<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________ to ________________
COMMISSION FILE NUMBER: 1-6732
DANIELSON HOLDING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-6021257
(State of Incorporation) (I.R.S. Employer Identification No.)
767 THIRD AVENUE, NEW YORK, NEW YORK 10017-2023
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (212) 888-0347
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 3, 1996
----- --------------------------
Common Stock, $0.10 par value 15,360,255 shares
Cover page 1 of 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DANIELSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
REVENUES:
Gross premiums earned $12,901 $22,391
Ceded premiums earned (3,933) (3,859)
------- -------
Net premiums earned 8,968 18,532
Trust fee income 1,085 1,076
Net investment income 2,839 3,093
Other income 333 294
------- -------
TOTAL REVENUES 13,225 22,995
------- -------
LOSSES AND EXPENSES:
Gross losses and loss adjustment expenses 8,586 16,895
Ceded losses and loss adjustment expenses (1,915) (2,450)
------- -------
Net losses and loss adjustment expenses 6,671 14,445
Policyholder dividends 44 137
Policy acquisition expenses 2,539 3,930
General and administrative expenses 3,401 3,832
------- -------
TOTAL LOSSES AND EXPENSES 12,655 22,344
------- -------
Income before provision for income taxes 570 651
Income tax provision 13 38
------- -------
NET INCOME $ 557 $ 613
======= =======
EARNINGS PER SHARE OF COMMON STOCK
AND COMMON EQUIVALENT SHARE $ .03 $ .04
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
DANIELSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)
<TABLE>
<CAPTION>
March 31, 1996 December 31,
(Unaudited) 1995
--------------- -------------
<S> <C> <C>
ASSETS:
Fixed maturities, available-for-sale at fair value
(Cost: $162,623 and $167,773) $162,916 $172,595
Equity securities, at fair value (Cost: $256 and $256) 602 629
Short term investments, at cost which
approximates fair value 5,052 8,570
-------- --------
TOTAL INVESTMENTS 168,570 181,794
Cash 294 605
Accrued investment income 2,140 2,718
Premiums and fees receivable, net of allowances
of $184 and $157 7,295 8,826
Reinsurance recoverable on paid losses, net of allowances
of $388 and $388 2,977 1,828
Reinsurance recoverable on unpaid losses, net of
allowances of $425 and $425 18,098 21,112
Prepaid reinsurance premiums 2,414 2,226
Property and equipment, net of accumulated depreciation
of $6,871 and $6,849 3,850 4,159
Deferred acquisition costs 1,031 1,045
Excess of cost over net assets acquired 2,613 2,657
Other assets 1,107 954
-------- --------
TOTAL ASSETS $210,389 $227,924
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Unpaid losses and loss adjustment expenses $124,258 $137,406
Unearned premiums 8,772 8,563
Policyholder dividends 4,665 4,664
Reinsurance premiums payable 1,832 1,707
Funds withheld on ceded reinsurance 1,492 1,534
Other liabilities 3,548 4,229
-------- --------
TOTAL LIABILITIES 144,567 158,103
Preferred stock ($0.10 par value; authorized
10,000,000 shares; none issued and outstanding) -- --
Common stock ($0.10 par value; authorized
20,000,000 shares; issued 15,370,894 shares;
outstanding 15,360,255 shares) 1,537 1,537
Additional paid-in capital 46,131 46,131
Net unrealized gain on available-for-sale securities 639 5,195
Retained earnings 17,581 17,024
Treasury stock (Cost of 10,639 shares) (66) (66)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 65,822 69,821
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $210,389 $227,924
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
DANIELSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1996
---------------
<S> <C>
COMMON STOCK
Balance, beginning of year $ 1,537
-----------
Balance, end of period 1,537
-----------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year 46,131
-----------
Balance, end of period 46,131
-----------
NET UNREALIZED GAIN (LOSS) ON AVAILABLE-FOR-SALE
SECURITIES
Balance, beginning of year 5,195
Net (decrease) (4,556)
-----------
Balance, end of period 639
-----------
RETAINED EARNINGS
Balance, beginning of year 17,024
Net income 557
-----------
Balance, end of period 17,581
-----------
TREASURY STOCK
Balance, beginning of year (66)
-----------
Balance, end of period (66)
-----------
TOTAL STOCKHOLDERS' EQUITY $ 65,822
===========
- -------------------------------------------------------------------------------
COMMON STOCK, SHARES
Balance, beginning of year 15,370,894
-----------
Balance, end of period 15,370,894
===========
TREASURY STOCK, SHARES
Balance, beginning of year 10,639
-----------
Balance, end of period 10,639
===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
DANIELSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED MARCH 31,
------------------------
1996 1995
-------------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 557 $ 613
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 298 536
Change in accrued investment income 578 253
Change in premiums and fees receivable 1,531 1,688
Change in reinsurance recoverables (1,149) 1,357
Change in reinsurance recoverable on unpaid losses 3,014 (125)
Change in prepaid reinsurance premiums (188) (239)
Change in deferred acquisition costs 14 67
Change in unpaid losses and loss adjustment expenses (13,148) (1,565)
Change in unearned premiums 209 (680)
Change in policyholder dividends payable 1 (391)
Change in reinsurance payables and funds withheld 83 538
Other, net (895) (2,352)
-------- -------
Net cash (used in) operating activities (9,095) (300)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales:
Fixed income maturities available-for-sale -- 997
Investments, matured or called:
Fixed income maturities held-to-maturity -- 483
Fixed income maturities available-for-sale 5,194 2,932
Investments, purchased:
Fixed income maturities held-to-maturity -- (170)
Fixed income maturities available-for-sale -- (4,224)
Proceeds of sale of branch office assets 71 --
Proceeds of sale of property and equipment 60 --
Purchases of property and equipment (59) (90)
-------- -------
Net cash provided by (used in) investing activities 5,266 (72)
-------- -------
Net decrease in cash and short term investments (3,829) (372)
Cash and short term investments at beginning of year 9,175 3,776
-------- -------
Cash and short term investments at end of period $ 5,346 $ 3,404
======== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
DANIELSON HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1) BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements of Danielson
Holding Corporation ("DHC" or "Registrant") and subsidiaries (collectively with
DHC, the "Company") have been prepared in accordance with generally accepted
accounting principles. However, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information,
reference is made to the Consolidated Financial Statements and footnotes thereto
included in DHC's Annual Report on Form 10-K for the year ended December 31,
1995.
2) PER SHARE DATA
Per share data is based on the weighted average number of shares of common
stock of DHC, par value $0.10 per share ("Common Stock"), outstanding during a
particular year or other relevant period. Earnings per share computations, as
calculated under the treasury stock method, include the average number of shares
of additional outstanding Common Stock issuable for stock options, whether or
not currently exercisable. Such average number of shares were 16,013,221 and
16,048,970 for the three months ended March 31, 1996 and 1995, respectively.
3) INCOME TAXES
DHC files a Federal consolidated income tax return with its subsidiaries
and with certain trusts that assumed various former liabilities of certain
present and former subsidiaries of DHC. The Company records its interim tax
provisions based upon estimated effective tax rates for the year.
The Company has made provisions for certain state and local franchise
taxes. The amount of these provisions is not material to the Consolidated
Financial Statements. Tax filings for these jurisdictions do not consolidate
the activity of the trusts referred to above. For further information,
reference is made to Note 8 of the Notes to Consolidated Financial Statements
included in DHC's Annual Report on Form 10-K for the year ended December 31,
1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1. GENERAL
Danielson Holding Corporation ("DHC") is organized as a holding company
with substantially all of its operations conducted by subsidiaries (collectively
with DHC, the "Company"). DHC, on a parent-only basis, has limited continuing
expenditures for rent and administrative expenses and derives revenues primarily
from investment return on portfolio securities. Therefore, the analysis of the
Company's financial condition is generally done on an operating subsidiary
basis.
6
<PAGE>
2. RESULTS OF NAICC'S OPERATIONS
The operations of DHC's principal subsidiary, National American Insurance
Company of California ("NAICC"), are primarily in specialty property and
casualty insurance. At March 31, 1996, NAICC had a B++ rating from A.M. Best
Company.
PROPERTY AND CASUALTY INSURANCE OPERATIONS
Net premiums written were $9 million and $17.6 million for the three months
ended March 31, 1996 and 1995, respectively. The decrease in net premiums
written in the first quarter of 1996 from the same period in 1995 is
attributable to a decline in workers' compensation business in California,
discussed below. Net premiums earned were $9 million and $18.5 million for the
three months ended March 31, 1996 and 1995, respectively. The decrease in
premiums earned is directly related to the decrease in premiums written.
In the workers' compensation line of business, net premiums written were $4
million for the first three months of 1996 compared to $13.3 million for that
period in 1995. The 1996 first quarter decrease from the same period in 1995 is
attributable to significantly increased price competition in California. It is
the policy of NAICC to underwrite business that is expected to yield an
operating profit. As a result, NAICC's new and renewal policy count, which
decreased significantly in 1995, has continued to decrease during the first
quarter of 1996.
In the non-standard personal automobile insurance line of business, net
premiums written were $4 million and $3.9 million for the three months ended
March 31, 1996 and 1995, respectively. In the first three months of 1996, the
personal automobile line represented 45% of total net premiums written, up from
22% in the first three months of 1995. NAICC continues to cede 50% of its
personal automobile business to a major reinsurance company under a reinsurance
agreement.
Net investment income was $2.7 million and $2.9 million for the three
months ended March 31, 1996 and 1995, respectively. The decline in net
investment income is the result of a decrease in NAICC's investment portfolio in
those periods.
The combined ratio (which represent a ratio of losses and expenses to net
earned premiums in a particular period) was 120% and 109% for the three months
ended March 31, 1996 and 1995, respectively.
Net losses and loss adjustment expenses ("LAE") were $6.7 million and $14.4
million for the three months ended March 31, 1996 and 1995, respectively. The
resulting net loss and LAE ratios for the corresponding periods were 74.4% and
77.7%, respectively. The decrease in the net loss and LAE ratio in the first
quarter of 1996 is due to the decrease in the workers' compensation line of
business which has a higher loss and LAE expense ratio than the automobile line
of business.
Policy acquisition costs were $2.5 million and $3.9 million for the three
months ended March 31, 1996 and 1995, respectively. The decrease is directly
related to the decline in net premiums earned. Policy acquisition expenses as a
percent of net premiums earned were 28.3% and 21.1% for the three months ended
March 31, 1996 and 1995, respectively. The increase in the policy acquisition
expense ratio in the first quarter of 1996 as compared to the same period in
1995 is primarily the result of a greater decline in workers' compensation
premiums than in certain underwriting expenses included in policy acquisition
costs.
General and administrative expenses were $1.6 million and $1.7 million for
the three months ended March 31, 1996 and 1995. These expenses are fixed or
semi-variable in nature.
7
<PAGE>
Policyholder dividends for the three months ended March 31, 1996 were
$44,000, as compared with $137,000 during the first quarter of 1995. The
decrease in policyholder dividends is attributable to the decline in workers'
compensation premiums.
Net income from insurance operations for the three months ended March 31,
1996 and 1995 was $1.1 million and $1.4 million, respectively. Net income for
the first quarter of 1996 decreased from the same period in 1995 due to the
decline in premium revenue and investment income.
CASH FLOW FROM INSURANCE OPERATIONS
Cash used in insurance operating activities for the three months ended
March 31 1996 was $8.4 million; cash provided by insurance operations for the
same period in 1995 was $929,000. The increase in cash used in operations in
the first quarter of 1996 is primarily due to the payment of losses and LAE
related to prior years while workers' compensation premiums written have
declined. Because workers' compensation claims ordinarily are paid over a
period of several years, NAICC is now experiencing a situation in which current
claims payments relating to prior years exceed current workers' compensation
premiums. Such negative cash flow is expected to continue with the settlement
of workers' compensation claims, or until such time as management of NAICC
determines that workers' compensation premiums can be written at rates that can
be expected to achieve a profit. Overall cash and invested assets, at fair
value, at March 31, 1996 were $156.6 million, compared to $170 million at
December 31, 1995. The ratio of (annualized) net written premiums to surplus
was 1.3 to 1 and 1.7 to 1 for the three months ended March 31, 1996 and 1995,
respectively.
The Company's insurance subsidiaries require both readily liquid assets and
adequate capital to meet ongoing obligations to policyholders and claimants, as
well as to pay ordinary operating expenses. The primary sources of funds to
meet these obligations are premium revenues, investment income, recoveries from
reinsurance and, if required, the sale of invested assets. NAICC's investment
policy guidelines require that all liabilities be matched by a comparable amount
of investment grade invested assets. Management of NAICC believes that NAICC
has both adequate capital resources and sufficient reinsurance to meet any
unforeseen events such as natural catastrophes, reinsurer insolvencies or
possible reserve deficiencies.
3. RESULTS OF DANIELSON TRUST COMPANY'S OPERATIONS
The operations of DHC's Danielson Trust Company ("Danielson Trust")
subsidiary are comprised of trust and fiduciary services.
TRUST AND FIDUCIARY SERVICES OPERATIONS
Total fee income was $1.1 million in each of the three month periods ended
March 31, 1996 and 1995. Fee income for the three months ended March 31, 1996,
as compared with the same period in 1995, reflects increased fees from the
retirement services and private trust lines of business offsetting decreased
custody services fees.
Net investment income was $26,000 and $36,000 for the three months ended
March 31, 1996 and 1995, respectively. Net investment income for the first
quarter of 1996 decreased from the same period in 1995 because average invested
assets during such period in 1996 were less than average invested assets during
the same period in 1995.
8
<PAGE>
General and administrative expenses were $1.2 million and $1.5 million for
the three months ended March 31, 1996 and 1995, respectively. The decrease in
expenses for the first quarter of 1996 from the comparable period in 1995
reflects reduced staffing and data processing expenses, as well as other
operating efficiencies. As a result of the decrease in expenses, Danielson
Trust's net loss for the three months ended March 31, 1996 was $81,000, compared
to a net loss of $395,000 in the same period of 1995.
CASH FLOW FROM TRUST OPERATIONS
Cash used in trust operating activities for the three months ended March
31, 1996 and 1995 was $178,000 and $463,000, respectively. The $285,000
decrease in cash used in trust operating activities in the first quarter of 1996
from the same period in 1995 is primarily attributable to cost reductions and
operating efficiencies. Overall cash and invested assets, at fair value, at
March 31, 1996 were $1.7 million, compared to $1.8 million at December 31, 1995.
Danielson Trust requires liquid assets to meet the working capital needs of
its continuing business. The primary source of these liquid assets are fees
charged to Danielson Trust's trust clients. Effective March 31, 1996, DHC
forgave the entire principal balance of a $300,000 unsecured note from Danielson
Trust and accrued interest as of January 1, 1996, and converted such amount into
additional paid-in capital of Danielson Trust. As of January 1, 1996, DHC
agreed to make an additional unsecured loan to Danielson Trust in the principal
amount of $600,000, bearing interest at the rate of prime plus 1%, and to
consider making additional such loans in the aggregate amount of $600,000 upon
request of Danielson Trust. As of the date hereof, Danielson Trust has not
borrowed any amount under such loan agreement. To the extent that timing
differences exist between the collection of revenue and the actual payment of
expenses, or where revenues generated by Danielson Trust's business are
insufficient to cover its expenses or to maintain compliance with regulatory
capital requirements, the primary sources of funds to meet those obligations
would be the sale of short term investments, additional intercompany loans or
parent company capital contributions or financing provided by a third party.
In accordance with California banking regulations, Danielson Trust has
pledged assets having a fair value of $611,000 as of March 31, 1996 to the State
of California as a reserve in connection with certain types of fiduciary
appointments, the maximum amount of such reserves that may be required. State
banking laws also regulate the nature of trust companies' investments of
contributed capital and surplus, and generally restrict such investments to debt
type investments in which banks also are permitted to invest. In order to
satisfy such regulations, a majority of Danielson Trust's investments are in
U.S. Government obligations and, as of the three months ended March 31, 1996,
Danielson Trust was in compliance with the foregoing requirements.
On January 31, 1996, following approval of the California State Banking
Department, Danielson Trust sold substantially all of the fiduciary accounts
administered by its Santa Barbara branch to The Bank of Montecito (now known as
Montecito Bank and Trust). In connection with the sale, in January 1996,
Danielson Trust recognized a gain of $32,874.
4. RESULTS OF DHC'S OPERATIONS
CASH FLOW FROM PARENT-ONLY OPERATIONS
Operating cash flow of DHC on a parent-only basis is primarily dependent
upon the rate of return achieved on its investment portfolio and the payment of
general and administrative expenses incurred in the normal course of business.
For the three months ended March 31, 1996 and 1995, cash used in parent-only
operating activities was $477,000 and $766,000, respectively. The decrease in
cash used in the first quarter of 1996 from the same period in 1995 was
primarily attributable to the receipt of
9
<PAGE>
interest on certain investments and the timing of certain expense payments. For
information regarding DHC's operating subsidiaries' cash flow from operations,
see "2. RESULTS OF NAICC'S OPERATIONS, Cash Flow from Insurance Operations" and
"3. RESULTS OF DANIELSON TRUST COMPANY'S OPERATIONS, Cash Flow from Trust
Operations."
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, cash and investments of the Company (excluding NAICC and
Danielson Trust) were approximately $10.6 million, compared to $11 million at
December 31, 1995. As described above, the primary use of funds was the payment
of general and administrative expenses in the normal course of business.
For information regarding DHC's operating subsidiaries' liquidity and
capital resources, see "2. RESULTS OF NAICC'S OPERATIONS, Cash Flow from
Insurance Operations" and "3. RESULTS OF DANIELSON TRUST COMPANY'S OPERATIONS,
Cash Flow from Trust Operations."
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
NAICC and Danielson Trust are parties to various legal proceedings which
are considered routine and incidental to their respective businesses and are not
material to the financial condition and operation of those businesses. DHC is
not a party to any legal proceeding which is considered material to the
financial condition and operation of its business.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Acquisition of Midland Financial Group, Inc. On February 26, 1996, DHC
--------------------------------------------
signed an Agreement and Plan of Merger dated February 26, 1996 among DHC,
Midland Financial Group, Inc., a Tennessee corporation ("Midland"), and Mission
Sub E, Inc., a Delaware corporation ("Merger Sub") (the "Merger Agreement").
Merger Sub is a wholly-owned subsidiary of DHC. Midland is engaged primarily in
non-standard automobile insurance and related activities in 20 states located
primarily in the southern and western United States. The Merger Agreement
provides for the merger of Midland with and into Merger Sub. Accordingly, upon
consummation of the transaction, Midland will be merged into Merger Sub, and
Merger Sub, as a subsidiary of DHC, will be the surviving company.
The closing of the transaction contemplated by the Merger Agreement is
subject to numerous conditions, including the completion of a public offering by
DHC of its common stock in order to raise capital to fund (i) the cash portion
of the consideration which will be payable to Midland's shareholders in the
merger and (ii) a $30 million capital contribution to the surviving company
which DHC is required to make under the terms of the Merger Agreement. The
proposed public offering of DHC's common stock is currently expected to take
place in the second quarter of calendar year 1996. DHC anticipates that if the
merger is consummated, DHC will be required under Statement of Financial
Accounting Standards No. 109 to increase its paid-in capital to recognize the
book value of a portion of its approximately $1.4 billion net operating loss
carryforward in light of the pro forma impact of the merger.
On April 24, 1996, DHC and Midland filed a preliminary joint proxy
statement with the Securities and Exchange Commission ("SEC") in connection with
the Merger Agreement.
On May 2, 1996, DHC was advised by the Federal Trade Commission ("FTC")
that the FTC had granted early termination of the waiting period in connection
with DHC's filing under the Hart-Scott-Rodino Antitrust Improvement's Act of
1976, as amended, with respect to the transaction.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits are required to be filed with this Report.
(b) During the quarter for which this Report is filed, DHC filed one
Report on Form 8-K dated February 26, 1996.
11
<PAGE>
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.
Date: May 13, 1996
DANIELSON HOLDING CORPORATION
(Registrant)
By: /s/ C. KIRK RHEIN, JR.
--------------------------------------
C. Kirk Rhein, Jr.
President & Chief Executive Officer
By: /s/ JAMES P. HEFFERNAN
--------------------------------------
James P. Heffernan
Chief Financial Officer
By: /s/ CLAUDIA C. COSENZA
--------------------------------------
Claudia C. Cosenza
Controller
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DANIELSON
HOLDING CORPORATION FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 162,916
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 602
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 168,570
<CASH> 294
<RECOVER-REINSURE> 21,075<F1>
<DEFERRED-ACQUISITION> 1,031
<TOTAL-ASSETS> 210,389
<POLICY-LOSSES> 124,258
<UNEARNED-PREMIUMS> 8,772
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 4,665
<NOTES-PAYABLE> 0
0
0
<COMMON> 1,537
<OTHER-SE> 64,285<F2>
<TOTAL-LIABILITY-AND-EQUITY> 210,389
8,968
<INVESTMENT-INCOME> 2,839
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 1,418<F3>
<BENEFITS> 6,671
<UNDERWRITING-AMORTIZATION> 1,410
<UNDERWRITING-OTHER> 4,530
<INCOME-PRETAX> 570
<INCOME-TAX> 13
<INCOME-CONTINUING> 570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 557
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<RESERVE-OPEN> 116,294
<PROVISION-CURRENT> 6,671
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 1,529
<PAYMENTS-PRIOR> 15,276
<RESERVE-CLOSE> 106,160
<CUMULATIVE-DEFICIENCY> 3,123
<FN>
<F1>Included in this caption are reinsurance recoverables on unpaid losses of
18,098 and reinsurance recoverables on paid losses of 2,977.
<F2>Included in stockholders' Equity-Other is treasury stock of 66.
<F3>Included in caption other income is Trust fee income of 1,085.
</FN>
</TABLE>
