 10,214,908 5,668,369
Cash and cash equivalents at end of period $ 7,791,144 $ 21,104,764
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
<PAGE>
OLD GUARD GROUP, INC. AND SUBSIDIARIES
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
The consolidated financial statements include the accounts
of Old Guard Group, Inc. and its wholly-owned subsidiaries (the
Group), Old Guard Insurance Company (Old Guard), Old Guard Fire
Insurance Company (Old Guard Fire), First Patriot Insurance
Company (First Patriot) and Old Guard Investment Holding Company,
Inc. (OGIHC) and its wholly-owned subsidiaries, Old Guard
Insurance Management Company (OGIM) and 2929 Service Corporation
and OGIHC's 80% owned subsidiary, First Delaware Insurance
Company (First Delaware).
The Group is a regional insurance holding company that, on
February 11, 1997, completed a subscription offering in which it
raised $38.3 million, net of issuance costs of $3.7 million, in
exchange for 4.2 million shares of no par common stock.
Concurrent with the offering and in accordance with a plan of
conversion, Old Guard, Old Guard Fire and First Patriot
(collectively, the Insurance Companies) were converted from
mutual to stock insurance companies and issued shares of common
stock to the Group in exchange for $16.0 million. As a result of
the conversion, the Insurance Companies are wholly-owned
subsidiaries of the Group.
2. Basis of Presentation
The financial information for the interim periods included
herein is unaudited; however, such information reflects all
adjustments, consisting of normal recurring adjustments, which
are, in the opinion of management, necessary to a fair
presentation of the financial position, results of operations,
and cash flows for the interim periods. The results of
operations for interim periods are not necessarily indicative of
results to be expected for the full year.
These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
for the year ended December 31, 1997 included in the Company's
1997 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
Certain amounts in the 1997 financial statements have been
reclassified to conform with the current year presentation.
3. Earnings Per Share
The following table reconciles the numerator and denominator
used in basic earnings per share to diluted earnings per share.
March 31, 1998 March 31, 1997
Net income - for basic and
diluted earnings per share $1,577,924 $1,128,654
Common shares outstanding 3,704,466 3,799,804
Dilutive shares
Treasury stock in MRP trust 127,029 -
Outstanding stock options 94,941 -
Total common and dilutive
shares 3,926,436 3,799,804
Options to purchase 10,000 shares of common stock at $19 to
$22 per share were granted during the second half of 1997 but
were not included in the computation of diluted earnings per
share because the options' exercise price was greater than the
average market price of the common shares.
4. Supplemental Cash Flow Disclosure
Interest paid for the three months ended March 31, 1998 and
1997 was $84,808 and $112,941, respectively. Net income taxes
paid (received) for the three months ended March 31, 1998 and
1997 was $490,000 and ($16,523), respectively.
5. New Accounting Pronouncements
In June 1997, Statement of Financial Accounting Standards
(SFAS) No. 130, "Comprehensive Income," was issued. SFAS No. 130
establishes standards for the reporting and disclosure of
comprehensive income and its components (revenues, expenses,
gains and losses). SFAS No. 130 requires that all items that are
required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 requires that an enterprise
(a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings
and additional paid-in capital in the equity section of a
statement of financial position. The effects of adopting SFAS
No. 130 are included in the consolidated financial statements
included herein.
In June 1997, SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," was issued. SFAS No. 131
establishes 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 issued to shareholders. SFAS No. 131 also
establishes standards for related disclosures about products and
services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997.
The Group is currently in the process of determining the effect
of SFAS No. 131 upon its financial reporting requirements and
will adopt SFAS No. 131 for its year-end 1998 financial
reporting.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Premiums. Gross premiums written increased $4.6 million or
22.4% in the first quarter of 1998 as compared to the first
quarter of 1997. The primary cause of this increase was the
assumption of 100% of the net premiums of New Castle Mutual
Insurance Company (New Castle), which is affiliated with the
Group through a management contract. Assumed premiums from New
Castle amounted to $4.4 million in the first quarter of 1998
versus $299,000 in 1997. Of the $4.4 million, $3.0 million is
attributable to the one time transfer of New Castle's unearned
premium reserve as of January 1, 1998. Other increases in gross
written premiums are attributable to changes in direct premiums
with commercial and personal automobile, farmowners and
commercial multi-peril experiencing the most significant growth
while property lines and workers' compensation direct premiums
decreased.
Premiums ceded to reinsurers decreased $349,000 to $3.5
million for the quarter ended March 31, 1998 compared to the
quarter ended March 31, 1997. The decrease in premiums ceded was
attributable to the elimination, on a run-off basis, of the quota
share reinsurance agreement effective January 1, 1998. As a
result, no premiums are ceded under the quota share reinsurance
treaty in 1998. This compares to $1,000,000 of ceded premiums
ceded under this treaty in the first quarter of 1997 and negative
ceded premiums of $1,400,000 under the surplus reinsurance treaty
as a result of its cancellation effective January 1, 1997.
Net premiums written increased $4.5 million, or 27.0%, for
the quarter ended March 31, 1998 to $21.3 million from $16.8
million in 1997. For the same comparative periods, net premiums
earned increased by $3.0 million, or 20.5%, to $17.7 million from
$14.7 million in 1997. The increases in net premiums written and
earned were directly attributable to the effects of the changes
instituted in the Company's reinsurance program and increases in
gross premiums written as previously discussed.
Net Investment Income. Cash and invested assets decreased
$1.9 million, or 1.5%, to $126.4 million on March 31, 1998 from
$128.3 million on December 31, 1997. This decrease is primarily
as a result of additional investments in computer software and
hardware and constructions costs associated with the Group's home
office expansion in Lancaster, Pennsylvania. For the quarter
ended March 31, 1998, the yield on average cash and invested
assets was 4.9% compared to 5.2% for the comparable period of
1997. The result of these changes was that net investment income
increased $131,000, or 9.5%, to $1.5 million for the quarter
ended March 31, 1998 from $1.4 million in the first quarter of
1997.
Net Realized Investment Gains. Net realized investment
gains were $807,000 for the first quarter of 1998 compared to
$467,000 in 1997. The increase can be attributed to profits
taken in both the Group's fixed income and equity portfolios.
Losses and Loss Adjustment Expense. Net losses and loss
adjustment expenses incurred increased by $655,000, or 7.4%, to
$9.5 million for the quarter ended March 31, 1998 from $8.9
million for the quarter ended March 31, 1997. The loss and loss
adjustment expense ratio for the first quarter of 1998 was 53.8%
versus 60.4% in 1997. The decrease in the loss and loss
adjustment expense ratio can be attributed to the mild winter
weather experienced in the first quarter of 1998 which primarily
benefitted the farmowners, homeowners, commercial multi-peril and
automobile lines of business.
Operating Expenses. Operating expenses increased by $2.6
million, or 45.2%, for the quarter ended March 31, 1998 to $8.5
million from $5.9 million for 1997. The increase is primarily
the result of the unwinding of the quota share reinsurance
agreement in 1998 and additional commission expense on the
assumed business from New Castle.
Federal Income Tax Expense. Federal income tax as a
percentage of pre-tax income was 35.2% for the quarters ended
March 31, 1998 and 1997.
Liquidity and Capital Resources
The principal sources of the Group's cash flow are premiums,
investment income, maturing investments and proceeds from sales
of invested assets. In addition to the need for cash flow to
meet operating expenses, the liquidity requirements of the Group
relate primarily to the payment of losses and loss adjustment
expenses. The short and long-term liquidity requirements of the
Group vary because of the uncertainties regarding the settlement
dates for liabilities for unpaid claims and because of the
potential for large losses, either individually or in the
aggregate.
The Group and its subsidiaries have in place unsecured lines
of credit with local financial institutions under which they may
borrow up to an aggregate of $1.5 million. During the first
quarter of 1998, no amounts were borrowed against these lines of
credit.
Net cash used by operating activities was $700,000 and $1.1
million during the first quarter of 1998 and 1997, respectively.
The negative cash flow from operating activities in 1998 was
primarily a result of an increase in prepaid premium taxes and an
increase in reinsurance receivables from New Castle offset
somewhat by an increase in unearned premiums. The negative cash
flow from operating activities during 1997 was primarily
attributable to the reduction of liabilities for losses and loss
adjustment expenses and year-end profit sharing with agents.
In 1998, cash used by investing activities was minimal as
the Group utilized the net proceeds from activity in its
investment portfolio to finance its home office expansion. In
1997, cash used for investing activities was $20.7 million as the
Group invested the net proceeds from the subscription offering
and made continuing investments in computer systems.
In 1998, cash used by financing activities was $1.7 million
as the Group purchased treasury stock and paid cash dividends.
In 1997, cash provided by financing activities of $37.2 million
resulted primarily from the net proceeds from the subscription
offering less repayments of capital leases and other debt.
The principal source of liquidity for Old Guard Group, Inc.
(OGGI) will be dividend payments and other fees received from its
subsidiaries. OGGI's insurance subsidiaries are restricted by
the insurance laws of the state of domicile as to the amount of
dividends or other distributions they may pay to the OGGI without
the prior approval of the state regulatory authority. Under
Pennsylvania law, the maximum amount that may generally be paid
by an insurance company during any twelve-month period after
notice to, but without prior approval of, the Pennsylvania
Insurance Department, cannot exceed the greater of 10% of the
insurance company's statutory surplus as reported on the most
recent annual statement filed with the Department, or the net
income of the insurance company for the period covered by such
annual statement. However, the Insurance Companies are further
restricted as to the amount of dividends that may be paid to
OGGI. These restrictions do not allow the Insurance Companies to
pay a dividend to OGGI without prior approval of the Pennsylvania
Insurance Department for a 36 month period following the
conversion.
OGGI's Employee Stock Ownership Plan (ESOP) borrowed
$4.1 million from an unaffiliated lender and $100,000 from OGGI
to purchase 10% of the common stock issued in the Conversion.
The loans bear an 8.45% interest rate, and will require the ESOP
to make monthly payments of approximately $49,000 for a term of
10 years. The loans are secured by the shares of common stock
purchased and the earnings thereon. Shares purchased with such
loan proceeds will be held in a suspense account for allocation
among participants as the loan is repaid. OGGI expects to
contribute sufficient funds to the ESOP to repay such loan, plus
such other amounts as the OGGI's Board of Directors may determine
at its discretion.
In February 1996, OGIHC and American Technologies, Inc., a
California based software lessor, entered into a lease financing
agreement in connection with the acquisition by the Group of a
new policy processing software system for approximately $2.5
million. The terms of the lease financing agreement provide for
an aggregate lease facility up to $1.5 million. The implied
interest rate under the lease is 9.5%. As of December 31, 1996,
the lease facility was fully utilized. Under the terms of the
lease financing agreement, OGIHC is required to make payments of
approximately $57,000 per month for 24 months.
Effects of Inflation
The effects of inflation on the Group are implicitly
considered in estimating reserves for unpaid losses and loss
adjustment expenses, and in the premium rate-making process. The
actual effects of inflation on the Group'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 liability for losses and LAE,
including losses that have been incurred but not yet reported,
make adequate provision for the effects of inflation.
Year 2000 Issue
The unprecedented advances in computer technology over the
past several decades have resulted in dramatic changes in the way
companies do business. Most of these developments have been
beneficial, but some have proven costly, as businesses have
struggled to adapt to various features of the new technological
landscape. One such well-publicized problem has arisen out of
the worldwide use of the so called "Year 2000" programming
convention, in which two digit numbers were generally used
instead of four digit numbers to identify the years used in
dates. As a consequence, most computers require relatively
costly reprogramming to enable them to correctly perform data
operations involving years 2000 or later, a problem anticipated
to have substantial repercussions on the business world because
computer operations involving date calculations are pervasive.
Beginning in 1991, the Group began evaluating and
reprogramming its own computer systems to address the Year 2000
problem. By the end of 1992, all necessary programming work was
completed and implemented. With the completion of these changes,
Year 2000 issues are not likely to result in any material adverse
disruption in the Group's computer systems or its internal
business operations. The cost of this work through 1992 was
approximately $140,000.
To ensure that all software applications are Year 2000
compliant, the Group is currently testing all applications in a
true Year 2000 environment. This testing is being conducted on
hardware and system operating software that has the operating
system date beyond 1999. This project is scheduled to be
completed by June 30, 1998. It is estimated that the total
remaining cost to complete this phase and become Year 2000
compliant will be approximately $10,000.
Many experts now believe that the Year 2000 problem may have
a material adverse impact on the national and global economy
generally. In addition, it seems likely that if businesses are
materially damaged as a result of Year 2000 problems, at least
some such businesses may attempt to recoup their losses by
claiming coverage under various types of insurance policies.
And, although management has concluded that under a fair reading
of the various policies of insurance issued by it no coverage for
Year 2000 problems should be considered to exist, it is not
possible to predict whether or to what extent any such coverage
could ultimately be found to exist by courts in the various
jurisdictions. Accordingly, important factors which could cause
actual results to differ materially from those expressed in the
forward looking statements include, but are not limited to, the
inability of the Group to accurately estimate the impact of the
Year 2000 problem on the insurance issued by, or other business
operations of the Group.
Forward-Looking Statements
Certain statements contained in the Management's Discussion
and Analysis of Financial Condition and Results of Operations and
other statements made throughout this report constitute "forward-
looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995). Such statements
involve certain assumptions, risks and uncertainties that could
cause actual results to differ materially from those included in
or contemplated by the statements. These assumptions, risks and
uncertainties include, but are not limited to those associated
with factors affecting the property-casualty insurance industry
generally, including price competition, size and frequency of
claims, escalating damage awards, natural disasters, fluctuations
in interest rates and general business conditions; the Group's
dependence on investment income; the geographic concentration of
the Group's business in the Northeast United States, the adequacy
of the Group's liability for losses and loss adjustment expenses;
government regulation of the insurance industry and the other
risks and uncertainties discussed or indicated in all documents
filed by the Group with the Securities and Exchange Commission.
The Group expressly disclaims any obligation to update any
forward-looking statements as a result of developments occurring
after the release of this report.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings - For a detail description of the
status of material litigation pending against the Group
see footnote 15 of the Consolidated Financial
Statements contained in the Group's 1997 Annual Report
on Form 10-K filed with the Securities and Exchange
Commission. No material events have happened impacting
the status of that litigation since the filing of the
1997 Form 10-K.
ITEM 2. Change in Securities - None
ITEM 3. Defaults Upon Senior Securities - None
ITEM 4. Submission of Matters to a Vote of Security Holders -
None
ITEM 5. Other Information - None
ITEM 6. Exhibits and Reports on Form 8-K
Report on Form 8-K was filed on February 13,
1997 under "Item 5. Other Events" of such
form
Exhibit 27 - Financial Data Schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
OLD GUARD GROUP, INC.
Date: May 15, 1998 /s/ Mark J. Keyser
Mark J. Keyser,
Chief Financial Officer and
Treasurer (principal financial
officer and principal accounting
officer)
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 56,175
<DEBT-CARRYING-VALUE> 37,490
<DEBT-MARKET-VALUE> 37,927
<EQUITIES> 19,186
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 118,617
<CASH> 7,791
<RECOVER-REINSURE> 2,752
<DEFERRED-ACQUISITION> 8,246
<TOTAL-ASSETS> 179,296
<POLICY-LOSSES> 47,586
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0
0
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17,729
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</TABLE>
