<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 June 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)
30 Rockefeller Plaza
New York, New York 10112 - 0156
- - ---------------------------------------- -----------------------
(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
---- ----
14,268,486 shares of Common Stock, $1.00 par value, of the registrant
were outstanding on August 1, 1994.
Page 1 of 27
Exhibit Index Appears at Page 25
<PAGE>
ORION CAPITAL CORPORATION
FORM 10-Q INDEX
For the Quarter Ended June 30, 1994
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet at June 30, 1994
(Unaudited) and December 31, 1993....................... 3 - 4
Consolidated Statement of Earnings for the three and six-
month periods ended June 30, 1994 and 1993 (Unaudited).. 5
Consolidated Statement of Stockholders' Equity for the
six-month periods ended June 30, 1994 and 1993
(Unaudited), and for the year ended December 31, 1993... 6
Consolidated Statement of Cash Flows for the six-month
periods ended June 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)
June 30, 1994 December 31,
(Unaudited) 1993
------------- ------------
<S> <C> <C>
Investments:
Fixed maturities at amortized cost
(market $385,809 - 1994 and $402,149 -
1993) .................................. $ 386,867 $ 384,402
Fixed maturities at market (amortized
cost $514,653 - 1994 and $517,716 - 1993) 496,660 548,336
Common stocks at market (cost $112,794 -
1994 and $111,325 - 1993) .............. 138,539 139,022
Non-redeemable preferred stocks at
market (cost $129,895 - 1994 and
$98,986 - 1993) ........................ 127,373 103,621
Other long-term investments .............. 52,190 50,682
Short-term investments ................... 116,373 96,473
---------- ----------
Total investments ..................... 1,318,002 1,322,536
Cash ....................................... 7,086 6,433
Accrued investment income .................. 16,221 17,623
Investments in and advances to affiliates .. 107,269 111,459
Accounts and notes receivable .............. 127,035 111,539
Reinsurance recoverables and prepaid
reinsurance .............................. 356,592 393,309
Deferred policy acquisition costs .......... 65,652 57,522
Property and equipment ..................... 23,706 23,596
Excess of cost over fair value of net
assets acquired .......................... 30,002 30,587
Deferred federal income taxes .............. 38,078 18,891
Other assets ............................... 24,111 23,959
---------- ----------
Total assets .......................... $2,113,754 $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)
June 30, 1994 December 31,
(Unaudited) 1993
------------- ------------
<S> <C> <C>
Liabilities:
Policy liabilities -
Losses ...................................... $ 948,675 $ 937,775
Loss adjustment expenses .................... 212,631 202,628
Unearned premiums ........................... 263,665 259,359
Policyholders' dividends .................... 11,891 12,523
---------- ----------
Total policy liabilities .................. 1,436,862 1,412,285
Federal income taxes payable .................. 15,818 19,294
Notes payable ................................. 156,377 160,372
Other liabilities ............................. 134,655 131,308
---------- ----------
Total liabilities ......................... 1,743,712 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 ............................... 147,796 148,167
Net unrealized investment gains, net of federal
income taxes (benefit) of $(3,703) - 1994 and
$18,718 - 1993 .............................. 7,925 49,566
Net unrealized foreign exchange translation
losses, net of federal income tax benefit of
$547 - 1994 and $394 - 1993 ................. (3,950) (3,665)
Retained earnings ............................. 218,134 198,491
Treasury stock, at cost (1,029,164 shares -
1994 and 965,442 shares - 1993) ............. (14,070) (12,182)
Deferred compensation on restricted stock ..... (1,131) (1,520)
---------- ----------
Total stockholders' equity ................ 370,042 394,195
---------- ----------
Total liabilities and stockholders' equity. $2,113,754 $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 Six Months Ended
June 30, June 30,
------------------ ------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Premiums earned .............................. $162,443 $157,404 $329,538 $306,676
Net investment income ........................ 20,601 21,170 41,369 42,847
Realized investment gains .................... 178 1,755 711 6,567
Other income ................................. 415 464 717 767
-------- -------- -------- --------
183,637 180,793 372,335 356,857
-------- -------- -------- --------
Expenses:
Losses incurred .............................. 95,150 93,234 192,148 183,757
Loss adjustment expenses ..................... 24,399 22,883 49,170 46,157
Amortization of deferred policy acquisition
costs ...................................... 38,835 37,740 78,878 71,782
Other insurance expenses ..................... 4,478 4,088 8,823 8,121
Dividends to policyholders ................... 3,235 3,539 6,871 6,848
Interest expense ............................. 3,441 3,479 6,765 6,354
Other expenses ............................... 2,159 1,145 3,559 3,286
-------- -------- -------- --------
171,697 166,108 346,214 326,305
-------- -------- -------- --------
Earnings before equity in earnings of
affiliates, federal income taxes and
cumulative effect of adoption of new
accounting principles ........................ 11,940 14,685 26,121 30,552
Equity in earnings of affiliates ............... 3,106 2,587 6,138 5,647
-------- -------- -------- --------
Earnings before federal income taxes and
cumulative effect of adoption of new
accounting principles ........................ 15,046 17,272 32,259 36,199
Federal income taxes ........................... 3,479 3,365 7,452 7,964
-------- -------- -------- --------
Earnings before cumulative effect of adoption
of new accounting principles ................. 11,567 13,907 24,807 28,235
Cumulative effect of adoption of new accounting
principles ................................... - - - 11,825
-------- -------- -------- --------
Net earnings ................................. $ 11,567 $ 13,907 $ 24,807 $ 40,060
======== ======== ======== ========
Earnings per common share before cumulative
effect of adoption of new accounting
principles ................................... $ .80 $ .95 $ 1.72 $ 1.91
Cumulative effect of adoption of new
accounting principles ........................ - - - .81
-------- -------- -------- --------
Net earnings per common share ................ $ .80 $ .95 $ 1.72 $ 2.72
======== ======== ======== ========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 5
<PAGE>
<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(000s omitted)
Six Months Ended
June 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
-------- -------- --------
Balance, end of period .................... $ 15,338 $ 12,260 $ 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
(cancellation) of restricted stock ...... (371) 266 406
Stock issued in 5-for-4 stock split ....... - - (3,065)
-------- -------- --------
Balance, end of period .................... $147,796 $151,092 $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 ............................ (41,641) 6,860 10,031
-------- -------- --------
Balance, end of period .................... $ 7,925 $ 25,675 $ 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 ........ (285) (190) (747)
-------- -------- --------
Balance, end of period .................... $ (3,950) $ (3,108) $ (3,665)
======== ======== ========
Retained earnings:
Balance, beginning of period .............. $198,491 $139,947 $139,947
Net earnings .............................. 24,807 40,060 68,813
Dividends declared ........................ (5,164) (5,062) (10,269)
-------- -------- --------
Balance, end of period .................... $218,134 $174,945 $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 ...... 637 6 (15)
Acquisition of treasury stock ............. (2,525) (127) (5,473)
-------- -------- --------
Balance, end of period .................... $(14,070) $ (6,815) $(12,182)
======== ======== ========
Deferred compensation on restricted stock:
Balance, beginning of period .............. $ (1,520) $ (2,251) $ (2,251)
(Issuance) cancellation of restricted stock 25 (138) (108)
Amortization of deferred compensation on
restricted stock ........................ 364 436 839
-------- -------- --------
Balance, end of period .................... $ (1,131) $ (1,953) $ (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)
Six Months Ended June 30,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Premiums collected ............................. $ 342,284 $ 316,633
Net investment income collected ................ 42,836 39,554
Losses and loss adjustment expenses paid ....... (213,268) (161,351)
Policy acquisition costs paid .................. (89,865) (82,135)
Dividends paid to policyholders ................ (7,503) (7,555)
Interest paid .................................. (6,575) (5,888)
Federal income tax payments .................... (7,541) (2,959)
Other receipts (payments) ...................... 4,227 (17,607)
--------- ---------
Net cash provided by operating activities .... 64,595 78,692
--------- ---------
Cash flows from investing activities:
Maturities of fixed maturity investments ....... 54,768 69,492
Sales of fixed maturity investments ............ 82,383 32,292
Sales of equity securities ..................... 29,851 183,138
Investments in fixed maturities ................ (139,915) (156,742)
Investments in equity securities ............... (57,916) (196,769)
Net purchases of short-term investments ........ (17,907) (6,287)
Other payments ................................. (3,175) (7,339)
--------- ---------
Net cash used in investing activities ........ (51,911) (82,215)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable ........ - 59,672
Proceeds from exercise of stock options ........ 229 123
Dividends paid to stockholders ................. (5,179) (5,833)
Repayment of notes payable ..................... (4,000) (26,500)
Purchases and redemption of adjustable rate
preferred and common stock ................... (3,000) (18,806)
Other payments ................................. (81) (1,085)
--------- ---------
Net cash provided by (used in) financing
activities ................................. (12,031) 7,571
--------- ---------
Effect of foreign exchange rate changes on cash... - (13)
--------- ---------
Net increase in cash ......................... 653 4,035
Cash balance, beginning of period ................ 6,433 12,764
--------- ---------
Cash balance, end of period ...................... $ 7,086 $ 16,799
========= =========
<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)
Six Months Ended June 30,
--------------------------
1994 1993
---- ----
<S> <C> <C>
Reconciliation of net earnings to net
cash provided by operating activities:
Net earnings ..................................... $ 24,807 $ 40,060
-------- --------
Adjustments:
Cumulative effect of adoption of new accounting
principles ................................... - (11,825)
Depreciation and amortization .................. 2,529 1,880
Amortization of excess of cost over fair
value of net assets acquired ................. 585 586
Deferred federal income taxes .................. 3,387 2,136
Amortization of fixed maturity investments ..... 712 (560)
Non-cash investment income ..................... (1,555) (2,294)
Equity in earnings of affiliates ............... (6,138) (5,647)
Dividends received from affiliates ............. 1,656 1,536
Realized investment gains ...................... (711) (6,567)
Foreign exchange transaction adjustment ........ 73 82
Other .......................................... (18) (16)
Change in assets and liabilities:
Decrease (increase) in accrued investment
income ....................................... 1,402 (522)
Increase in accounts and notes receivable ...... (15,496) (2,245)
Decrease in reinsurance recoverables and
prepaid reinsurance .......................... 36,717 46,079
Increase in deferred policy acquisition costs... (8,130) (3,432)
Decrease in other assets ....................... 600 126
Increase in losses ............................. 10,900 37,526
Increase in loss adjustment expenses ........... 10,003 2,411
Increase in unearned premiums .................. 4,306 12,226
Decrease in policyholders' dividends ........... (632) (707)
Decrease in other liabilities .................. (402) (32,141)
-------- --------
Total adjustments and changes ................ 39,788 38,632
-------- --------
Net cash provided by operating activities ........ $ 64,595 $ 78,692
======== ========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 8
</TABLE>
<PAGE>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Six Months Ended June 30, 1994
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 investment 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,
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 increased its investments recorded at market value by $452,102,000,
and its 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 six-month periods ended June 30, 1994 and
1993, including first quarter 1994 results for Intercargo in the Company's
second quarter, is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(000s omitted)
Revenues:
Premiums earned .................... $ 95,196 $ 61,310 $170,527 $118,266
Realized investment gains .......... 563 1,134 1,708 2,010
Investment and other income ........ 7,259 5,439 13,124 11,089
-------- -------- -------- --------
103,018 67,883 185,359 131,365
-------- -------- -------- --------
Expenses:
Insurance expenses ................. 92,041 58,365 165,659 112,521
Interest and other ................. 1,879 2,592 2,737 3,427
-------- -------- -------- --------
93,920 60,957 168,396 115,948
-------- -------- -------- --------
Earnings before federal income taxes
and cumulative effect of change in
accounting principles .............. 9,098 6,926 16,963 15,417
Federal income taxes ................. 2,163 1,680 3,958 3,964
-------- -------- -------- --------
Earnings before cumulative effect of
change in accounting principles..... $ 6,935 $ 5,246 $ 13,005 $ 11,453
======== ======== ======== ========
The Company's proportionate share:
Earnings before cumulative effect of
change in accounting principles... $ 3,106 $ 2,587 $ 6,138 $ 5,647
======== ======== ======== ========
Cumulative effect of change in
accounting principles ............ $ - $ - $ - $ 545
======== ======== ======== ========
Page 10
<PAGE>
The Company's investments in and advances to affiliates are as follows:
June 30, December 31,
1994 1993
--------- ------------
(000s omitted)
Book value ................................ $107,269 $111,459
Market value .............................. 121,946 143,255
Guaranty National shares held ............. 6,006 6,143
- Book value of shares held ............. $ 71,404 $ 75,394
- Market value of shares held ........... 89,344 107,510
Intercargo shares held .................... 1,526 1,526
- Book value of shares held ............. $ 18,669 $ 18,869
- Market value of shares held ........... 16,028 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 Six Months Ended
June 30, June 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ---- ----
(000s omitted)
Direct premiums written .............. $164,406 $157,113 $330,225 $314,467
Reinsurance assumed .................. 27,659 32,651 57,639 63,919
-------- -------- -------- --------
Gross premiums written ............... 192,065 189,764 387,864 378,386
Reinsurance ceded .................... (27,875) (28,892) (35,527) (57,221)
-------- -------- -------- --------
Net premiums written ................. $164,190 $160,872 $352,337 $321,165
======== ======== ======== ========
Direct premiums earned ............... $164,052 $147,450 $324,222 $307,185
Reinsurance assumed .................. 26,787 39,457 59,336 58,975
-------- -------- -------- --------
Gross premiums earned ................ 190,839 186,907 383,558 366,160
Reinsurance ceded .................... (28,396) (29,503) (54,020) (59,484)
-------- -------- -------- --------
Net premiums earned .................. $162,443 $157,404 $329,538 $306,676
======== ======== ======== ========
Loss and loss adjustment expenses
recoverable from reinsurers ........ $ 9,322 $ 9,866 $ 22,120 $ 28,347
======== ======== ======== ========
Page 11
<PAGE>
Note D - Stockholders' Equity and Earnings Per Common Share
During the first six months of 1994 the Company repurchased 80,700 shares
of its common stock at an aggregate cost of $2,525,000. In July 1994, the
Company repurchased an additional 48,000 shares for $1,658,000 and the Board
of Directors authorized an additional $5,000,000 for the stock repurchase
program, bringing the remaining authorization as of July 31, 1994 to
$6,698,000.
Common stock and per common share data have been restated, as required,
to give effect to the 5-for-4 stock split paid on November 15, 1993 to
stockholders of record on October 15, 1993.
On December 21, 1992, Orion called for the redemption of 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 six-month periods ended June 30, 1994 and 1993. The weighted average
common shares amounted to 14,439,000 and 14,677,000 shares for the three
months ended June 30, 1994 and 1993, respectively, and 14,459,000 and
14,560,000 shares for the six months ended June 30, 1994 and 1993,
respectively. Preferred stock dividends of $27,000 in the 1993 second quarter
and $409,000 in the six months ended June 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 June 30, 1994, and
the related consolidated statements of earnings for the three-month and six-
month periods ended June 30, 1994 and 1993 and the statements of stockholders'
equity and cash flows for the six-month periods ended June 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
Hartford, Connecticut
August 1, 1994
Page 13
<PAGE>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Three Months Ended June 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 101.9% for the
first six 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 $11,294,000 and $12,750,000, or $.78
and $.87 per share, in the second quarters of 1994 and 1993, respectively,
based on weighted average shares outstanding of 14,439,000 in 1994 and
14,677,000 in 1993. For the six months ended June 30, 1994 and 1993,
operating earnings were $24,121,000 and $24,404,000, or $1.67 and $1.65 per
share, based on 14,459,000 and 14,560,000 weighted average shares,
respectively. Preferred stock dividends of $27,000 in the 1993 second quarter
and $409,000 in the six months ended June 30, 1993 were deducted from earnings
in order to compute earnings per common share. The decline in quarterly
operating earnings in the second quarter of 1994 is attributable to a decrease
in net investment income and an increase in non-cash expenses for certain
deferred compensation benefits, the value of which is based on the market
price of the Company's common stock. 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>
By segment, earnings (loss) before federal income taxes and the
cumulative effect of the adoption of new accounting principles are summarized
as follows for the quarterly and six-month periods ended June 30, 1994 and
1993.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1994 1993 1994 1993
---- ---- ---- ----
(000s omitted)
Regional Operations ............... $13,070 $ 6,991 $21,330 $13,779
Reinsurance/Special Programs ...... 4,564 12,123 13,739 24,970
Guaranty National Corporation ..... 3,034 2,587 6,066 5,647
------- ------- ------- -------
Total ........................... 20,668 21,701 41,135 44,396
Other ............................. (5,622) (4,429) (8,876) (8,197)
------- ------- ------- -------
$15,046 $17,272 $32,259 $36,199
======= ======= ======= =======
The following table sets forth certain ratios of insurance operating
expenses to premiums earned for the Company.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1994 1993 1994 1993
---- ---- ---- ----
(000s omitted)
Loss and loss adjustment expenses.. 73.6% 73.8% 73.2% 75.0%
Policy acquisition costs and other
insurance expenses .............. 26.6 26.6 26.6 26.0
----- ----- ----- -----
Total before policyholders'
dividends ................... 100.2 100.4 99.8 101.0
Policyholders' dividends .......... 2.0 2.2 2.1 2.3
----- ----- ----- -----
Total after policyholders'
dividends ................... 102.2% 102.6% 101.9% 103.3%
===== ===== ===== =====
REVENUES
Premiums written and premiums earned
- - ------------------------------------
Net premiums written increased 2.1% ($3,318,000) to $164,190,000 in the
second quarter of 1994 versus $160,872,000 in the second quarter of 1993, and
9.7% ($31,172,000) to $352,337,000 in the first six months of 1994 from
$321,165,000 in the first half of 1993. The results by segment are as
follows:
- Regional Operations' premiums written increased 0.6% ($392,000) to
$67,940,000 in the second quarter of 1994 from $67,548,000 in the second
quarter of 1993 and 2.1% ($3,014,000) in the first half of 1994 to
$143,720,000 versus $140,706,000 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 both lower premium rates and reduced loss expenses, concomitantly
resulting in higher profit margins. The increase in this segment was
partially offset by a reduction in net premiums at Nations' Care, Inc.,
reflecting its transition toward high-deductible and fee-based products
that support alternative workers compensation markets.
Page 15
<PAGE>
- Reinsurance/Special Programs' premiums written during the second quarter
of 1994 increased 3.1% ($2,926,000) to $96,250,000 from $93,324,000 in
the 1993 second quarter, and 15.6% ($28,158,000) to $208,617,000 in the
first half of 1994 from $180,459,000 in 1993. Premiums written by DPIC
for professional liability insurance, the largest special program,
increased 47.7% ($28,987,000) to $89,781,000 for the first six months of
1994 from $60,794,000 for the first half 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 11.5%
($11,062,000) to $85,136,000 in the first six months of 1994 from
$96,198,000 in the 1993 period. The decrease is primarily attributable
to the personal injury protection program, a low limit no-fault medical
and property damage automobile program in Florida, where the Company has
tightened underwriting requirements and increased pricing to offset
unfavorable loss experience. The percentage of treaty and facultative
reinsurance premiums assumed to total net premiums written for
Reinsurance/Special Programs amounted to 16.2% and 13.0% in the first
half 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 3.2% ($5,039,000) to $162,443,000 in the second
quarter of 1994 compared to $157,404,000 in the second quarter of 1993, and
7.5% ($22,862,000) to $329,538,000 in the first six months of 1994 from
$306,676,000 in 1993.
Net investment income
- - ---------------------
Pre-tax net investment income decreased 2.7% ($569,000) to $20,601,000
for the second quarter of 1994 versus $21,170,000 for the second quarter of
1993, and decreased 3.4% ($1,478,000) to $41,369,000 for the first six months
of 1994 as compared to $42,847,000 for 1993. The pre-tax yields on the
average investment portfolio were 6.3% and 6.8% for the second quarters of
1994 and 1993, respectively, and 6.5% and 7.1% for the six-month periods ended
June 30, 1994 and 1993, respectively. These declines reflect (i) a change in
the Company's mix of investments toward higher amounts of tax-advantaged
securities which generally yield less than fully taxable securities, (ii)
issuers calling their securities in order to refinance at lower rates, (iii)
generally lower yields on new investments due to current market conditions and
(iv) losses in certain limited partnership investments which are accounted for
on the equity basis. The decrease in net investment income was offset in part
by the investment income generated by the employment of positive operating
cash flow in 1994. The Company's long-term experience with its limited
partnership investments has been quite favorable, and results for this
category of investments are expected to reflect the long-term trend.
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
$999,900,000 and $1,029,211,000 at June 30, 1994 and December 31, 1993,
respectively, or approximately 75.9% 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 June 30, 1994 and December 31, 1993, the
Company's investments in non-investment grade and unrated fixed maturity
securities were carried at $130,755,000 and $97,653,000 with market values of
$129,343,000 and $97,306,000, respectively. These investments represented a
total of 9.9% and 7.3% of cash and investments and 6.2% and 4.6% of total
assets at June 30, 1994 and December 31, 1993, respectively.
Realized investment gains
- - -------------------------
Net realized investment gains decreased $1,577,000 and $5,856,000 to
$178,000 and $711,000 in the second quarter and first six months of 1994,
respectively, from gains of $1,755,000 and $6,567,000 in the respective
periods of 1993. Realized investment gains in the second quarters of 1994 and
1993 are net of $294,000 and $2,670,000, respectively, of provisions for
losses on securities deemed to be other than temporarily impaired. Such
provisions were $1,088,000 and $4,370,000 for the six-month periods ended June
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.
EXPENSES AND OTHER
Operating ratios
- - ----------------
The ratio of loss and loss adjustment expenses to premiums earned (the
"loss ratio") was 73.6% and 73.2% in the second quarter and first six months
of 1994, respectively, compared to 73.8% and 75.0% in the same periods of
1993. The decrease in the 1994 loss ratios is 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'
Page 17
<PAGE>
losses amounted to $10,554,000 in the first six months of 1994 compared with
$13,167,000 in the first half 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 64.9% in the 1994
second quarter and 75.1% in the 1993 second quarter. In the first half of
1994 the loss ratio was 67.3% as compared to 75.5% in 1993. These decreases
reflect continued improvement in workers compensation insurance, and
decreasing levels of losses applicable to discontinued business that is being
runoff, principally from closed offices and from the Company having ceased
writing commercial package business.
The second quarter 1994 and 1993 loss ratios for Reinsurance/Special
Programs amounted to 79.5% and 72.7%, respectively. The loss ratios for the
six-month periods ended June 30, 1994 and 1993 were 77.4% and 74.6%,
respectively. The loss ratio increase for this segment was primarily the
result of increased losses incurred in Connecticut Specialty's personal injury
protection program. The Company has both increased its premium rates and
tightened its underwriting requirements for this program.
The ratio of deferred policy acquisition costs and other insurance
expenses to premiums earned (the "expense ratio") was 26.6% in the first six
months of 1994 as compared to 26.0% 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 2.1%
and 2.3% during the first six months of 1994 and 1993, respectively. The
combined ratio was 101.9% in the first half of 1994 and 103.3% for the same
period of 1993.
Interest expense
- - ----------------
Interest expense decreased slightly to $3,441,000 in the second quarter
of 1994 versus $3,479,000 in 1993, and increased to $6,765,000 in the first
six months of 1994 from $6,354,000 in 1993. The 6.5% increase in year-to-date
interest expense reflects higher average debt outstanding in 1994 as compared
to 1993, including debt incurred to redeem the Company's Adjustable Rate
Preferred Stock.
Equity in earnings of affiliates
- - --------------------------------
Equity in earnings of affiliates includes the Company's portion of
earnings from Guaranty National and Intercargo. Earnings of $72,000 were
recorded from the Intercargo investment in the second quarter of 1994. The
Company's portion of Guaranty National's net earnings before the cumulative
effect of adopting changes in accounting principles was $3,034,000 and
$6,066,000 for the second quarter and first six-months of 1994, respectively,
and $2,587,000 and $5,647,000 for the corresponding periods of 1993, based on
Guaranty National's earnings of $6,075,000 and $5,246,000 for the second
quarters of 1994 and 1993, respectively, and $12,145,000 and $11,453,000 for
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<PAGE>
the six-month periods ended June 30, 1994 and 1993, respectively. Guaranty
National's gross premiums written increased to $177,738,000 for the first six
months of 1994 from $149,353,000 for the 1993 period. Guaranty National's
overall combined ratio was 96.5% and 95.1% for the first half of 1994 and
1993, respectively.
Other Expenses
- - --------------
Other general and administrative expenses increased $1,014,000 from
$1,145,000 in the second quarter of 1993 to $2,159,000 in the 1994's second
quarter. These expenses were $3,559,000 and $3,286,000 in the six month
periods ended June 30, 1994 and 1993, respectively. The quarterly and year-
to-year variances are primarily the result of fluctuations in certain deferred
compensation benefits that are based upon the market price of the Company's
common stock, which increased expenses in the second quarter and first six
months of 1994 by $828,000 and $43,000, respectively, over the corresponding
1993 periods.
Federal income taxes
- - --------------------
Federal income taxes on pre-tax operating results and the related
effective tax rates amounted to $3,479,000 (23.1%) and $3,365,000 (19.5%) in
the second quarters of 1994 and 1993, respectively. The corresponding amounts
for the first six months of 1994 and 1993 were $7,452,000 (23.1%) and
$7,964,000 (22.0%), 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 $14,097,000 for the
first six months of 1994 from $78,692,000 in 1993 to $64,595,000 in 1994. The
decrease in operating cash provided for the first half 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 collected. In 1994
Page 19
<PAGE>
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, the decline in year-to-year operating cash
flows approximated $3,200,000.
Cash used in investment activities decreased to $51,911,000 for the first
six months of 1994 from $82,215,000 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 $12,031,000 for the first half of
1994 and cash provided by financing activities during the same period of 1993
was $7,571,000. 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 $109,508,000 and $92,421,000 at June 30, 1994 and December 31, 1993,
respectively. Orion's insurance subsidiaries had consolidated policyholders'
surplus of $429,920,000 at June 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 June 30, 1994 and 1.4:1
at December 31, 1993.
On May 24, 1994, Orion filed a shelf registration statement with the
Securities and Exchange Commission ("SEC") relating to the offering of up to
$100 million of its debt and/or equity securities. Upon the registration
statement being declared effective by the SEC, securities may be issued from
time to time, with specified terms of an issue of securities to be set forth
in a prospectus supplement at the time of issuance. The proceeds from the
sale of securities would 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 $8,500,000 in scheduled
commitment reductions through June 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 $46,500,000 at June 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 June 30,
1994 the Company had 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 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 June
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 80,700 shares of its common stock at an aggregate
cost of $2,525,000 in the first six months of 1994. The Company's remaining
stock purchase authorization from its Board of Directors amounted to
$3,356,000 at June 30, 1994. In July 1994, the Company repurchased an
additional 48,000 shares for $1,658,000 and the Board of Directors authorized
an additional $5,000,000 for the stock repurchase program, bringing the
remaining authorization as of July 31, 1994 to $6,698,000.
On September 10, 1993 the Company declared a 5-for-4 split of its common
stock payable on November 15, 1993 to shareholders of record on October 15,
1993. Prior period common stock and per common share data presented in the
financial statements have been restated to give effect to this stock split.
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.
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<PAGE>
PART II. OTHER INFORMATION
Items 1 - 3.
- - ------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- - -------------------------------------------------------------
At the Orion Annual Meeting of Stockholders held on June 1, 1994
("Annual Meeting"), 14,346,238 shares of Orion Common Stock were
outstanding and entitled to vote (the "Outstanding Common Stock"), and
13,039,920 shares of Outstanding Common Stock or 90.9%, consist- ing of
a quorum, were represented at the Annual Meeting in person or by proxy.
At that Annual Meeting, the directors nominated were elected by the
following votes:
Number of Shares Number of Shares
Voted For Withheld
----------------- -----------------
Bertram J. Cohn 12,972,226 67,694
John C. Colman 13,026,144 13,776
Alan R. Gruber 13,026,976 12,944
Larry D. Hollen 13,025,595 14,325
Robert H. Jeffrey 13,026,063 13,857
Warren R. Lyons 13,024,212 15,708
James K. McWilliams 13,027,706 12,214
Ronald W. Moore 13,025,938 13,982
Robert B. Sanborn 13,024,783 15,137
William J. Shepherd 13,026,144 13,776
John R. Thorne 13,026,018 13,902
Roger B. Ware 13,025,715 14,205
No director received fewer than 12,972,226 votes or 90.4% of the
Outstanding Common Stock (99.5% of the shares voted at the Annual
Meeting).
At the Annual Meeting, the selection of Deloitte & Touche, independ-
ent certified public accountants, as auditors for Orion for the year
1994 was ratified by a vote of 12,993,675 shares or 90.6% of the
Outstanding Common Stock (99.6% of the shares voted at the Annual
Meeting). Holders of 9,766 shares or approximately 0.07% of the
Outstanding Common Stock voted against the ratification and holders of
36,479 shares or approximately 0.3% of the Outstanding Common Stock
abstained from voting.
There were no "broker non-votes" on any of the proposals presented at
the Annual Meeting.
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<PAGE>
Item 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 19: Reserve information from Guaranty National
Corporation's 1993 10-K (incorporated by
reference to pages 11-14 of Guaranty National
Corporation's Annual Report on Form 10-K for
1993, Commission file number 1-10861)
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter.
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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: August 4, 1994 By: /s/ Alan R. Gruber
---------------------------------
Chairman of the Board
and Chief Executive Officer
Date: August 4, 1994 By: /s/ Daniel L. Barry
----------------------------------
Vice President, Controller
and Principal Accounting Officer
Page 24
<PAGE>
EXHIBIT INDEX
Page No.
Exhibit 11: Computation of Earnings 26
Per Common Share
Exhibit 15: Letter in Lieu of Consent of 27
Deloitte & Touche re Unaudited
Interim Financial Information
Exhibit 19: Reserve information from Guaranty
National Corporation's 1993 10-K
(incorporated by reference to pages
11-14 of Guaranty National Corporation's
Annual Report on Form 10-K for 1993,
Commission file number 1-10861)
Page 25
<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 Six Months Ended
June 30, June 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 ............................. 14,316 14,532 14,335 14,417
Dilutive effect of stock options .......... 123 145 124 143
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 14,439 14,677 14,459 14,560
======= ======= ======= =======
Net earnings before preferred dividend
requirements .............................. $11,567 $13,907 $24,807 $40,060
Preferred dividends ......................... - 27 - 409
------- ------- ------- -------
Net earnings attributable to common
stockholders .............................. $11,567 $13,880 $24,807 $39,651
======= ======= ======= =======
Net earnings per common share ............... $ .80 $ .95 $ 1.72 $ 2.72
======= ======= ======= =======
FULLY DILUTED
Weighted average number of shares
outstanding ............................. 14,316 14,532 14,335 14,417
Dilutive effect of stock options .......... 131 145 131 143
Conversion of $2.125 preferred stock ...... - - - 115
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 14,447 14,677 14,466 14,675
======= ======= ======= =======
Net earnings before preferred dividend
requirements .............................. $11,567 $13,907 $24,807 $40,060
Adjustable rate preferred stock dividends ... - 27 - 407
------- ------- ------- -------
Net earnings attributable to common
stockholders .............................. $11,567 $13,880 $24,807 $39,653
======= ======= ======= =======
Net earnings per common share ............... $ .80 $ .95 $ 1.71 $ 2.70
======= ======= ======= =======
</TABLE>
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EXHIBIT 15
August 1, 1994
Orion Capital Corporation
30 Rockefeller Plaza
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
June 30, 1994 and 1993, as indicated in our report dated August 1, 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 June 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
Hartford, Connecticut
Page 27
