<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, 1996
( ) 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
---- ----
13,751,857 shares of Common Stock, $1.00 par value, of the registrant
were outstanding on August 1, 1996.
Page 1 of 29
Exhibit Index Appears at Page 25
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ORION CAPITAL CORPORATION
FORM 10-Q INDEX
For the Quarter Ended June 30, 1996
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet at June 30, 1996
(Unaudited) and December 31, 1995....................... 3 - 4
Consolidated Statement of Earnings for the three and six-
month periods ended June 30, 1996 and 1995 (Unaudited).. 5
Consolidated Statement of Stockholders' Equity for the
six-month periods ended June 30, 1996 and 1995
(Unaudited), and for the year ended December 31, 1995 .. 6
Consolidated Statement of Cash Flows for the six-month
periods ended June 30, 1996 and 1995 (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
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<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
(000s omitted)
June 30, 1996 December 31,
(Unaudited) 1995
------------- ------------
<S> <C> <C>
Investments:
Fixed maturities at amortized cost
(market $347,188 - 1996 and $276,282 -
1995) .................................. $ 342,559 $ 265,169
Fixed maturities at market (amortized
cost $1,084,148 - 1996 and $748,008 -
1995) .................................. 1,093,717 782,869
Common stocks at market (cost $147,065 -
1996 and $108,211 - 1995) .............. 208,947 158,895
Non-redeemable preferred stocks at
market (cost $180,617 - 1996 and
$149,167 - 1995) ....................... 177,926 145,990
Other long-term investments .............. 77,781 62,925
Short-term investments ................... 334,352 187,013
---------- ----------
Total investments ..................... 2,235,282 1,602,861
Cash ....................................... 26,744 3,584
Accrued investment income .................. 26,788 19,290
Investments in and advances to affiliates .. 20,935 125,731
Accounts and notes receivable .............. 185,105 137,197
Reinsurance recoverables and prepaid
reinsurance .............................. 449,630 360,052
Deferred policy acquisition costs .......... 127,700 77,673
Property and equipment ..................... 68,913 34,009
Excess of cost over fair value of net
assets acquired .......................... 82,490 50,199
Deferred federal income taxes .............. 48,393 8,726
Other assets ............................... 66,310 54,266
---------- ----------
Total assets .......................... $3,338,290 $2,473,588
========== ==========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 3
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<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(000s omitted - except for share data)
June 30, 1996 December 31,
(Unaudited) 1995
------------- ------------
<S> <C> <C>
Liabilities:
Policy liabilities -
Losses ...................................... $1,331,162 $1,007,016
Loss adjustment expenses .................... 341,863 267,966
Unearned premiums ........................... 484,034 302,105
Policyholders' dividends .................... 20,777 18,946
---------- ----------
Total policy liabilities .................. 2,177,836 1,596,033
Federal income taxes payable .................. 17,006 18,910
Notes payable ................................. 311,246 209,148
Other liabilities ............................. 293,160 158,594
---------- ----------
Total liabilities ......................... 2,799,248 1,982,685
---------- ----------
Contingencies (Note F)
Minority interest ............................... 41,476 -
---------- ----------
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 ............................... 146,323 146,658
Net unrealized investment gains, net of
federal income taxes of $18,841 -
1996 and $26,691 - 1995 ..................... 46,911 63,255
Net unrealized foreign exchange translation
losses, net of federal income tax benefits of
$357 - 1996 and $540 - 1995 ................. (3,595) (3,935)
Retained earnings ............................. 330,001 298,452
Treasury stock, at cost (1,589,915 shares -
1996 and 1,385,012 shares - 1995) ........... (35,731) (26,534)
Deferred compensation on restricted stock ..... (1,681) (2,331)
---------- ----------
Total stockholders' equity ................ 497,566 490,903
---------- ----------
Total liabilities and stockholders' equity. $3,338,290 $2,473,588
========== ==========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 4
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<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,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Premiums earned .............................. $319,109 $186,709 $621,511 $361,767
Net investment income ........................ 36,291 24,435 70,793 48,288
Realized investment gains .................... 5,761 726 11,126 3,286
Other income ................................. 6,011 241 11,533 567
-------- -------- -------- --------
367,172 212,111 714,963 413,908
-------- -------- -------- --------
Expenses:
Losses incurred .............................. 174,004 99,810 342,804 194,555
Loss adjustment expenses ..................... 45,329 29,653 88,506 57,505
Amortization of deferred policy acquisition
costs ...................................... 86,810 48,150 165,249 93,366
Other insurance expenses ..................... 6,697 4,144 15,533 10,208
Dividends to policyholders ................... 4,946 5,149 8,892 8,465
Interest expense ............................. 6,143 3,472 12,318 7,034
Other expenses ............................... 12,451 3,389 23,155 5,310
-------- -------- -------- --------
336,380 193,767 656,457 376,443
-------- -------- -------- --------
Earnings before equity in earnings (loss) of
affiliates, federal income taxes and
minority interest expense .................... 30,792 18,344 58,506 37,465
Equity in earnings (loss) of affiliates ........ 119 2,722 (721) 5,817
-------- -------- -------- --------
Earnings before federal income taxes and
minority interest expense .................... 30,911 21,066 57,785 43,282
Federal income taxes ........................... 7,701 5,017 13,767 10,171
Minority interest expense ...................... 2,637 - 5,558 -
-------- -------- -------- --------
Net earnings ................................. $ 20,573 $ 16,049 $ 38,460 $ 33,111
======== ======== ======== ========
Net earnings per common share ................ $ 1.49 $ 1.13 $ 2.76 $ 2.33
======== ======== ======== ========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 5
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<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(000s omitted)
Six Months Ended
June 30, Year Ended
(Unaudited) December 31,
------------------- ------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Common stock:
Balance ................................ $ 15,338 $ 15,338 $ 15,338
======== ======== ========
Capital surplus:
Balance, beginning of period ........... $146,658 $147,598 $147,598
Issuance of common stock ............... - 152 152
Exercise of stock options and issuance
(cancellation) of restricted stock ... (335) 12 (1,092)
-------- -------- --------
Balance, end of period ................. $146,323 $147,762 $146,658
======== ======== ========
Net unrealized investment gains (losses):
Balance, beginning of period ........... $ 63,255 $(11,498) $(11,498)
Change in unrealized investment gains
(losses), net of taxes ............... (16,344) 46,202 74,753
-------- -------- --------
Balance, end of period ................. $ 46,911 $ 34,704 $ 63,255
======== ======== ========
Net unrealized foreign exchange
translation losses:
Balance, beginning of period ........... $ (3,935) $ (3,959) $ (3,959)
Change in unrealized foreign exchange
translation losses, net of taxes ..... 340 137 24
-------- -------- --------
Balance, end of period ................. $ (3,595) $ (3,822) $ (3,935)
======== ======== ========
Retained earnings:
Balance, beginning of period ........... $298,452 $242,908 $242,908
Net earnings ........................... 38,460 33,111 67,622
Dividends declared ..................... (6,911) (5,628) (12,078)
-------- -------- --------
Balance, end of period ................. $330,001 $270,391 $298,452
======== ======== ========
Treasury stock:
Balance, beginning of period ........... $(26,534) $(22,451) $(22,451)
Issuance of common stock ............... - 728 770
Exercise of stock options and issuance
(cancellation) of restricted stock ... 414 108 2,330
Acquisition of treasury stock .......... (9,611) - (7,183)
-------- -------- --------
Balance, end of period ................. $(35,731) $(21,615) $(26,534)
======== ======== ========
Deferred compensation on restricted stock:
Balance, beginning of period ........... $ (2,331) $ (2,848) $ (2,848)
(Issuance) cancellation of restricted
stock ................................ 170 (76) (517)
Amortization of deferred compensation on
restricted stock ..................... 480 594 1,034
-------- -------- --------
Balance, end of period ................. $ (1,681) $ (2,330) $ (2,331)
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 6
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<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(000s omitted)
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Premiums collected ............................. $ 646,044 $ 349,560
Net investment income collected ................ 65,407 46,367
Losses and loss adjustment expenses paid ....... (395,065) (201,301)
Policy acquisition costs paid .................. (195,278) (106,324)
Dividends paid to policyholders ................ (7,061) (6,281)
Interest paid .................................. (11,982) (6,891)
Federal income tax payments .................... (16,146) (8,267)
Other payments ................................. (10,144) (4,603)
--------- ---------
Net cash provided by operating activities .... 75,775 62,260
--------- ---------
Cash flows from investing activities:
Maturities of fixed maturity investments ....... 96,058 23,989
Sales of fixed maturity investments ............ 139,777 115,420
Sales of equity securities ..................... 60,352 31,296
Investments in fixed maturities ................ (190,483) (157,974)
Investments in equity securities ............... (43,583) (27,376)
Acquisition of McGee ........................... - (22,177)
Effect on cash of consolidating Guaranty
National in 1996 and McGee in 1995 ........... 6,794 349
Net purchases of short-term investments ........ (91,058) (25,915)
Other payments ................................. (10,587) (2,027)
--------- ---------
Net cash used in investing activities ........ (32,730) (64,415)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable ........ - 12,000
Dividends paid to stockholders ................. (6,684) (5,623)
Dividends paid to minority stockholders ........ (1,909) -
Repayment of notes payable ..................... (938) (5,000)
Purchases of common stock ...................... (9,439) -
Other receipts (payments) ...................... 42 (16)
--------- ---------
Net cash provided by (used in) financing
activities ................................. (18,928) 1,361
--------- ---------
Effect of foreign exchange rate changes on cash... (957) 57
--------- ---------
Net increase (decrease) in cash .............. 23,160 (737)
Cash balance, beginning of period ................ 3,584 6,201
--------- ---------
Cash balance, end of period ...................... $ 26,744 $ 5,464
========= =========
<FN>
See Notes to Consolidated Financial Statements (Unaudited)
Page 7
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<CAPTION>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - (Continued)
(UNAUDITED)
(000s omitted)
Six Months Ended June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Reconciliation of net earnings to net
cash provided by operating activities:
Net earnings ..................................... $ 38,460 $ 33,111
-------- --------
Adjustments:
Depreciation and amortization .................. 5,515 2,593
Amortization of excess of cost over fair
value of net assets acquired ................. 1,576 586
Deferred federal income taxes .................. (523) 2,597
Amortization of fixed maturity investments ..... (1,363) 1,205
Non-cash investment income ..................... (5,542) (4,961)
Equity in (earnings) loss of affiliates ........ 721 (5,817)
Dividends received from affiliates ............. 137 1,638
Realized investment gains ...................... (11,126) (3,286)
Foreign exchange translation adjustment ........ 696 (111)
Minority interest expense ...................... 5,558 -
Other .......................................... 1,693 (20)
Change in assets and liabilities (net of effects
of consolidating Guaranty National in 1996 and
McGee in 1995):
Decrease (increase) in accrued investment
income ....................................... 114 (404)
Decrease (increase) in accounts and notes
receivable ................................... 3,730 (14,897)
Decrease (increase) in reinsurance recoverables
and prepaid reinsurance ...................... (23,106) 17,850
Increase in deferred policy acquisition costs... (12,390) (3,326)
Increase in other assets ....................... (9,136) (636)
Increase in losses ............................. 38,839 22,453
Increase in loss adjustment expenses ........... 12,940 14,657
Increase in unearned premiums .................. 40,375 3,499
Increase in policyholders' dividends ........... 1,831 2,184
Decrease in other liabilities .................. (13,224) (6,655)
-------- --------
Total adjustments and changes ................ 37,315 29,149
-------- --------
Net cash provided by operating activities ........ $ 75,775 $ 62,260
======== ========
<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, 1996 and 1995
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 ("Orion") 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 1995 annual report on Form
10-K.
Note B - Purchase of Guaranty National Corporation Common Stock
On July 2, 1996, the Company completed a tender offer to acquire
4,600,000 shares of Guaranty National Corporation ("Guaranty National")
common stock. Together with the open-market purchase of 120,000
additional shares on July 17, 1996, the Company has increased its
ownership of Guaranty National from 49.5% to 81.0%. The aggregate
purchase price, including expenses, of approximately $88,206,000 was paid
in cash.
These purchases of Guaranty National shares were recorded as of June
30, 1996 using the purchase method of accounting. A liability for the
purchase price was recorded in other liabilities on the June 30, 1996
balance sheet. All revenues and expenses of Guaranty National for the
first six months of 1996 have been consolidated with those of the
Company, and minority interest expense has been recorded for the portion
of Guaranty National's 1996 earnings that was attributable to the shares
not owned by the Company during that period. Consequently, the
consolidation of Guaranty National's results had no impact on the
Company's net earnings reported for the first half of 1996. The
Company's first quarter 1996 revenues and expenses have been restated
herein to include Guaranty National on a consolidated basis.
The increase in the Company's ownership to over 80% of Guaranty
National will allow the inclusion of Guaranty National in Orion's
consolidated federal income tax return, as well as the reversal of a
deferred tax liabilitiy previously established by the Company for its
Page 9
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share of the undistributed earnings of Guaranty National. The excess of
cost over the estimated fair value of the 31.5% interest in Guaranty
National's net assets acquired during 1996 was $9,080,000, after the
reversal of $21,547,000 of deferred taxes, and will be amortized over 28
years, which is the remaining amortization period for goodwill recorded upon
Orion's initial investment in Guaranty National.
Pro forma information as if the Guaranty National shares had been
purchased as of the beginning of each of the six-month periods ended June
30, 1996 and 1995 is as follows:
Six Months Ended
June 30,
----------------
1996 1995
---- ----
(000s omitted)
Total revenues ................................ $712,726 $661,105
======== ========
Net earnings .................................. $ 43,402 $ 37,806
======== ========
Net earnings per common share ................. $ 3.12 $ 2.66
======== ========
Note C - Investments in Affiliates
Investments in affiliates include the Company's interest in Guaranty
National through December 31, 1995, and the Company's 23.1% interest in
Intercargo Corporation ("Intercargo"), a publicly held company. The Company
records its share of Intercargo's operating results in the subsequent
quarter, after Intercargo has reported its financial results. Summarized
financial information of Intercargo for the three-month and six-month
periods ended June 30, 1996, and for Guaranty National and Intercargo for
the same periods in 1995, is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
(000s omitted)
Revenues:
Premiums earned .................... $ 14,740 $103,120 $ 36,368 $202,579
Realized investment gains (losses).. - (210) - 359
Investment and other income ........ 1,163 8,562 3,414 16,603
-------- -------- -------- --------
15,903 111,472 39,782 219,541
-------- -------- -------- --------
Expenses:
Insurance expenses ................. 14,915 100,653 42,780 197,591
Interest and other ................. 217 1,484 499 2,844
-------- -------- -------- --------
15,132 102,137 43,279 200,435
-------- -------- -------- --------
Earnings (loss) before equity in
earnings of affiliate and federal
income taxes ....................... 771 9,335 (3,497) 19,106
Equity in earnings of affiliate ...... 552 - 552 -
Federal income (taxes) benefit ....... (207) (2,409) 422 (4,758)
-------- -------- -------- --------
Net earnings (loss) .................. $ 1,116 $ 6,926 $ (2,523)$ 14,348
======== ======== ======== ========
The Company's proportionate share .... $ 119 $ 2,722 $ (721)$ 5,817
======== ======== ======== ========
Page 10
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Note D - 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. Reinsurance does not discharge the
primary liability of the original insurer. The table below summarizes certain
reinsurance information:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
(000s omitted)
Direct premiums written .............. $350,457 $190,709 $698,316 $365,864
Reinsurance assumed .................. 47,292 33,878 94,336 64,447
-------- -------- -------- --------
Gross premiums written ............... 397,749 224,587 792,652 430,311
Reinsurance ceded .................... (72,667) (33,987) (146,624) (63,619)
-------- -------- -------- --------
Net premiums written ................. $325,082 $190,600 $646,028 $366,692
======== ======== ======== ========
Direct premiums earned ............... $342,488 $186,928 $670,698 $360,248
Reinsurance assumed .................. 42,887 35,399 84,262 66,815
-------- -------- -------- --------
Gross premiums earned ................ 385,375 222,327 754,960 427,063
Reinsurance ceded .................... (66,266) (35,618) (133,449) (65,296)
-------- -------- -------- --------
Net premiums earned .................. $319,109 $186,709 $621,511 $361,767
======== ======== ======== ========
Loss and loss adjustment expenses
recoverable from reinsurers ........ $ 35,591 $ 21,000 $ 59,011 $ 32,013
======== ======== ======== ========
Note E - Stockholders' Equity and Earnings Per Common Share
The Company repurchased 213,311 shares of its common stock at an
aggregate cost of $9,611,000 in the first six months of 1996, leaving
$1,008,000 remaining from the Board of Directors' authorization for the stock
repurchase program.
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, 1996 and 1995. The weighted average
common shares amounted to 13,849,000 and 14,198,000 shares for the three
months ended June 30, 1996 and 1995, and 13,923,000 and 14,191,000 shares for
the six months ended June 30, 1996 and 1995, respectively.
Page 11
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Note F - Contingencies
Orion and its subsidiaries are routinely engaged in litigation incidental
to their businesses. Management believes that there are no significant legal
proceedings pending against the Company which, net of 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 Note J to the 1995
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, 1996, and
the related consolidated statements of earnings for the three-month and six-
month periods ended June 30, 1996 and 1995 and the statements of stockholders'
equity and cash flows for the six-month periods ended June 30, 1996 and 1995.
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.
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, 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
the year then ended; and in our report dated February 21, 1996, we expressed
an unqualified opinion on those consolidated financial statements. The
consolidated statements of earnings and cash flows for the year ended
December 31, 1995 are not presented herein. In our opinion, the information
set forth in the accompanying consolidated balance sheet as of December 31,
1995 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
July 24, 1996
Page 13
<PAGE>
ORION CAPITAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Six Months Ended June 30, 1996 and 1995
RESULTS OF OPERATIONS
Orion Capital Corporation ("Orion") and its majority-owned subsidiaries
(collectively the "Company") operate principally in the property and casualty
insurance business. The Company reports its insurance operations in three
segments - Regional Operations, Reinsurance/Special Programs and Guaranty
National Companies. Regional Operations provides workers compensation
insurance products through EBI Companies. Reinsurance/Special Programs
includes (i) DPIC Companies ("DPIC"), which markets professional liability
insurance, (ii) Connecticut Specialty, which writes specialty insurance
programs, (iii) SecurityRe Companies ("SecurityRe"), a reinsurer, (iv) Wm. H.
McGee & Co., Inc. ("McGee"), an underwriting management company that
specializes in ocean marine, inland marine and property insurance and (v) a
23.1% interest in Intercargo Corporation ("Intercargo"), which underwrites
insurance coverages for international trade. The third segment, Guaranty
National Corporation ("Guaranty National"), specializes in 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.
On July 2, 1996, the Company completed a tender offer to acquire
4,600,000 shares of Guaranty National common stock. Together with the open-
market purchase of 120,000 additional shares on July 17, 1996, the Company has
increased its ownership of Guaranty National from 49.5% to 81.0%. The
aggregate purchase price, including expenses, of approximately $88,206,000 was
paid in cash. The Company increased its investment in Guaranty National as
management believes it will provide a favorable investment return and it will
also allow the inclusion of Guaranty National in Orion's consolidated federal
income tax return. The Company's increased ownership percentage will allow
the Company's management to become more involved in setting the strategic
direction of Guaranty National.
These purchases of Guaranty National shares were recorded as of June 30,
1996. All revenues and expenses of Guaranty National for the first six months
of 1996 have been consolidated with those of the Company, and minority
interest expense has been recorded for the portion of Guaranty National's 1996
earnings that was attributable to the shares not owned by the Company during
that period. Consequently, the consolidation of Guaranty National's results
had no impact on the Company's net earnings reported for the first half of
1996. The Company's first quarter 1996 revenues and expenses have been
restated herein to include Guaranty National on a consolidated basis.
Page 14
<PAGE>
Earnings (loss) by segment before federal income taxes and minority
interest expense are summarized as follows for the quarterly and six-month
periods ended June 30, 1996 and 1995:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
(000s omitted)
Regional Operations ............... $17,286 $12,598 $30,101 $27,081
Reinsurance/Special Programs ...... 12,514 9,954 24,461 19,173
Guaranty National Corporation ..... 6,945 2,419 14,186 5,295
------- ------- ------- -------
Total ........................... 36,745 24,971 68,748 51,549
Other ............................. (5,834) (3,905) (10,963) (8,267)
------- ------- ------- -------
$30,911 $21,066 $57,785 $43,282
======= ======= ======= =======
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,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
Loss and loss adjustment expenses.. 68.7% 69.3% 69.4% 69.7%
Policy acquisition costs and other
insurance expenses .............. 29.3 28.0 29.1 28.6
----- ----- ----- -----
Total before policyholders'
dividends ................... 98.0 97.3 98.5 98.3
Policyholders' dividends .......... 1.6 2.8 1.4 2.3
----- ----- ----- -----
Total after policyholders'
dividends ................... 99.6% 100.1% 99.9% 100.6%
===== ===== ===== =====
REVENUES
Premiums written and premiums earned
- ------------------------------------
Net premiums written increased 70.6% ($134,482,000) to $325,082,000 in
the second quarter of 1996 versus $190,600,000 in the second quarter of 1995,
and 76.2% ($279,336,000) to $646,028,000 in the first six months of 1996 from
$366,692,000 in the first half of 1995. The consolidation of Guaranty
National increased net written premiums by $120,742,000 for the second quarter
and $244,355,000 for the first half of 1996. The results by segment are as
follows:
- Regional Operations' premiums written increased 8.0% ($6,463,000) to
$87,553,000 in the second quarter of 1996 from $81,090,000 in the second
Page 15
<PAGE>
quarter of 1995 and 12.1% ($19,274,000) in the first half of 1996 to
$179,158,000 versus $159,884,000 in 1995. Premiums written were
increased by the opening of fifteen new offices in 1995 and 1996, in
territories where the Company believes it will benefit from its service
oriented approach. The increases were 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 commission expenses.
- Reinsurance/Special Programs' premiums written during the second quarter
of 1996 increased 6.6% ($7,277,000) to $116,787,000 from $109,510,000 in
the 1995 second quarter, and 7.6% ($15,707,000) to $222,515,000 in the
first half of 1996 from $206,808,000 in 1995. Premiums written by DPIC
for professional liability insurance, the largest special program,
increased 7.2% ($5,934,000) to $88,492,000 for the first six months of
1996 from $82,558,000 for the first half of 1995. The increase is
primarily attributable to growth in DPIC's programs for architects and
engineers. Premium volume for Connecticut Specialty increased 9.8%
($8,543,000) to $95,497,000 in the first six months of 1996 from
$86,954,000 in the 1995 period. The increase resulted from increased
participation in the underwriting pools managed by McGee and increased
premiums written in its low exposure professional liability programs,
offset in part by lower premiums from other marine and transportation
coverages. The percentage of treaty and facultative reinsurance premiums
assumed to total net premiums written for Reinsurance/Special Programs
amounted to 17.3% and 18.0% in the first half of 1996 and 1995,
respectively.
- Guaranty National's net written premiums of $120,742,000 for the second
quarter of 1996 and $244,355,000 for the first six months of the year
have been included in the Company's financial statements. Net written
premiums for Guaranty National were $82,499,000 and $164,321,000 in the
three and six-month periods ended June 30, 1995, respectively. Guaranty
National's net written premiums for its personal lines, commercial lines,
and collateral protection unit increased 80.0%, 11.6% and 70.9% for the
first six months of 1996 over the comparable period for 1995. The
increase for personal lines was the result of Guaranty National's
acquisition of Viking Insurance Company of Wisconsin ("Viking") in July
1995. Commercial lines premiums increased in its specialty and standard
divisions, partially offset by a planned reduction in commercial auto
liability premiums written in its general division. The collateral
protection units increase was due to geographic expansion in the
Northeast and new products.
Premiums earned increased 70.9% ($132,400,000) to $319,109,000 in the
second quarter of 1996 compared to $186,709,000 in the second quarter of 1995,
and 71.8% ($259,744,000) to $621,511,000 in the first six months of 1996 from
$361,767,000 in 1995. The 1996 increases were attributable to the inclusion
of Guaranty National earned premiums of $118,949,000 for the second quarter
and $234,419,000 for the six-month period, as well as the recognition in
income of increased premium writings.
Page 16
<PAGE>
Net investment income
- ---------------------
Pre-tax net investment income increased 48.5% ($11,856,000) to
$36,291,000 for the second quarter of 1996 versus $24,435,000 for the second
quarter of 1995, and 46.6% ($22,505,000) to $70,793,000 for the first six
months of 1996 as compared to $48,288,000 for 1995. The pre-tax yields on the
average investment portfolio were 6.6% for the first six months of 1996 and
7.1% for the first half of 1995, and the after-tax yields were 5.2% and 5.5%,
respectively. Net investment income increased by $9,428,000 and $18,844,000
in the three and six-month periods ended June 30, 1996, respectively, from the
inclusion of Guaranty National in 1996, as well as by increased earnings on
a higher investment base, notwithstanding a growing portfolio of lower
yielding tax-advantaged securities. Net investment income reflects earnings
from limited partnership investments of $3,117,000 and $6,072,000 for the
second quarter and first six months of 1996, respectively, and $2,513,000 and
$4,688,000 for the respective 1995 periods. These increases were primarily
attributable to including Guaranty National's partnership earnings for 1996.
Earnings from limited partnership investments can vary considerably from
quarter to quarter; however, the Company's long-term experience with these
investments has been quite favorable.
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 $1,770,628,000 and $1,235,051,000 at June 30, 1996 and December
31, 1995, or approximately 78.3% and 76.9% of the Company's cash and
investments, respectively.
The Company's investment philosophy is to achieve a superior rate of
return after taxes while maintaining a proper balance of safety, liquidity,
maturity and marketability. 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, 1996 and December 31, 1995,
the Company's investments in non-investment grade and unrated fixed maturity
securities were carried at $206,712,000 and $139,075,000 with market values
of $205,813,000 and $139,067,000, respectively. The increases are primarily
attributable to the inclusion of Guaranty National's portfolio in 1996. Non-
investment grade and unrated fixed maturity securities represent a total of
9.1% and 8.7% of cash and investments and 6.2% and 5.6% of total assets at
June 30, 1996 and December 31, 1995, respectively.
Page 17
<PAGE>
Realized investment gains
- -------------------------
Net realized investment gains increased $5,035,000 and $7,840,000 to
$5,761,000 and $11,126,000 in the second quarter and first six months of 1996,
respectively, from gains of $726,000 and $3,286,000 in the respective periods
of 1995. Realized investment gains in the second quarters of 1996 and 1995
are net of $700,000 and $1,000,000, respectively, of provisions for losses on
securities deemed to be other than temporarily impaired. Such provisions were
$1,868,000 and $1,500,000 for the six-month periods ended June 30, 1996 and
1995, 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 68.7% and 69.4% in the second quarter and first six months
of 1996, respectively, compared to 69.3% and 69.7% in the same periods of
1995. The decreases in the 1996 loss ratios are attributable to improvements
in both the Regional Operations and Reinsurance/Special Programs segments,
offset in part by slightly higher loss ratios from the consolidation of
Guaranty National's results in 1996. Adverse development of prior years'
losses amounted to $3,612,000 on a consolidated basis with Guaranty National
in the first six months of 1996 compared with $9,245,000 excluding Guaranty
National in the first half of 1995. Management believes that the Company's
reserves for losses and loss adjustment expenses make reasonable and
sufficient provision for the ultimate cost of all losses on claims incurred.
The loss ratio for the Regional Operations segment was 61.4% in the 1996
second quarter and 65.1% in the 1995 second quarter. In the first half of
1996 the loss ratio was 63.5% as compared to 64.1% in 1995. The decreases in
the 1996 loss ratios reflect the continued success of the Company's service
oriented approach for workers compensation insurance, offset in part by higher
initial reserving.
The second quarter 1996 and 1995 loss ratios for Reinsurance/Special
Programs amounted to 72.9% and 72.4%, respectively. The loss ratios for the
six-month periods ended June 30, 1996 and 1995 were 71.5% and 73.7%,
respectively. The increase in the second quarter loss ratio is due to higher
initial reserving by DPIC. The improvement in the year-to-date loss ratio for
this segment is attributable in large part to lower loss ratios for
Connecticut Specialty, where results were impacted in 1995 by certain programs
cancelled in the second half of 1994 which had unfavorable loss experience.
Page 18
<PAGE>
Guaranty National's loss ratio for its personal lines of business
increased to 73.4% and 74.4% in the second quarter and first six months of
1996 from 73.0% for both of these periods in 1995. The commercial lines loss
ratio increased to 70.5% and 70.9% in the three and six-month periods of 1996
from 69.1% and 67.3% in the respective 1995 periods. The increase in the loss
ratio from personal lines was from higher claim frequency. The higher loss
ratio for commercial lines was primarily due to increased claim frequency and
severity for specialty automobile programs, as well as an increase in fire and
hail storm losses within the specialty and standard divisions.
The ratio of deferred policy acquisition costs and other insurance
expenses to premiums earned (the "expense ratio") was 29.1% in the first six
months of 1996 as compared to 28.6% in 1995. The increase in the expense
ratio in 1996 is attributable to a number of factors including opening offices
in new territories, a change in the mix of business toward policies with lower
premiums and losses relative to policyholder servicing expenses and general
inflationary increases in fixed operating expenses. The decrease in the ratio
of policyholders' dividends to premiums earned (the "dividend ratio") to 1.4%
during the first six months of 1996 from 2.3% in 1995 results from the
consolidation of Guaranty National in 1996. The combined ratio was 99.9% in
the first half of 1996 and 100.6% for the same period of 1995.
Interest expense
- ----------------
Interest expense increased to $6,143,000 in the second quarter of 1996
from $3,472,000 in 1995, and increased to $12,318,000 in the first six months
of 1996 versus $7,034,000 in 1995. The 75.1% increase in year-to-date
interest expense is due to the inclusion of interest expense on Guaranty
National's $100,000,000 bank debt for the 1996 periods, and higher average
debt outstanding after the issuance of $100,000,000 of Senior Notes by Orion
on July 17, 1995, offset in part by the extinguishment of Orion's bank debt
at that time.
Other Expenses
- --------------
Other expenses were $12,451,000 and $23,155,000 in the second quarter and
first six months of 1996, respectively, versus $3,389,000 and $5,310,000 for
the respective periods of 1995. The increases in both other income and other
expenses for 1996 are primarily attributable to the inclusion of McGee's
revenue and expenses after it was acquired by the Company on June 30, 1995.
Equity in earnings of affiliates and minority interest expense
- --------------------------------------------------------------
Equity in earnings of affiliates for 1996 consists of earnings recorded
from the Intercargo investment of $119,000 for the second quarter and a loss
of $721,000 for the first six months. The Company records its share of
Intercargo's results in the subsequent quarter, and the six-month period
reflects the loss reported by Intercargo in the fourth quarter of 1995.
Earnings of $303,000 and $522,000 were recorded from the Intercargo investment
in the second quarter and first six months of 1995, respectively. In 1995
Guaranty National was a non-majority owned affiliate of the Company and was
therefore accounted for using the equity method. Included in equity in net
Page 19
<PAGE>
earnings of affiliates for 1995 were second quarter and six-month earnings
from Guaranty National of $2,419,000 and $5,295,000, respectively. Guaranty
National became a majority-owned subsidiary in July 1996, and its results have
been consolidated in the Company's financial statements for all of 1996.
Minority interest expense of $2,637,000 for the second quarter and $5,558,000
for the first half of 1996 were recorded for the after-tax portion of Guaranty
National's 1996 earnings attributable to stockholders of Guaranty National
other than the Company.
Federal income taxes
- --------------------
Federal income taxes on pre-tax operating results and the related
effective tax rates amounted to $7,701,000 (24.9%) and $5,017,000 (23.8%) in
the second quarters of 1996 and 1995, respectively. The corresponding amounts
for the first six months of 1996 and 1995 were $13,767,000 (23.8%) and
$10,171,000 (23.5%), 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. The higher tax rates for 1996 versus 1995 result
from reporting Guaranty National in the Company's financial statements on a
consolidated basis, offset in part by the increased level of tax-advantaged
investments in the Company's portfolio. The effective tax rate is expected
to decrease in the second half of 1996. Dividends received from Guaranty
National will no longer be taxable since Guaranty National will be included
in Orion's consolidated federal income tax return after the Company increases
its ownership of Guaranty National to over 80% in July 1996. Also, a tax
provision will no longer be required for the Company's portion of Guaranty
National's undistributed earnings. The liability for deferred taxes
established by the Company through June 30, 1996 for its share of Guaranty
National's undistributed earnings has been reversed, resulting in a reduction
of $21,547,000 in the amount of goodwill recorded from the purchase of
Guaranty National shares, with no effect on net income.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased by $13,515,000 for the
first six months of 1996 from $62,260,000 in 1995 to $75,775,000 in 1996. The
increase is attributable to including Guaranty National's cash flow in the
Company's consolidated financial statements. Cash flow for 1995 included a
disbursement of $7,800,000 under a retrospectively rated program written by
DPIC.
Cash used in investment activities decreased to $32,730,000 for the first
six months of 1996 from $64,415,000 in 1995. Cash is used in investment
activities primarily for purchases of investments. The purchases are funded
by maturities and sales of investments, as well as by the net cash from
positive operating cash flows after cash provided by or used in financing
activities. In June 1995 Orion paid $22,000,000 plus acquisition costs to
acquire McGee. Included in other liabilities on the June 30, 1996 balance
sheet is $88,206,000 for the purchase of 4,720,000 shares of Guaranty National
common stock, which was paid for in July 1996 from funds obtained from the
short-term investment portfolio.
Page 20
<PAGE>
Cash used in financing activities was $18,928,000 for the first half of
1996 and cash provided by financing activities during the same period of 1995
was $1,361,000. Cash was used for the Company's stock repurchase program in
1996, and for dividend payments and scheduled debt payments in both years. The
Company increased its quarterly dividend rate by 15% in the third quarter of
1995 and an additional 9% in the first quarter of 1996. In 1995, Orion
borrowed $12,000,000 under its bank line of credit to finance part of the
McGee acquisition.
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. 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. Excluding Guaranty National, the insurance subsidiaries held cash
and short-term investments of $220,180,000 and $123,457,000 at June 30, 1996
and December 31, 1995, respectively. As of June 30, 1996, Guaranty National
has not been combined with the Orion's other insurance subsidiaries for
statutory reporting purposes. Orion's insurance subsidiaries had consolidated
policyholders' surplus of $548,422,000 at June 30, 1996 and $521,510,000 at
December 31, 1995, and statutory operating leverage ratios of trailing twelve
months net premiums written to policyholders' surplus of 1.4:1 at June 30,
1996 and 1.5:1 at December 31, 1995.
The terms of Orion's indentures for its $100,000,000 of 7 1/4% Senior
Notes due 2005 and its $110,000,000 of 9 1/8% Senior Notes due 2002 limit the
amount of liens and guaranties by the Company, and the Company's ability to
incur secured indebtedness without equally and ratably securing the senior
notes. Management does not believe that these limitations unduly restrict the
Company's operations or limit Orion's ability to pay dividends on its stock.
At June 30, 1996, the Company was in compliance with the terms of its senior
note indentures. Management believes that the Company continues to have
substantial sources of capital and liquidity from the capital markets and bank
borrowings.
As of June 30, 1996, Guaranty National has $100,000,000 outstanding under
an agreement with several banks which provides for an unsecured reducing
revolving credit facility. Principal payments are due from April 1998 until
2002. Interest is payable quarterly at interest rates based on the floating
LIBOR rate, plus a margin of 0.5% to 1.0%. Guaranty National hedged
$80,000,000 of these borrowings until 1998 with interest rate swap agreements
which result in a fixed interest rate of approximately 6.5%.
The Company repurchased 213,311 shares of its common stock at an
aggregate cost of $9,611,000 in the first six months of 1996, leaving
$1,008,000 remaining from the Board of Directors' authorization for the stock
repurchase program.
Page 21
<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 5, 1996 ("Annual
Meeting"), 13,868,306 shares of Orion Common Stock were outstanding and
entitled to vote (the "Outstanding Common Stock"); 12,773,689 shares or 92.11%
of the Outstanding Common Stock, consti- tuting 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
----------------- -----------------
W. Marston Becker 12,744,804 28,885
Bertram J. Cohn 12,744,677 29,012
John C. Colman 12,745,230 28,459
Alan R. Gruber 12,744,349 29,340
Larry D. Hollen 12,733,782 39,907
Robert H. Jeffrey 12,745,548 28,141
Warren R. Lyons 12,745,175 28,514
James K. McWilliams 12,745,438 28,251
Ronald W. Moore 12,744,885 28,804
Robert B. Sanborn 12,744,555 29,134
William J. Shepherd 12,745,248 28,441
John R. Thorne 12,744,589 29,100
Roger B. Ware 12,745,463 28,226
No director received fewer than 12,733,782 votes or 91.82% of the Outstanding
Common Stock (99.7% 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 1996 was
ratified by a vote of 12,726,075 shares or 91.76% of the Outstanding Common
Stock (99.6% of the shares voted at the Annual Meeting). Holders of 17,630
shares or approximately 0.13% of the Outstanding Common Stock voted against
the ratification and holders of 29,984 shares or approximately 0.21% of the
Outstanding Common Stock abstained from voting.
There were no "broker non-votes" on any of the proposals presented at the
Annual Meeting.
Page 22
<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 27: Financial Data Schedule
(b) Reports on Form 8-K.
A report on Form 8-K, dated July 2, 1996 with respect to an event
described in Item 2 of Form 8-K, was filed on July 16, 1996 to report the
purchase by Orion and certain of its subsidiaries of 4,600,000 shares of
Guaranty National Corporation ("GNC") common stock on July 2, 1996, at $18.50
per share, pursuant to an Orion tender offer. The GNC shares acquired,
together with the 7,409,942 shares then already owned by Orion and its
subsidiaries, represented approximately 80.2% of the GNC shares outstanding
as of July 2, 1996.
The financial statements of GNC as of and for the year ended December
31, 1995, and as of March 31, 1996 and for the three months ended March 31,
1996 and 1995 were incorporated by reference in the report on Form 8-K from
Exhibits (g)(1) and (g)(2) of the Schedule 13E-3 dated May 8, 1996, filed by
Orion and certain of its subsidiaries.
Page 23
<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: August 5, 1996 By: /s/ W. Marston Becker
---------------------------------
Vice Chairman
Date: August 5, 1996 By: /s/ Daniel L. Barry
----------------------------------
Vice President and
Chief Financial 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 27: Financial Data Schedule 28
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,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computation of weighted average number of
common and equivalent shares outstanding:
PRIMARY -
Weighted average number of shares
outstanding ............................. 13,662 14,069 13,739 14,068
Dilutive effect of stock options and stock
awards .................................. 187 129 184 123
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 13,849 14,198 13,923 14,191
======= ======= ======= =======
Net earnings attributable to common
stockholders .............................. $20,573 $16,049 $38,460 $33,111
======= ======= ======= =======
Net earnings per common share ............... $ 1.49 $ 1.13 $ 2.76 $ 2.33
======= ======= ======= =======
FULLY DILUTED
Weighted average number of shares
outstanding ............................. 13,662 14,069 13,739 14,068
Dilutive effect of stock options and stock
awards .................................. 207 138 194 127
------- ------- ------- -------
Weighted average number of common and
equivalent shares ....................... 13,869 14,207 13,933 14,195
======= ======= ======= =======
Net earnings attributable to common
stockholders .............................. $20,573 $16,049 $38,460 $33,111
======= ======= ======= =======
Net earnings per common share ............... $ 1.48 $ 1.13 $ 2.76 $ 2.33
======= ======= ======= =======
Page 26
</TABLE>
EXHIBIT 15
July 24, 1996
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 June 30, 1996 and 1995, as indicated
in our report dated July 24, 1996; because we did not perform an audit,
we expressed no opinion on the 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, 1996, 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. 33-59847 on Form S-8.
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 27
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS FINANCIAL SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ORION CAPITAL CORPORATION'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 1,093,717
<DEBT-CARRYING-VALUE> 342,559
<DEBT-MARKET-VALUE> 347,188
<EQUITIES> 386,873
<MORTGAGE> 1,288
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,235,282
<CASH> 26,744
<RECOVER-REINSURE> 367,354
<DEFERRED-ACQUISITION> 127,700
<TOTAL-ASSETS> 3,338,290
<POLICY-LOSSES> 1,673,025
<UNEARNED-PREMIUMS> 484,034
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 20,777
<NOTES-PAYABLE> 311,246
<COMMON> 161,661
0
0
<OTHER-SE> 335,905
<TOTAL-LIABILITY-AND-EQUITY> 3,338,290
621,511
<INVESTMENT-INCOME> 70,793
<INVESTMENT-GAINS> 11,126
<OTHER-INCOME> 11,533
<BENEFITS> 431,310
<UNDERWRITING-AMORTIZATION> 165,249
<UNDERWRITING-OTHER> 24,425
<INCOME-PRETAX> 57,785
<INCOME-TAX> 13,767
<INCOME-CONTINUING> 38,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,460
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.76
<RESERVE-OPEN> 1,280,317
<PROVISION-CURRENT> 427,698
<PROVISION-PRIOR> 3,612
<PAYMENTS-CURRENT> 136,508
<PAYMENTS-PRIOR> 258,555
<RESERVE-CLOSE> 1,316,564
<CUMULATIVE-DEFICIENCY> 3,612
</TABLE>
