UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
[ ] 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 0-8162
ACCEL INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-0788334
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 METRO PLACE NORTH, SUITE 100, DUBLIN, OHIO 43017
(Address of principal executive offices) (Zip Code)
614-764-7000
(Registrant's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of each class
COMMON STOCK, $.10 PAR VALUE
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-Q or any amendment to
this Form 10-Q. _____
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
As of October 31, 1996, there were 8,603,742 shares of Common Stock, $.10 par
value per Share outstanding.
COMMISSION FILE NO. 0-8162
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1996
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Unaudited Consolidated Balance Sheets
(September 30, 1996 and December 31, 1995) 1 - 2
Unaudited Consolidated Statements of Operations (Nine months
and three months ended September 30, 1996 and 1995) 3
Unaudited Consolidated Statements of Common Stockholders'
Equity (Nine months ended September 30, 1996 and year
ended December 31, 1995) 4
Unaudited Consolidated Statements of Cash Flows (Nine months
ended September 30, 1996 and 1995) 5
Notes to Unaudited Consolidated Financial Statements 6 - 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 16
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(Thousands of dollars)
ASSETS
Investments:
Investments available for sale, at fair value:
Fixed maturities (cost: 1996--$ 57,251,000;
1995--$53,427,000) $ 55,927 $ 53,204
Equity securities (cost: 1996--$6,275,000;
1995--$5,433,000) 6,266 5,451
Short-term investments, at cost 11,960 4,278
Other invested assets, at fair value
(cost: 1996--$353,000;1995--$364,000) 321 364
--------- ---------
74,474 63,297
Cash - 5,039
Receivables:
Premiums in process of transmittal, less
allowance (1996--$282,000; 1995--$279,000) 10,443 1,779
Amounts due from reinsurers 31,481 9,119
Federal income taxes recoverable 481 70
--------- ---------
42,405 10,968
Accrued investment income 579 557
Prepaid reinsurance premiums 17,052 14,895
Reinsurance premium deposits 25,182 51,634
Deferred policy acquisition costs 32,632 31,839
Equipment--at cost, less accumulated
depreciation (1996--$169,000;
1995--$564,000) 46 187
Leasehold improvements 161 -
Property occupied by the Company--at cost, less
accumulated depreciation - (1995--$2,382,000) - 3,167
Other assets:
Cost in excess of fair value of net
assets of subsidiaries at dates of
acquisition ($4,448,000) less
accumulated amortization 742 822
Funds held under reinsurance agreements 20,313 829
Other 950 273
--------- ---------
22,005 1,924
--------- ---------
$ 214,536 $ 183,507
========= =========
(Continued)
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS--(CONTINUED)
September 30, December 31,
1996 1995
(Thousands of dollars)
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Policy Reserves and Liabilities:
Unearned premium reserves $ 87,445 $ 82,080
Insurance claims 23,813 22,761
Other 13 11
--------- --------
111,271 104,852
Other Liabilities:
Funds held under reinsurance agreements 19,490 3,072
Cash overdraft 610 -
Accounts payable and other liabilities 2,511 2,353
Commissions payable 5,706 5,010
Amounts due reinsurers 5,716 4,442
Federal income taxes:
Current 1,006 -
Deferred 4,234 5,024
Deferred reinsurance commissions 18,505 15,663
Notes payable--Note D 16,500 22,531
--------- --------
74,278 58,095
Commitments and Contingencies
Redeemable Preferred Stock:
Authorized shares--1,000,000;
no issued or outstanding shares - -
Common Stockholders' Equity:
Common Stock, $.10 par value
Authorized shares (1996--15,000,000;
1995--10,000,000)
Issued shares (1996--9,401,162;
1995--5,243,852) 940 524
Additional paid-in capital 32,509 23,702
Retained earnings 3,551 3,299
Less 797,420 treasury shares at cost (6,599) (6,599)
ESOP loan (49) (161)
Net unrealized depreciation on
investment securities (1,365) (205)
--------- ---------
Total Common Stockholders' Equity 28,987 20,560
--------- ---------
$ 214,536 $ 183,507
========= =========
See notes to unaudited consolidated financial statements.
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
(Thousands of dollars, except per share data)
REVENUE:
Gross premiums written--Note E $ 15,288 $ 15,297 $ 49,152 $ 43,669
Less reinsurance ceded--Note E 3,969 3,413 11,395 10,454
--------- --------- --------- ---------
Net premiums written 11,319 11,884 37,757 33,215
Decrease (increase) in
unearned premium reserves 945 (1,563) (3,927) (3,274)
--------- --------- --------- ---------
Premiums earned--Note E 12,264 10,321 33,830 29,941
Net investment income:
Interest and dividends 1,218 1,556 3,277 4,644
Realized gains (losses) (48) 24 227 303
Service fees on extended
service contracts 662 594 1,885 1,645
Other income 1,439 253 1,711 375
-------- --------- --------- ---------
15,535 12,748 40,930 36,908
BENEFITS AND EXPENSES:
Policy benefits--Note E 7,454 4,820 18,031 12,931
Commissions and selling expenses 5,085 5,873 16,250 16,689
Reinsurance expense recovery (810) (454) (1,428) (710)
General and administrative 1,949 1,807 5,309 5,348
Taxes, licenses and fees 689 437 1,560 1,398
Interest 489 414 1,577 1,288
Decrease (increase) in deferred
policy acquisition costs 305 (624) (795) (1,245)
--------- --------- ------- ---------
15,161 12,273 40,504 35,699
--------- --------- --------- ---------
INCOME BEFORE FEDERAL INCOME
TAX AND EXTRAORDINARY ITEM 374 475 426 1,209
Federal income tax:
Current 582 84 1,095 341
Deferred (benefit) (237) 226 (790) 36
--------- --------- --------- ---------
345 310 305 377
--------- --------- --------- ---------
INCOME BEFORE
EXTRAORDINARY ITEM 29 165 121 832
Extraordinary item--gain on
extinguishment of debt--Note D 131 - 131 -
--------- --------- --------- ---------
NET INCOME $ 160 $ 165 $ 252 $ 832
========= ========= ========= =========
Per Common Share:
Income Before
Extraordinary item $ .01 $ .04 $ .02 $ .19
Extraordinary item .02 - .03 -
--------- --------- --------- ---------
Net Income $ .03 $ .04 $ .05 $ .19
========= ========= ========= =========
Weighted average number of common
shares outstanding 6,029,561 4,446,432 4,998,048 4,446,432
========= ========= ========= =========
See notes to unaudited consolidated financial statements.
<TABLE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
Net
unrealized
appreciation
Common (depreci- Foreign
Additional stock ation) on currency
Common paid-in Retained held in ESOP investment translation
stock capital earnings treasury loan securities adjustments Total
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 $ 524 $24,066 $ 4,759 $(6,599) $ (627) $(6,672) $ (85) $15,366
Payments on and write down
of ESOP loan - (364) - - 466 - - 102
Change in net unrealized
depreciation on
investment securities - - - - - 6,467 - 6,467
Change in foreign currency
translation adjustment - - - - - - 85 85
Net loss - - (1,460) - - - - (1,460)
------- ------- ------- ------- ------- ------- ------- -------
Balances at December 31, 1995 524 23,702 3,299 (6,599) (161) (205) 20,560
Payments on ESOP loan - - - - 112 - - 112
Issuance of 110,000 shares of
Common Stock under Common
Stock Option Plan 11 223 - - - - - 234
Issuance of 4,047,310 shares
of Common Stock in
conjuction with the Rights
Offering and the
Supplemental Offering 405 8,584 - - - - - 8,989
Change in net unrealized
depreciation on
investment securities - - - - - (1,160) - (1,160)
Net income - - 252 - - - - 252
------- ------- ------- ------- ------- ------- ------- -------
Balances at September 30, 1996 $ 940 $32,509 $ 3,551 $(6,599) $ (49) $(1,365) $ - $28,987
======= ======= ======= ======= ======= ======= ======= =======
See notes to unaudited consolidated financial statements.
</TABLE>
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1996 1995
(Thousands of dollars)
OPERATING ACTIVITIES:
Net income before extraordinary item $ 121 $ 832
Adjustments to reconcile net income
to net cash used in operating activities:
Change in premiums receivable (8,667) 522
Change in accrued investment income (22) 116
Change in prepaid reinsurance premiums (2,157) 2,440
Change in unearned premium reserves 5,365 519
Change in claim reserves 1,052 (1,880)
Change in amounts due reinsurers
and amounts due from reinsurers (21,088) (3,368)
Change in funds held under reinsurance
agreements (3,066) (381)
Change in other assets, other liabilities,
and accrued income taxes 206 581
Interest paid in kind 403 422
Accrual of discount on bonds (179) (85)
Amortization of premium on bonds 77 61
Amortization of deferred policy acquisition
costs 15,537 15,286
Policy acquisition costs deferred (16,330) (16,567)
Reinsurance commissions earned (16,846) (10,189)
Reinsurance commissions received 19,688 8,940
Provision for depreciation and amortization 225 312
Net realized gains on investments (227) (303)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES
EXCLUDING EXTRAORDINARY ITEM (25,908) (2,742)
Extraordinary Item 131 -
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (25,777) (2,742)
INVESTING ACTIVITIES:
Sale of investments 9,566 25,137
Purchase of investments (21,739) (23,079)
Sale of property occupied by the Company 3,298 -
Other, net (350) (43)
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (9,225) 2,015
FINANCING ACTIVITIES:
Payment on ESOP loan 112 76
Repayment of notes payable (731) (200)
Issuance of Common Stock under
Stock Option Plan 257 -
Issuance of Common Stock under
Rights Offering 3,263 -
Change in reinsurance premium deposit 26,452 301
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,353 177
-------- --------
NET DECREASE IN CASH (5,649) (550)
Cash at beginning of period 5,039 1,044
-------- --------
CASH (OVERDRAFT) AT END OF PERIOD $ (610) $ 494
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING
ACTIVITIES: CANCELLATION OF SUBORDINATED
NOTES AS CONSIDERATION FOR THE PURCHASE OF
COMMON STOCK--NOTE D 5,703 -
======== ========
See notes to unaudited consolidated financial statements.
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited consolidated financial
statements of ACCEL International Corporation ("ACCEL") and subsidiaries
(collectively referred to herein as the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X which, as to the insurance company subsidiaries, differ in some
respects from statutory accounting practices prescribed or permitted by state
insurance departments. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for all periods presented are not necessarily indicative of
the results that may be expected for the full year. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1995.
PRINCIPLES OF CONSOLIDATION: The accompanying unaudited consolidated
financial statements include the accounts of ACCEL and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have
been eliminated in the unaudited consolidated financial statements.
DESCRIPTION OF BUSINESS: ACCEL is an insurance holding company incorporated
in Delaware in June 1978 as the successor to an Ohio corporation, formerly
Acceleration Corporation, organized in 1969. The Company has been engaged in
the sale and underwriting of credit life and credit accident and health
insurance, extended service contracts, vendor's single interest and other
specialty casualty products. Beginning in the first quarter of 1996, the
Company began to offer coverages for long haul trucking and charter buses
through a managing general agent. In the second quarter the Company began to
offer commercial multi-peril policies to auto dealers. In the third quarter
the Company elected to exit the commercial multi-peril line due to differences
with the managing general agent who produced and administered this business.
The credit insurance and extended service contract products continue to be
offered to consumers, principally through automobile dealers, financial
institutions and other business entities. The Company is subject to
competition from other insurers throughout the states in which it writes
business. The Company is also subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
The following is a description of the most significant risks facing life and
health and property/casualty insurers and how the Company mitigates those
risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or regulatory
environment in which an insurer operates will create additional expenses not
anticipated by the insurer in pricing its products. That is, regulatory
initiatives designed to reduce insurer profits, new legal theories or
insurance company insolvencies through guaranty fund assessments may create
costs for the insurer beyond those currently recorded in the unaudited
consolidated financial statements. The Company mitigates this risk by
operating throughout the United States, thus reducing its exposure to any
single jurisdiction, and also by employing underwriting and loss adjusting
practices which identify and minimize the adverse impact of this risk.
CREDIT RISK is the risk that issuers of securities owned by the Company will
default or that other parties, including reinsurers, which owe the Company
money, will not pay. The Company minimizes this risk by adhering to a
conservative investment strategy, by maintaining sound reinsurance and
credit and collection policies and by providing for any amounts deemed
uncollectible.
INTEREST RATE RISK is the risk that interest rates will change and cause a
decrease in the value of an insurer's investments. The Company mitigates
this risk by attempting to match the maturity schedule of its assets with
the expected payouts of its liabilities. To the extent that liabilities
come due more quickly than assets mature, an insurer may have to borrow
funds or sell assets prior to maturity and potentially recognize a gain or
loss.
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
ACCOUNTING ESTIMATES: In preparing the unaudited consolidated financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosures of
contingent assets and liabilities as of the date of the unaudited consolidated
financial statements and revenues and expenses for the reporting period.
Actual results could differ significantly from those estimates.
The most significant estimates include those used in determining deferred
policy acquisition costs and the liability for unearned premium reserves and
insurance claims. Although some variability is inherent in these estimates,
management believes the amounts provided are adequate. The estimates are
continually reviewed and adjusted as necessary. Such adjustments are
reflected in current operations.
INVESTMENTS: The Company classifies all of its fixed maturity and equity
securities as available for sale, therefore these securities are carried at
fair value and the unrealized appreciation or depreciation is reported as a
separate component of common stockholders' equity after giving effect to
applicable income taxes.
Short-term investments which include U.S. Treasury securities, commercial
paper and certificates of deposit are carried at cost which approximates fair
value.
Other invested assets are carried at fair value.
Realized gains and losses on the disposal of investments are determined by
specific identification and are included in the unaudited consolidated
statements of operations.
When an other than temporary decline in value is recognized, the specific
investment is carried at estimated realizable value and its original book
value is reduced to reflect such impairment of the investment. Such
reductions in book value are reflected in realized investment losses for the
period in which they were written down. For mortgage backed securities, the
Company's accounting follows the provisions of the Financial Accounting
Standards Board Emerging Issues Tasks Force ("EITF") Consensus No. 93-18.
This EITF requires that when the present value of estimated future cash flows
discounted at a risk-free rate of return is less than the cost basis of the
investment, an impairment loss is to be recognized by writing the investment
down to its fair value.
FEDERAL INCOME TAXES: Deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry-forwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under this method, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the deferred tax
assets to the amounts expected to be realized.
EARNINGS PER COMMON SHARE: Net income per common share is computed using the
weighted average number of common shares outstanding during the period. The
inclusion of common stock equivalents (options) would not be dilutive.
RECLASSIFICATIONS: Certain amounts in the 1995 unaudited consolidated
financial statements have been reclassified to conform with the 1996
presentation.
NOTE B--FOREIGN CURRENCY TRANSLATION
The financial statements of Acceleration Insurance Company Limited ("AICL"), a
United Kingdom subsidiary, have been translated into U.S. dollars using the
British pound as the functional currency. The balance sheets of AICL have
been translated into U.S. dollars using exchange rates as of the date of the
unaudited consolidated financial statements. The operating results of AICL
have been translated into U.S. dollars using the average exchange rates in
effect during the respective periods.
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE B--FOREIGN CURRENCY TRANSLATION--(CONTINUED)
Included in foreign currency translation adjustments are unrealized exchange
gains of $85,000 in 1995.
During 1995, the Company redeemed most of its shares of AICL, which resulted
in proceeds approximating the Company's original investment in AICL. The
transaction was approved by the Department of Trade and Insurance (United
Kingdom). On February 7, 1996, the Company received the final proceeds for
redemption of its remaining shares.
NOTE C--FEDERAL INCOME TAXES
The Company files a consolidated federal income tax return. The provision for
income taxes is based on income for financial reporting purposes, after
permanent differences.
NOTE D--NOTES PAYABLE
In July 1991, ACCEL issued $5,848,000 of subordinated notes (the "Subordinated
Notes") in connection with the purchase of all outstanding common shares of
Randjill Group Ltd. ("RGL"). The Subordinated Notes had a nine-year term with
no principal payable until maturity, and bore interest at 10.125% per annum.
Effective June 30, 1992, ACCEL amended the notes to permit the issuance of
additional notes for the purpose of making interest payments, provided,
however, that ACCEL may at its option pay cash in lieu of issuing additional
notes in any denomination of less than $1,000. As a result, ACCEL issued
additional notes totaling $403,000 and $569,000 for the first nine months of
1996 and the full year 1995, respectively.
Of the Subordinated Notes described above, $5,371,000 were initially issued to
Ranger Insurance Company ("Ranger"), a company related through common
ownership by a stockholder and director of the Company. In 1993, Ranger sold
all of the Subordinated Notes held by it to Chase Insurance Holdings
Corporation ("CIHC"), another company related through common ownership by a
stockholder and director of the Company. Additional Subordinated Notes in the
amount of $356,000 and $506,000 were issued as interest payments to related
parties for the first nine months of 1996 and the full year 1995,
respectively.
On July 25, 1996, the Company commenced an offering of non-transferable rights
(the "Rights Offering") to stockholders of record as of June 18, 1996 (see
Rights Offering under Certain Events). Under the provisions of the Rights
Offering, the Company permitted CIHC and its affiliate to tender the principal
amount of their Subordinated Notes for cancellation as consideration (in lieu
of cash) for the purchase of shares of Common Stock pursuant to the Rights
Offering. On August 23, 1996, CIHC and its affiliate tendered $5,619,046
principal amount of their Subordinated Notes plus an additional $83,759 of
accrued interest thereon under the terms of the Rights Offering. At the
conclusion of the offering, CIHC and its affiliate had reduced their holding
of Subordinated Notes to $0.
In a separate transaction, the Company retired $731,533 principal amount of
Subordinated Notes held by an unrelated third party for consideration of
$600,000. The Company recognized an extraordinary gain on this transaction of
$131,533. No Federal Income Tax was recognized related to this gain due to
the current consolidated tax position of the Company.
The result of the two aforementioned transactions was to retire all
outstanding Subordinated Notes.
At December 31, 1994, the Company had an outstanding loan balance of
$13,000,000 under the terms of a credit agreement (the "Credit Agreement")
with a bank. On February 7, 1995 the Company renegotiated the terms of the
Credit Agreement. Under the amended Credit Agreement, the quarterly principal
payments scheduled to begin in 1995 were waived. Specific principal payments
totaling up to $1.5 million were due on June 30, 1995 and December 31, 1995,
respectively, from the liquidation of AICL and the projected sale of the
building used as the corporate home office. The loan was to be payable in
full on June 30, 1997.
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE D--NOTES PAYABLE--(CONTINUED)
On December 29, 1995, the Company issued senior notes (the "Senior Notes")
totaling $16,500,000 at 9.50%, maturing on April 1, 2001. The proceeds from
these notes were used to retire the bank loan outstanding under the
aforementioned Credit Agreement and to liquidate an intercompany loan between
ACCEL and an insurance subsidiary. In addition, as of January 1, 1996, a
subsidiary of the Company entered into a reinsurance agreement with an
unaffiliated company to reinsure the in-force Credit Business. This agreement
is structured, such, that as future profits emerge on this block of business,
a substantial portion of the Company's share of the profits will be used over
the next four to five years to pay the interest thereon and redeem these
Senior Notes.
NOTE E--REINSURANCE
During 1995, the Company had an agreement in place which covered a substantial
portion of its credit insurance business. The agreement contained an
experience adjustment computation that resulted in the ultimate cost of this
agreement being a stated percentage related to the business covered by the
agreement. The Company ultimately retained a substantial part of the
insurance risk, the underwriting income or loss and the investment income on
net funds.
The Company determined that deposit accounting is the appropriate method of
accounting for this agreement since it is not reasonably possible for the
reinsurer to realize a significant loss from the transaction. The unaudited
consolidated financial statements have been prepared on this basis.
On January 1, 1996 the Company terminated this quota share reinsurance
agreement and elected to recapture the liabilities subject to this treaty.
The liabilities recaptured thereunder were then available for cession under
the treaty described below.
Concurrent with this termination, the Company entered into a reinsurance
agreement with a different unaffiliated reinsurer (which is also the buyer of
the Senior Notes discussed in Note D) to reinsure a substantial portion of the
in-force credit life and accident and health insurance business, including the
amounts recaptured.
This agreement is structured in such a way that as future profits emerge on
this block of business, a substantial portion of the Company's share of the
profits will be used over the next four to five years to pay fees and interest
to the reinsurer and redeem the new Senior Notes of $16,500,000. In
connection with this agreement, approximately $40,000,000 of assets were
transferred to the reinsurer on December 29, 1995, as agreed to by all
parties. The unearned premium reserves and liability for insurance claims
subject to cession under this treaty were $29,756,000 and $8,018,000,
respectively, as of September 30, 1996.
Prior to December 31, 1995, a security fund had been maintained, primarily
comprised of fixed maturities, for the benefit of the reinsurer. Pursuant to
the termination of the agreement effective January 1, 1996, as discussed
above, certain investments were liquidated from the security fund on December
29, 1995. Proceeds from this liquidation, along with other funds, were
transferred on December 29, 1995 to the reinsurer who is party to the
agreement dated January 1, 1996. These amounts are included in "Reinsurance
Premium Deposits" on the accompanying unaudited consolidated balance sheets as
of December 31, 1995.
Effective January 1, 1996, the Company entered into a reinsurance agreement
with the same unaffiliated reinsurer referenced above to reinsure a
substantial portion of the credit life and accident and health insurance
produced in 1996. This agreement contains an experience adjustment
computation that results in the ultimate cost of this agreement being a stated
percentage related to the business covered by the agreement.
The Company uses the deposit accounting method for recording transactions
under both of the reinsurance agreements effective January 1, 1996.
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE E--REINSURANCE--(CONTINUED)
The following data summarizes certain aspects of the Company's reinsurance
activity for the periods presented.
Premiums written and earned in 1996 and 1995 are summarized as follows:
WRITTEN EARNED
Period Ended September 30,
Nine Months Three Months Nine Months Three Months
Ended Ended Ended Ended
1996 1995 1996 1995 1996 1995 1996 1995
(Thousands of dollars)
Direct $45,214 $39,145 $13,930 $13,527 $38,922 $38,444 $13,775 $13,849
Assumed 3,938 4,524 1,358 1,770 4,864 4,645 2,132 1,732
Ceded 11,395 10,454 3,969 3,413 9,956 13,148 3,643 5,260
------- ------- ------- ------- ------- ------- ------- -------
Net premiums $37,757 $33,215 $11,319 $11,884 $33,830 $29,941 $12,264 $10,321
Policy benefits incurred for the periods presented are as follows:
Nine Months Ended Three Months Ended
1996 1995 1996 1995
(Thousands of dollars)
Direct $ 15,125 $ 18,494 $ 6,321 $ 6,385
Assumed 2,993 2,680 1,124 1,026
Ceded 87 8,243 (9) 2,591
------- ------- -------- -------
Net policy benefits $ 18,031 $ 12,931 $ 7,454 $ 4,820
======== ======== ======== ========
NOTE F--PROPERTIES
Since July 1981 the Company's executive offices have been located at 475 Metro
Place North, Dublin, Ohio. The four-story office building had been owned by
Acceleration Life Insurance Company ("ALIC"), a wholly owned subsidiary of
ACCEL, and consists of approximately 80,000 square feet of office space.
On March 21, 1996, the building was sold by ALIC to an unrelated party for a
price of $3.5 million. The Company realized a pre-tax gain of $170,000 on
this sale. The Company will remain in the building and occupy approximately
16,000 square feet of home office space under a five-year lease at an annual
rental of approximately $256,000.
NOTE G--COMMITMENTS AND CONTINGENCIES
Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions which arise in the normal course of its
activities. In management's opinion, based on the advice of outside counsel,
the unaudited consolidated financial statements will not be materially
affected by the ultimate outcome of any legal proceedings or contingent
liabilities.
On October 7, 1994, the Liquidation Bureau of the New York State Insurance
Department (the "Liquidation Bureau") took control of Galaxy Insurance Company
("Galaxy"), which prior to the commencement of liquidation proceedings had
been an indirect wholly-owned subsidiary of the Company, pursuant to an order
of liquidation of the New York Supreme Court. Prior to the liquidation of
Galaxy, Acceleration National Insurance Company ("ANIC"), the property and
casualty insurance company subsidiary of the Company, had issued certain
certificates of suretyship ("Certificates") with respect to certain Galaxy
insurance policies each of which provided that ANIC would assume the
responsibilities of Galaxy under the specified policy if Galaxy became
insolvent or financially unable to meet its obligations on the underlying
policy, but only if certain conditions were met. In particular, the
Certificates provided that ANIC's assumption of liability was contingent upon
the insured's executing and delivering all agreements, assignments or
evidences of subrogation satisfactory to ANIC respecting payments made or
liabilities assumed.
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE G--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
In May 1996, the Liquidation Bureau, acting on behalf of the New York
Property/Casualty Insurance Security Funds (the "Guaranty Fund"), during a
meeting with Company representatives informally advised the Company that on
behalf of the Guaranty Fund it intended to seek indemnification or
reimbursement from ANIC for claims paid by the Guaranty Fund to Galaxy
insureds on policies which may have been covered by the Certificates. The
Liquidation Bureau has provided some information in response to the Company's
request for accounting data and other information with respect to the
Liquidation Bureau's analysis of the Guaranty Fund's right to indemnification;
however, the Company is not yet able to quantify the magnitude of the
potential claim, if any, for indemnification or reimbursement. The Company
has taken the position that the Guaranty Fund has no right to seek
indemnification unless Galaxy insureds who hold properly issued Certificates
have executed assignments and evidences of subrogation. Even if any Galaxy
insured properly made such a claim directly to ANIC, the Company has been
advised by counsel that if ANIC paid any such claim, it would have the right,
under assignment and subrogation agreements with its insureds, to assert all
rights that the insureds could have asserted to recover the loss amounts from
any other source, including the Guaranty Fund.
The Company intends to fully investigate each claim which the Liquidation
Bureau, acting on behalf of the Guaranty Fund, formally asserts is entitled to
the benefits of a Certificate to determine whether such Certificate was
properly endorsed by ANIC and issued with proper authority and if so, whether
proper agreements, assignments and evidences of subrogation have been
executed. The Company intends to vigorously defend any claims for
indemnification or reimbursement made by the Liquidation Bureau, on behalf of
the Guaranty Fund, with respect to the Certificates. Although the Company is
not in a position to estimate the magnitude of the potential claims for
indemnification or reimbursement, it does not believe that the ultimate
resolution of such claims will have a material adverse affect on the financial
condition or results of operations of the Company.
NOTE H--STOCK OPTION AGREEMENT
On May 23, 1995, Mr. Friedberg was elected Chairman & CEO of ACCEL and Mr.
Coats was elected Executive Vice President and President of ANIC.
Accordingly, Mr. Friedberg and Mr. Coats became Key Employees under ACCEL's
1987 Stock Incentive Plan. Under the terms of their arrangement with ACCEL,
both were granted stock options for ACCEL's common stock in lieu of salary for
their first year of service. Mr. Friedberg was granted an option for 100,000
shares and Mr. Coats for 50,000 shares. The grant price for both options was
$2.125, the fair value of ACCEL's common stock on the date of grant. The
options vested immediately and become exercisable one year following the date
of grant; however, they would become exercisable immediately upon either a) a
change of control of ACCEL, or b) an involuntary termination. The options
would be forfeited if employment with ACCEL was voluntarily terminated prior
to May 23, 1996.
The options lapse five years from the effective date of the grant.
At the end of their first year of service, Messrs. Friedberg and Coats' status
was evaluated by the Compensation Committee and based on the value of their
services, commenced to receive compensation effective June 1, 1996. In
addition, Mr. Friedberg and Mr. Coats were granted options pursuant to the
1996 Stock Incentive Plan as of August 28, 1996, for 110,000 and 55,000
shares, respectively, at a grant price equal to the price of ACCEL stock at
the close of the market on the date of grant and otherwise according to terms
identical to the aforementioned options granted on May 23, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating Results for the Nine Months Ended
September 30, 1996 and September 30, 1995
OPERATING RESULTS
The income before federal income taxes and an extraordinary item for the nine
months ended September 30, 1996 was $426,000 compared to income of $1,209,000
for the same period in 1995. The income before federal income taxes and an
extraordinary item for the three months ended September 30, 1996 was $374,000
compared to $475,000 for the same period in 1995. The reduction in income for
the nine months ended September 30, 1996 can be attributed to several items.
In the third quarter of 1996, the Company received $1,400,000 representing a
partial payment of a judgement rendered in favor of the Company (see
Discontinued Realtors Errors and Omissions Program in Certain Events). This
other income has been offset by reserve strengthening on the discontinued
Agriculture lines, reserve strengthening on the Company's credit business and
the write down of an investment.
The third quarter results have been affected by the aforementioned $1,400,000
income item partially offset by increases in policy benefits on the Company's
credit business, reserve strengthening on runoff lines of business ($500,000)
and the write down of an investment ($150,000).
The Company's new Property and Casualty programs produced $14,300,000 of
annualized premium in the first nine months of 1996; $4,600,000 in the first
quarter, $5,700,000 in the second quarter and $4,000,000 in the third quarter.
Approximately $1,500,000 of this total relates to the commercial multi-peril
policies issued to auto dealers which has now been discontinued. As this new
Property and Casualty premium earns, its effect on the bottom line will become
increasingly more pronounced.
REVENUE
Premium writings for the nine months ended September 30, 1996, were $49.2
million compared to $43.7 million for the same period in 1995. This increase
was due to writings in the aforementioned new Property and Casualty programs
of $14.3 million partially offset by a decrease in premium written of $4.9
million in credit insurance and decreases in discontinued Agriculture lines.
Premium written for the three months ended September 30, 1996, was $15.3
million compared to essentially the same for the same period in 1995. Several
offsetting changes resulted in the similar premium written numbers. Premium
written under the new Property and Casualty programs increased by $4.0 million
offset by a decrease in premium written of $2.8 million in credit insurance
and decreased premium in discontinued Agriculture lines.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows from operations have generally been adequate for its
current operating needs. Cash flows from operating activities in 1995 were
adversely impacted by the reinsurance transaction dated December 29, 1995 (See
Note E--Reinsurance). The Company's credit insurance policy terms and related
liabilities are generally limited to a four-year period during which the
consumer makes payments on the loan. The Company's liability on extended
service contracts typically extends for either one-year or five-year periods.
The Company's long haul trucking and charter bus business generally is written
for a term of one year with the casualty claim related liabilities extending
beyond that period. The Company, therefore, maintains liquidity in its
investment portfolio to correspond with the liability outstanding on its lines
of business. At September 30, 1996, the estimated duration of the Company's
fixed income investment portfolio was 2.75 years while the estimated liability
duration was approximately 3.5 years. Currently, an interest rate change of
1% would impact the market value of the fixed maturity portfolio and
stockholders' equity by a decline of approximately $1.8 million if interest
rates rose and an increase of approximately $1.8 million if interest rates
declined.
The mortgage and asset-backed securities held by the Company are subject to
risks associated with variable prepayments. As such, these securities may
have a different actual maturity and yield than planned at the time of
purchase. The degree to which a security is susceptible to either gains or
losses is influenced by the difference between its amortized cost and par
value, relative sensitivity of the underlying mortgages to prepayment risk in
a changing interest rate environment and relative priority of the securities
in the overall securitization.
The Company limits the extent of its risks on fixed maturity securities by
generally avoiding securities whose cost significantly exceeds par, by
purchasing securities which are backed by stable collateral, and by
concentrating on securities that are either planned amortization or sequential
pay classes. The collateralized mortgage obligations and asset backed
securities owned have primarily short to intermediate average lives. At
September 30, 1996, the Company did not have a significant amount of higher
risk mortgage or asset backed securities. There are negligible default risks
on the mortgage and asset backed security portfolio as a whole as the vast
majority of the assets are either guaranteed by U.S. government-sponsored
entities or are supported in the securitization structure by junior securities
enabling the assets to achieve high investment grade status.
Ohio domiciled insurance companies are subject to Ohio law which regulates the
ability of insurance companies to pay dividends. The regulation limits the
annual dividend or distribution of an insurer to the greater of (1) net income
of the previous year or (2) 10% of unassigned surplus as of the end of the
previous year. In addition, all dividends must come from earned surplus to
qualify as a non-extraordinary dividend. Amounts greater than this would be
considered extraordinary dividends and could not be paid without permission of
the Department of Insurance of the State of Ohio ("Ohio Department"). Based
on this regulation, Acceleration Life Insurance Company ("ALIC") could pay a
dividend of $8,000 and Acceleration National Insurance Company ("ANIC") would
require Ohio Department approval to pay any dividend to the registrant during
1996.
The Company's cash flow projections for 1996 assume that certain events will
take place in order to have sufficient cash to meet its debt service and other
requirements. One of these events included the liquidation of Acceleration
Insurance Company Limited ("AICL"), which was concluded in the first quarter
of 1996. The Company will monitor its current and future debt service
requirements to coincide with cash flow availability. The Company has used a
portion of the proceeds from the Rights Offering and a partial payment from a
judgement entered in its favor in a legal proceeding (see Rights Offering and
Discontinued Realtors' Errors and Omissions Program under CERTAIN EVENTS) to
repay $2,647,000 in advances received in 1992 and 1993 from the registrant's
subsidiaries. The Company intends to retire the remaining intercompany
balance ($1,600,000) in the fourth quarter of 1996. These outstanding
advances are eliminated in consolidation.
On July 25, 1996, the Company commenced an offering of non-transferable rights
to stockholders of record as of June 18, 1996 (see Rights Offering under
Certain Events). The Rights Offering concluded on August 28, 1996 and
generated $3,261,780 in cash proceeds. A supplemental offering to employees,
agents and customers concluded on September 30, 1996 generated $141,862 in
cash proceeds of which $110,812 had been received by the Company as of
September 30, 1996. The cash proceeds from these offerings have been used to
repay intercompany advances ($2,647,000), for the redemption of Subordinated
Notes which were not tendered in the rights offering ($600,000) (See Note D--
Notes Payable), and for general corporate purposes.
Also, under the provisions of the Rights Offering, the Company permitted CIHC
and its affiliate to tender the principal amount of their Subordinated Notes
(See Note D--Notes Payable) for cancellation as consideration (in lieu of
cash) for the purchase of shares of Common Stock pursuant to the Rights
Offering. On August 23, 1996, CIHC and its affiliate tendered $5,619,046
principal amount of their Subordinated Notes plus an additional $83,759 of
accrued interest thereon under the terms of the Rights Offering. At the
conclusion of the offering, CIHC and its affiliate had reduced their holding
of Subordinated Notes to $0.
In a separate transaction, Accel retired $731,533 principal amount of
Subordinated Notes held by an unrelated third party for consideration of
$600,000. Accel recognized an extraordinary gain on this transaction of
$131,533. No Federal Income Tax was recognized related to this gain due to
the current consolidated tax position of the Company. The result of the two
aforementioned transactions was to retire all outstanding Subordinated Notes.
On December 29, 1995, the Company issued new senior notes (the "Senior Notes")
totaling $16,500,000 at 9.50%, maturing on April 1, 2001. The proceeds from
these notes were used to retire a bank loan outstanding under an existing
Credit Agreement (See Note D--Notes Payable) and to liquidate an intercompany
loan between ACCEL and an insurance subsidiary. In addition, as of January 1,
1996 ALIC entered into a reinsurance agreement with an unaffiliated company to
reinsure its in-force Credit Business. This agreement is structured, such,
that as future profits emerge on this block of business, a substantial portion
of the Company's share of the profits will be used over the next four to five
years to pay the interest thereon and redeem these Senior Notes.
ACCEL's Board of Directors approved an Employee Stock Ownership Plan ("ESOP")
during 1989. In 1990, the ESOP entered into an agreement with ALIC to borrow
up to $1,000,000 for the purchase of ACCEL's common stock. Company
contributions into the ESOP have been used to pay down the loan from ALIC and
release shares into the participants' accounts as the Company's matching
contribution. The ESOP purchased 136,887 shares (adjusted for the 1990 5%
common stock dividend) under this loan agreement with ALIC at a cost of
$1,000,000. In addition to the shares purchased under the loan agreement, the
ESOP purchased 90,088 common shares at a cost of $603,000. The loan bears
interest at 10%.
At December 31, 1995, the loan had an unpaid balance of $525,239. The market
value of the underlying shares was $161,000. The Company revalued this loan
to market value as of December 31, 1995. This will allow the release of
shares to participants' accounts at an average price which more closely
approximates recent market values on the Company's stock. The decrease in the
loan in 1995 has been reflected through a decrease in additional paid-in
capital in the accompanying unaudited consolidated balance sheets. The unpaid
balance of the loan ($49,000 at September 30, 1996 and $161,000 at December
31, 1995) has been reflected as a reduction in common stockholders' equity in
the accompanying unaudited consolidated financial statements.
The Company currently has two material business lines that are in run-off
status: the realtors' errors and omissions ("REO") line and the farmowner's
multi-peril and ancillary inland marine products ("Agriculture").
The estimates for policy reserves are continually under review and adjusted as
necessary as experience develops or new information becomes known; such
adjustments are included in current operations. These liabilities are
necessarily subject to the impact of future changes in claim severity,
frequency and other factors. Although considerable variability is inherent in
such estimates, based on recent evaluations conducted by experienced
consultants and internal reviews, management believes that the current level
of policy reserves will be adequate to cover anticipated claim liabilities.
However, because the REO risk was written from the first quarter 1986 through
the first quarter of 1991; and considering the length of time involved in the
settlement of some claims, there remains a lack of credible experience needed
to determine whether actual incurred policy benefits will conform to the
assumptions inherent in the determination of these liabilities. In addition,
outstanding claims on the Company's discontinued Agriculture lines are subject
to variability due to the length of time that has elapsed since the
termination of the program and the nature of some of the claims. Accordingly,
the ultimate amounts required for settlement of policy benefits may vary
significantly from the amounts included in the accompanying unaudited
consolidated financial statements.
The Company has reviewed Financial Accounting Standards Board ("FASB")
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" which became effective in 1996, and has
determined this FASB Statement will not impact the Company. The Company has
also reviewed FASB Statement No. 123, "Accounting for Stock-Based
Compensation" which became effective in 1996. The Company has decided to
disclose the impact of FASB 123 in a footnote to the annual consolidated
financial statements and not adopt the statement for financial statement
reporting as permitted by FASB 123. The Company has also reviewed FASB
Statement No. 125 "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" which becomes effective in 1997, and does
not expect this FASB Statement to have a material impact on the financial
condition of the Company.
Although the cumulative effects of inflation on premium growth cannot be fully
determined, increases in the retail price of automobiles have generally
resulted in increased amounts being financed which constitute the basis of
premiums charged for credit insurance. Anticipated increases in automobile
repairs also provide the primary basis for increases in extended service
contract premium rates.
CERTAIN EVENTS
RIGHTS OFFERING: On July 25, 1996, the Company commenced the Rights Offering
to stockholders of record as of June 18, 1996. The non-transferable
subscription rights entitled stockholders of record to receive one right for
each share of stock held and each right entitled the holder thereof to
purchase one and one-half shares of the common stock of the Company at a
subscription price of $2.25 per share. The rights expired at 5:00 p.m.,
Eastern Standard time, on August 28, 1996. No commission or compensation was
paid in connection with the Rights Offering. As part of the Rights Offering,
the Company permitted the outstanding Subordinated Notes held by CIHC and its
affiliate to be tendered for cancellation as consideration (in lieu of cash)
for the purchase of shares of common stock pursuant to the Rights Offering.
A total of 3,984,260 shares were subscribed for under the Rights Offering.
Total consideration of $8,964,585 consisted of $5,702,805 in Subordinated
Notes and $3,261,780 in cash.
Subsequent to the rights offering, the Company commenced a Supplemental
Offering to employees, agents and customers which concluded on September 30,
1996. Shares were offered under this Supplemental Offering at $2.25 per
share. A total of 63,050 shares were subscribed for under this offering. No
soliciting fees or other compensation were paid in connection with such
offering. The net cash proceeds from these offerings have been used to repay
intercompany advances ($2,647,000), for the redemption of Subordinated Notes
which were not tendered in the Rights Offering ($600,000) and for general
corporate purposes.
CLAIMS ASSERTED BY LIQUIDATION BUREAU UNDER CERTIFICATES OF SURETYSHIP: On
October 7, 1994, the Liquidation Bureau of the New York Department (the
"Liquidation Bureau") took control of Galaxy (a New York domiciled Property
and Casualty Company, "Galaxy"), which prior to the commencement of
liquidation proceedings had been an indirect wholly-owned subsidiary of the
Company, pursuant to an order of liquidation of the New York Supreme Court.
Prior to the liquidation of Galaxy, ANIC, the property and casualty insurance
company subsidiary of the Company, had issued certain certificates of
suretyship ("Certificates") with respect to certain Galaxy insurance policies
each of which provided that ANIC would assume the responsibilities of Galaxy
under the specified policy if Galaxy became insolvent or financially unable to
meet its obligations on the underlying policy, but only if certain conditions
were met. In particular, the Certificates provided that ANIC's assumption of
liability was contingent upon the insured's executing and delivering all
agreements, assignments or evidences of subrogation satisfactory to ANIC
respecting payments made or liabilities assumed.
In May 1996, the Liquidation Bureau, acting on behalf of the New York
Property/Casualty Insurance Security Funds (the "Guaranty Fund"), during a
meeting with Company representatives informally advised the Company that on
behalf of the Guaranty Fund it intended to seek indemnification or
reimbursement from ANIC for claims paid by the Guaranty Fund to Galaxy
insureds on policies which may have been covered by the Certificates. The
Liquidation Bureau has provided some information in response to the Company's
request for accounting data and other information with respect to the
Liquidation Bureau's analysis of the Guaranty Fund's right to indemnification;
however, the Company is not yet able to quantify the magnitude of the
potential claim, if any, for indemnification or reimbursement. The Company
has taken the position that the Guaranty Fund has no right to seek
indemnification unless Galaxy insureds who hold properly issued Certificates
have executed assignments and evidences of subrogation. Even if any Galaxy
insured properly made such a claim directly to ANIC, the Company has been
advised by counsel that if ANIC paid any such claim, it would have the right,
under assignment and subrogation agreements with its insureds, to assert all
rights that the insureds could have asserted to recover the loss amounts from
any other source, including the Guaranty Fund.
The Company intends to fully investigate each claim which the Liquidation
Bureau, acting on behalf of the Guaranty Fund, formally asserts is entitled to
the benefits of a Certificate to determine whether such Certificate was
properly endorsed by ANIC and issued with proper authority and if so, whether
proper agreements, assignments and evidence of subrogation have been executed.
The Company intends to vigorously defend any claims for indemnification or
reimbursement made by the Liquidation
Bureau, on behalf of the Guaranty Fund, with respect to the Certificates.
Although the Company is not in a position to estimate the magnitude of the
potential claims for indemnification or reimbursement, it does not believe
that the ultimate resolution of such claims will have a material adverse
affect on the financial condition or results of operations of the Company.
DISCONTINUED REALTORS' ERRORS AND OMISSIONS PROGRAM: Litigation was commenced
in
November, 1991, to recover losses sustained in the REO program which resulted
in $5.3 million being awarded to Accel in December, 1995.
Pursuant to settlements reached with all the parties earlier in 1996,
$1,541,085 was received by Accel as of September 30, 1996 and has been
recognized as other income for the nine months ended September 30, 1996. An
additional $2,750,000 was received on November 8, 1996 and will be recognized
as other income in the fourth quarter of 1996. This resulted in a total
recovery of $4,291,085. With the approval of the Department of Insurance of
the State of Ohio, the proceeds from the settlement are being shared equally
between Accel and ANIC. The Company requested the sharing arrangement due to
the continuing losses in the REO Program realized by ANIC since 1991.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(b) No reports on Form 8-K have been filed by the Registrant during the
quarter ended September 30, 1996.
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.
ACCEL INTERNATIONAL CORPORATION
Dated: November 13, 1996 By: /S/ Kurt L. Mueller
------------------------------ --------------------------
Kurt L. Mueller
Vice President, Treasurer
and
Controller*
_____
* Mr. Mueller is Vice President, Treasurer and Controller and has been duly
authorized to execute the report on behalf of the Registrant.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from ACCEL
International Corporation's third quarter 1996 Form 10-Q and is qualified in its
entirety by reference to such Form 10-Q.
</LEGEND>
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<NAME> ACCEL INTERNATIONAL CORPORATION
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