<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[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 1-4720
WESCO FINANCIAL CORPORATION
--------------------------------------------------------------
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 95-2109453
----------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
301 East Colorado Boulevard, Suite 300, Pasadena, California 91101-1901
------------------------------------------------------------------------
(Address of Principal Executive Offices)
818/585-6700
------------
(Registrant's Telephone Number, Including Area Code)
- ------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes__________ No__________
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. 7,119,807 as of
August 8, 1996
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The condensed consolidated financial statements of Wesco Financial
Corporation, listed in the accompanying index, are incorporated as
an integral part of this report.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
See pages 9 through 12.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
At the annual meeting of shareholders of Wesco Financial
Corporation ("Wesco") held May 15, 1996, Wesco's shareholders
reelected all Wesco's Directors. Each of the nominees -- Charles
T. Munger, Robert H. Bird, Carolyn H. Carlburg, William T.
Caspers, James N. Gamble, Elizabeth Caspers Peters and David K.
Robinson -- received 6,712,272 favorable votes. There were 1,281
shares voted against the election of each nominee. There were no
votes withheld, abstentions or broker non-votes. No other matters
were voted upon at the meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -- Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K -- None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
WESCO FINANCIAL CORPORATION
Date: August 9, 1996 By: /s/ Jeffrey L. Jacobson
-------------------------- --------------------------------
Jeffrey L. Jacobson
Vice President and
Chief Financial Officer
(principal financial officer)
-2-
<PAGE> 3
WESCO FINANCIAL CORPORATION
FINANCIAL STATEMENTS FILED WITH FORM 10-Q
FOR QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Condensed consolidated statement of income and
retained earnings -- six- and three-month periods
ended June 30, 1996 and June 30, 1995 . . . . . . . . . . . . 4
Condensed consolidated balance sheet --
June 30, 1996 and December 31, 1995 . . . . . . . . . . . . . 5
Condensed consolidated statement of cash flows --
six-month periods ended June 30, 1996
and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . 6
Notes to condensed consolidated financial
statements . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
-3-
<PAGE> 4
WESCO FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- ---------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Sales and service revenues . . . . . . . . . . . $ 16,401 $ 15,703 $ 32,539 $ 33,362
Insurance premiums earned . . . . . . . . . . . 2 751 5,043 9,283
Dividend and interest income . . . . . . . . . . 8,035 7,676 15,953 15,183
Gains, net, on sales of securities
and foreclosed property . . . . . . . . . . . -- 6,731 40 6,709
Other . . . . . . . . . . . . . . . . . . . . . 296 587 609 1,153
-------- -------- -------- --------
24,734 31,448 54,184 65,690
-------- -------- ------- --------
Costs and expenses:
Cost of products and services sold . . . . . . . 13,124 12,628 26,053 26,689
Insurance losses, loss adjustment
and underwriting expenses . . . . . . . . . . 24 (1,537) 1,870 1,396
Selling, general and administrative expenses . . 2,636 3,003 5,247 5,630
Interest on notes payable . . . . . . . . . . . 839 843 1,679 1,687
-------- -------- -------- --------
16,623 14,937 34,849 35,402
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . 8,111 16,511 19,335 30,288
Provision for income taxes . . . . . . . . . . . . (1,538) (4,463) (4,192) (7,874)
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . 6,573 12,048 15,143 22,414
Retained earnings -- beginning of period . . . . . 332,547 307,136 325,864 298,586
Cash dividends declared and paid . . . . . . . . . (1,886) (1,815) (3,773) (3,631)
-------- -------- -------- --------
Retained earnings -- end of period . . . . . . . . $337,234 $317,369 $337,234 $317,369
======= ======= ======= =======
Amounts per share based on 7,119,807 shares
outstanding throughout each period:
Net income . . . . . . . . . . . . . . . . . . . $ .92 $ 1.69 $ 2.12 $ 3.15
====== ===== ===== =====
Cash dividends . . . . . . . . . . . . . . . . . $ .265 $ .255 $ .530 $ .510
===== ===== ===== =====
</TABLE>
See notes starting on page 7.
-4-
<PAGE> 5
WESCO FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Cash and temporary cash investments . . . . . . . . . . . . . . . . . . . . $ 52,230 $ 87,981
Investments:
Securities with fixed maturities . . . . . . . . . . . . . . . . . . . . 164,957 119,575
Marketable equity securities . . . . . . . . . . . . . . . . . . . . . . 1,241,096 1,102,221
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,882 55,950
---------- ----------
$1,512,165 $1,365,727
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Insurance losses and loss adjustment expenses . . . . . . . . . . . . . . . $ 34,302 $ 34,195
Income taxes payable, principally deferred . . . . . . . . . . . . . . . . 372,485 324,341
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,267 37,369
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,343 12,193
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 452,397 408,098
---------- ----------
Shareholders' equity:
Capital stock and surplus . . . . . . . . . . . . . . . . . . . . . . . . 30,439 30,439
Unrealized appreciation of investments,
net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692,095 601,326
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,234 325,864
---------- ----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . 1,059,768 957,629
---------- ----------
$1,512,165 $1,365,727
========= =========
</TABLE>
See notes starting on page 7.
-5-
<PAGE> 6
WESCO FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------
June 30, June 30,
1996 1995
-------- --------
<S> <C> <C>
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . $ 9,058 $ 8,535
------ ------
Cash flows from investing activities --
Proceeds from maturities and redemptions of securities
with fixed maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,612 41,064
Purchases of securities with fixed maturities . . . . . . . . . . . . . . . . . . . . (49,730) ---
Purchases of marketable equity securities . . . . . . . . . . . . . . . . . . . . . . --- (20,687)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,184 872
------- -------
Net cash provided (used) by investing activities . . . . . . . . . . . . . . . . . . . (40,934) 21,249
------- -------
Cash flows from financing activities --
Payment of cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,773) (3,631)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (102) (92)
------- --------
Net cash used by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . (3,875) (3,723)
------- -------
Increase (decrease) in cash, including temporary
cash investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,751) 26,061
Cash, including temporary cash investments --
beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,981 15,800
------- -------
Cash, including temporary cash investments -- end of period . . . . . . . . . . . . . . $52,230 $41,861
====== ======
Supplementary information:
Interest paid during period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,678 $ 1,687
====== =======
Income taxes paid, net, during period . . . . . . . . . . . . . . . . . . . . . . . . $ 4,993 $ 7,880
====== ======
</TABLE>
See notes starting on page 7.
-6-
<PAGE> 7
WESCO FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
In the opinion of management, all adjustments necessary to a fair statement of
the results of operations of Wesco Financial Corporation ("Wesco") and its
subsidiaries (consisting only of normal recurring accruals) are reflected in
the condensed consolidated financial statements.
NOTE 2
Reference is made to the notes to Wesco's consolidated financial statements
appearing on pages 33 through 40 of its 1995 Form 10-K Annual Report for other
information deemed generally applicable to the condensed consolidated financial
statements.
NOTE 3
Following is a summary of marketable equity securities (all common stocks), in
thousands of dollars:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------------------ -------------------------
Estimated Fair Estimated Fair
(Carrying) (Carrying)
Cost Value Cost Value
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage
Corporation . . . . . . . . . . . . . . . . . $ 71,729 $615,600 $ 71,729 $ 601,200
The Coca-Cola Company . . . . . . . . . . . . . . 40,761 353,074 40,761 267,508
The Gillette Company . . . . . . . . . . . . . . 40,000 199,600 40,000 166,800
American Express Company . . . . . . . . . . . . 20,687 28,904 20,687 26,799
Wells Fargo & Company . . . . . . . . . . . . . . 11,351 40,493 11,351 36,577
Other . . . . . . . . . . . . . . . . . . . . . . 2,914 3,425 2,914 3,337
-------- ---------- -------- ----------
$187,442 $1,241,096 $187,442 $1,102,221
======= ========= ======= =========
</TABLE>
-7-
<PAGE> 8
NOTE 4
Following is a summary of the changes in unrealized appreciation of
investments, net of deemed applicable income taxes, set forth separately in
shareholders' equity on the condensed consolidated balance sheet, in thousands
of dollars:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------------- --------------------------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . $637,490 $419,066 $601,326 $349,122
Net increase in unrealized
appreciation . . . . . . . . . . 83,944 98,560 139,714 206,333
Increase in deemed applicable
income taxes . . . . . . . . . . (29,339) (34,439) (48,945) (72,268)
-------- -------- -------- --------
Balance at end of period . . . . . . . $692,095 $483,187 $692,095 $483,187
======= ======= ======= =======
</TABLE>
NOTE 5
Wesco's wholly owned subsidiary, Wesco-Financial Insurance Company ("Wes-FIC"),
on July 17, 1996, consummated the previously reported purchase of Kansas
Bankers Surety Company of Topeka, Kansas ("KBS") for approximately $79 million
in cash. Inasmuch as the acquisition will be accounted for as a purchase, the
results of operations of KBS will be included in Wesco's consolidated financial
statements beginning in the third quarter of 1996. KBS provides community
banks throughout the Midwestern United States with various insurance products,
including bank deposit guaranty bonds which insure deposits in excess of FDIC
coverage.
-8-
<PAGE> 9
WESCO FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to management's discussion and analysis of Wesco's
consolidated financial condition and results of operations appearing on pages 18
through 26 of its 1995 Form 10-K Annual Report for information deemed generally
appropriate to an understanding of the accompanying condensed consolidated
financial statements. The information set forth in the following paragraphs
updates such discussion.
FINANCIAL CONDITION
At June 30, 1996, $692.1 million, or 65% of Wesco's shareholders' equity,
represented unrealized appreciation of investments. Unrealized appreciation is
credited directly to shareholders' equity, net of taxes, without being reflected
in earnings. Calculations are based on quoted market or estimated fair values,
which are subject to fluctuation, and accordingly the net gains ultimately
realized could differ substantially from recorded unrealized appreciation.
Even if unrealized appreciation is ignored, the financial condition of Wesco and
its subsidiaries continues to be sound and liquid.
RESULTS OF OPERATIONS
Following is a breakdown of Wesco's consolidated net (after-tax)
income by business segment, in thousands of dollars:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income from identified segments:
Insurance segment:
"Normal" net operating income . . . . . . . . . . $ 5,716 $ 6,977 $13,410 $15,960
Securities gains . . . . . . . . . . . . . . . . -- 2,283 -- 2,269
------- ------- ------- -------
Segment net income . . . . . . . . . . . . . . . 5,716 9,260 13,410 18,229
------- ------- ------- -------
Industrial segment net income
(all "normal" net operating) . . . . . . . . . . 703 592 1,358 1,498
------- ------- ------- -------
Net income from other than identified
business segments:
"Normal" net operating income . . . . . . . . 154 287 375 778
Securities gains . . . . . . . . . . . . . . -- 1,909 -- 1,909
------- ------- ------- -------
Nonsegment net income . . . . . . . . . . . . 154 2,196 375 2,687
------- ------- ------- -------
Net income -- consolidated . . . . . . . . . . . . $ 6,573 $12,048 $15,143 $22,414
======= ======= ======= =======
</TABLE>
-9-
<PAGE> 10
Insurance Segment
Following is a summary of the results of underwriting and investing
activities comprising the "normal" net operating income of Wesco's wholly owned
subsidiary, Wesco-Financial Insurance Company ("Wes-FIC"), in thousands of
dollars:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Premiums written . . . . . . . . . . . . . . . . . . $ 885 $ -- $ 885 $ 5,427
====== ====== ======= =======
Premiums earned . . . . . . . . . . . . . . . . . . . $ 2 $ 751 $ 5,043 $ 9,283
====== ====== ======= =======
Underwriting gain (loss) . . . . . . . . . . . . . . $ (19) $2,288 $ 3,173 $ 7,887
Dividend and interest income . . . . . . . . . . . . 7,093 6,603 14,057 13,055
------ ------ ------- -------
Income before income taxes . . . . . . . . . . . . . 7,074 8,891 17,230 20,942
Provision for income taxes . . . . . . . . . . . . . (1,358) (1,914) (3,820) (4,982)
------ ------ ------- -------
"Normal" net operating income . . . . . . . . . . . . $5,716 $6,977 $13,410 $15,960
====== ====== ======= =======
</TABLE>
As further explained in Wesco's 1995 Form 10-K Annual Report and prior reports,
Wes-FIC entered into the super-catastrophe ("super-cat") reinsurance business in
the first quarter of 1994, when National Indemnity Company ("NICO"), an
insurance subsidiary of Berkshire Hathaway Inc. ("Berkshire"), Wesco's ultimate
parent company, retroceded to Wes-FIC from 10% to 20% of certain super-cat
reinsurance contracts. Wes-FIC's entry into the business of super-cat
reinsurance followed a large increase in net worth due to its absorption through
merger of Mutual Savings and Loan Association, another wholly owned subsidiary
of Wesco, in January 1994.
Premiums written by Wes-FIC since its entry into the super-cat reinsurance
business, and premiums earned in 1995 and 1996 to date, have related almost
entirely to super-cat reinsurance. At approximately the time of Wes-FIC's entry
into that business, other insurers infused much capital into the super-cat
reinsurance business, with the result that the pricing of super-cat reinsurance,
in terms of premiums charged, became less attractive. Berkshire's management
has reported that its insurance subsidiaries will not knowingly write business
at inadequate rates. As a result, several super-cat reinsurance contracts in
which Wes-FIC participated in 1994 were not renewed in 1995; and, of the 1995
contracts, none were renewed in the first six months of 1996. Premiums written
in 1996 relate almost entirely to Wes-FIC's participation to the extent of 3% in
a super-cat reinsurance policy covering hurricane risk in Florida for a
twelve-month period beginning June 1, 1996, retroceded to Wes-FIC by National
Fire & Marine Insurance Co., another of Berkshire's wholly owned insurance
subsidiaries. Wes-FIC has also accepted a 3% participation with NICO in a
similar, but somewhat larger super-cat hurricane policy whose coverage period
begins in January 1997, at which time written premiums will be recorded.
Insurance premiums are recognized as earned revenues by Wes-FIC pro rata over
the term of the contract on all forms of insurance except for super-cat
reinsurance. Premiums on super-cat reinsurance are not recognized as earned
until the earlier of a loss occurrence or policy expiration. The decreases in
premiums earned in1996 compared to 1995 for the second quarter and first six
months were attributable principally to the reduction in super-cat premiums
written in 1995.
-10-
<PAGE> 11
An underwriting loss has typically been reported by Wes-FIC each year.
The underwriting gains reported for the first six months of 1996 and 1995 were
attributable mainly to the recognition of earned premiums without offsetting
losses upon the expiration of various super-cat reinsurance contracts written
in earlier periods, and, for the second quarter of 1995, to a downward revision
of estimated liabilities for losses and loss adjustment expenses with respect
to business written in earlier years.
Industrial Segment
Following is a summary of the results of operations of the industrial
segment, whose operations comprise those of wholly owned Precision Steel
Warehouse, Inc. and its subsidiaries ("Precision Steel"), in thousands of
dollars:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues, principally sales
and services . . . . . . . . . . . . . . . . . . $16,426 $15,732 $32,582 $33,431
======= ======= ======= =======
Income before income taxes . . . . . . . . . . . . . $ 1,169 $ 982 $ 2,256 $ 2,489
Provision for income taxes . . . . . . . . . . . . . (466) (390) (898) (991)
------- ------- ------- -------
Industrial segment net income . . . . . . . . . . . . $ 703 $ 592 $ 1,358 $ 1,498
======= ======= ======= =======
</TABLE>
Precision Steel's revenues for the second quarter of 1996 increased
$0.7 million (approximately 4 percent) after having decreased $1.5 million
(approximately 9 percent) for the first quarter from those reported for the
corresponding periods of 1995. Pounds of steel products sold increased 10
percent in the second quarter, following a decrease of 15 percent for the first
quarter of 1996 from the comparable figures for the corresponding periods last
year. Management of Precision Steel attributes the revenue increase in this
year's second quarter generally to an improvement in the industrial sector of
the economy.
Income before income taxes and net income of Precision Steel
typically fluctuate from period to period for a number of reasons, including
fluctuations in sales volume and changes in the gross profit percentage caused
by changes in product mix, price competition among suppliers and at the retail
level, and availability of favorable quantity order prices on materials
purchased. The gross profit percentages were 20.0% and 19.6% for the second
quarters of 1996 and 1995, and 19.9% and 20.0% for the corresponding six-month
periods.
Other Than Identified Business Segments
"Normal" net operating income other than from identified business
segments includes mainly (1) dividend and interest income from marketable
securities and cash equivalents owned outside the insurance subsidiary, and (2)
rental income from owned commercial real estate, reduced by (1) the costs
associated with the development and liquidation of foreclosed real estate and
delinquent loans formerly owned by the savings and loan subsidiary, (2)
interest and other corporate expenses, and (3) income taxes.
-11-
<PAGE> 12
"Normal" net operating income other than from identified business
segments typically fluctuates from period to period. The decreases in the
figures for the second quarter and first six months of 1996 from the
corresponding prior year figures were due principally to a reduction in
tax-favored dividend income following the conversion to common stock and sale
in the second quarter last year of Wesco's entire investment in preferred
stock of Champion International Corporation and the redemption in the fourth
quarter last year of 20% of Wesco's investment in preferred stock of Salomon
Inc.
* * * * *
Realized gains and losses -- recorded when securities are sold or when
a decline in market value of an investment is considered to be other than
temporary -- tend to fluctuate, sometimes significantly, from period to period.
The amount of realized gain or loss has no predictive value, and variations in
amount from period to period have no practical analytical value, particularly
in view of the existence of substantial unrealized price appreciation in
Wesco's consolidated investment portfolio. Consolidated earnings for the
second quarter of 1995 included realized securities gains of $4,178,000, after
taxes, relating to the disposition of the Champion International Corporation
preferred stock investment. Earnings for the first quarter of 1995 included
after-tax losses of $14,000. No securities gains or losses were realized in
the first six months of 1996.
Wesco's effective consolidated income tax rate typically fluctuates
from period to period for various reasons, such as the inclusion in
consolidated revenues of significant, varying amounts of dividend income from
preferred and common stocks, which is substantially exempt from income taxes.
The respective income tax provisions, expressed as percentages of income before
income taxes, amounted to 19.0% and 27.0% for the second quarters and 21.7% and
26.0% for the six-month periods ended June 30, 1996 and June 30, 1995.
Consolidated revenues, expenses and earnings reported in any period
are not necessarily indicative of future revenues, expenses and earnings, in
that they are subject to significant variations in amount and timing of
securities gains and losses, and the possible occurrence of other unusual
items. These items and items on the consolidated balance sheet will be affected
in the future by the recent acquisition of Kansas Bankers Surety Company (see
Note 5 to the accompanying condensed consolidated financial statements).
Shareholders' equity will be impacted not only to the extent unusual items
affect earnings, but also to reflect changes in unrealized appreciation of
investments, which is not reflected in earnings (see Financial Condition
above).
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 52,230
<SECURITIES> 1,406,053
<RECEIVABLES> 11,737
<ALLOWANCES> (90)
<INVENTORY> 9,203
<CURRENT-ASSETS> 0
<PP&E> 29,910
<DEPRECIATION> (16,451)
<TOTAL-ASSETS> 1,512,165
<CURRENT-LIABILITIES> 0
<BONDS> 37,267
0
0
<COMMON> 7,120
<OTHER-SE> 1,052,648
<TOTAL-LIABILITY-AND-EQUITY> 1,512,165
<SALES> 32,539
<TOTAL-REVENUES> 54,184
<CGS> 26,053
<TOTAL-COSTS> 27,923
<OTHER-EXPENSES> 5,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,679
<INCOME-PRETAX> 19,335
<INCOME-TAX> (4,192)
<INCOME-CONTINUING> 15,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,143
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.12
</TABLE>
