<PAGE> 1
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 JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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.)
12603 S.W. FRWY, STE. 315, STAFFORD, TEXAS 77477
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
281-565-8010
-------------------------------
(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 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 July 31, 1998, there were 8,571,259 shares of Common Stock, $.10 par
value per share outstanding.
<PAGE> 2
COMMISSION FILE NO. 0-8162
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
JUNE 30, 1998
INDEX
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
-------
<S> <C> <C>
Unaudited Consolidated Balance Sheets
(June 30, 1998 and December 31, 1997) 3 - 4
Unaudited Consolidated Statements of Operations (Six months
ended June 30, 1998 and 1997) 5
Unaudited Consolidated Statements of Common Stockholders'
Equity (Six months ended June 30, 1998 and year
ended December 31, 1997) 6
Unaudited Consolidated Statements of Cash Flows (Six months
ended June 30, 1998 and 1997) 7
Notes to Unaudited Consolidated Financial Statements 8 - 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14 - 16
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
Signature 17
</TABLE>
2
<PAGE> 3
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(Thousands of dollars)
<S> <C> <C>
ASSETS
Investments
Investments available for sale, at fair value:
Fixed maturities (cost: 1998--$28,849,000;
1997--$21,614,000) $ 29,068 $ 21,789
Equity securities (cost: 1997--$4,879,000) -- 4,879
Short-term investments
(cost: 1998--$4,676,000; 1997--$7,253,000) 4,806 7,253
Other invested assets 5,000 --
-------- --------
38,874 33,921
Cash (overdraft) (189) 1,589
Receivables:
Premiums in process of transmittal, less
allowance (1998--$144,000; 1997--$130,000) 7,454 11,633
Amounts due from reinsurers 22,793 16,739
Amounts due from former subsidiaries -- 1,201
-------- --------
30,247 29,573
Accrued investment income 257 252
Prepaid reinsurance premiums 11,226 9,567
Deferred policy acquisition costs 3,012 3,112
Equipment--at cost, less accumulated
depreciation (1998--$394,000; 1997--$273,000) 550 409
Leasehold improvements, less accumulated amortization
(1998--$8,000; 1997--$3,000) 30 35
Receivable from sale of discontinued and disposed
of operations 556 24,987
Other assets:
Reinsurance recoverable 2,129 --
Other 1,355 649
-------- --------
19,115 39,011
-------- --------
Total assets $ 88,047 $104,094
======== ========
(Continued)
</TABLE>
3
<PAGE> 4
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS--(CONTINUED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(Thousands of dollars)
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Policy Reserves and Liabilities:
Unearned premium reserves $ 17,571 $ 29,986
Insurance claims 27,592 22,028
--------- ---------
45,163 52,014
Other Liabilities:
Funds held under reinsurance agreements 1,958 2,076
Deferred reinsurance commissions 1,670 1,635
Amounts due reinsurers 3,173 4,563
Commissions payable -- 2,842
Accounts payable and other liabilities 3,249 3,097
Payable to former subsidiaries 749 --
Current federal income taxes 1 4,278
--------- ---------
10,800 18,491
--------- ---------
55,963 70,505
--------- ---------
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 (1998--15,000,000;
1997--15,000,000)
Issued shares (1998--9,458,583;
1997--9,445,183) 946 944
Additional paid-in capital 32,637 32,610
Retained earnings 5,243 6,518
Less treasury shares at cost (1998--891,424;
1997--797,420) (6,905) (6,599)
Accumulated other comprehensive income 163 116
--------- ---------
Net common stockholders' equity 32,084 33,589
--------- ---------
Total liabilities and common stockholders' equity $ 88,047 $ 104,094
========= =========
</TABLE>
See notes to unaudited consolidated financial statements
4
<PAGE> 5
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
REVENUE:
Gross premiums written $ 11,141 $ 12,307 $ 24,932 $ 19,723
Less reinsurance ceded 6,658 5,520 14,843 7,923
----------- ----------- ----------- -----------
Net premiums written 4,483 6,787 10,089 11,800
Decrease (increase) in unearned premium reserves 930 (2,578) 207 (3,776)
----------- ----------- ----------- -----------
Premiums earned 5,413 4,209 10,296 8,024
Net investment income:
Interest and dividends 601 420 1,265 823
Realized gains (losses) -- 3 (53) 67
Service fees on extended service
contracts -- 972 -- 1,517
Other income 87 91 212 136
----------- ----------- ----------- -----------
6,101 5,695 11,720 10,567
----------- ----------- ----------- -----------
BENEFITS AND EXPENSES:
Loss and loss adjustment expenses 4,368 3,527 8,237 6,224
Commissions and selling expenses 1,716 2,972 3,927 4,487
Reinsurance expense recovery (1,225) (708) (2,753) (1,125)
General and administrative 1,304 461 2,594 1,451
Taxes, licenses and fees 455 489 974 736
Interest -- 357 -- 713
Decrease (increase) in deferred policy
acquisition costs 334 (1,187) 100 (1,452)
----------- ----------- ----------- -----------
6,952 5,911 13,079 11,034
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE FEDERAL INCOME
TAXES AND DISCONTINUED OPERATIONS (851) (216) (1,359) (467)
Federal income taxes:
Current expense -- -- -- --
Deferred expense -- 171 -- 264
----------- ----------- ----------- -----------
-- 171 -- 264
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS (851) (387) (1,359) (731)
Discontinued operations:
Income from operations of discontinued
business segment -- 765 -- 1,334
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (851) $ 378 $ (1,359) $ 603
=========== =========== =========== ===========
Earnings per common share--basic/assuming dilution:
Loss from continuing operations $ (0.10) $ (0.04) $ (0.16) $ (0.08)
Income from discontinued operations -- .09 -- .15
----------- ----------- ----------- -----------
Net income (loss) $ (0.10) $ 0.05 $ (0.16) $ 0.07
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 8,559,369 8,603,742 8,583,648 8,603,742
=========== =========== =========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE> 6
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Thousands of dollars)
Additional Common stock Accumulated other
Common paid-in Retained held in comprehensive
stock capital earnings treasury ESOP loan income Net
------- ---------- -------- ------------ --------- ----------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 940 32,507 5,403 (6,599) (32) (578) 31,641
Comprehensive income:
Net income -- -- 1,115 -- -- -- 1,115
Other comprehensive
income (loss), net:
Change in net unrealized
appreciation on
investment securities -- -- -- -- -- 694 694
------- ------- ------- ------- ------- ------- -------
Other comprehensive
income -- -- -- -- -- 694 694
------- ------- ------- ------- ------- ------- -------
Comprehensive income 1,115 694 1,809
Payments on ESOP loan -- -- -- -- 32 -- 32
Issuance of 44,021 shares of
Common Stock under
Common Stock Option Plan 4 103 -- -- -- -- 107
------- ------- ------- ------- ------- ------- -------
Balances at December 31, 1997 944 32,610 6,518 (6,599) -- 116 33,589
Comprehensive income (loss):
Net loss -- -- (1,359) -- -- -- (1,359)
Other comprehensive
income (loss), net:
Change in valuation allowance
for unrealized appreciation
on investment securities -- -- 84 -- -- 47 131
------- ------- ------- ------- ------- ------- -------
Other comprehensive
income -- -- 84 -- -- 47 131
------- ------- ------- ------- ------- ------- -------
Comprehensive income (loss) -- -- (1,275) -- -- 47 (1,228)
Purchase of 94,004 shares as
treasury stock -- -- -- (306) -- -- (306)
Issuance of 13,400 shares of
Common Stock under
Common Stock Option Plan 2 27 -- -- -- -- 29
------- ------- ------- ------- ------- ------- -------
Balances at June 30, 1998 946 32,637 5,243 (6,905) -- 163 32,084
======= ======= ======= ======= ======= ======= =======
</TABLE>
See notes to unaudited consolidated financial statements
6
<PAGE> 7
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
---------- ----------
(Thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (1,359) $ (731)
Adjustments to reconcile income (loss) from continuing operations
to net cash used in operating activities:
Change in premiums receivable 4,179 (6,011)
Change in accrued investment income (5) 1
Change in prepaid reinsurance premiums (1,659) (3,664)
Change in premium deposits held (118) 116
Change in unearned premium reserves (12,415) 7,439
Change in insurance claim reserves 5,564 601
Change in amounts due to and from reinsurers (9,573) 2,180
Change in other assets, other liabilities
and accrued income taxes (5,723) (2,183)
Accrual of discount on bonds (28) (27)
Amortization of premium on bonds 38 22
Change in deferred policy acquisition costs 100 (1,452)
Change in deferred reinsurance commissions 35 792
Provision for depreciation and amortization 125 62
Net realized gains (losses) on investments (53) 67
-------- --------
Net cash (used in) provided by continuing operations (20,892) (2,788)
Net cash (used in) provided by discontinued operations 39,469 2,497
-------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 18,577 (291)
-------- --------
INVESTING ACTIVITIES:
Sale of investments available for sale 9,080 7,211
Purchase of investments available for sale (13,897) (6,785)
Other, net (261) (270)
-------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (5,078) 156
-------- --------
FINANCING ACTIVITIES:
Payment of ESOP loan -- 32
Repayment of notes payable (15,000) --
Issuance of Common Stock under Stock Option Plan 29 --
Repurchase of treasury shares (306) --
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (15,277) 32
-------- --------
NET INCREASE (DECREASE) IN CASH (1,778) (103)
Cash at beginning of year 1,589 415
-------- --------
CASH AT END OF YEAR $ (189) $ 312
======== ========
</TABLE>
See notes to unaudited consolidated financial statements
7
<PAGE> 8
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
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 ("GAAP") 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 GAAP 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, 1997.
PRINCIPLES OF CONSOLIDATION: The accompanying unaudited consolidated financial
statements include the accounts of ACCEL and its wholly-owned subsidiaries. As
discussed more fully in Note B, Acceleration Life Insurance Company ("ALIC")
and Dublin International Limited ("Dublin") are presented as discontinued
operations. 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. The Company is engaged in the underwriting and sale of property and
casualty insurance products, concentrating on commercial lines of business. The
Company offers various policies covering long-haul trucking, charter bus,
limousine and paratransit vehicle fleets, as well as other specialized products
tailored to other groups such as crane operators and gun dealers. The Company
offers these products through general agents. 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.
In addition to the property and casualty insurance products described above,
the Company has historically sold, principally through automobile dealers,
credit life and credit accident and health insurance and extended service
contracts ("Auto Aftermarket Group"). Effective December 31, 1997, the Company
sold its Auto Aftermarket Group as discussed more fully in Note B. As a result
of this transaction, the Company has ceased to be engaged in the auto
aftermarket credit insurance and extended service contract businesses.
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 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 generally
reflected in current operations.
INVESTMENTS: The Company classifies 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 fair value which approximates
cost.
Effective April 1, 1998, the Company purchased a 25% interest in the common
stock of USA Insurance Group, Inc., the parent company of Transportation
Insurance Service, the Company's general agent, for $5 million. This investment
is included in other invested assets.
Realized gains and losses on the disposal of investments are determined by
specific identification and are included in the consolidated statements of
operations.
8
<PAGE> 9
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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, 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 recognized by
writing the investment down to its fair value.
DEFERRED POLICY ACQUISITION COSTS: The costs (principally commissions and
certain expenses of policy issuance) of acquiring or renewing insurance
business, all of which vary with and are directly related to the production of
business, have been deferred. These deferred policy acquisition costs are
amortized in a manner related to the recognition of premiums earned.
Anticipated investment income is considered in determining recoverability of
deferred costs.
EQUIPMENT AND DEPRECIATION: Equipment is carried at cost less accumulated
depreciation. Depreciation is provided using the straight-line method over an
estimated useful asset life of five years.
LEASEHOLD IMPROVEMENTS: Leasehold improvements are carried at cost less
accumulated amortization. Amortization is provided using the straight-line
method over the term of the five-year lease.
PREMIUM INCOME RECOGNITION AND UNEARNED PREMIUM RESERVES: Unearned premium
reserves on property and casualty products are calculated on the pro rata
method. Unearned premium reserves on the extended service contracts are based
on the historical emergence pattern of claims. The Company's primary liability
on new car contracts exists subsequent to the expiration of manufacturers'
warranties. This method results in premium being recognized in direct
proportion to the emergence of benefits on these contracts.
INSURANCE CLAIMS: The liabilities for insurance claims are determined using
statistical analyses and represent estimates of the ultimate net cost of all
reported and unreported claims that are unpaid at period end. Considerable
variability is inherent in such estimates and actual results will likely differ
from those estimates.
FEDERAL INCOME TAXES: ACCEL and its subsidiaries file a consolidated federal
income tax return. The provision for income taxes is based on income for
financial reporting purposes, after permanent differences. Deferred tax assets
and liabilities are recognized for the 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 carryforwards. 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.
REINSURANCE: Reinsurance premiums ceded and reinsurance recoveries on losses
and loss adjustment expenses incurred are deducted from the respective income
and expense accounts. Assets and liabilities related to reinsurance ceded are
reported on a gross basis.
DEFERRED REINSURANCE COMMISSIONS: Commissions and ceding fees received in
connection with premiums ceded are deferred and amortized in a manner related
to the recognition of premiums earned. Earned ceding fees, commissions and
experience refunds are reported as reinsurance expense recoveries in the
unaudited consolidated statements of operations.
STOCK OPTION PLANS: Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995
and future years as if the fair-value-based method defined in SFAS No. 123 had
been applied. The Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS
No. 123.
9
<PAGE> 10
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
EARNINGS PER COMMON SHARE: Net income and net loss per common share are
computed using the weighted average number of common shares outstanding during
the period. Effective December 31, 1997, the Company adopted SFAS No. 128,
Earnings per Share. This standard, which did not have an effect on net income,
establishes standards for computing and presenting earnings per share. Earnings
per share for all periods presented have been restated to comply with SFAS No.
128.
RECLASSIFICATIONS: Certain amounts in the 1997 unaudited consolidated financial
statements have been reclassified to conform with the 1998 presentation.
NOTE B -- SALE OF AUTO AFTERMARKET GROUP
On October 20, 1997, ACCEL entered into agreements to sell to Lyndon Insurance
Group, Inc. and Lyndon Life Insurance Company (collectively, "Lyndon") the
outstanding capital stock of Acceleration Life Insurance Company ("ALIC"),
Acceleration National Service Company ("ANSC") and Dublin (collectively, the
"Target Corporations") for $30.2 million in cash and to sell to Lyndon Property
Insurance Company ("Lyndon Property") assets related to the vehicle extended
service contract business of ACCEL's wholly owned subsidiary, Acceleration
National Insurance Company ("ANIC"), for $10.3 million in cash. The sale was
effective December 31, 1997.
The agreements provided that within 125 days after the closing, the sales price
for the Target Corporations would be decreased or increased by the amount, if
any, by which the Target Corporations' combined GAAP stockholder's equity as of
December 31, 1997 was less than or greater than, respectively, $31.6 million.
As of December 31, 1997, the combined GAAP stockholder's equity of the Target
Corporations was $32.1 million which resulted in a net sales price of
approximately $41.0 million.
The "Receivable from sale of discontinued and disposed of operations"
("Receivable from sale") of approximately $.5 million as of June 30, 1998
represents the difference between the net sales price of $41 million and the
initial sales price of $40.5 million. The receivable from sale of approximately
$25 million as of December 31, 1997 represents the net sales proceeds of $41
million less the note payable and accrued interest of $16 million transferred
to ALIC by an unaffiliated company on December 31, 1997. The Company has filed
a legal action seeking declaratory judgement relief relating to disagreement
with Lyndon concerning the exact amount of the net sales price. Accordingly,
the receivable from sale may be more or less than $.5 million. The Company
believes the resolution of the matter will not have a material adverse effect
on the financial condition or results of operations of the Company.
In conjunction with the sale, on January 1, 1998, ANIC ceded via a quota share
reinsurance agreement 100% of its liability related to the vehicle extended
service contract business to Lyndon Property. Upon consummation of the
aforementioned sale, the Company ceased to be engaged in the auto aftermarket
credit insurance and extended service contract businesses. The consolidated
financial statements of the Company have been reclassified to reflect the
disposition of ALIC and Dublin which comprised the Life/Health business
segment. Accordingly, the revenues, benefits and expenses, and cash flows of
ALIC and Dublin have been excluded from the respective captions in the
unaudited consolidated statements of operations and unaudited consolidated
statements of cash flows for 1997. The net operating results of these entities
have been reported, net of applicable income taxes, as "Income from
discontinued operations" and the net cash flows of these entities have been
reported as "Net cash (used in) provided by discontinued operations." The
vehicle extended service contract business sold to Lyndon Property and ANSC
were components of the Company's property and casualty segment, and therefore
are included in continuing operations for 1997.
NOTE C--REINSURANCE
The Company has entered into reinsurance contracts associated with its property
and casualty lines which transfer a percentage of risk to the related
reinsurer. The Company also has agreements which transfer risks after a
predetermined loss amount has been reached. Unearned premium reserves
associated with reinsurance agreements at June 30, 1998 and December 31, 1997
are $11.2 million and $9.6 million, respectively, and the liability for
insurance claims is $18.6 million and $14.3 million at June 30, 1998 and
December 31, 1997, respectively. The following data summarizes certain aspects
of the Company's reinsurance activity for 1998 and 1997.
10
<PAGE> 11
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE C--REINSURANCE--(CONTINUED)
Premiums written and earned in 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
WRITTEN EARNED
-------------------------------------------- --------------------------------------------
Period Ended June 30,
Six Months Ended Three Months Ended Six Months Ended Three Months Ended
1998 1997 1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- -------- -------- -------- --------
(Thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Direct $ 22,683 $ 19,723 $ 9,987 $ 12,307 $ 21,242 $ 12,284 $ 10,350 $ 6,538
Assumed 2,249 -- 1,154 -- 2,241 -- 1,315 --
Ceded (14,843) (7,923) (6,658) (5,520) (13,187) (4,260) (6,252) (2,329)
-------- -------- -------- -------- -------- -------- -------- --------
Net $ 10,089 $ 11,800 $ 4,483 $ 6,787 $ 10,296 $ 8,024 $ 5,413 $ 4,209
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Loss and loss adjustment expenses incurred in 1998 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
1998 1997 1998 1997
-------- -------- -------- --------
(Thousands of dollars)
<S> <C> <C> <C> <C>
Direct $ 17,394 $ 8,679 $ 8,922 $ 5,047
Assumed 1,423 -- 852 --
Ceded (10,580) (2,455) (5,406) (1,520)
-------- -------- -------- --------
Net loss and
Loss adjustment expenses $ 8,237 $ 6,224 $ 4,368 $ 3,527
======== ======== ======== ========
</TABLE>
NOTE D--SEGMENT INFORMATION
The Company operates primarily in the property/casualty insurance industry
within the United States. There are no intersegment sales. The allocations of
certain general expenses and investment income within segments are based on a
number of assumptions, and the reported operating results would change if
different methods were applied. Depreciation and capital expenditures are not
considered material.
Information relating to revenue, income (loss) before income taxes and
discontinued operations, and identifiable assets by segment are summarized as
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
1998 1997 1998 1997
-------- -------- -------- --------
(Thousands of dollars) (Thousands of dollars)
<S> <C> <C> <C> <C>
Revenue:
Property/Casualty $ 11,410 $ 9,048 $ 6,019 $ 4,184
Corporate and Other 310 1,519 82 1,511
-------- -------- -------- --------
Total $ 11,720 $ 10,567 $ 6,101 $ 5,695
======== ======== ======== ========
Income (loss) before income taxes and
discontinued operations:
Property/Casualty $ (1,206) $ 493 $ (701) $ 255
Corporate and Other (153) (960) (150) (471)
-------- -------- -------- --------
Total $ (1,359) $ (467) $ (851) $ (216)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(Thousands of dollars)
<S> <C> <C>
Identifiable assets:
Property/Casualty $ 82,570 $ 89,303
Corporate and Other 5,477 4,791
-------- --------
Total $ 88,047 $104,094
======== ========
</TABLE>
11
<PAGE> 12
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE D--SEGMENT INFORMATION--(CONTINUED)
Effective January 1, 1998, the Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. This standard, which does
not have an effect on net income, establishes standards for disclosing segment
information.
NOTE E--COMMITMENTS AND CONTINGENCIES
Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions that arise in the normal course of its
activities. In management's opinion, based on the advice of outside counsel,
the accompanying consolidated financial statements would not be materially
affected by the ultimate outcome of any legal proceedings or contingent
liabilities.
In July 1991, the Company acquired 100% of RGL. Galaxy Insurance Company
("Galaxy"), a wholly owned subsidiary of RGL, wrote commercial property
insurance, property and casualty, and assumed treaty reinsurance. Galaxy became
statutorily insolvent at June 30, 1994. Due to the insolvency of Galaxy, the
Company wrote its investment in RGL to zero and deconsolidated RGL as of
April 1, 1994.
On October 7, 1994, the Liquidation Bureau took control of Galaxy pursuant to
an order of liquidation of the New York Supreme Court. Prior to the liquidation
of Galaxy, ANIC 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"), 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 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 to ANIC. 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.
In early 1998, the Superintendent of Insurance of the State of New York, as
Liquidator of Galaxy and Administrator of the Guaranty Fund, sued ANIC in New
York State Supreme Court. The complaint alleges, among other things, breach of
contract and demands that ANIC specifically perform its alleged obligations
under the Certificates. The complaint seeks an amount in excess of $6.5 million
in damages.
As reflected above, the suit seeks indemnification or reimbursement for the
claims paid or to be paid by the Guaranty Fund to Galaxy insureds on policies
which may have been covered by the Certificates. ANIC's position continues to
be that the Guaranty Fund has no right to seek indemnification unless the terms
and conditions of validly issued Certificates have been strictly complied with.
Accordingly, ANIC filed for dismissal of the suit which motion is currently
pending. ANIC will continue to vigorously defend itself against any such claims
and its alleged liability in the suit. Although the suit is of recent origin
and the Company is not in a position to estimate the magnitude of exposure for
indemnification or reimbursement, it continues to believe that the ultimate
resolution of the matter will not have a material adverse effect on the
financial condition or results of operations of the Company.
In November 1997, suit was filed against ALIC by four long-term care
policyholders seeking to represent a class of North Dakota policyholders
alleging breach of contract, fraud and misrepresentation regarding an alleged
promise not to raise premiums "too much". Said long-term care insurance
business was entirely reinsured to and assumed by Commonwealth Life Insurance
Company ("Commonwealth") of Louisville, Kentucky, in 1991. The matter was
tendered to Commonwealth to defend on behalf of ALIC pursuant to the applicable
provisions of the reinsurance agreement between the parties, and Commonwealth
also tendered the matter back to ALIC.
12
<PAGE> 13
ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
NOTE E--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The allegations of fraud and misrepresentation at the time of sale of the
long-term care policies are based on alleged statements that premiums "would
not be raised too much" even though the policy on its face stated that the
"Company reserves the right to increase premiums at anytime." Moreover,
premiums were increased subsequent to the reinsurance of the business to
Commonwealth by ALIC and all increases appear to have been approved by the
proper regulatory authority. The Company and Commonwealth are cooperating to
vigorously defend the matter. Joint motions to dismiss and to strike the class
action allegations were filed in the U.S. District Court, District of North
Dakota, Southeastern Division. The Court recently denied all pending motions
without prejudice to refiling until development of the record has occurred. The
Company believes there is little or no exposure of liability for ALIC and the
matter will not have a material adverse effect on the financial condition or
results of operations of the Company. In the event the plaintiffs prevail
however, the Company believes that it has the right to seek indemnification
from Commonwealth.
When the suit was filed, the Company was in the middle of a transaction to sell
one hundred percent of ALIC to Lyndon. Due to the recent filing of the suit,
Lyndon requested a separate indemnification for the matter. Accordingly, the
Company agreed to provide additional indemnification, fully assume and directly
pay for all defense costs of the litigation against ALIC, and to directly pay
any settlement costs, judgments or other liabilities incurred in connection
with the litigation. The indemnification shall expire on its terms when and if
there is a final, nonappealable determination that class certification in the
matter is denied. The obligation of the Company is insured by a bond of
indemnity in the amount of $3,000,000 issued by ANIC.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Operating Results for the Six Months Ended June 30, 1998 and 1997
OPERATING RESULTS
On October 20, 1997, ACCEL entered into agreements to sell to Lyndon Insurance
Group, Inc. and Lyndon Life Insurance Company (collectively, "Lyndon") the
outstanding capital stock of Acceleration Life Insurance Company ("ALIC"),
Acceleration National Service Company ("ANSC") and Dublin International Limited
("Dublin") (collectively, the "Target Corporations") for $30.2 million in cash
and to sell to Lyndon Property Insurance Company ("Lyndon Property") assets
related to the vehicle extended service contract business of ACCEL's wholly
owned subsidiary, Acceleration National Insurance Company ("ANIC"), for $10.3
million in cash. The sale was effective December 31, 1997.
The agreements provided that within 125 days after the closing, the sales price
for the Target Corporations would be decreased or increased by the amount, if
any, by which the Target Corporations' combined GAAP stockholder's equity as of
December 31, 1997, was less than or greater than, respectively, $31.6 million.
As of December 31, 1997, the combined GAAP stockholder's equity of the Target
Corporations was $32.1 million which resulted in a net sales price of
approximately $41 million.
The "receivable from sale of discontinued and disposed of operations"
("receivable from sale") of approximately $.5 million as of June 30, 1998
represents the difference between the net sales price of $41 million and the
initial sales price of $40.5 million. The receivable from sale of approximately
$25 million as of December 31, 1997, represents the net sales proceeds of $41
million less the note payable and accrued interest of $16 million transferred
to ALIC by an unaffiliated company on December 31, 1997. The Company has filed
a legal action seeking declaratory judgment relief relating to a disagreement
with Lyndon concerning the exact amount of the net sales price. Accordingly,
the receivable from sale may be more or less than $.5 million. The Company
believes the resolution of the matter will not have a material adverse effect
on the financial condition or results of operations of the Company.
In conjunction with the sale, on January 1, 1998, ANIC ceded via a quota share
reinsurance agreement 100% of its liability related to the vehicle extended
service contract business to Lyndon Property. Upon consummation of the
aforementioned sale, the Company ceased to be engaged in the auto aftermarket
credit insurance and extended service contract businesses. The consolidated
financial statements of the Company have been reclassified to reflect the
disposition of ALIC and Dublin that comprised the Life/Health business segment.
Accordingly, the revenues, benefits and expenses, and cash flows of ALIC and
Dublin have been excluded from the respective captions in the unaudited
consolidated statements of operations and unaudited consolidated statements of
cash flows for 1997. The net operating results of these entities have been
reported, net of applicable income taxes, as "Income from discontinued
operations," and the net cash flows of these entities have been reported as
"Net cash (used in) provided by discontinued operations" for 1997. The vehicle
extended service contract business sold to Lyndon Property and ANSC were
components of the Company's property and casualty segment, and therefore are
included in continuing operations for 1997.
The loss before federal income taxes and discontinued operations for the six
months of 1998 was $1.36 million compared to a loss of $467,000 for the same
period in 1997. The Company's primary product line, commercial auto, produced a
positive underwriting margin in the first half of 1998 of approximately
$700,000 while net investment income contributed approximately $1.3 million.
These contributions were offset primarily by general and administrative
expenses of approximately $2.6 million and taxes, licenses and fees other than
premium taxes of $300,000. The Company's commercial auto program, consisting of
direct and assumed business, continued its growth, producing $18.9 million of
annualized premium in the first six months of 1998 compared to $14.8 million
for the same period in 1997.
For the quarter ending June 30, 1998, the loss before federal income taxes and
discontinued operations was $851,000 compared to a loss of $216,000 for the
same quarter in 1997. Loss and loss adjustment expenses as a percentage of net
earned premiums improved to 80.7% for the quarter ended June 30, 1998, from
83.8% for the same period in 1997. This improvement in the net loss ratio of
approximately $170,000 is offset by increased general and administrative
expenses of approximately $800,000 from the second quarter of 1997.
Net premium earned for the six months ended June 30, 1998 rose to $10.3 million
from $8.0 million for the same period in 1997. This 28.8% increase is
attributable to increased premium writings and assumed premiums from a
reinsurance agreement entered into in mid-1997 relating to the Company's
commercial auto line. Net premium earned for the quarter ended June 30, 1998
increased to $5.4 million from $4.2 million for the same period in 1997. This
increase is also attributable to the previously mentioned explanation. The net
loss and loss adjustment expense ratios were 80.0% for the first half of 1998
as compared to 77.6% for the same period in 1997. This increase is attributable
to higher than expected losses from the Company's trucking accounts. Many of
these policies have since been non-renewed or canceled and this refinement
process is continuing. However, some development may persist in the future. The
net loss and loss adjustment expense ratios
14
<PAGE> 15
were 80.7% for the second quarter of 1998 as compared to 83.8% for the same
period in 1997. This decrease is attributable to a more selective underwriting
policy as previously mentioned and pricing increases in most segments of the
commercial auto program.
A positive impact on 1997 earnings was the level of service fee revenue on
extended service contract business which amounted to $1.5 million for the first
six months of 1997. These service fees are non-recurring in 1998 due to the
sale of the extended service contract business to Lyndon Property effective
January 1, 1998.
Commissions and selling expenses as a percent of gross premiums were 15.7% for
the first six months of 1998 compared to 22.8% for the same period in 1997. For
the second quarter of 1998, commissions and selling expenses as a percent of
gross premiums were 15.4% as compared to 24.1% for the same period in 1997.
These decreases are due largely to commercial auto becoming the predominant
product line for the Company. Commercial auto has significantly lower
acquisition costs than the Company's extended service contract business which
was fully ceded to Lyndon effective January 1, 1998.
The Company's general and administrative expensed have increased by $1.1
million or 78.8% in the first six months of 1998 compared to the same period in
1997. For the second quarter of 1998, general and administrative expenses
increased by $840,000 or 183% for the same period in 1997. These increases are
largely due to salaries and other expenses which were previously allocated to
the subsidiaries sold effective December 31, 1997. Additionally, the second
quarter of 1997 benefited from a non-recurring item of approximately $300,000.
REVENUE
Gross premium writings for the first six months of 1998 were $24.9 million
compared to $19.7 million for the same period in 1997. This increase is due to
increased writings in the Company's commercial auto program of approximately
$4.2 million. Gross premiums written for the second quarter of 1998 were $11.1
million as compared to $12.3 million for the second quarter of 1997. This
decrease is attributable to the company non-renewing larger trucking accounts
within the commercial auto line due to poor underwriting results.
Net premium earned was $10.3 million for the first half of 1998 as compared to
$8.0 million for the first half of 1997. The second quarter of 1998 produced
net earned premium of $5.4 million as compared to $4.2 million for the second
quarter of 1997. These increases are due to the development and expansion by
the Company of its commercial auto program.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows from operations have generally been adequate for its
current operating needs. The Company's long haul trucking, charter bus and
paratransit business generally is written for a term of one year with the
casualty claim-related liabilities extending beyond that period. The Company's
liability on vehicle extended service contracts typically has extended for
either one-year or five-year periods. However as previously discussed, the
Company's existing vehicle extended service contract business was ceded to
Lyndon Property effective January 1, 1998.
The Company's "available for sale" fixed maturity securities at June 30, 1998
and 1997 include collateralized mortgage obligation securities and asset-backed
collateralized securities. The mortgage and asset-backed securities are subject
to risks associated with variable prepayments. As such, those 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 have either a planned amortization or
sequential pay classes. The collateralized mortgage obligations and asset
backed securities owned have primarily short to intermediate average lives. At
June 30, 1998, the Company did not have a significant amount of higher risk
mortgage or asset backed securities which had a significant risk of loss or
principal. There are negligible default risks on the mortgage and asset backed
security portfolios 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. The Company's collateralized mortgage obligations
and asset backed securities are predominantly sequential pay with little or no
exposure to interest only obligations ("IOs") or inverse IOs.
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
15
<PAGE> 16
the Ohio Department. Based on this regulation, ANIC could pay a dividend of
approximately $8.8 million without Ohio Department approval to ACCEL in 1998.
The Company used a portion of the proceeds from the sale upon closing in
January 1998 of the Auto Aftermarket Group to retire the outstanding balance of
$15 million of senior notes held by ALIC, who had received them from an
unaffiliated company, along with accrued interest of approximately $1.1
million, to make a capital contribution of $3.5 million to ANIC, to pay taxes
on the sale of approximately $4.3 million, to transfer $8.8 million in cash to
Lyndon in connection with the ceding of the existing vehicle extended service
contract business on January 1, 1998 and will utilize the remainder for general
corporate purposes.
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 management believes that the
current level of policy reserves will be adequate to cover anticipated claim
liabilities. Accordingly, the ultimate amounts required for settlement of
policy benefits may vary significantly from the amounts included in the
accompanying consolidated financial statements.
Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions that arise in the normal course of its
activities. For information regarding legal proceedings involving the Company
including developments relating to the insolvency of Galaxy Insurance Company
(a subsidiary of the Company) and a suit against ALIC by four long-term care
policyholders, see "Note E" in the Notes to Unaudited Consolidated Financial
Statements. In management's opinion, based on the advice of and information
obtained from outside counsel, the ultimate resolution of the pending legal
matters will not have a material adverse effect on the financial condition or
results of operations of the Company.
Effective April 1, 1998, the Company purchased a 25% interest in the common
stock of USA Insurance Group, Inc., the parent company of TIS, the Company's
general agent, for $5 million. This investment is included in other invested
assets.
In June 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards ("SFAS") No. 130, Reporting Comprehensive Income,
effective for years beginning after December 15, 1997. This SFAS establishes
standards for reporting and display of comprehensive income and its components.
The adoption of SFAS No. 130 does not affect results of operations or financial
position, but affects their presentation and disclosure. The Company adopted
SFAS No. 130 as of January 1, 1998.
The Company adopted the reporting requirements of SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information, in the first quarter
of 1998. Adoption of this SFAS had no effect on net income of the Company. SFAS
No. 132, Employer's Disclosures about Pensions and Other Postretirement
Benefits, is effective for fiscal years beginning after December 15, 1997. This
SFAS will not affect the Company's financial statement presentation or related
disclosures as the Company does not offer pension or other postretirement
benefits to employees or former employees.
Although the cumulative effects of inflation on premium growth cannot be fully
determined, increases in the value of commercial property results in increased
premiums for property coverages. The combination of severity (which is affected
by inflation) and frequency of loss trends in commercial auto and general
liability are recognized in premium increases or decreases by the adoption of
filed premium rates.
The National Association of Insurance Commissioners ("NAIC") has completed and
adopted a project to codify statutory accounting principles with a provision
for commissioner discretion in the determination of appropriate statutory
accounting for insurers. Although the NAIC has indicated that January 1, 2001
is the expected date of implementation, the implementation is ultimately
dependent upon an insurer's state of domicile. Implementation of the codified
statutory principles may affect the surplus level of ANIC on a statutory basis.
Management is unable at this time to determine what impact, if any this project
will have on the statutory surplus of ANIC.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
The 1995 Private Securities Litigation Reform Act provides issuers the
opportunity to make cautionary statements regarding forward-looking statements.
Accordingly, any forward-looking statement contained herein or in any other
oral or written statement by the Company or any of its officers, directors or
employees is qualified by the fact that actual results of the Company may
differ materially from such statement due to the following important factors,
among other risks and uncertainties inherent in the Company's business: state
insurance regulations, rate competition, adverse changes in interest rates,
unforeseen losses with respect to loss and settlement expense reserves for
unreported and reported claims, and catastrophic events.
16
<PAGE> 17
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 June 30, 1998.
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.
ACCEL INTERNATIONAL CORPORATION
DATED: August 13, 1998 BY: /s/ Cindy Moore
--------------- --------------------------------------
Cynthia A. Moore
Senior Vice President, Chief Financial
Officer and Treasurer*
* Ms. Moore has been duly authorized to execute the report on behalf of the
Registrant.
17
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM ACCEL INTERNATIONAL
CORPORATION'S JUNE 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY SUCH
FINANCIAL STATEMENTS. FINANCIAL DATA FOR THE SIX MONTHS ENDED JUNE 30, 1997
INCLUDED HEREIN HAS BEEN RESTATED TO REFLECT DISCONTINUED OPERATIONS (SEE "NOTE
B" IN THE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS).
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<DEBT-HELD-FOR-SALE> 29,068 22,387
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 4,700
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 38,874 29,936
<CASH> (189) 312
<RECOVER-REINSURE> 2,129 0
<DEFERRED-ACQUISITION> 3,012 2,871
<TOTAL-ASSETS> 88,047 64,340
<POLICY-LOSSES> 27,592 11,617
<UNEARNED-PREMIUMS> 17,571 28,368
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 0 15,000
0 0
0 0
<COMMON> 946 940
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 88,047 64,340
10,296 8,024
<INVESTMENT-INCOME> 1,265 823
<INVESTMENT-GAINS> (53) 67
<OTHER-INCOME> 212 136
<BENEFITS> 8,237 6,224
<UNDERWRITING-AMORTIZATION> 100 (1,452)
<UNDERWRITING-OTHER> 4,742 5,549
<INCOME-PRETAX> (1,359) (467)
<INCOME-TAX> 0 264
<INCOME-CONTINUING> (1,359) (731)
<DISCONTINUED> 0 1,334
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,359) 603
<EPS-PRIMARY> (0.16) 0.07
<EPS-DILUTED> (0.16) 0.07
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
