<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994
( ) TRANSITION REPORT, PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7801
ORION CAPITAL CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-6069054
- - --------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
600 Fifth Avenue
New York, New York 10020 - 2302
- - ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 332-8080
--------------
Former name, former address and former fiscal year if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
---- ----
14,051,687 shares of Common Stock, $1.00 par value, of the registrant
were outstanding on October 28, 1994.
Page 1 of 27
Exhibit Index Appears at Page 24
<PAGE>
ORION CAPITAL CORPORATION
FORM 10-Q INDEX
For the Quarter Ended September 30, 1994
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet at September 30, 1994
(Unaudited) and December 31, 1993 .................... 3 - 4
Consolidated Statement of Earnings for the three
and nine-month periods ended September 30, 1994
and 1993 (Unaudited) ................................. 5
Consolidated Statement of Stockholders' Equity for
the nine-month periods ended September 30, 1994
and 1993 (Unaudited), and for the year ended
December 31, 1993 .................................... 6
Consolidated Statement of Cash Flows for the nine-month
periods ended September 30, 1994 and 1993 (Unaudited). 7 - 8
Notes to Consolidated Financial Statements (Unaudited).. 9 - 12
Independent Accountants' Review Report ................. 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............. 14 - 21
PART II. OTHER INFORMATION ................................ 22
Page 2
<PAGE>
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
(000s omitted)
September 30, 1994 December 31,
(Unaudited) 1993
------------------ ------------
<S> <C> <C>
Investments:
Fixed maturities at amortized cost
(market $370,218 - 1994 and $402,149 -
1993) .................................. $ 372,764 $ 384,402
Fixed maturities at market (amortized
cost $551,157 - 1994 and $517,716 - 1993) 526,070 548,336
Common stocks at market (cost $119,157 -
1994 and $111,325 - 1993) .............. 145,395 139,022
Non-redeemable preferred stocks at
market (cost $135,156 - 1994 and
$98,986 - 1993) ........................ 131,609 103,621
Other long-term investments .............. 52,570 50,682
Short-term investments ................... 111,554 96,473
---------- ----------
Total investments ..................... 1,339,962 1,322,536
Cash ....................................... 5,328 6,433
Accrued investment income .................. 15,287 17,623
Investments in and advances to affiliates .. 108,612 111,459
Accounts and notes receivable .............. 131,190 111,539
Reinsurance recoverables and prepaid
reinsurance .............................. 352,053 393,309
Deferred policy acquisition costs .......... 69,247 57,522
Property and equipment ..................... 24,701 23,596
Excess of cost over fair value of net
assets acquired .......................... 29,708 30,587
Deferred federal income taxes .............. 36,926 18,891
Other assets ............................... 25,917 23,959
---------- ----------
Total assets .......................... $2,138,931 $2,117,454
========== ==========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 3
<PAGE>
<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(000s omitted - except for share data)
September 30, 1994 December 31,
(Unaudited) 1993
------------------ ------------
<S> <C> <C>
Liabilities:
Policy liabilities -
Losses ................................... $ 953,913 $ 937,775
Loss adjustment expenses ................. 221,483 202,628
Unearned premiums ........................ 265,955 259,359
Policyholders' dividends ................. 12,651 12,523
---------- ----------
Total policy liabilities ............... 1,454,002 1,412,285
Federal income taxes payable ............... 16,622 19,294
Notes payable .............................. 154,380 160,372
Other liabilities .......................... 141,297 131,308
---------- ----------
Total liabilities ...................... 1,766,301 1,723,259
---------- ----------
Contingencies (Note E)
Stockholders' equity:
Preferred stock, authorized 5,000,000
shares - issued and outstanding - none
Common stock, $1 par value; authorized
30,000,000 shares; issued 15,337,650
shares ................................... 15,338 15,338
Capital surplus ............................ 147,976 148,167
Net unrealized investment gains, net of
federal income taxes (benefit) of
$(6,487) - 1994 and $18,718 - 1993 ....... 2,758 49,566
Net unrealized foreign exchange translation
losses, net of federal income tax benefits
of $220 - 1994 and $394 - 1993 ........... (3,341) (3,665)
Retained earnings .......................... 230,609 198,491
Treasury stock, at cost (1,126,813 shares -
1994 and 965,442 shares - 1993) .......... (17,495) (12,182)
Deferred compensation on restricted stock .. (3,215) (1,520)
---------- ----------
Total stockholders' equity ............. 372,630 394,195
---------- ----------
Total liabilities and stockholders'
equity ............................... $2,138,931 $2,117,454
========== ==========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 4
<PAGE>
<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(000s omitted - except for per common share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Premiums earned .............................. $180,703 $151,641 $510,241 $458,317
Net investment income ........................ 22,550 22,218 63,919 65,065
Realized investment gains .................... 1,197 1,131 1,908 7,698
Other income ................................. 341 428 1,058 1,195
-------- -------- -------- --------
204,791 175,418 577,126 532,275
-------- -------- -------- --------
Expenses:
Losses incurred .............................. 101,318 89,267 293,466 273,024
Loss adjustment expenses ..................... 27,874 22,765 77,044 68,922
Amortization of deferred policy acquisition
costs ...................................... 44,269 35,368 123,147 107,150
Other insurance expenses ..................... 5,576 5,164 14,399 13,285
Dividends to policyholders ................... 3,096 3,214 9,967 10,062
Interest expense ............................. 3,439 3,354 10,204 9,708
Other expenses ............................... 1,452 2,079 5,011 5,365
-------- -------- -------- --------
187,024 161,211 533,238 487,516
-------- -------- -------- --------
Earnings before equity in earnings of
affiliates, federal income taxes and
cumulative effect of adoption of new
accounting principles ........................ 17,767 14,207 43,888 44,759
Equity in earnings of affiliates ............... 2,577 2,805 8,715 8,452
-------- -------- -------- --------
Earnings before federal income taxes and
cumulative effect of adoption of new
accounting principles ........................ 20,344 17,012 52,603 53,211
Federal income taxes ........................... 5,015 4,144 12,467 12,108
-------- -------- -------- --------
Earnings before cumulative effect of adoption
of new accounting principles ................. 15,329 12,868 40,136 41,103
Cumulative effect of adoption of new accounting
principles ................................... - - - 11,825
-------- -------- -------- --------
Net earnings ................................... $ 15,329 $ 12,868 $ 40,136 $ 52,928
======== ======== ======== ========
Earnings per common share before cumulative
effect of adoption of new accounting
principles ................................... $ 1.07 $ .88 $ 2.78 $ 2.79
Cumulative effect of adoption of new
accounting principles ........................ - - - .81
-------- -------- -------- --------
Net earnings per common share .............. $ 1.07 $ .88 $ 2.78 $ 3.60
======== ======== ======== ========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 5
<PAGE>
<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(000s omitted)
Nine Months Ended
September 30, Year Ended
(Unaudited) December 31,
------------------- ------------
1994 1993 1993
---- ---- ----
<S> <C> <C> <C>
Convertible exchangeable preferred stock:
Balance, beginning of period .............. $ - $ 28,524 $ 28,524
Conversion of preferred stock ............. - (28,524) (28,524)
-------- -------- --------
Balance, end of period .................... $ - $ - $ -
======== ======== ========
Common stock:
Balance, beginning of period .............. $ 15,338 $ 11,110 $ 11,110
Conversion of preferred stock ............. - 1,139 1,139
Exercise of stock options and issuance of
restricted stock ........................ - 11 24
Stock issued in 5-for-4 stock split ....... - 3,065 3,065
-------- -------- --------
Balance, end of period .................... $ 15,338 $ 15,325 $ 15,338
======== ======== ========
Capital surplus:
Balance, beginning of period .............. $148,167 $124,754 $124,754
Redemption and conversions of preferred
stock ................................... - 26,072 26,072
Exercise of stock options and issuance
of restricted stock ..................... (191) 266 406
Stock issued in 5-for-4 stock split ....... - (3,065) (3,065)
-------- -------- --------
Balance, end of period .................... $147,976 $148,027 $148,167
======== ======== ========
Net unrealized investment gains:
Balance, beginning of period .............. $ 49,566 $ 18,815 $ 18,815
Cumulative effect of adoption of new
accounting principle, net of taxes
of $11,157 .............................. - - 20,720
Change in unrealized investment gains,
net of taxes ............................ (46,808) 16,179 10,031
-------- -------- --------
Balance, end of period .................... $ 2,758 $ 34,994 $ 49,566
======== ======== ========
Net unrealized foreign exchange translation
losses:
Balance, beginning of period .............. $ (3,665) $ (2,918) $ (2,918)
Change in unrealized foreign exchange
translation losses, net of taxes ........ 324 (567) (747)
-------- -------- --------
Balance, end of period .................... $ (3,341) $ (3,485) $ (3,665)
======== ======== ========
Retained earnings:
Balance, beginning of period .............. $198,491 $139,947 $139,947
Net earnings .............................. 40,136 52,928 68,813
Dividends declared ........................ (8,018) (7,679) (10,269)
-------- -------- --------
Balance, end of period .................... $230,609 $185,196 $198,491
======== ======== ========
<PAGE>
Treasury stock:
Balance, beginning of period .............. $(12,182) $ (6,694) $ (6,694)
Exercise of stock options and issuance
(cancellation) of restricted stock ...... 2,790 (7) (15)
Acquisition of treasury stock ............. (8,103) (127) (5,473)
-------- -------- --------
Balance, end of period .................... $(17,495) $ (6,828) $(12,182)
======== ======== ========
Deferred compensation on restricted stock:
Balance, beginning of period .............. $ (1,520) $ (2,251) $ (2,251)
Issuance of restricted stock .............. (2,276) (125) (108)
Amortization of deferred compensation on
restricted stock ........................ 581 632 839
-------- -------- --------
Balance, end of period .................... $ (3,215) $ (1,744) $ (1,520)
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 6
<PAGE>
<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(000s omitted)
Nine Months Ended September 30,
-------------------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Premiums collected .......................... $ 522,006 $ 473,001
Net investment income collected ............. 64,546 62,353
Losses and loss adjustment expenses paid .... (323,664) (272,303)
Policy acquisition costs paid ............... (139,138) (120,358)
Dividends paid to policyholders ............. (9,839) (11,369)
Interest paid ............................... (11,295) (11,669)
Federal income tax payments ................. (8,144) (5,063)
Other receipts (payments) ................... 11,625 (2,216)
--------- ---------
Net cash provided by operating activities.. 106,097 112,376
--------- ---------
Cash flows from investing activities:
Maturities of fixed maturity investments .... 70,489 101,153
Sales of fixed maturity investments ......... 79,753 48,731
Sales of equity securities .................. 36,004 68,984
Investments in fixed maturities ............. (172,071) (243,046)
Investments in equity securities ............ (78,663) (100,372)
Net sales (purchases) of short-term
investments ............................... (15,620) 17,211
Purchase of property and equipment .......... (4,106) (3,181)
Other investments - net ..................... (1,056) (11,925)
--------- ---------
Net cash used in investing activities ..... (85,270) (122,445)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable ..... - 59,672
Proceeds from exercise of stock options ..... 259 123
Dividends paid to stockholders .............. (7,754) (8,159)
Repayment of notes payable .................. (6,000) (28,000)
Purchases and redemption of adjustable rate
preferred and purchases of common stock ... (8,215) (18,806)
Other payments .............................. (222) (1,098)
--------- ---------
Net cash provided by (used in) financing
activities .............................. (21,932) 3,732
--------- ---------
Effect of foreign exchange rate changes on cash - (24)
--------- ---------
Net decrease in cash ...................... (1,105) (6,361)
Cash balance, beginning of period ............. 6,433 12,764
--------- ---------
Cash balance, end of period ................... $ 5,328 $ 6,403
========= =========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 7
<PAGE>
<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - (Continued)
(UNAUDITED)
(000s omitted)
Nine Months Ended September 30,
-------------------------------
1994 1993
---- ----
<S> <C> <C>
Reconciliation of net earnings to net
cash provided by operating activities:
Net earnings .................................. $ 40,136 $ 52,928
-------- --------
Adjustments:
Cumulative effect of adoption of new
accounting principles ..................... - (11,825)
Depreciation and amortization ............... 3,584 2,798
Amortization of excess of cost over fair
value of net assets acquired .............. 879 879
Deferred federal income taxes ............... 6,996 3,435
Amortization of fixed maturity investments .. 1,044 (246)
Non-cash investment income .................. (1,758) (4,832)
Equity in earnings of affiliates ............ (8,715) (8,452)
Dividends received from affiliates .......... 2,544 2,304
Realized investment gains ................... (1,908) (7,698)
Other ....................................... 342 33
Change in assets and liabilities:
Decrease in accrued investment income ....... 2,336 2,023
Increase in accounts and notes receivable ... (19,651) (5,533)
Decrease in reinsurance recoverables and
prepaid reinsurance ....................... 41,256 55,106
Increase in deferred policy acquisition costs (11,725) (2,936)
Decrease (increase) in other assets ......... (464) 594
Increase in losses .......................... 16,138 29,349
Increase in loss adjustment expenses ........ 18,855 7,384
Increase in unearned premiums ............... 6,596 11,643
Increase (decrease) in policyholders'
dividends ................................. 128 (1,307)
Increase (decrease) in other liabilities .... 9,484 (13,271)
-------- --------
Total adjustments and changes ............. 65,961 59,448
-------- --------
Net cash provided by operating activities ..... $106,097 $112,376
======== ========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 8
</TABLE>
<PAGE>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months Ended September 30, 1994 and 1993
Note A - Basis of Financial Statement Presentation
The consolidated financial statements and notes thereto are prepared in
accordance with generally accepted accounting principles for property and
casualty insurance companies. The consolidated financial statements include
Orion Capital Corporation and its majority-owned subsidiaries (collectively
the "Company"). The Company's investments in unconsolidated affiliates are
accounted for using the equity method. All material intercompany balances and
transactions have been eliminated.
In the opinion of management, the accompanying consolidated financial
statements reflect all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the Company's results of operations,
financial position and cash flows for all periods presented. Although these
consolidated financial statements are unaudited, they have been reviewed by
the Company's independent accountants, Deloitte & Touche LLP, for conformity
with accounting requirements for interim financial reporting. Their report on
such review is included herein. These consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 1993 annual report on Form 10-K.
Effective January 1, 1993 the Company recorded the cumulative effect of
adopting Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes" and SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions." Upon adoption of SFAS No. 109,
the Company recorded a benefit of $16,881,000 which was principally
attributable to its deferred tax benefits that had not been recognized due to
limitations under prior accounting standards. SFAS No. 106 requires the
accrual of the estimated cost of retiree benefit payments during the years the
employees provide services. Upon adoption of SFAS No. 106 the Company's
accumulated obligation for providing medical benefits to retirees was
$5,056,000, after a related tax benefit of $2,604,000. Included in the
cumulative effects of adopting these accounting principles is the Company's
portion of Guaranty National's benefit from changes in accounting principles
in 1993 of $360,000, net of $185,000 of federal income taxes provided by the
Company.
Effective December 31, 1993, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," which
establishes the "available-for-sale" category of investment securities and
requires such securities to be recorded at market value, with unrealized gains
and losses reported in a separate component of stockholders' equity. As a
result of the adoption of this standard on December 31, 1993, the Company
reclassified investments with a market value of $452,102,000 from fixed
maturities recorded at amortized cost to fixed maturities recorded at market,
and increased unrealized appreciation on investments, a component of
stockholders' equity, by $20,720,000, net of deferred income taxes.
Page 9
<PAGE>
Note B - Investment in Affiliates
The Company owns slightly less than fifty percent of the common stock of
Guaranty National Corporation ("Guaranty National") and approximately twenty
percent of Intercargo Corporation ("Intercargo"), both publicly-held
companies. The acquisition of the Company's interest in Intercargo was
completed in December 1993. The Company records its share of Intercargo's
interim operating results in the subsequent quarter, after Intercargo has
reported its financial results. Summarized financial information of
affiliates for the three-month and nine-month periods ended September 30, 1994
and 1993, including second quarter and six-month results for Intercargo in the
1994 periods, is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ---- ----
(000s omitted)
Revenues:
Premiums earned .................... $100,968 $ 65,949 $271,495 $184,215
Realized investment gains .......... 598 2,060 2,306 4,070
Investment and other income ........ 7,931 5,489 21,055 16,578
-------- -------- -------- --------
109,497 73,498 294,856 204,863
-------- -------- -------- --------
Expenses:
Insurance expenses ................. 100,424 65,382 266,083 177,903
Interest and other ................. 1,367 783 4,104 4,210
-------- -------- -------- --------
101,791 66,165 270,187 182,113
-------- -------- -------- --------
Earnings before federal income taxes
and cumulative effect of change in
accounting principles .............. 7,706 7,333 24,669 22,750
Federal income taxes ................. 2,000 1,644 5,958 5,608
-------- -------- -------- --------
Earnings before cumulative effect of
change in accounting principles..... $ 5,706 $ 5,689 $ 18,711 $ 17,142
======== ======== ======== ========
The Company's proportionate share:
Earnings before cumulative effect of
change in accounting principles... $ 2,577 $ 2,805 $ 8,715 $ 8,452
======== ======== ======== ========
Cumulative effect of change in
accounting principles ............ $ - $ - $ - $ 545
======== ======== ======== ========
Page 10
<PAGE>
The Company's investments in and advances to affiliates are as follows:
September 30, December 31,
1994 1993
------------ ------------
(000s omitted)
Book value ................................ $108,612 $111,459
Market value .............................. 137,238 143,255
Guaranty National shares held ............. 6,004 6,143
- Book value of shares held ............. $ 72,967 $ 75,394
- Market value of shares held ........... 108,819 107,510
Intercargo shares held .................... 1,526 1,526
- Book value of shares held ............. $ 18,449 $ 18,869
- Market value of shares held ........... 12,212 17,936
Note C - Reinsurance
In the normal course of business, the Company's insurance subsidiaries
reinsure certain risks, generally on an excess-of-loss or pro rata basis, with
other companies to limit exposure to losses. The table below summarizes certain
reinsurance information:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ---- ----
(000s omitted-except for percentages)
Direct premiums written .............. $172,919 $158,874 $503,144 $473,341
Reinsurance assumed .................. 37,343 33,186 94,982 97,105
-------- -------- -------- --------
Gross premiums written ............... 210,262 192,060 598,126 570,446
Reinsurance ceded .................... (27,569) (36,995) (63,096) (94,216)
-------- -------- -------- --------
Net premiums written ................. $182,693 $155,065 $535,030 $476,230
======== ======== ======== ========
Direct premiums earned ............... $165,673 $161,275 $489,895 $468,460
Reinsurance assumed .................. 42,298 31,368 101,634 90,343
-------- -------- -------- --------
Gross premiums earned ................ 207,971 192,643 591,529 558,803
Reinsurance ceded .................... (27,268) (41,002) (81,288)(100,486)
-------- -------- -------- --------
Net premiums earned .................. $180,703 $151,641 $510,241 $458,317
======== ======== ======== ========
Loss and loss adjustment expenses
recoverable from reinsurers ........ $ 12,857 $ 12,047 $ 34,977 $ 40,394
======== ======== ======== ========
Page 11
<PAGE>
Note D - Stockholders' Equity and Earnings Per Common Share
During the first nine months of 1994 the Company repurchased 250,500
shares of its common stock at an aggregate cost of $8,103,310. On October 14,
1994, the Board of Directors authorized an additional $5,000,000 for the stock
repurchase program. Since September 30, 1994, the Company purchased an
additional 156,150 shares for $4,539,000. The remaining authorization as of
October 26, 1994 is $3,238,000.
On December 21, 1992, Orion called for redemption its $2.125 Convertible
Exchangeable Preferred Stock (the "$2.125 Preferred Stock") on January 21,
1993. The market price of the shares of common stock that a holder would
receive upon conversion of the preferred stock was substantially higher than
the redemption price of $25.76 per share. Consequently, most holders
converted into common stock prior to the redemption date, resulting in the
issuance of 3,579 shares of common stock in December 1992 and 1,423,544 shares
of common stock in January 1993. Holders of 21,605 shares of $2.125 Preferred
Stock, who did not elect to convert, redeemed their shares for an aggregate
of $557,000.
Primary earnings per common share are computed using the weighted average
common and dilutive common equivalent shares outstanding for the three-month
and nine-month periods ended September 30, 1994 and 1993. The weighted
average common shares amounted to 14,378,000 and 14,685,000 shares for the
three months ended September 30, 1994 and 1993, respectively, and 14,430,000
and 14,603,000 shares for the nine months ended September 30, 1994 and 1993,
respectively. Preferred stock dividends of $409,000 for the nine months ended
September 30, 1993 were deducted from earnings in order to compute earnings
per common share.
Note E - Contingencies
Orion and its subsidiaries are routinely engaged in litigation incidental
to their businesses. Loss reserves are provided based on the probable
outcomes of such litigation. In the judgment of the Company's management,
there are no significant legal proceedings pending against the Company or its
subsidiaries which, net of loss reserves established therefor, are likely to
result in judgments for amounts that are material to the financial condition,
liquidity or results of operations of Orion and its consolidated subsidiaries,
taken as a whole. (See also Notes G and H to the 1993 consolidated financial
statements).
Page 12
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Board of Directors
Orion Capital Corporation
New York, New York
We have reviewed the accompanying consolidated balance sheet of Orion
Capital Corporation and subsidiaries (the "Company") as of September 30, 1994,
and the related consolidated statements of earnings for the three-month and
nine-month periods ended September 30, 1994 and 1993 and the statements of
stockholders' equity and cash flows for the nine-month periods ended
September 30, 1994 and 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements effective
January 1, 1993 the Company changed the method of accounting for income taxes
and post-retirement benefits. Also effective on December 31, 1993, the
Company changed its method of accounting for investments.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Orion Capital
Corporation and subsidiaries as of December 31, 1993, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
the year then ended; and in our report dated February 22, 1994, we expressed
an unqualified opinion on those consolidated financial statements. The
consolidated statements of earnings and cash flows for the year ended December
31, 1993 are not presented herein. In our opinion, the information set forth
in the accompanying consolidated balance sheet as of December 31, 1993 and
related consolidated statement of stockholders' equity for the year then ended
is fairly stated, in all material respects, in relation to the consolidated
financial statements from which it has been derived.
DELOITTE & TOUCHE LLP
Hartford, Connecticut
October 26, 1994
Page 13
<PAGE>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Nine Months Ended September 30, 1994 and 1993
RESULTS OF OPERATIONS
Orion Capital Corporation ("Orion") and its wholly-owned subsidiaries
(collectively the "Company") operate principally in the property and casualty
insurance business which is reported as three segments - Regional Operations,
Reinsurance/Special Programs and Guaranty National Companies. Regional
Operations markets workers compensation insurance through EBI Companies and
Nations' Care, Inc. Reinsurance/Special Programs includes (i) DPIC Companies
("DPIC"), which markets professional liability insurance, (ii) Connecticut
Specialty Insurance Group ("Connecticut Specialty"), which writes specialty
insurance programs, (iii) SecurityRe Companies ("SecurityRe"), a reinsurer and
(iv) a 20.0% interest in Intercargo Corporation ("Intercargo") which
underwrites insurance coverages for international trade. The third segment,
Guaranty National Companies, specializes in writing nonstandard commercial and
personal automobile insurance. The miscellaneous income and expenses
(primarily interest, general and administrative expenses and other
consolidating elimination entries) of the parent company are reported as a
fourth segment.
The Company's insurance operations have experienced favorable trends for
the past several years, as indicated by its combined ratio which has improved
from 109.4% in 1991, to 105.4% in 1992, 103.2% in 1993 and 101.5% for the
first nine months of 1994. Operating earnings (defined as earnings after
taxes, excluding the effects of the adoption of new accounting principles and
after-tax realized investment gains) were $14,539,000 and $12,151,000, or
$1.01 and $.83 per share, in the third quarters of 1994 and 1993,
respectively, based on weighted average shares outstanding of 14,378,000 in
1994 and 14,685,000 in 1993. For the nine months ended September 30, 1994 and
1993, operating earnings were $38,660,000 and $36,555,000, or $2.68 and $2.48
per share, based on 14,430,000 and 14,603,000 weighted average shares,
respectively. Preferred stock dividends of $409,000 in the nine months ended
September 30, 1993 were deducted from earnings in order to compute earnings
per common share. Management is of the opinion that, particularly considering
the improvements in underwriting results as reflected in the Company's
combined ratio, operating earnings for the full year 1994 will exceed the
record level attained in 1993.
Page 14
<PAGE>
Earnings (loss) by segment before federal income taxes and the cumulative
effect of the adoption of new accounting principles are summarized as follows
for the quarterly and nine-month periods ended September 30, 1994 and 1993.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1994 1993 1994 1993
---- ---- ---- ----
(000s omitted)
Regional Operations ................. $10,409 $ 6,387 $31,739 $20,166
Reinsurance/Special Programs ........ 10,622 11,714 24,361 36,684
Guaranty National Corporation ....... 2,581 2,805 8,647 8,452
------- ------- ------- -------
Total ............................. 23,612 20,906 64,747 65,302
Other ............................... (3,268) (3,894) (12,144) (12,091)
------- ------- ------- -------
$20,344 $17,012 $52,603 $53,211
======= ======= ======= =======
The following table sets forth certain ratios of insurance operating
expenses to premiums earned for the Company.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1994 1993 1994 1993
---- ---- ---- ----
Loss and loss adjustment expenses ... 71.5% 73.9% 72.6% 74.6%
Policy acquisition costs and other
insurance expenses ................ 27.6 26.7 27.0 26.3
----- ----- ----- -----
Total before policyholders'
dividends ..................... 99.1 100.6 99.6 100.9
Policyholders' dividends ............ 1.7 2.1 1.9 2.2
----- ----- ----- -----
Total after policyholders'
dividends ..................... 100.8% 102.7% 101.5% 103.1%
===== ===== ===== =====
REVENUES
Premiums written and premiums earned
- - ------------------------------------
Net premiums written increased 17.8% ($27,628,000) to $182,693,000 in the
third quarter of 1994 versus $155,065,000 in the third quarter of 1993, and
12.3% ($58,800,000) to $535,030,000 in the first nine months of 1994 from
$476,230,000 in the first three quarters of 1993. The results by segment are
as follows:
- Regional Operations' premiums written increased 17.3% ($10,274,000) to
$69,675,000 in the third quarter of 1994 from $59,401,000 in the third
quarter of 1993 and 6.6% ($13,288,000) to $213,395,000 in the first nine
months of 1994 as compared to $200,107,000 in 1993. Premiums written
increased in geographic areas where the Company has had favorable loss
experience stemming from its service-oriented approach. The increase was
partially offset by the impact of legislative reforms in certain states
which have led to lower premium rates and a concomitant reduction in
losses and expenses, resulting in higher profit margins. The increase
Page 15
<PAGE>
in this segment was also offset by a reduction in net premiums at
Nations' Care, Inc., reflecting its transition toward high-deductible and
fee-based workers compensation products.
- Reinsurance/Special Programs' premiums written increased 18.1%
($17,354,000) to $113,018,000 in the third quarter of 1994 from
$95,664,000 in the 1993 third quarter, and 16.5% ($45,512,000) to
$321,635,000 in the first three quarters of 1994 from $276,123,000 in
1993. Premiums written by DPIC for professional liability insurance, the
largest special program, increased 35.2% ($33,867,000) to $130,137,000
for the first nine months of 1994 from $96,270,000 for the same period
of 1993. The increase is primarily attributable to the discontinuation
on January 1, 1994 of a reinsurance contract in order to retain more of
DPIC's profitable business, including reinsurance applicable to business
in force on that date. Premium volume for Connecticut Specialty
decreased 2.0% ($2,852,000) to $136,907,000 in the first nine months of
1994 from $139,759,000 in the 1993 period. The decrease is primarily
attributable to the cancellation of a personal injury protection program
in Florida where the Company has had unfavorable loss experience and
lower premiums from a physical damage program in Texas, offset in part
by increased premiums written in the truck liability program and the
introduction of an additional marine program. The percentage of treaty
and facultative reinsurance premiums assumed to total net premiums
written for Reinsurance/Special Programs amounted to 17.0% and 14.5% in
the first three quarters of 1994 and 1993, respectively. The Company's
reinsurance operations are benefitting from A.M. Best Company's upgrade
last year of the rating applicable to the Company's principal insurance
subsidiaries to "A (Excellent)". A.M. Best Company ratings are not
primarily designed for investors and do not constitute recommendations
to buy, sell or hold any security.
Premiums earned increased 19.2% ($29,062,000) to $180,703,000 in the
third quarter of 1994 compared to $151,641,000 in the third quarter of 1993,
and 11.3% ($51,924,000) to $510,241,000 in the first nine months of 1994 from
$458,317,000 in 1993.
Net investment income
- - ---------------------
Pre-tax net investment income increased 1.5% ($332,000) to $22,550,000
for the third quarter of 1994 versus $22,218,000 for the third quarter of
1993, and decreased 1.8% ($1,146,000) to $63,919,000 for the first nine months
of 1994 as compared to $65,065,000 for 1993. The pre-tax yields on the
average investment portfolio were 6.9% and 7.1% for the third quarters of 1994
and 1993, respectively, and 6.6% and 7.1% for the nine-month periods ended
September 30, 1994 and 1993, respectively. The year-to-year changes in net
investment income reflect lower earnings from certain limited partnership
investments which are accounted for on the equity basis, offset by an increase
in investment income generated by the employment of positive operating cash
flow in 1994.
Page 16
<PAGE>
The Company's investment philosophy is to achieve a superior rate of
return after taxes and maintain a high degree of safety and liquidity. Fixed
maturity investments which the Company has both the positive intent and the
ability to hold to maturity are recorded at amortized cost. Investments which
may be sold in response to, among other things, changes in interest rates,
prepayment risk, income tax strategies or liquidity needs are classified as
"available-for-sale" and are carried at market value, with unrealized gains
and losses reported in a separate component of stockholders' equity. The
carrying value of fixed maturity and short-term investments amounted to
$1,010,388,000 and $1,029,211,000 at September 30, 1994 and December 31, 1993,
respectively, or approximately 75.4% and 77.8% of the investment portfolio.
The Company invests primarily in investment grade securities and strives
to enhance the average return of its portfolio through limited investment in
a diversified group of non-investment grade fixed maturity securities or
securities that are not rated. The risk of loss due to default is generally
considered greater for non-investment grade securities than for investment
grade securities because the former, among other things, are often
subordinated to other indebtedness of the issuer and are often issued by
highly leveraged companies. At September 30, 1994 and December 31, 1993, the
Company's investments in non-investment grade and unrated fixed maturity
securities were carried at $129,183,000 and $97,653,000 with market values of
$128,576,000 and $97,306,000, respectively. These investments represented a
total of 9.6% and 7.3% of cash and investments and 6.0% and 4.6% of total
assets at September 30, 1994 and December 31, 1993, respectively. The
increase in non-investment grade securities during 1994 reflects both
purchases of investments (bonds and preferred stocks totalling approximately
$35,000,000 representing securities of 31 issuers) and rating agency
downgrades of securities issued by Long Island Lighting Company and Cleveland
Electric Illuminating Company (which had a combined carrying value of
approximately $14,000,000 at September 30, 1994.)
Realized investment gains
- - -------------------------
Net realized investment gains were $1,197,000 and $1,908,000 in the third
quarter and first nine months of 1994, respectively, as compared to gains of
$1,131,000 and $7,698,000 in the respective periods of 1993. Realized
investment gains in the third quarters of 1994 and 1993 are net of $44,000 and
$1,912,000, respectively, of provisions for losses on securities deemed to be
other than temporarily impaired. Such provisions were $1,132,000 and
$6,282,000 for the nine-month periods ended September 30, 1994 and 1993,
respectively. Realized gains (losses) vary from period to period, depending
on market conditions relative to the Company's investment holdings, the timing
of investment sales generating gains and losses, the occurrence of events
which give rise to other than temporary impairment of investments, and other
factors.
Page 17
<PAGE>
EXPENSES AND OTHER
Operating ratios
- - ----------------
The ratio of loss and loss adjustment expenses to premiums earned (the
"loss ratio") was 71.5% and 72.6% in the third quarter and first nine months
of 1994, respectively, compared to 73.9% and 74.6% in the corresponding
periods of 1993. The decrease in the 1994 loss ratios was attributable to
improved ratios for the Regional Operations segment offset in part by higher
loss ratios for the Reinsurance/Special Programs segment. Adverse development
of prior years' losses amounted to $13,557,000 in the first nine months of
1994 compared with $15,395,000 in the first three quarters of 1993.
Management believes that the Company's reserves for losses and loss adjustment
expenses make reasonable and sufficient provision for the ultimate net cost
of all losses and claims incurred.
The loss ratio for the Regional Operations segment was 67.7% in the 1994
third quarter and 72.1% in the 1993 third quarter. In the first nine months
of 1994 the loss ratio was 67.5% as compared to 74.4% in 1993. These
decreases reflect continued improvement in workers compensation insurance, and
decreasing levels of losses applicable to discontinued business that is being
run off, principally from closed offices and from the Company having ceased
writing commercial package business.
The third quarter 1994 and 1993 loss ratios for Reinsurance/Special
Programs amounted to 74.0% and 75.1%, respectively. The loss ratios for the
nine-month periods ended September 30, 1994 and 1993 were 76.1% and 74.7%,
respectively. The increase in the nine-month loss ratio for this segment was
primarily the result of increased losses incurred in Connecticut Specialty's
personal injury protection program which was cancelled in the third quarter
of 1994.
The ratio of deferred policy acquisition costs and other insurance
expenses to premiums earned (the "expense ratio") was 27.0% in the first nine
months of 1994 as compared to 26.3% in 1993. The 1994 and 1993 expense ratios
reflect low levels of assessments from assigned risk pools. The ratio of
policyholders' dividends to premiums earned (the "dividend ratio") was 1.9%
and 2.2% in 1994 and 1993, respectively. The combined ratio was 101.5% in the
first nine months of 1994 and 103.1% for the same period of 1993.
Interest expense
- - ----------------
Interest expense increased to $3,439,000 in the third quarter of 1994
versus $3,354,000 in 1993, and to $10,204,000 in the first nine months of 1994
from $9,708,000 in 1993. The increases of 2.5% and 5.1%, respectively,
reflect higher average debt outstanding in 1994 as compared to 1993, including
debt incurred to redeem the Company's Adjustable Rate Preferred Stock.
Page 18
<PAGE>
Equity in earnings of affiliates
- - --------------------------------
Equity in earnings of affiliates includes the Company's portion of
earnings from Guaranty National and Intercargo. Earnings of $68,000 were
recorded from the Intercargo investment in the first three quarters of 1994.
The Company's portion of Guaranty National's net earnings before the
cumulative effect of adopting changes in accounting principles was $2,581,000
and $8,647,000 for the third quarter and first nine-months of 1994,
respectively, and $2,805,000 and $8,452,000 for the corresponding periods of
1993, based on Guaranty National's earnings of $5,167,000 and $5,689,000 for
the third quarters of 1994 and 1993, respectively, and $17,312,000 and
$17,142,000 for the nine-month periods ended September 30, 1994 and 1993,
respectively. Guaranty National's gross premiums written increased to
$273,142,000 for the first nine months of 1994 from $235,496,000 for the 1993
period. Guaranty National's overall combined ratio was 97.2% and 96.6% for
the first three quarters of 1994 and 1993, respectively.
Federal Income taxes
- - --------------------
Federal income taxes on pre-tax operating results and the related
effective tax rates amounted to $5,015,000 (24.7%) and $4,144,000 (24.4%) in
the third quarters of 1994 and 1993, respectively. The corresponding amounts
for the first nine months of 1994 and 1993 were $12,467,000 (23.7%) and
$12,108,000 (22.8%), respectively. The Company's effective tax rate is less
than the statutory tax rate of 35% primarily because of income derived from
tax-advantaged securities.
Cumulative effect of adoption of new accounting principles
- - ----------------------------------------------------------
Effective January 1, 1993 the Company recorded the cumulative effect of
adopting Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes" and SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other than Pensions." The cumulative effect of
adopting SFAS No. 109 was a benefit of $16,881,000, which was principally
attributable to the Company's deferred tax benefits that had not been
recognized due to limitations under prior accounting standards. SFAS No. 106
requires the accrual of the estimated cost of retiree benefit payments during
the years the employees provide services. Upon adoption of SFAS No. 106 the
Company's accumulated obligation for providing medical benefits to retirees
was $5,056,000, after a related tax benefit of $2,604,000. Included in the
cumulative effects of adopting these accounting principles is the Company's
portion of Guaranty National's benefit from changes in accounting principles
in 1993 of $360,000, net of $185,000 of federal income taxes provided by the
Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities decreased by $6,279,000 for the
first nine months of 1994 from $112,376,000 in 1993 to $106,097,000 in 1994.
The decrease in operating cash provided for the first three quarters of 1994
is primarily due to an increase in paid losses, policy acquisition costs and
federal income tax payments, offset in part by an increase in premiums
Page 19
<PAGE>
collected. In 1994 operating cash flow included a $10,223,000 receipt from
DPIC's discontinuation of a reinsurance contract. Cash flow for 1993 included
a receipt of $17,096,000 under a retrospectively rated program written by
DPIC, and the benefit of a prior period income tax overpayment of
approximately $4,000,000. Excluding these one-time items, year-to-year
operating cash flows increased approximately $4,600,000.
Cash used in investment activities decreased to $85,270,000 for the first
nine months of 1994 from $122,445,000 in 1993. The use of investment cash in
both 1994 and 1993 is attributable to purchases of investments which exceeded
maturities and sales of investments, reflecting positive operating cash flows
as well as cash provided by or used in the financing activities described
below.
Cash used in financing activities was $21,932,000 for the first nine
months of 1994 and cash provided by financing activities during the same
period of 1993 was $3,732,000. Cash was used in 1994 for dividend payments,
scheduled debt repayments and the Company's stock repurchase program. The
cash provided in 1993 resulted from an increase in bank borrowings, offset by
the redemption of the Company's Adjustable Rate Preferred Stock.
Orion's uses of cash consist of debt service, dividends to stockholders
and overhead expenses. These cash uses are funded from existing available
cash, financing transactions and receipt of dividends, reimbursement of
overhead expenses and amounts in lieu of federal income taxes from Orion's
insurance subsidiaries. Payments of dividends by Orion's insurance
subsidiaries must comply with insurance regulatory limitations concerning
stockholder dividends and capital adequacy. State insurance regulators have
broad discretionary authority with respect to limitations on the payment of
dividends by insurance companies. Limitations under current regulations are
well in excess of Orion's cash requirements.
Orion's insurance subsidiaries maintain liquidity in their investment
portfolios substantially in excess of that required to pay claims and
expenses. The insurance subsidiaries held cash and short-term investments of
$107,219,000 and $92,421,000 at September 30, 1994 and December 31, 1993,
respectively. Orion's insurance subsidiaries had consolidated policyholders'
surplus of $453,037,000 at September 30, 1994 and $460,986,000 at December 31,
1993, and statutory operating leverage ratios of trailing twelve months net
premiums written to policyholders' surplus of 1.5:1 at September 30, 1994 and
1.4:1 at December 31, 1993.
In August 1994, Orion's shelf registration statement relating to the
offering of up to $100 million of its debt and/or equity securities was
declared effective by the Securities and Exchange Commission ("SEC"). The
shelf registration provides for securities to be issued from time to time,
with specified terms of an issue of securities set forth in a prospectus
supplement at the time of issuance. The proceeds from the sale of securities
may be used for general corporate purposes, including working capital,
investment in subsidiaries, the repayment of existing bank debt, the
repurchase of shares of common stock, or for such other purpose as may be
specified in a prospectus supplement.
Page 20
<PAGE>
Orion entered into a bank loan arrangement (the "Loan Agreement") in
March 1993 that provided for initial borrowings of up to $60,000,000,
consisting of a $50,000,000 term loan (reduced by $10,500,000 in scheduled
commitment reductions through September 30, 1994) and a $10,000,000 line of
credit. These borrowings are unsecured and bear interest at or below prime.
Borrowings under the Loan Agreement amounted to $44,500,000 at September 30,
1994. The proceeds were used to repay the Company's outstanding bank debt
and to redeem Orion's Adjustable Rate Preferred Stock in April 1993. At
September 30, 1994, the Company has available $5,000,000 in unused
commitments under the line of credit.
The terms of the Loan Agreement and Orion's Indenture for its 9 1/8%
Senior Notes ($110,000,000 principal amount) limit the amount of additional
borrowings, prepayments on existing indebtedness, liens and guaranties by
the Company. Management does not believe that any of these limitations
unduly restricts the Company's operations or limits Orion's ability to pay
dividends on its stock. At September 30, 1994, the Company was in
compliance with the terms of its debt agreements. Management believes that
the Company continues to have substantial sources of capital and liquidity
from the capital markets and bank borrowings.
The Company repurchased 250,500 shares of its common stock at an
aggregate cost of $8,103,310 in the first nine months of 1994. The
Company's remaining stock purchase authorization from its Board of Directors
amounted to $2,777,000 at September 30, 1994. On October 14, 1994, the
Board of Directors authorized an additional $5,000,000 for the stock
repurchase program. Since September 30, 1994, the Company repurchased an
additional 156,150 shares for $4,539,000. The remaining authorization as
of October 26, 1994 is $3,238,000.
Page 21
<PAGE>
PART II. OTHER INFORMATION
Items 1 - 5.
- - ------------
None.
Item 6. Exhibits and Reports on Form 8-K
- - ------------------------------------------
(a) Exhibits
Exhibit 11: Computation of Earnings Per Common Share
Exhibit 15: Letter in Lieu of Consent of Deloitte & Touche
re Unaudited Interim Financial Information
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter.
Page 22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ORION CAPITAL CORPORATION
Date: November 1, 1994 By: /s/ Alan R. Gruber
---------------------------------
Chairman of the Board
and Chief Executive Officer
Date: November 1, 1994 By: /s/ Daniel L. Barry
----------------------------------
Vice President, Controller
and Principal Accounting Officer
Page 23
<PAGE>
EXHIBIT INDEX
Page No.
Exhibit 11: Computation of Earnings 25
Per Common Share
Exhibit 15: Letter in Lieu of Consent of 26
Deloitte & Touche re Unaudited
Interim Financial Information
Exhibit 27: Financial Data Schedule 27
Page 24
<TABLE>
<CAPTION>
EXHIBIT 11
ORION CAPITAL CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
(000s omitted - except for per common share data)
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computation of weighted average number of
common and equivalent shares outstanding:
PRIMARY -
Weighted average number of shares
outstanding ............................. 14,253 14,533 14,307 14,456
Dilutive effect of stock options .......... 125 152 123 147
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 14,378 14,685 14,430 14,603
======= ======= ======= =======
Net earnings before preferred dividend
requirements .............................. $15,329 $12,868 $40,136 $52,928
Preferred dividends ......................... - - - 409
------- ------- ------- -------
Net earnings attributable to common
stockholders .............................. $15,329 $12,868 $40,136 $52,519
======= ======= ======= =======
Net earnings per common share ............... $ 1.07 $ .88 $ 2.78 $ 3.60
======= ======= ======= =======
FULLY DILUTED
Weighted average number of shares
outstanding ............................. 14,253 14,533 14,307 14,456
Dilutive effect of stock options .......... 125 156 123 156
Conversion of $2.125 preferred stock ...... - - - 76
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 14,378 14,689 14,430 14,688
======= ======= ======= =======
Net earnings before preferred dividend
requirements .............................. $15,329 $12,868 $40,136 $52,928
Adjustable rate preferred stock dividends ... - - - 407
------- ------- ------- -------
Net earnings attributable to common
stockholders .............................. $15,329 $12,868 $40,136 $52,521
======= ======= ======= =======
Net earnings per common share ............... $ 1.07 $ .88 $ 2.78 $ 3.58
======= ======= ======= =======
Page 25
</TABLE>
<PAGE>
EXHIBIT 15
October 26, 1994
Orion Capital Corporation
600 Fifth Avenue
New York, New York
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited interim
financial information of Orion Capital Corporation and subsidiaries for the
periods ended September 30, 1994 and 1993, as indicated in our report dated
October 26, 1994; because we did not perform an audit, we expressed no opinion
on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, is
incorporated by reference in Registration Statements No. 2-65348 on Form S-8
and S-16 relating to the Orion Capital Corporation 1976 and 1979 Stock Option
Plans, No. 2-80636 on Form S-8 relating to the Orion Capital Corporation 1982
Long-Term Performance Incentive Plan, No. 2-63344 on Form S-8 relating to the
Orion Capital Corporation Employees' Stock Savings and Retirement Plan and
No. 33-53759 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Hartford, Connecticut
Page 26
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS FINANCIAL SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM ORION CAPITAL CORPORATION'S FINANCIAL STATEMENTS FOR THE YEAR ENDED
DECEMBER 31, 1993 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1994, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1993 SEP-30-1994
<PERIOD-START> JAN-1-1993 JAN-1-1994
<PERIOD-END> DEC-31-1993 SEP-30-1994
<DEBT-HELD-FOR-SALE> 548,336 526,070
<DEBT-CARRYING-VALUE> 384,402 372,764
<DEBT-MARKET-VALUE> 402,149 370,218
<EQUITIES> 242,643 277,004
<MORTGAGE> 1,690 1,693
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 1,322,536 1,339,962
<CASH> 6,433 5,328
<RECOVER-REINSURE> 338,266 315,202
<DEFERRED-ACQUISITION> 57,522 69,247
<TOTAL-ASSETS> 2,117,454 2,138,931
<POLICY-LOSSES> 1,140,403 1,175,396
<UNEARNED-PREMIUMS> 259,359 265,955
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 12,523 12,651
<NOTES-PAYABLE> 160,372 154,380
<COMMON> 163,505 163,314
0 0
0 0
<OTHER-SE> 230,690 209,316
<TOTAL-LIABILITY-AND-EQUITY> 2,117,454 2,138,931
617,404 510,241
<INVESTMENT-INCOME> 91,803 63,919
<INVESTMENT-GAINS> 9,478 1,908
<OTHER-INCOME> 1,470 1,058
<BENEFITS> 459,132 370,510
<UNDERWRITING-AMORTIZATION> 148,440 123,147
<UNDERWRITING-OTHER> 29,894 24,366
<INCOME-PRETAX> 72,505 52,603
<INCOME-TAX> 15,517 12,467
<INCOME-CONTINUING> 56,988 40,136
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 11,825 0
<NET-INCOME> 68,813 40,136
<EPS-PRIMARY> 4.69 2.78
<EPS-DILUTED> 4.67 2.78
<RESERVE-OPEN> 746,298 830,805
<PROVISION-CURRENT> 434,840 356,953
<PROVISION-PRIOR> 24,292 13,557
<PAYMENTS-CURRENT> 125,042 84,320
<PAYMENTS-PRIOR> 249,583 239,344
<RESERVE-CLOSE> 830,805 877,651
<CUMULATIVE-DEFICIENCY> 24,292 13,557
</TABLE>
