UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the Fiscal Year Ended December 31, 1993
[ ] 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
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Commission File Number: 0-10956
EMC INSURANCE GROUP INC.
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(Exact Name of Registrant as Specified in its Charter)
Iowa 42-6234555
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 Mulberry Street, Des Moines, Iowa 50309
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (515) 280-2581
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1.00
-----------------------------
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation 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-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 1, 1994 was $31,263,947.
The number of shares outstanding of the registrant's common stock, $1.00
par value, on March 1, 1994, was 10,331,693.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement, which will be
filed with the Securities and Exchange Commission on or before April 30, 1994,
are incorporated by reference under Part III.
This document contains 162 sequentially numbered pages.
Index to Exhibits is on page number 95.
1
<PAGE>
PART I
------
ITEM 1. BUSINESS.
- ------- --------
GENERAL
- -------
EMC Insurance Group Inc. is an insurance holding company incorporated in
Iowa in 1974. EMC Insurance Group Inc. is approximately 67 percent owned by
Employers Mutual Casualty Company ("Employers Mutual"), a multiple-line
property and casualty insurance company organized as an Iowa mutual insurance
company in 1911 that is licensed in all 50 states and the District of
Columbia. EMC Insurance Group Inc. and its subsidiaries are referred to herein
as the "Company". Employers Mutual and all of its subsidiaries (including the
Company), which collectively have assets totaling $1,228,334,000 and written
premiums of $562,817,000, are referred to as the "EMC Insurance Companies".
The Company conducts its insurance business through four business
segments as follows:
...............................
: :
: EMC INSURANCE GROUP INC. :
:.............................:
: Excess and
Property and : Nonstandard Surplus Lines
Casualty : Risk Automobile Insurance
Insurance Reinsurance : Insurance Agency
................................:.................................
: : : :
: : : :
EMCASCO Insurance EMC Farm and City EMC
Company (EMCASCO) Reinsurance Insurance Underwriters,
Illinois EMCASCO Company Company Ltd.
Insurance Company (EMC Re) (Farm and (Underwriters,
(Illinois EMCASCO) City) Ltd.)
Dakota Fire Insurance
Company (Dakota Fire)
EMCASCO was formed in Iowa in 1958, Illinois EMCASCO was formed in
Illinois in 1976, and Dakota Fire was formed in North Dakota in 1957 for the
purpose of writing property and casualty insurance lines. These companies are
licensed to write insurance in a total of 35 states and are participants in a
pooling agreement with Employers Mutual. (See "Property and Casualty Insurance
- - Pooling Agreement").
EMC Re was formed in 1981 to assume reinsurance business of Employers
Mutual. EMC Re assumes 95 percent of Employers Mutual's assumed reinsurance
business, exclusive of certain reinsurance contracts, and is licensed to do
business in 11 states.
Farm and City was purchased in January of 1984. Farm and City was formed
in Iowa in 1962 to write nonstandard risk automobile insurance and is licensed
in 5 states.
2
<PAGE>
Underwriters, Ltd. was acquired in January of 1985. Underwriters, Ltd.
was formed in Iowa in 1975 as a broker for excess and surplus lines insurance
and acts as managing underwriter for such lines for several of the property and
casualty pool members. (See "Property and Casualty Insurance - Pooling
Agreement").
The Company sold its life insurance subsidiary to Employers Mutual on
December 31, 1991. All information presented in this report reflects the life
segment as a discontinued operation. Additional information regarding the
discontinued operation is included in note 5 of Notes to Consolidated Financial
Statements under Item 8 of this Form 10-K.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
- ---------------------------------------------
For information concerning the Company's revenues, operating income and
identifiable assets attributable to each of its industry segments over the past
three years, see note 9 of Notes to Consolidated Financial Statements under
Item 8 of this Form 10-K.
PROPERTY AND CASUALTY INSURANCE
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POOLING AGREEMENT
The three property and casualty insurance subsidiaries of the Company and
two subsidiaries of Employers Mutual (Union Insurance Company of Providence and
American Liberty Insurance Company) are parties to reinsurance pooling
agreements with Employers Mutual (collectively the "pooling agreement"). Under
the terms of the pooling agreement, each company cedes to Employers Mutual all
of its insurance business and assumes from Employers Mutual an amount equal to
its participation in the pool. All losses, settlement expenses and other
underwriting and administrative expenses are prorated among the parties on the
basis of participation in the pool. The investment programs and income tax
liabilities of the pool participants are not subject to the pooling agreement.
The purpose of the pooling agreement is to reduce the risk of an exposure
insured by any of the pool participants by spreading it among all the
companies. The pooling agreement produces a more uniform and stable
underwriting result from year to year for all companies in the pool than might
be experienced individually. In addition, each company benefits from the
capacity of the entire pool, rather than being limited to policy exposures of a
size commensurate with its own assets, and from the wide range of policy forms
and lines of insurance written and the variety of rate filings and commission
plans offered by each of the companies. A single set of reinsurance treaties
is maintained for the protection of all six companies in the pool.
Effective January 1, 1992, the aggregate participation of the property and
casualty insurance subsidiaries was increased to 22 percent from 17 percent.
In connection with this change in pool participation, the Company's liabilities
increased $31,427,861 and invested assets increased $29,402,411. The Company
reimbursed Employers Mutual $2,025,450 for commissions incurred to generate
this business.
3
<PAGE>
Employers Mutual voluntarily assumes reinsurance business from
nonaffiliated insurance companies and cedes 95 percent of this business to the
Company's reinsurance subsidiary, exclusive of certain reinsurance contracts.
Amounts not ceded to the reinsurance subsidiary have historically been retained
by Employers Mutual and have been subject to cession to the pool members.
Under the terms of the pooling agreement, the property and casualty
subsidiaries had a 22 percent participation (17 percent in 1991) in the amounts
assumed from these nonaffiliated companies.
Effective January 1, 1993, the pooling agreement was amended so that the
voluntary assumed reinsurance business written by Employers Mutual is no longer
subject to cession to the pool members. In connection with this change in the
pooling agreement, the Company's liabilities decreased $4,470,204 and invested
assets decreased $4,426,945. Employers Mutual reimbursed the Company $43,259
for commissions incurred to generate this business.
The parties to the pooling agreement have historically recorded amounts
assumed from the National Workers' Compensation Reinsurance Pool on a net
basis. Under this approach, reserves for outstanding losses and unearned
premiums were reported as liabilities under "Indebtedness to Related Party" in
the Company's consolidated financial statements. Effective December 31, 1993,
the parties to the pooling agreement began recording these amounts as
outstanding losses and unearned premiums. As a result, outstanding losses
increased $11,436,543, unearned premiums increased $1,711,288 and indebtedness
to related party decreased $13,147,831. There was no income effect from this
reclassification. Prior year consolidated financial statements have been
restated for comparative purposes.
SERVICES PROVIDED BY EMPLOYERS MUTUAL
Employers Mutual and the Company's property and casualty insurance
subsidiaries utilize many common services and facilities. These services are
provided to all parties to the pooling agreement by Employers Mutual. The
parties receive the benefit of greater expertise in a broader range of services
at a lower cost than would otherwise be possible if each party was individually
required to provide these services. Costs of these services are charged by
Employers Mutual to the pool, and each party shares in the total cost in
proportion to its participation percentage. Common data processing, claims,
financial, investment, actuarial, auditing, risk management, risk improvement,
marketing and underwriting services are among the services provided by
Employers Mutual for the Company's property and casualty insurance
subsidiaries. This interrelationship means that Employers Mutual has the
ability to determine the types and extent of services available to the property
and casualty insurance subsidiaries.
PRINCIPAL PRODUCTS
The Company's property and casualty insurance subsidiaries and the other
parties to the pooling agreement underwrite both commercial and personal lines
of insurance. The following table sets forth the aggregate direct written
premiums of all parties to the pooling agreement for the three years ended
December 31, 1993. The pooling agreement is continuous but may be amended or
terminated at the end of any calendar year as to any one or more parties.
4
<PAGE>
Percent Percent Percent
of of of
Line of Business 1993 Total 1992 Total 1991 Total
- ---------------- -------- ----- -------- ----- -------- -----
(Dollars in thousands)
Commercial Lines:
Automobile ............ $ 83,415 16.0% $ 77,102 14.9% $ 70,406 14.2%
Property .............. 72,743 13.9 71,856 13.9 68,710 13.8
Workers' compensation 134,529 25.8 141,245 27.2 136,594 27.5
Liability ............. 99,976 19.1 98,029 18.9 92,721 18.7
Other ................. 11,948 2.3 11,858 2.3 10,016 2.0
-------- ----- -------- ----- -------- -----
Total commercial lines 402,611 77.1 400,090 77.2 378,447 76.2
-------- ----- -------- ----- -------- -----
Personal Lines:
Automobile ............ 83,068 15.9 82,346 15.9 81,178 16.4
Property .............. 36,515 7.0 35,785 6.9 35,912 7.2
Liability ............. - - 200 - 988 .2
Other ................. 56 - 57 - 58 -
-------- ----- -------- ----- -------- -----
Total personal lines 119,639 22.9 118,388 22.8 118,136 23.8
-------- ----- -------- ----- -------- -----
Total ............ $522,250 100.0% $518,478 100.0% $496,583 100.0%
======== ===== ======== ===== ======== =====
MARKETING
Marketing of insurance by the parties to the pooling agreement is
conducted through 18 offices located throughout the United States and
approximately 2,400 independent agents. These offices maintain close contact
with the local market conditions and are able to react rapidly to change. Each
office employs underwriting, claims, marketing, and risk improvement
representatives, as well as field auditors and branch administrative
technicians. The offices are supported by Employers Mutual technicians and
specialists. Systems are in place to monitor the underwriting results of each
office and to maintain guidelines and policies consistent with the underwriting
and marketing environment in each region.
The following table sets forth the geographic distribution of the
aggregate direct written premiums of all parties to the pooling agreement for
the three years ended December 31, 1993.
1993 1992 1991
---- ---- ----
Arizona ............................ 3.7% 3.6% 3.6%
Illinois ........................... 6.8 7.0 6.6
Iowa ............................... 26.2 26.7 26.4
Kansas ............................. 7.4 7.1 6.0
Michigan ........................... 3.1 2.8 2.4
Minnesota .......................... 5.3 5.3 5.4
Nebraska ........................... 7.5 7.6 7.1
North Carolina ..................... 3.3 3.3 3.8
Rhode Island ....................... 3.2 2.9 3.2
Texas .............................. 2.8 3.2 4.3
Wisconsin .......................... 6.7 7.0 7.1
Other * ............................ 24.0 23.5 24.1
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
* Includes all other jurisdictions, none of which accounted for more than 3%.
5
<PAGE>
REINSURANCE CEDED
The parties to the pooling agreement cede insurance in the ordinary course
of business for the purpose of limiting their maximum loss exposure through
diversification of their risks. The pool participants also purchase
catastrophe reinsurance to cover multiple losses arising from a single event.
All major reinsurance treaties, with the exception of the pooling
agreement, are on an "excess of loss" basis whereby the reinsurer agrees to
reimburse the primary insurer for covered losses in excess of a predetermined
amount, up to a stated limit. Facultative reinsurance from approved domestic
markets, which provides reinsurance on an individual risk basis and requires
specific agreement of the reinsurer as to the limits of coverage provided, is
purchased when coverage by an insured is required in excess of treaty capacity
or where a high-risk type policy could expose the treaty reinsurance programs.
Retention levels are adjusted according to reinsurance market conditions
and the surplus position of Employers Mutual. The intercompany pooling
arrangement aids efficient buying of reinsurance since it allows for higher
retention levels and correspondingly decreased dependence on the reinsurance
marketplace.
A summary of the reinsurance treaties benefiting the parties to the
pooling agreement follows:
Type of Coverage Retention Limits
---------------- --------- ------
Property per risk ....... $2,000,000 100 percent of $18,000,000
Property catastrophe .... $9,000,000 95 percent of $51,000,000
Casualty ................ $2,000,000 100 percent of $43,000,000
Umbrella ................ $5,000,000 100 percent of $ 5,000,000
The property per risk, property catastrophe and casualty reinsurance
programs are handled by a reinsurance intermediary (broker). The reinsurance
of those programs is syndicated to approximately 90 domestic and foreign
reinsurers that meet Employers Mutual's financial security guidelines. The
umbrella reinsurance is written by one large domestic direct writing reinsurer
(General Reinsurance Corporation).
Although reinsurance does not discharge the original insurer from its
primary liability to its policyholders, it is the practice of insurers for
accounting purposes to treat reinsured risks as risks of the reinsurer since
the primary insurer would only reassume liability in those situations where the
reinsurer is unable to meet the obligations it assumed under the reinsurance
agreements. The collectability of reinsurance is subject to the solvency of
the reinsurers.
6
<PAGE>
The major participants in the pool members' reinsurance program are
presented below. These percentages represent the reinsurers' share of the
total reinsurance protection under all coverages. Each type of coverage is
purchased in layers, and an individual reinsurer may participate in more than
one coverage and at various layers within these coverages.
Percent
of Total 1993
Reinsurance Best's
Reinsurer Protection Rating
- --------- ----------- ------
Underwriters at Lloyd's of London .................. 19.9% (1)
Insurance Company of North America ................. 7.2 A-
Prudential Reinsurance Company ..................... 6.0 A
General Reinsurance Corporation .................... 3.6 A++
NAC Reinsurance Corporation ........................ 3.3 A
Hartford Fire Insurance Company .................... 3.0 A+
AXA Reinsurance Company ............................ 2.7 A
(1) Not rated; however, the individual members of the Lloyd's organization are
required to pledge their entire net worth toward the satisfaction of their
liabilities. In response to reported losses of $3.8 billion, $4.2 billion,
$1.9 billion (estimated) and $758 million (estimated) in 1989, 1990, 1991
and 1992, respectively, Lloyd's has developed a business plan to improve
its profitability. The plan is described in detail in the "Rowland" report
published by Lloyd's in April, 1993. This plan outlines several
significant changes: a new management team will play a more active role in
the administration of affairs, corporate capital will be allowed, names are
to continue with unlimited liability, "NewCo" will be incorporated with
assets of 4.0 billion pounds sterling to manage old liabilities, a table
will be published on an annual basis of the best syndicate performers, and
independent regulations will be enforced. All of these changes may help to
reduce the risk of doing business with Lloyd's. In addition, standing
behind the means of individual members is the Lloyd's Central Fund. This
Fund is considered by Lloyd's to be a safety net, whereby Lloyd's
membership as a whole can be compelled to make up deficiencies caused by
individual names defaulting. There is also a multi-billion dollar trust
fund to secure Lloyd's obligations to United States policyholders.
The Company has not experienced any difficulty in collecting its
reinsurance receivables from any Lloyd's syndicates. However, the
substantial losses noted above could affect the ability of certain
syndicates to continue to trade and the ability of the Company to continue
to place business with the syndicates.
Premiums ceded by all parties to the pooling agreement and by the property
and casualty insurance subsidiaries for the year ended December 31, 1993 are
presented below. Each type of reinsurance coverage is purchased in layers, and
an individual reinsurer may participate in more than one coverage and at
various layers within these coverages. Since each layer of each coverage is
priced separately, with the lower layers being more expensive than the upper
layers, a reinsurer's overall participation in a reinsurance program does not
necessarily correspond to the amount of premiums it receives.
7
<PAGE>
Premiums Ceded By
------------------------
Property
All Pool and Casualty
Reinsurer Members Subsidiaries
- --------- ----------- ------------
General Reinsurance Corporation ...................... $ 3,517,725 $ 773,900
Underwriters at Lloyd's London ....................... 1,670,393 367,486
Hartford Steam Boiler Inspection and Insurance Company 1,138,371 250,442
Hartford Fire Insurance Company ...................... 632,192 139,082
Michigan Mutual Insurance Company .................... 629,529 138,496
Pennsylvania Mfg. Assn. Insurance Company ............ 629,529 138,496
Transamerica Insurance Company ....................... 553,987 121,877
Utica Mutual Insurance Company ....................... 497,328 109,412
Other Reinsurers ..................................... 9,734,638 2,141,621
----------- ------------
Total ............................................. $19,003,692 $ 4,180,812
=========== ============
The parties to the pooling agreement also cede reinsurance on both a
voluntary and a mandatory basis to state and national organizations in
connection with various workers' compensation and assigned risk programs.
Premiums ceded by all parties to the pooling agreement and by the property and
casualty insurance subsidiaries for the year ended December 31, 1993 are
presented below.
Premiums Ceded By
------------------------
Property
All Pool and Casualty
Reinsurer Members Subsidiaries
- --------- ----------- ------------
Wisconsin Compensation Rating Bureau ................. $13,887,977 $ 3,055,355
National Workers' Compensation Reinsurance Pool ...... 13,297,246 2,925,394
North Carolina Reinsurance Facility .................. 1,387,107 305,164
Michigan Catastrophe Claims Association .............. 814,504 179,191
Other reinsurers ..................................... 252,574 55,566
----------- ------------
$29,639,408 $ 6,520,670
=========== ============
In formulating reinsurance programs, Employers Mutual is selective in its
choice of reinsurers. Employers Mutual selects reinsurers on the basis of
financial stability and long-term relationships, as well as price of the
coverage. Reinsurers are generally required to have a Best's rating of "A-" or
higher and policyholders surplus of $50,000,000 ($100,000,000 for casualty
reinsurance).
For information concerning amounts due the Company from reinsurers for
losses and settlement expenses and prepaid reinsurance premiums and the effect
of reinsurance on premiums written and earned and losses and settlement
expenses incurred, see "Property and Casualty Insurance Subsidiaries,
Reinsurance Subsidiary and Nonstandard Risk Automobile Insurance Subsidiary -
Reinsurance Ceded".
8
<PAGE>
RELATIONSHIP BETWEEN NET PREMIUMS WRITTEN AND SURPLUS
The volume of insurance which a property and casualty insurance company
writes under industry standards is a multiple of its surplus calculated in
accordance with statutory accounting practices. Generally, a ratio of 3 to 1
or less is considered satisfactory. The ratios of the pool members for the
past three years are as follows:
Year ended December 31,
--------------------------------
1993 1992 1991
---- ---- ----
Employers Mutual .................. 1.33 1.32 1.43
EMCASCO ........................... 2.51 2.56 2.06
Illinois EMCASCO .................. 2.44 2.65 2.17
Dakota Fire ....................... 2.18 2.49 2.26
American Liberty .................. 1.38 1.38 1.40
Union Mutual ...................... 1.63 1.68 1.70
OUTSTANDING LOSSES AND SETTLEMENT EXPENSES
The property and casualty insurance subsidiaries' reserve information is
included in the property and casualty loss reserve development for 1993. See
"Property and Casualty Insurance Subsidiaries, Reinsurance Subsidiary and
Nonstandard Risk Automobile Insurance Subsidiary - Outstanding Losses and
Settlement Expenses".
COMPETITION
The property and casualty insurance business is highly competitive. The
Company competes in the United States insurance market with numerous insurers,
many of which have greater financial resources than the Company. Competition
in the types of insurance in which the Company is engaged is based on many
factors, including the perceived overall financial strength of the insurer,
premiums charged, contract terms and conditions, services offered, speed of
claim payments, reputation and experience. In this competitive environment,
insureds have tended to favor large, financially strong insurers and the
Company faces the risk that insureds may become more selective and may seek
larger and/or more highly rated insurers.
BEST'S RATING
A.M. Best rates insurance companies based on their relative financial
strength and ability to meet their contractual obligations. The "A
(Excellent)" rating assigned to the Company's property and casualty insurance
subsidiaries and the other pool members is based on the pool members' 1992
operating results and financial condition as of December 31, 1992. Best's
reevaluates its ratings from time to time (normally on an annual basis) and
there can be no assurance that the Company's property and casualty insurance
subsidiaries and the other pool members will maintain their current rating in
the future. Management believes that a Best's rating of "A (Excellent)" or
better is important to the Company's business since many insureds require that
companies with which they insure be so rated. Best's defines both "A" and "A-"
as "Excellent". Best's publications indicate that these ratings are assigned
to companies which Best's believes have achieved excellent overall performance
and have a strong ability to meet their obligations over a long period of time.
Best's ratings are based upon factors of concern to policyholders and insurance
agents and are not necessarily directed toward the protection of investors.
9
<PAGE>
REINSURANCE
- -----------
EMC Re is a property and casualty treaty reinsurer with a concentration in
property lines. EMC Re began its operations in 1981 with a five percent quota
share assumption of Employers Mutual's assumed reinsurance business. The quota
share percentage has been gradually increased over the years and since 1988 EMC
Re has assumed a 95 percent quota share of Employers Mutual's assumed
reinsurance business. EMC Re receives 95 percent of all premiums and assumes
95 percent of all related losses and expenses of this business. EMC Re does
not reinsure any of Employers Mutual's direct insurance business, nor any
"involuntary" facility or pool business that Employers Mutual assumes pursuant
to state law. In addition, EMC Re is not liable for credit risk in connection
with the insolvency of any reinsurers of Employers Mutual.
Effective January 1, 1993, the quota share agreement with Employers Mutual
was amended so that losses in excess of $1,000,000 per event are retained by
Employers Mutual. EMC Re pays an annual override commission to Employers
Mutual for this additional protection, which totaled $1,808,527 in 1993.
Employers Mutual retained losses totaling $615,000 under this agreement in
1993.
Effective June 30, 1993, Employers Mutual commuted the portion of the
quota share agreement that pertains to a casualty pool that is in a run-off
position. In connection with this change in the quota share agreement, the
Company's liabilities decreased $19,783,037 and invested assets decreased
$17,806,179. The reserve discount amount of $1,976,858 was recorded as
deferred income and is being amortized into operations over the estimated
settlement period of the reserves, which is ten years. During 1993, $259,217
was recognized as income.
Effective October 31, 1993, Employers Mutual commuted the portion of the
quota share agreement that pertains to a voluntary pool that handles large
"highly protected" risks. This pool has experienced deteriorating underwriting
results over the last several years and Employers Mutual is presently
considering whether to continue its participation in the pool beyond 1994. In
connection with this change in the quota share agreement, the Company's
liabilities decreased $3,827,201 and invested assets decreased $2,619,776.
Employers Mutual reimbursed the Company $1,207,425 for commissions incurred to
generate this business. No reserve discount was calculated as this business
involves short-tail property coverage.
REINSURANCE CEDED
In conjunction with the change in the quota share agreement noted above,
EMC Re terminated its catastrophe reinsurance treaties with Employers Mutual
and other nonaffiliated reinsurers effective January 1, 1993. The reinsurance
treaty with Employers Mutual paid losses in excess of $1,000,000 resulting from
any one catastrophe, subject to a maximum loss of $3,000,000. Maximum recovery
was limited to $6,000,000. The catastrophe protection placed on the open
market amounted to 95 percent of $8,000,000 in excess of $4,000,000. Ceded
reinsurance on the books at December 31, 1992 is being allowed to run-off.
10
<PAGE>
EMC Re has an aggregate "excess of loss" treaty with Employers Mutual
which provides protection from a large accumulation of retentions resulting
from multiple catastrophes in any one calendar year. The coverage provided is
$2,000,000 excess of $2,500,000 ($2,000,000 in 1991) aggregate losses retained,
excess of $200,000 per event. Maximum recovery is limited to $4,000,000 per
accident year.
For information concerning amounts due the Company from reinsurers for
losses and settlement expenses and prepaid reinsurance premiums and the effect
of reinsurance on premiums written and earned and losses and settlement
expenses incurred, see "Property and Casualty Insurance Subsidiaries,
Reinsurance Subsidiary and Nonstandard Risk Automobile Insurance Subsidiary -
Reinsurance Ceded".
OUTSTANDING LOSSES AND SETTLEMENT EXPENSES
EMC Re's reserve information is included in the property and casualty loss
reserve development for 1993. See "Property and Casualty Insurance
Subsidiaries, Reinsurance Subsidiary and Nonstandard Risk Automobile Insurance
Subsidiary - Outstanding Losses and Settlement Expenses".
COMPETITION
Competition for reinsurance business abated somewhat in 1993. This
reduction in competition is primarily due to reduced market capacity for
catastrophe reinsurance, which has resulted in higher rates for this segment of
business.
EMC Re continues to reduce its aggregate liabilities in hurricane exposed
areas in favor of writing new business away from coastal areas. Despite a
decrease in overall exposure, written premiums are expected to increase in 1994
due to the increased rates currently available.
BEST'S RATING
The most recent Best's Property Casualty Key Rating Guide gives EMC Re an
A (Excellent) policyholders' rating. Best's ratings are based upon factors of
concern to policyholders and insurance agents and are not necessarily directed
toward the protection of investors.
NONSTANDARD RISK AUTOMOBILE INSURANCE
- -------------------------------------
Farm and City was acquired by the Company in January of 1984. Farm and
City specializes in insuring private passenger automobile risks that are found
to be unacceptable in the normal automobile market.
MARKETING
Farm and City is admitted in a five state area which includes Iowa,
Kansas, Nebraska, North Dakota and South Dakota. Personal automobile policies
are solicited through the American Agency System and are written for two, three
or six month terms. Limits of liability are offered equal to the state
responsibility laws. Physical damage coverages are written at normal insurance
deductibles.
11
<PAGE>
REINSURANCE CEDED
Farm and City has a reinsurance treaty on an "excess of loss" basis with
Employers Mutual, which provides reinsurance for 100 percent of each loss in
excess of $100,000, up to $1,000,000. No recoveries have been made under this
treaty.
OUTSTANDING LOSSES AND SETTLEMENT EXPENSES
Farm and City's reserve information is included in the property and
casualty loss reserve development for 1993. See "Property and Casualty
Insurance Subsidiaries, Reinsurance Subsidiary and Nonstandard Risk Automobile
Insurance Subsidiary - Outstanding Losses and Settlement Expenses".
For information concerning amounts due the Company from reinsurers for
losses and settlement expenses and prepaid reinsurance premiums and the effect
of reinsurance on premiums written and earned and losses and settlement
expenses incurred, see "Property and Casualty Insurance Subsidiaries,
Reinsurance Subsidiary and Nonstandard Risk Automobile Insurance Subsidiary -
Reinsurance Ceded".
COMPETITION
The nonstandard risk marketplace is very competitive. Policies are
written for relatively short periods of time and insureds continually search
for the most attractive rates. The number of companies willing to write
nonstandard coverage remained fairly constant during 1993, as did availability
in the standard market. Nevertheless, Farm and City was able to increase its
market share through competitive pricing.
Demand for nonstandard coverage, which is primarily a result of
availability in the standard market, is expected to remain fairly constant in
1994. Future premium growth will therefore continue to be dependent upon
competitive pricing and expansion into new markets.
BEST'S RATING
The most recent Best's Property Casualty Key Rating Guide gives Farm and
City an A+ (Superior) policyholders' rating. Best's ratings are based upon
factors of concern to policyholders and insurance agents and are not
necessarily directed toward the protection of investors.
PROPERTY AND CASUALTY INSURANCE SUBSIDIARIES, REINSURANCE SUBSIDIARY AND
- ------------------------------------------------------------------------
NONSTANDARD RISK AUTOMOBILE INSURANCE SUBSIDIARY.
- ------------------------------------------------
STATUTORY COMBINED RATIOS
The following table sets forth the Company's subsidiaries' statutory
combined ratios and the property and casualty insurance industry average for
the five years ended December 31, 1993. The combined ratios below are the sum
of the following: the loss ratio, calculated by dividing losses and settlement
expenses by net premiums earned, and the expense ratio, calculated by dividing
underwriting expenses and policyholder dividends by net premiums written.
12
<PAGE>
Generally, if the combined ratio is below 100 percent, a company has an
underwriting profit; if it is above 100 percent, a company has an underwriting
loss.
Year ended December 31,
--------------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Property and casualty insurance
Loss ratio .................... 72.6% 76.1% 76.8% 73.8% 68.1%
Expense ratio ................. 30.9 30.1 30.5 30.8 32.9
------ ------ ------ ------ ------
Combined ratio .............. 103.5% 106.2% 107.3% 104.6% 101.0%
====== ====== ====== ====== ======
Reinsurance
Loss ratio .................... 77.7% 109.1% 82.9% 92.6% 126.1%
Expense ratio ................. 33.1 34.8 36.6 37.2 37.4
------ ------ ------ ------ ------
Combined ratio .............. 110.8% 143.9% 119.5% 129.8% 163.5%
====== ====== ====== ====== ======
Nonstandard risk automobile insurance
Loss ratio .................... 94.3% 92.3% 72.4% 77.8% 67.4%
Expense ratio ................. 23.7 23.7 25.2 24.7 29.7
------ ------ ------ ------ ------
Combined ratio .............. 118.0% 116.0% 97.6% 102.5% 97.1%
====== ====== ====== ====== ======
Total insurance operations
Loss ratio .................... 75.6% 83.4% 77.8% 78.0% 79.3%
Expense ratio ................. 30.7 30.5 31.4 31.5 33.4
------ ------ ------ ------ ------
Combined ratio .............. 106.3% 113.9% 109.2% 109.5% 112.7%
====== ====== ====== ====== ======
Property and casualty insurance
industry averages (1)
Loss ratio .................... 81.8% 88.1% 81.2% 82.3% 82.0%
Expense ratio ................. 27.4 27.6 27.7 27.3 27.2
------ ------ ------ ------ ------
Combined ratio .............. 109.2% 115.7% 108.9% 109.6% 109.2%
====== ====== ====== ====== ======
(1) As reported by A.M. Best Company. The ratio for 1993 is an estimate; the
actual combined ratio is not currently available.
13
<PAGE>
REINSURANCE CEDED
The following table presents amounts due to the Company from reinsurers for
losses and settlement expenses and prepaid reinsurance premiums as of December
31, 1993:
1993
Amount Percent Best's
Recoverable of Total Rating
----------- -------- ------
Wisconsin Compensation Rating Bureau .. $ 9,328,318 43.8% (1)
National Workers' Compensation
Reinsurance Pool .................... 2,862,700 13.4 (1)
Employers Mutual Casualty Company ..... 1,250,209 5.9 A
General Reinsurance Corporation ....... 1,074,942 5.0 A++
North Carolina Reinsurance Facility ... 618,930 2.9 (2)
American Re-Insurance Company ......... 596,830 2.8 A+
New England Reinsurance Corporation ... 474,113 2.2 (3)
Old Republic Insurance Company ........ 442,972 2.1 A+
Minnesota Workers' Compensation
Reinsurance Association ............. 398,992 1.9 (4)
Allstate Insurance Company ............ 351,076 1.6 A-
Underwriters at Lloyd's London ........ 341,961 1.6 (3)
Other Reinsurers ...................... 3,568,547 16.8
----------- --------
Total ........................... $21,309,590(5) 100.0%
=========== ========
(1) Amounts recoverable reflect the property and casualty insurance
subsidiaries' pool participation percentage of amounts ceded to these
organizations by Employers Mutual in connection with its role as "service
carrier". Under these arrangements, Employers Mutual writes business for
these organizations on a direct basis and then cedes 100 percent of the
business to these organizations. Credit risk associated with these
amounts is minimal as all companies writing direct business in the states
that participate in these organizations are responsible for the
liabilities of such organizations on a pro rata basis.
(2) The amount recoverable reflects the property and casualty insurance
subsidiaries' pool participation percentage of amounts ceded to this
organization by the pool members in conjunction with the state run
assigned risk program ("state fund"). Under this program, all insurers
writing direct business in the state of North Carolina are required by law
to write insurance for risks that are not insurable in the normal
marketplace. Business written under this program is ceded 100 percent to
the state fund and each respective company assumes from the state fund its
share of such business in proportion to its direct writings in the state.
Credit risk associated with this amount is minimal as all companies
writing direct business in the state are responsible for the liabilities
of this organization on a pro rata basis.
(3) Not rated.
14
<PAGE>
(4) The amount recoverable reflects the property and casualty insurance
subsidiaries' pool participation percentage of amounts ceded to this
association by the pool members under a reinsurance contract that provides
protection for workers' compensation losses in excess of $430,000 per
occurrence. Credit risk associated with this amount is minimal as all
companies writing direct workers' compensation business in the state of
Minnesota are responsible for the liabilities of this association on a pro
rata basis.
(5) The total amount at December 31, 1993 represented $1,234,983 in paid
losses and settlement expenses recoverable, $17,242,423 in unpaid losses
and settlement expenses recoverable and $2,832,184 in unearned premiums
recoverable.
The effect of reinsurance on premiums written and earned and losses and
settlement expenses incurred for the years ended December 31, 1993, 1992 and
1991 is presented below. Amounts for the year ended December 31, 1993 reflect
(1) the change in the property and casualty insurance subsidiaries' pooling
agreement whereby effective January 1, 1993, the voluntary assumed reinsurance
business written by Employers Mutual is no longer subject to cession to the
pool members and (2) the change in the reinsurance subsidiary's quota share
agreement whereby effective January 1, 1993 losses in excess of $1,000,000 per
event are retained by Employers Mutual and the reinsurance subsidiary therefore
no longer purchases catastrophe protection. (See notes 2 and 3 of Notes to
Consolidated Financial Statements under Item 8 of this Form 10-K).
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Premiums written:
Direct ........................ $135,277,129 $138,829,576 $139,292,883
Assumed from nonaffiliates .... 6,636,942 16,467,613 9,477,850
Assumed from affiliates ....... 147,620,705 150,070,741 108,847,230
Ceded to nonaffiliates ........ (10,701,482) (17,721,207) (11,113,238)
Ceded to affiliates ........... (120,898,914) (129,826,840) (130,675,014)
------------ ------------ ------------
Net premiums written ....... $157,934,380 $157,819,883 $115,829,711
============ ============ ============
Premiums earned:
Direct ........................ $137,141,457 $142,391,771 $134,675,865
Assumed from nonaffiliates .... 6,758,364 14,980,642 9,056,890
Assumed from affiliates ....... 148,366,487 140,442,245 106,783,050
Ceded to nonaffiliates ........ (11,507,217) (16,775,394) (11,051,459)
Ceded to affiliates ........... (124,321,553) (133,628,977) (126,045,108)
------------ ------------ ------------
Net premiums earned ........ $156,437,538 $147,410,287 $113,419,238
============ ============ ============
Losses and settlement expenses
incurred:
Direct ........................ $ 97,842,980 $112,579,261 $101,910,680
Assumed from nonaffiliates .... 6,575,099 17,415,319 8,671,495
Assumed from affiliates ....... 107,369,274 114,359,445 77,845,953
Ceded to nonaffiliates ........ (5,845,414) (16,862,082) (4,735,272)
Ceded to affiliates ........... (85,586,640) (105,404,110) (95,587,937)
------------ ------------ ------------
Net losses and settlement
expenses incurred ........ $120,355,299 $122,087,833 $ 88,104,919
============ ============ ============
15
<PAGE>
OUTSTANDING LOSSES AND SETTLEMENT EXPENSES
The Company maintains reserves for losses and settlement expenses with
respect to both reported and unreported claims. The amount of reserves for
reported claims is primarily based upon a case-by-case evaluation of the
specific type of claim, knowledge of the circumstances surrounding each claim
and the policy provisions relating to the type of loss. Reserves on assumed
business are the amounts reported by the ceding company.
The amount of reserves for unreported claims is determined on the basis
of statistical information for each line of insurance with respect to the
probable number and nature of claims arising from occurrences which have not
yet been reported. Established reserves are closely monitored and are
frequently recomputed using a variety of formulas and statistical techniques
for analyzing current actual claim cost, frequency data and other economic and
social factors.
The Company does not discount reserves. Inflation is implicitly provided
for in the reserving function through analysis of cost trends, reviews of
historical reserving results and projections of future economic conditions.
Large ($25,000 and over) incurred and reported gross reserves are reviewed
regularly for adequacy. In addition, long-term and lifetime medical claims are
periodically reviewed for cost trends and the applicable reserves are
appropriately revised.
Loss reserves are estimates at a given time of what the insurer expects
to pay on incurred losses, based on facts and circumstances then known.
During the loss settlement period, which may be many years, additional facts
regarding individual claims become known, and accordingly, it often becomes
necessary to refine and adjust the estimates of liability on a claim.
Settlement expense reserves are intended to cover the ultimate cost
of investigating claims and defending lawsuits arising from claims. These
reserves are established each year based on previous years' experience to
project the ultimate cost of settlement expenses. To the extent that
adjustments are required to be made in the amount of outstanding loss reserves
each year, settlement expense reserves are correspondingly revised.
Despite the inherent uncertainties of estimating insurance company loss
and settlement expense reserves, management believes that the Company's
reserves are being calculated in accordance with sound actuarial practices and,
based upon current information, that the Company's reserves for losses and
settlement expenses at December 31, 1993 are adequate.
Over the past several years, the Company's financial results have been
affected by losses associated with environmental exposures. The Company's
environmental claims activity is predominately from hazardous waste and
pollution-related claims. The parties to the pooling agreement have not
written primary coverage for the major oil or chemical companies; the greatest
exposure arises out of commercial general liability and umbrella policies
issued to municipalities during the 1970s which allegedly cover contamination
emanating from closed landfills. The remaining exposure is from claims from
small regional operations or local businesses involved with disposing wastes at
dump sites or having pollution on their own property due to hazardous material
use or leaking underground storage tanks. These insureds include small
manufacturing operations, tool makers, automobile dealerships, contractors,
gasoline stations and real estate developers.
16
<PAGE>
Prior to July 1, 1993, the Company's reinsurance subsidiary assumed
reinsurance business that included environmental exposures from a casualty pool
that is in a run-off position. Effective June 30, 1993, Employers Mutual
commuted the portion of the quota share agreement that pertains to this pool.
As a result of this commutation, the Company's environmental reserves decreased
$502,818 on June 30, 1993. Environmental losses associated with this pool
totaled $197,859, $161,693 and $152,384 in 1993, 1992 and 1991, respectively.
The following table presents selected data on environmental losses and
settlement expenses incurred and reserves outstanding for the Company:
Year Ended December 31,
--------------------------------
1993 1992 1991
---------- ---------- ----------
Total losses incurred ....................... $ 485,197 $ 563,652 $ 304,833
Total settlement expenses incurred .......... 85,282 43,845 82,345
---------- ---------- ----------
Total losses and settlement expenses
incurred ................................ $ 570,479 $ 607,497 $ 387,178
========== ========== ==========
Loss reserves ............................... $ 676,511 $ 873,292 $ 676,398
Settlement expense reserves ................. 235,426 197,808 173,274
---------- ---------- ----------
Total loss and settlement expense reserves $ 911,937 $1,071,100 $ 849,672
========== ========== ==========
Number of outstanding claims ................ 63 74 78
========== ========== ==========
Estimating environmental reserves is one of the most difficult aspects of
the reserving process. The legal definition of environmental damage is still
evolving, the assignment of responsibility varies widely by state, defense
costs are often much greater than the claim costs and claims often emerge long
after the policy has expired, making assignment of damages to the time period
covered by a particular policy difficult. Management periodically reviews the
adequacy of environmental reserves as part of the reserve review process and
believes that the stated reserves are adequate.
The Company has two policyholders which have filed claims at three
separate sites in connection with the transportation of hazardous waste to
landfills. Included in the above table at December 31, 1993 are five pollution
sites which involve multiple claims as follows:
Number
Pollution site of claims
-------------- ---------
Closed landfill ................... 4
Closed landfill ................... 2
Oil recycling facility ............ 2
Battery reclamation site .......... 2
Battery reclamation site .......... 2
Pollution coverage is being disputed in 40 of the 63 claims which were
outstanding at December 31, 1993. Coverage is disputed in all claims involving
the removal of underground storage tanks or the clean up of (i) underground
storage tank sites, (ii) landfills based on ownership of the landfill or the
generation of waste disposed of at landfills or (iii) insured property.
17
<PAGE>
Pollution coverage is not being disputed in the remaining 23 claims which
were outstanding as of December 31, 1993. These claims are the result of
petroleum misdeliveries or spills where coverage has been accepted under a
commercial automobile policy that had an applicable endorsement.
The Company has 39 bodily injury claims involving asbestosis as of
December 31, 1993. In each case, a former insured has been named as one of
multiple defendants covering exposure over many years. The Company has not
paid any defense costs or loss payments and there is no evidence of injury as a
result of exposure to the Company's insured's products during the policy
periods.
Prior to July 1, 1993, the Company's reinsurance subsidiary assumed
reinsurance business that included asbestosis related exposures from a casualty
pool that is in a run-off position. Effective June 30, 1993, Employers Mutual
commuted the portion of the quota share agreement that pertains to this pool.
As a result of this commutation, the Company's asbestosis related reserves
decreased $1,037,738 on June 30, 1993. Asbestosis related losses associated
with this pool totaled $226,470, $330,653 and $292,478 in 1993, 1992 and 1991,
respectively.
The following table presents selected data on asbestosis related losses
and settlement expenses incurred and reserves outstanding for the Company:
Year Ended December 31,
--------------------------------
1993 1992 1991
---------- ---------- ----------
Total losses incurred ....................... $ 198,267 $ 347,764 $ 262,575
Total settlement expenses incurred .......... (3,299) 7,995 (5,690)
---------- ---------- ----------
Total losses and settlement expenses
incurred ................................ $ 194,968 $ 355,759 $ 256,885
========== ========== ==========
Loss reserves ............................... $ 49,161 $ 982,197 $ 646,022
Settlement expense reserves ................. 16,616 20,966 11,767
---------- ---------- ----------
Total loss and settlement expense reserves $ 65,777 $1,003,163 $ 657,789
========== ========== ==========
Number of outstanding claims ................ 39 44 44
========== ========== ==========
18
<PAGE>
The following table sets forth a reconciliation of beginning and ending
reserves for losses and settlement expenses of the property and casualty
insurance subsidiaries, the reinsurance subsidiary and the nonstandard risk
automobile insurance subsidiary. Amounts presented are on a net basis, with a
reconciliation of beginning and ending reserves to the gross amounts presented
in the consolidated financial statements in accordance with SFAS 113. (See
note 1 of Notes to Consolidated Financial Statements.)
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Gross reserves for losses and
settlement expenses, beginning
of year .......................... $215,388,865 $158,814,130 $151,242,287
Ceded reserves for losses and
settlement expenses, beginning
of year .......................... 25,253,507 13,951,033 16,484,739
------------ ------------ ------------
Net reserves for losses and
settlement expenses, beginning
of year .......................... 190,135,358 144,863,097 134,757,548
------------ ------------ ------------
Incurred losses and
settlement expenses:
- -------------------------
Provision for insured events
of the current year .............. 119,896,526 116,615,951 83,477,534
Increase in provision for
insured events of prior years .... 458,773 5,471,882 4,627,385
------------ ------------ ------------
Total incurred losses and
settlement expenses ...... $120,355,299 $122,087,833 $ 88,104,919
------------ ------------ ------------
19
<PAGE>
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Payments:
- ---------
Losses and settlement expenses
attributable to insured events
of the current year .............. $ 47,600,851 $ 46,436,360 $ 35,398,095
Losses and settlement expenses
attributable to insured events
of prior years ................... 45,508,460 53,810,715 42,601,275
Adjustment to beginning reserves
due to the change in the
property and casualty insurance
subsidiaries' pooling agreement .. 4,373,629 (23,431,503) -
Adjustment to reserves due to the
commutation of two reinsurance
contracts under the reinsurance
subsidiary's quota share agreement 21,904,001 - -
Adjustment to reserves due to the
gross-up of amounts associated
with the National Workers'
Compensation Reinsurance Pool .... 11,436,543 - -
------------ ------------ ------------
Total payments .............. 130,823,484 76,815,572 77,999,370
------------ ------------ ------------
Net reserves for losses and
settlement expenses, end of year 179,667,173 190,135,358 144,863,097
Ceded reserves for losses and
settlement expenses, end of year 17,454,679 25,253,507 13,951,033
------------ ------------ ------------
Gross reserves for losses and
settlement expenses, end of year $197,121,852 $215,388,865 $158,814,130
============ ============ ============
20
<PAGE>
The following table shows the calendar year development of the unpaid loss
and settlement expense reserves of the property and casualty insurance
subsidiaries, the reinsurance subsidiary and the nonstandard risk automobile
insurance subsidiary (beginning in 1984). Amounts presented are on a net basis
with (i) a reconciliation of the net loss and settlement expense reserves at
the end of 1992 and 1993 to the gross amounts presented in the consolidated
financial statements in accordance with SFAS 113 and (ii) disclosure of the
gross re-estimated loss and settlement expense reserves as of the end of 1993
and the related re-estimated reinsurance receivables.
Reflected in this table is (1) the increase in the reinsurance
subsidiary's quota share assumption of Employers Mutual's assumed reinsurance
business from 50 percent in 1983 to 75 percent in 1984 and 95 percent in 1988,
(2) the increase in the property and casualty insurance subsidiaries'
collective participation in the pool from 17 percent to 22 percent in 1992, (3)
the change in the pooling agreement whereby effective January 1, 1993 the
voluntary reinsurance business written by Employers Mutual is no longer subject
to cession to the pool members, and (4) the commutation of two reinsurance
contracts under the reinsurance subsidiary's quota share agreement in 1993. In
addition, prior year amounts have been restated to reflect the gross-up of
reserve amounts associated with the National Workers' Compensation Reinsurance
Pool.
In evaluating the table, it should be noted that each cumulative
redundancy (deficiency) amount includes the effects of all changes in reserves
for prior periods. Conditions and trends that have affected development of the
liability in the past, such as the time lag in the reporting of assumed
reinsurance business and the high rate of inflation associated with medical
services and supplies, may not necessarily occur in the future. Accordingly,
it may not be appropriate to project future development of reserves based on
this table.
21
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------------------------------------
(Dollars in thousands) 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATUTORY RESERVES FOR LOSSES
AND SETTLEMENT EXPENSES ...... $ 57,001 71,775 67,921 90,357 109,088 121,667 127,870 131,623 139,317 180,797 181,471
NATIONAL WORKERS' COMPENSATION
REINSURANCE POOL
RECLASSIFICATION ............. 1,007 949 1,028 1,561 2,378 2,911 3,855 4,338 6,830 11,364 -
STATUTORY RESERVES AFTER
RECLASSIFICATION ............. 58,008 72,724 68,949 91,918 111,466 124,578 131,725 135,961 146,147 192,161 181,471
GAAP ADJUSTMENTS:
SALVAGE AND SUBROGATION ...... (880) (950) (1,130) (1,000) (930) (930) (930) (1,203) (1,284) (2,026) (1,804)
RESERVES FOR LOSSES AND
SETTLEMENT EXPENSES .......... 57,128 71,774 67,819 90,918 110,536 123,648 130,795 134,758 144,863 190,135 179,667
PAID (CUMULATIVE) AS OF:
One year later ............... 13,638 34,055 27,040 25,874 23,805 34,648 42,357 42,601 30,379 77,589 -
Two years later .............. 31,594 47,026 41,667 36,199 44,662 57,511 65,965 58,242 78,096 - -
Three years later ............ 37,840 56,283 48,477 52,014 61,052 72,121 76,356 95,154 - - -
Four years later ............. 42,902 59,882 59,885 63,902 71,550 79,092 106,432 - - - -
Five years later ............. 45,297 68,147 69,214 71,859 77,230 105,513 - - - - -
Six years later .............. 51,510 72,860 75,371 76,748 101,714 - - - - - -
Seven years later ............ 54,236 76,570 79,141 97,533 - - - - - - -
Eight years later ............ 56,316 78,102 96,470 - - - - - - - -
Nine years later ............. 56,892 88,952 - - - - - - - - -
Ten years later .............. 62,426 - - - - - - - - - -
RESERVES REESTIMATED AS OF:
End of year .................. 57,128 71,774 67,819 90,918 110,536 123,648 130,795 134,758 144,863 190,135 179,667
One year later ............... 57,343 73,823 80,888 98,127 109,099 123,628 134,453 139,385 150,335 190,594 -
Two years later .............. 56,084 79,445 91,452 97,465 111,212 124,011 136,972 140,764 147,388 - -
Three years later ............ 58,584 85,566 91,927 100,437 113,588 125,957 136,902 139,421 - - -
Four years later ............. 61,737 86,460 95,199 104,024 116,995 127,964 137,510 - - - -
Five years later ............. 62,327 88,958 99,649 107,784 119,332 128,434 - - - - -
Six years later .............. 64,442 92,681 103,157 110,961 120,147 - - - - - -
Seven years later ............ 66,715 95,051 106,671 111,988 - - - - - - -
Eight years later ............ 67,694 97,294 107,681 - - - - - - - -
Nine years later ............. 68,417 97,799 - - - - - - - - -
Ten years later .............. 68,684 - - - - - - - - - -
CUMULATIVE REDUNDANCY
(DEFICIENCY) ................. $(11,556) (26,025) (39,862) (21,070) (9,611) (4,786) (6,715) (4,663) (2,525) (459) -
=================================================================================================
GROSS LOSS AND SETTLEMENT EXPENSE RESERVES - END OF YEAR ........................................................ $215,389 197,122
REINSURANCE RECEIVABLES ......................................................................................... 25,254 17,455
-----------------
NET LOSS AND SETTLEMENT EXPENSE RESERVES - END OF YEAR .......................................................... $190,135 179,667
=================
GROSS RE-ESTIMATED RESERVES - LATEST ............................................................................ $214,997 197,122
RE-ESTIMATED REINSURANCE RECEIVABLES - LATEST ................................................................... 24,403 17,455
-----------------
NET RE-ESTIMATED RESERVES - LATEST .............................................................................. $190,594 179,667
=================
GROSS CUMULATIVE REDUNDANCY (DEFICIENCY) ........................................................................ $ 392 -
==================
</TABLE>
22
<PAGE>
The increase in reserves for losses and settlement expenses for prior year
claims was $5,472,000 in 1992 and $459,000 in 1993. The large increase in 1992
primarily relates to a strengthening of workers' compensation reserves in the
property and casualty insurance subsidiaries, a time lag in the reporting of
assumed reinsurance business in the reinsurance subsidiary and a strengthening
of reserves in the nonstandard risk automobile insurance subsidiary. The
increase in 1993 is primarily related to development on reserves associated
with Hurricane Andrew in the reinsurance subsidiary. Additional strengthening
of workers' compensation reserves in the property and casualty insurance
subsidiaries was offset by savings in the products liability line of business.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations".
Time lags in the reporting of assumed reinsurance business do not have a
material affect on the income of the Company since the premium income
associated with this business is recorded at the same time the losses are
recorded. However, management recognizes the financial reporting problems
associated with such time lags and procedures are now in place to monitor the
reporting of assumed reinsurance business and to record estimates for the time
periods not yet reported.
EXCESS AND SURPLUS LINES INSURANCE AGENCY
- -----------------------------------------
Underwriters, Ltd. is an excess and surplus lines insurance agency
providing brokerage and underwriting facilities.
Underwriters, Ltd. was acquired by the Company in January of 1985.
Incorporated in 1974, Underwriters, Ltd. provides access to the excess and
surplus lines markets through independent agents and managing general agents.
Underwriters, Ltd. also functions as managing underwriter for such lines for
several of the pool members and represents several major excess and surplus
lines companies, including Lloyds of London. Lines of insurance handled range
from relatively straight forward property and casualty insurance to the more
exotic hole-in-one, kidnap and ransom, ocean marine, aircraft and professional
liability lines. Income is derived from fees and commissions and not from
underwriting the risk.
INVESTMENTS
- -----------
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115) "Accounting for Certain Investments in
Debt and Equity Securities." SFAS 115 requires that investments in all debt
securities and those equity securities with readily determinable market values
be classified into one of three categories: held-to-maturity, trading or
available-for-sale. Classification of investments is based upon management's
current intent. Debt securities that management has the intent and ability to
hold until maturity are classified as securities held-to-maturity and are
carried at amortized cost. Unrealized holding gains and losses on securities
held-to-maturity are not reflected in the consolidated financial statements.
Debt and equity securities that are purchased for short-term resale are
classified as trading securities. Trading securities are carried at market
value, with unrealized holding gains and losses included in earnings. All
other debt and equity securities not included in the above two categories are
classified as securities available-for-sale. Securities available-for-sale are
carried at market value, with unrealized holding gains and losses reported as a
separate component of stockholders' equity, net of tax.
23
<PAGE>
At December 31, 1993, the Company did not have any investments categorized
as trading securities. Adoption of this statement had no effect on the income
of the Company. Unrealized holding gains associated with fixed maturity
securities available-for-sale increased stockholders' equity by $2,068,451, net
of deferred income taxes of $1,065,565.
Prior to December 31, 1993, investments in fixed maturities were carried
at amortized cost, equity securities were carried at market value and short-
term investments were carried at cost. Changes in the unrealized holding gains
and losses resulting from the revaluation of equity securities were reported as
direct increases and decreases in stockholders' equity. Unrealized holding
gains and losses on fixed maturities and short-term investments were not
recognized in the consolidated financial statements.
The assets of the property and casualty insurance subsidiaries, the
reinsurance subsidiary and the nonstandard risk automobile insurance subsidiary
are primarily invested in government bonds. At December 31, 1993,
approximately 89 percent of the Company's fixed maturity bonds were invested in
government backed securities. Investments in bonds categorized as held-to-
maturity are purchased with the intent of being held to maturity. A variety of
maturities are maintained in the Company's portfolio to assure adequate
liquidity. The maturity structure of bond investments is also established by
the relative attractiveness of yields on short, intermediate, and long-term
bonds. The Company does not invest in any high-yield debt investments
(commonly referred to as junk bonds).
Investments of the Company's insurance subsidiaries are subject to the
insurance laws of the state of their incorporation. These laws prescribe the
kind, quality and concentration of investments which may be made by insurance
companies. In general, these laws permit investments, within specified limits
and subject to certain qualifications, in federal, state and municipal
obligations, corporate bonds, preferred and common stocks and real estate
mortgages. The Company believes it is in compliance with these laws. Failure
to comply could result in administrative supervision.
A committee of the National Association of Insurance Commissioners (NAIC)
is developing model legislation to govern insurance company investments. A
discussion draft was released at the September 1993 NAIC meeting to which the
industry is in the process of responding. Management believes that if the
discussion draft were adopted without modification it would not have a material
impact on the Company. The model law is not scheduled for adoption by the NAIC
until September, 1994.
The investments of the Company are supervised by an investment committee
of the Board of Directors of the Company, which includes one individual who is
an officer of the Company. The bond portfolios for each of the subsidiaries
are managed by an internal staff which is composed of employees of Employers
Mutual.
Investment expenses are based on actual expenses incurred by each of the
Company's subsidiaries plus an allocation of other investment expenses incurred
by Employers Mutual, which is based on a weighted average of total assets and
investment transactions of each subsidiary.
24
<PAGE>
The following table shows the composition of the Company's investment
portfolio (at amortized cost), by type of security, as of December 31, 1993.
In the Company's consolidated financial statements, securities held-to-maturity
are carried at amortized cost; securities available-for-sale are carried at
market value.
Amortized
Cost Percent
------------ -------
Securities held-to-maturity:
United States government agencies and authorities $109,895,914 36.4%
States and political subdivisions ................ 18,374,003 6.1
Foreign governments .............................. 587,060 .2
Public utilities ................................. 8,813,202 2.9
Corporate securities ............................. 17,050,988 5.7
Mortgage-backed securities ....................... 36,289,456 12.0
------------ -------
Total fixed maturity securities held-to-maturity 191,010,623 63.3
------------ -------
Securities available-for-sale:
States and political subdivisions ................ 58,431,008 19.4
Short-term investments ........................... 51,029,615 16.9
Other debt securities ............................ 486,941 .2
------------ -------
Total fixed maturity securities
available-for-sale ........................... 109,947,564 36.5
------------ -------
Equity securities available-for-sale ............. 505,000 .2
------------ -------
Total investments .......................... $301,463,187 100.0%
============ =======
The following table shows the composition of the Company's investment
portfolio (at amortized cost), by type of security, as of December 31, 1992.
In the Company's consolidated financial statements, fixed maturities are
carried at amortized cost, equity securities are carried at market value and
short-term investments are carried at cost.
Amortized
Cost Percent
------------ -------
Fixed maturity securities held-to-maturity:
United States government agencies and authorities $144,419,244 46.4%
States and political subdivisions ................ 51,188,090 16.4
Debt securities issued by foreign governments .... 590,502 .2
Public utilities ................................. 9,693,693 3.1
Corporate securities ............................. 16,560,387 5.3
Mortgage-backed securities ....................... 26,983,821 8.7
Other debt securities ............................ 1,117,121 .4
------------ -------
Total fixed maturity securities held-to-maturity 250,552,858 80.5
------------ -------
Equity securities available-for-sale ................. 1,560,000 .5
------------ -------
Short-term investments ............................... 59,198,070 19.0
------------ -------
Total investments .......................... $311,310,928 100.0%
============ =======
25
<PAGE>
Fixed maturity investments held by the Company generally have an
investment quality rating of "A" or better by independent rating agencies. The
following table shows the composition of the Company's fixed maturity
investments, by rating, as of December 31, 1993. Securities held-to-maturity
are carried at amortized cost; securities available-for-sale are carried at
market value.
Securities Securities
held-to-maturity available-for-sale
--------------------- ---------------------
Amount Percent Amount Percent
------------ ------- ------------ -------
Rating(1)
Aaa ..................... $153,843,269 80.5% $ 60,876,041 53.8%
Aa ...................... 6,221,433 3.3 36,855,004 32.6
A ....................... 24,733,496 12.9 15,350,535 13.6
Baa ..................... 5,714,089 3.0 - -
Ba ...................... 498,336 .3 - -
------------ ------- ------------ -------
Total fixed maturities $191,010,623 100.0% $113,081,580 100.0%
============ ======= ============ =======
(1) Ratings for preferred stocks and fixed maturity securities with initial
maturities greater than one year are assigned by Moody's Investor's
Services, Inc. Moody's rating process seeks to evaluate the quality of a
security by examining the factors that affect returns to investors.
Moody's ratings are based on quantitative and qualitative factors, as well
as the economic, social and political environment in which the issuing
entity exists. The quantitative factors include debt coverage, sales and
income growth, cash flows and liquidity ratios. Qualitative factors
include management quality, access to capital markets and the quality of
earnings and balance sheet items. Ratings for securities with initial
maturities less than one year are based on an evaluation of the underlying
assets or the credit rating of the issuer's parent company.
The amortized cost and estimated market value of fixed maturity securities
held-to-maturity and available-for-sale at December 31, 1993, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
------------ ------------
Fixed maturity securities held-to-maturity:
Due in one year or less ................... $ 14,613,909 $ 14,887,469
Due after one year through five years ..... 55,951,990 61,054,939
Due after five years through ten years .... 73,944,312 80,286,921
Due after ten years ....................... 10,210,956 11,582,035
Mortgage-backed securities ................ 36,289,456 38,494,233
------------ ------------
Totals .................................. $191,010,623 $206,305,597
============ ============
Fixed maturity securities available-for-sale:
Due in one year or less ................... $ 51,429,559 $ 51,599,338
Due after one year through five years ..... 10,168,440 10,476,611
Due after five years through ten years .... 31,194,883 33,453,428
Due after ten years ....................... 17,154,682 17,552,203
------------ ------------
Totals .................................. $109,947,564 $113,081,580
============ ============
26
<PAGE>
The mortgage-backed securities shown on the above table include
$14,616,836 of securities issued by government corporations and agencies and
$21,672,620 of collateralized mortgage obligations ("CMOs"). CMOs are
securities backed by mortgages on real estate which come due at various times.
The Company has attempted to minimize the prepayment risks associated with
mortgage-backed securities by not investing in "principal only" and "interest
only" CMOs. The CMOs that the Company has invested in are designed to reduce
the risk of prepayment by providing predictable principal payment schedules
within a designated range of prepayments. Investment yields may vary from
those anticipated due to changes in prepayment patterns of the underlying
collateral.
Investment results of the Company for the periods indicated are shown in
the following table:
Year Ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Average invested assets (1) ........ $306,387,058 $288,433,650 $252,909,481
Investment income (2) .............. 20,779,951 21,539,597 20,201,993
Average yield ...................... 6.78% 7.47% 7.99%
Realized investment gains .......... $ 684,445 $ 384,283 $ 64,418
(1) Average of the aggregate invested amounts (amortized cost) at the beginning
and end of the year.
(2) Investment income is net of investment expenses and does not include
realized gains or provision for income taxes.
EMPLOYEES
- ---------
EMC Insurance Group Inc. has no full-time employees, although
approximately 12 employees of Employers Mutual perform administrative duties on
a part-time basis. Otherwise, the Company's business activities are conducted
by employees of Employers Mutual, Farm and City, and Illinois EMCASCO, which
have 1,486 (plus 30 part-time), 14 (plus 1 part-time), and 60 (plus 1 part
time) employees, respectively. Dakota Fire, EMCASCO, EMC Re and Underwriters,
Ltd. have no employees of their own; they transact business through Employers
Mutual and Illinois EMCASCO employees. The property and casualty insurance
subsidiaries share the costs associated with the pooling agreement in
accordance with their pool participation percentages. See "Property and
Casualty Insurance -- Pooling Agreement" and "Property and Casualty Insurance
- -- Services Provided by Employers Mutual".
REGULATION
- ----------
The Company's insurance subsidiaries are subject to extensive regulation
and supervision by their home states, as well as those in which they do
business. The purpose of such regulation and supervision is primarily to
provide safeguards for policyholders rather than to protect the interests of
stockholders. The insurance laws of the various states establish regulatory
agencies with broad administrative powers, including the power to grant or
revoke operating licenses and to regulate trade practices, investments, premium
rates, deposits of securities, the form and content of financial statements and
insurance policies, accounting practices and the maintenance of specified
reserves and capital for the protection of policyholders.
27
<PAGE>
Premium rate regulation varies greatly among jurisdictions and lines of
insurance. In most states in which the Company's subsidiaries write insurance,
premium rates for their lines of insurance are subject to either prior approval
or limited review upon implementation. States require rates for property and
casualty insurance that are adequate, not excessive, and not unfairly
discriminatory.
The Company's insurance subsidiaries are required to file detailed annual
reports with the appropriate regulatory agency in each state where they do
business based on applicable statutory regulations, which differ from generally
accepted accounting principles. Their businesses and accounts are subject to
examination by such agencies at any time. Since EMC Insurance Group Inc. and
Employers Mutual are domiciled in Iowa, the State of Iowa exercises principal
regulatory supervision, and Iowa law requires periodic examination. The
Company's subsidiaries are subject to examination by state insurance
departments on a periodic basis as applicable law requires.
State laws governing insurance holding companies also impose standards on
certain transactions with related companies, which include, among other
requirements, that all transactions be fair and reasonable and that an
insurer's surplus as regards policyholders be reasonable and adequate in
relation to its liabilities. Under Iowa law, dividends or distributions made
by registered insurers are restricted in amount and may be subject to approval
from the Iowa Commissioner of Insurance. "Extraordinary" dividends or
distributions are subject to prior approval and are defined as dividends or
distributions which exceed the greater of 10 percent of statutory surplus as
regards policyholders as of the preceding December 31, or net income of the
preceding calendar on a statutory basis. Both Illinois and North Dakota impose
restrictions which are similar to those of Iowa on the payment of extraordinary
dividends and restrictions. At December 31, 1993, $10,113,818 was available
for distribution in 1994 to EMC Insurance Group Inc. without prior approval.
See note 8 of Notes to Consolidated Financial Statements under Item 8 of this
Form 10-K.
Under the insurance laws of all states in which the Company's insurance
subsidiaries and Employers Mutual operate, insurers can be assessed up to
prescribed limits for policyholder losses occasioned by the insolvency or
liquidation of other insurance companies. Under these laws, the extent of any
future assessments against the Company is uncertain. Most laws do provide,
however, that an assessment may be excused or deferred if it would threaten a
solvent insurer's financial strength. Such assessments totaled $86,200,
$132,996 and $41,736 in 1993, 1992 and 1991, respectively.
The NAIC has recently adopted certain risk-based capital standards for
property and casualty insurance companies which will be implemented in 1994.
Risk-based capital requirements attempt to measure minimum statutory capital
needs based upon the risks in a company's mix of products and investment
portfolio. The formula has been designed to help state regulators assess
capital adequacy of insurance companies and identify property/casualty insurers
that are in (or are perceived as approaching) financial difficulty by
establishing minimum capital needs based upon the risks applicable to the
operations of the individual insurer. The formula takes into consideration
industry performance and individual insurer financial characteristics by
examining a number of financial criteria to test its perceived levels of risk
against assets available to bear such risks.
28
<PAGE>
The model act adopted by the NAIC provides a minimum level of capital at
which a State Commissioner of Insurance may act to place an insurer under
certain restraints or in the worst case, to place an insurer under his or her
control. These risk-based capital rules are a quantitative measurement
technique which purport to quantify the minimum amount of capital necessary to
match the degree of financial risk. It is a method for specifying how much
minimum capital an insurer must have, based on the risks it has assumed, to
assure that it maintains an acceptably low probability of financial impairment.
The risk-based capital requirements for property and casualty insurance
companies will measure three major areas of risk facing property and casualty
insurers: asset risk, credit risk and underwriting risk. Companies having less
statutory surplus than required by the risk-based capital requirements are
subject to varying degrees of regulatory scrutiny and intervention, depending
on the severity of the inadequacy. The Company's insurance subsidiaries' ratio
of total adjusted capital to risk-based capital at December 31, 1993 is well in
excess of the level which would prompt regulatory action.
ITEM 2. PROPERTIES.
- ------- -----------
Lease costs of the Company's two office facilities in West Des Moines,
Iowa total approximately $71,000 and $31,000 annually. These leases expire
March 31, 1998 and November 30, 1995, respectively.
Lease costs of the Company's office facilities in Oak Brook, Illinois, and
Bismarck, North Dakota, which total approximately $187,000 and $137,000
annually, are included as expenses under the pooling agreement. See note 2 of
Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.
Expenses of office facilities owned by Employers Mutual are borne by the
parties to the pooling agreement, less the rent received from the space used
and paid for by non-insurance subsidiaries and outside tenants. Expenses
totaling $1,784,868, $1,699,591 and $1,457,824 for the three years ended
December 31, 1993, 1992 and 1991, respectively, were charged to the pool in
connection with the rental of 130,433 and 63,450 square feet located in Des
Moines and Ames, Iowa, respectively.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
The Company and Employers Mutual and its other subsidiaries are parties to
numerous lawsuits arising in the normal course of the insurance business. The
Company believes that the resolution of these lawsuits will not have a material
adverse effect on its financial condition or its results of operations. The
companies involved have reserves which are believed adequate to cover any
potential liabilities arising out of all such pending or threatened
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
None.
29
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ------- -------------------------------------------------
STOCKHOLDER MATTERS.
--------------------
The Company's common stock is traded on the NASDAQ National Market System
under the symbol EMCI.
The following table shows the range of high and low bid quotations and
dividends paid for each quarter within the two most recent years.
1993 1992
---------------------------- ----------------------------
High Low Dividends High Low Dividends
------- ------- --------- ------- ------- ---------
1st Quarter $10 3/4 $ 8 $.13 $10 1/4 $ 8 3/4 $.13
2nd Quarter 11 1/4 9 1/2 .13 10 1/2 9 1/4 .13
3rd Quarter 10 1/4 9 1/4 .13 9 3/4 8 .13
4th Quarter 10 1/4 8 3/4 .13 8 3/4 7 7/8 .13
At December 31 9 1/2 8 1/2
On March 9, 1994, there were approximately 958 holders of record of the
Company's common stock.
There are certain regulatory restrictions relating to the payment of
dividends (see note 8 of Notes to Consolidated Financial Statements under Item
8 of this Form 10-K). It is the present intention of the Company's Board of
Directors to declare quarterly cash dividends.
A dividend reinvestment and common stock purchase plan provides
stockholders with the option of receiving additional shares of common stock
instead of cash dividends. Participants may also purchase additional shares of
common stock without incurring broker commissions by making optional cash
contributions to the Plan. See note 6(c) of Notes to Consolidated Financial
Statements under Item 8 of this Form 10-K. During 1993, Employers Mutual
elected to receive 50 percent of it's dividends in common stock under this plan.
30
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
- ------- ------------------------
Year ended December 31,*
--------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(In thousands except per share amounts)
Insurance premiums earned ...... $156,438 $147,410 $113,419 $101,323 $ 91,728
Investment income, net ......... 20,780 21,540 20,202 19,884 19,309
Realized investment gains ...... 684 384 65 48 257
Other income ................... 259 - - - -
-------- -------- -------- -------- --------
Total revenues ............ 178,161 169,334 133,686 121,255 111,294
Losses and expenses ............ 169,142 168,359 123,254 110,415 102,517
-------- -------- -------- -------- --------
Income before income taxes ..... 9,019 975 10,432 10,840 8,777
Income taxes ................... 1,885 759 3,124 2,894 2,055
-------- -------- -------- -------- --------
Income from continuing
operations ................... 7,134 216 7,308 7,946 6,722
Income from discontinued
operations ................... - - 1,853 319 274
Income from accounting changes 2,621 - - - -
-------- -------- -------- -------- --------
Net income ................ $ 9,755 $ 216 $ 9,161 $ 8,265 $ 6,996
======== ======== ======== ======== ========
Earnings per common share:
Income from continuing
operations ................. $ .70 $ .02 $ .73 $ .80 $ .71
Income from discontinued
operations ................. - - .18 .03 .03
Income from accounting
changes .................... .26 - - - -
-------- -------- -------- -------- --------
Net income ................ $ .96 $ .02 $ .91 $ .83 $ .74
======== ======== ======== ======== ========
Premiums earned by segment:
Property and casualty ........ $109,585 $109,139 $ 78,413 $ 70,597 $ 62,517
Reinsurance .................. 33,324 26,615 25,009 20,696 18,621
Nonstandard risk automobile .. 13,529 11,656 9,997 10,030 10,590
-------- -------- -------- -------- --------
Total ..................... $156,438 $147,410 $113,419 $101,323 $ 91,728
======== ======== ======== ======== ========
Total assets ................... $368,936 $372,807 $311,001 $296,126 $284,396
======== ======== ======== ======== ========
Stockholders' equity ........... $109,634 $100,911 $105,144 $100,615 $ 95,911
======== ======== ======== ======== ========
Average return on equity ....... 9.3% .2% 8.9% 8.4% 7.5%
======== ======== ======== ======== ========
Book value per share ........... $ 10.63 $ 9.98 $ 10.47 $ 10.04 $ 9.82
======== ======== ======== ======== ========
Cash dividends paid per share .. $ .52 $ .52 $ .52 $ .52 $ .52
======== ======== ======== ======== ========
* Prior year assets have been restated to reflect the reporting of ceded
reinsurance balances as assets in accordance with SFAS 113. See note 1 of
Notes to Consolidated Financial Statements under Item 8 of this Form 10-K.
31
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
------------------------------------
OVERVIEW
EMC Insurance Group Inc. (the "Company"), an approximately 67 percent
owned subsidiary of Employers Mutual Casualty Company ("Employers Mutual"), is
an insurance holding company with operations in property and casualty
insurance, reinsurance, nonstandard risk automobile insurance and excess and
surplus lines insurance management. Property and casualty insurance is the
most significant segment, representing 70.1 percent of consolidated premium
income.
The three property and casualty insurance subsidiaries of the Company and
two subsidiaries of Employers Mutual are parties to reinsurance pooling
agreements with Employers Mutual (collectively the "pooling agreement"). Under
the terms of the pooling agreement, each company cedes to Employers Mutual all
of its insurance business and assumes from Employers Mutual an amount equal to
its participation in the pool. All losses, settlement expenses and other
underwriting and administrative expenses are prorated among the parties on the
basis of participation in the pool. The investment programs and income tax
liabilities of the pool participants are not subject to the pooling agreement.
The purpose of the pooling agreement is to reduce the risk of an exposure
insured by any of the pool participants by spreading it among all the
companies. The pooling agreement produces a more uniform and stable
underwriting result from year to year for all companies in the pool than might
be experienced individually. In addition, each company benefits from the
capacity of the entire pool, rather than being limited to policy exposures of a
size commensurate with its own assets, and from the wide range of policy forms
and lines of insurance written and the variety of rate filings and commission
plans offered by each of the companies. A single set of reinsurance treaties
is maintained for the protection of all six companies in the pool.
Effective January 1, 1992, the aggregate participation of the property and
casualty insurance subsidiaries was increased to 22 percent from 17 percent.
In connection with this change in pool participation, the Company's
liabilities increased $31,428,000 and invested assets increased $29,402,000.
The Company reimbursed Employers Mutual $2,026,000 for commissions incurred to
generate this business.
Employers Mutual voluntarily assumes reinsurance business from
nonaffiliated insurance companies and cedes 95 percent of this business to the
Company's reinsurance subsidiary, exclusive of certain reinsurance contracts.
Amounts not ceded to the reinsurance subsidiary have historically been retained
by Employers Mutual and have been subject to cession to the pool members.
Under the terms of the pooling agreement, the property and casualty insurance
subsidiaries had a 22 percent (17 percent in 1991) participation in the amounts
assumed from these nonaffiliated companies.
32
<PAGE>
Effective January 1, 1993, the pooling agreement was amended so that the
voluntary assumed reinsurance business written by Employers Mutual is no longer
subject to cession to the pool members. As a result, amounts assumed from
nonaffiliates have declined from amounts assumed in prior years. In connection
with this change in the pooling agreement, the Company's liabilities decreased
$4,470,000 and invested assets decreased $4,427,000. Employers Mutual
reimbursed the Company $43,000 for commissions incurred to generate this
business.
The parties to the pooling agreement have historically recorded amounts
assumed from the National Workers' Compensation Reinsurance Pool on a net
basis. Under this approach, reserves for outstanding losses and unearned
premiums were reported as liabilities under "Indebtedness to Related Party" in
the Company's consolidated financial statements. Effective December 31, 1993,
the parties to the pooling agreement began recording these amounts as
outstanding losses and unearned premiums. As a result, outstanding losses
increased $11,437,000, unearned premiums increased $1,711,000 and indebtedness
to related party decreased $13,148,000. There was no income effect from this
reclassification. Prior year consolidated financial statements have been
restated for comparative purposes.
As noted above, the Company's reinsurance subsidiary assumes a 95 percent
quota share portion of Employers Mutual's assumed reinsurance business,
exclusive of certain reinsurance contracts. The reinsurance subsidiary
receives 95 percent of all premiums and assumes 95 percent of all related
losses and settlement expenses of this business. The reinsurance subsidiary
does not reinsure any of Employers Mutual's direct insurance business, nor any
"involuntary" facility or pool business that Employers Mutual assumes pursuant
to state law. In addition, the reinsurance subsidiary is not liable for credit
risk in connection with the insolvency of any reinsurers of Employers Mutual.
The following changes were made to the quota share agreement during 1993:
(1) Effective January 1, 1993, the quota share agreement was amended so that
losses in excess of $1,000,000 per event are retained by Employers Mutual.
The reinsurance subsidiary pays an annual override commission to Employers
Mutual for this additional protection, which totaled $1,809,000 in 1993.
In conjunction with this change in the quota share agreement, the
reinsurance subsidiary terminated its catastrophe reinsurance contracts
with Employers Mutual and other nonaffiliated reinsurers. Effective
January 1, 1993, the reinsurance subsidiary no longer cedes reinsurance to
nonaffiliated reinsurers and only cedes reinsurance to Employers Mutual
under an aggregate "excess of loss" treaty. As a result, reinsurance
receivables and prepaid reinsurance premiums for the Company have
decreased from prior year amounts. Ceded reinsurance on the books at
December 31, 1992 is being allowed to run-off.
(2) Effective June 30, 1993, Employers Mutual commuted the portion of the
quota share agreement that pertains to a casualty pool that is in a run-
off position. In connection with this change in the quota share
agreement, the Company's liabilities decreased $19,783,000 and invested
assets decreased $17,806,000. The reserve discount amount of $1,977,000
was recorded as deferred income and is being amortized into operations
over the estimated settlement period of the reserves, which is ten years.
During 1993, $259,000 was recognized as income.
33
<PAGE>
(3) Effective October 31, 1993, Employers Mutual commuted the portion of the
quota share agreement that pertains to a voluntary pool that handles
large "highly protected" risks. This pool has experienced deteriorating
underwriting results over the last several years and Employers Mutual is
presently considering whether to continue its participation in the pool
beyond 1994. In connection with this change in the quota share agreement,
the Company's liabilities decreased $3,827,000 and invested assets
decreased $2,620,000. Employers Mutual reimbursed the Company $1,207,000
for commissions incurred to generate this business. No reserve discount
was calculated as this business involves short-tail property coverage.
The Company sold its life insurance subsidiary to Employers Mutual on
December 31, 1991. All information presented in this report reflects the life
segment as a discontinued operation.
RESULTS OF OPERATIONS
Operating income before income taxes was $9,019,000 in 1993, $975,000 in
1992 and $10,432,000 in 1991. Results for 1992 were significantly affected by
catastrophe losses, which totaled $16,569,000. This compares to catastrophe
losses of $8,513,000 in 1993 (which includes $1,283,000 of development on
Hurricane Andrew) and $3,652,000 in 1991. Results for 1993 and 1992 were
negatively impacted by poor experience in the nonstandard risk automobile
insurance subsidiary and declining production in the excess and surplus lines
insurance management agency.
Premiums earned totaled $156,438,000 in 1993, 147,410,000 in 1992 and
$113,419,000 in 1991. The large increase in 1992 reflects the change in the
property and casualty insurance subsidiaries' pool participation. Premium
volume increased substantially in the reinsurance subsidiary and the
nonstandard risk automobile insurance subsidiary in 1993 while the property and
casualty insurance subsidiaries remained relatively flat.
Net investment income totaled $20,780,000 in 1993, $21,540,000 in 1992 and
$20,202,000 in 1991. The large increase in 1992 reflects investment income
earned on $29,402,000 transferred to the property and casualty insurance
subsidiaries in connection with the change in pool participation. The decrease
in 1993 is primarily due to a decline in invested assets resulting from the
transfer of $24,853,000 to Employers Mutual in connection with the change in
the property and casualty insurance subsidiaries' pooling agreement relating to
the voluntary assumed reinsurance business and the commutation of two
reinsurance contracts under the reinsurance subsidiary's quota share agreement.
Losses and expenses totaled $169,142,000 in 1993, $168,359,000 in 1992 and
$123,254,000 in 1991. The large increase in 1992 reflects the change in the
property and casualty insurance subsidiaries' pool participation and a record
amount of catastrophe losses.
The Company adopted four new accounting standards and implemented an
accounting change in 1993. The net impact of these items was an increase in
net income of $2,621,000 ($.26 per share). Following is a brief explanation of
each item:
34
<PAGE>
* Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The Company adopted SFAS 106
by recognizing the transition obligation as a cumulative effect adjustment
to income. The Company's transition obligation amounted to $2,166,000 ($.21
per share), net of income tax benefits of $1,116,000.
* Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes".
The Company adopted SFAS 109 as a cumulative effect adjustment to income.
The Company recognized a benefit of $5,595,000 ($.55 per share), net of a
valuation allowance of $1,000,000.
* Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 113 (SFAS 113), "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts". SFAS 113
requires a gross (rather than net) balance sheet presentation for ceded
reinsurance amounts and addresses the recognition of gain or loss resulting
from reinsurance transactions and appropriate financial statement disclosure
of reinsurance activities. Ceded reinsurance amounts previously reported on
a net basis in the December 31, 1992 balance sheet have been reclassified
for comparative purposes. Assets and liabilities increased $20,075,000 and
$28,891,000 at December 31, 1993 and 1992, respectively, as a result of the
gross-up of ceded balances related to reinsurance receivables on losses and
settlement expenses and prepaid reinsurance premiums. Adoption of this
statement had no effect on the income of the Company.
* Effective January 1, 1993, the property and casualty insurance subsidiaries
changed their method of calculating unearned premiums from the monthly pro
rata method to the daily method. The property and casualty insurance
subsidiaries changed their accounting method because of management's belief
that the new method provides for a more accurate matching of revenues and
expenses over the terms of the underlying insurance policies. This change
resulted in a cumulative increase in unearned premiums of $1,110,000 and a
decrease in income of $808,000 ($.08 per share), net of income tax benefits
of $302,000.
35
<PAGE>
* Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities". SFAS 115 provides that
investments in all debt securities and those equity securities with readily
determinable market values are to be classified in one of three categories:
held-to-maturity, trading or available-for-sale. Classification of
investments is based upon management's current intent. Debt securities
which management has a positive intent and ability to hold to maturity are
classified as "securities held-to-maturity" and are carried at amortized
cost. Unrealized holding gains and losses on securities held-to-maturity
are not reflected in the consolidated financial statements. Debt and equity
securities that are held for current resale are classified as "trading
securities" and are reported at market value, with unrealized holding gains
and losses included in earnings. All other debt and equity securities are
classified as "securities available-for-sale" and are carried at market
value, with unrealized holding gains and losses excluded from earnings and
reported as a separate component of stockholders' equity, net of tax. The
Company has historically held its investment portfolio to maturity and has
classified the majority of its portfolio at December 31, 1993 (63.3 percent)
as "securities held-to-maturity". The remainder of the portfolio has been
classified as "securities available-for-sale". Adoption of this statement
had no effect on the income of the Company. Net unrealized holding gains
reflected in stockholders' equity at December 31, 1993 totaled $2,049,000,
net of deferred income taxes of $1,055,000.
SEGMENT RESULTS
Property and Casualty Insurance
Operating income before income taxes increased 59.6 percent to $9,835,000
in 1993, increased 2.1 percent to $6,164,000 in 1992 and decreased 17.3 percent
to $6,037,000 in 1991. Underwriting loss decreased significantly in 1993.
Results for 1992 reflect an increase in catastrophe losses, which was
compounded by the increase in the pool participation. Results for 1991 reflect
a substantial increase in reserves reported by the National Workers'
Compensation Reinsurance Pool. Investment income increased 2.9 percent to
$13,243,000 in 1993, 17.0 percent to $13,048,000 in 1992 and 9.6 percent to
$11,153,000 in 1991. Results for 1993 reflect the transfer of $4,427,000 to
Employers Mutual in connection with the change in the pooling agreement and the
general decline in interest rates for current investments. The large increase
in 1992 reflects investment income earned on $29,402,000 received from
Employers Mutual in connection with the change in pool participation and
$10,000,000 received from the parent company to support this increased
participation.
Premiums earned increased .4 percent to $109,585,000 in 1993, 39.2 percent
to $109,139,000 in 1992 and 11.1 percent to $78,413,000 in 1991. The large
increase in 1992 reflects $24,821,000 from the change in pool participation.
Depressed rates caused by the soft market, a shift of large commercial insureds
to alternative risk mechanisms and the generally weak economy contributed to
the small increase in 1993. In addition to these factors, results for 1993
reflect the change in the pooling agreement whereby effective January 1, 1993,
the voluntary assumed reinsurance business written by Employers Mutual is no
longer subject to cession to the pool members. This business accounted for
$1,442,000 of earned premiums (including reinstatement premiums) in 1992.
36
<PAGE>
Underwriting loss decreased 46.8 percent to $3,813,000 in 1993, increased
39.3 percent to $7,169,000 in 1992 and increased 76.5 percent to $5,147,000 in
1991. Catastrophe losses had a significant impact on these results, totaling
$3,372,000 in 1993, $4,631,000 in 1992 and $2,980,000 in 1991. Results for the
last three years have been negatively impacted by a strengthening of workers'
compensation reserves. The Company had underestimated the cost of medical
expenses associated with workers' compensation claims due to greater than
expected increases in the price and usage of drugs, medical durables and
medical services. Losses totaling $1,998,000, $1,026,000 and $1,272,000 were
charged to operations during 1993, 1992 and 1991, respectively. Employers
Mutual has assigned additional staff to supervise the reserving process for
workers' compensation claims and to more closely monitor the development of
such reserves. In addition, Employers Mutual now employs medically trained
persons to assist in determining proper reserve levels based on the future
medical needs of the insureds. All major claims have been reviewed and the
Company believes that the reserves are now adequate. Results for 1993 reflect
$880,000 of losses related to the Midwest summer floods and the change in the
pooling agreement whereby effective January 1, 1993, the voluntary reinsurance
business written by Employers Mutual is no longer subject to cession to the
pool members. Underwriting losses associated with the voluntary reinsurance
business (including catastrophe losses) amounted to $1,427,000 in 1992.
Inadequate rate increases and the increasing burden of residual markets in
some states reduces the profit potential for the workers' compensation line of
business in those states. The parties to the pooling agreement have adjusted
rates, policyholder dividends and underwriting standards in these problem
states and have experienced a planned overall decline in writings for this line
of business. Workers' compensation will continue to be an important line of
business for the parties to the pooling agreement; however, the percentage of
workers' compensation written premiums to total written premiums is expected to
decline gradually as the parties to the pooling agreement refine their
underwriting standards based on current conditions in each state.
Reinsurance
Operating income before income taxes increased 110.0 percent to $510,000
in 1993, decreased 332.8 percent to a loss of $5,089,000 in 1992 and increased
71.8 percent to $2,186,000 in 1991. Results for 1993 and 1992 were
significantly impacted by catastrophe losses, poor experience in two voluntary
pools and continued development in a casualty pool that is in a run-off
position. Investment income declined 10.0 percent to $6,090,000 in 1993, 5.4
percent to $6,763,000 in 1992 and 2.6 percent to $7,149,000 in 1991. The large
decline in 1993 is primarily attributable to the transfer of $20,426,000 to
Employers Mutual in connection with the commutation of two reinsurance
contracts. Declining interest rates for current investments contributed to the
decline in 1992 and 1991.
The following changes were implemented in 1993 to improve the future
operating results of the reinsurance subsidiary: (1) the quota share agreement
was amended so that effective January 1, 1993, losses in excess of $1,000,000
per event are retained by Employers Mutual; (2) management reduced the
aggregate liability in hurricane prone areas by moving to a higher attachment
point in nationally exposed programs and by terminating several reinsurance
arrangements with other reinsurers that had severe hurricane losses; (3)
Employers Mutual commuted two reinsurance contracts under the quota share
agreement that have produced very poor results over the last several years.
37
<PAGE>
Premiums earned increased 25.2 percent to $33,324,000 in 1993, 6.4 percent
to $26,615,000 in 1992 and 20.8 percent to $25,009,000 in 1991. Amounts earned
in 1992 and 1991 reflect $1,220,000 and $1,286,000, respectively, in premiums
ceded (excluding reinstatement premiums) to Employers Mutual for catastrophe
reinsurance protection. This coverage was terminated in 1993 in conjunction
with the change in the quota share agreement noted above. The reinsurance
subsidiary pays Employers Mutual an annual override commission for retaining
losses in excess of $1,000,000 per event, which totaled $1,809,000 in 1993.
The amount earned in 1992 also reflects $3,859,000 of reinstatement premiums
paid to reinsurers (including Employers Mutual) to reinstate reinsurance
coverage which was exhausted by Hurricanes Andrew and Iniki. Results for 1993
reflect a shift from catastrophe "excess of loss" business to "pro rata"
business and a general improvement in rates. Under catastrophe "excess of
loss" contracts, the reinsurance subsidiary provided coverage for catastrophe
losses which exceeded a specified amount. Premiums associated with this type
of business are generally lower as the coverage provided is not often exposed.
However, the last few years have demonstrated that the exposure under this type
of business can far exceed the premiums received. With "pro rata" business,
the reinsurance subsidiary receives a specified portion of all premiums on each
contract and then shares in all losses in the same proportion as the premium.
Although the reinsurance subsidiary has a share in each loss under this type of
business, the premium received is believed to be more adequate.
Underwriting loss decreased 49.3 percent to $6,040,000 in 1993, increased
138.5 percent to $11,904,000 in 1992 and decreased 17.9 percent to $4,991,000
in 1991. The large loss in 1992 is primarily related to catastrophe losses,
which totaled $11,609,000. This compares to catastrophe losses of $5,141,000
in 1993 (including development on Hurricane Andrew of $1,283,000) and
$2,403,000 in 1991. Operating results for the last three years have been
significantly impacted by losses from two voluntary pools in which the
subsidiary participates and by losses from a casualty pool that is in a run-off
position. The voluntary pools reported combined losses of $2,425,000 in 1993,
$2,007,000 in 1992 and $1,571,000 in 1991. Effective October 31, 1993,
Employers Mutual commuted the portion of the quota share agreement that
pertains to one of these pools. Losses associated with this pool totaled
$2,017,000 in 1993 and $1,294,000 in 1992. No reserve discount was calculated
as this business involves short-tail property coverage. Losses associated with
the casualty pool that is in a run-off position totaled $868,000 in 1993,
$952,000 in 1992 and $2,376,000 in 1991. Employers Mutual commuted the portion
of the quota share agreement that pertains to this pool effective June 30,
1993. The reserve discount amount of $1,977,000 was recorded as deferred
income and is being amortized into operations over the estimated settlement
period of the reserves, which is ten years. During 1993, $259,000 was
recognized as income. Results for 1993 also reflect $1,000,000 of losses
associated with severe east coast winter storms and $398,000 of losses
associated with the World Trade Center explosion.
38
<PAGE>
Nonstandard Risk Automobile Insurance
Operating results before income taxes decreased 65.4 percent to a loss of
$1,268,000 in 1993, decreased 153.1 percent to a loss of $767,000 in 1992 and
increased 51.9 percent to a profit of $1,444,000 in 1991. Results for 1993 and
1992 were significantly impacted by increased loss frequency and severity
associated with a new book of business and a strengthening of loss and
settlement expense reserves. Investment income decreased 1.1 percent to
$1,166,000 in 1993, 11.3 percent to $1,179,000 in 1992 and 2.1 percent to
$1,329,000 in 1991 due to the declining interest rates available for current
investments.
The nonstandard risk marketplace is very competitive. Policies are
written for relatively short periods of time and insureds continually search
for the most attractive rates. In response to the favorable results achieved
in 1991, the company began increasing market share in 1992 by offering more
competitive rates. The company experienced adverse selection in this new
business as the standard market began to accept marginal risks during this same
time period. As a result, losses associated with this new business exceeded
the premiums received.
Premiums earned increased 16.1 percent to $13,528,000 in 1993, increased
16.6 percent to $11,656,000 in 1992 and decreased .3 percent to $9,997,000 in
1991. The large increases in 1993 and 1992 reflect the increase in market
share discussed above.
Underwriting results decreased 27.6 percent to a loss of $2,543,000 in
1993, decreased 1,911.8 percent to a loss of $1,993,000 in 1992 and increased
126.7 percent to a profit of $110,000 in 1991. In addition to the adverse
selection experienced in 1993 and 1992, the company also strengthened its loss
and expense reserves in each of these years.
The company has applied for rate increases in all states and is currently
reviewing its book of business to identify those risks with unacceptable loss
experience. The company will take appropriate action, up to and including the
cancellation of specific risks, to improve future loss experience. Rate
increases are not expected to have a significant impact on the company's market
share in 1994.
Excess and Surplus Lines Insurance Management Agency
Operating income before income taxes decreased 79.1 percent to $103,000 in
1993, 22.7 percent to $496,000 in 1992 and 12.3 percent to $641,000 in 1991.
Operating results continue to be effected by the termination of business with a
large agency that had previously represented over 50 percent of this segment's
volume. Management continues to search for new business, but a large portion
of excess and surplus lines insurance is currently being written by standard
carriers due to the soft market conditions.
39
<PAGE>
Parent Company
Operating income before income taxes decreased 194.1 percent to a loss of
$161,000 in 1993, increased 39.2 percent to $171,000 in 1992 and decreased 79.1
percent to $123,000 in 1991. The loss in 1993 is primarily due to a decline in
investment income. Invested assets decreased in 1993 as a result of a capital
contribution made to the reinsurance subsidiary in December of 1992 and the
payment of stockholder dividends.
NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for
Postemployment Benefits". SFAS 112 requires that the cost of certain
postemployment benefits that vest or accumulate be accrued over the period of
an employee's service. SFAS 112 is effective for fiscal years beginning after
December 15, 1993. The Company will adopt this standard in the first quarter
of 1994. Adoption of this standard is not expected to have a material effect
on the income of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a portion of the investment portfolio in relatively
short-term and highly liquid investments to ensure the availability of funds to
meet claims and expenses. The remainder of the investment portfolio is
invested in securities with maturities that approximate the anticipated
liabilities of the insurance issued. The major ongoing sources of the
Company's liquidity are insurance premium income, investment income and cash
provided from maturing or liquidated investments. The principal outflows of
cash are payments of claims, commissions, premium taxes, operating expenses,
income taxes, dividends and investment purchases.
The Company has historically generated positive cash flows from
operations. During 1993, the Company had a negative operating cash flow of
$8,794,000, which reflects $24,853,000 paid to Employers Mutual in connection
with the change in the property and casualty insurance subsidiaries' pooling
agreement and the commutation of two reinsurance contracts under the
reinsurance subsidiary's quota share agreement. This compares to operating
cash flows of $50,826,000 for 1992, which included $29,402,000 received from
Employers Mutual in connection with the increase in the property and casualty
insurance subsidiaries' pool participation.
40
<PAGE>
The National Association of Insurance Commissioners (NAIC) has recently
adopted certain risk-based capital standards for property and casualty
insurance companies which will be implemented in 1994. Risk-based capital
requirements attempt to measure minimum statutory capital needs based upon the
risks in a company's mix of products and investment portfolio. The formula has
been designed to help state regulators assess capital adequacy of insurance
companies and identify property/casualty insurers that are in (or perceived as
approaching) financial difficulty by establishing minimum capital needs based
upon the risks applicable to the operations of the individual insurer. The
formula takes into consideration industry performance and individual insurer
financial characteristics by examining a number of financial criteria to test
its perceived levels of risk against assets available to bear such risks. The
model act adopted by the NAIC provides a minimum level of capital at which a
State Commissioner of Insurance may act to place an insurer under certain
restraints or in the worst case, to place an insurer under his or her control.
These risk-based capital rules are a quantitative measurement technique which
purport to quantify the minimum amount of capital necessary to match the degree
of financial risk. It is a method for specifying how much minimum capital an
insurer must have, based on the risks it has assumed, to assure that it
maintains an acceptably low probability of financial impairment.
The risk-based capital requirements for property and casualty insurance
companies will measure three major areas of risk facing property and casualty
insurers: asset risk, credit risk and underwriting risk. Companies having less
statutory surplus than required by the risk-based capital requirements are
subject to varying degrees of regulatory scrutiny and intervention, depending
on the severity of the inadequacy. The Company's insurance subsidiaries' ratio
of total adjusted capital to risk-based capital at December 31, 1993 is well in
excess of the level which would prompt regulatory action.
The majority of the Company's assets are invested in fixed maturities.
These investments provide a substantial amount of income which offsets
underwriting losses and contributes to net earnings. As these investments
mature the proceeds will be reinvested at current rates, which are
significantly lower than those now being earned; therefore, less investment
income will be available to contribute to net earnings.
41
<PAGE>
The Company contributed $10,000,000 of the proceeds received from the sale
of the life subsidiary to increase the surplus of the property and casualty
insurance subsidiaries in 1992 in connection with the increase in pool
participation. The Company contributed $3,000,000 to the surplus of the
reinsurance subsidiary in 1992 in order to retain its status as an authorized
reinsurance company in several states.
As of December 31, 1993, the Company had no material commitments for
capital expenditures.
A source of cash flows for the holding company is dividend payments from
its subsidiaries. State insurance regulations restrict the maximum amount of
dividends insurance companies can pay without prior regulatory approval. See
note 8 of Notes to Consolidated Financial Statements for additional information
regarding dividend restrictions. The Company collected $860,000, $3,288,000
and $3,600,000 of dividends from its insurance subsidiaries in 1993, 1992 and
1991, respectively and $106,000 of dividends from its excess and surplus lines
insurance agency in 1991. The Company paid cash dividends to stockholders
totaling $3,443,000, $5,104,000 and $5,082,000 in 1993, 1992 and 1991,
respectively. The decrease in 1993 is due to the fact that Employers Mutual
received 50 percent of its dividends in common stock under the Company's
dividend reinvestment and common stock purchase plan.
Inflation has a widespread effect on the Company's results of operations,
primarily through increased losses and settlement expenses. The Company
considers inflation, including social inflation which reflects an increasingly
litigious society and increasing jury awards, when setting reserve amounts.
Premiums are also affected by inflation, although they are often restricted or
delayed by competition and the regulatory rate-setting environment.
42
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
Management's Responsibility for Financial Reporting
The consolidated financial statements and related financial information in
this annual report are the responsibility of management. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles and necessarily include certain amounts that are based on
management's best estimates and judgments.
In discharging its responsibility both for the integrity and fairness of
these statements and the related financial information, and for the examination
of the accounting systems from which they are derived, management maintains a
system of internal control designed to provide reasonable assurance, weighing
the costs with the benefits sought, that transactions are executed in
accordance with management's authorization, assets are safeguarded, and proper
records are maintained. Management believes that the system of internal
control, which is subject to close scrutiny by management and by internal
auditors and is revised as considered necessary, supports the integrity and
reliability of the consolidated financial statements. Further, in accordance
with generally accepted auditing standards, the independent certified public
accountants obtained a sufficient understanding of the Company's internal
control structure to plan their audit and determine the nature, timing and
extent of tests to be performed.
The Audit Committee of the Board of Directors, composed solely of outside
directors, met during the year with management, the Company's internal auditors
and the independent certified public accountants to review the scope of the
audits, discuss the evaluation of internal accounting controls and discuss
financial reporting matters. The independent auditors and internal auditors
have free access to the Audit Committee and meet with it, without management
present, to discuss any appropriate matters.
The consolidated financial statements are examined by KPMG Peat Marwick,
independent certified public accountants. Their report appears elsewhere in
this annual report.
/s/ E.H. Creese
- ------------------------------------
E. H. Creese, C.P.A.
Senior Vice President, Treasurer and
Chief Financial Officer
43
<PAGE>
Independent Auditor's Report
The Board of Directors and Stockholders
EMC Insurance Group Inc.:
We have audited the accompanying consolidated balance sheets of EMC
Insurance Group Inc. and Subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1993. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of EMC
Insurance Group Inc. and Subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in notes 1, 10, 12 and 13 to the consolidated financial
statements, the Company changed its method of computing unearned premiums in
1993 and implemented the provisions of the Financial Accounting Standards
Board's Statements No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions", No. 109, "Accounting for Income Taxes", No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts" and No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".
/s/ KPMG Peat Marwick
Des Moines, Iowa
February 21, 1994
44
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31,
--------------------------
1993 1992
------------ ------------
ASSETS
Investments (note 10):
Fixed maturities:
Securities held-to-maturity, at amortized cost
(market value $206,305,597 and $266,719,495) $191,010,623 $250,552,858
Securities available-for-sale, at market value
(amortized cost $109,947,564) ............... 113,081,580 -
Equity securities available-for-sale, at market
value (cost $505,000 and $1,560,000) .......... 475,000 1,418,000
Short-term investments, at cost which
approximates market value ..................... - 59,198,070
------------ ------------
Total investments .......................... 304,567,203 311,168,928
------------ ------------
Cash .............................................. 675,203 2,009,512
Indebtedness of related party (note 4) ............ 12,291,512 3,652,076
Accrued investment income ......................... 4,835,451 4,592,856
Accounts receivable ............................... 415,215 576,155
Deferred policy acquisition costs ................. 7,698,864 8,112,831
Deferred income taxes (note 13) ................... 13,040,693 7,065,221
Intangible assets, including goodwill, at cost
less accumulated amortization of $1,540,130
and $1,405,617 ................................. 2,017,690 2,152,203
Reinsurance receivables (note 3) .................. 18,477,406 27,866,790
Prepaid reinsurance premiums (note 3) ............. 2,832,184 3,637,917
Other assets ...................................... 2,084,102 1,972,611
------------ ------------
Total assets ............................... $368,935,523 $372,807,100
============ ============
See accompanying Notes to Consolidated Financial Statements.
45
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31,
--------------------------
1993 1992
------------ ------------
LIABILITIES
Losses and settlement expenses (notes 2, 3 and 4) . $197,121,852 $215,388,865
Unearned premiums (notes 2, 3 and 4) .............. 45,941,056 45,984,474
Other policyholders' funds ........................ 2,854,793 3,695,397
Income taxes payable .............................. 550,000 668,000
Postretirement benefits (note 12) ................. 3,537,449 -
Deferred income (note 2) .......................... 1,717,641 -
Other liabilities ................................. 7,578,963 6,159,587
------------ ------------
Total liabilities .......................... 259,301,754 271,896,323
------------ ------------
STOCKHOLDERS' EQUITY (notes 6, 7, 8 and 10)
Common stock, $1 par value,
authorized 20,000,000 shares;
issued and outstanding, 10,325,329 shares
in 1993 and 10,161,760 shares in 1992 ........... 10,325,329 10,161,760
Additional paid-in capital ........................ 55,021,926 53,507,459
Unrealized holding gains on fixed maturity
securities available-for-sale, net of tax ....... 2,068,451 -
Unrealized holding losses on equity securities
available-for-sale, net of tax .................. (19,800) (142,000)
Retained earnings ................................. 42,319,249 37,866,902
Treasury stock, at cost (8,090 shares in 1993
and 49,392 shares in 1992) ...................... (81,386) (483,344)
------------ ------------
Total stockholders' equity ................. 109,633,769 100,910,777
------------ ------------
Contingent liabilities (notes 3, 13 and 16)
Total liabilities and stockholders' equity $368,935,523 $372,807,100
============ ============
See accompanying Notes to Consolidated Financial Statements.
46
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Income
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Revenues:
Premiums earned (notes 2 and 3) ... $156,437,538 $147,410,287 $113,419,238
Investment income, net (note 10) .. 20,779,951 21,539,597 20,201,993
Realized investment gains (note 10) 684,445 384,283 64,418
Other income (note 2) ............. 259,217 - -
------------ ------------ ------------
178,161,151 169,334,167 133,685,649
------------ ------------ ------------
Losses and expenses:
Losses and settlement
expenses (notes 2 and 3) ........ 120,355,299 122,087,833 88,104,919
Dividends to policyholders ........ 2,494,284 3,382,736 1,757,923
Amortization of deferred
policy acquisition costs ........ 30,717,175 29,291,362 24,255,722
Other underwriting expenses ....... 15,575,257 13,597,179 9,135,247
------------ ------------ ------------
169,142,015 168,359,110 123,253,811
------------ ------------ ------------
Income from continuing operations
before income taxes and
cumulative effect of changes
in accounting principles ....... 9,019,136 975,057 10,431,838
------------ ------------ ------------
Income taxes (note 13):
Current ........................... 1,903,128 2,260,795 3,905,736
Deferred .......................... (18,027) (1,501,430) (781,719)
------------ ------------ ------------
1,885,101 759,365 3,124,017
------------ ------------ ------------
Income from continuing operations
before cumulative effect of
changes in accounting principles 7,134,035 215,692 7,307,821
Income from discontinued
operations (note 5) ............... - - 1,853,234
------------ ------------ ------------
Income before cumulative effect of
changes in accounting principles 7,134,035 215,692 9,161,055
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES FOR:
Income taxes (note 13) .......... 5,595,177 - -
Postretirement benefits (note 12) (2,165,900) - -
Unearned premiums (note 1) ...... (807,933) - -
------------ ------------ ------------
Net income ................. $ 9,755,379 $ 215,692 $ 9,161,055
============ ============ ============
See accompanying Notes to Consolidated Financial Statements.
47
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Income, Continued
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
EARNINGS PER COMMON SHARE:
Income from continuing operations
before cumulative effect of
changes in accounting principles $ .70 $ .02 $ .73
Income from discontinued
operations .................... - - .18
------------ ------------ ------------
Income before cumulative effect of
changes in accounting principles .70 .02 .91
Cumulative effect of changes in
accounting principles for:
Income taxes ................. .55 - -
Postretirement benefits ...... (.21) - -
Unearned premiums ............ (.08) - -
------------ ------------ ------------
Net income ................. $ .96 $ .02 $ .91
============ ============ ============
Average number of shares outstanding 10,197,999 10,071,901 10,054,899
============ ============ ============
Pro forma amounts, assuming retroactive application of new method of
calculating unearned premiums:
Net income ................. $ 10,563,312 $ 344,420 $ 8,971,387
============ ============ ============
Earnings per common share ......... $1.04 $ .03 $ .89
============ ============ ============
See accompanying Notes to Consolidated Financial Statements.
48
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Common stock, beginning of year ........ $10,161,760 $10,082,675 $10,023,435
Issuance of common stock:
Stock option plans ................. 31,252 79,085 59,240
Dividend reinvestment plan ......... 132,317 - -
----------- ----------- -----------
Common stock, end of year .............. 10,325,329 10,161,760 10,082,675
----------- ----------- -----------
Additional paid-in capital,
beginning of year .................... 53,507,459 52,838,624 52,332,954
Additional paid-in capital from
issuance of common stock:
Stock option plans ................. 279,234 669,320 490,783
Dividend reinvestment plan ......... 1,211,972 - -
Gain (loss) on sale of treasury stock .. 23,261 (485) 14,887
----------- ----------- -----------
Additional paid-in capital, end of year 55,021,926 53,507,459 52,838,624
----------- ----------- -----------
Unrealized holding gains on fixed
maturity securities available-for-
sale, beginning of year .............. - - -
Unrealized holding gains on revaluation
of fixed maturity securities available
-for-sale, net of tax (note 10) ...... 2,068,451 - -
----------- ----------- -----------
Unrealized holding gains on fixed
maturity securities available-for-
sale, net of tax, end of year ........ 2,068,451 - -
----------- ----------- -----------
Unrealized holding losses on equity
securities available-for-sale,
net of tax, beginning of year ........ (142,000) (326,375) (625,000)
Unrealized holding gains on revaluation
of equity securities available-for-
sale, net of tax ..................... 122,200 184,375 298,625
----------- ----------- -----------
Unrealized holding losses on equity
securities available-for-sale,
net of tax, end of year .............. $ (19,800) $ (142,000) $ (326,375)
----------- ----------- -----------
49
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity, Continued
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Retained earnings, beginning of year $ 37,866,902 $ 42,891,128 $ 38,947,265
Net income .......................... 9,755,379 215,692 9,161,055
Dividends on common stock ($.52 per
share in 1993, 1992 and 1991):
Cash dividends .................. (3,443,465) (5,103,890) (5,081,607)
Dividends reinvested in shares
of common stock .............. (1,859,567) (136,028) (135,585)
------------ ------------ ------------
Retained earnings, end of year ...... 42,319,249 37,866,902 42,891,128
------------ ------------ ------------
Treasury stock at cost,
beginning of year ................. (483,344) (341,616) (63,207)
Purchase of shares for the treasury (126,948) (315,749) (420,799)
Sale of shares from the treasury .... 528,906 174,021 142,390
------------ ------------ ------------
Treasury stock at cost, end of year (81,386) (483,344) (341,616)
------------ ------------ ------------
Total stockholders' equity ..... $109,633,769 $100,910,777 $105,144,436
============ ============ ============
See accompanying Notes to Consolidated Financial Statements.
50
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Cash flows from operating activities:
Income from continuing operations .... $ 9,755,379 $ 215,692 $ 7,307,821
----------- ----------- -----------
Adjustments to reconcile
income to net cash (used in)
provided by operating activities:
Cumulative effect of changes in
accounting principles, net of tax (2,621,344) - -
Losses and settlement expenses .... 8,010,617 33,143,232 7,571,843
Unearned premiums ................. 650,196 4,122,176 2,472,252
Other policyholders' funds ........ (840,604) 880,866 (217,686)
Deferred policy acquisition costs 413,967 (2,189,375) (523,277)
Indebtedness of related party ..... (8,639,436) 2,261,884 (5,269,702)
Accrued investment income ......... (242,595) (168,511) 29,659
Accrued income taxes:
Current ......................... (118,000) (2,390,000) 951,000
Deferred ........................ (18,027) (1,501,430) (781,719)
Provision for amortization ........ (23,072) 23,660 65,284
Realized investment gains ......... (684,445) (384,283) (64,418)
Postretirement benefits ........... 255,782 - -
Reinsurance receivables ........... 9,389,384 (12,828,945) 3,004,446
Prepaid reinsurance premiums ...... 805,733 (945,813) (61,779)
Amortization of deferred income ... (259,217) - -
Other, net ........................ 225,040 1,184,844 (961,824)
----------- ----------- -----------
6,303,979 21,208,305 6,214,079
Cash (used in) provided by the
change in the property and
casualty insurance subsidiaries'
pooling agreement (note 2) ...... (4,426,945) 29,402,411 -
Cash used in the commutation of
two reinsurance contracts under
the reinsurance subsidiary's
quota share agreement (note 2) .. (20,425,955) - -
----------- ----------- -----------
Total adjustment .............. (18,548,921) 50,610,716 6,214,079
----------- ----------- -----------
Net cash (used in) provided
by operating activities ... $(8,793,542) $50,826,408 $13,521,900
----------- ----------- -----------
51
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Cash flows from investing activities:
Purchases of fixed maturities ..... $(55,851,708) $(62,701,348) $(35,475,949)
Maturities of fixed maturities .... 57,329,956 37,285,914 31,844,948
Sale of equity securities ......... 1,043,068 - -
Purchases of short-term investments (308,953,569) (357,300,319) (163,308,142)
Sales of short-term investments ... 317,122,024 337,456,332 141,779,010
Sale of life subsidiary ........... - 474,356 15,500,000
------------ ------------ ------------
Net cash provided by (used
in) investing activities 10,689,771 (44,785,065) (9,660,133)
------------ ------------ ------------
Cash flows from financing activities:
Issuance of common stock .......... 331,568 748,405 550,023
Dividends paid to
stockholders (note 6(c)) ........ (3,443,465) (5,103,890) (5,081,607)
Purchase of treasury stock, net ... (118,641) (278,241) (399,107)
------------ ------------ ------------
Net cash used in financing
activities ............... (3,230,538) (4,633,726) (4,930,691)
------------ ------------ ------------
Net (decrease) increase in cash ..... (1,334,309) 1,407,617 (1,068,924)
Cash at beginning of year ........... 2,009,512 601,895 1,670,819
------------ ------------ ------------
Cash at end of year ................. $ 675,203 $ 2,009,512 $ 601,895
============ ============ ============
Income taxes paid ................... $ 4,656,213 $ 4,650,795 $ 2,954,736
Interest paid ....................... 1,696 387,351 15,874
See accompanying Notes to Consolidated Financial Statements.
52
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
EMC Insurance Group Inc., an approximately 67 percent owned subsidiary of
Employers Mutual Casualty Company (Employers Mutual), is an insurance holding
company with operations in property and casualty insurance, reinsurance,
nonstandard risk automobile insurance and excess and surplus lines insurance
management. EMC Insurance Group Inc. and its subsidiaries are referred to
herein as the "Company".
The Company's subsidiaries include EMCASCO Insurance Company, Illinois
EMCASCO Insurance Company, Dakota Fire Insurance Company, EMC Reinsurance
Company, Farm and City Insurance Company and EMC Underwriters, Ltd.
The Company sold its life insurance subsidiary to Employers Mutual on
December 31, 1991. All information presented in this report reflects the life
segment as a discontinued operation (see note 5).
The consolidated financial statements have been prepared on the basis of
generally accepted accounting principles (GAAP) which differ in some respects
from those followed in reports to insurance regulatory authorities. All
significant intercompany balances and transactions have been eliminated.
PROPERTY AND CASUALTY INSURANCE, REINSURANCE AND NONSTANDARD RISK AUTOMOBILE
INSURANCE OPERATIONS
Premiums are recognized as revenue ratably over the terms of the
respective policies. Effective January 1, 1993, the property and casualty
insurance subsidiaries changed their method of calculating unearned premiums
from the monthly pro rata method to the daily pro rata method. The property
and casualty insurance subsidiaries changed their accounting method because of
management's belief that the new method provides for a more accurate matching
of revenues and expenses over the terms of the underlying insurance policies.
This change resulted in a cumulative increase in unearned premiums of
$1,109,799 and a decrease in income of $807,933 ($.08 per share), net of income
tax benefits of $301,866.
Certain costs of acquiring new business, principally commissions, premium
taxes and variable underwriting expenses, have been deferred. Such costs are
being amortized as premium revenue is recognized. The method followed in
computing deferred policy acquisition costs limits the amount of such deferred
costs to their estimated realizable value, which gives effect to the premium to
be earned, related investment income, losses and loss settlement expenses and
certain other costs expected to be incurred as the premium is earned.
Unpaid losses and settlement expenses are based on estimates of reported
and unreported claims and related settlement expenses. Changes in estimates
are reflected in current operating results. The provisions for losses and
settlement expenses are considered adequate to cover the ultimate net cost of
losses and claims incurred to date net of estimated salvage and subrogation
recoverable. Since the provisions are necessarily based on estimates, the
ultimate liability may be more or less than such provisions.
53
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
EXCESS AND SURPLUS LINES OPERATIONS
Income is derived from fees and commissions which are realized when
earned. Costs of doing business are expensed as incurred.
REINSURANCE CEDED
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 113 (SFAS 113), "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts". SFAS 113 requires
a gross (rather than net) balance sheet presentation for ceded reinsurance
amounts and addresses the recognition of gain or loss resulting from
reinsurance transactions and appropriate financial statement disclosure of
reinsurance activities. Ceded reinsurance amounts previously reported on a net
basis in the December 31, 1992 consolidated financial statements have been
reclassified for comparative purposes. Assets and liabilities increased
$20,074,607 and $28,891,424 at December 31, 1993 and 1992, respectively, as a
result of the gross-up of ceded balances related to reinsurance receivables on
losses and settlement expenses and prepaid reinsurance premiums. Adoption of
this statement had no effect on the income of the Company.
INVESTMENTS
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115) "Accounting for Certain Investments in
Debt and Equity Securities." SFAS 115 requires that investments in all debt
securities and those equity securities with readily determinable market values
be classified into one of three categories: held-to-maturity, trading or
available-for-sale. Classification of investments is based upon management's
current intent. Debt securities which management has a positive intent and
ability to hold until maturity are classified as securities held-to-maturity
and are carried at amortized cost. Unrealized holding gains and losses on
securities held-to-maturity are not reflected in the consolidated financial
statements. Debt and equity securities that are purchased for short-term
resale are classified as trading securities. Trading securities are carried at
market value, with unrealized holding gains and losses included in earnings.
All other debt and equity securities not included in the above two categories
are classified as securities available-for-sale. Securities available-for-sale
are carried at market value, with unrealized holding gains and losses reported
as a separate component of stockholders' equity, net of tax. At December 31,
1993 the Company did not have any investments categorized as trading
securities. Adoption of this statement had no effect on the income of the
Company.
Prior to December 31, 1993, investments in fixed maturities were carried
at amortized cost, equity securities were carried at market value and short-
term investments were carried at cost. Changes in unrealized holding gains and
losses resulting from the revaluation of equity securities were reported as
direct increases and decreases in stockholders' equity. Unrealized holding
gains and losses on fixed maturities and short-term investments were not
recognized in the consolidated financial statements.
54
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company's carrying value for investments in the held-to-maturity and
available-for-sale categories is reduced to its estimated realizable value if a
decline in the market value is deemed other than temporary. Such reductions in
carrying value are recognized as realized losses and charged to income.
Premiums and discounts on debt securities are amortized over the life of the
security as an adjustment to yield using the effective interest method.
Realized gains and losses on disposition of investments are included in net
income. The cost of investments sold is determined on the first-in, first-out
method. Included in investments at December 31, 1993 and 1992 are securities
on deposit with various regulatory authorities as required by law amounting to
$11,329,402 and $10,774,732, respectively.
PENSION COSTS
Net periodic pension cost relating to the Company's employee participation
in Employers Mutual's Retirement Plan is computed on the basis of Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions",
and includes the following components: service cost, interest cost, actual
return on assets for the period and amortization of unrealized gain/loss from
past experience. It is the Company's policy to fund pension costs according to
regulations provided under the Internal Revenue Code. Assets held in the Plan
are a mix of equity, debt and guaranteed interest securities.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions". Under SFAS 106, the cost of
postretirement benefits other than pensions must be recognized on an accrual
basis as employees perform services to earn the benefits. Prior to 1993, the
cost of retiree health care and life insurance benefits were recognized as
expenses when paid.
INCOME TAXES
The Company files a consolidated Federal income tax return with its
subsidiaries. Consolidated income taxes/benefit are allocated among the
entities based upon separate tax liabilities.
Deferred income taxes are provided for temporary differences between
financial statement carrying values of assets and liabilities and their
respective tax bases. Effective January 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes". Under SFAS 109, deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit carryforwards, and then
a valuation allowance is established to reduce that deferred tax asset if it is
"more likely than not" that the related tax benefits will not be realized.
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. The effect on deferred
tax assets and liabilities from a change in tax rates is recognized in income
in the period that includes the enactment date. Prior to 1993, the Company
computed deferred income taxes in accordance with Statement of Financial
Accounting Standards No. 96.
55
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
EARNINGS PER SHARE
Earnings per common share are computed by dividing earnings by the
weighted average number of common shares outstanding during each year.
INTANGIBLE ASSETS
Goodwill, which represents the excess of cost over the fair value of net
assets of acquired subsidiaries, is being amortized on a straight-line basis
over 25 years.
RECLASSIFICATIONS
Certain amounts previously reported in prior years' consolidated financial
statements have been reclassified to conform to current year presentation.
2. AFFILIATION AND TRANSACTIONS WITH AFFILIATES
Property and Casualty Insurance Subsidiaries
The three property and casualty insurance subsidiaries of the Company and
two subsidiaries of Employers Mutual are parties to reinsurance pooling
agreements with Employers Mutual (collectively the "pooling agreement"). Under
the terms of the pooling agreement, each company cedes to Employers Mutual all
of its insurance business and assumes from Employers Mutual an amount equal to
its participation in the pool. All losses, settlement expenses and other
underwriting and administrative expenses are prorated among the parties on the
basis of participation in the pool. The investment programs and income tax
liabilities of the pool participants are not subject to the pooling agreement.
Effective January 1, 1992, the aggregate participation of the property and
casualty insurance subsidiaries was increased to 22 percent from 17 percent. In
connection with this change in pool participation, the Company's liabilities
increased $31,427,861 and invested assets increased $29,402,411. The Company
reimbursed Employers Mutual $2,025,450 for commissions incurred to generate
this business.
Employers Mutual voluntarily assumes reinsurance from nonaffiliated
insurance companies and cedes 95 percent of this business to the Company's
reinsurance subsidiary, exclusive of certain reinsurance contracts. Amounts
not ceded to the reinsurance subsidiary have historically been retained by
Employers Mutual and have been subject to cession to the pool members. Under
the terms of the pooling agreement, the property and casualty insurance
subsidiaries had a 22 percent (17 percent in 1991) participation in the amounts
assumed from these nonaffiliated companies.
Effective January 1, 1993, the pooling agreement was amended so that the
voluntary assumed reinsurance business written by Employers Mutual is no longer
subject to cession to the pool members. As a result, amounts assumed from
nonaffiliates have declined from amounts assumed in prior years. In connection
with this change in the pooling agreement, the Company's liabilities decreased
$4,470,204 and invested assets decreased $4,426,945. Employers Mutual
reimbursed the Company $43,259 for commissions incurred to generate this
business.
56
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Reinsurance Subsidiary
As noted above, the reinsurance subsidiary assumes a 95 percent quota
share portion of Employers Mutual's assumed reinsurance business, exclusive of
certain reinsurance contracts. The reinsurance subsidiary receives 95 percent
of all premiums and assumes 95 percent of all related losses and settlement
expenses of this business. The reinsurance subsidiary does not reinsure any of
Employers Mutual's direct insurance business, nor any "involuntary" facility or
pool business that Employers Mutual assumes pursuant to state law. In
addition, the reinsurance subsidiary is not liable for credit risk in
connection with the insolvency of any reinsurers of Employers Mutual.
Effective January 1, 1993, the quota share agreement was amended so that
losses in excess of $1,000,000 per event are retained by Employers Mutual. EMC
Re pays an annual override commission to Employers Mutual for this additional
protection, which totaled $1,808,527 in 1993. Employers Mutual retained
$615,000 of losses under this agreement in 1993.
Effective June 30, 1993, Employers Mutual commuted the portion of the
quota share agreement that pertains to a casualty pool that is in a run-off
position. In connection with this change in the quota share agreement, the
Company's liabilities decreased $19,783,037 and invested assets decreased
$17,806,179. The reserve discount amount of $1,976,858 was recorded as
deferred income and is being amortized into operations over the estimated
settlement period of the reserves, which is ten years. During 1993, $259,217
was recognized as income.
Effective October 31, 1993, Employers Mutual commuted the portion of the
quota share agreement that pertains to a voluntary pool that handles large
"highly protected" risks. This pool has experienced deteriorating underwriting
results over the last several years and Employers Mutual is presently
considering whether to continue its participation in the pool beyond 1994. In
connection with this change in the quota share agreement, the Company's
liabilities decreased $3,827,201 and invested assets decreased $2,619,776.
Employers Mutual reimbursed the Company $1,207,425 for commissions incurred to
generate this business. No reserve discount was calculated as this business
involves short-tail property coverage.
Premiums assumed by the reinsurance subsidiary from Employers Mutual
amounted to $34,445,978, $35,777,710 and $29,291,685 in 1993, 1992 and 1991,
respectively. It is customary in the reinsurance business for the assuming
company to compensate the ceding company for the acquisition expenses it
incurred in the generation of the business. Commissions paid by the
reinsurance subsidiary to Employers Mutual amounted to $8,979,309, $10,242,650
and $8,873,078 in 1993, 1992 and 1991, respectively.
In conjunction with the change in the quota share agreement noted above,
the reinsurance subsidiary terminated its catastrophe reinsurance treaty with
Employers Mutual. This treaty paid losses in excess of $1,000,000 resulting
from any one catastrophe, subject to a maximum loss of $3,000,000. Maximum
recovery was limited to $6,000,000. Ceded reinsurance on the books at December
31, 1992 is being allowed to run-off. The reinsurance subsidiary recovered
$306,250, $4,125,000 and $485,000 under this treaty and paid reinstatement
premiums of $0, $1,033,330 and $47,025 in 1993, 1992 and 1991, respectively.
Total premiums paid to Employers Mutual amounted to $0, $2,253,579 and
$1,332,957 in 1993, 1992 and 1991, respectively.
57
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The reinsurance subsidiary has an aggregate excess of loss treaty with
Employers Mutual which provides protection from a large accumulation of
retentions resulting from multiple catastrophes in any one calendar year. The
coverage provided is $2,000,000 excess of $2,500,000 ($2,000,000 in 1991)
aggregate losses retained, excess of $200,000 per event. Maximum recovery is
limited to $4,000,000 per accident year. EMC Re recovered $143,501, $4,221,444
and $607,306 under this treaty and paid reinstatement premiums of $208,470,
$744,561 and $0 in 1993, 1992 and 1991, respectively. Total premiums paid to
Employers Mutual amounted to $708,445, $1,124,561 and $320,000 in 1993, 1992
and 1991, respectively.
Nonstandard Risk Automobile Insurance Subsidiary
The nonstandard risk automobile insurance subsidiary has a reinsurance
treaty on an excess of loss basis with Employers Mutual which provides
reinsurance for 100 percent of each loss in excess of $100,000, up to
$1,000,000. No recoveries have been made under this treaty. Premiums paid to
Employers Mutual amounted to $42,065, $35,377 and $34,827 in 1993, 1992 and
1991, respectively.
3. REINSURANCE CEDED
The parties to the pooling agreement cede insurance business to other
insurers in the ordinary course of business for the purpose of limiting their
maximum loss exposure through diversification of their risks. In its
consolidated financial statements, the Company treats risks to the extent they
are reinsured as though they were risks for which the Company is not liable.
Insurance ceded by the pool participants does not relieve their primary
liability as the originating insurers. Employers Mutual evaluates the
financial condition of the reinsurers of the parties to the pooling agreement
and monitors concentrations of credit risk arising from similar geographic
regions, activities, or economic characteristics of the reinsurers to minimize
exposure to significant losses from reinsurer insolvencies. The parties to the
pooling agreement also assume insurance from involuntary pools and associations
in conjunction with direct business written in various states.
Prior to 1993, the reinsurance subsidiary ceded reinsurance business to
Employers Mutual and other nonaffiliated reinsurers in the ordinary course of
business for the purpose of limiting its maximum loss exposure. Effective
January 1, 1993, the quota share agreement with Employers Mutual was amended so
that losses in excess of $1,000,000 per event are retained by Employers Mutual.
In conjunction with this change in the quota share agreement, the reinsurance
subsidiary terminated its catastrophe reinsurance contracts with Employers
Mutual and the nonaffiliated reinsurers. Effective January 1, 1993, the
reinsurance subsidiary no longer cedes reinsurance to unaffiliated reinsurers
and only cedes reinsurance to Employers Mutual under an aggregate "excess of
loss" treaty. As a result, reinsurance receivables and prepaid reinsurance
premiums for the Company have decreased from prior year amounts. Ceded
reinsurance on the books at December 31, 1992 is being allowed to run-off.
58
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
As of December 31, 1993, deductions for reinsurance ceded to two
unaffiliated reinsurers aggregated $12,191,018, which represented a significant
portion of the total prepaid reinsurance premiums and reinsurance receivables
for losses and settlement expenses. These amounts reflect the property and
casualty insurance subsidiaries' pool participation percentage of amounts ceded
by Employers Mutual to these organizations in connection with its role as
"service carrier". Under these arrangements, Employers Mutual writes business
for these organizations on a direct basis and then cedes 100 percent of this
business to these organizations. Credit risk associated with these amounts is
minimal as all companies writing direct business in the states that participate
in these organizations are responsible for the liabilities of such
organizations on a pro rata basis.
The effect of reinsurance on premiums written and earned and losses and
settlement expenses incurred for the years ended December 31, 1993, 1992 and
1991 is presented below. Amounts for the year ended December 31, 1993 reflect
(1) the change in the property and casualty insurance subsidiaries' pooling
agreement whereby effective January 1, 1993, the voluntary assumed reinsurance
business written by Employers Mutual is no longer subject to cession to the
pool members and (2) the change in the reinsurance subsidiary's quota share
agreement whereby effective January 1, 1993, losses in excess of $1,000,000 per
event are retained by Employers Mutual and the reinsurance subsidiary therefore
no longer purchases catastrophe protection (see note 2).
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Premiums written
Direct ......................... $135,277,129 $138,829,576 $139,292,883
Assumed from nonaffiliates ..... 6,636,942 16,467,613 9,477,850
Assumed from affiliates ........ 147,620,705 150,070,741 108,847,230
Ceded to nonaffiliates ......... (10,701,482) (17,721,207) (11,113,238)
Ceded to affiliates ............ (120,898,914) (129,826,840) (130,675,014)
------------ ------------ ------------
Net premiums written ......... $157,934,380 $157,819,883 $115,829,711
============ ============ ============
Premiums earned
Direct ......................... $137,141,457 $142,391,771 $134,675,865
Assumed from nonaffiliates ..... 6,758,364 14,980,642 9,056,890
Assumed from affiliates ........ 148,366,487 140,442,245 106,783,050
Ceded to nonaffiliates ......... (11,507,217) (16,775,394) (11,051,459)
Ceded to affiliates ............ (124,321,553) (133,628,977) (126,045,108)
------------ ------------ ------------
Net premiums earned .......... $156,437,538 $147,410,287 $113,419,238
============ ============ ============
Losses and settlement expenses
incurred
Direct ......................... $ 97,842,980 $112,579,261 $101,910,680
Assumed from nonaffiliates ..... 6,575,099 17,415,319 8,671,495
Assumed from affiliates ........ 107,369,274 114,359,445 77,845,953
Ceded to nonaffiliates ......... (5,845,414) (16,862,082) (4,735,272)
Ceded to affiliates ............ (85,586,640) (105,404,110) (95,587,937)
------------ ------------ ------------
Net losses and settlement
expenses incurred .......... $120,355,299 $122,087,833 $ 88,104,919
============ ============ ============
59
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
4. REINSURANCE ASSUMED
The parties to the pooling agreement have historically recorded amounts
assumed from the National Workers' Compensation Reinsurance Pool on a net
basis. Under this approach, reserves for outstanding losses and unearned
premiums were reported as liabilities under "Indebtedness to Related Party" in
the Company's consolidated financial statements. Effective December 31, 1993,
the parties to the pooling agreement began recording these amounts as
outstanding losses and unearned premiums. As a result, outstanding losses
increased $11,436,543, unearned premiums increased $1,711,288 and indebtedness
to related party decreased $13,147,831. There was no income effect from this
reclassification. Prior year consolidated financial statements have been
restated for comparative purposes.
5. DISCONTINUED OPERATIONS
On December 31, 1991 the Company's life insurance subsidiary was sold to
Employers Mutual pursuant to a stock acquisition agreement dated December 9,
1991. The Company received $15,500,000 in cash on December 31, 1991 with final
settlement of $474,356 on March 2, 1992 based on the GAAP book value on
December 31, 1991, which totaled $15,974,356. No income statement gain was
recognized on the sale.
The consolidated financial statements report the life segment's results as
discontinued operations on a separate line in the 1991 statement of income.
Income from discontinued operations is net of applicable income tax benefit of
$150,939.
6. COMMON STOCK
(a) EMPLOYEE STOCK PURCHASE PLANS
1987 Employee Stock Purchase Plan
Under the Employers Mutual 1987 Employee Stock Purchase Plan, Employers
Mutual could purchase up to 200,000 shares of EMC Insurance Group Inc. common
stock for resale to eligible employees. The plan provided for two option
periods each calendar year; from January 1 until the last business day of June,
and from July 1 until the last business day of December, with the last business
day in each option period being the option exercise date. Any employee who was
employed by Employers Mutual, its affiliates, or its subsidiaries on the first
day of the month immediately preceding any option period was eligible to
participate in the plan. Eligible employees could elect to participate in the
plan either through payroll deduction or by lump sum contributions, but in no
case could the participation level exceed 10 percent of the employee's base
annual compensation amount. The option price was 85 percent of the fair market
value of the stock on the exercise date. The plan was terminated in August of
1993 and the remaining shares were deregistered. For the first option period
of 1993, 101 employees participated in the plan and exercised a total of 10,706
options at a price of $8.08. Activity under the plan was as follows:
60
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Year ended December 31,
---------------------------
1993 1992 1991
------- ------- -------
Shares available for purchase, beginning of year 55,720 85,765 110,564
Shares purchased under plan ................... (10,706) (30,045) (24,799)
Shares deregistered ........................... (45,014) - -
------- ------- -------
Shares available for purchase, end of year ...... - 55,720 85,765
======= ======= =======
1993 Employee Stock Purchase Plan
On February 12, 1993, the Company filed a registration statement with the
Securities and Exchange Commission authorizing the issuance of up to 500,000
shares of the Company's common stock for use in the Employers Mutual Casualty
Company 1993 Employee Stock Purchase Plan. The plan provides for two option
periods each calendar year; from January 1 until the last business day of June,
and from July 1 until the last business day of December, with the last business
day in each option period being the option exercise date. Any employee who is
employed by Employers Mutual, its affiliates, or its subsidiaries on the first
day of the month immediately preceding any option period is eligible to
participate in the plan. Eligible employees may elect to participate in the
plan either through payroll deduction or by lump sum contributions, but in no
case can the participation level exceed 10 percent of the employee's base
annual compensation amount. The option price is 85 percent of the fair market
value of the stock on the exercise date. Upon exercise of an option, the
Company shall issue a stock certificate evidencing the ownership of the
participant in the shares of stock so purchased. The certificate, however,
will be held in custody by the stock transfer agent for a period of one year
from the exercise date. During such one year period, the participant shall
have the rights and privileges of a shareholder, including the right to vote,
to receive dividends, and to have such shares participate in the dividend
reinvestment and common stock purchase plan. However, the participant shall
not be able to sell, transfer, assign, pledge or otherwise encumber or dispose
of such shares during such one year period. Upon expiration of the one year
period or upon any earlier termination of employment of the participant for
any reason, including death, such participant shall, within thirty days of such
expiration or termination, receive the stock certificate(s) evidencing his or
her shares of stock. The plan is administered by the Board of Directors of
Employers Mutual and the Board has the right to amend or terminate the plan at
any time; however, no such amendment or termination shall adversely affect the
rights and privileges of participants with unexercised options. For the second
option period of 1993, 104 employees participated in the plan and exercised a
total of 13,454 options at a price of $8.19. Activity under the plan was as
follows:
Year ended
December 31,
1993
------------
Shares available for purchase, beginning of year .......... -
Shares registered for use in plan ....................... 500,000
Shares purchased under plan ............................. (13,454)
------------
Shares available for purchase, end of year ................ 486,546
============
61
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(b) 1993 NON-EMPLOYEE DIRECTOR STOCK PURCHASE PLAN
On February 12, 1993, the Company filed a registration statement with the
Securities and Exchange Commission authorizing the issuance of up to 200,000
shares of the Company's common stock for use in the 1993 Employers Mutual
Casualty Company Non-Employee Director Stock Purchase Plan. All non-employee
directors of Employers Mutual and its subsidiaries and affiliates who are not
serving on the "Disinterested Director Committee" of Employers Mutual's Board
of Directors (the "Board") as of the beginning of the option period are
eligible for participation in the plan. The option period is from the date of
each eligible director's respective Annual Meeting to the day immediately prior
to the next and subsequent Annual Meeting. Each eligible director is granted
an option at the beginning of the option period to purchase stock at an option
price equal to 75 percent of the fair market value of the stock on the option
exercise date. The option may be exercised anytime during the option period.
An eligible director can purchase shares of common stock in an amount equal to
a minimum of 25 percent to a maximum of 100 percent of their annual cash
retainer. Eligible directors may not have sold any of the Company's common
stock in the six month period preceding the exercise date and may not sell any
shares of the Company's common stock in the six month period following the
exercise of an option. The plan is administered by the Disinterested Director
Committee of the Board. The Board may amend or terminate the plan at any time;
however, no such amendment or termination shall adversely affect the rights and
privileges of participants with unexercised options. The plan will continue
through the option period for options granted at the 2002 Annual Meeting.
During 1993, five directors participated in the plan and exercised a total of
5,952 options at prices ranging from $6.56 to $7.69. Activity under the plan
was as follows:
Year ended
December 31,
1993
------------
Shares available for purchase, beginning of year .......... -
Shares registered for use in plan ....................... 200,000
Shares purchased under plan ............................. (5,952)
------------
Shares available for purchase, end of year ................ 194,048
============
62
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(c) DIVIDEND REINVESTMENT PLAN
The Company maintains a Dividend Reinvestment and Common Stock Purchase
Plan which provides stockholders with the option of reinvesting cash dividends
in additional shares of the Company's common stock. Participants may also
purchase additional shares of common stock without incurring broker commissions
by making optional cash contributions to the plan. Any holder of shares of
common stock is eligible to participate in the plan. During 1993, Employers
Mutual elected to participate in the Dividend Reinvestment Plan by reinvesting
50 percent of its dividends in additional shares of the Company's common stock.
Activity under the plan was as follows:
Year ended December 31,
-------------------------
1993 1992 1991
------- ------- -------
Shares available for purchase, beginning of year 955,069 973,901 991,575
Shares purchased under plan ................... (186,187) (18,832) (17,674)
------- ------- -------
Shares available for purchase, end of year ...... 768,882 955,069 973,901
======= ======= =======
Range of purchase prices ........................ $10.00 $8.00 $8.50
to to to
$10.25 $10.25 $9.50
(d) TREASURY STOCK
The Company from time to time repurchases shares of its outstanding common
stock in the open market or through negotiated purchases for the purpose of
providing shares for use in the Company's Dividend Reinvestment and Common
Stock Purchase Plan. The Company repurchased 7,000 shares and 10,000 shares
for this purpose during 1992 and 1991 at an average cost of $10.47 and $9.00,
respectively. The Company also repurchases shares of its outstanding common
stock in connection with the issuance of new shares under Employers Mutual's
stock option plans.
Treasury stock activity was as follows:
Year ended December 31,
-------------------------
1993 1992 1991
------- ------- -------
Treasury shares, beginning of year ............... 49,392 36,685 8,863
Repurchased shares ............................ 12,568 31,539 45,496
Reissued shares ............................... (53,870) (18,832) (17,674)
------- ------- -------
Treasury shares, end of year ..................... 8,090 49,392 36,685
======= ======= =======
Average cost ..................................... $ 10.06 $ 9.79 $ 9.31
======= ======= =======
Gain (loss) on sale .............................. $23,261 $ (485) $14,887
======= ======= =======
63
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. STOCK OPTIONS
During 1993, Employers Mutual maintained three separate stock option plans
which utilize the common stock of the Company. The Company receives the
current fair market value for any shares issued under the plans and all costs
of the plans are borne by Employers Mutual or the company employing the
individual optionees.
(a) 1979 STOCK OPTION PLAN
Under Employers Mutual's 1979 Stock Option Plan, 480,000 shares of the
Company's common stock were reserved for issuance to certain officers and key
management employees of Employers Mutual and its subsidiaries as determined by
its Board of Directors. Options were granted to 37 individuals. For the one
remaining eligible participant at February 21, 1994 the option price is the
greater of statutory book value or fair market value at the date of grant,
which was $6.38 per share and which must be exercised by no later than March
14, 1994. The period for granting options under the plan expired on March 31,
1984. Options granted vest at an annual rate of 10 percent on a cumulative
basis. Upon death, retirement, or permanent disability, all options granted
become exercisable. During 1993, 960 options were exercised at a price of
$6.38. Stock options under the plan were as follows:
Year ended December 31,
------------------------
1993 1992 1991
------ ------ ------
Outstanding, beginning of year ............ 5,760 44,440 74,290
Exercised .............................. (960) (38,200) (29,850)
Expired ................................ - (480) -
------ ------- -------
Outstanding, end of year .................. 4,800 5,760 44,440
====== ======= =======
Shares exercisable, end of year ........... 4,800 3,840 40,600
====== ======= =======
(b) 1982 INCENTIVE STOCK OPTION PLAN
Under the terms of Employers Mutual's 1982 Incentive Stock Option Plan,
600,000 shares of the Company's common stock were reserved for issuance to
officers and key employees of Employers Mutual and its subsidiaries. The Board
of Directors of Employers Mutual is the administrator of the plan. Options
have been granted to 57 individuals. For the 35 remaining eligible
participants at February 21, 1994, the option price is the fair market value at
dates of grant ranging from $7.81 to $10.25 per share. Options granted under
the plan are for a term of two to ten years. Each option shall have a vesting
period of two, three, four or five years, with such vesting to commence one
year from the date of grant, except in the event of termination of employment
when all such granted options are exercisable within three, six or twelve
months depending upon the circumstances of such termination. The period for
granting options under the plan expired on August 30, 1992. Once granted, the
period for exercising the options can not exceed ten years from date of grant.
The option price was determined by the Board of Directors but could not be less
than the fair market value of the stock on the date of grant. During 1993,
24,820 options were exercised at prices ranging from $6.88 to $8.75. Stock
options under the plan were as follows:
64
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Year ended December 31,
-------------------------------
1993 1992 1991
------- ------- -------
Outstanding, beginning of year ............ 387,093 447,393 431,193
Granted ............................... - 82,900 62,500
Exercised ............................. (24,820) (58,540) (41,300)
Expired ............................... (10,200) (84,660) (5,000)
------- ------- -------
Outstanding, end of year .................. 352,073 387,093 447,393
======= ======= =======
Shares exercisable, end of year ........... 214,680 168,082 195,644
======= ======= =======
(c) 1993 INCENTIVE STOCK OPTION PLAN
On February 12, 1993 the Company filed a registration statement with the
Securities and Exchange Commission authorizing the issuance of up to 500,000
shares of the Company's common stock for use in the 1993 Employers Mutual
Casualty Company Incentive Stock Option Plan. Options granted under the plan
will be for a term of two to ten years. Each option shall have a vesting
period of two, three, four or five years, with such vesting to commence one
year from the date of grant, with the exception of an option with a two year
vesting period for which the vesting period shall commence on the date of
grant. The time limit for granting options under the plan is December 31,
2002. The Senior Executive Compensation and Stock Option Committee of
Employers Mutual's Board of Directors is the administrator of the plan.
Options have been granted to 52 individuals under the plan. For the 51
eligible participants at February 21, 1994, the option price is the fair market
value at dates of grant ranging from $9.38 to $9.56 per share. Option prices
are determined by the Committee but can not be less than the fair market value
of the stock on the date of grant. During 1993, 163,650 options were granted
to eligible participants and no options were exercised. Stock options under
the plan were as follows:
Year ended
December 31,
1993
------------
Outstanding, beginning of year ............................ -
Granted ................................................. 163,650
Exercised ............................................... -
Expired ................................................. (2,500)
------------
Outstanding, end of year .................................. 161,150
============
Shares exercisable, end of year ........................... -
============
65
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) RETAINED EARNINGS
Retained earnings of the Company's insurance subsidiaries available for
distribution as dividends to EMC Insurance Group Inc. are limited by law to the
statutory unassigned surplus of each of the subsidiaries as of the previous
December 31, as determined in accordance with accounting practices prescribed
by insurance regulatory authorities of the state of domicile of each
subsidiary. Subject to this limitation, the maximum dividend that may be paid
by Iowa corporations without prior approval of the insurance regulatory
authorities is restricted to the greater of 10 percent of statutory surplus as
regards policyholders as of the preceding December 31, or net income of the
preceding calendar year on a statutory basis. Both Illinois and North Dakota
impose restrictions which are similar to those of Iowa on the payment of
extraordinary dividends and distributions. At December 31, 1993, $10,113,818
was available for distribution in 1994 to EMC Insurance Group Inc. without
prior approval.
Illinois and North Dakota are currently exploring changes to the
definition of extraordinary dividends; however, no legislation has been
finalized at this time.
Statutory policyholders' surplus of the Company's insurance subsidiaries
was $78,681,248 and $73,638,088 at December 31, 1993 and 1992, respectively.
Statutory net income (loss) of the Company's insurance subsidiaries was
$8,788,458, ($3,960,393) and $4,852,271 for the three years ended December 31,
1993.
The Company contributed $10,000,000 of the proceeds received from the sale
of the life subsidiary to increase the surplus of the property and casualty
insurance subsidiaries in 1992 in connection with the increase in the pool
participation. The Company contributed $3,000,000 to the surplus of the
reinsurance subsidiary in 1992 in order to retain its status as an authorized
reinsurance company in several states.
66
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) SEGMENT INCOME
<TABLE>
<CAPTION>
The Company's operations include the following major segments: property and casualty insurance, reinsurance,
nonstandard risk automobile insurance and excess and surplus lines insurance management. No single source
accounted for 10 percent or more of consolidated revenues. Summarized financial information for these segments is
as follows:
Net Realized Operating
Premiums Underwriting Investment Gains Other Income
Earned Gain (Loss) Income (Losses) Income (Loss) Assets
------------ ------------ ----------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1993
Property and casualty insurance $109,584,986 $ (3,812,671) $13,242,584 $405,193 $ - $ 9,835,106 $266,070,386
Reinsurance ................... 33,324,202 (6,040,296) 6,090,294 200,612 259,217 509,827 76,743,953
Nonstandard risk automobile
insurance ................... 13,528,350 (2,542,690) 1,165,684 108,640 - (1,268,366) 20,821,495
Excess and surplus lines
insurance management ........ - 36,858 66,564 - - 103,422 2,765,076
Parent company ................ - (345,678) 214,825 (30,000) - (160,853) 109,731,870
Eliminations .................. - - - - - - (107,197,257)
------------ ------------ ----------- -------- -------- ----------- ------------
Consolidated ............. $156,437,538 $(12,704,477) $20,779,951 $684,445 $259,217 $ 9,019,136 $368,935,523
============ ============ =========== ======== ======== =========== ============
Year Ended December 31, 1992
Property and casualty insurance $109,138,829 $ (7,168,779) $13,047,540 $285,367 $ - $ 6,164,128 $265,598,463
Reinsurance ................... 26,615,180 (11,904,373) 6,763,257 51,649 - (5,089,467) 98,293,214
Nonstandard risk automobile
insurance ................... 11,656,278 (1,992,649) 1,178,748 47,267 - (766,634) 18,681,308
Excess and surplus lines
insurance management ........ - 429,756 66,266 - - 496,022 2,940,889
Parent company ................ - (312,778) 483,786 - - 171,008 100,995,033
Eliminations .................. - - - - - - (113,701,807)
------------ ------------ ----------- -------- -------- ----------- ------------
Consolidated ............. $147,410,287 $(20,948,823) $21,539,597 $384,283 $ - $ 975,057 $372,807,100
============ ============ =========== ======== ======== =========== ============
Year Ended December 31, 1991
Property and casualty insurance $ 78,413,029 $ (5,147,254) $11,153,452 $ 30,703 $ - $ 6,036,901 $190,514,870
Reinsurance ................... 25,009,419 (4,991,158) 7,148,790 28,811 - 2,186,443 88,120,312
Nonstandard risk automobile
insurance ................... 9,996,790 110,047 1,329,300 4,904 - 1,444,251 18,132,233
Excess and surplus lines
insurance management ........ - 554,984 86,374 - - 641,358 3,361,866
Parent company ................ - (361,192) 484,077 - - 122,885 105,229,305
Eliminations .................. - - - - - - (94,357,375)
------------ ------------ ----------- -------- -------- ----------- ------------
Consolidated ............. $113,419,238 $ (9,834,573) $20,201,993 $ 64,418 $ - $10,431,838 $311,001,211
============ ============ =========== ======== ======== =========== ============
</TABLE>
67
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) INVESTMENTS
As discussed in note 1, Summary of Significant Accounting Policies, the
Company adopted SFAS 115 as of December 31, 1993. In conjunction with the
adoption of SFAS 115, the Company changed its intent with respect to holding
certain debt securities to maturity and reclassified $61,885,165 of securities
held-to-maturity and $51,196,415 of short-term investments to securities
available-for-sale. Unrealized holding gains related to this reclassification
increased stockholders' equity by $2,068,451, net of deferred income taxes of
$1,065,565. Unrealized holding losses associated with equity securities
available-for-sale totaled $19,800, net of defered tax benefits of $10,200.
The amortized cost and estimated market value of securities held-to-
maturity and available-for-sale as of December 31, 1993 are as follows. The
estimated market value is based on quoted market prices, where available, or
on values obtained from independent pricing services.
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1993 Cost Gains Losses Value
----------------- ------------ ----------- ----------- ------------
Securities held-to-maturity:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies ........... $109,895,914 $ 9,931,812 $ (630) $119,827,096
Obligations of states
and political
subdivisions ........... 18,374,003 1,936,083 (2,129) 20,307,957
Debt securities issued
by foreign governments 587,060 70,343 - 657,403
Public utilities ......... 8,813,202 336,199 (910) 9,148,491
Corporate securities ..... 17,050,988 819,896 (467) 17,870,417
Mortgage-backed securities 36,289,456 2,204,777 - 38,494,233
------------ ----------- ----------- ------------
Total fixed maturity
securities held-to-
maturity ........... $191,010,623 $15,299,110 $ (4,136) $206,305,597
============ =========== =========== ============
Securities available-for-sale:
Obligations of states
and political
subdivisions ........... $ 58,431,008 $ 3,038,591 $ (74,084) $ 61,395,515
Other debt securities .... 486,941 4,779 (2,070) 489,650
Short-term investments ... 51,029,615 166,800 - 51,196,415
------------ ----------- ----------- ------------
Total fixed maturity
securities
available-for-sale $109,947,564 $ 3,210,170 $ (76,154) $113,081,580
============ =========== =========== ============
Equity securities
available-for-sale $ 505,000 $ - $ (30,000) $ 475,000
============ =========== =========== ============
68
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated market value of fixed maturity securities
held-to-maturity and equity securities available-for-sale as of December 31,
1992 are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1992 Cost Gains Losses Value
----------------- ------------ ----------- ----------- ------------
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies ............ $144,419,244 $ 9,242,068 $ (281,096) $153,380,216
Obligations of states
and political
subdivisions ............ 51,188,090 4,393,165 (99,395) 55,481,860
Debt securities issued
by foreign governments .. 590,502 50,452 - 640,954
Public utilities .......... 9,693,693 191,934 (37,746) 9,847,881
Corporate securities ...... 16,560,387 405,443 (183,348) 16,782,482
Mortgage-backed securities 26,983,821 2,500,728 (309) 29,484,240
Other debt securities ..... 1,117,121 19,400 (34,659) 1,101,862
------------ ----------- ----------- ------------
Total fixed maturity
securities held-to-
maturity ............ $250,552,858 $16,803,190 $ (636,553) $266,719,495
============ =========== =========== ============
Equity securities
available-for-sale .. $ 1,560,000 $ - $ (142,000) $ 1,418,000
============ =========== =========== ============
The amortized cost and estimated market value of fixed maturity securities
held-to-maturity and available-for-sale at December 31, 1993, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
------------ ------------
Fixed maturity securities held-to-maturity:
Due in one year or less ................... $ 14,613,909 $ 14,887,469
Due after one year through five years ..... 55,951,990 61,054,939
Due after five years through ten years .... 73,944,312 80,286,921
Due after ten years ....................... 10,210,956 11,582,035
Mortgage-backed securities ................ 36,289,456 38,494,233
------------ ------------
Totals .................................. $191,010,623 $206,305,597
============ ============
Fixed maturity securities available-for-sale:
Due in one year or less ................... $ 51,429,559 $ 51,599,338
Due after one year through five years ..... 10,168,440 10,476,611
Due after five years through ten years .... 31,194,883 33,453,428
Due after ten years ....................... 17,154,682 17,552,203
------------ ------------
Totals .................................. $109,947,564 $113,081,580
============ ============
69
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Proceeds from calls and prepayments of fixed maturity securities and
realized investment gains and losses were as follows:
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Proceeds from calls and prepayments ... $37,579,956 $18,640,915 $ 6,504,948
Gross realized investment gains ....... 706,059 388,692 64,514
Gross realized investment losses ...... 9,682 4,409 96
A summary of net investment income is as follows:
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Interest on fixed maturities .......... $19,701,641 $19,754,718 $19,297,727
Dividends on equity securities ........ 65,065 119,989 124,777
Interest on short-term investments .... 1,602,740 2,172,983 1,110,513
----------- ----------- -----------
Total investment income ........... 21,369,446 22,047,690 20,533,017
Investment expense .................... 589,495 508,093 331,024
----------- ----------- -----------
Net investment income ............. $20,779,951 $21,539,597 $20,201,993
=========== =========== ===========
A summary of realized investment gains (losses) and net changes in
unrealized holding gains (losses) is as follows:
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Realized investment gains (losses):
Fixed maturities .................. $ 696,377 $ 384,283 $ 64,418
Equity securities ................. (11,932) - -
----------- ----------- -----------
Total realized investment gains 684,445 384,283 64,418
Applicable income taxes ........... (232,711) (130,656) (21,902)
----------- ----------- -----------
Net realized investment gains 451,734 253,627 42,516
----------- ----------- -----------
Net changes in unrealized holding
gains (losses):
Fixed maturity securities
held-to-maturity ................ (871,663) (2,088,038) 11,501,606
Fixed maturity securities
available-for-sale .............. 3,134,016 - -
Equity securities
available-for-sale .............. 112,000 184,375 298,625
Applicable income taxes ........... (807,280) 647,245 (4,012,079)
----------- ----------- -----------
Net changes in unrealized
holding gains (losses) ...... 1,567,073 (1,256,418) 7,788,152
----------- ----------- -----------
Net realized investment gains and
changes in unrealized holding
gains (losses) ...................... $ 2,018,807 $(1,002,791) $ 7,830,668
=========== =========== ===========
70
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) EMPLOYEE RETIREMENT PLAN
The Company participates in Employers Mutual's defined benefit retirement
plan covering substantially all employees. The plan is funded by employer
contributions and provides a monthly income for life upon retirement or upon
total and permanent disability.
The following table sets forth the funded status and the net periodic
pension cost (benefit) for the Employers Mutual defined benefit retirement
plan, based upon a measurement date of November 1, 1993, 1992 and 1991,
respectively:
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$27,245,933, $23,739,308 and
$16,922,064 .................. $ 29,713,282 $ 24,695,567 $ 18,600,097
============ ============ ============
Projected benefit obligation for
service rendered to date ......... $(44,579,398) $(36,103,055) $(27,610,564)
Plan assets at fair value .......... 51,625,386 48,365,122 46,915,274
------------ ------------ ------------
Plan assets in excess of projected
benefit obligation ............... 7,045,988 12,262,067 19,304,710
Unrecognized net loss (gain) from
past experience different from
that assumed and effects of
changes in assumptions ........... 4,440,487 (754,346) (3,715,134)
Prior service cost not yet recog-
nized in net periodic pension cost 4,374,510 4,941,220 653,767
Unrecognized portion of initial
net asset ........................ (7,182,692) (8,072,193) (9,123,946)
------------ ------------ ------------
Prepaid pension cost ........ $ 8,678,293 $ 8,376,748 $ 7,119,397
============ ============ ============
Net periodic pension cost (benefit) included the following components:
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Service cost - benefits earned
during the period ................... $ 2,347,984 $ 1,691,648 $ 1,368,932
Interest cost on projected
benefit obligation .................. 2,533,587 2,053,584 1,818,023
Actual gain on plan assets ............ (5,229,721) (4,386,821) (9,440,576)
Net amortization and deferral ......... 647,291 (615,762) 4,791,814
----------- ----------- -----------
Net periodic pension cost (benefit) $ 299,141 $(1,257,351) $(1,461,807)
=========== =========== ===========
71
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The unrecognized net asset is being recognized over 12.5 to 15.2 years
beginning January 1, 1987. The weighted average discount rate used to measure
the projected benefit obligation was 6.75 percent, 7.00 percent and 7.75
percent and the assumed long-term rate of return on plan assets was 8.00
percent, 8.00 percent and 8.75 percent for 1993, 1992 and 1991, respectively.
The rate of increase in future compensation levels used in measuring the
projected benefit obligation was 5.30 percent in 1993, 5.50 percent in 1992 and
6.00 percent in 1991. Pension expense (benefit) for the Company amounted to
$103,846, ($622,177) and ($275,628) in 1993, 1992 and 1991, respectively.
Effective November 1, 1992, the Plan was amended to comply with the
requirements of the Tax Reform Act of 1986, which placed limits on the benefits
for highly compensated employees. This change in the benefit formula
represents a prior service cost of $4,354,553, which is being amortized over 12
to 14 years beginning January 1, 1993. The Company's share of this prior
service cost amounted to $1,003,257.
12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company participates in Employers Mutual's postretirement benefit
plans which provide certain health care and life insurance benefits for retired
employees. Substantially all of the Company's employees may become eligible
for those benefits if they reach normal retirement age while working for the
Company.
The health care postretirement plan requires contributions from
participants and contains certain cost sharing provisions such as coinsurance
and deductibles. The life insurance plan is noncontributory. Both plans are
unfunded and benefits provided are subject to change.
As discussed in note 1, Summary of Significant Accounting Policies, the
Company adopted SFAS 106 as of January 1, 1993. The Company's transition
obligation as of January 1, 1993 amounted to $2,165,900 ($.21 per share), net
of income tax benefits of $1,115,767, and was recorded as a cumulative effect
adjustment to income. Prior year financial statements have not been restated
to apply the provisions of SFAS 106.
The following table sets forth the status and the net periodic
postretirement benefit cost of the Employers Mutual postretirement benefit
plans at December 31, 1993, based upon a measurement date of November 1, 1993:
Actuarial present value of benefit obligations:
Retirees ............................................... $ 7,874,628
Fully eligible active plan participants ................ 5,681,430
Other active plan participants ......................... 7,783,183
-----------
Total .............................................. 21,339,241
-----------
Unrecognized net loss from past experience different
from that assumed and effects of changes in assumptions .. 447,778
Prior service cost not yet recognized in net periodic
postretirement benefit cost .............................. 5,105,109
-----------
Postretirement benefit obligation .................. $15,786,354
===========
72
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Net periodic postretirement benefit cost for the year ended December 31,
1993 included the following components:
Service cost - benefits earned during the period ............ $ 596,498
Interest cost on accumulated postretirement
benefit obligation ........................................ 999,526
----------
Net periodic postretirement benefit cost ............ $1,596,024
==========
The assumed weighted average annual rate of increase in the per capita
cost of covered health care benefits (i.e. the health care cost trend rate) is
12.5 percent for 1994 (compared to 13 percent assumed for 1993) and is assumed
to decrease gradually to 6 percent in 2007 and remain at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, a one-percentage-point increase in the assumed
health care cost trend rate for each future year would increase the accumulated
postretirement benefit obligation as of December 31, 1993 by $3,269,053 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year ended December 31, 1993 by $281,964.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation at December 31, 1993 and January 1, 1993 was
6.75 percent and 7.00 percent, respectively.
Effective January 1, 1993, the health care postretirement plan was amended
to provide additional benefits under the prescription drug coverage. The
amendment substantially reduced the retired employee's cost sharing provisions
for prescription drug coverage. The amendment resulted in a prior service
cost of $5,105,109, which will be amortized over 8.9 to 10.0 years beginning
January 1, 1994. The Company's share of the prior service cost amounted to
$1,156,028.
The Company's net periodic postretirement benefit cost for the year ended
December 31, 1993 was $359,747. The postretirement benefit cost of $78,807 and
$53,180 for the years ended December 31, 1992 and 1991, respectively, which
were recorded on a cash basis, have not been restated.
(13) INCOME TAXES
As discussed in note 1, Summary of Significant Accounting Policies, the
Company adopted SFAS 109 as of January 1, 1993. The cumulative effect of this
change in accounting for income taxes as of January 1, 1993 increased income by
$5,595,177 ($.55 per share), net of a valuation allowance of $1,000,000, and is
reported separately in the consolidated statement of income for the year ended
December 31, 1993. Excluding the amount recognized as the cumulative effect of
the change, the effect of applying SFAS 109 on net income for the year ended
December 31, 1993 was a decrease of $174,483 ($.02 per share). Prior year
consolidated financial statements have not been restated to apply the
provisions of SFAS 109.
73
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Temporary differences between the consolidated financial statement
carrying amount and tax basis of assets and liabilities that give rise to
significant portions of the deferred tax asset at December 31, 1993 and 1992
relate to the following:
Year ended December 31,
------------------------
1993 1992
----------- -----------
Loss reserve discounting .......................... $12,549,200 $ 7,239,227
Unearned premium reserve limitation ............... 2,953,491 2,886,863
Postretirement benefits ........................... 1,202,733 -
Policyholder dividends payable .................... 970,630 1,209,346
Prepayment of tax on commutation of loss reserves 583,998 -
Other, net ........................................ 617,529 201,763
----------- -----------
Total gross deferred income tax asset ......... 18,877,581 11,537,199
Less valuation allowance .......................... (1,000,000) -
----------- -----------
Total deferred income tax asset ............... 17,877,581 11,537,199
----------- -----------
Deferred policy acquisition costs ................. (2,617,614) (2,758,363)
Net unrealized holding gains ...................... (1,055,365) -
Other, net ........................................ (1,163,909) (1,713,615)
----------- -----------
Total gross deferred income tax liability ..... (4,836,888) (4,471,978)
----------- -----------
Net deferred income tax asset ............. $13,040,693 $ 7,065,221
=========== ===========
The valuation allowance primarily relates to the tax benefit of future
postretirement benefit deductions that are scheduled to reverse more than
fifteen years into the future. The valuation allowance was established for
these future deductions due to the uncertainty of the timing of these
deductions. There was no change in the valuation allowance during the year
ended December 31, 1993.
Management believes the Company will generate sufficient taxable income
in the future to recognize the benefits of future tax deductions. The Company
has had cumulative taxable income in the five-year period of 1989 - 1993 of
approximately $37,500,000.
74
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The actual income tax expense for the years ended December 31, 1993, 1992
and 1991 differed from the "expected" tax expense for those years (computed by
applying the United States federal corporate tax rate of 34 percent to income
from continuing operations before income taxes and cumulative effect of changes
in accounting principles) as follows:
Year ended December 31,
----------------------------------
1993 1992 1991
---------- ---------- ----------
Computed "expected" tax expense ......... $3,066,506 $ 331,519 $3,546,825
Increases (decreases) in
taxes resulting from:
Tax-exempt interest income .......... (1,171,612) (1,312,568) (1,464,296)
Unrecognized future temporary
differences ....................... - 1,745,003 480,042
(Under) over accrual ................ (252,839) - 620,500
Settlement of IRS examination ....... 117,497 - -
Other, net .......................... 125,549 (4,589) (59,054)
---------- ---------- ----------
Income taxes ...................... $1,885,101 $ 759,365 $3,124,017
========== ========== ==========
The Internal Revenue Service is currently examining the Company's 1990 and
1991 tax returns. The Company does not expect any material assessments related
to these examinations.
75
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) RECONCILIATION OF STATUTORY NET INCOME AND SURPLUS
A reconciliation of net income and stockholders' equity from that reported
on a statutory basis to that reported in the accompanying consolidated
financial statements on a GAAP basis is as follows:
Year ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Statutory net income (loss) ........... $ 8,761,472 $(3,118,589) $15,271,311
Change in deferred policy
acquisition costs ................... (413,967) 2,189,375 523,277
Change in salvage and subrogation
accrual ............................. (232,760) 742,233 81,119
Change in other policyholders' funds .. 840,604 (880,866) 217,686
Change in pension accrual ............. (103,846) 622,177 275,628
GAAP postretirement benefit cost
in excess of statutory cost ......... (216,091) - -
Deferred income tax benefit ........... 18,027 1,501,430 781,719
Income from discontinued
operations (note 4) ................. - - 1,853,234
Statutory gain on sale of
life subsidiary ..................... - (474,356) (9,900,000)
Statutory reserve discount on
commutation of reinsurance contract
in excess of GAAP amortization ...... (1,717,641) - -
Other, net ............................ 198,237 (365,712) 57,081
----------- ----------- -----------
Income before cumulative effect of
changes in accounting principles,
GAAP basis .......................... 7,134,035 215,692 9,161,055
Cumulative effect of changes in
accounting principles for:
Income taxes ...................... 5,595,177 - -
Postretirement benefits ........... (2,165,900) - -
Unearned premiums ................. (807,933) - -
----------- ----------- -----------
Net income, GAAP basis ................ $ 9,755,379 $ 215,692 $ 9,161,055
=========== =========== ===========
76
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Year ended December 31,
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Statutory stockholders' equity ..... $ 85,830,140 $ 83,331,013 $ 91,670,358
Deferred policy acquisition costs .. 7,698,864 8,112,831 5,923,456
Accrued salvage and subrogation .... 1,793,592 2,026,352 1,284,119
Other policyholders' funds payable (2,854,793) (3,695,397) (2,814,531)
Pension asset ...................... 1,705,735 1,809,581 1,187,404
GAAP postretirement benefit
liability in excess of statutory
liability ........................ (1,358,197) - -
Deferred income tax asset .......... 13,040,693 7,065,221 5,563,791
Goodwill ........................... 2,017,690 2,152,203 2,286,716
Statutory reserve discount on
commutation of reinsurance
contract in excess of GAAP
amortization ..................... (1,717,641) - -
Unrealized holding gains on
fixed maturity securities
available-for-sale ............... 3,134,016 - -
Other .............................. 343,670 108,973 43,123
------------ ------------ ------------
Stockholders' equity, GAAP basis ... $109,633,769 $100,910,777 $105,144,436
============ ============ ============
(15) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of (1) cash, (2) accounts receivable, (3) indebtedness
of related party, (4) accounts payable and (5) accrued expenses approximate
fair value because of the short maturity of these instruments.
The estimated fair value of the Company's investments at December 31,
1993 are summarized as follows. The estimated fair value is based on quoted
market prices, where available, or on values obtained from independent pricing
services (see note 10).
Carrying Estimated
Amount Fair Value
------------ ------------
Fixed maturity securities held-to-maturity ...... $191,010,623 $206,305,597
Fixed maturity securities available-for-sale .... $113,081,580 $113,081,580
Equity securities available-for-sale ............ $ 475,000 $ 475,000
(16) CONTINGENT LIABILITIES
The Company and Employers Mutual and its other subsidiaries are parties to
numerous lawsuits arising in the normal course of the insurance business. The
Company believes that the resolution of these lawsuits will not have a material
adverse effect on its financial condition or its results of operations. The
companies involved have reserves which are believed adequate to cover any
potential liabilities arising out of all such pending or threatened
proceedings.
77
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Employers Mutual has entered into unsecured financing arrangements with
several large commercial policyholders. The Company, under terms of the
pooling agreement, is a 22 percent participant in these policies (note 2). At
December 31, 1993, the Company is contingently liable for $1,738,000 of
unsecured receivables held by Employers Mutual.
(17) NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No 112 (SFAS 112), "Employers' Accounting for
Postemployment Benefits". SFAS 112 requires that the cost of certain
postemployment benefits that vest or accumulate be accrued over the period of
an employee's service. SFAS 112 is effective for fiscal years beginning after
December 31, 1993. The Company will adopt this standard in the first quarter
of 1994. Adoption of this standard is not expected to have a material effect
on the income of the Company.
(18) UNAUDITED INTERIM FINANCIAL INFORMATION
Three months ended,
--------------------------------------------------
March 31 June 30 September 30 December 31
----------- ----------- ----------- -----------
1993
- ----
Total revenues ........... $42,369,391 $45,480,653 $45,386,046 $44,665,844
=========== =========== =========== ===========
Income before income
taxes (benefit) ........ $ 3,375,144 $ 476,062 $ 627,295 $ 4,540,635
Income taxes (benefit) ... 1,262,205 (963,626) 392,546 1,193,976
----------- ----------- ----------- -----------
Income from operations ... 2,112,939 1,439,688 234,749 3,346,659
Income from accounting
changes ................ 2,621,344 - - -
----------- ----------- ----------- -----------
Net income .......... $ 4,734,283 $ 1,439,688 $ 234,749 $ 3,346,659
=========== =========== =========== ===========
Earnings per share:*
Income from operations $ .21 $ .14 $ .02 $ .33
Income from accounting
changes .............. .26 - - -
----------- ----------- ----------- -----------
Net income .......... $ .47 $ .14 $ .02 $ .33
=========== =========== =========== ===========
78
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Three months ended,
--------------------------------------------------
March 31 June 30 September 30 December 31
----------- ----------- ----------- -----------
1992
- ----
Total revenues ........... $40,592,007 $41,298,060 $42,664,483 $44,779,617
=========== =========== =========== ===========
Income (loss) before
income taxes (benefit) $ 2,315,687 $ 1,015,692 $(2,472,573) $ 116,251
Income taxes (benefit) ... 299,983 516,923 (879,335) 821,794
----------- ----------- ----------- -----------
Net income (loss) ... $ 2,015,704 $ 498,769 $(1,593,238) $ (705,543)
=========== =========== =========== ===========
Earnings (loss) per share* $ .20 $ .05 $ (.16) $ (.07)
=========== =========== =========== ===========
1991
- ----
Total revenues ........... $31,545,776 $33,059,727 $34,818,761 $34,261,385
=========== =========== =========== ===========
Income before income taxes $ 3,089,115 $ 773,182 $ 2,070,921 $ 4,498,620
Income taxes ............. 614,989 170,077 622,519 1,716,432
----------- ----------- ----------- -----------
Income from continuing
operations ............. 2,474,126 603,105 1,448,402 2,782,188
Income from discontinued
operations ............. 458,529 469,056 637,317 288,332
----------- ----------- ----------- -----------
Net income .......... $ 2,932,655 $ 1,072,161 $ 2,085,719 $ 3,070,520
=========== =========== =========== ===========
Earnings per share:*
Income from continuing
operations ............. $ .25 $ .06 $ .15 $ .27
Income from discontinued
operations ............. .04 .05 .06 .03
----------- ----------- ----------- -----------
Net income .......... $ .29 $ .11 $ .21 $ .30
=========== =========== =========== ===========
* Since the weighted average shares for the quarters are calculated independent
of the weighted average shares for the year, quarterly earnings per share may
not total to annual earnings per share.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------- ------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE.
------------------------------------
None.
79
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
See the information under the caption "Election of Directors" in the
Company's Proxy Statement in connection with its Annual meeting to be held
on May 25, 1994, which information is incorporated herein by reference.
The following sets forth information regarding all executive officers of
the Company.
NAME AGE POSITION
Bruce G. Kelley 40 President and Chief Executive Officer of the
Company and of Employers Mutual since 1992.
He was elected President of the Company and
Employers Mutual in 1991. Mr. Kelley was
Executive Vice President of the Company and
Employers Mutual from 1989 to 1991. He has
been employed with Employers Mutual since
1985 and has been a Director since 1984.
Fredrick A. Schiek 59 Executive Vice President and Chief Operating
Officer of the Company and of Employers
Mutual since 1992. He was Vice President of
Employers Mutual from 1983 until 1992. He
has been employed by Employers Mutual since
1959.
E. H. Creese 62 Senior Vice President and Treasurer of the
Company since 1993 and Senior Vice President
and Treasurer of Employers Mutual since 1992.
He was Vice President and Treasurer of the
Company from 1983 until 1993 and of Employers
Mutual from 1985 until 1992. He has been
employed by Employers Mutual since 1984.
Philip T. Van Ekeren 63 Senior Vice President and Secretary of the
Company since 1993 and Senior Vice President
and Secretary of Employers Mutual since 1992.
He was Vice President and Secretary of the
Company from 1978 until 1993 and of Employers
Mutual from 1978 until 1992. He has been
employed by Employers Mutual since 1961.
David O. Narigon 41 Vice President of the Company since 1989.
Vice President of Employers Mutual since
1989 and Assistant Secretary from 1986 to
1989. He has been employed by Employers
Mutual since 1983.
Raymond W. Davis 48 Vice President of the Company and Employers
Mutual since 1985. He has been employed by
Employers Mutual since 1979.
80
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
See the information under the caption "Compensation of Management" in the
Company's Proxy Statement in connection with its Annual Meeting to be held on
May 25, 1994, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ---------------------------------------------------------------
See the information under the captions "Voting Securities and Principal
Stockholder" and "Security Ownership of Management" in the Company's Proxy
Statement in connection with its Annual Meeting to be held on May 25, 1994,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
See the information under the caption "Certain Relationships and Related
Transactions" in the Company's Proxy Statement in connection with its Annual
Meeting to be held on May 25, 1994, which information is incorporated herein
by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- -------- -----------------------------------------------------------------
(a) List of Financial Statements and Schedules. Form 10-K
Page
------
1. Financial Statements
Independent Auditor's Report ................................ 44
Consolidated Balance Sheets, December 31, 1993 and 1992 ..... 45
Consolidated Statements of Income for the Years ended
December 31, 1993, 1992 and 1991 ......................... 47
Consolidated Statements of Stockholders' Equity for the
Years ended December 31, 1993, 1992 and 1991 ............. 49
Consolidated Statements of Cash Flows for the Years ended
December 31, 1993, 1992 and 1991 ......................... 51
Notes to Consolidated Financial Statements .................. 53
2. Schedules
Independent Auditor's Report on Schedules ................... 86
Schedule I - Summary of Investments ....................... 87
Schedule III - Condensed Financial Information of Registrant 88
Schedule V - Supplementary Insurance Information .......... 91
Schedule VI - Reinsurance .................................. 92
Schedule X - Supplemental Information Concerning
Property-Casualty Insurance Operations ..... 93
All other schedules have been omitted for the reason that the items
required by such schedules are not present in the consolidated
financial statements, are covered in notes to consolidated financial
statements or are not significant in amount.
81
<PAGE>
3. Management contracts and compensatory plan arrangements
Exhibit 10(b). Management Incentive Compensation Plan.
Exhibit 10(d). Employers Mutual Casualty Company 1979 Stock
Option Plan.
Exhibit 10(e). Employers Mutual Casualty Company 1982 Incentive
Stock Option Plan.
Exhibit 10(g). Deferred Bonus Compensation Plans.
Exhibit 10(h). EMC Reinsurance Company Executive Bonus Program.
Exhibit 10(j). Employers Mutual Casualty Company Excess Retirement
Benefit Agreement.
Exhibit 10(l). Employers Mutual Casualty Company 1993 Employee
Stock Purchase Plan.
Exhibit 10(m). 1993 Employers Mutual Casualty Company Incentive
Stock Option Plan.
Exhibit 10(n). Employers Mutual Casualty Company Non-Employee
Director Stock Option Plan.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation,
or Succession.
(a) Stock Purchase Plan between Employers Mutual Casualty
Company and EMC Insurance Group Inc. dated December 9, 1991.
(Incorporated by reference to Exhibit 2.1 to the Company's
December 31, 1991 Form 8-K on file with the Commission).
3. Articles of incorporation and bylaws:
(a) Articles of Incorporation of the Company, as amended.
(Incorporated by reference to the Company's Form 10-K
for the calendar year ended December 31, 1988.)
(b) Bylaws of the Company, as amended. (Incorporated by
reference to the Company's Form 10-K for the calendar
year ended December 31, 1992.)
10. Material contracts.
(a) Quota Share Reinsurance Contract between Employers Mutual
Casualty Company and EMC Reinsurance Company, as amended.
82
<PAGE>
(b) Management Incentive Compensation Plan. (Incorporated by
reference to the Company's Form 10-K for the calendar year
ended December 31, 1983.)
(c) Employers Mutual Companies reinsurance pooling agreements
between Employers Mutual Casualty Company and certain of its
affiliated companies, as amended.
(d) Employers Mutual Casualty Company 1979 Stock Option Plan.
(Incorporated by reference to Registration No. 2-81486.)
(e) Employers Mutual Casualty Company 1982 Incentive Stock Option
Plan, as amended. (Incorporated by reference to the Company's
Form 10-K for the calendar year ended December 31, 1986.)
(f) Excess of loss reinsurance contract between Employers Mutual
Casualty Company and Farm and City Insurance Company.
(Incorporated by reference to the Company's Form 10-K for the
calendar year ended December 31, 1985.)
(g) Deferred Bonus Compensation Plans. (Incorporated by reference
to the Company's Form 10-K for the calendar year ended December
31, 1986.)
(h) EMC Reinsurance Company Executive Bonus Program. (Incorporated
by reference to the Company's Form 10-K for the calendar year
ended December 31, 1989.)
(i) EMC Insurance Group Inc. Amended and Restated Dividend
Reinvestment and Common Stock Purchase Plan. (Incorporated by
reference to Registration No. 33-34499.)
(j) Employers Mutual Casualty Company Excess Retirement Benefit
Agreement. (Incorporated by reference to the Company's Form
10-K for the calendar year ended December 31, 1989.)
(k) Aggregate Catastrophe Excess of Loss Retrocession Agreement
between EMC Reinsurance Company and Employers Mutual Casualty
Company. (Incorporated by reference to the Company's Form 10-K
for the calendar year ended December 31, 1991.)
83
<PAGE>
(l) Employers Mutual Casualty Company 1993 Employee Stock Purchase
Plan. (Incorporated by reference to Registration No. 33-49335.)
(m) 1993 Employers Mutual Casualty Company Incentive Stock Option
Plan. (Incorporated by reference to Registration No. 33-49337.)
(n) Employers Mutual Casualty Company Non-Employee Director Stock
Option Plan. (Incorporated by reference to Registration No.
33-49339.)
13. 1993 Annual Report to Stockholders. (All information called for by
Parts I and II of this Form 10-K has been included in this document
under the respective item numbers (Items 1 through 9).
18. Letter re change in calculation of unearned premiums. (Incorporated
by reference to the Company's Form 10-Q for the quarter ended
March 31, 1993.)
21. Subsidiaries of the Registrant.
23. Consent of KPMG Peat Marwick with respect to Forms S-8 (Registration
No's. 2-81486, 2-93738, 33-49335, 33-49337 and 33-49339) and Form S-3
(Registration No. 33-34499).
24. Power of Attorney.
28. Consolidated Schedule P of Annual Statements provided to state
regulatory authorities.
(d) Financial statements required by Regulation S-X which are excluded from
the Annual Report to Stockholders by Rule 14a-3(b)(1).
None.
84
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 25, 1994.
EMC INSURANCE GROUP INC.
/s/ E. H. Creese
---------------------------
E. H. Creese
Senior Vice President, Treasurer &
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 25, 1994.
/s/ E. H. Creese
----------------------------------
Robb B. Kelley*
Chairman of the Board and Director
/s/ E. H. Creese
-----------------------------------
Bruce G. Kelley*
President and Director (Chief Executive Officer)
/s/ E. H. Creese
-----------------------------------
George C. Carpenter III*
Director
/s/ E. H. Creese
-----------------------------------
David J. Fisher*
Director
/s/ E. H. Creese
-----------------------------------
George W. Kochheiser*
Director
/s/ E. H. Creese
-----------------------------------
Raymond A. Michel*
Director
/s/ E. H. Creese
-----------------------------------
Therese M. Vaughan*
Director
/s/ E. H. Creese
-----------------------------------
E. H. Creese
Senior Vice President & Treasurer (Chief
Financial and Accounting Officer)
* by power of attorney
85
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
The Board of Directors and Stockholders
EMC Insurance Group Inc.:
Under date of February 21, 1994, we reported on the consolidated balance
sheets of EMC Insurance Group Inc. and Subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1993, as contained in Part II, Item 8 of the Form 10-K. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related supplementary financial statement
schedules listed in Part IV, Item 14(a)2. These supplementary financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplementary financial
statement schedules based on our audits.
In our opinion, such supplementary financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information set
forth therein.
As discussed in notes 1, 10, 12 and 13 to the consolidated financial
statements, the Company changed its method of computing unearned premiums in
1993 and implemented the provisions of the Financial Accounting Standards
Board's Statements No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions", No. 109, "Accounting for Income Taxes", No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts" and No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".
/s/ KPMG Peat Marwick
Des Moines, Iowa
February 21, 1994
86
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Schedule I - Summary of Investments -
Other Than Investments in Related Parties
December 31, 1993
Amount at
which shown
Market in the
Type of investment Cost value balance sheet
------------------ ------------ ------------ ------------
Fixed maturities:
Securities held-to-maturity:
United States Government
and government agencies
and authorities ............... $146,185,370 $158,321,329 $146,185,370
States, municipalities and
political subdivisions ........ 18,374,003 20,307,957 18,374,003
Foreign governments ............. 587,060 657,403 587,060
Public utilities ................ 8,813,202 9,148,491 8,813,202
All other corporate bonds ....... 17,050,988 17,870,417 17,050,988
------------ ------------ ------------
Total fixed maturity
securities held-to-maturity 191,010,623 206,305,597 191,010,623
------------ ------------ ------------
Securities available-for-sale:
States, municipalities and
political subdivisions ........ 58,431,008 61,395,515 61,395,515
Redeemable preferred stock ...... 486,941 489,650 489,650
Short-term investments .......... 51,029,615 51,196,415 51,196,415
------------ ------------ ------------
Total fixed maturity
securities available-for-sale 109,947,564 113,081,580 113,081,580
------------ ------------ ------------
Equity securities available-for-sale:
Nonredeemable preferred stock ..... 505,000 475,000 475,000
------------ ------------ ------------
Total equity securities
available-for-sale .......... 505,000 475,000 475,000
------------ ------------ ------------
Total investments ....... $301,463,187 $319,862,177 $304,567,203
============ ============ ============
87
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Schedule III - Condensed Financial Information of Registrant
Condensed Balance Sheets
December 31,
--------------------------
1993 1992
------------ ------------
ASSETS
- ------
Investment in common stock of
subsidiaries (equity method) .................. $104,350,390 $ 93,290,152
Fixed maturity securities available-for-sale,
at market value ............................... 4,785,692 -
Equity securities available-for-sale, at
market value .................................. 475,000 882,500
Short-term investments, at cost which
approximates market value ..................... - 6,723,101
Cash ............................................ 35,414 66,870
Accrued investment income ....................... 13,750 10,410
Income taxes recoverable ........................ 67,000 22,000
Indebtedness of related party ................... 4,624 -
------------ ------------
Total assets ............................... $109,731,870 $100,995,033
============ ============
LIABILITIES
- -----------
Accounts payable ................................ $ 98,101 $ 71,426
Indebtedness to related party ................... - 12,830
------------ ------------
Total liabilities .......................... 98,101 84,256
------------ ------------
STOCKHOLDERS' EQUITY
- --------------------
Common stock, $1 par value,
authorized 20,000,000 shares;
issued and outstanding, 10,325,329 shares
in 1993 and 10,161,760 shares in 1992 ......... 10,325,329 10,161,760
Additional paid-in capital ...................... 55,021,926 53,507,459
Unrealized holding losses on equity securities
available-for-sale, net of tax ................ (19,800) (142,000)
Retained earnings ............................... 44,387,700 37,866,902
Treasury stock, at cost (49,392 shares in 1993
and 36,685 shares in 1992) .................... (81,386) (483,344)
------------ ------------
Total stockholders' equity ................. 109,633,769 100,910,777
------------ ------------
Total liabilities and stockholders' equity $109,731,870 $100,995,033
============ ============
88
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Condensed Statements of Income
Years ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Equity in undistributed earnings (loss) $ 6,370,743 $(3,142,782) $ 3,505,464
Dividends received from
consolidated subsidiaries ........... 860,000 3,288,010 3,706,016
Investment income ..................... 214,825 483,786 484,077
Loss on sale of stock ................. (30,000) - -
----------- ----------- -----------
7,415,568 629,014 7,695,557
Operating expenses .................... 345,678 312,778 361,192
----------- ----------- -----------
Income from continuing operations
before income taxes (benefit) .... 7,069,890 316,236 7,334,365
Income taxes (benefit) ................ (64,145) 100,544 26,544
----------- ----------- -----------
Income from continuing operations .. 7,134,035 215,692 7,307,821
Income from discontinued operations ... - - 1,853,234
Income from accounting changes ........ 2,621,344 - -
----------- ----------- -----------
Net income .............. $ 9,755,379 $ 215,692 $ 9,161,055
=========== =========== ===========
89
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Condensed Statements of Cash Flows
Years ended December 31,
-------------------------------------
1993 1992 1991
----------- ----------- -----------
Net cash provided by
operating activities ................ $ 761,673 $ 3,370,212 $ 3,905,045
----------- ----------- -----------
Cash flows from investing activities:
Fixed maturities ................... - - 5,000,000
Short-term investments ............. 1,937,409 13,815,080 (19,449,054)
Sale of life subsidiary ............ - 474,356 15,500,000
Sale of stock ...................... 500,000 - -
----------- ----------- -----------
Net cash provided by
investing activities ........... 2,437,409 14,289,436 1,050,946
----------- ----------- -----------
Cash flows from financing activities:
Issuance of common stock ........... 331,568 748,405 550,023
Dividends paid to stockholders ..... (3,443,465) (5,103,890) (5,081,607)
Capital contribution to subsidiaries - (13,000,000) -
Purchase of treasury stock, net .... (118,641) (278,241) (399,107)
----------- ----------- -----------
Net cash used in financing
activities ..................... ( 3,230,538) (17,633,726) (4,930,691)
----------- ----------- -----------
Net (decrease) increase in cash ....... (31,456) 25,922 25,300
Cash at beginning of year ............. 66,870 40,948 15,648
----------- ----------- -----------
Cash at end of year ................... $ 35,414 $ 66,870 $ 40,948
=========== =========== ===========
Income taxes paid ..................... $ 14,000 $ 86,544 $ 120,544
Interest paid ......................... - - -
90
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Schedule V - Supplementary Insurance Information
For Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Deferred
policy Losses and
acquisition settlement Unearned Premium
Segment costs expenses premiums revenue
------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Year ended December 31, 1993:
Property and casualty insurance $6,275,214 $146,305,725 $38,898,256 $109,584,986
Reinsurance ................... 1,134,185 42,063,802 5,670,927 33,324,202
Nonstandard risk automobile
insurance ................... 289,465 8,752,325 1,371,873 13,528,350
Excess and surplus lines
insurance management ........ - - - -
Parent company ................ - - - -
---------- ------------ ----------- ------------
Consolidated .............. $7,698,864 $197,121,852 $45,941,056 $156,437,538
========== ============ =========== ============
Year ended December 31, 1992:
Property and casualty insurance $5,824,597 $156,531,043 $39,252,263 $109,138,829
Reinsurance ................... 2,006,408 68,136,494 6,918,647 26,615,180
Nonstandard risk automobile
insurance ................... 281,826 6,731,101 1,335,666 11,656,278
Excess and surplus lines
insurance management ........ - - - -
Parent company................. - - - -
Eliminations................... - (16,009,773) (1,522,102) -
---------- ------------ ----------- ------------
Consolidated .............. $8,112,831 $215,388,865 $45,984,474 $147,410,287
========== ============ =========== ============
Year ended December 31, 1991:
Property and casualty insurance $4,352,295 $106,250,335 $29,112,480 $ 78,413,029
Reinsurance ................... 1,331,585 57,636,564 5,326,339 25,009,419
Nonstandard risk automobile
insurance ................... 239,576 4,984,531 1,095,724 9,996,790
Excess and surplus lines
insurance management ........ - - - -
Parent company ................ - - - -
Eliminations .................. - (10,057,300) (905,478) -
---------- ------------ ----------- ------------
Consolidated .............. $5,923,456 $158,814,130 $34,629,065 $113,419,238
========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Amortization
of deferred
Net Losses and policy Other
investment settlement acquisition underwriting Premiums
Segment income expenses costs expenses written
------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Property and casualty insurance $13,242,584 $ 79,777,312 $19,528,117 $11,597,944 $112,293,341
Reinsurance ................... 6,090,294 27,871,896 8,331,595 3,161,007 $ 32,076,482
Nonstandard risk automobile
insurance ................... 1,165,684 12,706,091 2,857,463 507,486 $ 13,564,557
Excess and surplus lines
insurance management ........ 66,564 - - (36,858)
Parent company ................ 214,825 - - 345,678
----------- ------------ ----------- -----------
Consolidated .............. $20,779,951 $120,355,299 $30,717,175 $15,575,257
=========== ============ =========== ===========
Year ended December 31, 1992:
Property and casualty insurance $13,047,540 $ 82,313,897 $18,050,053 $12,560,922 $117,716,175
Reinsurance ................... 6,763,257 29,046,587 8,784,715 688,251 $ 28,207,488
Nonstandard risk automobile
insurance ................... 1,178,748 10,727,349 2,456,594 464,984 $ 11,896,220
Excess and surplus lines
insurance management ........ 66,266 - - (429,756)
Parent company ................ 483,786 - - 312,778
Eliminations .................. - - - -
----------- ------------ ----------- -----------
Consolidated .............. $21,539,597 $122,087,833 $29,291,362 $13,597,179
=========== ============ =========== ===========
Year ended December 31, 1991:
Property and casualty insurance $11,153,452 $60,138,955 $13,810,069 $ 7,853,336 $ 79,948,955
Reinsurance ................... 7,148,790 20,733,122 8,267,753 999,702 $ 25,896,854
Nonstandard risk automobile
insurance ................... 1,329,300 7,232,842 2,177,900 476,001 $ 9,983,902
Excess and surplus lines
insurance management ........ 86,374 - - (554,984)
Parent company ................ 484,077 - - 361,192
Eliminations .................. - - - -
----------- ----------- ----------- -----------
Consolidated .............. $20,201,993 $88,104,919 $24,255,722 $ 9,135,247
=========== =========== =========== ===========
</TABLE>
91
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Schedule VI - Reinsurance
For years ended December 31, 1993, 1992, and 1991
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
------------ ------------ ------------ ------------ ------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Earned premiums:
Property and casualty insurance ..... $137,141,457 $135,828,770 $155,124,851 $156,437,538 99.2%
============ ============ ============ ============ ======
Year ended December 31, 1992:
Earned premiums:
Property and casualty insurance ..... $142,391,771 $150,404,371 $155,422,887 $147,410,287 105.4%
============ ============ ============ ============ ======
Year ended December 31, 1991:
Earned premiums:
Property and casualty insurance ..... $134,675,865 $137,096,567 $115,839,940 $113,419,238 102.1%
============ ============ ============ ============ ======
</TABLE>
92
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Schedule X - Supplemental Insurance Information Concerning
Property-Casualty Insurance Operations
For Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Discount,
Deferred Reserves for if any,
policy losses and deducted Net
Consolidated property- acquisition settlement from Unearned Earned investment
casualty entities costs expenses reserves premiums premiums income
- ----------------- ---------- ------------ -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1993: $7,698,864 $197,121,852 $ -0- $45,941,056 $156,437,538 $20,498,562
========== ============ ======== =========== ============ ==========
Year ended December 31, 1992: $8,112,831 $215,388,865 $ -0- $45,984,474 $147,410,287 $20,989,545
========== ============ ======== =========== ============ ===========
Year ended December 31, 1991: $5,923,456 $158,814,130 $ -0- $34,629,065 $113,419,238 $19,631,542
========== ============ ======== =========== ============ ===========
</TABLE>
<TABLE>
<CAPTION>
Losses and
settlement expenses Amortization
incurred related to of deferred Paid
(1) (2) policy losses and
Consolidated property- Current Prior acquisition settlement Premiums
casualty entities Year Years costs expenses Written
----------------- ------------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993: $119,896,526 $ 458,773 $30,717,175 $130,823,484 $157,934,380
============ ========== =========== ============ ============
Year ended December 31, 1992: $116,615,951 $5,471,882 $29,291,362 $ 76,815,572 $157,819,883
============ ========== =========== ============ ============
Year ended December 31, 1991: $ 83,477,534 $4,627,385 $24,255,722 $ 77,999,370 $115,829,711
============ ========== =========== ============ ============
</TABLE>
93
<PAGE>
Differences between Electronic and Circulated 10-K's
- ----------------------------------------------------
1) The index to exhibits in the electronic format indicates if the exhibits
are included in the direct transmission or are filed under Form SE. The
circulated document contains the page numbers of the exhibits.
94
<PAGE>
EMC INSURANCE GROUP INC. AND SUBSIDIARIES
Index to Exhibits
Exhibit
Number Item
-------- ----
10 (a) Quota Share Reinsurance Contract between Included in Direct
Employers Mutual Casualty Company and Transmission
EMC Reinsurance Company, as amended.
10 (c) Employers Mutual Companies reinsurance Included in Direct
pooling agreements between Employers Transmission
Mutual Casualty Company and certain of
its affiliated companies, as amended.
21 Subsidiaries of the Registrant. Included in Direct
Transmission
23 Consent of KPMG Peat Marwick with Included in Direct
respect to Forms S-8 and Form S-3. Transmission
24 Power of Attorney. Included in Direct
Transmission
28 Consolidated Schedule P of Annual Included in Direct
Statements provided to state regulatory Transmission
authorities.
95
<PAGE>
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
This agreement made by and between Employers Mutual Casualty
Company ("Employers") and EMC Reinsurance Company ("EMC Re").
ARTICLE I
EMC Re is an affiliate of Employers and was formed by Employers
for the sole purpose of engaging in the business of reinsurance.
It is the intention of the parties hereto that EMC Re will
solicit, underwrite, and assume reinsurance risks in a mode of
operation similar to that heretofore conducted by Employers, and
that consistent therewith, EMC Re will gradually assume by means
of this Quota Share Agreement, the major portion of the reinsurance
assumed business of Employers as is in force or as may be placed
in force by Employers.
ARTICLE II
Excluded from this Quota Share Agreement at its inception
are: (1) all direct insurance business written by Employers
and its affiliated companies; (2) all involuntary insurance or
reinsurance business written by Employers and classed by Employers
as "facilities business"; (3) facultative reinsurance assumed
contracts; (4) intercompany reinsurance contracts between
96
<PAGE>
Employers and its affiliated companies; (5) reinsurance assumed
contracts that have been terminated or are in the process of
termination.
ARTICLE III
Pursuant to and subject to the foregoing, Employers hereby
cedes and transfers to EMC Re, and EMC Re hereby accepts, a
quota share portion of the reinsurance contracts on which Employers
is subject to liability which were outstanding and in force as
of 12:01 a.m. January 1, 1981, or which were issued thereafter,
or as shall be issued hereafter, in accordance with the Assumption
Addendum attached hereto. Such liability shall include reserves
for unearned premiums, outstanding loss and loss expenses (including
unreported losses) and all other underwriting and administrative
expenses, but shall not include liabilities incurred in connection
with investment transactions. Employers hereby assigns and trans-
fers to EMC Re amounts equal to the aggregate of the liabilities
quota shared as above, less a commission for the prepaid expenses
of Employers.
ARTICLE IV
Employers shall not be prejudiced in any way by any error
or omission through accident or oversight resulting in a failure
to accurately or fully cede, report, or recover with respect to
this Quota Share Agreement, but any such error or omission shall
be corrected immediately upon discovery.
97
<PAGE>
ARTICLE V
This agreement is a continuing one and is unlimited as to
duration, but may be terminated as of the end of any calendar
year upon ninety days prior written notice; or may be otherwise
terminated by agreement of the parties.
ARTICLE VI
Each of the parties hereto agrees that the reinsurance
business quota shared hereunder shall be payable by EMC Re on
the basis of the liability of Employers under the contracts
reinsured without diminution because of the insolvency of
Employers; provided that such reinsurance shall be payable
directly to Employers or its liquidator, receiver or such other
statutory successor, except as provided by Section 315 of new
York Insurance Law, or except (a) where the contract specifically
provides another payee for such reinsurance in the event of the
insolvency of the ceding insurer and (b) where EMC Re, with the
consent of the direct reinsured company, has assumed such contract
obligations of Employers as direct obligations of EMC Re to the
payees under wich reinsurance contracts and in substitution for
the obligations of Employers to such payees; and further provided
that the liquidator, receiver or statutory successor of Employers
shall give written notice of the pendency of any claim against
Employers on such contracts with any reasonable time after such
claim; and EMC Re may investigate such claim and interpose, at
its own expense, in the proceeding where such claim is to be
98
<PAGE>
ajudicated in the defense or defenses which it may deem
available to Employers or its liquidator, receiver or statutory
successor, the expense thus incurred by EMC Re to be chargable,
subject to court approval, against Employers as part of the expense
of liquidation to the extent of a proportionate share of the benefit
which may accrue to Employers solely as a result of the defense
undertaken by EMC Re.
Executed by the parties hereto the day and year as reflected
in the Assumption Addendum attached hereto.
99
<PAGE>
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
This agreement shall incept as 12:01 a.m. on the date
executed by the parties hereto. The parties to this agreement
mutually agree that as of its inception, the quota share
portion of the net liabilities of Employers as 12:01 a.m.
January 1, 1981 ceded to and assumed by EMC Re shall be five
percent.
Executed by the parties hereto this 10th day of
June, 1981.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
--------------------------------------
Robb B. Kelley, President
EMC Reinsurance Company
By:/s/ Richard E. Haskins
--------------------------------------
Richard E. Haskins, President
100
<PAGE>
AMENDMENT #1
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1982 ceded to and assumed by EMC Re shall be twenty-
five percent.
Executed by the parties hereto this 3rd day of January, 1982.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
------------------------------
Robb B. Kelley, President
EMC Reinsurance Company
By:/s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
101
<PAGE>
AMENDMENT #2
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1983 ceded to and assumed by EMC Re shall be fifty
percent.
Executed by the parties hereto this 18th day of March, 1983.
Employers Mutual Casualty Company
By:/s/ George W. Kochheiser
------------------------------
George W. Kochheiser, President
EMC Reinsurance Company
By:/s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
102
<PAGE>
AMENDMENT #3
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1984 ceded to and assumed by EMC Re shall be seventy-
five percent.
Executed by the parties hereto this 3rd day of January, 1984.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
-------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By:/s/ Richard E. Haskins
-------------------------------
Richard E. Haskins, President
103
<PAGE>
AMENDMENT #4
TO
ASSUMPTION ADDENDUM
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
The parties to this agreement mutually agree that the quota
share portion of the net liabilities of Employers at 12:01 a.m.
January 1, 1988 ceded to and assumed by EMC Re shall be ninety-
five percent.
Executed by the parties hereto this 9th day of March, 1988.
Employers Mutual Casualty Company
By:/s/ Robb B. Kelley
------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By:/s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
104
<PAGE>
ENDORSEMENT #1
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as follows:
1. Certain business subject to this agreement and ceded hereunder was
protected by pro-rata and excess of loss reinsurances; such
reinsurances to enure to the benefit of the parites as their
interests appear herein.
2. Such reinsurances were represented to be collectable; there was no
intent to transfer to the reinsurer the credit risk of non-
collectable reinsurances other than as would be deemed incidental;
and there was no consideration contemplated nor given for the
assumption of such credit risk.
3. At various times during the pendency of this agreement the parties
have come to perceive that recoverables from on such reinsurer,
Transit Casualty Company, were becoming of doubtful collectability,
and the parties began a scheduled "write down" of receivables from
that source as their interests appeared in order to recognize the
degree of doubt perceived.
4. The parties have now determined that no part of such receivables
from Transit Casualty Company are collectable, and that the entire
account should be written off as a bad debt.
5. The parties further recognize that the combination of a) increases
in the percentages of business ceded hereunder, and b) the more
than 200 percent growth in the loss amounts now recognized as non-
recoverable from Transit, have exacerbated the adverse affects upon
EMC Re hereunder to the point of severely reducing EMC Re's surplus,
and to the frustration of the purpose of this contract and to the
goals of the parties when it was drafted.
Now therefore, in consideration of the foregoing, the parties agree as
follows:
1. EMC Re will pay Employers in full the outstanding portion of its 95%
pro-rata part of the Transit Casualty Company scheduled write off as
105
<PAGE>
booked through September 30, 1988, in the amount of 95% of
$2,650,000.
2. Employers Mutual Casualty Company will retain (in addition to its 5%
quota share portion), and hereby releases EMC Re from liability
therefore, any additional non-recoverable sums now due or in the
future recognized as necessary to be written off, applicable not
only to Transit but to any other non-collectable reinsurance
protections on business subject to this quota share agreement, from
its inception.
Executed by the parties hereto this 6th day of December, 1988.
Employers Mutual Casualty Company
By: /s/ Robb B. Kelley
------------------------------
Robb B. Kelley, Chairman & CEO
EMC Reinsurance Company
By: /s/ Richard E. Haskins
------------------------------
Richard E. Haskins, President
106
<PAGE>
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual
Casualty Company (the "Company") and EMC Reinsurance Company
(the "Reinsurer") and shall be effective as of September 30,
1989 (the "commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and
remaining in full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust
and determine the liabilities of the Reinsurer thereunder for
losses occurring during all years prior to 12:01 A.M., January
1, 1981, and
WHEREAS, by reason of which settlement agreement there is due
and owing to the Company from the Reinsurer the sum of
$2,982,882.00,
NOW, THEREFORE, in consideration of the payment to the Company
by the Reinsurer of $2,982,882.00, the Company has released and
discharged, and by these presents does for itself, its succes-
sors and assigns, release and discharge the Reinsurer with
respect to any contractual obligations under the aforesaid quota
share reinsurance contract as respects, and only as respects,
losses occurring during any and all years prior to 12:01 A.M.,
January 1, 1981.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 5th day of December, 1989.
EMPLOYERS MUTUAL CASUALTY COMPANY
By /s/ George W. Kochheiser
-----------------------------
George W. Kochheiser
President
EMC REINSURANCE COMPANY
By /s/ Richard E. Haskins
-----------------------------
Richard E. Haskins
President
107
<PAGE>
ENDORSEMENT #2
TO
QUOTA SHARE
REINSURANCE RETROCESSIONAL AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY AND EMC REINSURANCE COMPANY
It is understood and agreed by and between the parties as
follows:
Effective January 1, 1993 Article III of the Quota Share is
amended by adding the follosing additional paragraph:
Notwithstanding the foregoing terms, it is agreed that the
maximum liability transferred to EMC Re for loss resulting
from any one occurrence, including reinstatement premium
costs resulting from such occurrence, is limited to
$1,000,000. As consideration to Employers for this per
occurrence limitation, it is agreed that EMC Re shall allow
Employers an additional ceding commission of 5.25%
Executed by the parties this 2nd day of December, 1992.
Employers Mutual Casualty Company
by /s/ Bruce G. Kelley
---------------------------------
EMC Reinsurance Company
by /s/ Dean P. McClaflin
---------------------------------
108
<PAGE>
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual
Casualty Company (the "Company") and EMC Reinsurance Company (the
"Reinsurer") and shall be effective as of June 30, 1993 (the
"commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and
remaining in full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust
and determine final liabilities of the Reinsurer thereunder for
losses originating from the business written by Russell
Reinsurace Services, Inc., and
WHEREAS, by reason of such settlement agreement there is due and
owing to the Company from the Reinsurer the sum of $17,806,179.
NOW, THEREFORE, in consideration of the payment to the Company by
the Reinsurer of $17,806,179, the Company has released and
discharged, and by these presents does for itself, its successors
and assigns, release and discharge the Reinsurer with respect to
any contractual obligations under the aforesaid quota share
reinsurance contract as respects, all business originating
through Russell Reinsurance Services, Inc.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 29th day of July, 1993.
EMPLOYERS MUTUAL CASUALTY COMPANY
By /s/ Bruce G. Kelley
-----------------------------
Bruce G. Kelley
President
EMC REINSURANCE COMPANY
By /s/ Dean P. McClaflin
-----------------------------
Dean P. McClaflin
President
109
<PAGE>
COMMUTATION AGREEMENT AND RELEASE
This Agreement entered into by and between Employers Mutual
Casualty Company (the "Company") and EMC Reinsurance Company (the
"Reinsurer") and shall be effective as of October 31, 1993 (the
"commutation date").
WHEREAS, the parties have entered into a certain quota share
reinsurance contract effective from January 1, 1981, and
remaining in full force and effect, and
WHEREAS, the Company and the Reinsurer desire to settle, adjust
and determine final liabilities of the Reinsurer thereunder for
losses originating from the business written by Improved Risk
Mutual, and
WHEREAS, by reason of such settlement agreement there is due and
owing to the Company from the Reinsurer the sum of $2,619,776.
NOW, THEREFORE, in consideration of the payment to the Company by
the Reinsurer of $2,619,776, the Company has released and
discharged, and by these presents does for itself, its successors
and assigns, release and discharge the Reinsurer with respect to
any contractual obligations under the aforesaid quota share
reinsurance contract as respects, all business originating through
Improved Risk Mutual.
IN WITNESS WHEREOF, the parties have caused these presents to be
executed in duplicate this 1st day of December, 1993.
EMPLOYERS MUTUAL CASUALTY COMPANY
By /s/ Bruce G. Kelley
-----------------------------
Bruce G. Kelley
President
EMC REINSURANCE COMPANY
By /s/ Dean P. McClaflin
-----------------------------
Dean P. McClaflin
President
110
<PAGE>
EMPLOYERS MUTUAL COMPANIES
REINSURANCE POOLING AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY
AND
CERTAIN OF ITS AFFILIATED COMPANIES
REWRITTEN EFFECTIVE JANUARY 1, 1987
111
<PAGE>
REINSURANCE POOLING AGREEMENT
This Agreement made by and between Employers Mutual Casualty Company and
certain of its affiliated or subsidiary companies such as are signatory hereto
by means of exhibits setting forth the interests and liabilities of the
parties, attached hereto and made a part of this Agreement. Employers Mutual
Casualty Company is hereinafter referred to as "EMC", and the other companies
signatory hereto are hereinafter referred to as the "Affiliated Companies" or
as the "Affiliated Company", as the context requires.
EMC and each Affiliated Company signatory to the Pooling Agreement agree
to honor the terms set forth herein as if this Agreement were solely between
EMC and each such Affiliated Company. Balances payable to or recoverable from
EMC and any such Affiliated Company shall not serve to offset any balances
payable to or recoverable from any other Affiliated Company signatory to this
Agreement. Reports and remittances between EMC and each Affiliated Company
shall be in sufficient detail to identify the individual premium and loss
obligation of each party to the other.
ARTICLE I
---------
The Companies are engaged in the insurance business and maintain a mutual
business relationship having certain incidents of common management, and desire
to bring about for each other added economies of operation, uniform underwriting
results, diversification as respects the classes of insurance business written,
and maximization of capacity. To accomplish the aforesaid, the Companies do by
means of this Agreement, pool all of their insurance business then in force as
of 12:01 A.M. of the date signatory hereto, and thereafter to share in the
fortunes of their pooled insurance business.
ARTICLE II
----------
EMC hereby reinsures and the Affiliated Company hereby cedes and transfers
to EMC all liabilities incurred under or in connections with all contracts and
policies of insurance issued by the Affiliated Company outstanding and in force
as of 12:01 A.M. of the date signatory hereto, or thereafter issued by it.
Such liabilities shall include the Affiliated Company's reserves for unearned
premiums, outstanding losses and loss expenses (including unreported losses)
and all other underwriting and administrative expenses as evidenced by the
Affiliated Company's books and records, but shall not include inter-company
balances, liabilities for Corporate Taxes including Federal or State Income
Taxes, or liabilities incurred in connection with their respective investment
transactions.
ARTICLE III
-----------
The Affiliated Company hereby assigns and transfers to EMC all right,
title and interest in and to reinsurance outstanding and in force with respect
to the liabilities reinsured by EMC under Article II hereof.
ARTICLE IV
----------
The Affiliated Company assigns and transfers to EMC amounts equal to the
aggregate of all of its liabilities reinsured by EMC under Article II hereof,
less a commission allowance equal to the prepaid expenses of the Affiliated
ratio on a trade basis. Prepaid expenses is defined as those expenses records
in column 2, part 4,
112
<PAGE>
of the Underwriting and Expense Exhibit of the Affiliated Company's convention
statement. The trade combined ratio is the ratio of loss and loss adjustment
expense to earned premium, plus the ratio of underwriting expenses to premiums
written.
ARTICLE V
---------
The Affiliated Company hereby reinsures, and EMC hereby cedes and
transfers to the Affiliated Company a portion of its net liabilities under all
contracts and policies of insurance (including those reinsured by EMC under
Article II hereof) on which EMC is subject to liability and which are
outstanding and in force as of 12:01 A.M. of the date signatory hereto, or are
issued thereafter, in accordance with the exhibit attached hereto to which the
Affiliated Company is a signatory party. Such liabilities shall include
reserves for unearned premiums, outstanding losses and loss expenses (including
unreported losses) and all other underwriting and administrative expenses, but
shall not include inter-company balances, liabilities for Corporate Taxes
including Federal or State Income Taxes, or liabilities in connection with
investment transactions.
ARTICLE VI
----------
EMC hereby assigns and transfers to the Affiliated Company amounts equal
to the aggregate of all liabilities of EMC reinsured by the Affiliated Company
under contracts and policies of insurance which are outstanding and in force as
of 12:01 A.M. of the date signatory hereto under Article V hereof, less a
commission allowance equal to the prepaid expenses of EMC but not in excess of
40 percent of EMC's combined ratio on a trade basis. Prepaid expenses is
defined as those expenses recorded in column 2, part 4, of the Underwriting and
Expense Exhibit of EMC's convention statement. The trade combined ratio is the
ratio of loss and loss adjustment expense to earned premium, plus the ratio of
underwriting expenses to premiums written.
ARTICLE VII
-----------
EMC agrees to pay to the Affiliated Company it respective participation of
all premiums written by the companies after first deducting premiums on all
reinsurance ceded to reinsurers (other than the parties hereto). Similarly, it
is further agreed that all losses, loss expense and other underwriting and
administrative expenses (with the exceptions noted in Articles II and V hereof)
of the companies, less all losses and expense recovered and recoverable under
reinsurance ceded to reinsurers (other than the parties hereto), shall be pro-
rated between the parties on the basis of their respective participations as
reflected in the aforesaid exhibit.
ARTICLE VIII
------------
The obligation of the companies under this Agreement to exchange
reinsurance between themselves may be offset by reciprocal obligation so that
the net amount only shall be required to be transferred, except no offset shall
be valid under circumstances prohibited by Section 7472, New York Insurance
Laws. An accounting on all transactions shall be rendered quarterly, and the
settling of balances shall be made within 30 days after the rendering of the
quarterly reports. Except as otherwise required by the context of this
Agreement, the amount of all payments between the companies under this
statements of the companies. Notwithstanding anything herein contained, this
Agreement shall not apply to the investment operations of the companies.
113
<PAGE>
ARTICLE IX
----------
The conditions of reinsurance hereunder shall in all cases be identical
with the conditions of the original insurance or as changed during the term of
insurance.
ARTICLE X
---------
This Agreement is a continuing one and is unlimited as to duration but may
be terminated upon mutual consent or by 30 day prior written notice by either
party.
ARTICLE XI
----------
Each of the companies hereto, as the assuming insurer, hereby agrees that
all reinsurance made, ceded, renewed or otherwise becoming effective under this
Agreement shall be payable by the assuming insurer on the basis of the
liability of the ceding insurer under the policy or contract reinsured without
diminution because of insolvency of the ceding insurer; provided that such
reinsurance shall be payable directly to the ceding insurer or to its
liquidator, receiver or other statutory successor,except as provided by Section
4118 of New York Insurance Law or except (a) where the contract specifically
provides another payee for such reinsurance in the event of the insolvency of
the ceding insurer and (b) where the assuming insurer, with consent of the
direct insured or insureds, has assumed such policy obligations of the ceding
insurer as direct obligations of the assuming insurer to the payees under such
policies and in substitution for the obligations of the ceding insurer to such
payee; and further provided that the liquidator, receiver or statutory
successor of the ceding insurer shall give written notice of the pendency of
any claim against the insolvent ceding insurer on the policy or contract
reinsured within a reasonable time after such claim; and the assuming insurer
may investigate such claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated any defense or defenses which it may deem
available to the ceding insurer or it liquidator, receiver or statutory
successor, the expense thus incurred by the assuming insurer to be chargeable,
subject to court approval against the insolvent ceding insurer as part of the
expense of liquidation to the extent of proportionate share of the benefit
which may accrue to the ceding insurer solely as a result of the defense
undertaken by the assuming insurer.
ARTICLE XII
-----------
Each party shall allow the other party to inspect, at reasonable times,
the records of the Company relevant to the business reinsured under this
Agreement, including files concerning claims, losses, or legal proceedings
which involve or are likely to involve the other party.
ARTICLE XIII
------------
A. As a condition precedent to any right of action hereunder, any dispute
arising out of this Agreement shall be submitted to the decision of a
board of arbitration composed of two arbitrators and an umpire, meeting
in Des Moines, Iowa, unless otherwise agreed.
114
<PAGE>
B. The memebers of the board of arbitration shall be active or retired
disinterested officials of insurance or reinsurance companies. Each
party shall appoint its arbitrator and the two arbitrators shall choose
an umpire before instituting the hearing. If the respondent fails to
appoint its arbitrator within four weeks
after being requested to do
so by the claimant, the latter shall also appoint the second arbitrator.
If the two arbitrators fail to agree upon the appointment of an umpire
within four weeks after their nominations, each of them shall name three,
of whom the other shall decline two and the decision shall be made by
drawing lots.
C. The claimant shall submit its initial brief within 20 days from
appointment of the umpire. The respondent shall submit its brief within
20 days after receipt of the claimant's brief and the claimant may submit
a reply brief within 10 days after receipt of the respondent's brief.
D. The board shall make its decision with regard to the custom and usage of
the insurance and reinsurance business. The board shall issue its
decision in writing based upon a hearing in which evidence may be
introduced without following strict rules of evidence but in which cross
examination and rebuttal shall be allowed. The board shall make its
decision within 60 days following the termination of the hearings unless
the parties consent to an extension. The majority decision of the board
shall be final and binding upon all parties to the proceeding. Judgment
may be entered upon the award of the board in any court having
jurisdiction thereof.
E. Each party shall bear the expense of its own arbitrator and shall jointly
and equally bear with the other party the expense of the umpire. The
remaining costs of the arbitration proceedings shall be allocated by the
board.
ARTICLE XIV
-----------
By execution of this Agreement, the parties hereto simultaneously
terminate any and all reinsurance agreements by and between them heretofore
existing, upon the understanding that this Agreement shall supersede and exist
in substitution for any such prior agreements.
Executed by the parties hereto the day and year as reflected in the
exhibit attached hereto.
115
<PAGE>
INTEREST AND LIABILITIES EXHIBIT #II
TO EMPLOYERS MUTUAL COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in the
Reinsurance Pooling Agreement to which this exhibit is attached, by and between
EMC and the Affiliated Company which is signatory to this exhibit, EMC hereby
cedes and transfers to the Affiliated Company, and the Affiliated Company
hereby accepts reinsurance thereon, 3% of EMC's net liabilities, pursuant to
Article V, effective January 1, 1987.
The Affiliated Companies signatory to this Agreement and their assumed
portions of the net liabilities of EMC are, as of the date of this Addendum, as
follows:
American Liberty Insurance Company 5 %
Dakota Fire Insurance Company 3 %
EMCASCO Insurance Company 8 %
Illinois EMCASCO Insurance Company 6 %
Union Mutual Insurance Company of
Providence 2.5%
-----
24.5%
EMC's Net Retained Portions of 75.5%
its Net Liabilities is -----
100.0%
Executed by the parties hereto this 25th day of November, 1986.
Employers Mutual Casualty Company
By:/s/Richard E. Haskins
------------------------------
Dakota Fire Insurance Company
By:/s/Robb B. Kelley
--------------------------------
116
<PAGE>
INTEREST AND LIABILITIES EXHIBIT # II
TO EMPLOYERS MUTUAL COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in the
Reinsurance Pooling Agreement to which this exhibit is attached, by and
between EMC and the Affiliated Company which is signatory to this exhibit, EMC
hereby cedes and transfers to the Affiliated Company,and the Affiliated Company
hereby accepts reinsurance thereon, 5% of EMC's net liabilities, pursuant to
Article V, effective January 1, 1992.
The Affiliated Companies signatory to this Agreement and their assumed
portions of the net liabilities of EMC are, as of the effective date of this
Amendment, as follows:
American Liberty Insurance Company 5 %
Dakota Fire Insurance Company 5 %
EMCASCO Insurance Company 9 %
Illinois EMCASCO Insurance Company 8 %
Union Mutual Insurance Company 2.5%
of Providence 2.5%
-----
29.5%
EMC's Net Retained Portions of 70.5%
its Net Liabilities is ------
100.0%
Executed by the parties hereto this 20th day of December, 1991.
Employers Mutual Casualty Company
By:/s/Richard E. Haskins
------------------------------
Dakota Fire Insurance Company
By:/s/Bruce G. Kelley
------------------------------
117
<PAGE>
ENDORSEMENT NO. I
TO
REINSURANCE POOLING AGREEMENT BETWEEN
DAKOTA FIRE INSURANCE CO. AND EMPLOYERS MUTUAL CASUALTY COMPANY
Whereby Dakota Fire Insurance Company does not desire to become licensed
in the State of Iowa which disallows credits taken by Employers Mutual Casualty
Company in their financial statements for unearned premium reserve and loss
reserve for reinsurance ceded to Dakota Fire Insurance Company.
In consideration of continuing with a reinsurance program between the
companies, Dakota Fire Insurance Company does place the Bond and Corporate Note
portion of their Custodial Account Number 1929009 at the Bankers Trust Company,
Des Moines, Iowa, under the control of Employers Mutual Casualty Company. The
market value of the account exceeds $9,000,000 and that amount or a greater
amount will be maintained there during the life of this Agreement.
It is further agreed that there will be no bonds cashed by Employers
Mutual casualty Company for their benefit unless Dakota Fire Insurance Company
defaults on the reinsurance contract.
This contract may be terminated by either party at such a time as may be
mutually agreeable.
Executed by the parties hereto 25th Day of November 1986.
DAKOTA FIRE INSURANCE COMPANY
By:/s/Robb B. Kelley
--------------------------
EMPLOYERS MUTUAL CASUALTY COMPANY
By:/s/Richard E. Haskins
--------------------------
118
<PAGE>
ENDORSEMENT NO. II
TO
REINSURANCE POOLING AGREEMENT BETWEEN DAKOTA FIRE AND
EMPLOYERS MUTUAL CASUALTY COMPANY
Endorsement No. I is hereby deleted from this Agreement.
Executed by the Parties this 4th day of March, 1993.
Employers Mutual Casualty Company
By:/s/Fred A. Schiek
------------------------------
Dakota Fire Insurance Company
By:/s/Bruce G. Kelley
------------------------------
119
<PAGE>
INTEREST AND LIABILITIES EXHIBIT #III
TO EMPLOYERS MUTUAL COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in the
Reinsurance Pooling Agreement to which this exhibit is attached, by and between
EMC and the Affiliated Company which is signatory to this exhibit, EMC hereby
cedes and transfer to the Affiliated Company, and the Affiliated Company hereby
accepts reinsurance thereon, 6% of EMC's net liabilities, pursuant to Article
V, effective January 1, 1987.
The Affiliated Companies signatory to this Agreement and their assumed
portions of the net liabilities of EMC are, as of the date of this Addendum, as
follows:
American Liberty Insurance Company 5 %
Dakota Fire Insurance Company 3 %
EMCASCO Insurance Company 8 %
Illinois EMCASCO Insurance Company 6 %
Union Mutual Insurance Company 2.5%
of Providence -----
24.5%
EMC's Net Retained Portions of 75.5%
------
100.0%
Executed by the parties hereto this 25th day of November, 1986.
EMPLOYERS MUTUAL CASUALTY COMPANY
By:/s/Richard E. Haskins
------------------------------
ILLINOIS EMCASCO INSURANCE COMPANY
By:/s/Robb B. Kelley
-------------------------------
120
<PAGE>
AMENDMENT #I TO
INTEREST AND LIABILITIES EXHIBIT # III
TO EMPLOYERS MUTUAL COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in the
Reinsurance Pooling Agreement to which this exhibit is attached, by and between
EMC and the Affiliated Company which is signatory to this exhibit, EMC hereby
cedes and transfers to the Affiliated Company, and the Affiliated Company
hereby accepts reinsurance thereon, 8% of EMC's net liabilities, pursuant to
Article V, effective January 1, 1992.
The Affiliated Companies signatory to this Agreement and their assumed
portions of the net liabilities of EMC are, as of the effective date of this
Amendment, as follows:
American Liberty Insurance Company 5 %
Dakota Fire Insurance Company 5 %
EMCASCO Insurance Company 9 %
Illinois EMCASCO Insurance Company 8 %
Union Mutual Insurance Company 2.5%
of Providence -----
29.5%
EMC's Net Retained Portions of 70.5%
its Net Liabilities is ------
100.0%
Executed by the parties hereto this 20th day of December, 1991.
Employers Mutual Casualty Company
By:/s/Richard E. Haskins
------------------------------
Illinois EMCASCO Insurance Company
By:/s/Bruce G. Kelley
------------------------------
121
<PAGE>
INTEREST AND LIABILITIES EXHIBIT #IV
TO EMPLOYERS MUTUAL COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in the
Reinsurance Pooling Agreement to which this exhibit is attached, by and between
EMC and the Affiliated Company which is signatory to this exhibit, EMC hereby
cedes and transfers to the Affiliated Company, and the Affiliated Company
hereby accepts reinsurance thereon, 8% of EMC's net liabilities, pursuant to
Article V, effective January 1, 1987. The Affiliated Companies signatory to this
Agreement and their assumed portions of the net liabilities of EMC are, as of
the date of this Addendum, as follows:
American Liberty Insurance Company 5 %
Dakota Fire Insurance Company 3 %
EMCASCO Insurance Company 8 %
Illinois EMCASCO Insurance Company 6 %
Union Mutual Insurance Company 2.5%
of Providence -----
24.5%
EMC's Net Retained Portions of 75.5%
its Net Liabilities is ------
100.0%
Executed by the parties hereto this 25th day of November, 1986.
Employers Mutual Casualty Company
By:/s/Richard E. Haskins
------------------------------
EMCASCO Insurance Company
By:/s/Robb B. Kelley
------------------------------
122
<PAGE>
AMENDMENT #I TO
INTEREST AND LIABILITIES EXHIBIT # IV
TO EMPLOYERS MUTUAL COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in the
Reinsurance Pooling Agreement to which this exhibit is attached, by and between
EMC and the Affiliated Company which is signatory to this exhibit, EMC hereby
cedes and transfers to the Affiliated Company, and the Affiliated Company
hereby accepts reinsurance thereon, 9% of EMC's net liabilities, pursuant to
Article V, effective January 1, 1992.
The Affiliated Companies signatory to this Agreement and their assumed
portions of the net liabilities of EMC are, as of the effective date of this
Amendment, as follows:
American Liberty Insurance Company 5 %
Dakota Fire Insurance Company 5 %
EMCASCO Insurance Company 9 %
Illinois EMCASCO Insurance Company 8 %
Union Mutual Insurance Company 2.5%
of Providence -----
29.5%
EMC's Net Retained Portions of 70.5%
its Net Liabilities is ------
100.0%
Executed by the parties hereto this 20th day of December, 1991.
Employers Mutual Casualty Company
By:/s/Richard E. Haskins
------------------------------
EMCASCO Insurance Company
By:/s/Bruce G. Kelley
------------------------------
123
<PAGE>
ADDENDUM #I TO
EMC INSURANCE COMPANIES
REINSURANCE POOLING AGREEMENT
BETWEEN
EMPLOYERS MUTUAL CASUALTY COMPANY
AND
CERTAIN OF ITS AFFILIATED COMPANIES
This Pooling Agreement is amended by adding Article XV thereto, with effect
from January 1, 1993, as follows:
ARTICLE XV
----------
Notwithstanding the wording of this Agreement as contained
in Articles II through VIII, it is agreed and understood
that the voluntary reinsurance assumed business written by
EMC and heretofore ceded to the Affiliated Companies under
this Pooling Agreement, is hereafter not "contracts and
policies of insurance" as used in this agreement, and is
not business subject to cession and transfer by EMC to the
Affiliated Companies.
On January 1, 1993, EMC and the Affiliated Companies shall make such asset
and reserve transfers as are required to give effect to the provisions of
this Article XV.
This Pooling Agreement is further amended by substituting "EMC Insurance
Companies" for "Employers Mutual Companies" wherever it appears, consistent
with and pursuant to action of the Board of Directors effecting this name
change.
124
<PAGE>
AMENDMENT #II TO INTERESTS AND LIABILITY EXHIBIT II
TO EMC INSURANCE COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in
Addendum #I to the Reinsurance Pooling Agreement to which this
Exhibit is attached, EMC and the affiliated company which is
signatory to this Exhibit each do hereby ratify Addendum #I as
a part of the Pooling Agreement effective from January 1, 1993.
Executed by the parties this 23rd day of December, 1992.
Employers Mutual Casualty Company
By:/s/Bruce G. Kelley
------------------------------
Dakota Fire Insurance Company
By:/s/Fred A. Schiek
------------------------------
125
<PAGE>
AMENDMENT #II TO INTERESTS AND LIABILITY EXHIBIT III
TO EMC INSURANCE COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in
Addendum #I to the Reinsurance Pooling Agreement to which this
Exhibit is attached, EMC and the affiliated company which is
signatory to this Exhibit each do hereby ratify Addendum #I as
a part of the Pooling Agreement effective from January 1, 1993.
Executed by the parties this 23rd day of December, 1992.
Employers Mutual Casualty Company
By:/s/Bruce G. Kelley
------------------------------
Illinois EMCASCO Insurance Company
By:/s/Fred A. Schiek
------------------------------
126
<PAGE>
AMENDMENT #II TO INTERESTS AND LIABILITY EXHIBIT IV
TO EMC INSURANCE COMPANIES
REINSURANCE POOLING AGREEMENT
In consideration of the covenants and agreements as reflected in
Addendum #I to the Reinsurance Pooling Agreement to which this
Exhibit is attached, EMC and the affiliated company which is
signatory to this Exhibit each do hereby ratify Addendum #I as
a part of the Pooling Agreement effective from January 1, 1993.
Executed by the parties this 23rd day of December, 1992.
Employers Mutual Casualty Company
By:/s/Bruce G. Kelley
------------------------------
EMCASCO Insurance Company
By:/s/Fred A. Schiek
------------------------------
127
<PAGE>
EMC INSURANCE GROUP INC.
ORGANIZATIONAL CHART
...............................
: :
: EMC INSURANCE GROUP INC. :
:.............................:
:
:
:
:
:
............................:.....................................
: : : :
: : : :
: : : :
EMCASCO Insurance EMC Farm and City EMC
Company Reinsurance Insurance Underwriters,
Illinois EMCASCO Company Company Ltd.
Insurance Company
Dakota Fire
Insurance Company
128
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
EMC Insurance Group Inc.:
We consent to incorporation by reference in Registration Statement
Nos. 2-81486, 2-93738, 33-49335, 33-49337 and 33-49339 on Forms S-8 and
No. 33-34499 on Form S-3 of EMC Insurance Group Inc. of our reports dated
February 21, 1994, relating to the consolidated balance sheets of EMC Insurance
Group Inc. and Subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity and cash flows and the
related schedules for each of the years in the three-year period ended December
31, 1993, which reports appear in the December 31, 1993 annual report on Form
10-K of EMC Insurance Group Inc.
As discussed in notes 1, 10, 12 and 13 to the consolidated financial
statements, the Company changed its method of computing unearned premiums in
1993 and implemented the provisions of the Financial Accounting Standards
Board's Statements No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions", No. 109, "Accounting for Income Taxes", No. 113,
"Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration
Contracts" and No. 115, "Accounting for Certain Investments in Debt and Equity
Securities".
/s/ KPMG Peat Marwick
Des Moines, Iowa
March 25, 1994
129
<PAGE>
POWER OF ATTORNEY
KNOW EVERYONE BY THESE PRESENTS, that each director whose signature
appears below constitutes and appoints E. H. Creese and B. G. Kelley, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities related to entering his personal identification
number onto the EDGAR online reporting system and transmitting the 1993 Form
10-K (annual report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934) and all other required filings, until the 1993 annual
meeting of shareholders, to the Securities and Exchange Commission, and hereby
ratifies and confirms all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
SIGNATURE TITLE
- --------- -----
/s/ George C. Carpenter III
- ------------------------------------
George C. Carpenter III Director
/s/ David J. Fisher
- ------------------------------------
David J. Fisher Director
/s/ Bruce G. Kelley
- ------------------------------------
Bruce G. Kelley Director
/s/ Robb B. Kelley
- ------------------------------------
Robb B. Kelley Chairman of the Board of
Directors and Director
/s/ George W. Kochheiser
- ------------------------------------
George W. Kochheiser Director
/s/ Raymond A. Michel
- ------------------------------------
Raymond A. Michel Director
/s/ Therese M. Vaughan
- ------------------------------------
Therese M. Vaughan Director
May 24, 1993
130
<PAGE>
ANNUAL STATEMENT FOR THE YEAR 1993 OF THE EMC INSURANCE GROUP, INC.
SCHEDULE P - ANALYSIS OF LOSSES AND LOSS EXPENSES
Notes to Schedule P
(1) The Parts of Schedule P:
Part 1 - detailed information on losses and loss expenses.
Part 2 - history of incurred losses and allocated expenses.
Part 3 - history of loss and allocated expense payments.
Part 4 - history of bulk and incurred-but-not reported reserves.
Schedule P Interrogatories
(2) Lines of business A through M and R are groupings of the lines of business
used on Page 14, the state page.
(3) Reinsurance A, B, C, and D (lines N to Q) are:
Reinsurance A = nonproportional property (1988 and subsequent)
Reinsurance B = nonproportional liability (1988 and subsequent)
Reinsurance C = financial lines (1988 and subsequent)
Reinsurance D = old Schedule O line 30 (1987 and prior)
(4) The Instructions to Schedule P contain directions necessary for
filling out Schedule P.
<TABLE>
<CAPTION>
SCHEDULE P - PART 1 - SUMMARY
(000 omitted)
(1) Premiums Earned Loss and Loss Expense Payments
----------------------------------------------------------------------------------------------------- (12)
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 4,847 74 255 1 7 (38) 4,989 X X X
2. 1984.... 77,026 11,029 65,997 64,422 6,339 4,690 211 1,369 2,273 64,835 X X X
3. 1985.... 91,120 15,932 75,188 69,601 7,165 4,989 276 1,253 2,316 69,465 X X X
4. 1986.... 121,115 22,642 98,473 50,617 6,646 4,260 94 1,408 2,344 50,481 X X X
5. 1987.... 112,894 17,369 95,525 54,638 8,736 4,544 89 1,334 2,637 52,994 X X X
6. 1988.... 100,869 12,664 88,205 47,812 3,761 4,093 100 1,239 2,492 50,536 X X X
7. 1989.... 106,284 15,519 90,765 74,276 15,757 4,768 127 1,211 2,813 65,973 X X X
8. 1990.... 118,347 17,081 101,266 63,558 8,096 4,531 93 1,229 2,893 62,793 X X X
9. 1991.... 130,976 17,567 113,409 61,328 6,643 3,508 88 1,355 3,107 61,212 X X X
10. 1992.... 175,043 27,710 147,333 92,219 22,800 3,784 92 1,141 4,239 77,350 X X X
11. 1993.... 168,399 12,156 156,243 45,629 2,730 2,337 47 675 4,109 49,298 X X X
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 628,947 88,747 41,759 1,218 12,221 29,185 609,926 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
--------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
--------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses - Direct
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid and Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 5,175 1,589 1,250 0 576 14 3 0 0 63 5,464 X X X X
2. 1984.... 2,484 1,127 508 0 388 19 1 0 34 20 2,255 X X X X
3. 1985.... 1,117 142 664 0 148 0 1 0 5 15 1,803 X X X X
4. 1986.... 1,995 450 815 0 314 2 2 0 15 32 2,706 X X X X
5. 1987.... 2,618 705 1,008 0 317 0 3 0 20 38 3,279 X X X X
6. 1988.... 3,253 629 1,029 0 639 5 3 0 23 56 4,346 X X X X
7. 1989.... 6,193 608 1,332 80 1,041 6 4 0 37 119 7,995 X X X X
8. 1990.... 11,826 1,671 1,652 0 2,064 4 8 0 67 236 14,111 X X X X
9. 1991.... 21,291 4,439 4,198 122 3,317 6 408 0 160 433 25,080 X X X X
10. 1992.... 29,473 1,927 9,785 191 4,332 35 977 0 265 675 43,089 X X X X
11. 1993.... 38,382 2,649 27,351 979 5,827 59 2,292 0 743 1,178 71,343 X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 123,807 15,936 49,592 1,372 18,963 150 3,702 0 1,369 2,865 181,471 X X X X
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
--------------------------------------------------------------------------------Inter-Company--------------------
(25) (26) (27) (28) (29) (30) (31) (32) Pooling (34) (35)
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X 0 0 X X X X 4,836 628
2. 1984.... 74,786 7,696 67,090 97.1 69.8 101.7 0 0 0.0 1,865 390
3. 1985.... 78,851 7,583 71,268 86.5 47.6 94.8 0 0 0.0 1,639 164
4. 1986.... 60,379 7,192 53,187 49.9 31.8 54.0 0 0 0.0 2,360 346
5. 1987.... 65,803 9,530 56,273 58.3 54.9 58.9 0 0 0.0 2,921 358
6. 1988.... 59,377 4,495 54,882 58.9 35.5 62.2 0 0 0.0 3,653 693
7. 1989.... 90,546 16,578 73,968 85.2 106.8 81.5 0 0 0.0 6,837 1,158
8. 1990.... 86,768 9,864 76,904 73.3 57.7 75.9 0 0 0.0 11,807 2,304
9. 1991.... 97,590 11,298 86,292 74.5 64.3 76.1 0 0 0.0 20,928 4,152
10. 1992.... 145,484 25,045 120,439 83.1 90.4 81.7 0 0 0.0 37,140 5,949
11. 1993.... 127,105 6,464 120,641 75.5 53.2 77.2 0 0 0.0 62,105 9,238
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 156,091 25,380
</TABLE>
131
<PAGE>
<TABLE>
SCHEDULE P - PART 2 - SUMMARY
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported At Year End (000 omitted) Development**
Years in Which -----------------------------------------------------------------------------------------------------------------
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 43,066 42,025 44,842 47,838 48,276 50,137 52,387 53,361 54,041 54,059 18 698
2. 1984........ 52,334 54,556 57,474 60,167 60,393 60,727 62,149 63,531 65,020 64,794 (226) 1,263
3. 1985........ X X X 54,807 61,261 65,725 65,312 65,978 66,668 67,776 69,010 68,943 (67) 1,167
4. 1986........ X X X X X X 57,431 53,673 52,489 52,092 51,230 51,444 51,078 50,811 (267) (633)
5. 1987........ X X X X X X X X X 58,838 57,609 56,716 55,446 55,013 54,120 53,598 (522) (1,415)
6. 1988........ X X X X X X X X X X X X 59,360 56,742 54,652 53,122 52,766 52,336 (430) (786)
7. 1989........ X X X X X X X X X X X X X X X 70,032 72,728 73,047 70,897 71,034 137 (2,013)
8. 1990........ X X X X X X X X X X X X X X X X X X 73,051 74,508 75,760 73,776 (1,984) (732)
9. 1991........ X X X X X X X X X X X X X X X X X X X X X 81,194 84,503 82,750 (1,753) 1,556
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X 113,050 115,524 2,474 X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X 115,351 X X X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals .............................................................................................. (2,620) (895)
</TABLE>
<TABLE>
SCHEDULE P - PART 3 - SUMMARY
<CAPTION>
(12) (13)
(1) Cumulative Paid Losses and Allocated Expenses At Year End (000 omitted) Number of Number of
Years in Which ------------------------------------------------------------------------------------------- Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed With Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 000 18,021 24,692 29,777 32,162 38,310 41,001 43,057 43,629 48,657 X X X X X X X X
2. 1984........ 24,433 39,812 45,717 49,708 50,730 52,812 54,773 56,388 57,339 62,561 X X X X X X X X
3. 1985........ X X X 26,455 40,140 45,364 48,553 51,582 56,147 58,573 60,780 67,151 X X X X X X X X
4. 1986........ X X X X X X 21,048 31,878 35,276 39,574 42,075 43,849 44,954 48,138 X X X X X X X X
5. 1987........ X X X X X X X X X 21,589 34,634 39,485 43,841 46,306 47,062 50,357 X X X X X X X X
6. 1988........ X X X X X X X X X X X X 21,625 34,973 41,291 45,282 46,522 48,047 X X X X X X X X
7. 1989........ X X X X X X X X X X X X X X X 29,174 48,146 56,950 60,229 63,159 X X X X X X X X
8. 1990........ X X X X X X X X X X X X X X X X X X 30,849 49,326 54,400 59,901 X X X X X X X X
9. 1991........ X X X X X X X X X X X X X X X X X X X X X 35,588 49,739 58,107 X X X X X X X X
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X 47,559 73,113 X X X X X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X 45,183 X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 4 - SUMMARY
<CAPTION>
(1) Bulk and Incurred But Not Reported Reserves on Losses and Allocated Expenses at Year End(000 omitted)
Years in Which ----------------------------------------------------------------------------------------------------
Losses (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Were Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior . 5,822 1,208 707 1,060 2,663 1,982 2,661 2,994 2,836 1,253
2. 1984... 6,318 2,030 1,272 1,766 2,156 1,722 2,038 2,087 2,404 509
3. 1985... X X X X 9,402 6,203 7,231 6,054 5,206 3,327 3,083 3,357 664
4. 1986... X X X X X X X 17,816 8,263 6,680 5,650 4,439 3,894 3,072 817
5. 1987... X X X X X X X X X X 15,555 8,609 7,733 5,526 4,616 3,485 1,011
6. 1988... X X X X X X X X X X X X X 14,202 7,712 4,216 1,963 1,553 1,032
7. 1989... X X X X X X X X X X X X X X X X 16,459 6,841 3,906 1,571 1,256
8. 1990... X X X X X X X X X X X X X X X X X X X 15,935 6,504 4,030 1,660
9. 1991... X X X X X X X X X X X X X X X X X X X X X X 16,782 8,337 4,484
10. 1992... X X X X X X X X X X X X X X X X X X X X X X X X X 24,430 10,571
11. 1993... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 28,665
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1A - HOMEOWNERS/FARMOWNERS
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
----------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were --------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 16 0 0 0 0 1 17 X X X
2. 1984.... 7,575 381 7,194 5,401 97 388 8 52 192 5,876 4,259
3. 1985.... 7,369 366 7,003 5,444 268 403 19 48 196 5,756 3,882
4. 1986.... 6,857 427 6,430 4,435 109 336 8 42 189 4,843 3,303
5. 1987.... 7,110 519 6,591 3,833 125 307 7 59 171 4,179 2,485
6. 1988.... 7,148 449 6,699 3,933 165 281 11 36 176 4,214 2,336
7. 1989.... 7,165 397 6,768 5,708 287 391 12 27 220 6,020 3,055
8. 1990.... 7,116 434 6,682 5,259 321 344 22 15 213 5,473 2,916
9. 1991.... 7,604 492 7,112 5,761 198 410 14 17 249 6,208 3,424
10. 1992.... 8,798 570 8,228 6,204 549 381 11 12 302 6,327 3,213
11. 1993.... 8,540 265 8,275 4,433 (1) 283 0 7 273 4,990 2,908
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 50,427 2,118 3,524 112 315 2,182 53,903 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 5 0 0 0 1 0 0 0 0 0 6 0
2. 1984.... 15 0 0 0 3 0 0 0 0 0 18 1
3. 1985.... 4 0 0 0 1 0 0 0 0 0 5 1
4. 1986.... 0 0 0 0 0 0 0 0 0 0 0 0
5. 1987.... 5 0 0 0 1 0 0 0 0 0 6 3
6. 1988.... 12 0 0 0 3 0 0 0 0 0 15 2
7. 1989.... 27 0 0 0 4 0 0 0 0 0 31 5
8. 1990.... 141 0 0 0 32 0 0 0 0 3 176 10
9. 1991.... 244 0 38 0 53 0 3 0 4 6 344 27
10. 1992.... 310 17 69 28 68 1 5 0 11 8 414 51
11. 1993.... 1,478 0 892 0 295 0 43 0 57 44 2,752 330
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 2,241 17 999 28 461 1 51 0 72 61 3,767 430
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 5 1
2. 1984.... 5,999 105 5,894 79.2 27.6 81.9 0 0 0.0 15 3
3. 1985.... 6,048 287 5,761 82.1 78.4 82.3 0 0 0.0 4 1
4. 1986.... 4,960 117 4,843 72.3 27.4 75.3 0 0 0.0 0 0
5. 1987.... 4,317 132 4,185 60.7 25.4 63.5 0 0 0.0 5 1
6. 1988.... 4,408 179 4,229 61.7 39.9 63.1 0 0 0.0 12 3
7. 1989.... 6,353 302 6,051 88.7 76.1 89.4 0 0 0.0 27 4
8. 1990.... 5,995 346 5,649 84.2 79.7 84.5 0 0 0.0 141 35
9. 1991.... 6,767 215 6,552 89.0 43.7 92.1 0 0 0.0 282 62
10. 1992.... 7,349 608 6,741 83.5 106.7 81.9 0 0 0.0 334 80
11. 1993.... 7,741 (1) 7,742 90.6 (0.4) 93.6 0 0 0.0 2,370 382
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 3,195 572
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
--------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 6 0 9 0 0 0 15 X X X
2. 1984.... 11,149 257 10,892 8,759 110 892 0 117 663 10,204 6,456
3. 1985.... 11,168 204 10,964 8,821 98 899 0 172 653 10,275 6,044
4. 1986.... 13,068 254 12,814 9,725 100 1,153 0 211 699 11,477 6,265
5. 1987.... 16,277 273 16,004 11,462 109 1,443 0 153 735 13,531 7,272
6. 1988.... 15,893 358 15,535 10,916 79 1,204 0 159 678 12,719 6,321
7. 1989.... 14,446 344 14,102 10,257 144 1,124 (1) 191 643 11,881 5,728
8. 1990.... 14,397 450 13,947 10,090 242 896 (1) 139 649 11,394 5,540
9. 1991.... 15,174 438 14,736 9,438 75 850 (2) 207 653 10,868 5,965
10. 1992.... 19,316 539 18,777 9,419 114 832 0 170 747 10,884 6,267
11. 1993.... 20,718 489 20,229 6,846 48 486 0 70 642 7,926 6,803
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 95,739 1,119 9,788 (4) 1,589 6,762 111,174 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
----------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
---------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 26 0 0 0 4 0 0 0 0 1 31 12
2. 1984.... 1 0 0 0 0 0 0 0 0 0 1 3
3. 1985.... 15 0 0 0 2 0 0 0 0 0 17 5
4. 1986.... 87 0 0 0 13 0 0 0 0 2 102 8
5. 1987.... 92 0 0 0 14 0 0 0 0 2 108 10
6. 1988.... 170 0 0 0 29 0 0 0 0 4 203 23
7. 1989.... 301 5 0 0 53 0 0 0 0 7 356 36
8. 1990.... 728 8 0 0 121 1 0 0 0 17 857 85
9. 1991.... 2,044 32 119 0 354 3 10 0 3 52 2,544 221
10. 1992.... 4,238 271 787 0 805 25 34 0 10 115 5,683 518
11. 1993.... 8,199 13 2,316 30 1,844 1 130 0 39 252 12,697 1,981
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 15,901 329 3,222 30 3,239 30 174 0 52 452 22,599 2,902
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 26 5
2. 1984.... 10,315 110 10,205 92.5 42.8 93.7 0 0 0.0 1 0
3. 1985.... 10,390 98 10,292 93.0 48.0 93.9 0 0 0.0 15 2
4. 1986.... 11,679 100 11,579 89.4 39.4 90.4 0 0 0.0 87 15
5. 1987.... 13,748 109 13,639 84.5 39.9 85.2 0 0 0.0 92 16
6. 1988.... 13,001 79 12,922 81.8 22.1 83.2 0 0 0.0 170 33
7. 1989.... 12,385 148 12,237 85.7 43.0 86.8 0 0 0.0 296 60
8. 1990.... 12,501 250 12,251 86.8 55.6 87.8 0 0 0.0 720 137
9. 1991.... 13,520 108 13,412 89.1 24.7 91.0 0 0 0.0 2,131 413
10. 1992.... 16,977 410 16,567 87.9 76.1 88.2 0 0 0.0 4,754 929
11. 1993.... 20,715 92 20,623 100.0 18.8 101.9 0 0 0.0 10,472 2,225
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 18,764 3,835
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
-------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 56 0 9 0 0 2 67 X X X
2. 1984.... 3,308 28 3,280 3,195 14 441 0 81 165 3,787 1,767
3. 1985.... 3,734 61 3,673 3,534 20 404 0 16 174 4,092 1,438
4. 1986.... 4,175 73 4,102 1,891 61 250 0 15 127 2,207 1,076
5. 1987.... 4,666 108 4,558 2,412 25 330 0 18 141 2,858 1,003
6. 1988.... 5,205 111 5,094 3,151 21 330 0 19 161 3,621 1,078
7. 1989.... 6,212 181 6,031 2,955 84 322 (1) 22 157 3,351 1,228
8. 1990.... 7,337 208 7,129 4,210 77 337 0 35 200 4,670 1,425
9. 1991.... 8,206 248 7,958 3,391 93 218 (8) 96 205 3,729 1,668
10. 1992.... 11,993 305 11,688 3,955 59 284 0 29 285 4,465 1,887
11. 1993.... 12,911 254 12,657 2,011 30 112 0 23 237 2,330 1,792
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 30,761 484 3,037 (9) 354 1,854 35,177 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
--------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 101 0 0 0 21 0 0 0 0 2 124 3
2. 1984.... 4 0 0 0 1 0 0 0 0 0 5 0
3. 1985.... 22 0 0 0 5 0 0 0 0 1 28 0
4. 1986.... 6 0 0 0 1 0 0 0 0 0 7 1
5. 1987.... 43 0 0 0 9 0 0 0 0 1 53 5
6. 1988.... 182 0 0 0 37 0 0 0 0 4 223 8
7. 1989.... 412 0 0 0 84 0 0 0 0 10 506 19
8. 1990.... 527 0 0 0 107 0 0 0 0 13 647 37
9. 1991.... 2,233 2 241 0 453 0 29 0 3 60 3,014 88
10. 1992.... 3,517 31 334 0 714 4 41 0 4 93 4,664 168
11. 1993.... 3,554 74 1,823 29 720 9 221 0 18 130 6,336 523
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 10,601 107 2,398 29 2,152 13 291 0 25 314 15,607 852
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
-------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 101 23
2. 1984.... 3,806 14 3,792 115.1 50.0 115.6 0 0 0.0 4 1
3. 1985.... 4,140 20 4,120 110.9 32.8 112.2 0 0 0.0 22 6
4. 1986.... 2,275 61 2,214 54.5 83.6 54.0 0 0 0.0 6 1
5. 1987.... 2,936 25 2,911 62.9 23.1 63.9 0 0 0.0 43 10
6. 1988.... 3,865 21 3,844 74.3 18.9 75.5 0 0 0.0 182 41
7. 1989.... 3,940 83 3,857 63.4 45.9 64.0 0 0 0.0 412 94
8. 1990.... 5,394 77 5,317 73.5 37.0 74.6 0 0 0.0 527 120
9. 1991.... 6,830 87 6,743 83.2 35.1 84.7 0 0 0.0 2,472 542
10. 1992.... 9,223 94 9,129 76.9 30.8 78.1 0 0 0.0 3,820 844
11. 1993.... 8,808 142 8,666 68.2 55.9 68.5 0 0 0.0 5,274 1,062
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 12,863 2,744
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1D - WORKERS' COMPENSATION
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X (257) 68 11 1 0 (55) (370) X X X
2. 1984.... 6,862 296 6,566 5,123 192 321 (4) 113 444 5,700 4,564
3. 1985.... 7,446 773 6,673 5,130 616 357 2 127 461 5,330 4,523
4. 1986.... 9,922 2,126 7,796 7,083 1,888 338 3 139 528 6,058 4,851
5. 1987.... 12,033 2,931 9,102 8,183 2,679 378 1 282 613 6,494 5,033
6. 1988.... 13,480 3,508 9,972 8,878 2,459 421 (1) 219 670 7,511 5,409
7. 1989.... 18,461 3,872 14,589 11,414 1,771 507 (2) 254 839 10,991 6,363
8. 1990.... 21,868 4,575 17,293 11,357 2,155 518 (12) 180 826 10,558 7,054
9. 1991.... 25,805 4,650 21,155 12,046 2,097 384 (19) 120 920 11,272 7,992
10. 1992.... 37,449 6,461 30,988 13,692 2,088 364 0 67 1,414 13,382 8,424
11. 1993.... 37,002 6,572 30,430 6,449 1,098 100 (1) 13 1,597 7,049 5,921
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 89,098 17,111 3,699 (32) 1,514 8,257 83,975 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 3,197 1,277 186 0 216 0 3 0 0 51 2,376 114
2. 1984.... 1,288 694 32 0 87 0 1 0 34 15 729 17
3. 1985.... 496 142 36 0 33 0 1 0 5 9 433 17
4. 1986.... 1,227 410 109 0 83 0 2 0 15 22 1,033 35
5. 1987.... 1,573 705 158 0 106 0 3 0 20 25 1,160 46
6. 1988.... 1,436 512 152 0 97 0 3 0 23 26 1,202 63
7. 1989.... 2,613 235 214 0 176 0 4 0 37 62 2,834 129
8. 1990.... 5,494 1,308 436 0 371 0 8 0 67 111 5,112 239
9. 1991.... 9,943 3,964 1,154 29 671 0 20 0 127 171 7,966 430
10. 1992.... 8,701 1,248 2,279 89 587 0 40 0 201 232 10,502 890
11. 1993.... 11,279 1,874 6,861 658 763 0 117 0 282 377 16,865 1,971
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 47,247 12,369 11,617 776 3,190 0 202 0 811 1,101 50,212 3,951
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 2,106 270
2. 1984.... 7,311 882 6,429 106.5 298.0 97.9 0 0 0.0 626 103
3. 1985.... 6,523 760 5,763 87.6 98.3 86.4 0 0 0.0 390 43
4. 1986.... 9,392 2,301 7,091 94.7 108.2 91.0 0 0 0.0 926 107
5. 1987.... 11,039 3,385 7,654 91.7 115.5 84.1 0 0 0.0 1,026 134
6. 1988.... 11,683 2,970 8,713 86.7 84.7 87.4 0 0 0.0 1,076 126
7. 1989.... 15,829 2,004 13,825 85.7 51.8 94.8 0 0 0.0 2,592 242
8. 1990.... 19,121 3,451 15,670 87.4 75.4 90.6 0 0 0.0 4,622 490
9. 1991.... 25,309 6,071 19,238 98.1 130.6 90.9 0 0 0.0 7,104 862
10. 1992.... 27,309 3,425 23,884 72.9 53.0 77.1 0 0 0.0 9,643 859
11. 1993.... 27,543 3,629 23,914 74.4 55.2 78.6 0 0 0.0 15,608 1,257
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 45,719 4,493
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1E - COMMERCIAL MULTIPLE PERIL
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were --------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 0 0 10 0 0 0 10 X X X
2. 1984.... 6,607 600 6,007 6,103 1,693 498 86 48 123 4,945
3. 1985.... 7,973 805 7,168 3,946 325 444 19 93 105 4,151
4. 1986.... 7,225 996 6,229 3,627 1,066 318 19 120 81 2,941
5. 1987.... 5,565 979 4,586 1,649 260 139 13 39 46 1,561
6. 1988.... 5,979 1,097 4,882 1,535 (48) 158 21 39 43 1,763
7. 1989.... 5,381 945 4,436 3,654 410 218 30 12 59 3,491
8. 1990.... 5,321 869 4,452 2,280 483 180 24 35 46 1,999
9. 1991.... 5,323 810 4,513 2,798 363 159 20 13 54 2,628
10. 1992.... 5,499 877 4,622 3,732 241 217 10 11 83 3,781
11. 1993.... 4,704 323 4,381 1,883 48 102 4 1 62 1,995
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 31,207 4,841 2,443 246 411 702 29,265 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
-------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 36 0 0 0 5 0 0 0 0 1 42 3
2. 1984.... 28 0 0 0 4 0 0 0 0 1 33 2
3. 1985.... 17 0 0 0 2 0 0 0 0 0 19 3
4. 1986.... 17 0 0 0 3 0 0 0 0 0 20 1
5. 1987.... 13 0 0 0 2 0 0 0 0 0 15 0
6. 1988.... 4 0 0 0 1 0 0 0 0 0 5 0
7. 1989.... 10 0 0 0 1 0 0 0 0 0 11 3
8. 1990.... 162 0 0 0 23 0 0 0 0 4 189 8
9. 1991.... 281 0 2 0 31 0 0 0 2 4 318 12
10. 1992.... 998 0 26 0 128 0 3 0 10 20 1,175 32
11. 1993.... 717 21 205 13 81 1 12 0 38 13 993 83
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 2,283 21 233 13 281 1 15 0 50 43 2,820 147
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 36 6
2. 1984.... 6,758 1,780 4,978 102.3 296.7 82.9 0 0 0.0 28 5
3. 1985.... 4,514 344 4,170 56.6 42.7 58.2 0 0 0.0 17 2
4. 1986.... 4,046 1,085 2,961 56.0 108.9 47.5 0 0 0.0 17 3
5. 1987.... 1,850 274 1,576 33.2 28.0 34.4 0 0 0.0 13 2
6. 1988.... 1,744 (24) 1,768 29.2 (2.2) 36.2 0 0 0.0 4 1
7. 1989.... 3,947 445 3,502 73.4 47.1 78.9 0 0 0.0 10 1
8. 1990.... 2,700 512 2,188 50.7 58.9 49.1 0 0 0.0 162 27
9. 1991.... 3,332 386 2,946 62.6 47.7 65.3 0 0 0.0 283 35
10. 1992.... 5,210 254 4,956 94.7 29.0 107.2 0 0 0.0 1,024 151
11. 1993.... 3,075 87 2,988 65.4 26.9 68.2 0 0 0.0 888 105
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 2,482 338
</TABLE>
<PAGE>
SCHEDULE P - PART 1F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE - NONE
<PAGE>
SCHEDULE P - PART 1F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE - NONE
<PAGE>
<TABLE>
SCHEDULE P - PART 1G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT (ALL PERILS),
BOILER AND MACHINERY)
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 1 0 0 0 0 0 1 X X X X
2. 1984.... 6,307 2,168 4,139 3,064 425 325 45 0 0 2,919 X X X X
3. 1985.... 6,422 2,110 4,312 3,421 485 434 62 0 0 3,308 X X X X
4. 1986.... 567 294 273 2 3 0 0 0 0 (1) X X X X
5. 1987.... 7 7 0 6 7 0 0 0 0 (1) X X X X
6. 1988.... 133 75 58 13 12 0 0 0 0 1 X X X X
7. 1989.... 590 197 393 390 57 21 2 0 3 355 X X X X
8. 1990.... 1,101 283 818 478 62 26 2 0 4 444 X X X X
9. 1991.... 1,114 286 828 465 73 22 2 0 3 415 X X X X
10. 1992.... 2,299 582 1,717 984 61 33 1 0 4 959 X X X X
11. 1993.... 4,533 231 4,302 424 10 8 1 0 12 433 X X X X
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 9,248 1,195 869 115 0 26 8,833 X X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 0 0 0 0 0 0 0 0 0 0 0 0
2. 1984.... 0 0 0 0 0 0 0 0 0 0 0 0
3. 1985.... 0 0 0 0 0 0 0 0 0 0 0 0
4. 1986.... 0 0 0 0 0 0 0 0 0 0 0 0
5. 1987.... 0 0 0 0 0 0 0 0 0 0 0 0
6. 1988.... 0 0 0 0 0 0 0 0 0 0 0 0
7. 1989.... 58 0 24 0 2 0 0 0 0 0 84 0
8. 1990.... 171 0 0 0 7 0 0 0 0 0 178 0
9. 1991.... 222 0 0 0 9 0 0 0 0 0 231 0
10. 1992.... 808 0 171 0 32 0 0 0 0 0 1,011 0
11. 1993.... 1,241 0 1,395 0 49 0 0 0 0 1 2,686 8
- -----------------------------------------------------------------------------------------------------------------------------------
12. Totals . 2,500 0 1,590 0 99 0 0 0 0 1 4,190 8
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 0 0
2. 1984.... 3,389 470 2,919 53.7 21.7 70.5 0 0 0.0 0 0
3. 1985.... 3,855 547 3,308 60.0 25.9 76.7 0 0 0.0 0 0
4. 1986.... 2 3 (1) 0.4 1.0 (0.4) 0 0 0.0 0 0
5. 1987.... 6 7 (1) 85.7 100.0 0.0 0 0 0.0 0 0
6. 1988.... 13 12 1 9.8 16.0 1.7 0 0 0.0 0 0
7. 1989.... 498 59 439 84.4 29.9 111.7 0 0 0.0 82 2
8. 1990.... 686 64 622 62.3 22.6 76.0 0 0 0.0 171 7
9. 1991.... 721 75 646 64.7 26.2 78.0 0 0 0.0 222 9
10. 1992.... 2,032 62 1,970 88.4 10.7 114.7 0 0 0.0 979 32
11. 1993.... 3,130 11 3,119 69.0 4.8 72.5 0 0 0.0 2,636 50
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 4,090 100
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
(000 omitted)
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were -------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 300 6 112 0 1 4 410 X X X
2. 1984.... 3,850 1,055 2,795 2,754 214 841 11 10 178 3,548 1,429
3. 1985.... 5,428 1,511 3,917 3,022 318 871 114 4 190 3,651 1,158
4. 1986.... 7,660 2,027 5,633 2,562 485 631 (13) 19 178 2,899 1,048
5. 1987.... 9,580 2,200 7,380 3,010 360 743 0 6 205 3,598 1,109
6. 1988.... 10,579 2,006 8,573 2,137 (10) 668 (4) 2 195 3,014 1,392
7. 1989.... 10,814 2,046 8,768 3,294 434 1,035 18 3 244 4,121 1,868
8. 1990.... 12,486 1,915 10,571 3,110 331 1,175 4 12 265 4,215 2,137
9. 1991.... 13,096 1,618 11,478 1,913 220 577 3 5 260 2,527 2,107
10. 1992.... 17,796 2,083 15,713 2,020 2 444 0 4 311 2,773 2,163
11. 1993.... 17,218 1,341 15,877 1,337 1 464 1 1 309 2,108 1,988
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 25,459 2,361 7,561 134 67 2,339 32,864 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
--------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 573 307 0 0 210 14 0 0 0 7 469 8
2. 1984.... 527 433 0 0 193 19 0 0 0 2 270 3
3. 1985.... 135 0 0 0 50 0 0 0 0 3 188 3
4. 1986.... 231 40 0 0 85 2 0 0 0 5 279 5
5. 1987.... 276 0 0 0 101 0 0 0 0 7 384 12
6. 1988.... 681 117 0 0 250 5 0 0 0 14 823 14
7. 1989.... 1,283 39 0 0 469 2 0 0 0 31 1,742 40
8. 1990.... 2,959 51 0 0 1,084 2 0 0 0 74 4,064 101
9. 1991.... 3,791 10 734 0 1,388 0 231 0 2 114 6,248 189
10. 1992.... 4,697 0 1,790 0 1,720 0 563 0 5 164 8,934 305
11. 1993.... 4,044 2 3,578 0 1,483 1 1,124 0 9 195 10,421 701
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 19,197 999 6,102 0 7,033 45 1,918 0 16 616 33,822 1,381
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
-------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 266 203
2. 1984.... 4,495 677 3,818 116.8 64.2 136.6 0 0 0.0 94 176
3. 1985.... 4,271 432 3,839 78.7 28.6 98.0 0 0 0.0 135 53
4. 1986.... 3,692 514 3,178 48.2 25.4 56.4 0 0 0.0 191 88
5. 1987.... 4,342 360 3,982 45.3 16.4 54.0 0 0 0.0 276 108
6. 1988.... 3,945 108 3,837 37.3 5.4 44.8 0 0 0.0 564 259
7. 1989.... 6,356 493 5,863 58.8 24.1 66.9 0 0 0.0 1,244 498
8. 1990.... 8,667 388 8,279 69.4 20.3 78.3 0 0 0.0 2,908 1,156
9. 1991.... 9,008 233 8,775 68.8 14.4 76.5 0 0 0.0 4,515 1,733
10. 1992.... 11,709 2 11,707 65.8 0.1 74.5 0 0 0.0 6,487 2,447
11. 1993.... 12,534 5 12,529 72.8 0.4 78.9 0 0 0.0 7,620 2,801
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 24,300 9,522
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
(000 omitted)
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 0 0 0 0 0 0 0 X X X
2. 1984.... 0 0 0 0 0 0 0 0 0 0 0
3. 1985.... 0 0 0 0 0 0 0 0 0 0 0
4. 1986.... 0 0 0 0 0 0 0 0 0 0 0
5. 1987.... 244 29 215 29 0 7 0 0 5 41 0
6. 1988.... 792 110 682 469 0 3 0 1 25 497 28
7. 1989.... 1,013 141 872 236 0 4 0 1 18 258 34
8. 1990.... 1,059 152 907 389 0 2 0 1 25 416 69
9. 1991.... 1,103 109 994 437 0 4 0 7 25 466 104
10. 1992.... 1,523 55 1,468 397 0 17 0 0 41 455 126
11. 1993.... 1,620 56 1,564 128 0 5 0 0 7 140 124
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 2,085 0 42 0 10 146 2,273 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 0 0 0 0 0 0 0 0 0 0 0 0
2. 1984.... 0 0 0 0 0 0 0 0 0 0 0 0
3. 1985.... 0 0 0 0 0 0 0 0 0 0 0 0
4. 1986.... 0 0 0 0 0 0 0 0 0 0 0 0
5. 1987.... 25 0 0 0 0 0 0 0 0 1 26 0
6. 1988.... 87 0 0 0 2 0 0 0 0 2 91 3
7. 1989.... 96 0 0 0 2 0 0 0 0 2 100 3
8. 1990.... 137 0 0 0 2 0 0 0 0 4 143 10
9. 1991.... 327 0 0 0 6 0 0 0 0 9 342 22
10. 1992.... 525 0 0 0 9 0 0 0 0 14 548 52
11. 1993.... 722 0 82 0 13 0 1 0 0 20 838 105
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 1,919 0 82 0 34 0 1 0 0 52 2,088 195
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling Loss
Direct Direct Loss Participation Losses Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X 0 0 X X X X 0 0
2. 1984.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
3. 1985.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
4. 1986.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
5. 1987.... 67 0 67 27.5 0.0 31.2 0 0 0.0 25 1
6. 1988.... 588 0 588 74.2 0.0 86.2 0 0 0.0 87 4
7. 1989.... 358 0 358 35.3 0.0 41.1 0 0 0.0 96 4
8. 1990.... 559 0 559 52.8 0.0 61.6 0 0 0.0 137 6
9. 1991.... 808 0 808 73.3 0.0 81.3 0 0 0.0 327 15
10. 1992.... 1,003 0 1,003 65.9 0.0 68.3 0 0 0.0 525 23
11. 1993.... 978 0 978 60.4 0.0 62.5 0 0 0.0 804 34
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X 0 0 X X X X 2,001 87
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,
EARTHQUAKE, GLASS, BURGLARY AND THEFT)
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
-------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 1,585 462 90 5 66 5 1,213 X X X
2. 1992.... 33,845 5,282 28,563 19,639 8,255 667 65 71 257 12,243 X X X
3. 1993.... 31,141 1,825 29,316 12,290 1,284 436 42 25 243 11,643 X X X
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X 33,514 10,001 1,193 112 162 505 25,099 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 1,833 488 583 65 85 8 0 0 19 2 1,942 35
2. 1992.... 2,750 240 1,383 43 130 5 0 0 19 10 3,985 66
3. 1993.... 3,687 484 5,815 171 213 23 33 0 57 67 9,137 269
- ------------------------------------------------------------------------------------------------------------------------------------
4. Totals . 8,270 1,212 7,781 279 428 36 33 0 95 79 15,064 370
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
-------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 1,863 79
2. 1992.... 24,846 8,618 16,228 73.4 163.2 56.8 0 0 0.0 3,850 135
3. 1993.... 22,784 2,004 20,780 73.2 109.8 70.9 0 0 0.0 8,847 290
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 14,560 504
</TABLE>
<TABLE>
SCHEDULE P - PART 1J - AUTO PHYSICAL DAMAGE
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X (121) 1 29 0 141 (4) (97) X X X
2. 1992.... 15,921 163 15,758 8,781 250 431 2 774 675 9,635 8,790
3. 1993.... 16,289 199 16,090 8,127 0 317 0 535 674 9,118 7,001
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X 16,787 251 777 2 1,450 1,345 18,656 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
-------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 62 0 0 0 5 0 0 0 0 1 68 144
2. 1992.... 53 0 0 0 5 0 0 0 0 1 59 126
3. 1993.... 1,252 0 359 0 212 0 11 0 222 41 1,875 706
- ------------------------------------------------------------------------------------------------------------------------------------
4. Totals . 1,367 0 359 0 222 0 11 0 222 43 2,002 976
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------------ --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 62 6
2. 1992.... 9,946 252 9,694 62.5 154.6 61.5 0 0 0.0 53 6
3. 1993.... 10,993 0 10,993 67.5 0.0 68.3 0 0 0.0 1,611 264
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 1,726 276
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X (44) (62) 54 14 19 3 61 X X X
2. 1992.... 2,415 432 1,983 333 0 36 0 3 15 384 X X X
3. 1993.... 2,654 (81) 2,735 186 212 4 0 0 7 (15) X X X
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X 475 150 94 14 22 25 430 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
-------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 223 1 36 0 48 0 0 0 0 4 310 33
2. 1992.... 55 0 58 0 10 0 10 0 5 4 137 13
3. 1993.... 186 181 231 0 34 24 38 0 21 8 292 8
- ------------------------------------------------------------------------------------------------------------------------------------
4. Totals . 464 182 325 0 92 24 48 0 26 16 739 54
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 258 52
2. 1992.... 521 0 521 21.6 0.0 26.3 0 0 0.0 113 24
3. 1993.... 694 417 277 26.1 (514.8) 10.1 0 0 0.0 236 56
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 607 132
</TABLE>
<TABLE>
SCHEDULE P - PART 1L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were --------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 265 0 0 0 0 0 265 X X X
2. 1992.... 141 0 141 369 0 0 0 0 0 369 X X X
3. 1993.... 13 0 13 1 0 0 0 0 0 1 X X X
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X 635 0 0 0 0 0 635 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 0 0 0 0 0 0 0 0 0 0 0 0
2. 1992.... 0 0 0 0 0 0 0 0 0 0 0 0
3. 1993.... 0 0 0 0 0 0 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
4. Totals . 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------ --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 0 0
2. 1992.... 369 0 369 261.7 0.0 261.7 0 0 0.0 0 0
3. 1993.... 1 0 1 7.7 0.0 7.7 0 0 0.0 0 0
- -------------------------------------------------------------------------------------------------------------------------
4. Totals . X X X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 0 0
</TABLE>
<PAGE>
SCHEDULE P - PART 1M - INTERNATIONAL - NONE
<PAGE>
<TABLE>
SCHEDULE P - PART 1N - REINSURANCE A
(000 omitted)
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 3,247 1,527 1,720 2,583 352 71 11 0 19 2,310 X X X
2. 1989.... 5,586 4,314 1,272 15,147 10,139 47 6 0 44 5,093 X X X
3. 1990.... 7,742 4,661 3,081 5,074 2,573 14 2 0 19 2,532 X X X
4. 1991.... 8,597 4,608 3,989 5,326 1,377 31 4 0 36 4,012 X X X
5. 1992.... 13,129 9,811 3,318 22,301 11,164 31 3 0 70 11,235 X X X
6. 1993.... 6,793 663 6,130 1,417 0 12 0 0 21 1,450 X X X
- -------------------------------------------------------------------------------------------------------------------------
7. Totals . X X X X X X X X X X 51,848 25,605 206 26 0 209 26,632 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
-------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 28 0 33 0 0 0 0 0 0 0 61 X X X X
2. 1989.... 301 172 168 60 1 0 0 0 0 0 238 X X X X
3. 1990.... 191 218 152 0 1 0 0 0 0 0 126 X X X X
4. 1991.... 457 190 236 48 2 0 0 0 0 0 457 X X X X
5. 1992.... 2,261 120 920 31 7 0 0 0 0 0 3,037 X X X X
6. 1993.... 1,558 0 1,217 78 5 0 0 0 0 1 2,703 X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
7. Totals . 4,796 700 2,726 217 16 0 0 0 0 1 6,622 X X X X
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
-------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 2,739 368 2,371 84.4 24.1 137.8 0 0 0.0 61 0
2. 1989.... 15,717 10,386 5,331 281.4 240.8 419.1 0 0 0.0 237 1
3. 1990.... 5,456 2,798 2,658 70.5 60.0 86.3 0 0 0.0 125 1
4. 1991.... 6,096 1,627 4,469 70.9 35.3 112.0 0 0 0.0 455 2
5. 1992.... 25,602 11,330 14,272 195.0 115.5 430.1 0 0 0.0 3,030 7
6. 1993.... 4,231 78 4,153 62.3 11.8 67.7 0 0 0.0 2,697 6
- -------------------------------------------------------------------------------------------------------------------------
7. Totals . X X X X X X X X X X X X X X X X X X 0 0 X X X X 6,605 17
</TABLE>
<TABLE>
SCHEDULE P - PART 1O - REINSURANCE B
(000 Omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
--------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... (2,291) (329) (1,962) 2,066 124 216 31 0 9 2,136 X X X
2. 1989.... 1,988 285 1,703 1,125 60 69 5 0 7 1,136 X X X
3. 1990.... 2,100 303 1,797 989 46 59 5 0 7 1,004 X X X
4. 1991.... 2,634 379 2,255 404 (45) 20 1 0 7 475 X X X
5. 1992.... 2,523 450 2,073 240 9 3 0 0 5 239 X X X
6. 1993.... 1,887 0 1,887 35 1 (1) 0 0 4 37 X X X
- -------------------------------------------------------------------------------------------------------------------------
7. Totals . X X X X X X X X X 4,859 195 366 42 0 39 5,027 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
-------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 251 0 771 0 21 0 0 0 0 0 1,043 X X X X
2. 1989.... 430 0 765 0 36 0 0 0 0 0 1,231 X X X X
3. 1990.... 431 0 797 0 36 0 0 0 0 0 1,264 X X X X
4. 1991.... 410 0 1,231 0 34 0 0 0 0 0 1,675 X X X X
5. 1992.... 453 0 1,343 0 38 0 0 0 0 0 1,834 X X X X
6. 1993.... 336 0 1,487 0 27 0 0 0 0 1 1,851 X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
7. Totals . 2,311 0 6,394 0 192 0 0 0 0 1 8,898 X X X X
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
-------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 3,336 157 3,179 (145.6) (47.7) (162.0) 0 0 0.0 1,022 21
2. 1989.... 2,433 66 2,367 122.4 23.2 139.0 0 0 0.0 1,195 36
3. 1990.... 2,321 53 2,268 110.5 17.5 126.2 0 0 0.0 1,228 36
4. 1991.... 2,107 (43) 2,150 80.0 (11.3) 95.3 0 0 0.0 1,641 34
5. 1992.... 2,082 9 2,073 82.5 2.0 100.0 0 0 0.0 1,796 38
6. 1993.... 1,889 1 1,888 100.1 0.0 100.1 0 0 0.0 1,823 28
- -------------------------------------------------------------------------------------------------------------------------
7. Totals . X X X X X X X X X X X X X X X X X X 0 0 X X X X 8,705 193
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1P - REINSURANCE C
(000 omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 797 115 682 (2) (2) 0 0 0 0 0 X X X
2. 1989.... 499 72 427 79 5 0 0 0 0 74 X X X
3. 1990.... 393 57 336 55 (1) 0 0 0 0 56 X X X
4. 1991.... 376 54 322 (2) (11) 0 0 0 0 9 X X X
5. 1992.... 334 60 274 35 8 0 0 0 1 28 X X X
6. 1993.... 201 0 201 1 (1) 0 0 0 1 3 X X X
- -------------------------------------------------------------------------------------------------------------------------
7. Totals . X X X X X X X X X X 166 (2) 0 0 0 2 170 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 2 0 14 0 0 0 0 0 0 0 16 X X X X
2. 1989.... 17 0 43 0 0 0 0 0 0 0 60 X X X X
3. 1990.... 74 0 48 0 1 0 0 0 0 0 123 X X X X
4. 1991.... 1 0 64 0 0 0 0 0 0 0 65 X X X X
5. 1992.... 0 0 157 0 0 0 0 0 0 0 157 X X X X
6. 1993.... 10 0 154 0 0 0 0 0 0 0 164 X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
7. Totals . 104 0 480 0 1 0 0 0 0 0 585 X X X X
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net * and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988.... 14 (2) 16 1.8 (1.7) 2.3 0 0 0.0 16 0
2. 1989.... 139 5 134 27.9 6.9 31.4 0 0 0.0 60 0
3. 1990.... 178 (1) 179 45.3 (1.8) 53.3 0 0 0.0 122 1
4. 1991.... 63 (11) 74 16.8 (20.4) 23.0 0 0 0.0 65 0
5. 1992.... 193 8 185 57.8 13.3 67.5 0 0 0.0 157 0
6. 1993.... 166 (1) 167 82.6 0.0 83.1 0 0 0.0 164 0
- -------------------------------------------------------------------------------------------------------------------------
7. Totals . X X X X X X X X X X X X X X X X X X 0 0 X X X X 584 1
</TABLE>
<TABLE>
SCHEDULE P - PART 1Q - REINSURANCE D
(000 Omitted)
<CAPTION>
(1) Premiums Earned Loss and Loss Expense Payments
------------------------------------------------------------------------------------------------------------
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11) (12)
Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X 4,739 0 85 0 0 10 4,834 X X X
2. 1984.... 10,742 2,578 8,164 18,224 2,973 177 22 0 60 15,466 X X X
3. 1985.... 17,306 4,970 12,336 23,908 4,301 156 19 0 86 19,830 X X X
4. 1986.... 47,302 13,221 34,081 9,721 1,285 210 29 0 64 8,681 X X X
5. 1987.... 31,251 8,393 22,858 14,209 4,980 401 52 0 223 9,801 X X X
- -------------------------------------------------------------------------------------------------------------------------
6. Totals . X X X X X X X X X 70,801 13,539 1,029 122 0 443 58,612 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
-------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expense Expenses Direct and
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 1,144 0 1,028 0 70 0 0 0 0 0 2,242 X X X X
2. 1984.... 527 0 476 0 32 0 0 0 0 0 1,035 X X X X
3. 1985.... 361 0 628 0 22 0 0 0 0 0 1,011 X X X X
4. 1986.... 236 0 706 0 15 0 0 0 0 0 957 X X X X
5. 1987.... 501 0 850 0 32 0 0 0 0 1 1,384 X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
6. Totals . 2,769 0 3,688 0 171 0 0 0 0 1 6,629 X X X X
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
------------------------------------------------------------------------------- -------------------------
(25) (26) (27) (28) (29) (30) (31) (32) Inter-Company (34) (35)
Pooling
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X X X X X X 0 0 0.0 2,172 70
2. 1984.... 19,506 3,005 16,501 181.6 116.6 202.1 0 0 0.0 1,003 32
3. 1985.... 25,175 4,334 20,841 145.5 87.2 168.9 0 0 0.0 989 22
4. 1986.... 10,962 1,324 9,638 23.2 10.0 28.3 0 0 0.0 942 15
5. 1987.... 16,253 5,068 11,185 52.0 60.4 48.9 0 0 0.0 1,351 33
- -------------------------------------------------------------------------------------------------------------------------
6. Totals . X X X X X X X X X X X X X X X X X X 0 0 X X X X 6,457 172
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
(000 omitted)
<CAPTION>
Premiums Earned Loss and Loss Expense Payments
(1) ----------------------------------------------------------------------------------------------------- (12)
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 7 0 15 0 0 0 22 X X X
2. 1984.... 756 0 756 410 0 195 0 1 21 626 152
3. 1985.... 928 0 928 618 0 375 0 1 24 1,017 112
4. 1986.... 1,261 0 1,261 601 0 440 0 0 28 1,069 91
5. 1987.... 1,450 0 1,450 480 0 198 0 0 25 703 101
6. 1988.... 1,256 0 1,256 88 0 85 0 1 20 193 102
7. 1989.... 1,509 0 1,509 70 0 194 0 0 18 282 123
8. 1990.... 1,790 0 1,790 190 0 93 0 0 22 305 110
9. 1991.... 1,797 2 1,795 (203) 0 (71) 0 5 7 (267) 110
10. 1992.... 2,056 40 2,016 118 0 44 0 0 29 191 110
11. 1993.... 2,175 19 2,156 61 0 9 0 0 19 89 102
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 2,440 0 1,577 0 8 213 4,230 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid and Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 56 0 0 0 41 0 0 0 0 1 98 3
2. 1984.... 92 0 0 0 68 0 0 0 0 2 162 9
3. 1985.... 41 0 0 0 30 0 0 0 0 1 72 5
4. 1986.... 137 0 0 0 101 0 0 0 0 3 241 3
5. 1987.... 59 0 0 0 44 0 0 0 0 1 104 3
6. 1988.... 263 0 0 0 193 0 0 0 0 6 462 3
7. 1989.... 257 0 0 0 189 0 0 0 0 6 452 9
8. 1990.... 345 0 0 0 254 0 0 0 0 8 607 10
9. 1991.... 361 0 192 0 265 0 115 0 0 14 947 20
10. 1992.... 107 0 468 0 79 0 281 0 0 14 949 14
11. 1993.... 119 0 936 0 88 0 562 0 0 28 1,733 30
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals . 1,837 0 1,596 0 1,352 0 958 0 0 84 5,827 109
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
----------------------------------------------------------------------------- Inter-Company --------------------
(25) (26) (27) (28) (29) (30) (31) (32) Pooling (34) (35)
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X 0 0 X X X X 56 42
2. 1984.... 788 0 788 104.2 0.0 104.2 0 0 0.0 92 70
3. 1985.... 1,089 0 1,089 117.3 0.0 117.3 0 0 0.0 41 31
4. 1986.... 1,310 0 1,310 103.9 0.0 103.9 0 0 0.0 137 104
5. 1987.... 807 0 807 55.7 0.0 55.7 0 0 0.0 59 45
6. 1988.... 655 0 655 52.1 0.0 52.1 0 0 0.0 263 199
7. 1989.... 734 0 734 48.6 0.0 48.6 0 0 0.0 257 195
8. 1990.... 912 0 912 50.9 0.0 50.9 0 0 0.0 345 262
9. 1991.... 680 0 680 37.8 0.0 37.9 0 0 0.0 553 394
10. 1992.... 1,140 0 1,140 55.4 0.0 56.5 0 0 0.0 575 374
11. 1993.... 1,822 0 1,822 83.8 0.0 84.5 0 0 0.0 1,055 678
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 3,433 2,394
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 1R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
(000 omitted)
<CAPTION>
Premiums Earned Loss and Loss Expense Payments
(1) --------------------------------------------------------------------------------------------------- (12)
Years (2) (3) (4) Loss Payments Allocated Loss (9) (10) (11)
in Which Expense Payments Number of
Premiums Were ---------------------------------------- Salvage Unallocated Total Claims
Earned and Direct Net (5) (6) (7) (8) and Loss Net Paid Reported
Losses Were and Ceded (2 - 3) Direct Direct Subrogation Expense (5 - 6 + 7 Direct and
Incurred Assumed and Assumed Ceded and Assumed Ceded Received Payments - 8 + 10) Assumed
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X 0 0 0 0 0 0 0 X X X
2. 1984.... 0 0 0 0 0 0 0 0 0 0 0
3. 1985.... 0 0 0 0 0 0 0 0 0 0 0
4. 1986.... 0 0 0 0 0 0 0 0 0 0 0
5. 1987.... 2 0 2 0 0 0 0 0 0 0 0
6. 1988.... 8 0 8 0 0 0 0 0 0 0 0
7. 1989.... 18 0 18 0 0 0 0 0 0 0 0
8. 1990.... 21 0 21 22 0 1 0 0 0 23 0
9. 1991.... 9 0 9 0 0 0 0 0 0 0 0
10. 1992.... 6 0 6 0 0 0 0 0 0 0 0
11. 1993.... 0 0 0 0 0 0 0 0 0 0 0
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X 22 0 1 0 0 0 23 X X X
</TABLE>
<TABLE>
<CAPTION>
Losses Unpaid Allocated Loss Expenses Unpaid
------------------------------------------------------------------------------- (21) (22) (23) (24)
Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Net Number of
------------------------------------------------------------------------------- Salvage Unallocated Losses Claims
(13) (14) (15) (16) (17) (18) (19) (20) and Loss and Outstanding
Direct Direct Direct Direct Subrogation Expenses Expenses Direct
and Assumed Ceded and Assumed Ceded and Assumed Ceded and Assumed Ceded Anticipated Unpaid Unpaid and Assumed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. 0 0 0 0 0 0 0 0 0 0 0 0
2. 1984.... 0 0 0 0 0 0 0 0 0 0 0 0
3. 1985.... 0 0 0 0 0 0 0 0 0 0 0 0
4. 1986.... 0 0 0 0 0 0 0 0 0 0 0 0
5. 1987.... 0 0 0 0 0 0 0 0 0 0 0 0
6. 1988.... 0 0 0 0 0 0 0 0 0 0 0 0
7. 1989.... 0 0 0 0 0 0 0 0 0 0 0 0
8. 1990.... 0 0 0 0 0 0 0 0 0 0 0 0
9. 1991.... 0 0 0 0 0 0 0 0 0 0 0 0
10. 1992.... 0 0 0 0 0 0 0 0 0 0 0 0
11. 1993.... 0 0 0 0 0 0 0 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
12. Totals . 0 0 0 0 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
Total Losses and Loss and Loss Expense Percentage Discount for Time Net Balance Sheet Reserves
Loss Expenses Incurred (Incurred/Premiums Earned) Value of Money (33) After Discount
----------------------------------------------------------------------------- Inter-Company -------------------
(25) (26) (27) (28) (29) (30) (31) (32) Pooling (34) (35)
Direct Direct Loss Participation Losses Loss Expenses
and Assumed Ceded Net and Assumed Ceded Net Loss Expense Percentage Unpaid Unpaid
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior .. X X X X X X X X X X X X X X X X X X 0 0 X X X X 0 0
2. 1984.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
3. 1985.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
4. 1986.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
5. 1987.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
6. 1988.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
7. 1989.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
8. 1990.... 23 0 23 109.5 0.0 109.5 0 0 0.0 0 0
9. 1991.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
10. 1992.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
11. 1993.... 0 0 0 0.0 0.0 0.0 0 0 0.0 0 0
- -------------------------------------------------------------------------------------------------------------------------
12. Totals . X X X X X X X X X X X X X X X X X X X X 0 0 X X X X 0 0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 2A - HOMEOWNERS/FARMOWNERS
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 726 621 701 626 592 565 550 552 545 552 7 0
2. 1984........ 5,870 5,811 5,791 5,762 5,714 5,699 5,689 5,697 5,694 5,703 9 6
3. 1985........ X X X 5,748 5,642 5,638 5,637 5,604 5,595 5,579 5,568 5,565 (3) (14)
4. 1986........ X X X X X X 5,130 4,821 4,759 4,801 4,752 4,725 4,698 4,654 (44) (71)
5. 1987........ X X X X X X X X X 4,314 4,233 4,146 4,014 4,009 4,010 4,013 3 4
6. 1988........ X X X X X X X X X X X X X 4,310 4,204 4,146 4,043 4,049 4,053 4 10
7. 1989........ X X X X X X X X X X X X X X X X 5,708 5,866 5,854 5,798 5,831 33 (23)
8. 1990........ X X X X X X X X X X X X X X X X X X X 5,635 5,449 5,440 5,433 (7) (16)
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 6,823 6,279 6,297 18 (526)
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 7,032 6,433 (599) X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 7,424 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Total (579) (630)
</TABLE>
<TABLE>
SCHEDULE P - PART 2B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 3,900 4,169 4,439 4,435 4,294 4,335 4,304 4,301 4,342 4,356 14 55
2. 1984........ 8,855 9,423 9,689 9,670 9,584 9,579 9,540 9,523 9,542 9,542 0 19
3. 1985........ X X X 9,294 9,772 9,963 9,702 9,606 9,637 9,619 9,601 9,641 40 22
4. 1986........ X X X X X X 11,066 11,321 10,897 10,806 10,824 10,842 10,912 10,879 (33) 37
5. 1987........ X X X X X X X X X 13,053 13,166 12,975 13,061 12,932 12,894 12,903 9 (29)
6. 1988........ X X X X X X X X X X X X X 12,801 12,569 12,126 12,104 12,215 12,241 26 137
7. 1989........ X X X X X X X X X X X X X X X X 11,901 12,092 11,781 11,569 11,586 17 (195)
8. 1990........ X X X X X X X X X X X X X X X X X X X 12,049 11,684 11,793 11,585 (208) (99)
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 12,454 12,934 12,707 (227) 253
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 15,763 15,704 (59) X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 19,726 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Total (421) 200
</TABLE>
<TABLE>
SCHEDULE P - PART 2C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 3,705 3,760 3,874 4,209 4,097 4,042 4,031 4,001 4,059 3,965 (94) (36)
2. 1984........ 3,280 3,966 3,805 3,866 3,924 3,839 3,692 3,638 3,631 3,626 (5) (12)
3. 1985........ X X X 3,409 3,938 4,205 4,118 4,147 3,980 3,993 3,947 3,945 (2) (48)
4. 1986........ X X X X X X 2,583 2,364 2,257 2,257 2,192 2,164 2,091 2,087 (4) (77)
5. 1987........ X X X X X X X X X 3,441 2,871 3,072 2,850 2,900 2,843 2,769 (74) (131)
6. 1988........ X X X X X X X X X X X X X 3,408 3,768 4,283 4,068 3,758 3,680 (78) (388)
7. 1989........ X X X X X X X X X X X X X X X X 3,298 3,644 4,048 3,765 3,691 (74) (357)
8. 1990........ X X X X X X X X X X X X X X X X X X X 4,691 5,342 5,206 5,105 (101) (237)
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 5,418 6,267 6,478 211 1,060
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 9,111 8,752 (359) X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 8,297 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Total (580) (226)
</TABLE>
<TABLE>
SCHEDULE P - PART 2D - WORKERS' COMPENSATION
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 7,549 6,695 6,702 6,436 6,384 6,202 5,994 5,796 5,739 5,866 127 70
2. 1984........ 5,815 5,789 5,981 6,068 6,050 6,168 6,081 5,998 5,960 5,970 10 (28)
3. 1985........ X X X 5,386 5,688 5,849 5,576 5,411 5,313 5,249 5,202 5,294 92 45
4. 1986........ X X X X X X 6,503 6,759 6,681 6,612 6,392 6,516 6,431 6,541 110 25
5. 1987........ X X X X X X X X X 8,105 7,647 7,481 7,052 7,158 7,030 7,017 (13) (141)
6. 1988........ X X X X X X X X X X X X X 8,274 8,233 7,847 7,795 7,828 8,016 188 221
7. 1989........ X X X X X X X X X X X X X X X X 11,346 11,988 12,352 12,778 12,923 145 571
8. 1990........ X X X X X X X X X X X X X X X X X X X 12,316 13,781 14,396 14,733 337 952
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 16,389 17,424 18,146 722 1,757
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 22,023 22,238 215 X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 21,940 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Total 1,933 3,472
</TABLE>
<TABLE>
SCHEDULE P - PART 2E - COMMERCIAL MULTIPLE PERIL
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 1,324 1,519 1,561 1,548 1,337 1,405 1,421 1,302 1,301 1,321 20 19
2. 1984........ 5,393 5,160 5,035 5,068 5,055 4,872 4,878 4,848 4,852 4,853 1 5
3. 1985........ X X X 4,276 3,978 4,088 4,220 4,032 4,212 4,168 4,059 4,066 7 (102)
4. 1986........ X X X X X X 3,567 2,993 3,000 2,898 2,816 2,789 2,900 2,880 (20) 91
5. 1987........ X X X X X X X X X 1,833 1,688 1,620 1,585 1,548 1,531 1,530 (1) (18)
6. 1988........ X X X X X X X X X X X X X 2,347 1,786 1,755 1,742 1,759 1,725 (34) (17)
7. 1989........ X X X X X X X X X X X X X X X X 3,130 3,546 3,446 3,435 3,444 9 (2)
8. 1990........ X X X X X X X X X X X X X X X X X X X 2,389 2,025 2,138 2,138 0 113
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 3,031 2,880 2,887 7 (144)
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 4,090 4,854 764 X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2,911 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Totals 753 (55)
</TABLE>
<PAGE>
SCHEDULE P - PART 2F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE - NONE
SCHEDULE P - PART 2F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE - NONE
<TABLE>
SCHEDULE P - PART 2G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 9,224 6,035 6,030 6,035 6,036 6,041 6,041 6,038 6,034 6,034 0 (4)
2. 1984........ 4,345 2,918 2,918 2,918 2,918 2,918 2,918 2,918 2,918 2,918 0 0
3. 1985........ X X X 3,313 3,308 3,308 3,308 3,308 3,308 3,308 3,308 3,308 0 0
4. 1986........ X X X X X X 4 0 (2) (2) (2) (2) (2) (2) 0 0
5. 1987........ X X X X X X X X X 4 1 (1) (1) (1) (1) (1) 0 0
6. 1988........ X X X X X X X X X X X X X 9 2 1 1 1 1 0 0
7. 1989........ X X X X X X X X X X X X X X X X 497 543 496 470 435 (35) (61)
8. 1990........ X X X X X X X X X X X X X X X X X X X 558 786 805 618 (187) (168)
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 596 904 644 (260) 48
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 1,211 1,966 755 X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 3,107 X X X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
12. Total 273 (185)
</TABLE>
<TABLE>
SCHEDULE P - PART 2H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 7,562 6,802 6,572 6,819 6,742 6,442 6,770 6,599 6,694 6,737 43 138
2. 1984........ 2,782 3,018 3,303 3,513 3,182 3,281 3,285 3,257 3,875 3,636 (239) 379
3. 1985........ X X X 4,057 3,747 3,766 4,017 3,810 3,611 3,637 3,655 3,645 (10) 8
4. 1986........ X X X X X X 3,170 3,714 3,252 3,001 3,114 3,031 3,107 2,995 (112) (36)
5. 1987........ X X X X X X X X X 4,477 4,657 4,026 3,910 3,903 3,937 3,770 (167) (133)
6. 1988........ X X X X X X X X X X X X X 5,155 4,397 4,386 4,077 3,809 3,627 (182) (450)
7. 1989........ X X X X X X X X X X X X X X X X 6,038 5,658 6,257 5,201 5,588 387 (669)
8. 1990........ X X X X X X X X X X X X X X X X X X X 8,080 7,930 8,703 7,940 (763) 10
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 7,785 8,697 8,400 (297) 615
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 10,904 11,232 328 X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 12,028 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Total (1,012) (138)
</TABLE>
<TABLE>
SCHEDULE P - PART 2H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ...... 0 0 0 0 0 0 0 0 0 0 0 0
2. 1984........ 0 0 0 0 0 0 0 0 0 0 0 0
3. 1985........ X X X 0 0 0 0 0 0 0 0 0 0 0
4. 1986........ X X X X X X 0 0 0 0 0 0 0 0 0 0
5. 1987........ X X X X X X X X X 47 42 45 76 66 60 62 2 (4)
6. 1988........ X X X X X X X X X X X X X 237 214 261 314 564 561 (3) 247
7. 1989........ X X X X X X X X X X X X X X X X 262 252 251 282 337 55 86
8. 1990........ X X X X X X X X X X X X X X X X X X X 350 362 471 531 60 169
9. 1991........ X X X X X X X X X X X X X X X X X X X X X X 520 544 774 230 254
10. 1992........ X X X X X X X X X X X X X X X X X X X X X X X X X 791 947 156 X X X X
11. 1993........ X X X X X X X X X X X X X X X X X X X X X X X X X X X X 950 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Total 500 752
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 2I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,
EARTHQUAKE, GLASS, BURGLARY AND THEFT)
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ..... X X X X X X X X X X X X X X X X X X X X X 8,694 * 10,635 8,760 (1,875) 66
2. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 14,630 15,959 1,329 X X X X
3. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 20,472 X X X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
4. Totals (546) 66
</TABLE>
<TABLE>
SCHEDULE P - PART 2J - AUTO PHYSICAL DAMAGE
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ..... X X X X X X X X X X X X X X X X X X X X X 1,234 624 499 (125) (735)
2. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 9,949 9,019 (930) X X X X
3. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 10,276 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
4. Totals (1,055) (735)
</TABLE>
<TABLE>
SCHEDULE P - PART 2K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ..... X X X X X X X X X X X X X X X X X X X X X 857 654 553 (101) (304)
2. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 487 502 15 X X X X
3. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 262 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
4. Totals (86) (304)
</TABLE>
<TABLE>
SCHEDULE P - PART 2L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ..... X X X X X X X X X X X X X X X X X X X X X 459 265 265 0 (194)
2. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 372 369 (3) X X X X
3. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 1 X X X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
4. Totals (3) (194)
</TABLE>
SCHEDULE P - PART 2M - INTERNATIONAL - NONE
<PAGE>
<TABLE>
SCHEDULE P - PART 2N - REINSURANCE A
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988....... X X X X X X X X X X X X 4,114 3,143 2,538 2,474 2,389 2,353 (36) (121)
2. 1989....... X X X X X X X X X X X X X X X 5,355 4,581 6,059 5,354 5,287 (67) (772)
3. 1990....... X X X X X X X X X X X X X X X X X X 2,695 3,610 2,912 2,639 (273) (971)
4. 1991....... X X X X X X X X X X X X X X X X X X X X X 4,459 4,550 4,432 (118) (27)
5. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 12,820 14,202 1,382 X X X X
6. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 4,132 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
7. Totals 888 (1,891)
</TABLE>
<TABLE>
SCHEDULE P - PART 2O - REINSURANCE B
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988....... X X X X X X X X X X X X 3,159 3,588 3,400 3,525 3,477 3,171 (306) (354)
2. 1989....... X X X X X X X X X X X X X X X 1,859 2,040 2,439 2,419 2,359 (60) (80)
3. 1990....... X X X X X X X X X X X X X X X X X X 1,683 2,074 2,293 2,259 (34) 185
4. 1991....... X X X X X X X X X X X X X X X X X X X X X 1,819 2,192 2,144 (48) 325
5. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 1,725 2,067 342 X X X X
6. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,888 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
7. Totals (106) 76
</TABLE>
<TABLE>
SCHEDULE P - PART 2P - REINSURANCE C
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988....... X X X X X X X X X X X X 417 438 45 45 47 16 (31) (29)
2. 1989....... X X X X X X X X X X X X X X X 390 514 328 207 135 (72) (193)
3. 1990....... X X X X X X X X X X X X X X X X X X 252 270 293 180 (113) (90)
4. 1991....... X X X X X X X X X X X X X X X X X X X X X 230 268 74 (194) (156)
5. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 183 184 1 X X X X
6. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 164 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
7. Totals (409) (468)
</TABLE>
<TABLE>
SCHEDULE P - PART 2Q - REINSURANCE D
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ..... 6,877 10,485 12,895 15,560 15,561 18,999 21,186 22,536 23,047 22,974 (73) 438
2. 1984....... 3,439 6,352 8,987 11,418 11,546 12,277 13,765 15,372 16,498 16,441 (57) 1,069
3. 1985....... X X X 6,484 12,620 16,079 15,513 17,105 18,282 19,423 20,981 20,756 (225) 1,333
4. 1986....... X X X X X X 13,335 10,654 10,144 10,332 9,878 10,130 9,751 9,575 (176) (555)
5. 1987....... X X X X X X X X X 11,891 12,135 12,398 12,186 11,638 11,100 10,958 (142) (680)
-----------------------------------------------------------------------------------------------------------------------------------
6. Totals (673) 1,605
</TABLE>
<TABLE>
SCHEDULE P - PART 2R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ..... 634 545 536 475 449 428 394 536 536 533 (3) (3)
2. 1984....... 596 753 577 537 696 778 914 902 675 765 90 (137)
3. 1985....... X X X 816 980 1,070 1,061 1,253 1,215 1,203 1,066 1,065 (1) (138)
4. 1986....... X X X X X X 624 1,003 1,269 1,307 990 1,214 1,171 1,278 107 64
5. 1987....... X X X X X X X X X 1,005 1,150 1,153 939 892 913 782 (131) (110)
6. 1988....... X X X X X X X X X X X X 1,092 912 822 503 466 629 163 126
7. 1989....... X X X X X X X X X X X X X X X 1,279 1,227 1,243 810 711 (99) (532)
8. 1990....... X X X X X X X X X X X X X X X X X X 1,883 1,085 1,256 883 (373) (202)
9. 1991....... X X X X X X X X X X X X X X X X X X X X X 1,931 1,011 659 (352) (1,272)
10. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 1,955 1,096 (859) X X X X
11. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,773 X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
12. Total (1,458) (2,204)
</TABLE>
<TABLE>
SCHEDULE P - PART 2R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
<CAPTION>
(1) Incurred Losses and Allocated Expenses Reported at Year End (000 omitted) Development**
-------------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 One Year Two Year
Incurred
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ..... 0 0 0 0 0 0 0 0 0 0 0 0
2. 1984....... 0 0 0 0 0 0 0 0 0 0 0 0
3. 1985....... X X X 0 0 0 0 0 0 0 0 0 0 0
4. 1986....... X X X X X X 0 0 0 0 0 0 0 0 0 0
5. 1987....... X X X X X X X X X 0 0 0 0 0 0 0 0 0
6. 1988....... X X X X X X X X X X X X 0 0 0 0 0 0 0 0
7. 1989....... X X X X X X X X X X X X X X X 1 0 0 0 0 0 0
8. 1990....... X X X X X X X X X X X X X X X X X X 10 57 58 23 (35) (34)
9. 1991....... X X X X X X X X X X X X X X X X X X X X X 0 0 0 0 0
10. 1992....... X X X X X X X X X X X X X X X X X X X X X X X X 4 0 (4) X X X X
11. 1993....... X X X X X X X X X X X X X X X X X X X X X X X X X X X 0 X X X X X X X X
- ------------------------------------------------------------------------------------------------------------------------------------
12. Totals (39) (34)
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 3A - HOMEOWNERS/FARMOWNERS
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without
Payment Loss Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 254 376 485 497 504 511 518 530 546 0 0
2. 1984......... 4,153 5,364 5,508 5,593 5,656 5,667 5,670 5,681 5,679 5,684 3,917 341
3. 1985......... X X X 4,061 5,185 5,355 5,461 5,533 5,539 5,546 5,558 5,560 3,606 275
4. 1986......... X X X X X X 3,449 4,374 4,516 4,650 4,683 4,697 4,698 4,654 3,067 236
5. 1987......... X X X X X X X X X 2,733 3,778 3,932 3,964 3,986 4,003 4,007 2,286 196
6. 1988......... X X X X X X X X X X X X 2,716 3,769 3,906 3,976 3,995 4,038 2,095 239
7. 1989......... X X X X X X X X X X X X X X X 3,892 5,558 5,656 5,710 5,800 2,737 313
8. 1990......... X X X X X X X X X X X X X X X X X X 3,857 5,064 5,182 5,260 2,564 342
9. 1991......... X X X X X X X X X X X X X X X X X X X X X 4,349 5,693 5,959 3,042 355
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 4,736 6,025 2,796 366
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 4,716 2,258 320
</TABLE>
<TABLE>
SCHEDULE P - PART 3B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without
Payment Loss Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 2,060 2,995 3,480 3,933 4,135 4,233 4,252 4,312 4,327 1 2
2. 1984......... 3,818 6,870 8,127 8,929 9,275 9,389 9,459 9,485 9,537 9,541 5,048 1,405
3. 1985......... X X X 3,836 6,614 7,921 8,722 9,176 9,380 9,464 9,527 9,623 4,755 1,284
4. 1986......... X X X X X X 4,013 7,293 8,999 10,074 10,486 10,628 10,713 10,779 4,814 1,443
5. 1987......... X X X X X X X X X 4,786 8,793 10,838 11,921 12,519 12,652 12,797 5,557 1,705
6. 1988......... X X X X X X X X X X X X 4,625 8,363 10,248 11,381 11,756 12,041 4,829 1,469
7. 1989......... X X X X X X X X X X X X X X X 4,333 8,060 9,932 10,818 11,238 4,439 1,253
8. 1990......... X X X X X X X X X X X X X X X X X X 4,740 8,221 9,406 10,745 4,275 1,180
9. 1991......... X X X X X X X X X X X X X X X X X X X X X 4,681 7,741 10,215 4,572 1,172
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 6,005 10,137 4,617 1,132
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 7,282 3,855 967
</TABLE>
<TABLE>
SCHEDULE P - PART 3C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without
Payment Loss Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 1,298 2,071 2,775 3,178 3,556 3,758 3,786 3,778 3,843 2 0
2. 1984......... 937 1,899 2,615 3,067 3,290 3,437 3,484 3,602 3,621 3,622 1,436 331
3. 1985......... X X X 820 1,860 2,749 3,292 3,527 3,707 3,778 3,877 3,918 1,167 271
4. 1986......... X X X X X X 677 1,086 1,425 1,844 1,961 2,024 2,077 2,079 883 192
5. 1987......... X X X X X X X X X 672 1,401 1,977 2,365 2,553 2,525 2,717 817 181
6. 1988......... X X X X X X X X X X X X 729 1,594 2,548 3,180 3,371 3,460 874 196
7. 1989......... X X X X X X X X X X X X X X X 912 1,658 2,244 2,622 3,195 983 226
8. 1990......... X X X X X X X X X X X X X X X X X X 1,190 2,560 3,022 4,471 1,161 227
9. 1991......... X X X X X X X X X X X X X X X X X X X X X 1,654 2,250 3,523 1,291 289
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 1,909 4,181 1,434 285
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 2,092 1,086 183
</TABLE>
<TABLE>
SCHEDULE P - PART 3D - WORKERS' COMPENSATION
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without
Payment Loss Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 1,279 2,189 2,734 3,136 3,520 3,801 4,058 3,856 3,541 26 3
2. 1984......... 1,785 3,301 4,196 4,647 4,914 5,115 5,244 5,348 5,262 5,257 4,269 278
3. 1985......... X X X 1,734 3,163 4,007 4,480 4,660 4,857 4,945 4,919 4,870 4,222 284
4. 1986......... X X X X X X 2,449 3,929 4,662 5,156 5,483 5,663 5,693 5,530 4,550 266
5. 1987......... X X X X X X X X X 3,157 4,614 5,302 5,765 6,065 6,062 5,881 4,719 268
6. 1988......... X X X X X X X X X X X X 3,369 5,198 6,234 6,802 6,975 6,840 5,055 291
7. 1989......... X X X X X X X X X X X X X X X 4,493 8,014 9,695 10,185 10,151 5,822 412
8. 1990......... X X X X X X X X X X X X X X X X X X 5,104 8,671 9,607 9,732 6,384 431
9. 1991......... X X X X X X X X X X X X X X X X X X X X X 7,735 10,292 10,352 7,045 517
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 10,712 11,968 6,994 540
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 5,453 3,713 237
</TABLE>
<TABLE>
SCHEDULE P - PART 3E - COMMERCIAL MULTIPLE PERIL
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without
Payment Loss Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 302 615 783 1,039 1,133 1,238 1,275 1,270 1,279 0 0
2. 1984......... 2,989 4,189 4,342 4,673 4,655 4,710 4,785 4,802 4,811 4,821 1,143 179
3. 1985......... X X X 2,208 3,300 3,443 3,654 3,788 3,844 3,905 4,043 4,047 1,027 179
4. 1986......... X X X X X X 1,824 2,542 2,509 2,678 2,758 2,742 2,821 2,861 619 89
5. 1987......... X X X X X X X X X 792 1,394 1,481 1,494 1,514 1,508 1,515 272 30
6. 1988......... X X X X X X X X X X X X 1,025 1,640 1,697 1,712 1,721 1,721 221 29
7. 1989......... X X X X X X X X X X X X X X X 1,531 3,184 3,302 3,356 3,432 264 54
8. 1990......... X X X X X X X X X X X X X X X X X X 1,102 1,804 1,906 1,953 252 55
9. 1991......... X X X X X X X X X X X X X X X X X X X X X 1,481 2,235 2,574 309 69
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 2,045 3,699 366 72
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,932 232 41
</TABLE>
<PAGE>
SCHEDULE P - PART 3F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE - NONE
SCHEDULE P - PART 3F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE - NONE
<TABLE>
SCHEDULE P - PART 3G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without Loss
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 6,009 6,014 6,021 6,023 6,032 6,033 6,033 6,032 6,034 X X X X X X X X
2. 1984......... 591 2,918 2,918 2,918 2,918 2,918 2,918 2,918 2,918 2,918 X X X X X X X X
3. 1985......... X X X 3,308 3,308 3,308 3,308 3,308 3,308 3,308 3,308 3,308 X X X X X X X X
4. 1986......... X X X X X X X 0 0 (2) (2) (2) (2) (2) (2) X X X X X X X X
5. 1987......... X X X X X X X X X X 0 0 (1) (1) (1) (1) (1) X X X X X X X X
6. 1988......... X X X X X X X X X X X X X 1 1 1 1 1 1 X X X X X X X X
7. 1989......... X X X X X X X X X X X X X X X X 30 155 255 314 352 X X X X X X X X
8. 1990......... X X X X X X X X X X X X X X X X X X X 58 260 380 440 X X X X X X X X
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X 64 280 413 X X X X X X X X
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X 180 955 X X X X X X X X
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 421 X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 3H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without Loss
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 2,096 2,682 3,295 3,783 4,140 4,447 4,645 4,479 4,885 44 1
2. 1984......... 354 1,029 1,691 2,235 2,599 2,811 3,065 3,124 3,138 3,369 988 438
3. 1985......... X X X 615 1,177 1,754 2,220 2,651 3,191 3,343 3,482 3,460 800 355
4. 1986......... X X X X X X X 241 772 1,193 1,876 2,185 2,414 2,372 2,721 731 312
5. 1987......... X X X X X X X X X X 315 1,092 1,910 2,925 3,262 3,270 3,393 758 339
6. 1988......... X X X X X X X X X X X X X 427 1,226 1,943 2,529 2,486 2,819 867 511
7. 1989......... X X X X X X X X X X X X X X X X 563 1,320 2,701 3,034 3,877 1,013 815
8. 1990......... X X X X X X X X X X X X X X X X X X X 732 2,124 2,503 3,951 1,157 879
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X 960 368 2,268 1,253 665
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X 956 2,462 1,220 638
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,800 897 390
</TABLE>
<TABLE>
SCHEDULE P - PART 3H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without Loss
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 0 0 0 0 0 0 0 0 0 0 0
2. 1984......... 0 0 0 0 0 0 0 0 0 0 0 0
3. 1985......... X X X 0 0 0 0 0 0 0 0 0 0 0
4. 1986......... X X X X X X X 0 0 0 0 0 0 0 0 0 0
5. 1987......... X X X X X X X X X X 5 19 24 33 36 30 37 0 0
6. 1988......... X X X X X X X X X X X X X 16 104 207 234 413 473 21 4
7. 1989......... X X X X X X X X X X X X X X X X 24 99 175 209 239 30 1
8. 1990......... X X X X X X X X X X X X X X X X X X X 37 163 286 391 58 1
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X 64 176 441 80 2
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X 122 413 65 9
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 132 14 5
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 3I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,
EARTHQUAKE, GLASS, BURGLARY AND THEFT)
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X 000 5,611 6,819 X X X X X X X X
2. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 6,560 11,985 X X X X X X X X
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 11,402 X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 3J - AUTO PHYSICAL DAMAGE
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X 000 524 431 1,617 155
2. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 8,279 8,961 8,099 565
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 8,444 5,804 491
</TABLE>
<TABLE>
SCHEDULE P - PART 3K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X 000 189 248 X X X X X X X X
2. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 78 370 X X X X X X X X
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X (24) X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 3L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 omitted) (12) (13)
------------------------------------------------------------------------------------------ Number of Number of
Years in Which Claims Claims
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Closed Closed
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X 000 (1) 265 X X X X X X X X
2. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 28 369 X X X X X X X X
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 1 X X X X X X X X
</TABLE>
SCHEDULE P - PART 3M - INTERNATIONAL - NONE
<PAGE>
<TABLE>
SCHEDULE P - PART 3N - REINSURANCE A
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 Omitted) (12) (13)
------------------------------------------------------------------------------------------- Number of Number of
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Claims Claims
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Closed Closed
Incurred With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988......... X X X X X X X X X X X X 627 1,931 2,015 2,110 2,205 2,292 X X X X X X X X
2. 1989......... X X X X X X X X X X X X X X X 2,621 3,265 4,608 4,879 5,048 X X X X X X X X
3. 1990......... X X X X X X X X X X X X X X X X X X 1,211 2,143 2,270 2,514 X X X X X X X X
4. 1991......... X X X X X X X X X X X X X X X X X X X X X 1,824 3,646 3,976 X X X X X X X X
5. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 5,782 11,165 X X X X X X X X
6. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,428 X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 3O - REINSURANCE B
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 Omitted) (12) (13)
------------------------------------------------------------------------------------------- Number of Number of
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Claims Claims
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Closed Closed
Incurred With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988......... X X X X X X X X X X X X 15 386 777 1,299 1,506 2,127 X X X X X X X X
2. 1989......... X X X X X X X X X X X X X X X 32 213 585 852 1,128 X X X X X X X X
3. 1990......... X X X X X X X X X X X X X X X X X X 42 375 703 996 X X X X X X X X
4. 1991......... X X X X X X X X X X X X X X X X X X X X X 48 203 469 X X X X X X X X
5. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 43 234 X X X X X X X X
6. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 35 X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 3P - REINSURANCE C
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 Omitted) (12) (13)
------------------------------------------------------------------------------------------- Number of Number of
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Claims Claims
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Closed Closed
Incurred With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988......... X X X X X X X X X X X X 0 0 0 0 0 0 X X X X X X X X
2. 1989......... X X X X X X X X X X X X X X X 3 7 22 96 75 X X X X X X X X
3. 1990......... X X X X X X X X X X X X X X X X X X 5 23 54 56 X X X X X X X X
4. 1991......... X X X X X X X X X X X X X X X X X X X X X 0 (1) 9 X X X X X X X X
5. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 39 27 X X X X X X X X
6. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 0 X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 3Q - REINSURANCE D
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 Omitted) (12) (13)
------------------------------------------------------------------------------------------- Number of Number of
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Claims Claims
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Closed Closed
Incurred With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 3,747 6,189 8,047 7,918 12,296 13,674 15,053 15,907 20,731 X X X X X X X X
2. 1984......... 993 3,135 4,979 6,237 5,840 7,059 8,219 9,479 10,434 15,406 X X X X X X X X
3. 1985......... X X X 825 4,332 5,040 5,482 6,911 9,979 11,790 13,501 19,744 X X X X X X X X
4. 1986......... X X X X X X 741 2,365 2,251 3,330 3,931 4,867 5,627 8,618 X X X X X X X X
5. 1987......... X X X X X X X X X 1,412 3,840 4,050 5,123 5,984 6,634 9,576 X X X X X X X X
</TABLE>
<TABLE>
SCHEDULE P - PART 3R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 Omitted) (12) (13)
------------------------------------------------------------------------------------------- Number of Number of
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Claims Claims
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Closed Closed
Incurred With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 360 660 1,058 1,319 1,474 1,702 1,809 1,803 1,825 0 0
2. 1984......... 28 83 157 276 391 491 607 618 600 605 87 56
3. 1985......... X X X 74 164 403 575 657 840 927 975 993 75 32
4. 1986......... X X X X X X 25 67 197 391 774 865 1,003 1,041 61 27
5. 1987......... X X X X X X X X X 22 147 310 567 644 638 679 72 26
6. 1988......... X X X X X X X X X X X X 37 66 113 189 135 173 64 35
7. 1989......... X X X X X X X X X X X X X X X 29 146 252 120 265 66 48
8. 1990......... X X X X X X X X X X X X X X X X X X 24 75 181 283 61 39
9. 1991......... X X X X X X X X X X X X X X X X X X X X X 35 (425) (274) 51 39
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 85 162 77 19
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 69 58 14
</TABLE>
<TABLE>
SCHEDULE P - PART 3R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
<CAPTION>
(1) Cumulative Paid Losses and Allocated Expenses at Year End (000 Omitted) (12) (13)
------------------------------------------------------------------------------------------- Number of Number of
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Claims Claims
Losses Were 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 Closed Closed
Incurred With Loss Without Loss
Payment Payment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 000 0 0 0 0 0 0 0 0 0 0 0
2. 1984......... 0 0 0 0 0 0 0 0 0 0 0 0
3. 1985......... X X X 0 0 0 0 0 0 0 0 0 0 0
4. 1986......... X X X X X X 0 0 0 0 0 0 0 0 0 0
5. 1987......... X X X X X X X X X 0 0 0 0 0 0 0 0 0
6. 1988......... X X X X X X X X X X X X 0 0 0 0 0 0 0 0
7. 1989......... X X X X X X X X X X X X X X X 0 0 0 0 0 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X 0 0 (16) 23 0 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X 0 0 0 0 0
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X 0 0 0 0
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X 0 0 0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 4A - HOMEOWNERS/FARMOWNERS
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 15 0 0 0 0 0 0 0 0 0
2. 1984......... 246 19 0 0 0 0 0 0 0 0
3. 1985......... X X X X 322 20 6 0 0 0 0 0 0
4. 1986......... X X X X X X X X 458 14 14 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 220 17 41 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 327 47 26 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 649 40 17 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 558 23 10 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 771 45 42
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 919 47
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 934
</TABLE>
<TABLE>
SCHEDULE P - PART 4B - PRIVATE PASSENGER AUTO LIABILITY/MEDICAL
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 202 60 12 7 2 0 0 0 0 0
2. 1984......... 697 176 61 5 0 0 0 0 0 0
3. 1985......... X X X X 962 238 145 12 4 5 0 0 0
4. 1986......... X X X X X X X X 1,088 386 169 8 4 3 0 0
5. 1987......... X X X X X X X X X X X X 1,261 414 198 43 12 0 0
6. 1988......... X X X X X X X X X X X X X X X X 1,545 636 155 16 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 1,498 367 171 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 1,671 317 129 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,778 534 129
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2,414 820
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2,417
</TABLE>
<TABLE>
SCHEDULE P - PART 4C - COMMERCIAL AUTO/TRUCK LIABILITY/MEDICAL
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 73 16 0 0 0 0 0 0 0 0
2. 1984......... 303 93 43 0 0 0 0 0 0 0
3. 1985......... X X X X 579 158 118 0 0 0 0 0 0
4. 1986......... X X X X X X X X 797 293 119 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 1,106 245 154 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 874 240 141 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 701 239 179 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 942 283 174 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,142 420 270
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,833 375
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2,015
</TABLE>
<TABLE>
SCHEDULE P - PART 4D - WORKERS' COMPENSATION
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 117 76 0 0 0 0 0 0 0 189
2. 1984......... 236 121 45 0 0 0 0 0 0 33
3. 1985......... X X X X 676 144 59 0 0 0 0 0 36
4. 1986......... X X X X X X X X 989 157 69 0 0 0 0 111
5. 1987......... X X X X X X X X X X X X 1,190 185 81 0 0 0 161
6. 1988......... X X X X X X X X X X X X X X X X 1,392 243 107 0 0 155
7. 1989......... X X X X X X X X X X X X X X X X X X X X 1,593 331 110 0 218
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 1,406 315 160 444
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,870 410 1,145
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2,727 2,230
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 6,321
</TABLE>
<TABLE>
SCHEDULE P - PART 4E - COMMERCIAL MULTIPLE PERIL
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 57 36 0 0 0 0 0 0 0 0
2. 1984......... 296 46 10 0 0 0 0 0 0 0
3. 1985......... X X X X 454 31 5 0 0 0 0 0 0
4. 1986......... X X X X X X X X 501 11 2 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 93 4 8 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 222 16 11 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 406 26 0 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 407 6 1 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 222 22 2
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 225 29
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 204
</TABLE>
<PAGE>
SCHEDULE P - PART 4F - SECTION 1 - MEDICAL MALPRACTICE - OCCURRENCE - NONE
SCHEDULE P - PART 4F - SECTION 2 - MEDICAL MALPRACTICE - CLAIMS-MADE - NONE
<TABLE>
SCHEDULE P - PART 4G - SPECIAL LIABILITY (OCEAN MARINE, AIRCRAFT
(ALL PERILS), BOILER AND MACHINERY)
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 3,332 0 0 0 0 0 0 0 0 0
2. 1984......... 2,244 0 0 0 0 0 0 0 0 0
3. 1985......... X X X X 5 0 0 0 0 0 0 0 0
4. 1986......... X X X X X X X X 4 0 0 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 0 0 0 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 3 0 0 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 396 259 153 96 24
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 348 235 195 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 294 298 0
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 497 171
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,395
</TABLE>
<TABLE>
SCHEDULE P - PART 4H - SECTION 1 - OTHER LIABILITY - OCCURRENCE
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 650 196 0 0 0 0 0 0 0 0
2. 1984......... 875 360 175 0 0 0 0 0 0 0
3. 1985......... X X X X 1,393 561 198 0 0 0 0 0 0
4. 1986......... X X X X X X X X 1,265 825 283 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 2,028 1,153 407 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 2,233 1,103 671 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 2,903 1,224 696 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 2,918 1,235 1,020 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 3,243 2,106 965
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 4,371 2,353
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 4,702
</TABLE>
<TABLE>
SCHEDULE P - PART 4H - SECTION 2 - OTHER LIABILITY - CLAIMS-MADE
<CAPTION>
(1) BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
--------------------------------------------------------------------------------------------------------------
Years in Which
Losses Were (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 0 0 0 0 0 0 0 0 0 0
2. 1984......... 0 0 0 0 0 0 0 0 0 0
3. 1985......... X X X X 0 0 0 0 0 0 0 0 0
4. 1986......... X X X X X X X X 0 0 0 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 13 0 0 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 41 0 0 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 52 0 0 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 54 0 0 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 57 0 0
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 78 0
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 83
</TABLE>
<PAGE>
<TABLE>
SCHEDULE P - PART 4I - SPECIAL PROPERTY (FIRE, ALLIED LINES, INLAND MARINE,
EARTHQUAKE, GLASS, BURGLARY AND THEFT)
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 4,280 1,926 519
2 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 4,735 1,340
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 5,675
</TABLE>
<TABLE>
SCHEDULE P - PART 4J - AUTO PHYSICAL DAMAGE
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 227 0 0
2 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 416 0
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 370
</TABLE>
<TABLE>
SCHEDULE P - PART 4K - FIDELITY, SURETY, FINANCIAL GUARANTY, MORTGAGE GUARANTY
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 399 106 36
2 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 294 68
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 270
</TABLE>
<TABLE>
SCHEDULE P - PART 4L - OTHER (INCLUDING CREDIT, ACCIDENT AND HEALTH)
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1 0 0
2 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 0 0
3. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 0
</TABLE>
SCHEDULE P - PART 4M - INTERNATIONAL - NONE
<PAGE>
<TABLE>
SCHEDULE P - PART 4N - REINSURANCE A
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
1. 1988......... X X X X X X X X X X X X X X X X 2,323 562 288 228 125 33
2. 1989......... X X X X X X X X X X X X X X X X X X X X 1,751 569 461 194 108
3. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 1,431 1,017 437 152
4. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,114 507 187
5. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2,629 889
6. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,140
</TABLE>
<TABLE>
SCHEDULE P - PART 4O - REINSURANCE B
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988......... X X X X X X X X X X X X X X X X 1,505 2,274 1,682 1,423 1,271 771
2. 1989......... X X X X X X X X X X X X X X X X X X X X 1,373 1,184 1,079 991 765
3. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 1,257 1,149 1,025 797
4. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,536 1,549 1,231
5. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,431 1,343
6. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,488
</TABLE>
<TABLE>
SCHEDULE P - PART 4P - REINSURANCE C
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. 1988......... X X X X X X X X X X X X X X X X 407 436 43 43 45 14
2. 1989......... X X X X X X X X X X X X X X X X X X X X 326 340 211 91 43
3. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 216 182 143 48
4. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 230 262 64
5. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 145 157
6. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 154
</TABLE>
<TABLE>
SCHEDULE P - PART 4Q - REINSURANCE D
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 834 506 695 1,053 1,608 1,959 2,641 2,978 2,806 1,028
2. 1984......... 327 955 748 1,761 1,946 1,722 2,038 2,087 2,404 476
3. 1985......... X X X X 4,096 4,860 6,642 5,558 5,202 3,322 3,083 3,357 628
4. 1986......... X X X X X X X X 11,061 6,346 5,700 5,642 4,435 3,891 3,072 706
5. 1987......... X X X X X X X X X X X X 8,579 6,168 6,710 5,483 4,604 3,485 850
</TABLE>
<TABLE>
SCHEDULE P - PART 4R - SECTION 1 - PRODUCTS LIABILITY - OCCURRENCE
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 541 318 0 0 0 0 0 0 0 0
2. 1984......... 270 260 181 0 0 0 0 0 0 0
3. 1985......... X X X X 471 182 55 0 0 0 0 0 0
4. 1986......... X X X X X X X X 464 226 94 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 514 344 134 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 680 364 378 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 957 690 331 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 1,644 587 401 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,541 827 307
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,716 749
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 1,497
</TABLE>
<TABLE>
SCHEDULE P - PART 4R - SECTION 2 - PRODUCTS LIABILITY - CLAIMS-MADE
<CAPTION>
BULK AND INCURRED BUT NOT REPORTED RESERVES ON LOSSES AND ALLOCATED EXPENSES AT YEAR END (000 OMITTED)
(1) ----------------------------------------------------------------------------------------------------------------
Years in Which (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
Losses Were
Incurred 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Prior ....... 0 0 0 0 0 0 0 0 0 0
2. 1984......... 0 0 0 0 0 0 0 0 0 0
3. 1985......... X X X X 0 0 0 0 0 0 0 0 0
4. 1986......... X X X X X X X X 0 0 0 0 0 0 0 0
5. 1987......... X X X X X X X X X X X X 0 0 0 0 0 0 0
6. 1988......... X X X X X X X X X X X X X X X X 0 0 0 0 0 0
7. 1989......... X X X X X X X X X X X X X X X X X X X X 1 0 0 0 0
8. 1990......... X X X X X X X X X X X X X X X X X X X X X X X X 1 0 0 0
9. 1991......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X 0 0 0
10. 1992......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 0 0
11. 1993......... X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 0
</TABLE>
<PAGE>
SCHEDULE P INTERROGATORIES
(000 Omitted)
1. Computation of excess statutory reserves over statement reserves. See
Instructions for explanation and formulas.
(a) Auto Liability (private passenger and commercial)
1993 $0 ( 75.0%) 1992 $0 ( 75.0%)
------------------------------ --------------------------------
1991 $0 ( 75.0%) Total $0
------------------------------ ----------------------------
(b) Other Liability and Products Liability
1993 $0 ( 60.0%) 1992 $0 ( 60.0%)
------------------------------- -------------------------------
1991 $0 ( 60.0%) Total $0
------------------------------- ----------------------------
(c) Medical Malpractice
1993 $0 ( 60.0%) 1992 $0 ( 60.0%)
------------------------------- -------------------------------
1991 $0 ( 60.0%) Total $0
------------------------------- ----------------------------
(d) Workers' Compensation
1993 $0 ( 75.0%) 1992 $0 ( 75.0%)
------------------------------- -------------------------------
1991 $0 ( 75.0%) Total $0
------------------------------- ----------------------------
(e) Credit Total $0
---------------------------
(f) All Lines Total (Report here and Page 3) Total NONE
---------------------------
2. What is the extended loss and expense reserve - direct and assumed - for the
following classes? An example of an extended loss and expense reserve is
the actuarial reserve for the free-tail coverage arising upon death, dis-
ability or retirement in most medical malpractice policies. Such a liability
is to be reported here even if it was not reported elsewhere in Schedule P,
but otherwise reported as a liability item on page 3. Show the full reserve
amount, not just the change during the current year.
------------------------------------------------------------------------------
| Year in which premiums | 1 | 2 | 3 |
| were earned and losses | Medical | Other | Products |
| were incurred | Malpractice | Liability | Liability|
|------------------------------------------------------|------------|----------|
| (a) 1987 | 0 | 0 | 0 |
| (b) 1988 | 0 | 0 | 0 |
| (c) 1989 | 0 | 0 | 0 |
| (d) 1990 | 0 | 0 | 0 |
| (e) 1991 | 0 | 0 | 0 |
| (f) 1992 | 0 | 0 | 0 |
| (g) 1993 | 0 | 0 | 0 |
|---------------------------------------|--------------|------------|----------|
| (h) Totals | 0 | 0 | 0 |
------------------------------------------------------------------------------
3. The term "Loss expense" includes all payments for legal expenses, including
attorney's and witness fees and court costs, salaries and expenses of
investigators, adjustors and field men, rents, stationery, telegraph and
telephone charges, postage, salaries and expenses of office employees, home
office expenses and all other payments under or on account of such injuries,
whether the payments are allocated to specific claims or are unallocated.
Are they so reported in this statement? Answer: Yes [ X ] No [ ]
4. The unallocated loss expense payments paid during the most recent calendar
year should be distributed to the various years in which losses were
incurred as follows: (1) 45% to the most recent year, (2) 5% to the next
most recent year, and (3) the balance to all years, including the most
recent, in proportion to the amount of loss payments paid for each year
during the most recent calendar year. If the distribution in (1) or (2)
produces an accumulated distribution to such year in excess of 10% of
the premiums earned for such year, disregarding all distributions made
under (3), such accumulated distribution should be limited to 10% of
premiums earned and the balance distributed in accordance with (3). Are
they so reported in this Statement? Answer: Yes [ X ] No [ ]
5. Do any lines in Schedule P include reserves which are reported gross of any
discount to present value of future payments, but are reported net of such
discounts on page 10? Yes [ ] No [ X ]
If yes, proper reporting must be made in the Notes to Financial
Statements, as specified in the Instructions. Also, the discounts must be
reported in Schedule P - Part 1, Columns 31 and 32.
Schedule P must be completed gross of non-tabular discounting. Work papers
relating to discount calculations must be available for examination upon
request.
Discounting is allowed only if expressly permitted by the state insurance
department to which this Annual Statment is being filed.
6. What were the net premiums in force at the end of the year for:
(in thousands of dollars)
(a) Fidelity $310
(b) Surety $2,131
7. Claim count information is reported (check one) (a) per claim
If not the same in all years, explain in ---------
Question 8. (b) per claimant X
---------
8. The information provided in Schedule P will be used by many persons to
estimate the adequacy of the current loss and expense reserves, among other
things. Are there any especially significant events, coverage, retention
or accounting changes which have occurred which must be considered when
making such analyses (An extended statement may be attached)? Yes. See
the following Overflow Page for Write-Ins. .................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
.............................................................................
<PAGE>
OVERFLOW PAGE FOR WRITE-INS
Schedule P Interrogatories - Question #8
Accounting For National Workers' Compensation Reinsurance Pool
- ---------------------------------------------------------------
The Company's property and casualty insurance subsidiaries have historically
recorded amounts assumed from the National Workers' Compensation Reinsurance
Pool (the "Pool") on a net basis. Under this approach, outstanding losses
were recorded as a contra asset, which was reported on Page 2, Line 9.1, and
incurred losses were recorded as paid losses. Effective December 31, 1993,
the property and casualty insurance subsidiaries began recording outstanding
losses as a liability. As a result, the Company's outstanding losses increased
$11,436,543. Incurred losses were not affected as negative paid amounts were
recorded to offset this increase in accident year reserves.
Changes in Reinsurance Subsidiary's Quota Share Agreement
- ----------------------------------------------------------
Effective January 1, 1993, the reinsurance subsidiary's quota share agreement
with Employers Mutual Casualty Company was amended so that losses in excess of
$1,000,000 per event are retained by Employers Mutual. The reinsurance
subsidiary pays an annual override commission to Employers Mutual for this
additional protection. In conjunction with this change in the quota share
agreement, the reinsurance subsidiary terminated its catastrophe reinsurance
contracts with Employers Mutual and other nonaffiliated reinsurers.
Commutation of Assumed Reinsurance
- ----------------------------------
During 1993, Employers Mutual Casualty Company commuted two reinsurance
contracts which were ceded to the reinsurance subsidiary under the quota
share agreement. Effective June 30, 1993, accident year reserves decreased
$19,783,037 and paid losses totaling $17,806,179 were recorded, reflecting a
reserve discount of $1,976,858. Effective November 1, 1993, accident year
reserves decreased $2,135,418 and paid losses totaling $2,135,418 were
recorded, reflecting no reserve discount.
