SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 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 1-7369
WASHINGTON NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-2663225
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
300 Tower Parkway,
Lincolnshire, Illinois 60069
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number, Including Area Code: (847) 793-3000
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 of Common Stock, $5 par value outstanding as of
August 6, 1996 was 12,259,689.
<PAGE>
CONTENTS
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 1996
and December 31, 1995 3
Consolidated Statement of Operations - Six and Three Months
Ended June 30, 1996 and 1995 4
Consolidated Condensed Statement of Cash Flows -
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements - June 30, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 18
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 24
Signature 25
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WASHINGTON NATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(000s Omitted)
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
<S> <C> <C>
ASSETS
Investments
Fixed maturities - available for sale at fair
value (cost: $1,971,018; $1,953,314) $1,966,715 $2,060,710
Mortgage loans on real estate 290,637 317,249
Real estate and joint ventures 23,039 34,080
Policy loans 56,391 56,279
Other long-term 13,651 27,744
Short-term 52,954 48,594
Total Investments 2,403,387 2,544,656
Cash 5,858 8,331
Deferred acquisition costs 284,048 235,499
Reinsurance recoverables and prepaid premiums 48,864 49,502
Accrued investment income 32,696 32,652
Insurance premiums in course of collection 13,839 14,718
Property and equipment 17,132 18,259
Goodwill 18,032 18,385
Separate Account 36,872 51,005
Other 38,275 39,891
Total Assets $2,899,003 $3,012,898
LIABILITIES
Policy liabilities $2,337,531 $2,363,329
General expenses and other liabilities 151,372 125,194
Mortgage payable 1,170 1,309
Short-term notes payable - 3,100
Income taxes (current: $588; $944) (1,683) 31,042
Separate Account 36,872 51,005
Total Liabilities 2,525,262 2,574,979
SHAREHOLDERS' EQUITY
Convertible preferred stock 716 718
Common stock 126,492 125,953
Retained earnings 304,668 319,447
Net unrealized investment gains (losses) (138) 49,798
Cost of common treasury stock (57,997) (57,997)
Total Shareholders' Equity 373,741 437,919
Total Liabilities and Shareholders' Equity $2,899,003 $3,012,898
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
WASHINGTON NATIONAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(000s Omitted, Except Per Share Data)
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues
Insurance premiums and policy charges $77,683 $73,053 $38,933 $36,911
Net investment income 81,999 84,544 40,835 42,629
Realized investment gains (losses) (242) (606) 368 9
Other 2,588 1,681 1,187 938
Total Revenues 162,028 158,672 81,323 80,487
Benefits and Expenses
Insurance benefits paid or provided 108,484 107,449 54,644 54,209
Insurance and general expenses 21,236 20,198 10,904 9,607
Amortization of deferred acquisition costs 10,754 11,397 4,967 5,772
Total Benefits and Expenses 140,474 139,044 70,515 69,588
Income from continuing operations before income taxes 21,554 19,628 10,808 10,899
Income taxes on continuing operations 7,128 6,689 3,060 3,831
Income from Continuing Operations 14,426 12,939 7,748 7,068
Discontinued Operations
Income (loss) from discontinued operations - net of tax (859) 3,248 385 1,829
Loss on disposal - net of tax (25,080) - (25,080) -
Income (loss) from discontinued operations (25,939) 3,248 (24,695) 1,829
Net Income (Loss) ($11,513) $16,187 ($16,947) $8,897
Primary Earnings Per Share
Income from continuing operations $1.16 $1.04 $0.63 $0.57
Income (loss) from discontinued
operations - net of tax (2.11) 0.27 (2.02) 0.15
Net Income (Loss) Per Share ($0.95) $1.31 ($1.39) $0.72
Average Shares and Equivalents Outstanding 12,241 12,245 12,247 12,254
Fully Diluted Earnings Per Share
Income from continuing operations $1.16 $1.03 $0.63 $0.56
Income (loss) from discontinued
operations - net of tax (2.11) 0.26 (2.02) 0.15
Net Income (Loss) Per Share ($0.95) $1.29 ($1.39) $0.71
Average Shares and Equivalents Outstanding 12,241 12,530 12,247 12,538
Dividends Paid Per Common Share $0.54 $0.54 $0.27 $0.27
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
WASHINGTON NATIONAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (Unaudited)
(000s Omitted)
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Net Cash Provided by Operating Activities $24,024 $44,763
Investing Activities
Proceeds from sales
Fixed maturities - available for sale 89,230 110,342
Mortgage loans, real estate and other 27,544 5,523
Proceeds from maturities, redemptions and distributions
Fixed maturities - available for sale 60,731 43,083
Fixed maturities - held to maturity - 9,706
Mortgage loans, real estate and other 31,464 15,917
Cost of purchases
Fixed maturities - available for sale (168,812) (217,635)
Real estate and other (6,964) (3,995)
Increase in policy loans (112) (1,083)
Purchases of property and equipment (403) (156)
Net change in short-term investments (4,360) 19,215
Net Cash Provided (Used) by Investing Activities 28,318 (19,083)
Financing Activities
Policyholder account deposits 71,215 81,832
Policyholder account withdrawals (116,446) (104,988)
Dividends to shareholders (6,790) (6,759)
Change in short-term notes payable (3,100) -
Proceeds from sale of common stock 445 468
Repayment of long-term borrowings (139) (276)
Net Cash Used by Financing Activities (54,815) (29,723)
Decrease in Cash (2,473) (4,043)
Cash at Beginning of Period 8,331 7,272
Cash at End of Period $5,858 $3,229
See notes to consolidated financial statements
</TABLE>
WASHINGTON NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1996
A. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles (GAAP) for interim periods. In the opinion of
management, all adjustments (consisting primarily of normal,
recurring accruals) considered necessary for a fair presentation
have been included.
Certain amounts in the 1995 consolidated financial statements
have been reclassified to conform to the 1996 presentation
including the restatement of the Statement of Operations for
discontinued operations.
B. Discontinued Operations
In May, 1996, the Company's Board of Directors approved a plan to
dispose of the Company's Health insurance business. On May 31,
1996 an agreement was signed that provided that Pioneer Financial
Services, Inc. would purchase the Company's individual and small
group health business, through a reinsurance transaction, for a
purchase price of $19.0 million. On July 3, 1996 an agreement was
signed to sell the remaining Health insurance business - the
large group business - to Trustmark Insurance Company through a
reinsurance transaction that provides that the Company will
receive consideration in the future based on persistency. The
sale of the individual and small group health insurance business
closed on August 2, 1996 and the sale of the large group business
is expected to close in August 1996.
The transactions have resulted in the Company recording an
estimated net loss of $25.1 million in the second quarter. The
loss consists principally of the future operating losses of this
business from the measurement date that the Company remains
responsible for, employee severance costs, the cost to terminate
one of the Company's defined benefit pension plans, related net
asset write-offs and other related disposal costs net of the
anticipated proceeds. The loss is net of a tax credit of $13.5
million. The loss is an estimate due to the nature of the
transactions and may change in future periods.
The operating results of the sold business have been shown on the
statement of operations as discontinued operations for 1996. The
June 30, 1995 statement of operations has been restated to
reflect the sale of the health insurance business as discontinued
operations. At June 30, 1996, the business had remaining assets
of approximately $246 million consisting primarily of invested
assets and liabilities of approximately $246 million which
consisted primarily of policyholder liabilities.
Revenues and income from operations on the discontinued business
consist of the following in millions:
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
<S> <C> <C>
Revenues $194.7 $185.3
Income (loss) from
operations,(net of
taxes: $1.2; $1.5) * (1.9) 3.2
<FN>
* June 30, 1996 includes a $1.0 million loss (net of taxes of
$.5 million) for the month of June 1996 that was reported as
part of the loss on disposal.
</TABLE>
In connection with the Company's plan of disposal, Washington
National Insurance Company's (WNIC's) defined benefit pension plan
(the Plan) is required to be terminated. The termination, which is
expected to take place in the fourth quarter of 1996 will result in
the Company recognizing additional pension expense of approximately
$8.9 million. This amount was included as part of the loss on the
disposal and includes $4.1 million of previously unrealized loss
that had been recorded as a reduction of shareholders' equity. In
addition, the termination of the Plan will result in the Company
purchasing 416,000 and 17,100 shares of the Company's common and
preferred stock, respectively, held by the Plan. These purchases
are expected to take place in 1996 and are expected to be financed
using short-term borrowings or by sales of fixed maturity
investments.
C. Reinsurance
The effect of reinsurance on insurance premiums and policy charges
reported in continuing operations for the six month period ended
June 30 follows:
<TABLE>
<CAPTION>
(000s omitted) 1996 1995
<S> <C> <C>
Direct premiums and policy charges $105,936 $100,321
Premiums ceded (28,253) (27,268)
Net premiums and policy charges $77,683 $ 73,053
</TABLE>
Reinsurance benefits ceded reported in continuing operations were
$9.9 million and $10.3 million at June 30, 1996 and 1995,
respectively.
D. Financial Guarantees
The Company has entered into certain financial guarantees. A
financial guarantee is a conditional commitment to guarantee the
payment of an obligation by an unrelated entity to a third party
and has off-balance sheet credit risk. The exposure to credit risk
is represented by the amount the Company would be required to pay
under certain circumstances.
At both June 30, 1996 and December 31, 1995, the Company had three
financial guarantees totaling $13.7 million, as well as a
construction completion guarantee. The Company feels it has
adequate reserves for related potential losses.
E. Net Unrealized Gains (Losses) on Investments
The components of net unrealized gains (losses) on investments
are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
Unrealized gains (losses) on investments $(3,160) $108,533
Adjustment to deferred acquisition costs 2,999 (37,700)
Deferred income tax 23 (21,035)
Net unrealized gains (losses) on investments $ (138) $ 49,798
</TABLE>
F. Long-Lived Assets
In the second quarter of 1996 the Company decided to sell an
investment property that had been classified as investment real
estate. The process has resulted in the Company identifying a
pretax impairment of $4.8 million on this property. The
impairment has been recognized as part of realized investment
gains and losses reducing the carrying value of the property to
$7.3 million. The Company expects the sale of the property to
close in early 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following updates and should be read in conjunction with the
Management's Discussion and Analysis of Financial Condition and
Results of Operations section of the Company's 1995 Annual Report,
copies of which may be obtained by contacting: Craig Simundza, Vice
President, Financial Reporting Department, Washington National
Corporation, 300 Tower Parkway, Lincolnshire, Illinois 60069
(telephone (847) 793-3053).
Health Business Disposal
On June 4, 1996, the Company announced an agreement to sell its
individual health insurance and small group life and health
insurance businesses. The sale closed August 2, 1996 and occurred
through a reinsurance transaction for cash proceeds of $19.0
million. On July 8, 1996, the Company announced an agreement to sell
its large group life and health insurance business. This
transaction, which is expected to close in August 1996, will also
occur through reinsurance, with the payment to be determined over
time based on the persistency of the business.
As a result of the sales of the health business, regulatory capital
of approximately $50 million, which previously was required to
support the health business, will become available to the Company
for other uses. The Company expects to utilize a portion of this
capital to repurchase 416,000 shares of its common stock and 17,000
shares of its preferred stock currently held by one of its defined
benefit pension plans. The Company is considering several possible
uses for the remainder of the available capital, including
additional share repurchases or investment in the Company's
remaining businesses.
Following the sales of the health business, the Company expects to
carry out a number of steps to reduce expenses previously allocated
to the businesses sold. These steps include (1) the establishment
of a smaller data center and the sublease of the existing data
center; (2) the elimination of certain positions in the Company's
support functions; (3) the sublease of three of the five floors in
the Company's headquarters building; and (4) the termination of an
under-funded defined benefit pension plan. These steps are expected
to eliminate approximately $8 million of the $13 million of annual
corporate overhead and data center expenses previously allocated to
the health business. The Company is continuing to explore steps for
eliminating the remaining $5 million of such expense but does not
expect any conclusions to be reached until 1997. As such, the $5
million of such annual expenses remaining has been allocated to the
Corporate and Other line.
As a result of the sales, an after-tax loss of $25.1 million was
recorded in the 1996 second quarter. The loss arose from anticipated
cash proceeds being more than offset by employee-related costs and
other expenses of approximately $45.0 million (including $10.6
million for the Company's share of individual and group health
insurance risks retained), net asset write-offs (including deferred
acquisition costs and excess claims reserves) of approximately $14.1
million, and a tax credit of approximately $13.5 million. Due to the
nature of the sales transactions, the loss calculation involves a
number of estimates that may change in future periods.
Under the conditions of these two sales agreements, the Company will
retain the risk for selected portions of the individual and group
health business. These include future losses on certain individual
health policies written in New Jersey and on group medical
conversion policies. In addition, the sale of the large group
business will occur in stages, typically at the next annual renewal
date of each account occurring on or after December 1, 1996, with
the Company retaining the risk until that time. Estimated costs for
these risks are provided for in the calculation of the loss on
disposition, discussed above.
The operating results of the individual health and large and small
group life and health business are now reported as discontinued
operations. Consolidated statements of operations for previous
periods have been restated. The restatement did not affect net
income or net income per share. As permitted by accounting rules,
assets and liabilities related to the health businesses have not
been shown separately from those of the continuing operations.
Continuing Operations
Management believes that the health business sales will create
greater operating focus. Following the sales, the Company will
focus on its universal life insurance and annuities line of
business, written by United Presidential Life Insurance Company (UPI),
and its educator disability line of business, written by Washington
National Insurance Company (WNIC).
<TABLE>
Analysis of Net Income (Loss)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(000s omitted) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Pretax operating income from
continuing operations (a)
Insurance operations $ 9,609 $ 9,474 $ 19,912 $18,453
Corporate and other 831 1,416 1,884 1,781
Total pretax operating income from
continuing operations 10,440 10,890 21,796 20,234
Income taxes on continuing operations 3,715 3,777 7,788 7,142
Net operating income from continuing operations 6,725 7,113 14,008 13,092
Net realized investment gains (losses) (b) 1,023 (45) 418 (153)
Discontinued operations, net of taxes (c) (24,695) 1,829 (25,939) 3,248
Net income (loss) $(16,947) $ 8,897 $(11,513) $16,187
<FN>
(a) Pretax income before realized investment gains (losses) and
income (loss) from discontinued operations.
(b) 1996 and 1995 include (taxes) benefits of $655 and $(54), for
the three months ended June 30 and $660 and $453, for the six
months ended June 30, respectively.
(c) 1996 three months and six months ended June 30 include the
operating results as well as the loss on sale of health insurance
business.
</TABLE>
<TABLE>
Consolidated Results of Continuing Operations
Components of Pretax Operating Income From Continuing Operations
<CAPTION>
Insurance Corporate
(000s omitted) Operations and Other Total
Three Months Ended June 30, 1996
<S> <C> <C> <C>
Revenues
Insurance premiums and policy
charges $38,933 $ - $38,933
Net investment income 38,645 2,190 40,835
Other revenues 1,180 7 1,187
Total revenues excluding realized
investment losses 78,758 2,197 80,955
Benefits and expenses
Insurance benefits 54,584 60 54,644
Expenses 9,598 1,306 10,904
Amortization of deferred
acquisition costs 4,967 - 4,967
Total benefits and expenses 69,149 1,366 70,515
Pretax operating income from continuing operations $ 9,609 $ 831 $10,440
</TABLE>
<TABLE>
<CAPTION>
Insurance Corporate
(000s omitted) Operations and Other Total
Three Months Ended June 30, 1995
<S> <C> <C> <C>
Revenues
Insurance premiums and policy
charges $ 36,911 $ - $36,911
Net investment income 39,721 2,908 42,629
Other revenues 1,068 (130) 938
Total revenues excluding realized
investment losses 77,700 2,778 80,478
Benefits and expenses
Insurance benefits 54,138 71 54,209
Expenses 8,316 1,291 9,607
Amortization of deferred
acquisition costs 5,772 - 5,772
Total benefits and expenses 68,226 1,362 69,588
Pretax operating income from continuing operations $ 9,474 $1,416 $10,890
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996
<S> <C> <C> <C>
Revenues
Insurance premiums and policy
charges $ 77,683 $ - $ 77,683
Net investment income 78,110 3,889 81,999
Other revenues 2,347 241 2,588
Total revenues excluding realized
investment losses 158,140 4,130 162,270
Benefits and expenses
Insurance benefits 108,364 120 108,484
Expenses 19,110 2,126 21,236
Amortization of deferred
acquisition costs 10,754 - 10,754
Total benefits and expenses 138,228 2,246 140,474
Pretax operating income from continuing operations $ 19,912 $1,884 $ 21,796
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1995
<S> <C> <C> <C>
Revenues
Insurance premiums and policy
charges $ 73,053 $ - $ 73,053
Net investment income 79,295 5,249 84,544
Other revenues 1,828 (147) 1,681
Total revenues excluding realized
investment losses 154,176 5,102 159,278
Benefits and expenses
Insurance benefits 107,304 145 107,449
Expenses 17,021 3,177 20,198
Amortization of deferred
acquisition costs 11,397 - 11,397
Total benefits and expenses 135,722 3,322 139,044
Pretax operating income from continuing operations $ 18,454 $1,780 $ 20,234
</TABLE>
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30,
1995
Insurance Premiums and Policy Charges. Insurance premiums and policy
charges increased $4.6 million, or 6.3%, from $73.1 million in 1995
to $77.7 million in 1996. The improvement was primarily due to
increased premiums from UPI and the education disability line of
business, offset in part by a decline in the closed blocks of life
insurance and annuities at WNIC.
Net Investment Income. Net investment income was $82.0 million in
1996, down 3.0% from the same period of 1995. The yield on the
Company's investment portfolio (based on amortized cost) declined
from 7.6% in 1995 to 7.4% in 1996 primarily due to lower market
interest rates on new investments in 1995. The amortized cost of the
portfolio at June 30, 1996, decreased approximately 1% from December
31, 1995.
Realized Investment Losses. Realized investment losses for the first
six months of 1996 were $0.2 million ($0.4 million gain after taxes)
compared to $0.6 million ($0.2 million after taxes) in 1995. In
1996, realized losses of $6.1 million on real estate and mortgage
loans were mostly offset by gains of $5.9 million, primarily from
other invested assets.
Insurance Benefits Paid or Provided. Insurance benefits paid or
provided increased $1.0 million, or 1.0%, from $107.4 million in
1995 to $108.5 million in 1996. The increase was mainly due to
increased benefits in the education disability line and at UPI,
mostly offset by a decline in the WNIC closed blocks of life
insurance and annuities.
Insurance and General Expenses. Insurance and general expenses were
$21.2 million in 1996, up 5.1% or $1.0 million from 1995. The
Company's expense ratio (expenses as a percentage of premiums and
net investment income) increased from 12.8% in 1995 to 13.3% in
1996. The increase in the expense ratio was due primarily to higher
operating expenses in the education disability line of business.
Amortization of Deferred Acquisition Costs. Amortization of deferred
acquisition costs decreased $0.6 million, or 5.6%, from $11.4
million in 1995 to $10.8 million in 1996. The decrease was primarily
due to an expected decline in amortized deferred acquisition costs
on a portion of the closed blocks of life insurance and annuities at
WNIC which were fully amortized in 1995. Partially offsetting this
decline were increases at UPI and for the education disability
business.
Income Taxes. Income taxes on operations were $7.8 million in 1996
compared to $7.1 million in 1995. The effective tax rate on
operations was 35.7% in 1996, essentially the same as last year.
Discontinued Operations, Net of Income Taxes. The Company reported a
loss of $25.1 million, net of income taxes, resulting from the
disposal of its health insurance business. See discussion under
"Health Business Disposal," above. In addition, the loss from
discontinued health insurance operations was $0.9 million through
May 31, 1996, the measurement date for the disposal of the health
business, compared to income of $3.2 million in the first six months
of 1995. The loss resulted primarily from adverse experience for
the group life and health insurance and the individual health
insurance, as compared to 1995.
Net Income (Loss). Net loss for 1996 was $11.5 million, compared to
net income of $16.2 million in 1995. The decline resulted primarily
from the loss on sale of the health business, net of income taxes
and the 1996 loss from discontinued operations compared to income
from discontinued operations in 1995, discussed above.
Comparison of Quarter Ended June 30, 1996 to June 30, 1995
The nature and reasons for any significant variations between
quarters ended June 30, 1996 and June 30, 1995 are the same as those
discussed above for the respective six-month periods, except where
otherwise noted.
Investment Portfolio
At June 30, 1996, the Company had invested assets with a carrying
value of $2.4 billion. Certain information about the Company's
investment portfolio as of that date follows (dollars in millions):
<TABLE>
<CAPTION>
Percent of Total
Carrying Value Carrying Value
<S> <C> <C>
Fixed maturity investments:
United States government obligations $ 74.6 3.1%
Obligations of states and
political subdivisions 76.8 3.2
Public utilities 147.7 6.1
Industrial and miscellaneous 1,038.4 43.2
Mortgage-backed securities 604.6 25.2
Other 24.6 1.0
Total fixed maturity investments 1,966.7 81.8
Mortgage loans on real estate 290.6 12.1
Real estate and joint ventures 23.0 1.0
Policy loans 56.4 2.3
Other long-term 13.7 0.6
Short-term 53.0 2.2
Total invested assets $2,403.4 100.0%
</TABLE>
Fixed Maturity Investments
The Company's fixed maturity investments are carried at fair value.
Due to continuing rise of interest rates during 1996, the carrying
value of the Company's fixed maturity investments compared to
amortized cost decreased $111.7 million, resulting in an unrealized
loss on fixed maturity investments of $4.3 million, compared to an
unrealized gain of $107.4 million at December 31, 1995. The
amortized cost of the Company's fixed maturity portfolio increased
$17.7 million in 1996 to $2 billion at June 30, 1996.
The composition of the Company's fixed maturity portfolio at June
30, 1996, based on ratings follows (dollars in millions):
<TABLE>
<CAPTION>
Carrying Value
as a Percent of
----------------------
Carrying Fixed Invested
Value Maturities Assets
<S> <C> <C> <C>
AAA/Aaa $ 808.3 41.1% 33.6%
AA/Aa 114.2 5.8 4.8
A 606.6 30.8 25.1
BBB/Baa 347.4 17.7 14.5
BB/Ba and lower 90.2 4.6 3.8
Total fixed maturities $1,966.7 100.0% 81.8%
</TABLE>
The Company's policy for rating fixed maturity investments is to use
the rating determined by Standard & Poor's Company or Moody's
Investor Service, Inc. for publicly-traded investments. For
privately-traded securities, the ratings of Duff & Phelps Credit
Rating Company and Fitch Investors Service, Inc. are also recognized
in defining rated securities. If an investment has a split rating
(i.e., different ratings from the rating services) the Company
categorizes the investment under the lowest rating. For those
investments that do not have a rating from these services, the
Company categorizes those investments on ratings assigned by the
National Association of Insurance Commissioners (NAIC), whose
ratings are as follows: NAIC Class 1 is considered equivalent to a
AAA/Aaa, AA/Aa, or A rating; NAIC Class 2, BBB/Baa; and NAIC Classes
3-6, BB/Ba and below. At June 30, 1996, $98.5 million or 5.0% of
fixed maturity investments were rated with comparable NAIC ratings,
the majority of which is $38.2 million of investments rated BBB and
$35.4 million of investments rated BB and lower.
The Company's fixed maturity portfolio at June 30, 1996, includes
$604.6 million of mortgage-backed securities, detailed as follows
(dollars in millions):
<TABLE>
<CAPTION>
Carrying Value as a Percent of
------------------------------
Mortgage-
Carrying Backed Invested
Value Securities Assets
<S> <C> <C> <C>
Agency CMOs
Planned amortization classes $171.5 28.4% 7.1%
Target amortization classes 8.6 1.4 0.4
Sequential classes 4.6 0.8 0.2
Support classes 5.5 0.9 0.2
Accrual classes 6.2 1.0 0.3
Total agency CMOs 196.4 32.5 8.2
Non-agency CMOs (1)
Planned amortization classes 13.9 2.3 0.5
Accrual classes 1.4 0.2 0.1
Sequential classes 8.8 1.5 0.4
Total non-agency CMOs 24.1 4.0 1.0
Total CMOs 220.5 36.5 9.2
Non-agency mortgage-backed
pass-through securities 2.4 0.4 0.1
Agency mortgage-backed
pass-through securities 381.7 63.1 15.9
Total mortgage-backed securities $604.6 100.0% 25.2%
<FN>
(1) All of the Company's non-agency CMO investments were rated AAA at
June 30, 1996. The credit risk associated with non-agency
mortgage-backed securities is generally greater than that of
agency mortgage-backed securities.
</TABLE>
To mitigate prepayment risk, the Company primarily invests in
collateralized mortgage obligation (CMO) classes that have, at time
of investment, the most stable prepayment structure. Such CMO
classes are termed "planned amortization class" (PAC) which
comprised 84.1% of the Company's CMO portfolio at June 30, 1996. The
next most stable class of CMOs is "target amortization class" (TAC)
which comprised 3.9% of the Company's CMO portfolio at June 30,
1996. PACs and TACs are designed to protect against prepayment risk
and may therefore have more predictable cash flows than pass-through
mortgage-backed securities.
As market interest rates have declined over the past several years,
prepayments on certain PAC and TAC investments have increased
resulting in a loss of some prepayment protection. Approximately 63%
of the Company's PAC and TAC investments at June 30, 1996, have lost
some of this protection. However, the Company believes the yield
earned on these issues continues to adequately compensate for the
reduced prepayment protection.
Mortgage Loans
The Company had investments in mortgage loans of $290.6 million (net
of allowances of $7.0 million) at June 30, 1996 compared to $317.2
million at December 31, 1995. Investments in mortgage loans declined
primarily due to prepayments and amortization of the mortgage loan
portfolio during the first half of 1996. Of the outstanding loans at
June 30, 1996, loans with a carrying value of $3.6 million, or
approximately 1.2%, were delinquent 60 days or more as to interest
or principal, far better than the recent industry average.
Restructured loans, where modifications of the terms of the mortgage
loan have occurred and which are considered current investments, had
a carrying value of $14.0 million at June 30, 1996, a decrease of
$1.0 million from December 31, 1995, resulting primarily from
impairments recognized.
Impaired mortgage loans decreased $3.0 million during the second
quarter to $7.1 million primarily due to a foreclosure.
The Company's mortgage loan portfolio at June 30, 1996, by
geographic distribution, year of maturity, and property type follows
(dollars in millions):
<TABLE>
<CAPTION>
Geographic Distribution of
Mortgage Loans
<S> <C> <C>
California $ 49.8 17.1%
Illinois 37.7 13.0
Indiana 30.9 10.6
Florida 30.6 10.5
Texas 22.3 7.7
North Carolina 17.4 6.0
Virginia 14.5 5.0
Wisconsin 10.0 3.4
All other 77.4 26.7
Total $290.6 100.0%
</TABLE>
<TABLE>
<CAPTION>
Mortgage Loans by Year of Maturity
Scheduled
Principal Balloon
Payments (1) Payments Total
<S> <C> <C> <C>
1996 $ 5.2 $ 19.1 $ 24.3
1997 12.5 23.1 35.6
1998 12.7 5.9 18.6
1999 13.5 6.0 19.5
2000 13.8 5.9 19.7
2001 and thereafter 85.1 87.8 172.9
Total $142.8 $147.8 $290.6
<FN>
(1) Includes scheduled payments on balloon loans
</TABLE>
<TABLE>
<CAPTION>
Property Type
<S> <C> <C>
Retail $179.5 61.8%
Office 29.6 10.2
Industrial 24.5 8.4
Medical 17.5 6.0
All other 39.5 13.6
Total $290.6 100.0%
</TABLE>
The Company no longer makes new investments in mortgage loans except
for purchase money loans and expansion of the Company's properties.
The Company will retain its existing mortgage loans.
Real Estate and Other
During the second quarter, the Company withdrew its seed money
investment in the WNIC Separate Account in conjunction with the
Separate Account's conversion to a unit investment trust. The
Company received proceeds of approximately $17 million, resulting in
a realized gain of $4.9 million.
The Company's real estate and joint venture investments decreased
$12.4 million during the second quarter. The decrease was due
primarily to sales and an impairment write down taken on an
investment property. A sale of the property is anticipated in early
1997. The Company recorded total realized losses on real estate for
the quarter of $5.1 million.
Liquidity and Capital Resources
Liquidity. As a result of the sales of the health business, the
Company expects that it will require cash totaling approximately
$165 million through the end of 1997 to discharge certain
policyholder benefit liabilities and to pay the expenses of its exit
from the health insurance business. The cash will be generated
primarily by the sale of fixed maturity investments. Cash to
purchase the shares of the Company's common and preferred stock held
by the terminated defined benefit pension plan will be generated by
either short-term borrowings or sales of fixed maturity investments.
The fair value of the Company's investment portfolio, primarily
fixed maturity investments, is affected by changing interest rates.
When interest rates rise, the fair value of the Company's fixed
maturity investments declines, while in periods of declining
interest rates, the fair value of the Company's fixed maturity
investments increases. The Company estimates that a one percentage
point change in market interest rates would have an inverse effect
on the fair value of its fixed maturity investments of approximately
5.5%.
The increase in market interest rates since year-end 1995 has
resulted in a $94.0 million decrease in the carrying value of the
Company's fixed maturity investments. Changes in unrealized gains or
losses on fixed maturity investments (net of adjustments for
deferred acquisition costs and deferred taxes) are reported directly
in shareholders' equity and have no effect on net income. At June
30, 1996, the decrease to shareholders' equity for unrealized losses
(net of amortization of deferred insurance costs and deferred income
taxes) on fixed maturity investments was $0.9 million, compared to
$49.1 million of unrealized gains at December 31, 1995.
In addition, rising interest rates could result in increased
surrenders of life insurance policies and annuities (as current
policy and contract holders seek higher returns elsewhere) causing
the Company to sell fixed maturity investments below cost. In order
to minimize the need to sell fixed maturity investments below cost,
the Company seeks to maintain sufficient levels of cash and short-
term investments. The Company held cash and short-term investments
of $58.8 million at June 30, 1996. Management believes the balance
of cash and short-term investments plus cash inflow from premium
revenues, investment income, and investment maturities is more than
sufficient to meet the operational requirements of the Company and
its subsidiaries.
Cash Flows. During the first six months of 1996, the Company's
operating activities generated cash of $24.0 million compared to
$44.8 million in 1995. The decrease in cash provided by operations
in the first six months of 1996 resulted primarily from increased
health insurance benefits paid.
Cash used for financing activities increased from $29.7 million in
the first six months of 1995 to $54.8 million in 1996, primarily
due to annuity contract holder withdrawals exceeding deposits. In
1996, UPI's deposits exceeded withdrawals by $18.3 million, compared
to $32.5 million in 1995. For the WNIC closed block, withdrawals
exceeded deposits by $63.6 million in 1996, compared to $55.6
million in 1995.
A.M. Best Ratings
The ability of an insurance company to compete successfully depends,
in part, on its financial strength, operating performance, and
claims-paying ability as rated by A.M. Best and other rating
agencies. The Company's insurance subsidiaries are each currently
rated "A- (Excellent)" by A.M. Best, based on their 1995 statutory
financial results and operating performance.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
WNC and certain affiliated companies have been named in various
pending legal proceedings considered to be ordinary routine
litigation incidental to the business of such companies. A number
of other legal actions have been filed which demand compensatory and
punitive damages aggregating material dollar amounts. WNC believes
that such suits are substantially without merit and that valid
defenses exist. WNC's management and its chief legal officer are of
the opinion that such litigation will not have a material effect on
WNC's results of operations or consolidated financial position. The
amount involved in any proceeding, or group of proceedings
presenting in large degree the same issues, does not exceed the
materiality standard for disclosure contained in Instruction 2 to
Item 103 of Regulation S-K.
In June 1996, the estate of a retired employee filed a lawsuit in
the United States District Court for the Northern District of
Illinois against WNC, WNC's wholly-owned subsidiary, WNIC, and the
three individual trustees of the Washington National Insurance
Company Home Office Group Insurance Plan (the "Plan"), and the Plan.
The plaintiff purports to represent a class consisting of eligible
retirees under the Plan who retired before January 1, 1992.
This complaint, brought under the Employee Retirement Income
Security Act, centers around a January 1992 amendment to the Plan
which resulted in a different coordination of benefits with
Medicare. Also, at that time the retirees were first required to
contribute a portion of their premium, whereas previously the
Company paid 100% of retiree medical premium. Plaintiff seeks
certification of the class, permanent no-cost retiree medical
benefits, an accounting and repayment of premium contributions,
attorney fees, costs and expenses, plus other appropriate equitable
relief. Plaintiff utilizes several theories of recovery, namely,
promissory estoppel, equitable estoppel, negligent
misrepresentation, breach of fiduciary duty, and entitlement.
WNC, WNIC and the individual trustees believe that valid defenses
exist and intend to contest vigorously the allegations made in the
complaint.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a. The Registrant's Annual Meeting of Shareholders was held on June 6, 1996.
b. Not applicable.
c. Shareholders voted on four Class C nominees, each of whom was
elected for a three-year term. The results of the voting were as
follows:
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Ronald L. Bornhuetter 10,365,690 846,077
Lee A. Ellis 10,987,814 223,953
Frank L. Klapperich, Jr. 10,989,002 222,765
Lee M. Mitchell 10,971,649 240,118
</TABLE>
ITEM 5. OTHER INFORMATION
Pursuant to SEC rules, the following discloses the information
required to be disclosed on Form 8-K with respect to the disposal of
the Company's health insurance business:
a. Description of Transaction. See Note B of Notes to Consolidated
Financial Statements on page 6 of this Form 10-Q.
b. Pro Forma Financial Information. The following unaudited pro
forma condensed financial statements are filed with this report:
Pro Forma Condensed Consolidated Statements of Operations for
the six months ended June 30, 1996 and for the year ended
December 31, 1995.
Pro Forma Condensed Consolidated Balance Sheet at June 30,
1996.
The unaudited pro forma condensed consolidated financial
statements have been prepared by the Company based upon
assumptions deemed proper. The unaudited pro forma condensed
consolidated financial statements presented herein are shown for
illustrative purposes only and are not necessarily indicative of
the future financial position or future results of operations of
the Company that would have actually occurred had the transaction
been in effect as of the date or for the periods presented. In
addition, it should be noted the Company's balance sheet will
reflect the disposition from August, 1996, if the large group
sale closes as expected.
The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the historical
financial statements and related notes of the Company.
Statement of Operations Information. The following condensed
statements of operations show the pro forma results for the
health insurance sale for the six months ended June 30, 1996 as
if the sale had occurred on January 1, 1996 and for the year
ended December 31, 1995 as if the sale had occurred on January 1,
1995:
<TABLE>
Washington National Corporation
Pro Forma Condensed Statement of Operations
For The Six Months Ended June 30, 1996
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
(000's omitted) Reported (1) Adjustment(2) Consolidation
<S> <C> <C> <C>
Revenues
Insurance premiums and policy charges $ 77,683 $ - $ 77,683
Net investment income 81,999 - 81,999
Other 2,346 - 2,346
Total Revenues 162,028 - 162,028
Benefits and Expenses
Insurance benefits paid or provided 108,484 - 108,484
Insurance and general expenses 21,236 493 21,729
Amortization of deferred acquisition costs 10,754 - 10,754
Total Benefits and Expenses 140,474 493 140,967
Income from continuing operations before
income taxes 21,554 (493) 21,061
Income taxes 7,128 (173) 6,955
Net Income From Continuing Operations $ 14,426 $ (320) $ 14,106
Primary Earnings Per Share
Income from continuing operations $1.16 $1.18
Average shares and equivalents
outstanding 12,241 11,825
Fully Diluted Earnings Per Share
Income from continuing operations $1.16 $1.18
Average shares and equivalents
outstanding 12,241 11,825
<FN>
(1) In connection with the Company's formal plan to sell its
health insurance business, the Company classified its
health insurance operations as discontinued operations.
(2) To reflect interest expense and related tax benefit on
borrowings to repurchase the Company's common and preferred
stock from the terminated defined benefit plan.
</TABLE>
<TABLE>
Washington National Corporation
Pro Forma Condensed Statement of Operations
For The Year Ended December 31, 1995
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
(000's omitted) Reported (1) Adjustments (2) Consolidation
<S> <C> <C> <C>
Revenues
Insurance premiums and policy charges $145,407 $ - $145,407
Net investment income 168,784 - 168,784
Other 2,925 - 2,925
Total Revenues 317,116 - 317,116
Benefits and Expenses
Insurance benefits paid or provided 214,276 - 214,276
Insurance and general expenses 41,120 986 42,106
Amortization of deferred acquisition costs 23,113 - 23,113
Total Benefits and Expenses 278,509 986 279,495
Income from continuing operations before
income taxes 38,607 (986) 37,621
Income taxes 12,149 (345) 11,804
Net Income From Continuing Operations $ 26,458 $ (641) $ 25,817
Primary Earnings Per Share
Income from continuing operations $2.13 $2.15
Average shares and equivalents
outstanding 12,250 11,819
Fully Diluted Earnings Per Share
Income from continuing operations $2.09 $2.12
Average shares and equivalents
outstanding 12,639 12,176
<FN>
(1) In connection with the Company's formal plan to sell its
health insurance business, the Company classified its health
insurance operations as discontinued operations. Accordingly,
the amounts previously reported in the Company's 1995 Annual
Report on Form 10-K have been reclassified as reported in this
column.
(2) To reflect interest expense and related tax benefit on
borrowings to repurchase the Company's common and preferred stock
from the terminated defined benefit plan.
</TABLE>
Balance Sheet Information. The following condensed balance sheet
shows the pro forma effect of the sale of the Health insurance
business as if the sale had occurred as of June 30, 1996:
<TABLE>
Washington National Corporation
Pro Forma Condensed Balance Sheet
As of June 30, 1996
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
(000's omitted) Reported Adjustments Consolidation
<S> <C> <C> <C>
ASSETS
Investments
Fixed maturities - available for sale $1,966,715 $(164,590) (1) $1,802,125
Mortgage loans on real estate 290,637 - 290,637
Other 146,035 (2,711) (1) 143,324
Total Investments 2,403,387 (167,301) 2,236,086
Other assets 495,616 (78,237) (1) 417,379
Total Assets $2,899,003 $(245,538) $2,653,465
LIABILITIES
Policy liabilities $2,337,531 $(198,509) (1) $2,139,022
Short-term debt - 11,600 (2) 11,600
Other 187,731 (47,029) (1) 140,702
Total Liabilities 2,525,262 (233,938) 2,291,324
SHAREHOLDERS' EQUITY
Common stock 126,492 - 126,492
Retained earnings 304,668 - 304,668
Other (57,419) (11,600) (2) (69,019)
Total Shareholders' Equity 373,741 (11,600) 362,141
Total Liabilities and Shareholders' Equity $2,899,003 $(245,538) $2,653,465
<FN>
Notes:
(1) Reflects the transfer of assets and liabilities to assuming
companies and the payment of certain policy and expense
liabilities by the Company.
(2) Reflects repurchase of the Company's common and preferred stock
from the terminated defined benefit plan and corresponding
financing of the transaction.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 10.1 - Form of Employment Security and Consulting
Agreement** dated June 14, 1996, between Registrant and
each of the following Executive Officers of Registrant;
W. G. Brown, C. L. Fuhrmann, R. W. Patin, J. N. Plato,
T. Pontarelli and T. C. Scott.
Exhibit 11 - Computation of Per Share Earnings.
b. Reports on Form 8-K
A Report on Form 8-K was filed on June 5, 1996 reporting, in Item
5, the execution of a definitive agreement for the sale by
Washington National Insurance Company, a wholly owned subsidiary
of Registrant, of its Health Division's individual and small
group health insurance business to Pioneer Financial Services,
Inc. of Schaumburg, Illinois.
Information required to be reported on Form 8-K in Item 5 as a
result of the sale of the health insurance business is included
in this Form 10-Q in Part II, Item 5, Other Information.
** Management contract or compensatory plans or arrangements.
<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.
WASHINGTON NATIONAL CORPORATION
August 13, 1996 /s/ Joan K. Cohen
Joan K. Cohen
Vice President, Controller and Treasurer
(Duly Authorized Officer and Chief
Accounting Officer)
<PAGE>
EXHIBIT INDEX
PAGE
Exhibit 10.1 - Form of Employment Security and Consulting Agreement 27
Exhibit 11 - Computation of Per Share Earnings. 40
WASHINGTON NATIONAL CORPORATION
EXHIBIT 10.1 - FORM OF EMPLOYMENT SECURITY AND
CONSULTING AGREEMENT
EMPLOYMENT SECURITY AND CONSULTING AGREEMENT
This Employment Security and Consulting Agreement
("Agreement") is entered into as of this day
of June, 1996, by and between Washington National
Insurance Company, an Illinois insurance corporation
("Company"), Washington National Corporation, a
Delaware corporation ("WNC"), and
______________("Employee").
W I T N E S S E T H:
WHEREAS, Employee is currently employed by Company
as its _________________________;
WHEREAS, Company is a wholly-owned subsidiary
corporation of WNC; and
WHEREAS, Employee, Company and WNC desire to enter
into this Agreement in order to provide security to
Employee with respect to his employment, and to provide
for consulting services to be rendered to Company and
WNC by Employee following his termination of employment
under certain circumstances;
NOW THEREFORE, in consideration of the mutual
covenants and promises contained herein, and other good
and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as
follows:
_
1. Definitions. For purposes of this Agreement:
(a) "Affiliate" or "Associate" shall have the meaning
set forth in Rule 12(b)-2 under the Securities Exchange
Act of 1934;
(b) "Base Salary" shall mean Employee's annual base
remuneration at the rate in effect at his Date of
Termination;
(c) "Beneficiary" shall mean the person or entity
designated by Employee, by written instrument delivered
to Company or WNC, to receive benefits payable under
this Agreement in the event of his death. If Employee
fails to designate a Beneficiary, or if no Beneficiary
survives Employee, such death benefits shall be paid:
(i) to his surviving spouse;
(ii) if there is no surviving spouse, to his living
descendants, per stirpes; or
(iii) if there is neither a surviving spouse nor
descendants, to his duly appointed and qualified
executor or personal representative.
(d) "Benefit Plan" shall mean any incentive plan or
arrangement, any stock option or other stock-based
plan, any defined benefit retirement plan, defined
contribution retirement plan, health and dental plan,
disability plan, survivor income plan, life insurance
plan, severance plan, automobile policy or other
employee benefit or compensation plan or arrangement,
including those listed on Exhibit A hereto, made
available by Company or WNC to its senior executives
from time to time.
(e) "Bonus" shall mean the higher of (1) the annual
award under the WNC Annual Pay At Risk Plan most
recently paid to Employee by Company or WNC, and (2)
the average of (i) the annual award most recently paid
to Employee by Company or WNC under the WNC Annual Pay
At Risk Plan, and (iii) the annual award paid to
Employee by Company or WNC under such Plan for the year
prior thereto.
(f) A Change in Control of WNC shall be deemed to take
place on the occurrence of any of the following events:
(i) Any person (as such term is used in Section 13 of
the Securities Exchange Act of 1934 and the rules and
regulations thereunder, and including any Affiliate or
Associate of such person, and any person acting in
concert with such person) directly or indirectly
acquires or otherwise becomes entitled to vote more
than 50% of the voting power entitled to be cast at an
election for directors ("Voting Power") of WNC; or
(ii) There occurs any merger or consolidation of WNC,
or any sale, lease or exchange of all or any
substantial part of the consolidated assets of WNC and
its subsidiaries to any other person and (A) in the
case of a merger or consolidation the holders of
outstanding stock of WNC entitled to vote in elections
of directors immediately before such merger or
consolidation (excluding for this purpose any person,
including any Affiliate or Associate, that directly or
indirectly owns or is entitled to vote 20% or more of
the Voting Power of WNC) hold less than 80% of the
Voting Power of the survivor of such merger or
consolidation or its parent, or (B) in the case of any
such sale, lease or exchange, WNC does not own at least
50% of the Voting Power of the other person; or
(iii) One or more new directors of WNC are elected
and at such time five or more directors (or, if less, a
majority of the directors) then holding office were not
nominated as candidates by a majority of the Continuing
Directors;
provided, however, that, for
purposes of this Agreement, no Change in Control of WNC
shall be deemed to have taken place on the occurrence
of any sale of all or substantially all of the assets
of the individual health and group life and health
insurance business of Company (without the sale of the
remainder of the business of WNC), whether by
reinsurance or sale of assets, merger, consolidation or
other business combination, including, but not limited
to, the transactions contemplated by the agreement
dated as of May 31, 1996 between Company and Pioneer
Financial Services, Inc.
(g) "Continuing Director" shall mean a person who is a
member of the board of directors of WNC elected by the
stockholders of WNC prior to the occurrence of any
event described in subparagraph (f) next above;
(h) "Date of Termination" shall mean the later of (i)
the date contained in a written notice of termination
given by Company or WNC to Employee, or by Employee to
Company or WNC, and (ii) the 30th day after such notice
is given.
(i) "Good Cause" shall mean (A) Employee's dishonesty,
fraud or breach of trust or substantial misconduct in
the performance of, or substantial nonperformance of,
his duties, (B) any act or omission by Employee that is
a substantial cause for a regulatory body with
jurisdiction over Company, WNC or any of their
subsidiaries to request or recommend the suspension or
removal of Employee, or to take punitive action against
Employee, Company or WNC, or (C) a material breach by
Employee of any covenant not to disclose confidential
information or trade secrets relating to the business
of Company or WNC or its Affiliates and Associates or
of a covenant not to compete with Company and WNC and
its Affiliates and Associates set forth herein or in
any other agreement among Employee, Company and/or WNC.
(j) "Good Reason" shall exist if Employee terminates
his employment with Company and/or WNC, after, without
his express written consent, (A) Company or WNC
materially breaches any terms of this Agreement or any
other agreement among Employee, Company and/or WNC, (B)
Employee is assigned duties materially inconsistent
with his position, duties and status as a senior
executive of Company and WNC, (C) Company or WNC
reduces Employee's fixed rate of annual Base Salary, (D)
Company or WNC reduces benefits under the Benefit Plans
so that, when considered in the aggregate and with any
substitute benefit plan or plans, Employee's aggregate
benefits are at a substantially lower level than that
existing at February 1, 1992, or (E) Company or WNC
requires or assigns duties to Employee the efficient
performance of which would require Employee to move the
location of his principal business office outside of a
fifty mile radius of his current principal business
office in Lincolnshire, Illinois.
(k) "Severance Period" shall mean the 12 month period
beginning on the second anniversary of the Date of
Termination.
2. Benefits Upon Termination of Employment.
(a) The following provisions will apply if the
effective date of a Change in Control of WNC occurs on
or after the date hereof, and if at any time during the
24 month period commencing on such effective date, (1)
the employment of Employee with Company, WNC and all
Affiliates and Associates thereof is terminated by
Company, WNC or any Affiliate or Associate for any
reason other than Good Cause, or (2) Employee
terminates his employment with Company, WNC and all
Affiliates and Associates thereof for Good Reason:
(i) Company or WNC shall pay to Employee, within 10
days after the Date of Termination, in a lump sum, an
amount equal to the aggregate of Employee's Base Salary
and Bonus;
(ii) Employee shall receive any and all benefits
accrued under each Benefit Plan through the Date of
Termination (or through such other date provided under
any Benefit Plan), with the amount, form and time of
payment of such benefits to be determined by the terms
of the Benefit Plans;
(iii) If, on the Date of Termination, Employee
holds any options with respect to capital stock of WNC
issued under the WNC Stock Benefit Plan, or any
successor plan, or otherwise acquired, all such options
shall immediately then become exercisable and shall
remain exercisable until the later to occur of (A) the
ninetieth day after the Date of Termination, and (B)
the date on which any such option shall expire pursuant
to the terms of the WNC Stock Benefit Plan, or any
successor plan, or any option agreement applicable
thereto.
(iv) Any restrictions on capital stock of WNC owned by
Employee on the Date of Termination and granted under
the WNC Stock Benefit Plan or any successor plan, or
otherwise acquired, shall lapse on the Date of
Termination.
(v) If Employee is participating in the United
Presidential Group Insurance Plan on the Date of
Termination, Company or WNC shall provide Employee with
nonconvertible term life insurance coverage in an
amount equal to the amount of coverage provided to
Employee under the terms of the United Presidential
Group Insurance Plan on the Date of Termination,
including any optional coverage that Employee had
elected. This coverage will commence on the first day
of the month next following the second anniversary of
the Date of Termination and will terminate 12 months
after such commencement date. The coverage provided
for under this subparagraph shall be in addition to any
coverage acquired under the conversion privilege
available to Employee under the United Presidential
Group Insurance Plan.
(vi) If Employee is participating in the United
Presidential Group Insurance Plan on the Date of
Termination, Company or WNC shall provide Employee and
his dependents (as defined in the United Presidential
Group Insurance Plan) with major medical insurance
coverage that will be approximately equivalent to the
coverage provided under the terms of the United
Presidential Group Insurance Plan on the Date of
Termination. This coverage will commence on the first
day of the month next following the second anniversary
of the Date of Termination and will terminate 12 months
after such commencement date or such earlier date that
Employee is employed by a third party and becomes
eligible for any major medical insurance coverage
provided by such third party. Any major medical
coverage provided hereunder will be in addition to, but
will coordinate with, any coverage acquired under the
conversion privilege available to Employee under the
United Presidential Group Insurance Plan.
(vii) If Employee is using an automobile pursuant
to WNC's Senior Executive Automobile Policy on the Date
of Termination, Employee may continue to use such
automobile during the Severance Period. If the lease
on the automobile expires during the Severance Period,
WNC shall enter into a new lease for a new automobile
for Employee's use that expires at the end of the
Severance Period. WNC shall assign any right WNC has
to purchase the automobile upon expiration of the lease
to Employee if Employee so requests. While Employee
uses the automobile during the Severance Period, WNC
shall continue to provide benefits to Employee in
accordance with WNC's Senior Executive Automobile
Policy, existing at the Date of Termination, regarding
maintenance, fuel, insurance and income recognition
related to leased automobiles.
(viii) If Employee has not secured full time
employment on the second anniversary of the Date of
Termination, Company or WNC, at its expense, shall
provide Employee with outplacement services of a
nationally recognized outplacement firm until the
earlier of (1) Employee's attainment of employment, and
(2) the end of the Severance Period.
(ix) During the Severance Period, Employee shall be
entitled to receive fringe benefits and perquisites
given by Company, WNC or an Affiliate or Associate
thereof to its senior executives, including, but not
limited to, payment by the Company or WNC for
preparation of Employee's income tax returns by WNC's
auditor.
(x) (a) If the effective date of a Change in Control
of WNC occurs in calendar year 1996, and if Employee is
employed by Company, WNC or an Affiliate or Associate
thereof on December 31, 1996, Employee shall receive,
as soon as practicable after December 31, 1996, a lump
sum payment under the WNC Annual Pay At Risk Plan equal
to the greater of the target award of Employee under
such Plan for calendar year 1996 and the actual award
earned under such Plan by Employee for calendar year
1996. If the effective date of a Change in Control of
WNC occurs in calendar year 1996, and if Employee is
not employed by Company, WNC or an Affiliate or
Associate thereof on December 31, 1996, Employee shall
receive, as soon as practicable after the Date of
Termination, a lump sum payment under the WNC Annual
Pay At Risk Plan equal to the target award of Employee
under such Plan for calendar year 1996.
(b) If the effective date of a Change
in Control of WNC occurs after
December 31, 1996, and if Employee
is employed by Company, WNC or an
Affiliate or Associate thereof on
the last day of the calendar year
in which such effective date
occurs, Employee shall receive, as
soon as practicable after the end
of such year, a lump sum payment
under the WNC Annual Pay At Risk
Plan equal to the greater of the
target award of Employee under such
Plan for such year and the actual
award earned under such Plan by
Employee for such year. If the
effective date of a Change in
Control of WNC occurs after
December 31, 1996, and if Employee
is not employed by Company, WNC or
an Affiliate or Associate thereof
on the last day of the calendar
year in which such effective date
occurs, Employee shall receive, as
soon as practicable after the Date
of Termination, a lump sum payment
under the WNC Annual Pay At Risk
Plan equal to the portion of the
target award of Employee under such
Plan for that year attributable to
the period commencing on the first
day of that year and ending on the
Date of Termination.
(i) If the effective date of a Change in Control of
WNC occurs in calendar year 1996:
(1) If Employee is employed by Company, WNC or an
Affiliate or Associate thereof on December 31, 1996,
Employee shall receive, as soon as practicable after
December 31, 1996, a lump sum payment under the WNC
Long Term Pay At Risk Plan, equal to the greater of
the target award of Employee under such Plan and the
actual award earned by Employee under such Plan for
the 1994-1996 performance cycle.
(2) If Employee is not employed by Company, WNC or an
Affiliate or Associate thereof on December 31, 1996,
Employee shall receive, as soon as practicable after
the Date of Termination, a lump sum payment under the
WNC Long Term Pay At Risk Plan equal to the target
award of Employee under such Plan for the 1994-1996
performance cycle.
(3) If Employee is employed by Company, WNC or an
Affiliate or Associate thereof on the last day of
either the 1995-1997 performance cycle or the 1996-
1998 performance cycle under the WNC Long Term Pay
At Risk Plan, Employee shall receive, as soon as
practicable after the end of the applicable
performance cycle, a lump sum payment under such Plan
equal to the greater of the target award of Employee
or the actual award earned by Employee for the
applicable performance cycle.
(4) If Employee is not employed by Company, WNC or an
Affiliate or Associate thereof on the last day of
either the 1995-1997 performance cycle or the 1996-
1998 performance cycle under the WNC Long Term Pay At
Risk Plan, Employee shall receive, as soon as
practicable after the Date of Termination, a lump sum
payment equal to the portion of the target award of
Employee under such Plan for the applicable
performance cycle, attributable to the period
commencing on the first day of the performance cycle
and ending on the Date of Termination.
(ii) If the effective date of a Change in Control of
WNC occurs after December 31, 1996:
(1) If Employee is employed by Company, WNC or an
Affiliate or Associate thereof on the last day of a
performance cycle under the WNC Long Term Pay At Risk
Plan, Employee shall receive, as soon as practicable
after the end of such performance cycle, a lump sum
payment equal to the greater of the target award of
Employee and the actual award earned by Employee for
that performance cycle.
(2) If Employee is not employed by Company, WNC, or an
Affiliate or Associate thereof on the last day of a
performance cycle under the WNC Long Term Pay At Risk
Plan, Employee shall receive, as soon as practicable
after the Date of Termination, a lump sum payment equal
to the portion of the target award of Employee for the
applicable performance cycle attributable to the
period commencing on the first day of the performance
cycle and ending on the Date of Termination.
(xiii) Any payment to
Employee under the WNC Annual Pay
At Risk Plan pursuant to
subparagraph (x) above for any
calendar year shall be reduced by
any payment to Employee under such
Plan for such calendar year
pursuant to paragraph 3. Any
payment to Employee under the WNC
Long Term Pay At Risk Plan pursuant
to subparagraphs (xi) or (xii)
above for any performance cycle
shall be reduced by any payment to
Employee under such Plan for such
performance cycle pursuant to
paragraph 3.
3. Annual Pay At Risk Plan and Long Term
Pay At Risk Plan. If the effective date of a
Change in Control of WNC shall occur, and if
the WNC Annual Pay At Risk Plan and/or the
WNC Long Term Pay At Risk Plan is terminated
or materially modified or amended thereafter
and prior to the Date of Termination, then:
(a) Employee shall receive, as
soon as practicable after the effective
date of the termination or material
modification or amendment of the WNC
Annual Pay At Risk Plan, a lump sum
payment under such Plan equal to the
portion of the target award of Employee
under such Plan for the year in which
such effective date occurs, attributable
to the period commencing on the first
day of that year, and ending on such
effective date.
(b) Employee shall receive, as
soon as practicable after the effective
date of the termination or material
modification or amendment of the WNC
Long Term Pay At Risk Plan, a lump sum
payment under such Plan equal to the
portion of the target award of Employee
under such Plan for each then incomplete
performance cycle, attributable to the
period commencing on the first day of
such performance cycle and ending on
such effective date.
4. Stock Options and Restricted Stock. (a)
All options held by Employee with respect to
capital stock of WNC issued under the WNC
Stock Benefit Plan, or any successor plan, or
otherwise acquired, shall immediately become
exercisable upon the effective date of a
Change in Control of WNC and shall remain
exercisable until the later to occur of (A)
the ninetieth day after the effective date of
such Change in Control, and (B) the date on
which any such option shall expire pursuant
to the terms of the WNC Stock Benefit Plan,
or any successor plan, or any option
agreement applicable thereto.
(b) Any restrictions on capital stock
of WNC owned by Employee on the effective
date of a Change in Control of WNC and
granted under the WNC Stock Benefit Plan or
any successor plan, or otherwise acquired,
shall lapse on such effective date.
5. Consulting Services. (a) If Employee's
employment with Company, WNC and all
Affiliates and Associates terminates under
conditions described in paragraph 2 above, he
shall, during the 12 month period following
the Date of Termination, be available to
render consulting services to Company and/or
WNC as an independent consultant and not as
an employee. In connection therewith,
Employee will devote his best efforts to his
position as an independent consultant and
will perform such duties and execute the
policies of Company and/or WNC, as determined
by the board of directors of either
corporation; provided that said duties and
policies will not be inconsistent with the
nature of the duties performed by Employee
during his active service with Company and/or
WNC as an officer and employee thereof.
(b) Employee shall exercise a
reasonable degree of skill and care in
performing the consulting services referred
to in the preceding subparagraph (a).
Employee shall not be obligated to render any
services during any period when he is unable
to do so due to illness, disability or
injury.
(c) Employee shall render
consulting services hereunder at mutually
convenient times as shall be agreed upon
between Employee and Company and/or WNC
taking into consideration the other business
activities of Employee.
(d) Employee shall not be entitled
to any additional compensation for his
consulting services rendered hereunder,
whether or not such services are actually
rendered. Employee shall be entitled to
reimbursement for reasonable expenses
authorized in writing by Company and/or WNC
in advance and incurred by Employee in the
performance of his consulting services.
(e) Except as otherwise provided
in paragraphs 2, 3 and 4, while he is
available to render consulting services
pursuant to this paragraph, Employee shall
not be entitled to participate in, or to
receive benefits under, any program
maintained by Company and/or WNC for its
employees, including without limitation,
life, medical and disability benefits,
pension, profit sharing or other retirement
plans or other fringe benefits.
6. Death. If Employee's employment with
Company, WNC and all Affiliates and
Associates thereof terminates under
circumstances described in paragraph 2 above,
then upon Employee's subsequent death all
unpaid amounts payable to Employee under
paragraphs 2, 3 and 4, if any, shall be paid
to his Beneficiary, and his spouse and other
dependents shall be entitled to be covered
under the United Presidential Group Insurance
Plan during the remainder of the Severance
Period, if any, pursuant to subparagraph
(a)(vi) of paragraph 2.
7. Disclosure of Information. Employee
will not at any time use, or disclose to any
third party, any confidential information or
trade secrets relating to the business of
Company, WNC or any Affiliate or Associate
thereof, including business methods and
techniques, research data, marketing and
sales information, customer lists, know-how
and any other information concerning the
business of Company, WNC, or any Affiliate or
Associate thereof, their manner of operation,
their plans or any other information not
disclosed to the general public or known in
the industry, except for use or disclosure in
the performance of Employee's consulting
services hereunder after the Date of
Termination. This covenant will survive the
termination of this Agreement.
8. Covenant Not to Compete. Subject to the
performance of the obligations of Company and
WNC hereunder, during the Severance Period
Employee shall not, directly or indirectly,
own, manage, operate, control or participate
in the ownership, management, operation or
control of, or be connected as an officer,
employee, partner, director or otherwise
with, or have any financial interest in, or
aid or assist anyone else in the conduct of,
any business that is in substantial
competition with any business conducted by
Company, WNC or any division, Affiliate or
Associate thereof, during the Severance
Period and with which Employee had
significant involvement during the term of
his employment with Company or WNC, or while
rendering consulting services hereunder.
Ownership of 1% or less of the voting stock
of any publicly held corporation shall not
constitute a violation of this paragraph.
9. No Solicitation of Representatives and
Employees. Employee agrees that he shall
not, prior to a Change in Control of WNC, or
thereafter and prior to the end of the
Severance Period, directly or indirectly, in
his individual capacity or otherwise, induce,
cause, persuade or attempt to do any of the
foregoing, in order to cause any
representative, agent or employee of Company,
WNC or any of its Affiliates or Associates,
to terminate such person's relationship with
Company, WNC or any Affiliate or Associate
thereof, or to violate the terms of any
agreement between said representative, agent
or employee, and Company, WNC or any
Affiliate or Associate thereof.
10. Forfeiture. If Employee shall at any
time violate any obligation of his under
paragraphs 7, 8 or 9 above in a manner that
results in material damage to Company, WNC,
or any Affiliate or Associate thereof, or the
business of any of them, he shall immediately
forfeit his right to any benefits under this
Agreement, none of Company, WNC or any
Affiliate or Associate thereof shall
thereafter have any further obligation
hereunder to Employee or his spouse,
Beneficiary or any other person, and Employee
shall have no further obligation to render
consulting services hereunder.
11. Employee Assignment. No interest of
Employee or his Beneficiary under this
Agreement, or any right to receive any
payment or distribution hereunder, shall be
subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment
or other alienation or encumbrance of any
kind nor may such interest or right to
receive a payment or distribution be taken
voluntarily or involuntarily for the
satisfaction of the obligations or debts
of, or other claims against, Employee or
his Beneficiary, including claims for
alimony, support, separate maintenance and
claims in bankruptcy proceedings.
12. Company Assignment. Neither Company nor
WNC may assign this Agreement, except that
the obligations of Company or WNC hereunder
shall be binding legal obligations of any
successor to all or substantially all of the
business of Company or WNC respectively, by
purchase, merger, consolidation or otherwise.
13. Benefits Unfunded. All rights of
Employee and his Beneficiary under this
Agreement shall at all times be entirely
unfunded and no provision shall at any time
be made with respect to segregating any
assets of Company, WNC or any Affiliate or
Associate thereof for payment of any amounts
due hereunder. Neither Employee nor his
Beneficiary shall have any interests in, or
rights against, any specific assets of
Company, WNC, or any Affiliate or Associate
thereof, and Employee and his Beneficiary
shall have only the rights of a general
unsecured creditor of Company and WNC.
14. Waiver. No waiver by any party at any
time of any breach by the other party of, or
of compliance with, any condition or
provision of this Agreement to be performed
by such other party, shall be deemed a waiver
of any other provision or condition at the
same time or at any prior or subsequent time.
15. Parachute Payments. If all or any
portion of the payments and benefits payable
to Employee under this Agreement, the Benefit
Plans and any other incentive compensation or
bonus plan of Company or WNC (including any
such plan adopted in the future) constitutes
"excess parachute payments" within the
meaning of Section 280G of the Internal
Revenue Code of 1986, as amended ("Code"),
that are subject to the tax imposed by
Section 4999 of the Code (or similar tax
and/or assessment), the Company or WNC (or
its successor) shall make a single lump sum
payment to Employee in an amount equal to the
amount necessary to place Employee in the
same after-tax position as he would have been
in (taking into account any taxes that would
have been payable on such amount including,
but not limited to, income taxes) had no such
tax been imposed on such payment and
benefits. The determination of the amount
payable to Employee hereunder shall initially
be made, at Company's or WNC's expense, by
the independent accounting firm employed by
WNC immediately prior to the occurrence of
the effective date of any Change in Control
of WNC that will result in the imposition of
such tax. If, after such lump sum payment
has been made to Employee, it is determined
(pursuant to final regulations or published
rulings of the Internal Revenue Service, a
settlement agreement entered into between
Employee and the Internal Revenue Service,
final judgment of a court of competent
jurisdiction or otherwise) that the amount of
tax payable by Employee pursuant to Section
4999 of the Code is greater than the amount
of such taxes calculated by WNC's independent
accounting firm and reflected in the lump sum
payment made to Employee as aforesaid, then
Company or WNC (or its successor) shall pay
Employee an amount equal to the sum of (a)
the difference between the amount of such tax
as initially determined by such independent
accounting firm hereunder, and the amount of
tax that is determined to be payable by
Employee, (b) any interest, fines and
penalties imposed on Employee by any taxing
authority due to any underpayment of such
taxes by Employee, and (c) the amount
necessary to reimburse Employee for any
income, excise or other taxes that are
payable by Employee with respect to amounts
specified in clauses (a) and (b) above, and
the reimbursement provided for by this clause
(c).
16. Setoff. No payments or benefits payable
to or with respect to Employee pursuant to
this Agreement shall be reduced by any amount
Employee or his spouse or other Beneficiary
may earn or receive from employment with
another employer or from any other source,
except as expressly provided in subparagraph
(v) of paragraph 2 above.
17. Indemnification. Company and WNC agree
to indemnify Employee against all attorneys'
fees and other costs incurred by Employee in
connection with any claim or legal action
brought under or involving this Agreement,
other than attorneys' fees and other costs
incurred in a legal action in which a final
non-appealable determination is made by a
court of competent jurisdiction, upholding
Company's or WNC's termination of Employee's
employment hereunder for Good Cause, or not
upholding Employee's termination of his
employment hereunder for Good Reason.
18. Determinations and Actions by the Board
of Directors. For all purposes of this
Agreement, a majority of the directors of WNC
shall have the exclusive power and authority
to administer this Agreement and to exercise
all rights and powers specifically granted to
Company, WNC or the board of directors of
Company or of WNC, or as may be necessary or
advisable in the administration of this
Agreement, including, without limitation, the
right and power to (a) interpret the
provisions of this Agreement, and (b) make
all determinations deemed necessary or
advisable for the administration of this
Agreement. All such actions, interpretations
and determinations (including for purposes of
clause (ii) below, all omissions with respect
to the foregoing) that are done or made by a
majority of the directors of WNC in good
faith, shall (i) be final, conclusive and
binding on Company, WNC and Employee, and
(ii) not subject the board of directors of
Company or of WNC to any liability.
19. Applicable Law. This Agreement shall be
construed and interpreted pursuant to the
laws of the State of Illinois without giving
effect to the principles of conflicts of laws
thereof.
20. Entire Agreement. This Agreement does
not replace or amend the employment agreement
dated _____________ among Employee, Company
and WNC, and shall otherwise contain the
entire agreement between Company, WNC and
Employee relating to the subject matter
hereof.
21. Amendment. This Agreement shall be
amended only by written document signed by
all parties.
22. No Employment Contract. Nothing
contained in this Agreement shall be
construed to be an employment contract
between Employee and Company or WNC.
23. Counterparts. This Agreement can be
executed in counterparts, each of which shall
be deemed an original.
24. Severability. If any provision of this
Agreement is held illegal or invalid, the
remaining provisions of this Agreement shall
not be affected thereby.
25. Successors. This Agreement shall be
binding upon, and inure to the benefit of,
the parties hereto, and their respective
heirs, representatives and successors.
26. Employment with Affiliates and
Associates for Purposes of This Agreement.
Base Salary and Bonuses shall include
remuneration received by Employee from
Company, WNC, and all Affiliates and
Associates thereof.
27. Notices. Any notices given hereunder
shall be in writing and shall be deemed to
have been given when delivered or 48 hours
after mailed by United States certified or
registered mail, postage prepaid, addressed
to:
If to Company:
Washington National Insurance Company
300 Tower Parkway
Lincolnshire, IL 60069
Attention: Corporate Secretary
If to WNC:
Washington National Corporation
300 Tower Parkway
Lincolnshire, Illinois 60069-3665
Attention: Corporate Secretary
If to Employee:
_ or to such other person or address as may be
designated by notice given as aforesaid.
IN WITNESS WHEREOF, the parties have executed this
Employment Security and Consulting Agreement, effective
as of the date and year first above written.
WASHINGTON NATIONAL
INSURANCE COMPANY
By: _______________________
Its: _______________________
WASHINGTON NATIONAL CORPORATION
By: _______________________
Its: _______________________
____________________________
, Employee
EXHIBIT A
Washington National Pension Plan Plus
Washington National Employees' Savings Plan
Washington National Profit Sharing Plan
Washington National Supplemental Executive Retirement
Plan
<TABLE>
WASHINGTON NATIONAL CORPORATION
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS
Primary and Fully Diluted
(000s Omitted Except Per Share Amounts)
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary
Average Shares:
Average common shares outstanding 12,241 12,180 12,247 12,188
Assumed exercise of stock options - 65 - 66
Total Average Shares 12,241 12,245 12,247 12,254
Net Income (Loss) Available to Common Shareholders:
Income from continuing operations before
Preferred Stock dividend requirement $14,426 $12,939 $7,748 $7,068
Preferred Stock dividend requirement (179) (181) (89) (90)
Income from continuing operations 14,247 12,758 7,659 6,978
Income (loss) from discontinued operations
- net of taxes (25,939) 3,248 (24,695) 1,829
Net Income (Loss) Available to Common Shareholders ($11,692) $16,006 ($17,036) $8,807
Primary Earnings Per Share:
Income from continuing operations $1.16 $1.04 $0.63 $0.57
Income (loss) from discontinued operations
- net of taxes (2.11) 0.27 (2.02) 0.15
Net Income (Loss) Per Share ($0.95) $1.31 ($1.39) $0.72
Fully Diluted
Average Shares:
Average common shares outstanding 12,241 12,180 12,247 12,188
Assumed conversion of preferred stock - 271 - 271
Assumed exercise of stock options - 79 - 79
Total Average Shares 12,241 12,530 12,247 12,538
Net Income (Loss) Available to Common Shareholders:
Income from continuing operations before
Preferred Stock dividend requirement $14,426 $12,939 $7,748 $7,068
Preferred Stock dividend requirement (179) - (89) -
Income from continuing operations 14,247 12,939 7,659 7,068
Income (loss) from discontinued operations
- net of taxes (25,939) 3,248 (24,695) 1,829
Net Income (Loss) Available to Common Shareholders ($11,692) $16,187 ($17,036) $8,897
Fully Diluted Earnings Per Share:
Income from continuing operations $1.16 $1.03 $0.63 $0.56
Income (loss) from discontinued operations
- net of taxes (2.11) 0.26 (2.02) 0.15
Net Income (Loss) Per Share ($0.95) $1.29 ($1.39) $0.71
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 1,966,715
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 1,718
<MORTGAGE> 290,637
<REAL-ESTATE> 23,039
<TOTAL-INVEST> 2,403,387
<CASH> 5,858
<RECOVER-REINSURE> 48,864
<DEFERRED-ACQUISITION> 284,048
<TOTAL-ASSETS> 2,899,003
<POLICY-LOSSES> 2,034,304
<UNEARNED-PREMIUMS> 39,970
<POLICY-OTHER> 223,245
<POLICY-HOLDER-FUNDS> 40,012
<NOTES-PAYABLE> 1,170
<COMMON> 126,492<F1>
0
716
<OTHER-SE> 246,533
<TOTAL-LIABILITY-AND-EQUITY> 2,899,003
77,683
<INVESTMENT-INCOME> 81,999
<INVESTMENT-GAINS> (242)
<OTHER-INCOME> 2,588
<BENEFITS> 108,484
<UNDERWRITING-AMORTIZATION> 10,754
<UNDERWRITING-OTHER> 21,236
<INCOME-PRETAX> 21,554
<INCOME-TAX> 7,128
<INCOME-CONTINUING> 14,426
<DISCONTINUED> (25,939)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,513)
<EPS-PRIMARY> (.95)
<EPS-DILUTED> (.95)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>INCLUDES ADDITIONAL PAID-IN CAPITAL OF $48,309.
</FN>
</TABLE>
